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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended January 31, 1995
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
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Commission File Number 1-8570
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CIRCUS CIRCUS ENTERPRISES, INC.
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(Exact name of registrant as specified in its charter)
Nevada 88-0121916
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2880 Las Vegas Boulevard South, Las Vegas, Nevada 89109-1120
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (702) 734-0410
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Securities registered pursuant to Section 12(b) of the Act:
Name of Exchanges
Title of Class on which Registered
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Common Stock, $.01-2/3 Par Value New York Stock Exchange and
Pacific Stock Exchange
Common Stock Purchase Rights New York Stock Exchange and
Pacific Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock of the registrant held by
persons other than the registrant's directors and executive officers as of April
24, 1995 (based upon the last reported sale price on the New York Stock Exchange
on such date) was $2,731,910,535.
The number of shares of Common Stock, $.01-2/3 par value, outstanding at
April 24, 1995: 85,867,798.
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DOCUMENTS INCORPORATED BY REFERENCE
PART II - Portions of the Registrant's Annual Report to Stockholders for
the year ended January 31, 1995 are incorporated by reference into Items 7 and
8, inclusive.
PART III - Portions of the Registrant's definitive proxy statement in
connection with the annual meeting of stockholders to be held on June 22, 1995,
are incorporated by reference into Items 10 through 13, inclusive.
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PART I
ITEM 1. BUSINESS.
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General
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Circus Circus Enterprises, Inc. (the "Company"), which was incorporated in
1974, owns and operates, through wholly-owned subsidiaries, six hotel-casino
properties with approximately 13,700 guest rooms in the State of Nevada,
including three properties in Las Vegas (Circus Circus-Las Vegas, Luxor and
Excalibur), the Circus Circus Hotel and Casino in Reno and the Colorado Belle
Hotel and Casino and the Edgewater Hotel and Casino which are located on the
Colorado River in Laughlin. The Company also owns and operates a dockside
casino (which opened in August 1994) situated on a 24-acre site in Tunica
County, Mississippi and operates two smaller casinos on the Las Vegas Strip,
Slots-A-Fun (which the Company also owns) and the Silver City Casino (which the
Company operates under a long-term lease).
The Company is currently engaged, through wholly-owned subsidiaries, as a
50% participant in two joint ventures which are developing, subject to the
requisite regulatory approvals, casino projects in Reno, Nevada and Chalmette,
Louisiana. The Company is also a one-third participant in a company which is
operating a temporary casino in Windsor, Ontario, Canada that opened in May
1994, pending the completion of a permanent hotel-casino facility. For
additional information concerning the projects with which the Company is
involved through the aforementioned joint ventures, see "Joint Venture
Participations" in this Item 1.
On March 6, 1995, the Company entered into an agreement to purchase the
Hacienda Hotel & Casino, which is situated on a 47-acre site adjacent to Luxor,
subject to the receipt of certain regulatory approvals. On March 2, 1995, the
Company purchased an unimproved 73-acre site adjacent to the Hacienda property.
The Company plans to operate the Hacienda while it finalizes plans to develop
these newly acquired properties into an integrated development with the
Company's Luxor and Excalibur properties. For additional information concerning
these properties, see "Current Expansion Activities" in this Item 1.
Pursuant to an Agreement and Plan of Merger dated as of March 19, 1995 (the
"Merger Agreement") and an Exchange Agreement dated as of March 19, 1995 (the
"Exchange Agreement" and, together with the Merger Agreement, the "Gold Strike
Agreements"), the Company has agreed, subject to the receipt of certain
regulatory approvals and the satisfaction of certain conditions, to acquire from
certain entities and individuals (collectively the "Gold Strike Shareholders") a
group of affiliated entities (collectively the "Gold Strike Entities") which own
the Gold Strike Hotel & Gambling Hall and the Nevada Landing Hotel & Casino in
Jean, Nevada, the Railroad Pass Hotel & Casino in Henderson, Nevada, a 50%
interest in a joint venture partnership with an affiliate of Hyatt Development
Corporation which owns the Grand Victoria, a riverboat casino and land-based
entertainment complex in Elgin, Illinois (situated approximately 40 miles
northwest of downtown Chicago), a 50% interest in a joint venture partnership
with an affiliate of Mirage Resorts, Incorporated which is developing a
3,000-room gaming resort near the south end of the Las Vegas Strip and certain
other assets (collectively the "Gold Strike Properties"). The Gold Strike
Agreements provide for the Company's acquisition of the Gold Strike Entities
(the "Acquisitions") in exchange for its issuance of 16,291,551 shares of its
Common Stock and the issuance by a subsidiary of the Company of shares of the
subsidiary's preferred stock which will be convertible into an additional
793,156 shares of the Company's Common Stock, as well as the Company's payment
of approximately $12.1 million in cash and its assumption of approximately $165
million of debt. Consummation of the Acquisitions is expected to occur at the
end of May 1995. The foregoing discussion is qualified in its entirety by
reference to the Merger Agreement and the Exchange Agreement, copies of which
are included as Exhibits 10(ee) and 10(ff), respectively, to this Report and are
incorporated herein by this reference.
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For additional information concerning the Merger Agreement, see: "Current
Expansion Activities - Pending Acquisition of Gold Strike Entities" in this Item
1.
Unless the context otherwise indicates, all references to the Company are
to Circus Circus Enterprises, Inc. and its subsidiaries.
DESCRIPTION OF THE COMPANY'S OPERATING HOTELS AND CASINOS
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Las Vegas, Nevada
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Circus Circus-Las Vegas. Circus Circus-Las Vegas, the Company's original
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property, is a circus-themed hotel and casino complex situated on approximately
69 acres on the north end of the Las Vegas Strip. The property, which has a
total of 2,786 hotel rooms, includes approximately 110,000 square feet of casino
space where, as of January 31, 1995, 2,412 licensed slot machines and other
coin-operated devices, 49 blackjack ("21") tables, three craps tables, seven
roulette tables and a wheel of fortune as well as poker, keno and a race and
sports book were available to the casino's patrons. From a "Big Top" above the
casino, Circus Circus-Las Vegas offers its guests a variety of circus acts
performed free of charge to the public from 11 a.m. to midnight daily. A
mezzanine area overlooking the casino has a circus midway with carnival-style
games and an arcade that offers a variety of amusements and electronic games.
Two specialty restaurants, a buffet with a seating capacity of approximately
1,084, two coffee shops, several fast food snack bars, four cocktail bars and
two cocktail service bars, and a variety of gift shops and specialty shops are
also available to the guests at Circus Circus-Las Vegas. The latest addition to
Circus Circus-Las Vegas is Grand Slam Canyon, an "adventuredome" covering
approximately five acres. The new facility, which opened in August 1993, offers
theme park entertainment that includes a high-speed, double-loop, double-
corkscrew roller coaster, a coursing river flume ride on white-water rapids,
several rides and attractions designed for pre-school age children, themed
carnival-style arcade games, a state-of-the art arcade, a 65-foot waterfall,
fully animated life-size dinosaurs in their primeval habitat, food kiosks, and
souvenir shops, all in a climate-controlled setting under a giant pink space-
frame dome. An expansion program which increased the number of attractions at
Grand Slam Canyon was completed during 1994 at a cost of approximately $15.4
million. On-site parking is available for approximately 5,100 vehicles,
including three garages that will accommodate approximately 3,200 vehicles and
covered parking for approximately 320 vehicles beneath Grand Slam Canyon.
Circus Circus-Las Vegas also offers accommodations for
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approximately 375 recreational vehicles at the property's Circusland RV Park.
Luxor. Luxor is an Egyptian-themed hotel and casino complex which features
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a 30-story pyramid sheathed in reflective glass. Situated at the south end of
the Las Vegas Strip on a 64-acre site adjacent to Excalibur, Luxor was opened to
the public October 15, 1993 and offers its guests more than 400,000 square feet
of public entertainment area on three different levels beneath a soaring hotel
atrium enclosed by 2,526 hotel rooms, including 287 suites. The rooms can be
reached from the four corners of the pyramid by state-of-the-art "inclinators"
which travel at a 39-degree angle. Luxor includes approximately 100,000 square
feet of casino space where, as of January 31, 1995, 2,501 licensed slot machines
and other coin-operated devices, 60 blackjack ("21") tables, seven craps tables,
nine roulette tables and two wheels of fortune as well as poker, keno and a race
and sports book were available to the casino's patrons. On the casino level,
guests may view a chronological tableau of Egyptian archaeological wonders
dating from 4000 B.C. to 300 B.C. from boats operated on a waterway that flows
along the interior perimeter of the building, separating the hotel rooms from
the casino. Above the casino, a series of high-tech "participatory" adventures
arrayed in striking scenery are designed to seemingly transport visitors to
extraordinary places of times past, present and future. Below the casino is a
showroom which features big-name entertainment. Also on the showroom level is a
museum of the Tomb of King Tutankhamen featuring authentic replicas of Egyptian
artifacts as they were found in the tomb. Luxor's other public areas contain a
buffet with a seating capacity of approximately 800, six themed restaurants
including two gourmet restaurants, as well as a snack bar, nine cocktail lounges
and a variety of specialty shops. In addition, the property's spa offers guests
a relaxing escape from the excitement of the casino. Parking is available for
nearly 3,500 vehicles, including a garage which contains approximately 1,300
spaces.
Excalibur. Excalibur is a castle-themed hotel and casino complex situated
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on the south end of the Las Vegas Strip on a 53-acre site adjacent to Luxor.
Excalibur, which has a total of 4,032 hotel rooms, offers its guests more than
400,000 square feet of public entertainment area, including approximately
110,000 square feet of casino space where, as of January 31, 1995, 2,706
licensed slot machines and other coin-operated devices, 62 blackjack ("21")
tables, five craps tables, six roulette tables and two wheels of fortune as well
as poker, keno and a race and sports book were available to the casino's
patrons. Excalibur's other public areas include a Renaissance faire, a medieval
village, an amphitheater with seating capacity of nearly 1,000 where nightly
mock jousting tournaments are held and costume drama are presented, two dynamic
motion theaters, various artisans' booths and medieval games of skill. In
addition, the property has a buffet with seating capacity of
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approximately 1,450, six themed restaurants, as well as three snack bars,
several cocktail lounges and a variety of specialty shops. Parking is available
for approximately 4,000 vehicles, including a garage which contains
approximately 1,400 spaces.
Other Las Vegas Properties. The Silver City Casino and Slots-A-Fun have
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18,200 and 16,700 square feet of casino space, respectively. Both casinos
depend on foot traffic along the Las Vegas Strip for their business. As of
January 31, 1995, the Silver City Casino had 536 licensed slot machines and
other coin-operated devices, and Slots-A-Fun had 629 such licensed machines and
devices.
Reno, Nevada
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Circus Circus-Reno. Circus Circus-Reno is a circus-themed hotel and casino
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complex situated in downtown Reno, Nevada. The property, which has a total of
1,625 hotel rooms, includes approximately 60,000 square feet of casino space
where, as of January 31, 1995, 1,675 licensed slot machines and other coin-
operated devices, 65 blackjack ("21") tables, three craps tables, six roulette
tables and a wheel of fortune as well as poker, keno and a race and sports book
were available to the casino's patrons. From a "Big Top" above the casino,
Circus Circus-Reno also offers its guests a variety of circus acts performed
free of charge to the public from 11 a.m. to midnight daily. A mezzanine area
overlooking the casino has a circus midway with carnival-style games and an
arcade that offers a variety of amusement and electronic games. The facilities
at Circus Circus-Reno also include a specialty restaurant, a buffet with a
seating capacity of approximately 700, a coffee shop, three fast food snack
bars, four cocktail lounges, a gift shop and specialty shops. Covered parking
is available for over 1,800 vehicles. For information concerning the Company's
participation in a joint venture which is developing a casino, hotel and
entertainment complex to be known as Silver Legacy, which will be connected to
Circus Circus-Reno by a skywalk, see "Joint Venture Participation -- Reno Joint
Venture", below.
Laughlin, Nevada
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Colorado Belle. The Colorado Belle Hotel and Casino is situated on a 22-
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acre site on the bank of the Colorado River (with 1,080 feet of river frontage)
in Laughlin, Nevada, approximately 90 miles south of Las Vegas. The Colorado
Belle features a 600-foot replica of a Mississippi riverboat with 200 hotel
rooms, two towers containing an additional 1,034 hotel rooms and a casino with
approximately 64,000 square feet of space where, as of January 31, 1995, 1,546
licensed slot machines and other coin-operated devices, 37 blackjack ("21")
tables, two craps tables and four roulette tables as well as poker, keno and a
sports book were available to the casino's patrons. The Colorado Belle's
facilities also include a 350-seat buffet, a coffee shop, three specialty
restaurants, two fast food snack
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bars, four cocktail lounges and a cocktail service bar as well as a gift shop
and other specialty shops. There is surface parking available for an estimated
1,700 vehicles.
Edgewater. The Edgewater Hotel and Casino is situated on a 16-acre site
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adjacent to the Colorado Belle in Laughlin, Nevada with approximately 1,640 feet
of frontage on the Colorado River. The property, which has 1,450 hotel rooms,
includes approximately 57,000 square feet of casino space where, as of January
31, 1995, 1,537 licensed slot machines and other coin-operated devices, 38
blackjack ("21") tables, two craps tables, four roulette tables and a wheel of
fortune as well as poker, keno and a race and sports book were available to the
casino's patrons. The Edgewater's facilities also include a specialty
restaurant, a coffee shop, a buffet with a seating capacity of approximately
735, a snack bar and three cocktail lounges. There is surface parking available
for approximately 1,350 vehicles and a parking garage which can accommodate
approximately 930 additional vehicles.
Tunica County, Mississippi
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Circus Circus-Tunica. Circus Circus-Tunica, which opened in August 1994,
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is a riverboat situated on a 24-acre site along the Mississippi River in Tunica
County, Mississippi, approximately three miles west of Mississippi State Highway
61 (a major north/south highway connecting Memphis, Tennessee with Tunica
County) and approximately 20 miles south of Memphis. The facility, which has a
total of approximately 127,000 square feet of space, is operated 24 hours a day
and includes approximately 59,000 square feet of casino space in addition to
restaurants, retail shops and entertainment areas. As of January 31, 1995,
1,468 licensed slot machines and other coin-operated devices, 41 blackjack
("21") tables, eight craps tables and four roulette tables as well as poker were
available to the casino's patrons. The facility also includes a specialty
restaurant, a 500-seat buffet, a snack bar, three cocktail lounges and two
service bars. Circus Circus-Tunica was completed at a cost of approximately $70
million, including land, capitalized interest and preopening expenses. For
information concerning regulatory provisions applicable to Circus Circus-Tunica,
including a new regulation relating to mandated infrastructure development, see
"Regulation and Licensing--Mississippi" in this Item 1.
The Company's Tunica site is a part of a three-casino development covering
approximately 72-acres. The other two casinos are owned and operated by
unaffiliated third parties. The Company also has an undivided one-half interest
in an additional 388 acres of land contiguous to or near the three casino sites
which may be used for future development.
MARKETING
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Generally, the Company follows a marketing and operating philosophy which
emphasizes high-volume business by providing moderately priced hotel rooms, food
and beverage and alternative entertainment in combination with the gaming
activity. The
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Company also maintains stringent cost controls which are exemplified by a
general policy of offering minimal credit for gaming customers at the Company's
properties. Management believes that this philosophy sets the Company apart
from its principal competitors.
The Company's current operations are conducted 24 hours a day, every day of
the year. The Company does not consider its business to be highly seasonal,
although its operating income is typically somewhat lower in the fourth
quarter. Management emphasizes courtesy and prompt service to its customers and
aspires to a high standard of excellence in all of its operations.
The Company believes it has been able to maintain high occupancy rates at
its hotels, in part, due to the modest prices charged for its rooms and its
advertised policy of assisting any customer who cannot be accommodated at its
properties in finding similarly priced rooms in nearby hotels and motels. The
combined occupancy rate (excluding complimentaries but including non-refunded
prepaid cancellations) of the Company hotel's was approximately 95.7%, 97.8% and
98.3% for the years ended January 31, 1995, 1994 and 1993, respectively.
Circus Circus-Las Vegas and Circus Circus-Reno, which together contributed
29% of the Company's revenues in the year ended January 31, 1995 (and 36% and
39%, respectively, in the years ended January 31, 1994 and 1993), have popular
buffets, attractive because of their variety, quality and low price. From a
"Big Top" above the casino, both properties offer a variety of circus acts
performed free of charge to the public from 11 a.m. to midnight daily. A
mezzanine area overlooking each casino has a circus midway with carnival-style
games and an arcade that offers a variety of amusement and electronic games. In
August 1993, the Grand Slam Canyon adventuredome was opened at Circus Circus-Las
Vegas and additional attractions were added during 1994.
Excalibur, which contributed 25% of the Company's revenues in the year
ended January 31, 1995 (and 30% and 33%, respectively, in the years ended
January 31, 1994 and 1993), attracts customers in the same manner as the
Company's two circus-themed Nevada properties by offering quality rooms, food
and entertainment at moderate prices. By way of entertainment, the medieval
castle-themed Excalibur offers a medieval village, an amphitheater where mock
tournaments and costume drama are presented, dynamic motion theaters, various
artisans' booths and medieval games of skill.
Luxor, which opened in October 1993 and contributed 24% of the Company's
revenues in the year ended January 31, 1995 (and 9% in the year ended January
31, 1994), is designed to attract the higher income segment of the middle-income
strata of gaming customers by offering a new level of entertainment and hotel
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accommodations. Designed with an Egyptian theme, the pyramid-shaped Luxor
offers its guests a tri-level entertainment area which includes a water journey
from which guests discover replicas of artifacts and treasures of ancient Egypt.
The upper level includes a series of high-tech "participatory" adventures
arrayed in striking scenery designed to seemingly transport visitors to
extraordinary places of times past, present and future. Other entertainment
features include a showroom with big-name entertainment and a museum replicating
King Tut's Tomb and its contents.
The Colorado Belle and Edgewater together contributed 16% of the Company's
revenues in the year ended January 31, 1995 (and 21% and 23%, respectively, in
the years ended January 31, 1994 and 1993). Forming the heart of the Laughlin
"Strip", the Colorado Belle and the Edgewater combine to offer 2,700 rooms and
over 120,000 square feet of casino space. The Colorado Belle offers a classic
Mississippi riverboat theme, complete with a 60-foot paddlewheel. The
Edgewater's southwestern motif provides a relaxing atmosphere to enjoy the
property's casino and other facilities. Connected by a scenic walkway, the two
resorts form an inviting shoreline along the Colorado River.
Circus Circus-Tunica, which opened in August 1994, represents the Company's
first wholly-owned casino outside of Nevada as well as its first riverboat
casino. The facility is part of an integrated three casino development that
provides patrons with the opportunity to visit any of the three casinos without
driving, a unique experience in the Tunica market. The three casinos are the
closest and provide the easiest access from Tunica's primary feeder market,
Memphis, Tennessee.
The Company maintains an active media advertising program through radio,
television, billboards and printed publications primarily in Nevada, California
and Arizona for its Nevada properties and in the Memphis area for Circus Circus-
Tunica. During the year ended January 31, 1995, the Company incurred total
expenses relating to advertising (including the media advertising described
above) of $49.8 million compared with $40.4 million and $35.0 million during the
years ended January 31, 1994 and 1993, respectively. While the Company offers
complimentary hotel accommodations, meals and drinks to its customers on an
individual basis, no group complimentary arrangements are offered.
OPERATIONS
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The primary source of revenues and income to the Company is its casinos,
although the hotels, restaurants, bars, shops, midway games and other
entertainment attractions and other services are an important adjunct to the
casinos.
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The following table sets forth the contribution to net revenues on a dollar
and percentage basis of the Company's major activities for each of the three
most recent fiscal years.
<TABLE>
<CAPTION>
Year Ended January 31,
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1993 1994 1995
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(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Casino(1)............... $495,012 58.2% $538,813 55.9% $612,115 52.3%
Food and
beverage(2)........... 135,786 15.9% 152,469 15.8% 189,664 16.2%
Rooms(2)................ 147,115 17.3% 176,001 18.3% 232,346 19.9%
Other(2)................ 100,416 11.8% 126,048 13.1% 171,754 14.7%
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878,329 103.2% 993,331 103.1% $1,205,879 103.1%
Less:
Complimentary
allowances(2)......... 27,388 3.2% 29,861 3.1% 35,697 3.1%
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Net revenues.............. $850,941 100.0% $963,470 100.0% $1,170,182 100.0%
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</TABLE>
(1) Casino revenues are the net difference between the sums received as
winnings and the sums paid as losses.
(2) Food and beverage, Rooms and Other include the retail value of revenues
from services which are provided to casino customers and others on a
complimentary basis. Such amounts are then deducted as complimentary
allowances to arrive at net revenue.
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In connection with its gaming activities, the Company follows a policy of
stringent controls and crosschecks on the recording of all receipts and
disbursements. The audit and cash controls developed and utilized by the
Company include the following: locked cash boxes, independent counters,
checkers and observers to perform the daily cash and coin counts, floor
observation of the gaming areas, closed-circuit television observation of
certain areas, computer tabulation of receipts and disbursements for each of the
Company's slot machines, tables and other games, and the rapid analysis and
resolution of discrepancies or deviations from normal performance.
The Company's credit policies are stringent and credit play historically
has accounted for an insignificant portion of its gaming activities. Because of
the Company's policies, its casino receivables have been significantly less than
1% of its total assets and its annual bad debt expense has been less than 1/10
of 1% of casino revenues.
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JOINT VENTURE PARTICIPATIONS
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The Company is currently participating in joint ventures which are engaged
in the development, subject to the requisite regulatory approvals, of casino
projects in Reno, Nevada and Chalmette, Louisiana (where the Company is a 50%
participant) and Windsor, Ontario, Canada (where the Company is a one-third
participant).
The following is a description of the casino projects with which the
Company is currently involved as a joint venture participant:
Reno, Nevada Joint Venture (50% Participation)
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The Company, through a wholly-owned subsidiary, is a 50% participant with
Eldorado Limited Liability Company ("Eldorado Limited") in a general partnership
(the "Reno Joint Venture") which is engaged in the development of Silver Legacy,
a themed hotel, casino and entertainment complex being constructed on two city
blocks in downtown Reno, Nevada. The casino and entertainment complex will be
located between Circus Circus-Reno and Eldorado Hotel & Casino (the
"Eldorado"). Silver Legacy's casino and entertainment complex will be connected
at the mezzanine level with Circus Circus-Reno, the Eldorado and Silver Legacy's
hotel complex by enclosed climate-controlled skyways above the streets between
the respective properties. The property's exterior will be heavily themed to
evoke images of Reno during the period from the 1880's through the 1930's. At
the main pedestrian entrances to the casino and hotel (located on all four sides
of each complex), patrons will be able to enter the property by passing through
active retail establishments and store fronts reminiscent of turn-of-the-century
Reno.
Silver Legacy's casino and entertainment complex will offer approximately
82,000 square feet of gaming space on two levels, including approximately 72,000
square feet on the ground level and approximately 10,000 square feet on the
mezzanine level. The casino is currently expected to open with approximately
2,500 slot machines and other coin operated devices and approximately 90 table
games, including blackjack ("21"), craps, roulette, baccarat, pai gow and pai
gow poker tables. A 180-foot diameter dome will project from the roof of the
casino complex. Extending up into the dome structure from the center of the
casino floor will be a 120-foot tall mining rig situated over a replica of a
silver mine. The rig will depict a functioning mining rig with running ore
wagons, water flumes, steam and beam-traction engines, cradles and working
buckets, and will appear to mine and smelt ore and pour liquid gold and silver
into coins and bullion in the center of the casino. At the center of the rig, a
glass-encased elevator will carry patrons between the main casino floor and
mezzanine level. Using light projectors, video screens, mirrors and other
optical devices, as well as sound equipment, atmospheric special effects will be
created on the interior
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surface of the dome, replicating lightning, sunsets, moving cloud patterns and
night skies accompanied by the sounds of the desert wind.
The hotel complex, which will be approximately 400 feet high, will, upon
completion, be the tallest structure in the Reno area and will be visible from
Interstate 80, the principal highway connecting Reno with San Francisco,
Sacramento and other cities in northern California. The hotel will have three
towers with guest rooms on 37, 34 and 31 floors, respectively, with a total of
approximately 1,700 guest rooms (approximately 400 of which will be completed
subsequent to Silver Legacy's initial opening to the public). The hotel's guest
rooms will include 145 player spa suites, each of which will have approximately
700 square feet of space (approximately twice the size of a standard guest
room), and eight luxury suites which will range in size from approximately 1,200
to 1,600 square feet. The hotel complex will also include a parking structure
with space for approximately 1,900 vehicles on ten levels.
The property will have four restaurants, including a 240-seat delicatessen,
bar and "sidewalk" cafe located on the ground floor. The mezzanine level of the
casino will have a seafood grill, a buffet and a 24-hour coffee shop. The
property will also include a 25,000-square foot special events center and a
12,000-square foot health spa with an outdoor pool and sun deck. In addition,
32,000 square feet of space on the mezzanine level of the casino complex not
initially opened to the public will be available for the expansion of the
Project's public areas to include additional restaurant, entertainment or retail
space.
Silver Legacy is expected to open in July 1995 with approximately 1,300
guest rooms in service. The remaining 400 guest rooms are scheduled for
completion by May 1996. The total cost of the project is currently estimated at
approximately $335 million (excluding capitalized interest and preopening
expenses).
Pursuant to the joint venture agreement relating to the Reno Joint Venture
(the "Reno Venture Agreement"), each of the participants has contributed to the
Reno Joint Venture cash or property with an agreed to value of $52.5 million.
The Reno Joint Venture expects to enter into a Credit Agreement with a group of
major banks pursuant to which $220 million of the costs associated with the
construction, furnishing and equipping of Silver Legacy will be funded. The
indebtedness under the Credit Agreement will be secured by a Deed of Trust on
Silver Legacy and security interests in other assets of the Reno Joint Venture.
The indebtedness incurred pursuant to the Credit Agreement will be subject to
scheduled quarterly reductions ranging from $5 million to $7 million per
quarter, and a scheduled reduction of $125 million on September 30, 2000.
Mandatory prepayments will be required after the end of each of the first eight
full fiscal quarters following the opening of Silver Legacy in the amount of 50%
of the Reno Joint Venture's Consolidated Available Cash Flow
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(as defined). Any funds required in excess of those available under the Credit
Agreement will be provided by the Company in the form of subordinated loans to
the Reno Joint Venture. The Company is also obligated to provide a $10 million
revolving line of credit to provide working capital for Silver Legacy, although
it is presently expected that these funds will be provided through additional
bank financing arranged by the Reno Joint Venture. Each venturer's ability to
participate in cash flows generated by Silver Legacy is limited by the terms of
the Reno Venture Agreement and will be limited by the Credit Agreement, and the
Company's right to receive repayments of its loan to the Reno Joint Venture will
be subject to limitations under the Credit Agreement. The foregoing discussion
of the Reno Venture Agreement is qualified in its entirety by reference to the
full text of such agreement which is included as Exhibit 10(y) to this Report.
As a condition to the Credit Agreement, the Company will be required to
enter into an agreement pursuant to which it will guarantee completion of Silver
Legacy. In addition, the Company will be required to enter into a make-well
agreement with the Reno Joint Venture for the benefit of the lenders under the
Credit Agreement pursuant to which the Company will be obligated to make such
additional contributions to the Reno Joint Venture as may be necessary to
maintain the Reno Joint Venture's coverage ratio at a minimum permitted level of
1.05 to 1.00.
Windsor, Ontario, Canada Joint Venture (33 1/3% Participation)
-------------------------------------------------------------
The Company is a participant in a casino in Windsor, Ontario with Hilton
Hotels Corporation and Caesars World, Inc., through its ownership of a one-third
interest in Windsor Casino Limited, an Ontario corporation ("WCL"), which has
been awarded the exclusive right to negotiate an agreement to develop and
operate a casino in Windsor, Ontario, Canada, approximately 1.5 miles from
Detroit, Michigan across the Detroit River. WCL plans, subject to reaching such
agreement, to develop and operate a hotel-casino which will include slot
machines, table games as well as entertainment, meeting facilities and other
public areas. WCL opened an interim casino in May 1994 and anticipates opening
the permanent facility in 1997. It is currently estimated that the total cost
of the permanent project will be approximately $250-$275 million. For
information concerning additional regulatory requirements applicable to the
ownership and operation of casino gaming facilities in Windsor, see "Regulation
and Licensing -- Windsor, Ontario, Canada" in this Item 1.
Chalmette, Louisiana (50% Participation)
----------------------------------------
The Company is a 50% participant with American Entertainment Corp. ("AEC")
in American Entertainment, L.L.C. (the "Louisiana Joint Venture"), a Louisiana
limited liability company, which is engaged in the development of a riverboat
gaming facility on a 26-acre parcel in Chalmette, Louisiana (the "Louisiana
Project"). As presently planned, the Louisiana Project will initially
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consist of a 290-foot riverboat casino designed to replicate a nineteenth
century paddlewheel-driven riverboat with approximately 30,000 square feet of
gaming space, additional dockside facilities and parking accommodations. The
site has additional space available for future expansion as warranted. Subject
to receipt of gaming and other approvals, it is currently anticipated that the
first phase of the Louisiana Project will commence operations in late 1995. The
Louisiana Joint Venture has received a certificate of preliminary approval from
the Louisiana Riverboat Gaming Commission to begin construction of the Louisiana
Project and has been issued a gaming operator's license by the Gaming
Enforcement Division of the Louisiana State Police (the "Louisiana Division").
The operation of the Louisiana Project's riverboat casino will be subject
to certain restrictions and conditions imposed by Louisiana gaming law, which
cause this riverboat gaming operation to differ from the Company's other gaming
operations. For example, gaming at the Louisiana Project will not be permitted
while the riverboat is docked, other than during the 45 minutes between
excursions and times when dangerous weather or water conditions exist. Also,
each round-trip riverboat cruise generally may not be less than three nor more
than eight hours in duration. For information concerning additional regulatory
requirements applicable to the ownership and operation of casino gaming
facilities in Louisiana, see "Regulation and Licensing -- Louisiana" in this
Item 1.
The Louisiana Project's riverboat casino, which will be docked in
Chalmette, Louisiana, approximately 20 minutes from New Orleans, will cruise
Bayou Bienvenue. It is anticipated that the Louisiana Project's principal
market will be the area within 50 miles of Chalmette, which includes New Orleans
(with a population of approximately 1,500,000). The Louisiana Division is
empowered to issue up to 15 licenses to conduct riverboat gaming activities, and
no more than six licenses may be granted to riverboat casinos operating in any
one parish. As of March 31, 1995, the Louisiana Division had issued 15 licenses
for riverboat casinos. Of the 15 licenses, seven are in the New Orleans area,
four in the City of New Orleans, one in Harvey (approximately eight miles from
the Louisiana Joint Venture site) and one is for a riverboat casino in
Luling/St. Rose (approximately 30 miles from the Louisiana Joint Venture site),
one in Kenner (approximately 30 miles from the Louisiana Joint Venture site),
and the Louisiana Venture in Chalmette. In addition, Harrah's Jazz Company is
developing a major land-based casino in downtown New Orleans, which is planning
to open its temporary facility in May 1995. As of March 31, 1995, 18 gaming
licenses had been granted for the operation of dockside casinos on the
Mississippi Gulf Coast, which is approximately 60 miles from Chalmette and may
draw customers from the same markets as the Louisiana Project. There is no
limit on the number of licenses that can be granted to operate casinos in
Mississippi.
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Pursuant to the terms of the Amended and Restated Operating Agreement
between AEC and a wholly-owned subsidiary of the Company (the "Louisiana
Agreement"), each of the Company and AEC is obligated to make capital
contributions to the Louisiana Joint Venture. AEC will contribute to the
Louisiana Joint Venture a portion of the land on which the Louisiana Project
will be located (at an agreed value of $5 million) and certain other property
with an agreed value of $15 million. The Company will make its $20 million
contribution in cash, of which $13.7 million had been funded as of January 31,
1995. In addition, the Company will lend the Louisiana Project any amount which
cannot be financed by a third party. The costs and the specifics of the design
and funding have yet to be finalized. Any loans made by the Company will bear
interest at the rate of 10% per annum and will be amortized over five years. In
addition, the Company has made a $10 million loan to AEC which bears interest at
1% over the prime rate and is payable in annual installments equal to the
greater of (i) interest only payments commencing November 1, 1995 or (ii) the
amount of "Net Available Cash" otherwise payable to AEC pursuant to the
Louisiana Agreement. Any remaining balance outstanding will be due November 1,
2001.
In accordance with the Louisiana Agreement, the Louisiana Joint Venture
will enter into a management agreement pursuant to which the Company will manage
and operate the Louisiana Project. Under the terms of the management agreement,
the Company will be paid a management fee for its services equal to 3-1/2% of
the first $100 million in annual gross revenues of the Louisiana Project plus 1-
1/2% of any such annual gross revenues in excess of $100 million. The
management agreement will also provide for reimbursement of certain expenses
incurred by the Company in connection with its management of the Louisiana
Project. The Louisiana Agreement also provides that the Louisiana Joint Venture
will enter into a consulting agreement with AEC under which AEC will be paid a
fee equal to 1% of the first $100 million in annual gross revenues of the
Louisiana Project plus 1/2% of any such annual gross revenues in excess of $100
million. The foregoing summaries of the Louisiana Agreement and the related
management and consulting agreements are qualified in their entirety by
references to the full text of the Louisiana Agreement and forms of such other
agreements which are included as Exhibit 10(z) to this Report.
Bid Proposals
-------------
The Company, which participated with its two Windsor venture partners in
the submission of a bid proposal to develop a casino project in Michigan City,
Indiana, has withdrawn from further participation in the development of a casino
project in Michigan City, Indiana.
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CURRENT EXPANSION ACTIVITIES
- ----------------------------
General. Consistent with past practice and the longstanding policy of
-------
making substantial investments in its gaming business at regular intervals, the
Company continues to actively pursue new projects, either by development or
acquisition. New projects may be undertaken in Nevada, where all but one of the
Company's wholly-owned operating properties are currently located, or in other
jurisdictions within the United States or abroad where gaming has been
legalized. Such projects may, like all of the Company's currently operating
properties (other than Silver City Casino), be wholly-owned and operated by the
Company, or may be developed, owned and/or operated through joint ventures
involving the Company and one or more other parties, such as the joint venture
projects described above.
The Company believes that its financial resources are adequate to permit it
to successfully meet its commitments with respect to its current expansion
projects and joint venture participations. However, depending on their timing,
and the size and the nature of the Company's commitments with respect thereto,
future expansion projects or joint venture participations may require the
Company to seek additional debt or equity funding.
Pending Acquisition of the Hacienda. On March 6, 1995, the Company reached
-----------------------------------
an agreement to purchase the Hacienda Hotel and Casino in Las Vegas, Nevada for
approximately $80 million. The Hacienda is located on 47 acres of land adjacent
to Luxor, between I-15 and the Las Vegas Strip, and contains 1,135 rooms and
approximately 50,000 square feet of casino space. Subject to receipt of the
requisite regulatory approvals, the Company anticipates the acquisition to be
completed in the summer or fall of 1995.
Recent Land Acquisition. On March 2, 1995, the Company purchased
-----------------------
approximately 73 acres of undeveloped land at the northwest corner of Russell
Road and the Las Vegas Strip, just south of the Hacienda at a cost of
approximately $73 million. The land is being held for future development.
Master Plan.
-----------
The Company is developing a master plan for its property on the south end
of the Las Vegas Strip, including the Hacienda and the Russell Road land, as
well as the existing Excalibur and Luxor resorts. The master plan, as presently
contemplated, will encompass several stages of development and will include a
series of new and interconnected hotel/casino/entertainment complexes. The
timing, cost, design and other specifics of the master plan have yet to be
determined.
Pending Acquisition of Gold Strike Entities
-------------------------------------------
The Company has entered into the Gold Strike Agreements, pursuant to which
it has agreed, subject to the receipt of applicable regulatory approvals and the
satisfaction of certain other conditions, to acquire the Gold Strike Entities,
which own the properties and venture interests described below.
Jean, Nevada Properties
-----------------------
General. Gold Strike Hotel & Gambling Hall ("Gold Strike") and Nevada
-------
Landing Hotel & Casino ("Nevada Landing") are located in Jean, Nevada on either
side of I-15, the primary thoroughfare
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between Las Vegas and Southern California. Situated 25 miles south of Las Vegas
and 12 miles north of the California/Nevada border, Gold Strike and Nevada
Landing each is conveniently located at the only highway interchange within 12
miles in either direction and is strategically positioned to attract the large
number of people traveling to or from Las Vegas.
Gold Strike Hotel & Gambling Hall. Gold Strike, which opened in December
---------------------------------
1987, is an "old west" themed casino-hotel located on approximately 21 acres of
land on the east side of I-15. The property includes, among other amenities,
approximately 37,000 square feet of casino space, 813 hotel rooms, several
restaurants, a gift shop, a swimming pool and spa, a banquet center and parking
spaces for approximately 1,600 cars.
Nevada Landing Hotel & Casino. Nevada Landing was built in 1989 and is a
-----------------------------
turn-of-the-century riverboat themed casino-hotel located on approximately 40
acres of land on the west side of I-15. The property includes approximately
37,000 square feet of casino space, 303 hotel rooms, a Chinese restaurant, a
coffee shop, a buffet, a snack bar, a gift shop, a swimming pool and spa, a
banquet facility and parking spaces for approximately 1,400 cars.
Henderson, Nevada Property
--------------------------
Railroad Pass Hotel & Casino. Railroad Pass Hotel & Casino ("Railroad
----------------------------
Pass") is situated in Henderson, Nevada. Built on approximately 52 acres,
Railroad Pass is located along US-93, the direct route between Las Vegas and
Phoenix, Arizona. The casino-hotel includes, among other amenities,
approximately 21,000 square feet of casino space, 120 hotel rooms, two bars, two
full-service restaurants, an all-you-can-eat buffet, gift shop, swimming pool, a
banquet facility and parking spaces for approximately 660 cars. In contrast with
the Jean properties, Railroad Pass caters to local residents, particularly from
Henderson, who often prefer
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the informal, friendly atmosphere and easy access of the Railroad Pass casino
over those on the Las Vegas Strip.
Elgin, Illinois Property
------------------------
The Grand Victoria. The Grand Victoria, which opened on October 6, 1994,
------------------
is a stately, Victorian themed riverboat casino and land-based entertainment
complex located in Elgin, Illinois, a suburb approximately 40 miles northwest of
downtown Chicago. The Grand Victoria is owned and operated by a 50/50 general
partnership (the "Elgin Partnership"), between Nevada Landing Partnership, an
Illinois general partnership ("Gold Strike-Illinois"), and RBG, L.P., an
affiliate of Hyatt Development Corporation. The two-story vessel is 420 feet in
length and 110 feet in width, providing up to approximately 80,000 square feet
of gaming space, approximately 46,000 of which is currently utilized. An
adjacent dockside complex on approximately 12 acres of land overlooking the Fox
River contains an approximately 83,000-square-foot pavilion with two movie
theaters, a buffet, a fine dining restaurant, a VIP lounge and a gift shop, in
addition to ticketing and registration services for the riverboat. There is also
both ground level and structured parking for more than 2,000 vehicles. The Grand
Victoria is strategically located in Elgin among the residential suburbs of
Chicago, with nearby freeway access and direct train service from downtown
Chicago. Under its agreements with the City of Elgin, the Elgin Partnership also
was granted an option to purchase an additional nine acres of land contiguous to
the existing site.
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Las Vegas, Nevada Joint Venture Development
-------------------------------------------
Victoria Partners is a 50/50 general partnership between Gold Strike L.V.,
a Nevada general partnership ("GSLV"), and MRGS Corp., an affiliate of Mirage
Resorts, Incorporated ("MRI"). GSLV will become an indirect subsidiary of the
Company upon consummation of the Acquisitions. Victoria Partners commenced
construction in April 1995 of a 3,000-room gaming mega-resort, tentatively named
The Victoria, that will have frontage of nearly 600 feet on the Las Vegas Strip.
The project, which will be located on 44 acres of the former "Dunes" golf course
between two of the busiest intersections in Las Vegas, will be part of a cluster
of new mega-resorts including the MGM Grand, Excalibur and Luxor, and will be
situated between Mirage's Beau Rivage and New York-New York, a casino resort
being jointly developed by MGM Grand, Inc. and Primadonna Resorts, Inc. The
Victoria, which is expected to open in the fall of 1996, is expected to contain
approximately 85,000 square feet of casino space and will be themed with
turn-of-the-century architecture.
GSLV is the managing partner of Victoria Partners and, subject to certain
exceptions, has sole authority for the design, development, construction and
operation of The Victoria. The cost of construction (including preopening
expenses, capitalized interest and land acquisition costs) is estimated to be
approximately $325 million. Victoria Partners has obtained a $175 million non-
recourse construction facility from a consortium of major banks, which, subject
to certain conditions, will
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convert to a permanent reducing revolving loan once The Victoria opens.
COMPETITION
- -----------
Recognizing that middle class vacationers enjoy gambling, but also vacation
with their families, the Company seeks to appeal to this value-oriented market
and satisfy the group's diverse entertainment demands by offering exciting
entertainment opportunities at reasonable prices. The Company seeks to achieve
this objective through its entertainment "megastores", such as the Circus
properties in Las Vegas and Reno, Luxor, Excalibur, Colorado Belle and
Edgewater, by offering gaming combined with dramatic entertainment concepts and
reasonably priced rooms, reasonably priced food and beverage and prompt,
courteous service. As of January 31, 1995, the Company was the largest hotel-
casino operator in the Las Vegas and Laughlin markets in terms of total square
footage of casino space and number of hotel rooms.
The Company's Las Vegas casino and hotel operations, which are conducted
from facilities located along the Las Vegas Strip, currently compete with
approximately 25 major hotel-casinos and a number of smaller casinos located on
or near the Las Vegas Strip. Such operations also compete with casinos located
in downtown Las Vegas, approximately 12 of which offer hotel, food and beverage
and entertainment facilities, and several major hotel-casinos located elsewhere
in the Las Vegas area. The Company's Las Vegas properties also compete, to a
lesser extent, with casino and hotel facilities in other parts of Nevada,
including Laughlin, Reno and along I-15 (the principal means of access to Las
Vegas from southern California by car) near the California-Nevada state line.
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The casino and hotel capacity continues to increase in the Las Vegas
market. During the fourth calendar quarter of 1993, two major new hotel-
casinos, including Luxor, opened at the south end of the Las Vegas Strip, and a
third such property opened near the center of the Las Vegas Strip. These three
properties added significant casino capacity and over 10,500 hotel rooms to the
existing Las Vegas market. These openings have shifted the focus of the Las
Vegas Strip toward its south end, although at Circus Circus - Las Vegas (which
is located at the Strip's northern end) results were not significantly different
compared to the prior year. The Company also believes such openings have had a
negative impact on Laughlin area properties, including the Colorado Belle and
the Edgewater, by drawing visitors from the Laughlin market. This has resulted
in increased competition among Laughlin properties for a reduced number of
visitors thus contributing to generally lower revenues and profit margins at
Laughlin properties, including the Colorado Belle and the Edgewater. Three other
major Las Vegas Strip projects have been announced, including The Victoria in
which the Company will acquire a 50% interest if the transactions described
under "Current Expansion Activities - Pending Acquisition of Gold Strike
Entities" are consummated. According to public statements of the developers, the
three projects (which will all be situated on contiguous sites near the south
end of the Las Vegas Strip between Flamingo Road and Tropicana Avenue) are
expected to add approximately 8,000 hotel rooms and significantly increase the
casino capacity along the Las Vegas Strip. The Company cannot determine at this
time what impact the opening of these projects will have on the Company's
operations. For information concerning the Company's pending agreement to
acquire certain properties, including the aforementioned 50% interest in a joint
venture partnership which is developing one of the three projects, see "Current
Expansion Activities - Pending Acquisition of Gold Strike Entities" in this
Item 1.
Excalibur and Luxor each benefit from walk-in business attributable to the
registered guests and casino customers at the other property. While Luxor may
attract guests who would otherwise have stayed at other properties of the
Company, management believes that the Company's Las Vegas operations, on a
consolidated basis, have benefited significantly as a result of the addition of
Luxor.
Circus Circus-Reno competes with approximately 12 major casinos (the
majority of which offer hotel rooms) as well as numerous other smaller casinos
in the greater Reno area. This property competes to a lesser extent with casino
and hotel facilities in other parts of Nevada. Upon the opening of Silver
Legacy (which is expected to commence operations in July 1995), Circus Circus-
Reno will also compete with that property which is being developed by a joint
venture partnership in which a wholly-owned subsidiary of the Company is a 50%
participant. See "Joint Venture Participations-Reno, Nevada Joint Venture (50%
Participation)" in this Item 1. The Company cannot determine at this time what
impact Silver Legacy will have on operations at Circus Circus-Reno.
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In Laughlin, the Colorado Belle and the Edgewater, which together account
for approximately 24% of the rooms in Laughlin, compete with eight other
Laughlin casinos. They also compete with the hotel-casinos in Las Vegas and
those situated on I-15 (the principal highway between Las Vegas and Los Angeles)
near the Nevada-California state line, as well as a growing number of casinos on
Indian reservations in Laughlin's regional market. While the Colorado Belle and
the Edgewater also compete with each other, both properties have consistently
maintained occupancy levels of approximately 95% at their hotels and, because
the two properties are situated on adjoining sites, the Company believes that
each property benefits from walk-in business attributable to the registered
guests and casino customers at the other property.
The Company believes that it receives the major portion of its Las Vegas
business from Southern California and to a lesser degree from the remainder of
the southwestern United States. The major portion of its Reno business is
derived from Northern California and to a lesser degree from the northwestern
United States. Laughlin's business is derived principally from Arizona and
Southern California.
The State of Mississippi legalized casino gaming on the water along the
Mississippi River and the Mississippi Gulf Coast in June 1990. Under Mississippi
law, 14 counties adjacent to the Mississippi River and the Gulf Coast have been
granted the option to authorize gaming, including Tunica County. Circus Circus-
Tunica competes with eight other casinos in Tunica County. There is no limit on
the number of licenses that may be granted within Mississippi or within any
county in Mississippi. The Company believes that Circus Circus-Tunica's
principal market is the area within 100 miles of Tunica County. This area
includes Memphis, Tennessee (with a population of approximately 1,000,000),
Little Rock, Arkansas (with a population of approximately 175,000) and northern
Mississippi with a population base of over 250,000. Tunica County is currently
the closest legalized gaming jurisdiction to Memphis. Because Circus Circus-
Tunica is heavily dependent upon the patronage of Memphis residents and upon
tourists and other out-of-state gaming customers coming to Tunica from Memphis,
the opening of gaming casinos at locations closer to Memphis could have a
material adverse effect on Circus Circus-Tunica's operations. In this regard, De
Soto County, the northwesternmost Mississippi county and the nearest to Memphis,
by local referendum in November 1992 voted against authorizing gaming activities
in the county, but could at any time after October 1996 vote to allow gaming
activities. If the proposed merger with the Gold Strike Entities is completed,
the Company will acquire an option to purchase land in De Soto County in the
event gaming activities are legalized in the county. In addition, the
authorization of gaming activities in Arkansas, or Tennessee, which currently
has a constitutional restriction on gaming activities, could have a material
adverse effect on the Company's Tunica County operations.
Gaming has expanded dramatically in the United States in recent years.
This growth has been reflected in various forms including riverboats, dockside
gaming facilities, Native American
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gaming ventures, land-based casinos, state-sponsored lotteries, off-track
wagering and card parlors. Since 1990, when there were casinos in only three
states (excluding casinos on Native American lands), gaming has spread to a
number of additional states and still other states are currently considering the
legalization of casino gaming in specific geographic areas within their
jurisdictions. Casino gaming is currently conducted by numerous Native American
tribes throughout the United States and other Native American tribes are either
in the process of establishing or are considering the establishment of gaming at
additional locations, including sites in California and Arizona. The Company
does not believe that gaming, as presently conducted in other states, has had a
material adverse impact on its operations. The competitive impact on Nevada
gaming establishments, in general, and the Company's operations, in particular,
from the continued growth of gaming in jurisdictions outside of Nevada cannot be
determined at this time. The Company believes that the introduction of casino
gaming in areas close to Nevada, such as California and Arizona, could have an
adverse impact on the Company's operations and, depending on the nature,
location and extent of such operations, such impact could be material.
REGULATION AND LICENSING
- ------------------------
Nevada
------
The ownership and operation of casino gaming facilities in Nevada are
subject to: (i) the Nevada Gaming Control Act and the regulations promulgated
thereunder (collectively, the "Nevada Act"); and (ii) various local ordinances
and regulations. The Company's gaming operations are subject to the licensing
and regulatory control of the Nevada Gaming Commission (the "Nevada
Commission"), the Nevada State Gaming Control Board (the "Nevada Board"), and
various local licensing and regulatory authorities, including the Clark County
Liquor and Gaming Licensing Board and the City of Reno (collectively, the "Local
Authorities"). The Nevada Commission, the Nevada Board and the Local
Authorities are collectively referred to as the "Nevada Gaming Authorities".
The laws, regulations and supervisory procedures of the Nevada Gaming
Authorities are based upon declarations of public policy which are concerned
with, among other things: (i) the prevention of unsavory or unsuitable persons
from having a direct or indirect involvement with gaming at any time or in any
capacity; (ii) the establishment and maintenance of responsible accounting
practices and procedures; (iii) the maintenance of effective controls over the
financial practices of licensees, including the establishment of minimum
procedures for internal fiscal affairs and the safeguarding of assets and
revenues, providing reliable record keeping and requiring the filing of periodic
reports with the Nevada Gaming Authorities; (iv) the prevention of cheating and
fraudulent practices; and (v) providing a source of state and local revenues
through taxation
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and licensing fees. Change in such laws, regulations and procedures could have
an adverse effect on the Company's gaming operations.
The Company is registered by the Nevada Commission as a publicly traded
corporation (a "Registered Corporation") and has been found suitable to own the
stock of Circus Circus Casinos, Inc., Slots-A-Fun, Inc., Edgewater Hotel
Corporation, Colorado Belle Corp., New Castle Corp. and Ramparts, Inc., each of
which is a corporate gaming licensee under the terms of the Nevada Act (each
individually, a "Corporate Licensee" and collectively, the "Corporate
Licensees"). The Corporate Licensees are required to be licensed by the Nevada
Gaming Authorities. The gaming licenses held by the Corporate Licensees require
the payment of fees and taxes and are not transferable. As a Registered
Corporation, the Company is required periodically to submit detailed financial
and operating reports to the Nevada Commission and furnish any other information
which the Nevada Commission may require. No person may become a stockholder of,
or receive any percentage of profits from the Corporate Licensees without first
obtaining licenses and approvals from the Nevada Gaming Authorities. The
Company and the Corporate Licensees have obtained from the Nevada Gaming
Authorities the various registrations, approvals, permits and licenses required
in order to engage in gaming activities in Nevada.
The Nevada Gaming Authorities may investigate any individual who has a
material relationship to, or material involvement with, the Company or the
Corporate Licensees in order to determine whether such individual is suitable or
should be licensed as a business associate of a gaming licensee. Officers,
directors and certain key employees of the Corporate Licensees must file
applications with the Nevada Gaming Authorities and may be required to be
licensed or found suitable by the Nevada Gaming Authorities. Officers,
directors and key employees of the Company who are actively and directly
involved in gaming activities of the Corporate Licensees may be required to be
licensed or found suitable by the Nevada Gaming Authorities. The Nevada Gaming
Authorities may deny an application for licensing for any cause which they deem
reasonable. A finding of suitability is comparable to licensing, and both
require submission of detailed personal and financial information followed by a
thorough investigation. The applicant for licensing or a finding of suitability
must pay all the costs of the investigation. Changes in licensed positions must
be reported to the Nevada Gaming Authorities and in addition to their authority
to deny an application for a finding of suitability or licensure, the Nevada
Gaming Authorities have jurisdiction to disapprove a change in a corporate
position.
If the Nevada Gaming Authorities were to find an officer, director or key
employee unsuitable for licensing or unsuitable to continue having a
relationship with the Company or the Corporate Licensees, the companies involved
would have to sever
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all relationships with such person. In addition, the Nevada Commission may
require the Company or the Corporate Licensees to terminate the employment of
any person who refuses to file appropriate applications. Determinations of
suitability or of questions pertaining to licensing are not subject to judicial
review in Nevada.
The Company and the Corporate Licensees are required to submit detailed
financial and operating reports to the Nevada Commission. Substantially all
material loans, leases, sales of securities and similar financing transactions
by the Corporate Licensees must be reported to or approved by the Nevada
Commission.
If it were determined that the Nevada Act was violated by a Corporate
Licensee, the gaming licenses it holds could be limited, conditioned, suspended
or revoked, subject to compliance with certain statutory and regulatory
procedures. In addition, the Corporate Licensees, the Company and the persons
involved could be subject to substantial fines for each separate violation of
the Nevada Act at the discretion of the Nevada Commission. Further, a
supervisor could be appointed by the Nevada Commission to operate the Company's
gaming properties and, under certain circumstances, earnings generated during
the supervisor's appointment (except for reasonable rental value of the casino)
could be forfeited to the State of Nevada. Limitation, conditioning or
suspension of any gaming license or the appointment of a supervisor could (and
revocation of any gaming license would) materially adversely affect the
Company's gaming operations.
Any beneficial holder of the Company's voting securities, regardless of the
number of shares owned, may be required to file an application, be investigated,
and have his suitability as a beneficial holder of the Company's voting
securities determined if the Nevada Commission has reason to believe that such
ownership would otherwise be inconsistent with the declared policies of the
state of Nevada. The applicant must pay all costs of investigation incurred by
the Nevada Gaming Authorities in conducting any such investigation.
The Nevada Act requires any person who acquires more than five percent of a
Registered Corporation's voting securities to report the acquisition to the
Nevada Commission. The Nevada Act requires that beneficial owners of more than
10% of a Registered Corporation's voting securities apply to the Nevada
Commission for a finding of suitability within thirty days after the Chairman of
the Nevada Board mails the written notice requiring such filing. Under certain
circumstances, an "institutional investor", as defined in the Nevada Act, which
acquires more than 10%, but not more than 15%, of the Registered Corporation's
voting securities may apply to the Nevada Commission for a waiver of such
finding of suitability if such institutional investor holds the voting
securities for investment purposes only. An
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institutional investor shall not be deemed to hold voting securities for
investment purposes unless the voting securities were acquired and are held in
the ordinary course of business as an institutional investor and not for the
purpose of causing, directly or indirectly, the election of a majority of the
members of the board of directors of the Company, any change in the Company's
corporate charter, bylaws, management, policies or operations of the Registered
Corporation, or any of its gaming affiliates, or any other action which the
Nevada Commission finds to be inconsistent with holding the Registered
Corporation's voting securities for investment purposes only. Activities which
are not deemed to be inconsistent with holding voting securities for investment
purposes only include: (i) voting on all matters voted on by stockholders; (ii)
making financial and other inquiries of management of the type normally made by
securities analysts for informational purposes and not to cause a change in its
management, policies or operations; and (iii) such other activities as the
Nevada Commission may determine to be consistent with such investment intent.
If the beneficial holder of voting securities who must be found suitable is a
corporation, partnership or trust, it must submit detailed business and
financial information including a list of beneficial owners. The applicant is
required to pay all costs of investigation.
Any person who fails or refuses to apply for a finding of suitability or a
license within 30 days after being ordered to do so by the Nevada Commission or
the Chairman of the Nevada Board, may be found unsuitable. The same
restrictions apply to a record owner if the record owner, after request, fails
to identify the beneficial owner. Any stockholder found unsuitable and who
holds, directly or indirectly, any beneficial ownership of the Company's voting
securities beyond such period of time as may be prescribed by the Nevada
Commission may be guilty of a criminal offense. The Company is subject to
disciplinary action if, after it receives notice that a person is unsuitable to
be a stockholder or to have any other relationship with the Company or the
Corporate Licensees, the Company (i) pays that person any dividend or interest
upon voting securities of the Company, (ii) allows that person to exercise,
directly or indirectly, any voting right conferred through securities held by
that person, (iii) pays remuneration in any form to that person for services
rendered or otherwise, or (iv) fails to pursue all lawful efforts to require
such unsuitable person to relinquish his voting securities including, if
necessary, the immediate purchase of said voting securities for cash at fair
market value. Additionally, the Clark County Liquor and Gaming Licensing Board
has the authority to approve all persons owning or controlling the stock of any
corporation controlling a gaming licensee.
The Nevada Commission may, in its discretion, require the holder of any
debt security of a Registered Corporation to file applications, be investigated
and be found suitable to own the debt security of a Registered Corporation. If
the Nevada Commission determines that a person is unsuitable to own such
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security, then pursuant to the Nevada Act, the Registered Corporation can be
sanctioned, including the loss of its approvals, if without the prior approval
of the Nevada Commission, it: (i) pays to the unsuitable person any dividend,
interest, or any distribution whatsoever; (ii) recognizes any voting right by
such unsuitable person in connection with such securities; (iii) pays the
unsuitable person remuneration in any form; or (iv) makes any payment to the
unsuitable person by way of principal, redemption, conversion, exchange,
liquidation, or similar transaction.
The Company is required to maintain a current stock ledger in Nevada which
may be examined by the Nevada Gaming Authorities at any time. If any securities
are held in trust by an agent or by a nominee, the record holder may be required
to disclose the identity of the beneficial owner to the Nevada Gaming
Authorities. A failure to make such disclosure may be grounds for finding the
record holder unsuitable. The Company is also required to render maximum
assistance in determining the identity of the beneficial owner. The Nevada
Commission has the power to require the Company's stock certificates to bear a
legend indicating that the securities are subject to the Nevada Act. However, to
date, the Nevada Commission has not imposed such a requirement on the Company.
The Company may not make a public offering of its securities without the
prior approval of the Nevada Commission if the securities or proceeds therefrom
are intended to be used to construct, acquire or finance gaming facilities in
Nevada, or to retire or extend obligations incurred for such purposes. On
September 29, 1994, the Nevada Commission granted the Company prior approval to
make public offerings for a period of one year, subject to certain conditions
(the "Shelf Approval"). The Shelf approval also applies to any affiliated
company wholly owned by the Company (an "Affiliate") which is a publicly traded
corporation or would thereby become a publicly traded corporation pursuant to a
public offering. The Shelf Approval also includes approval for the Corporate
Licensees to guarantee any security issued by, or to hypothecate their assets to
secure the payment or performance of any obligations issued by, the Company or
an Affiliate in a public offering under the Shelf Registration. However, the
Shelf Approval may be rescinded for good cause without prior notice upon the
issuance of an interlocutory stop order by the Chairman of the Nevada Board and
must be renewed annually. The Shelf Approval does not constitute a finding,
recommendation or approval by the Nevada Commission or the Nevada Board as to
the accuracy or adequacy of the prospectus or the investment merits of the
securities offered. Any representation to the contrary is unlawful.
Changes in control of the Company through merger, consolidation, stock or
asset acquisitions, management or consulting agreements, or any act or conduct
by a person whereby he obtains control, may not occur without the prior approval
of
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the Nevada Commission. Entities seeking to acquire control of a Registered
Corporation must satisfy the Nevada Board and Nevada Commission in a variety of
stringent standards prior to assuming control of such Registered Corporation.
The Nevada Commission may also require controlling stockholders, officers,
directors and other persons having a material relationship or involvement with
the entity proposing to acquire control, to be investigated and licensed as part
of the approval process relating to the transaction.
The Nevada legislature has declared that some corporate acquisitions
opposed by management, repurchases of voting securities and corporate defense
tactics affecting Nevada gaming corporate licensees, and Registered Corporations
that are affiliated with those operations, may be injurious to stable and
productive corporate gaming. The Nevada Commission has established a regulatory
scheme to ameliorate the potentially adverse effects of these business practices
upon Nevada's gaming industry and to further Nevada's policy to: (i) assure the
financial stability of corporate gaming operators and their affiliates; (ii)
preserve the beneficial aspects of conducting business in the corporate form;
and (iii) promote a neutral environment for the orderly governance of corporate
affairs. Approvals are, in certain circumstances, required from the Nevada
Commission before the Company can make exceptional repurchases of voting
securities above the current market price thereof and before a corporate
acquisition opposed by management can be consummated. The Nevada Act also
requires prior approval of a plan of recapitalization proposed by the Company's
Board of Directors in response to a tender offer made directly to the Registered
Corporation's stockholders for the purposes of acquiring control of the
Registered Corporation.
License fees and taxes, computed in various ways depending on the type of
gaming or activity involved, are payable to the State of Nevada and to the
counties and cities in which the Corporate Licensees' respective operations are
conducted. Depending upon the particular fee or tax involved, these fees and
taxes are payable either monthly, quarterly or annually and are based upon
either: (i) a percentage of the gross revenues received; (ii) the number of
gaming devices operated; or (iii) the number of table games operated. A casino
entertainment tax is also paid by casino operations where entertainment is
furnished in connection with the selling of food or refreshments. Nevada
licensees that hold a license as an operator of a slot route, or a
manufacturer's or distributor's license, also pay certain fees and taxes to the
State of Nevada.
Any person who is licensed, required to be licensed, registered, required
to be registered, or is under common control with such persons (collectively,
the "Licensees"), and who proposes to become involved in a gaming venture
outside of Nevada, is required to deposit with the Nevada Board, and thereafter
maintain, a revolving fund in the amount of $10,000 to
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pay the expenses of investigation by the Nevada Board of their participation in
such foreign gaming. The revolving fund is subject to increase or decrease in
the discretion of the Nevada Commission. Thereafter, Licensees are required to
comply with certain reporting requirements imposed by the Nevada Act. Licensees
are also subject to disciplinary action by the Nevada Commission if they
knowingly violate any laws of the foreign jurisdiction pertaining to the foreign
gaming operation, fail to conduct the foreign gaming operation in accordance
with the standards of honesty and integrity required of Nevada gaming
operations, engage in activities that are harmful to the state of Nevada or its
ability to collect gaming taxes and fees, or employ a person in the foreign
operation who has been denied a license or finding of suitability in Nevada on
the ground of personal unsuitability.
The sale of alcoholic beverages by the Company at its Nevada establishments
is subject to supervision, control and regulation by the Clark County Board or
the City of Reno, each of which issues licenses deemed to be nontransferable,
revocable privileges, and have full power to limit, condition, suspend or revoke
such licenses. The Company is currently licensed to sell alcoholic beverages at
each of its establishments. Any adverse regulatory act with respect to these
licenses could have an adverse effect upon operations at the affected properties
and, depending on the property or properties affected, the operation of the
Company.
Mississippi
-----------
The Company conducts its Mississippi gaming operations through a
Mississippi subsidiary, Circus Circus Mississippi, Inc. ("CCMI"). The ownership
and operation of casino gaming facilities in Mississippi are subject to
extensive state and local regulation. In order to open and operate Circus
Circus-Tunica, the Company was required to register under the Mississippi Gaming
Control Act (the "Mississippi Act") and its Mississippi gaming operations are
subject to the licensing and regulatory control of the Mississippi Gaming
Commission (the "Mississippi Commission") and various local and county
regulatory agencies. Effective October 29, 1991, the Mississippi Commission
adopted regulations in furtherance of the Mississippi Act (the "regulations").
Changes in the Mississippi Act, the regulations and/or interpretations of the
Mississippi Act and the regulations by the Mississippi Commission could have a
material adverse effect on gaming operations conducted by the Company in
Mississippi.
The Company is required to submit detailed financial, operating and other
reports to the Mississippi Commission. Substantially all loans, leases, sales
of securities and similar financing transactions entered into by CCMI must be
reported to or approved by the Mississippi Commission. CCMI also is required to
periodically submit detailed financial and operating reports
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to the Mississippi Commission and the Mississippi State Commission and to
furnish any other information required thereby.
Each of the directors, officers and key employees of the Company who are
actively and directly engaged in the administration or supervision of gaming in
Mississippi, or who have any other significant direct or indirect involvement
with the gaming activities of the Company in Mississippi, must be found suitable
therefor, and may be required to be licensed, by the Mississippi Commission.
The finding of suitability is comparable to licensing, and both require
submission of detailed personal financial information followed by a thorough
investigation. In addition, any individual who is found to have a material
relationship to, or material involvement with, the Company may be required to be
investigated in order to be found suitable or to be licensed as a business
associate of the Company. Key employees, controlling persons or others who
exercise significant influence upon the management or affairs of the Company may
also be deemed to have such a relationship or involvement. There can be no
assurance that a person who is subject to a finding of suitability will be
found suitable by the Mississippi Commission. An application for licensing may
be denied for any cause deemed reasonable by the Mississippi Commission.
Changes in licensed positions must be reported to the Mississippi Commission.
In addition to its authority to deny an application for a license, the
Mississippi Commission has jurisdiction to disapprove a change in corporate
position. If the Mississippi Commission were to find a director, officer or key
employee unsuitable for licensing or unsuitable to continue having a
relationship with the Company, the Company would have to suspend, dismiss and
sever all relationships with such person in order to continue to have any
involvement in gaming in Mississippi. The Company would have similar
obligations with regard to any person who should refuse to file appropriate
applications. Each gaming employee at a Mississippi gaming facility must obtain
from the Mississippi Commission a work permit which may be revoked upon the
occurrence of certain specified events.
Mississippi statutes and regulations give the Mississippi Commission the
discretion to require a suitability finding with respect to anyone who acquires
any security of the Company, regardless of the percentage of ownership. The
current policy of the Mississippi Commission is to require anyone acquiring five
percent or more of any voting securities of a public or private company to be
found suitable. If the owner of voting securities who is required to be found
suitable is a corporation, partnership or trust, it must submit detailed
business and financial information including a list of beneficial owners. The
applicant is required to pay all costs of investigation which the Company may
reimburse. The Mississippi Commission has selected those persons it feels were
required to be investigated and found suitable and has made the findings of
suitability. However,
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other persons, for the reasons set forth above, may be required to be found
suitable.
Any owner of voting securities found unsuitable and who holds, directly or
indirectly, any beneficial ownership of equity interests in the Company beyond
such period of time as may be prescribed by the Mississippi Commission may be
guilty of a misdemeanor. Any person who fails or refuses to apply for a finding
of suitability or a license within 30 days after being ordered to do so by the
Mississippi Commission may be found unsuitable. The Company will be subject to
disciplinary action if, after it receives notice that a person is unsuitable to
be an owner of or to have any other relationship with it, the Company (i) pays
the unsuitable person any dividends or interest upon any securities of the
gaming subsidiary or any payments or distribution of any kind whatsoever, (ii)
recognizes the exercise, directly or indirectly, of any voting rights in its
securities by the unsuitable person, or (iii) pays the unsuitable person any
remuneration in any form for services rendered or otherwise, except in certain
limited and specific circumstances. In addition, if the Mississippi Commission
finds any owner of voting securities unsuitable, such owner must immediately
surrender all securities to the Company, and the Company must refund any money
or other thing of value that may have been invested in the Company or made use
of by the Company.
The Company is required to maintain current equity ownership ledgers in the
State of Mississippi which may be examined by the Mississippi Commission at any
time. The Company obtained a waiver of this ledger requirement from the
Mississippi Commission at its licensing hearing, however, the waiver may be
revoked, modified or suspended at any time by the Mississippi Commission in its
discretion. If any securities are held in trust by an agent or by a nominee,
the record holder may be required to disclose the identity of the beneficial
owner to the Mississippi Commission. A failure to make such disclosure may be
grounds for finding the record holder unsuitable. The Company also is required
to render maximum assistance in determining the identity of such a beneficial
owner.
The Mississippi Act requires that certificates representing equity
securities of the Company bear a legend to the general effect that the
securities are subject to the Mississippi Act and regulations of the Mississippi
Commission. The Company obtained a waiver of this legend requirement from the
Mississippi Commission at its licensing hearing, however, this waiver may be
revoked, modified or suspended by the Mississippi Commission in its discretion
at any time. The Mississippi Commission, through the power to regulate
licenses, has the power to impose additional restrictions on the Company and on
the holders of the Company's securities at any time.
The regulations provide that a change in control of the Company may not
occur without the prior approval of the
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Mississippi Commission. Mississippi law prohibits the Company from making a
public offering of its securities without the approval of the Mississippi
Commission if any part of the proceeds of the offering is to be used to finance
the construction, acquisition or operation of gaming facilities in Mississippi,
or to retire or extend obligations incurred for one or more of such purposes.
As long as the Company is licensed to conduct gaming in Mississippi, the
Company may not engage in gaming activities in Mississippi while also conducting
gaming operations outside of Mississippi without approval of the Mississippi
Commission. The Company has been approved in the following jurisdictions;
Nevada, Indiana, Louisiana and Ontario, Canada.
The Company received its Mississippi gaming license on August 18, 1994.
The gaming license is not transferable and must be renewed every two years. The
Mississippi Commission in 1994 enacted an infrastructure development regulation
which requires that a Mississippi casino invest 25% of its casino costs in
infrastructure facilities. Infrastructure facilities are defined in the
regulation to include a hotel with at least 250 rooms, theme park, golf course
and other similar facilities. The regulation provides that the infrastructure
requirement is not satisfied by construction of parking, roads, drainage or
other items which a municipality or county would normally construct. The
Mississippi Commission in recent relicensure hearings has applied the
infrastructure regulation to existing licensed casinos seeking relicensure. The
Company anticipates that infrastructure development will be an issue considered
by the Mississippi Commission in the Company's relicensure hearing in 1996.
There can be no assurance that any renewal application will be approved. Each
issuing agency may at any time dissolve, suspend, condition, limit or restrict a
license or approval to own equity interests in the Company for any cause deemed
reasonable by such agency.
Substantial fines for each violation of gaming laws or regulations may be
levied against the Company in Mississippi. A violation under any gaming license
held by the Company may be deemed a violation of its Mississippi license.
Suspension or revocation of any of the Company's foregoing gaming licenses or
of the approval of the Company would have a material adverse effect upon any
business conducted by the Company in Mississippi.
License fees and taxes, computed in various ways depending on the type of
gaming involved, are payable to the State of Mississippi and to the county and
cities in which the Company conducts operations in Mississippi. Depending upon
the particular fee or tax involved, these fees and taxes are payable either
weekly or annually and are based upon (i) the gross gaming revenues received by
the casino operation, (ii) the number of slot machines operated by the casino,
and (iii) the number of
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table games operated by the casino. The legal age for gaming in Mississippi is
21.
Windsor, Ontario, Canada
------------------------
The Company is a shareholder holding one-third of the outstanding shares of
WCL, a corporation incorporated under the laws of the Province of Ontario,
Canada. WCL has two other shareholders, each holding one-third of the
outstanding shares of WCL. Pursuant to a contract with the Ontario Casino
Corporation (the "OCC"), a governmental authority established under the Ontario
Casino Corporation Act, WCL intends to develop and operate a hotel-casino in
Windsor, Ontario on behalf of the OCC and, pending the opening of such property,
has been operating an interim casino that opened in May 1994.
The operation of casino gaming facilities by WCL in Windsor, Ontario, is
subject to extensive regulation. The gaming operations of WCL in Ontario are
subject to the registration and regulatory control of the Ontario Gaming Control
Commission (the "Ontario Commission"), the Registrar of Gaming Control (the
"Ontario Registrar") and the Director of Gaming Control (the "Ontario Director")
established or appointed under the Ontario Gaming Control Act (the "Ontario
Act"). So long as WCL operates a casino in Windsor, it must be registered as a
casino operator under the Ontario Act.
An application for registration or renewal of registration will be denied
if there are reasonable grounds to believe that the applicant will not be
financially responsible in the conduct of its business or if there are
reasonable grounds to believe that it will not act in accordance with the law or
with integrity, honesty, or in the public interest. In determining whether
registration should be granted or renewed, the Ontario Registrar may have regard
to the financial history and past conduct of the applicant, its officers and
directors and "interested persons" who have a beneficial interest in, control
of, or who have financed the applicant's business or any of its officers' or
directors' businesses. The Ontario Registrar is empowered to investigate the
character, financial history and competence of WCL or any person who has a
beneficial interest in, control of, or who has financed WCL's business,
including WCL's shareholders. The Ontario Registrar may also investigate
officers or directors of WCL. The applicant for registration or renewal must
pay the reasonable costs of such investigations. Each gaming employee at an
Ontario gaming facility must be registered as a gaming assistant which
registration may be revoked upon the occurrence of certain events.
The Ontario Registrar may, subject to a registrant's right to a hearing
under the Ontario Act, suspend or revoke a registration for any reason that
would disentitle such registrant to registration or renewal. A change in
control of WCL could result in revocation of registration if the new person or
entity
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in control is determined to be unsuitable by the Ontario Registrar. The
registration of WCL shall be deemed to expire immediately upon any change in the
composition of the officers and directors of WCL, unless the Ontario Registrar
has consented in writing to such change. Moreover, there can be no assurance
that any renewal application will be approved.
All suppliers of goods and services to WCL must be registered as a supplier
under the Ontario Act and regulations or have been issued a certificate of
exemption from the Ontario Registrar.
All games of chance must be played in accordance with the rules of play
prescribed by the regulations and approved in writing by the Ontario Commission.
Investigators appointed by the Ontario Commission are empowered, subject to
certain limitations, to conduct warrantless searches for the purpose of
determining compliance with the Ontario Act, the regulations or the terms of a
registration. The Ontario Director may issue an order freezing the assets of a
person if it is alleged that a person has contravened the Ontario Act or the
regulations thereunder, is subject to criminal proceeding, or is the subject of
an investigation under the Ontario Act and the Ontario Director finds reasonable
grounds to believe that the interests of the person on whose behalf the assets
are to be held require protection.
Substantial fines for each violation of the gaming laws or regulations may
be levied against WCL. Suspension or revocation of registration could lead to a
termination of any contract with OCC and could have a material adverse effect
upon any business conducted by WCL in Ontario. The legal age for gaming in
Ontario is 19.
WCL is required to submit audited financial statements to the Ontario
Commission and to keep records prescribed by regulation. WCL must also make
available to the OCC all reports, accounts, records and other documents related
to the operation of the casino.
The government can make further regulations under the Ontario Act. Any
additions to or changes in the Ontario Act or the regulations thereunder could
have a material adverse effect on WCL's gaming operations, and thus the
Company's interest therein.
The sale of alcoholic beverages by WCL at its Ontario establishment is
subject to the supervision, control and regulation of the Liquor License Board
of Ontario, an Ontario provincial government agency. The failure to obtain or
the revocation of a license to sell alcoholic beverages for the casino gaming
facilities operated by WCL in Windsor could have a material adverse effect on
the operation of such facilities.
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Louisiana
---------
In July 1991, the Louisiana legislature adopted legislation permitting
riverboat casino activity on certain rivers and waterways in Louisiana. The
legislation granted authority to supervise riverboat gaming activities to the
Louisiana Division and to the Louisiana Riverboat Gaming Commission (the
"Louisiana Commission"). The Louisiana Division is authorized to investigate
applicants and issue licenses, investigate violations of the gaming statutes and
conduct continuing reviews of gaming activities generally. The Louisiana
Commission is authorized to hear and determine all appeals relative to the
granting, suspension, revocation, condition or renewal of licenses, permits and
applications; in addition, the Louisiana Commission must establish regulations
concerning authorized routes and duration of excursions, minimum levels of
insurance and the construction and periodic inspections of riverboat casinos.
The Louisiana Division is empowered to issue up to 15 licenses to conduct
riverboat gaming activities, and no more than six licenses may be granted to
riverboat casinos operating in any one parish. As of March 31, 1995, the
Louisiana Division had issued 15 licenses for riverboat casinos. Of the 15
licenses, seven are in the New Orleans area, four in the City of New Orleans,
one in Harvey (approximately eight miles from the Louisiana Joint Venture site)
and one is for a riverboat casino in Luling/St. Rose (approximately 30 miles
from the Louisiana Joint Venture site), one in Kenner (approximately 30 miles
from the Louisiana Joint Venture site), and the Louisiana Venture in Chalmette.
In issuing a license, the Louisiana Division must find that the applicant
is of good character, honesty and integrity and that the applicant's prior
activities, criminal record, if any, reputation, habits, and associations do not
pose a threat to the public interest of the State of Louisiana or to the
effective regulation and control of gaming, or create or enhance the dangers of
unsuitable, unfair or illegal practices, methods and activities in the conduct
of gaming or the carrying on of business and financial arrangements in
connection therewith. The applicant's officers, directors, managers and
principal shareholders may be subject to strict scrutiny and approval by the
Louisiana Division. The Louisiana Division will not grant a license unless it
finds that: (i) the applicant is capable of conducting gaming operations, which
means that the applicant can demonstrate the capability, either through
training, education, business experience, or a combination of the above, to
operate a gaming casino; (ii) the proposed financing of the riverboat and the
gaming operations is adequate for the nature of the proposed operation and from
a source suitable and acceptable to the Louisiana Division; (iii) the applicant
demonstrates a proven ability to operate a vessel of comparable size, capacity
and complexity to a riverboat so as to ensure the safety of its passengers; (iv)
the applicant submits a detailed plan of design
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of the riverboat in its application for a license; (v) the applicant designates
the docking facilities to be used by the riverboat; (vi) the applicant shows
adequate financial ability to construct and maintain a riverboat; and (vii) the
applicant has a good faith plan to recruit, train and upgrade minorities in all
employment classifications.
The Louisiana gaming law specifies certain restrictions and conditions
relating to the operation of a riverboat casino, including the following: (i)
gaming is not permitted while a riverboat casino is docked, except for 45
minutes between excursions and during times when dangerous weather or water
conditions exist, and an excursion would be unsafe; (ii) each excursion may not
be less than three hours nor more than eight hours in duration, subject to
specified exceptions; (iii) gaming devices, equipment and supplies may only be
purchased or leased from permitted suppliers; (iv) gaming may only take place in
the designated gaming area while the riverboat casino is upon a designated river
or waterway; (v) gaming equipment may not be possessed, maintained or exhibited
by any person on a riverboat except in the specifically designated gaming area,
or a secure area used for inspection, repair or storage of such equipment; (vi)
wagers may be received only from a person present on a licensed riverboat
casino; (vii) persons under 21 are not permitted in designated gaming areas;
(viii) except for slot machine play, wagers may be made only with tokens, chips
or electronic cards purchased from the licensee aboard a riverboat; (ix)
licensees may only use docking facilities and routes for which they are licensed
and may only board and discharge passengers at the riverboat casino's licensed
berth; (x) licenses must have adequate protection and indemnity insurance; (xi)
licensees must have all necessary federal and state licenses, certificates and
other regulatory approvals prior to operating a riverboat casino; and (xii)
gaming may only be conducted in accordance with the terms of the license and the
rules and regulations adopted by the Louisiana Division and the Louisiana
Commission.
A license is for a fixed term of five years and is subject to annual review
by the Louisiana Division thereafter. The transfer of a license or the transfer
of an interest in a license is prohibited. The sale, assignment, transfer,
pledge or disposition by any person of securities which represent five percent
or more of the total outstanding shares of a license holder is subject to
Louisiana Division approval. A security issued by a corporation that holds a
license must generally disclose these restrictions.
Fees for conducting gaming activities on a Louisiana riverboat casino
include (i) $50,000 for the first year after a license is issued and $100,000
per year thereafter plus (ii) 18-1/2% of net gaming proceeds. In addition, the
local governing authority may levy a per excursion admission fee of up to $2.50
per passenger boarding or embarking on a gaming riverboat.
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In July 1991, Louisiana also authorized operation of video poker machines
at various types of facilities in the state, including bars, truckstops and
racetracks.
Illinois
--------
If the Company's acquisition of the Gold Strike Entities is consummated,
the Company will become subject to the jurisdiction of the Illinois gaming
authorities as a result of its acquisition of a 50% interest in The Grand
Victoria riverboat casino and gaming complex based in Elgin, Illinois.
In 1990, the Riverboat Gambling Act (the "Illinois Act") was enacted by the
State of Illinois. The Illinois Act authorizes the five-member Illinois Gaming
Board (the "Illinois Board") to issue up to ten owners licenses on navigable
streams within or forming a boundary of the State of Illinois except for Lake
Michigan and any waterway in Cook County, which includes Chicago. The Illinois
Act strictly regulates the facilities, persons, associations and practices
related to gaming operations pursuant to the police powers of the State of
Illinois, including comprehensive law enforcement supervision. The Illinois Act
grants the Illinois Board specific powers and duties, and all other powers
necessary and proper to fully and effectively execute the Illinois Act for the
purpose of administering, regulating and enforcing the system of riverboat
gaming. The Illinois Board's jurisdiction extends to every person, association,
corporation, partnership and trust involved in riverboat gaming operations in
the State of Illinois.
The Illinois Act requires the owner of a riverboat gaming operation to hold
an owner's license issued by the Illinois Board. Each owner's license permits
the holder to own up to two riverboats, however, gaming participants are limited
to 1,200 for any owner's license. A licensed owner may hold up to 10% of a
second riverboat gaming operation in Illinois.
The Illinois Act restricts the granting of certain of the ten owners'
licenses by location. Four are for operators docking at sites on the
Mississippi River, one is for an operator docking at a site on the Illinois
River south of Marshall County and one is for an operator docking at a site on
the Des Plaines River in Will County. The remaining four owner's licenses are
not restricted as to location. In addition to the ten owner's licenses which
may be authorized under the Illinois Act, the Illinois Board may issue special
event licenses allowing persons who are not otherwise licensed to conduct
riverboat gaming to conduct such gaming on a specified date or series of dates.
Riverboat gaming under such a license may take place on a riverboat not normally
used for riverboat gaming.
A gaming license issued to the Company will be valid for an initial period
of three years and must be renewed annually thereafter. An owner's license is
eligible for renewal upon
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payment of the applicable fee and a determination by the Illinois Board that the
licensee continues to meet all of the requirements of the Illinois Act. An
ownership interest in an owner's license, or in a business entity other than a
publicly held business entity which holds an owner's license, may not be (i)
transferred or (ii) pledged as collateral without the approval of the Illinois
Board. The Illinois Board also requires that employees of a gaming operator and
vendors of gaming supplies and equipment be licensed.
The Illinois Act does not limit the maximum bet or per patron loss.
Licensees, however, may set any maximum or minimum limits on wagering under the
Illinois Act. No person under the age of 21 is permitted to wager.
An admission tax is imposed on the owner of a riverboat operation at a rate
of $2 per person admitted. Additionally, a wagering tax is imposed on the
adjusted gross receipts, as defined in the Illinois Act, of a riverboat
operation at the rate of 20%. The licensee is required to wire the wagering tax
payment to the Illinois Board daily.
Under the Illinois Act, there is a four-hour maximum period during which
gaming may be conducted during a gaming excursion. Gaming is deemed to commence
when the first passenger boards a riverboat for an excursion and may continue
while other passengers are boarding for a period not to exceed 30 minutes. A
gaming excursion is deemed to have started upon the commencement of gaming.
Gaming may continue for a period not to exceed 30 minutes after the gangplank or
its equivalent is lowered. During this 30-minute period of egress, new
passengers may not board a riverboat. Special event extended cruises may be
authorized by the Illinois Board.
If a riverboat captain reasonably determines that either it is unsafe to
transport passengers on the waterway due to inclement weather or the riverboat
has been rendered temporarily inoperable by mechanical or structural
difficulties or river icing, the riverboat shall either not leave the dock or
immediately return to it. If a riverboat captain reasonably determines for
reasons of safety that although seaworthy, the riverboat should not leave the
dock or should return immediately thereto, due to either of the above
conditions, a gaming excursion may commence or continue while the gangplank or
its equivalent is raised and remains raised, in which event the riverboat is not
considered docked. If, due to either of the above conditions, a gaming
excursion must commence or continue with the gangplank or its equivalent raised,
and the riverboat does not leave the dock, ingress is prohibited until the
completion of the excursion.
After consultation with the U.S. Army Corps of Engineers, the Illinois
Board may establish binding emergency orders upon the concurrence of a majority
regarding the navigability of
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rivers in the event of extreme weather conditions, acts of God or their extreme
circumstances.
The Illinois Board is authorized to conduct investigations into the conduct
of gaming as it may deem necessary and proper and into alleged violations of the
Illinois Act and the Illinois Board rules. Employees and agents of the Illinois
Gaming Board have access to and may inspect any facilities relating to the
riverboat gaming operations at all times.
A holder of any license is subject to imposition of fines, suspension or
revocation of such license, or other action for any act or failure to act by
himself or his agents or employees, that is injurious to the public health,
safety, morals, good order and general welfare of the people of the State of
Illinois, or that would discredit or tend to discredit the Illinois gaming
industry or the State of Illinois. Any riverboat operations not conducted in
compliance with the Illinois Act may constitute an illegal gaming place and
consequently may be subject to criminal penalties, which penalties include
possible seizure, confiscation and destruction of illegal gaming devices and
seizure and sale of riverboats and dock facilities to pay any unsatisfied
judgment that may be recovered and any unsatisfied fine that may be levied. The
Illinois Act also provides for civil penalties, equal to the amount of gross
receipts derived from wagering on the gaming, whether unauthorized or
authorized, conducted on the day of any violation. The Illinois Board may
revoke or suspend licenses, as the Illinois Board may see fit and in compliance
with applicable laws of the State of Illinois regarding administrative
procedures and may suspend an owner's license, without notice or hearing, upon a
determination that the safety or health of patrons or employees is jeopardized
by continuing a riverboat's operation. The suspension may remain in effect
until the Illinois Board determines that the cause for suspension has been
abated and it may revoke the owner's license upon a determination that the owner
has not made satisfactory progress toward abating the hazard.
The Illinois Board requires that a "Key Person" of an owner, operator or
licensee be investigated and approved by the Illinois Board. Any person
directly or indirectly holding a legal or beneficial interest of 5% or more of
an applicant is deemed to be a "Key Person," as are officers, directors,
trustees, partners, proprietors and managing agents of a gaming enterprise.
Furthermore, each applicant for an owner's license must disclose the identity of
every person, association, trust or corporation having a greater than 1% direct
or indirect pecuniary interest in the riverboat gaming operation with respect to
which the license is sought. The Illinois Board may also require an applicant
to disclose any other principal or investor and require the investigation and
approval of such individuals.
The Illinois Board (unless the investor qualifies as an institutional
investor) requires a Personal Disclosure Form from
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any person or entity who or which, individually or in association with others,
acquires directly or indirectly, beneficial ownership of more than 5% of any
class of voting securities or non-voting securities convertible into voting
securities of a publicly traded corporation which holds an ownership interest in
the holder of an owner's license. If the Illinois Board denies an application
for such a transfer and if no hearing is requested, the applicant for the
transfer of ownership must promptly divest those shares in the publicly traded
parent corporation. The holder of an owner's license would not be able to
distribute profits to a publicly traded parent corporation until such shares
have been divested. If a hearing is requested, the shares need not be divested
and profits may be distributed to a publicly-held parent corporation pending the
issuance of a final order from the Illinois Gaming Board.
If the Illinois Board does not approve of a holder of any of the Common
Stock, the Company's Bylaws provide that the Company shall have the right to
purchase the Common Stock under procedures similar to the purchase provisions
applicable to Disqualified Holders under the Casino Act.
The Illinois Board may waive any licensing requirement or procedure
provided by rule if it determines that such waiver is in the best interests of
the public and the gaming industry.
Uncertainty exists regarding the Illinois gambling regulatory environment
due to limited experience in interpreting the Illinois Act.
From time to time, various proposals have been introduced in the Illinois
legislature that, if enacted, would affect the taxation, regulation, operation
or other aspects of the gaming industry or the Company. Some of this
legislation, if enacted, could adversely affect the gaming industry or the
Company. No assurance can be given whether such or similar legislation will be
enacted.
Applicants for and holders of an owner's license are required to obtain
formal approval from the Illinois Board for changes in the following areas: (i)
Key Persons, (ii) type of entity, (iii) equity and debt capitalization of the
entity, (iv) investors and/or debt holders, (v) source of funds, (vi)
applicant's economic development plan, (vii) riverboat capacity or significant
design change, (viii) gaming positions, (ix) anticipated economic impact, or (x)
pro forma budgets and financial statements.
A holder of an owner's license is allowed to make distributions to its
stockholders only to the extent that such distribution would not impair the
financial viability of the gaming operation. Factors to be considered by the
licensee will include but not be limited to the following: (i) working capital
requirements, (ii) debt service requirements, (iii) requirements
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for repairs and maintenance, and (iv) capital expenditure requirements.
Other Jurisdictions
-------------------
As a result of the Company's efforts to expand its operations into new
jurisdictions, the Company is likely to become subject to comprehensive gaming
and other regulations in each such jurisdiction into which its operations are
expanded. Such regulations may be similar to, and could be more restrictive
than, those currently applicable to the Company, its officers, directors or
employees or persons associated with the Company.
EMPLOYEES AND LABOR RELATIONS
- -----------------------------
At January 31, 1995, the Company employed approximately 18,000 persons.
Approximately 41% of the Company's employees at January 31, 1995 were employed
pursuant to the terms of collective bargaining agreements. Management considers
its labor relations to be satisfactory. A work stoppage has not been experienced
at a Company-owned property since an industry-wide strike in 1975. In Windsor,
Ontario, the interim casino being operated by a corporation in which the Company
owns a 33-1/3% interest was closed by a three-week long strike in March 1995,
but has settled this labor dispute and has reopened the casino.
Certain states in which gaming recently has been legalized have established
community commitment and similar laws which require that a specified percentage
of employees of gaming ventures be residents of the state in which the gaming
venture is located. These laws could affect the ability of the Company to
attract and retain qualified employees for gaming operations conducted by the
Company or joint ventures in which it participates outside Nevada.
ITEM 2. PROPERTIES.
- ------ ----------
Circus Circus-Las Vegas. The Company owns approximately 69 acres of land
-----------------------
with 375 feet of frontage on the Las Vegas Strip (the "Circus Circus-Las Vegas
Site") and the related improvements. As of January 31, 1995, neither the Circus
Circus-Las Vegas Site nor any of the improvements situated thereon was subject
to any encumbrance securing the repayment of indebtedness. For additional
information concerning Circus Circus-Las Vegas, see "Description of the
Company's Operating Hotels and Casinos -- Las Vegas, Nevada -- Circus Circus-Las
Vegas" in Item 1 of this Report.
Luxor and Excalibur. The Company owns a 117-acre parcel on the southwest
-------------------
corner of the intersection of the Las Vegas Strip and Tropicana Avenue, with
approximately 2,400 feet of frontage on the Las Vegas Strip (the "Luxor-
Excalibur Site") and the related improvements. Luxor is situated on the
southern portion of the Luxor-Excalibur Site, and Excalibur is situated on the
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northern portion of such site. As of January 31, 1995, neither the Luxor-
Excalibur Site nor any of the improvements situated thereon was subject to any
encumbrance securing the repayment of indebtedness. For additional information
concerning Luxor and Excalibur, see "Description of the Company's Operating
Hotels and Casinos -- Las Vegas, Nevada -- Luxor" and "-- Excalibur" in Item 1
of this Report.
Circus Circus-Reno. Circus Circus-Reno is situated on a two-block area
------------------
in downtown Reno (the "Circus Circus-Reno Site"), of which approximately 80% is
owned by the Company and the remainder is held under three separate leases, two
of which expire in 2032 and 2033. The Company owns the remainder interest in
the parcel subject to the third lease pursuant to which the Company is obligated
to pay rent for the lifetime of the landlord. As of January 31, 1995, neither
the portion of the Circus Circus-Reno Site owned by the Company nor any of the
improvements situated thereon was subject to any encumbrance securing the
repayment of indebtedness. For additional information concerning Circus Circus-
Reno, see "Description of the Company's Operating Hotels and Casinos -- Reno,
Nevada -- Circus Circus-Reno" in Item 1 of this Report.
Colorado Belle. The Company owns approximately 22 acres on the bank of
--------------
the Colorado River in Laughlin, Nevada (the "Colorado Belle Site"), and the
related improvements. As of January 31, 1995, neither the Colorado Belle Site
nor any of the improvements situated thereon was subject to any encumbrance
securing the repayment of indebtedness. For additional information concerning
the Colorado Belle Hotel and Casino, see "Description of the Company's Operating
Hotels and Casinos -- Laughlin, Nevada -- the Colorado Belle" in Item 1 of this
Report.
Edgewater Hotel and Casino. Adjacent to the Colorado Belle Site, the
--------------------------
Company owns approximately 16 acres on the bank of the Colorado River in
Laughlin, Nevada (the "Edgewater Site"), and the related improvements. As of
January 31, 1995, neither the Edgewater Site nor any of the improvements
situated thereon was subject to any encumbrance securing the repayment of
indebtedness. For additional information concerning the Edgewater Hotel and
Casino, see "Description of the Company's Operating Hotels and Casinos --
Laughlin, Nevada -- the Edgewater" in Item 1 of this Report.
Circus Circus-Tunica. The Company owns approximately 24 acres in Tunica
--------------------
County, Mississippi and the related improvements (the "Circus Circus-Tunica
Site") and an undivided 50% interest in an additional 388 acres jointly owned by
the Company and another gaming company adjacent to the Tunica Site (the "Tunica
Jointly Owned Area"). As of January 31, 1995, neither the Tunica Site nor the
Company's interest in the Tunica Jointly Owned Area was subject to any
encumbrance securing the repayment of indebtedness. For additional information
concerning Circus Circus-Tunica, see "Description of the Company's Operating
Hotels
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<PAGE>
and Casinos -- Tunica County, Mississippi -- Circus Circus-Tunica" in Item 1 of
this Report.
Other Properties
----------------
Slots-A-Fun is situated on a 30,000 square foot parcel owned by the Company
and has approximately 100 feet of frontage on the Las Vegas Strip. The land,
building and other improvements were not subject to any encumbrance securing
indebtedness at January 31, 1995.
The Company operates the Silver City Casino in Las Vegas under a lease
which expires in October 1999. The Company currently pays a base rent of
$129,982 per month. The base rent is subject to annual increases, calculated by
using a specified index with a cap based on a specified percentage of annual
revenues. Under the terms of the lease, the landlord or the landlord's assignee
is entitled to participate in the profits to the extent of 50% of defined income
from the operation of the Silver City Casino. There was no participation rent
due for the years ended January 31, 1993, 1994 or 1995.
The Company owns approximately 73 acres of unimproved land located
immediately south of the approximately 47-acre site of the Hacienda Hotel and
Casino (which the Company has an agreement to purchase, subject to its receipt
of certain regulatory approvals). The 73-acre site, which was acquired in March
1995 for $73 million, is not, as of the date of this Report, subject to any
encumbrance securing indebtedness.
The Company owns approximately 15 acres of land across the Las Vegas Strip
from Luxor. The land, which was not subject to any encumbrance securing
indebtedness as of January 31, 1995, is utilized as parking lot for employees at
Luxor and Excalibur.
The Company also owns or leases, or has options and/or agreements to
purchase or lease, certain other improved and unimproved properties which are
not deemed to be material to the Company.
JOINT VENTURE INTERESTS
- -----------------------
Reference is made to "Joint Venture Participations" in Item 1 of the Report
for a discussion of (i) a casino and entertainment complex being constructed in
Reno, Nevada by a general partnership (the "Reno Partnership") in which the
Company is a 50% participant (the "Reno Venture Property") and (ii) a 26-acre
parcel in Chalmette, Louisiana which is the site of a riverboat gaming facility
being developed by a limited liability company (the "Chalmette LLC") in which
the Company owns a 50% interest (the "Chalmette Property"). As of January 31,
1995, neither the Reno Venture Property (which is owned by the Reno Partnership)
nor the Chalmette Property (which is owned by the Chalmette LLC) was subject to
any encumbrance securing the repayment of indebtedness.
ITEM 3. LEGAL PROCEEDINGS.
- ------ -----------------
On April 26, 1994, a lawsuit requesting class certification, was filed in
the United States District Court for the Middle District of Florida against 41
manufacturers, distributors and casino operators of video poker and electronic
slot machines, including the Company and most of the other major hotel-casino
companies. On May 10, 1994, a lawsuit requesting class certification alleging
substantially identical claims was filed by another plaintiff in the same court
against 48 defendants, including the Company. The two lawsuits have been
consolidated into a single action and transferred to the United States District
Court for the District of Nevada. The consolidated case alleges that the
defendants have engaged in a course of
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<PAGE>
fraudulent and misleading conduct intended to induce persons to play video poker
and electronic slot machines by collectively misrepresenting how the gaming
machines operate, as well as the extent to which there is an opportunity to win.
The case alleges violations of the Racketeer Influenced and Corrupt
Organizations Act, as well as claims of common law fraud, unjust enrichment and
negligent misrepresentation, and seeks unspecified compensatory and punitive
damages. The Company and other defendants have moved to dismiss the complaint
for failure to state a claim. No hearing has been set on this motion.
Management believes that the claims are without merit and intends to defend the
case vigorously.
On July 26, 1994, 7547 Partners, a Florida partnership and alleged
stockholder of the Company, filed a self-described class action complaint in the
District Court, Clark County, Nevada (the "Court") purportedly on behalf of the
Company's stockholders against the Company and each of its directors. On August
10, 1994, Harry Dines, also claiming to be a stockholder, filed a substantively
identical complaint with the Court. The two actions were subsequently
consolidated by the plaintiffs in a self-described consolidated amended class
action and derivative complaint (the "amended complaint") which was filed in the
Court on October 19, 1994. The amended complaint alleges substantively
identical class action claims as those pleaded in the earlier complaints and
also purports to bring a derivative action on behalf of the Company against the
directors. The amended complaint alleges that the individual defendants
breached their fiduciary and other common law duties and wasted corporate assets
in connection with supposed "indications of interest for the Company" by, among
other things, adopting the Rights Agreement (the "Rights Agreement") described
in the Company's Form 8-K report filed with the Securities and Exchange
Commission on July 14, 1994, and failing to initiate an auction for the sale of
the Company. The amended complaint requests declaratory and injunctive relief
enjoining the implementation of the Rights Agreement and ordering the directors
"to create an active auction of the Company." The amended complaint also
requests damages in unspecified amounts.
On November 9, 1994, the Company and the directors filed two motions to
dismiss the amended complaint and, as to the purported derivative claims, a
request in the alternative for an order requiring the plaintiffs to furnish a
bond as security for the expenses incurred by the Company. On January 23, 1995,
the Court issued an order dismissing plaintiffs' claims that the directors
breached their fiduciary duties by failing to auction or sell the Company. The
Court denied the motion to dismiss the plaintiffs' claims challenging the
adoption of the Rights Agreement, but ruled that the Company and the directors
could file a motion for summary judgment on this issue, including a request for
attorney's fees, at their convenience. The Court deferred ruling on the
Company's and the directors' request for a bond until it has ruled on their
motion for summary judgment. Management believes
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that the remaining claims in the amended complaint are without merit and is
defending against them vigorously.
On March 5, 1995, the Company and William G. Bennett, the Company's former
Chairman of the Board and Chief Executive Officer, entered into a Settlement
Agreement (the "Settlement Agreement") for the purpose of settling a lawsuit
filed by the Company in the Court on January 17, 1995. The complaint had sought
injunctive relief as well as damages alleged to have been incurred as a result
of Mr. Bennett's alleged breach of his fiduciary duty to the Company by entering
into an agreement (the "Hacienda Agreement") to purchase the Hacienda Hotel &
Casino, an alleged corporate opportunity of the Company. Pursuant to the
Settlement Agreement, Mr. Bennett assigned to the Company all of his right,
title and interest in the Hacienda Agreement and resigned from his position as a
director of the Company, and an order of dismissal of the suit with prejudice
was entered in the Court on March 7, 1995. Pursuant to the Settlement Agreement,
the Company also deposited the sum of $5,000,000 with the escrow agent under the
Hacienda Agreement to permit the reimbursement of Mr. Bennett for his original
downpayment of such amount. The Settlement Agreement included the Company's
disclaimer of any interest in purchasing any other property that Mr. Bennett may
subsequently acquire. It also included the Company's agreement to commence
negotiation with Mr. Bennett's representative within ten days to determine
whether suitable terms could be reached regarding the Company's filing of a
registration statement to facilitate Mr. Bennett's sale of his Common Stock. As
of the date hereof, agreement on such terms has not been reached. On April 27,
1995, Mr. Bennett consummated the sale of 6,000,000 shares (representing
approximately 94% of the shares he beneficially owned as of April 24, 1995)
pursuant to Rule 144 under the Securities Act of 1933.
The Company is a defendant in various pending litigation. In management's
opinion, the ultimate outcome of such litigation will not have a material
adverse effect on the results of operations or the financial position of the
Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
- ------ ---------------------------------------------------
No matter was submitted to a vote of the Company's security holders during
the fourth quarter of the fiscal year ended January 31, 1995.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
- ------ ---------------------------------------------------------------------
Price Range of Common Stock. The Company's Common Stock is listed on the
---------------------------
New York Stock Exchange and on the Pacific Stock Exchange. The following table
sets forth for the fiscal quarter periods shown the low and high sale prices for
the Common Stock on the New York Stock Exchange, as adjusted to give retroactive
effect to a three-for-two stock split effective July 9, 1993.
Fiscal 1994 Low High
----------- --- ----
First Quarter......................$27.58 $37.33
Second Quarter..................... 30.67 41.50
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Third Quarter...................... 35.38 49.75
Fourth Quarter..................... 31.25 40.75
Fiscal 1995 Low High
----------- --- ----
First Quarter......................$26.13 $39.38
Second Quarter..................... 20.50 31.75
Third Quarter...................... 20.50 26.63
Fourth Quarter..................... 19.75 27.13
On April 17, 1995 there were 5,111 holders of record of the Common Stock of
the Company.
Dividend Policy. The Company does not currently pay a cash dividend, nor
---------------
is one contemplated in the foreseeable future. The Company believes that
currently its stockholders are best served by a policy of reinvestment in new
projects. The Company has a policy of periodic share repurchase, as cash flows,
borrowing capacity and market conditions warrant.
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<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
- ------ -----------------------
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Year ended January 31,
-----------------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Operating Results(1):
- ---------------------
Revenues(2) $1,170,182 $ 963,470 $850,941 $813,564 $695,677
Operating profit before
corporate expense(3) 280,792 234,311 220,435 213,097 180,697
Pretax income 214,490 182,608 183,313 157,004 115,858
Net income before
non-recurring items(3) 138,244 126,918 120,983 103,348 83,669
Net income 136,286 116,189 117,322 103,348 76,292
Earnings per share before
non-recurring items (3)(4) $1.61 $1.46 $1.41 $1.23 $1.01
Earnings per share(4) $1.59 $1.34 $1.37 $1.23 $0.93
Balance Sheet Data:
- -------------------
Total assets $1,507,085 $1,297,924 $950,458 $783,071 $792,479
Long-term debt 632,652 567,345 308,092 337,680 496,750
Stockholders' equity 686,124 559,950 490,009 326,196 184,843
</TABLE>
(1) Circus Circus-Tunica opened in August 1994, Luxor opened in October 1993
and Excalibur opened in June 1990.
(2) Revenues are net of complimentary allowances.
(3) These amounts are before extraordinary items and one-time charges in fiscal
year 1995 for Circus Circus-Tunica preopening expenses of $3,012, in fiscal
1994 for Luxor and Grand Slam Canyon preopening expenses of $16,506 and in
fiscal 1991 for Excalibur preopening expenses of $11,177. In fiscal 1993,
the Company experienced an extraordinary loss of $3,661, net of income tax
benefit of $1,885, on the early retirement of $100,000 principal amount of
the Company's 10-1/8% Senior Subordinated Notes due April 1997.
(4) Earnings per share are based on shares outstanding adjusted for a two-for-
one stock split effective July 12, 1991 and a three-for-two stock split
effective July 9, 1993.
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<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------ ------------------------------------------------- -------------
RESULTS OF OPERATIONS.
---------------------
Incorporated herein by reference are pages 19 through 24 of the Company's
Annual Report to Stockholders for the fiscal year ended January 31, 1995 (the
"1995 Annual Report"), which pages are included as part of Exhibit 13 to this
Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
- ------ -------------------------------------------
Incorporated herein by reference are pages 25 through 38 of the 1995 Annual
Report, which pages are included as part of Exhibit 13 to this Report.
SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Year Ended January 31, 1995
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter Total
------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenue $284,901 $299,895 $306,613 $278,773 $1,170,182
Income from operations 61,080 68,225 68,214 58,488 256,007
Income before income tax 50,455 57,535 57,714 48,786 214,490
Net income 32,291 36,548 36,596 30,851 136,286
Earnings per share* $0.38 $0.43 $0.43 $0.36 $1.59
</TABLE>
Year Ended January 31, 1994
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter Total
------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenue $211,655 $230,277 $246,427 $275,111 $963,470
Income from operations 51,772 58,287 39,736 51,266 201,061
Income before income tax 49,665 56,610 35,318 41,015 182,608
Net income 32,779 37,363 20,522 25,525 116,189
Earnings per share* $0.38 $0.43 $0.24 $0.30 $1.34
</TABLE>
* Earnings per share information has been adjusted to reflect a 3-for-2 stock
split effective July 1993.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------ ---------------------------------------------------------------
FINANCIAL DISCLOSURE.
--------------------
Not applicable.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
- ------- --------------------------------------------------
The information beginning immediately following the caption "Election of
Directors" to, but not including, the caption "Management Remuneration" in the
Company's Proxy Statement, to be filed with the Securities and Exchange
Commission within 120 days after the close of the Company's fiscal year ended
January 31, 1995 and forwarded to stockholders prior to the Company's 1995
Annual Meeting of stockholders (the "1995 Proxy Statement") is incorporated
herein by reference.
Based solely on (i) a review of certain reports furnished to the Company
pursuant to the Securities Exchange Act of 1934 and (ii) the written
representations of the Company's executive officers and directors, the Company
believes that all reports required to be filed pursuant to such Act with respect
to transactions in the Company's Common Stock during the fiscal year ended
January 31, 1995 were filed on a timely basis, except for one transaction by
Kurt D. Sullivan which was not reported timely on a Form 4 and, with respect to
which, no Form 5 was filed.
ITEM 11. EXECUTIVE COMPENSATION.
- ------- ----------------------
The information in the 1995 Proxy Statement beginning immediately following
the caption "Management Remuneration" to, but not including, the subcaption
"Employment Agreements" under the caption "Management Remuneration" and the
additional information beginning immediately following the subcaption "Agreement
Relating to Resignation of Officer" under the caption "Management Remuneration"
to, but not including, the caption "Report of the Compensation and Stock Option
Committees on Executive Compensation", is incorporated herein by reference.
EMPLOYMENT AGREEMENTS
Currently, the Company has no employment agreements with any of its
executive officers. If the Company acquires the Gold Strike Entities (as
defined) pursuant to the terms of the Gold Strike Agreements (as defined),
discussed under "General" in Item 1 of this Report, it is obligated to enter
into employment agreements with certain of its executive officers, including
Clyde T. Turner, Kurt D. Sullivan, Daniel N. Copp and Mike Sloan, and the
following Gold Strike executives who would become executive officers of the
Company: Michael S. Ensign, William A. Richardson, Glenn W. Schaeffer, Antonio
C. Alamo and Gregg H. Solomon.
Each employment agreement will provide for an initial base salary (in the
cases of Messrs. Turner, Ensign, Richardson and Schaeffer, with a mandatory
increase of 5% per year during the term of the agreement) plus any
discretionary increases as may be determined by the Board of Directors. In
addition, each agreement will provide for the employee's eligibility to receive
an annual bonus under a bonus plan to be established by the Company for its
senior executive officers that provides for the payment of bonus compensation
based upon financial or other performance criteria and which is intended to
conform to the requirements that apply to "qualified performance based
compensation" under Section 162(m) of the Internal Revenue Code of 1986, as
amended. Each agreement will further provide that the targeted annual bonus
shall not be less than 100% of the employee's then current base salary.
Under the terms of Mr. Turner's employment agreement, he will be employed
as the Company's Chairman of the Board and Chief Executive Officer for an
initial term of three years with subsequent automatic three-year renewal terms
subject to early termination by either Mr. Turner or the Company with six
months' notice prior to renewal. Mr. Turner's employment agreement will provide
for an initial base salary and an initial annual target bonus in the amount of
$800,000 each.
Under the terms of Mr. Ensign's employment agreement, he will be employed
as the Company's Vice Chairman of the Board and Chief Operating Officer for an
initial term of three years with subsequent one-year renewal terms, subject to
early termination by either Mr. Ensign or the Company with six months' notice
prior to renewal. Mr. Ensign's employment agreement will provide for an initial
base salary and an initial annual target bonus in the amount of $625,000 each.
Mr. Ensign, 57, is presently acting in a chief executive capacity for the Gold
Strike Entities and has been involved in their management and operations since
1977. Previously, Mr. Ensign was employed by the Company for a period of 10
years and held the position of Chief Operating Officer at the time of his
departure from the Company in 1984 to devote his full time to the Gold Strike
Entities.
Under the terms of Mr. Richardson's employment agreement, he will be
employed as the Company's Executive Vice President--Construction for an initial
term of three years with subsequent one-year renewal terms, subject to early
termination by either Mr. Richardson or the Company with six months' notice
prior to renewal. Mr. Richardson's employment agreement will provide for an
initial base salary and an initial annual target bonus in the amount of $625,000
each. Mr. Richardson, 48, has been involved in an executive capacity in the
management and operations of the Gold Strike Entities since 1977. Mr. Richardson
is presently assisting Mr. Ensign in overseeing the operations of the Gold
Strike Entities. Mr. Richardson also supervises all construction projects for
the Gold Strike Entities.
Under the terms of Mr. Schaeffer's employment agreement, he will be
employed as the Company's President, Treasurer and Chief Financial Officer for
an initial term of three years with subsequent one-year renewal terms, subject
to early termination by either Mr. Schaeffer or the Company with six months'
notice prior to renewal. Mr. Schaeffer's employment agreement will provide for
an initial base salary and an initial annual target bonus in the amount of
$600,000 each. Mr. Schaeffer, 41, has been involved in an executive capacity in
the management and operations of the Gold Strike Entities since 1993, with
responsibility for the strategy, finance and development of the entities. Prior
thereto Mr. Schaeffer was President of the Company from July 1991 until February
1993 and Chief Financial Officer and a director of the Company from 1984 until
February 1993.
Under the terms of Mr. Sullivan's employment agreement, he will be employed
as the Company's Senior Vice President--Operations for an initial term of three
years with subsequent one-year renewal terms, subject to early termination by
either Mr. Sullivan or the Company with six months' notice prior to renewal.
Mr. Sullivan's employment agreement will provide for an initial base salary and
an initial annual target bonus in the amount of $400,000 each, and 50% of Mr.
Sullivan's target bonus will be guaranteed during the first year of the term of
his agreement.
Under the terms of Mr. Alamo's employment agreement, he will be employed as
the Company's Senior Vice President--Operations for an initial term of three
years with subsequent one-year renewal terms, subject to early termination by
either Mr. Alamo or the Company with six months' notice prior to renewal.
Mr. Alamo's employment agreement will provide for an initial base salary and an
initial annual target bonus in the amount of $400,000 each. Mr. Alamo, 53, has
been most recently involved in the management and operations of the Gold Strike
Entities since January 1, 1995. Previously, Mr. Alamo was the Executive Vice
President and Chief Operating Officer of MGM Grand Hotel, Casino and Theme Park
from July 1994 to December 1994 and its Senior Vice President and General
Manager from January 1992 to July 1994. From September 1990 to December 1991,
Mr. Alamo was the Senior Vice President and General Manager of the Desert Inn.
Prior to that, Mr. Alamo was affiliated with the Gold Strike Entities from
January 1989 to August 1990 in the capacities of General Manager for the Gold
Strike Hotel & Gambling Hall, the Nevada Landing Hotel & Casino and a third
property no longer owned by the Gold Strike Entities. Mr. Alamo was with the
Company from its inception in 1974 to 1988, where, among other things, he
served as General Manager of Circus Circus--Las Vegas from 1984 to 1988.
Under the terms of Mr. Copp's employment agreement, he will be employed as
the Company's Senior Vice President--Corporate Communications for an initial
term of three years with subsequent one-year renewal terms, subject to early
termination by either Mr. Copp or the Company with six months' notice prior to
renewal. Mr. Copp's employment agreement will provide for an initial base
salary and an initial annual target bonus in the amount of $200,000 each, and
50% of Mr. Copp's target bonus will be guaranteed during the first year of the
term of his agreement.
Under the terms of Mr. Solomon's employment agreement, he will be employed
as the Company's Senior Vice President--Operations for an initial term of three
years with subsequent one-year renewal terms, subject to early termination by
either Mr. Solomon or the Company with six months' notice prior to renewal. Mr.
Solomon's employment agreement will provide for an initial base salary and an
initial annual target bonus in the amount of $400,000 each. Mr. Solomon, 37, has
been involved in the management and operations of the Gold Strike Entities since
1983. Among other positions, Mr. Solomon has served as Director of Operations
for the Gold Strike Entities, and General Manager of the Gold Strike Hotel &
Gambling Hall, since 1992. He served as General Manager of the Nevada Landing
Hotel & Casino from January 1991 to March 1992. Previously he served as Director
of Slot Operations at such property from October 1985 to January 1991.
Under the terms of Mr. Sloan's employment agreement, he will be employed by
the Company as a Senior Vice President and General Counsel for an initial term
of three years with subsequent one-year renewal terms, subject to early
termination by either Mr. Sloan or the Company with six months' notice prior to
renewal. Mr. Sloan's employment agreement will provide for an initial base
salary and an initial annual target bonus in the amount of $300,000 each.
Additionally, each agreement will provide that upon the termination of
employment by the employee upon the occurrence of certain events, including a
"Change in Control" or for other "Good Reason" or by the Company without
"Cause," as each such term will be defined in the agreement (each, a "Designated
Termination") or the Company's failure to consent to any automatic one-year
extension of the agreement (or any automatic three-year extension in the case of
Mr. Turner's agreement), the Company will be obligated to pay the employee's
then-current base salary and targeted bonus (plus any other amounts due to, or
for the benefit of, the employee) for the greater of the remainder of the
agreement's then-current term or a period of 12 months (or a period of 36 months
in the case of Mr. Turner's agreement) and all options to purchase the Company's
Common Stock held by the employee will become exercisable immediately, provided,
in the case of options held under a 1995 Special Stock Option Plan being
submitted to the Company's stockholders for approval at the 1995 annual meeting
of stockholders, that such plan has been approved by the Company's stockholders
and the Company has acquired the Gold Strike Entities pursuant to the Gold
Strike Agreements discussed under "General" in Item 1 of this Report.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
- ------- --------------------------------------------------------------
The information in the 1995 Proxy Statement beginning immediately following
the caption "Security Ownership of Certain Beneficial Owners and Management" to
and including footnote (14) on page 4 is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
- ------- ----------------------------------------------
The information in the 1995 Proxy Statement beginning immediately following
the caption "Certain Transactions" to, but not including, the caption
"Information Concerning Committees of the Board of Directors" and the additional
information in the 1995 Proxy Statement beginning immediately following the
caption "Compensation Committee Interlocks and Insider Participation" to, but
not including, the caption "Comparative Stock Price Performance Graph", is
incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
- ------- ----------------------------------------------------
ON FORM 8-K.
-----------
(a)(1) Consolidated Financial Statements:
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CIRCUS CIRCUS ENTERPRISES, INC. AND SUBSIDIARIES
Page
----
Consolidated Balance Sheets as of January 31,
1995 and 1994..................................... *
Consolidated Statements of Income for the three
years ended January 31, 1995...................... *
Consolidated Statements of Cash Flows
for the three years ended January 31, 1995........ *
Consolidated Statements of Stockholders' Equity
for the three years ended January 31, 1995........ *
Notes to Consolidated Financial Statements........ *
Report of Independent Public Accountants.......... *
(a)(2) Supplemental Financial Statement Schedules
None
- --------------------
* Refers to page of the Annual Report to Stockholders for the year ended January
31, 1995, a copy of the incorporated portions of which are included as Exhibit
13 to this Report.
(a)(3) Exhibits
The following exhibits are filed as a part of this Report or
incorporated herein by reference:
3(i)(a). Restated Articles of Incorporation of the Company as of July 15, 1988
and Certificate of Amendment thereto, dated June 29, 1989
(Incorporated by reference to Exhibit 3(a) to the Company's Annual
Report on Form 10-K for the fiscal year ended January 31, 1991).
3(i)(b). Certificate of Division of Shares into Smaller Denominations, dated
June 20, 1991 (Incorporated by reference to Exhibit 3(b) to the
Company's Annual Report on Form 10-K for the fiscal year ended January
31, 1992).
3(i)(c). Certificate of Division of Shares into Smaller Denominations, dated
June 22, 1993 (Incorporated by reference to Exhibit 3(i) to the
Company's Current Report on Form 8-K dated July 21, 1993).
3(ii). Restated Bylaws of the Company dated March 19, 1995.
4(a). $250 Million Revolving Loan Agreement, dated as of September 30, 1993,
by and among the Company, the Banks named therein and Bank of America
National Trust and
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Savings Association, as managing agent for the Banks, and related
forms of unsecured Promissory Notes (Incorporated by reference to
Exhibit 4(a) to the Company's Current Report on Form 8-K dated
September 30, 1993).
4(b). First and Second Amendments to the $250 Million Revolving Loan
Agreement, by and among the Company, the Banks named therein and Bank
of America National Trust and Savings Association, as managing agent
for the Banks. (Incorporated by reference to Exhibit 4(a) to the
Company's Quarterly Report on Form 10-Q for the quarterly period ended
October 31, 1994).
4(c). Subsidiary Guaranty, dated as of September 30, 1993, by Circus Circus
Casinos, Inc., New Castle Corp., Ramparts, Inc., Edgewater Hotel
Corporation, Colorado Belle Corp., and Slots-A-Fun, Inc., with respect
to the $250 Million Revolving Loan Agreement, in favor of Bank of
America National Trust and Savings Association, as managing agent for
the Banks (Incorporated by reference to Exhibit 4(b) to the Company's
Current Report on Form 8-K dated September 30, 1993).
4(d). Instrument of Joinder, dated April 20, 1995, by Circus Circus
Mississippi, Inc., pursuant to the Subsidiary Guaranty dated as of
September 30, 1993 by Circus Circus Casinos, Inc., New Castle Corp.,
Ramparts, Inc. Edgewater Hotel Corporation, Colorado Belle Corp., and
Slots-A-Fun, Inc., with respect to the $250 Million Revolving Loan
Agreement, in favor of Bank of America National Trust and Savings
Association, as managing agent for the Banks.
4(e). Instrument of Joinder, dated April 20, 1995, by Galleon, Inc.,
pursuant to the Subsidiary Guaranty dated as of September 30, 1993 by
Circus Circus Casinos, Inc., New Castle Corp., Ramparts, Inc.
Edgewater Hotel Corporation, Colorado Belle Corp., and Slots-A-Fun,
Inc., with respect to the $250 Million Revolving Loan Agreement, in
favor of Bank of America National Trust and Savings Association, as
managing agent for the Banks.
4(f). Instrument of Joinder, dated April 20, 1995, by Circus Circus
Louisiana, Inc., pursuant to the Subsidiary Guaranty dated as of
September 30, 1993 by Circus Circus Casinos, Inc., New Castle Corp.,
Ramparts, Inc. Edgewater Hotel Corporation, Colorado Belle Corp., and
Slots-A-Fun, Inc., with respect to the $250 Million Revolving Loan
Agreement, in favor of Bank of America National Trust and Savings
Association, as managing agent for the Banks.
4(g). $500 Million Reducing Revolving Loan Agreement, dated as of September
30, 1993, by and among the Company, the Banks named therein and Bank
of America National Trust and Savings Association, as managing agent
for the Banks,
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<PAGE>
and related forms of unsecured Promissory Notes (Incorporated by
reference to Exhibit 4(c) to the Company's Current Report on Form 8-K
dated September 30, 1993).
4(h). First and Second Amendments to the $500 Million Revolving Loan
Agreement, by and among the Company, the Banks named therein and Bank
of America National Trust and Savings Association, as managing agent
for the Banks. (Incorporated by reference to Exhibit 4(b) to the
Company's Quarterly Report on Form 10-Q for the quarterly period ended
October 31, 1994).
4(i). Subsidiary Guaranty, dated as of September 30, 1993, by Circus Circus
Casinos, Inc., New Castle Corp., Ramparts, Inc., Edgewater Hotel
Corporation, Colorado Belle Corp., and Slots-A-Fun, Inc., with respect
to the $500 Million Reducing Revolving Loan Agreement, in favor of
Bank of America National Trust and Savings Association, as managing
agent for the Banks (Incorporated by reference to Exhibit 4(d) to the
Company's Current Report on Form 8-K dated September 30, 1993).
4(j). Instrument of Joinder, dated March 28, 1995, by Circus Circus
Mississippi, Inc., pursuant to the Subsidiary Guaranty dated as of
September 30, 1993 by Circus Circus Casinos Inc., New Castle Corp.,
Ramparts, Inc., Edgewater Hotel Corporation, Colorado Belle Corp., and
Slots-A-Fun, Inc. with respect to the $500 Million Reducing Revolving
Loan Agreement, in favor of Bank of America National Trust and Savings
Association, as managing agent for the Banks.
4(k). Instrument of Joinder, dated April 14, 1995, by Galleon, Inc. pursuant
to the Subsidiary Guaranty dated as of September 30, 1993 by Circus
Circus Casinos Inc., New Castle Corp., Ramparts, Inc., Edgewater Hotel
Corporation, Colorado Belle Corp., and Slots-A-Fun, Inc. with respect
to the $500 Million Reducing Revolving Loan Agreement, in favor of
Bank of America National Trust and Savings Association, as managing
agent for the Banks.
4(l). Instrument of Joinder, dated April 20, 1995, by Circus Circus
Mississippi, Inc., pursuant to the Subsidiary Guaranty dated as of
September 30, 1993 by Circus Circus Casinos Inc., New Castle Corp.,
Ramparts, Inc., Edgewater Hotel Corporation, Colorado Belle Corp., and
Slots-A-Fun, Inc. with respect to the $500 Million Reducing Revolving
Loan Agreement, in favor of Bank of America National Trust and Savings
Association, as managing agent for the Banks.
4(m). Rate Swap Master Agreement, dated as of October 24, 1986, and Rate
Swap Supplements One through Four (Incorporated
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<PAGE>
by reference to Exhibit 4(j) to the Company' s Current Report on Form
8-K dated December 29, 1986).
4(n). Interest Rate Swap Agreement, dated as of October 20, 1989, by and
between the Company and Salomon Brothers Holding Company Inc.
(Incorporated by reference to Exhibit 4(q) to the Company's Annual
Report on Form 10-K for the fiscal year ended January 31, 1990).
4(o). Interest Rate Swap Agreement, dated as of June 20, 1989, by and
between the Company and First Interstate Bank of California
(Incorporated by reference to Exhibit 4(r) to the Company's Annual
Report on Form 10-K for the fiscal year ended January 31, 1990).
4(p). Interest Rate Swap Agreement, dated as of April 6, 1992, by and
between the Company and Canadian Imperial Bank of Commerce
(Incorporated by reference to Exhibit 4(y) to the Company's Annual
Report on Form 10-K for the fiscal year ended January 31, 1992).
4(q). Indenture by and between the Company and First Interstate Bank of
Nevada, N.A., as Trustee with respect to the Company's 10-5/8% Senior
Subordinated Notes due 1997 (Incorporated by reference to Exhibit 4(a)
to the Company's Registration Statement (No. 33-34439) on Form S-3).
4(r). Indenture by and between the Company and First Interstate Bank of
Nevada, N.A., as Trustee with respect to the Company's 6-3/4% Senior
Subordinated Notes due 2003 and its 7-5/8% Senior Subordinated
Debentures due 2013 (Incorporated by reference to Exhibit 4(a) to the
Company's Current Report on Form 8-K dated July 21, 1993).
10(a)./*/ 1983 Nonqualified Stock Option Plan of the Company (Incorporated by
reference to Exhibit 10(d) to the Company's Registration Statement
(No. 2-85794) on Form S-1).
10(b)./*/ 1983 Incentive Stock Option Plan of the Company (Incorporated by
reference to Exhibit 10(e) to the Company's Registration Statement
(No. 2-85794) on Form S-1).
10(c)./*/ Amendment to Circus Circus Enterprises, Inc. 1983 Incentive Stock
Option Plan (Incorporated by reference to Exhibit 4(a) to the
Company's Registration Statement (No. 2-91950) on Form S-8).
10(d)./*/ 1989 Stock Option Plan of the Company (Incorporated by reference to
Exhibit 4 to the Company's Registration Statement (No. 33-39215) on
Form S-8).
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<PAGE>
10(e)./*/ Stock Purchase Warrant Plan (Incorporated by reference to Exhibit
4(a) to the Company's Registration Statement (No. 33-29014) on Form
S-8).
10(f)./*/ Amended and Restated 1991 Stock Incentive Plan of the Company
(Incorporated by reference to Exhibit 4 to the Company's Registration
Statement (No. 33-56420) on Form S-8).
10(g)./*/ 1993 Stock Option Plan of the Company (Incorporated by reference to
Exhibit 10(a) to the Company's Quarterly Report on Form 10-Q for the
quarterly period ended July 31, 1993).
10(h)./*/ Circus Circus Enterprises, Inc. Executive Compensation Insurance Plan
(Incorporated by reference to Exhibit 10(i) to the Company's Annual
Report on Form 10-K for the fiscal year ended January 31, 1992).
10(i). Lease, dated November 1, 1957, by and between Bethel Palma and others,
as lessor, and the Company's predecessor in interest, as lessee;
Amendment of Lease, dated May 6, 1983 (Incorporated by reference to
Exhibit 10(g) to the Company's Registration Statement (No. 2-85794) on
Form S-1).
10(j). Grant, Bargain and Sale Deed to the Company pursuant to the Lease
dated November 1, 1957 (Incorporated by reference to Exhibit 10(h) to
the Company's Annual Report on Form 10-K for the fiscal year ended
January 31, 1984).
10(k). Lease, dated August 3, 1977, by and between B&D Properties, Inc., as
lessor, and the Company, as lessee; Amendment of Lease, dated May 6,
1983 (Incorporated by reference to Exhibit 10(h) to the Company's
Registration Statement (No. 2-85794) on Form S-1).
10(l). Third Amendment and Restatement of the Circus Circus Employees' Profit
Sharing, Investment and Employee Stock Ownership Plan (Incorporated by
reference to Exhibit 4(f) to the Company's Registration Statement (No.
33-18278) on Form S-8).
10(m). Fourth Amendment to Circus Circus Employees' Profit Sharing,
Investment and Employee Stock Ownership Plan (Incorporated by
reference to Exhibit 4(f) to Post Effective Amendment No. 3 to the
Company's Registration Statement (No. 33-18278) on Form S-8).
10(n). Fifth Amendment to Circus Circus Employees' Profit Sharing, Investment
and Employee Stock Ownership Plan (Incorporated by reference to
Exhibit 4(g) to Post Effective Amendment No. 3 to the Company's
Registration Statement (No. 33-18278) on Form S-8).
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<PAGE>
10(o). Sixth Amendment to the Circus Circus Employees' Profit Sharing,
Investment and Employee Stock Ownership Plan (Incorporated by
reference to Exhibit 4(h) to Post Effective Amendment No. 4 to the
Company's Registration Statement (No. 33-18278) on Form S-8).
10(p). Form of Agreement of Trust between the Company and Valley Bank of
Nevada (Incorporated by reference to Exhibit 4(g) to the Company's
Registration Statement (No. 33-18278) on Form S-8).
10(q). First Amendment to Circus Circus Employees' Profit Sharing, Investment
and Employee Stock Ownership Trust (Incorporated by reference to
Exhibit 4(i) to Post Effective Amendment No. 3 to the Company's
Registration Statement (No. 33-18278) on Form S-8).
10(r). Second Amendment to Agreement of Trust between Circus Circus
Enterprises, Inc. and Bank of America, Nevada (formerly Valley Bank of
Nevada) (Incorporated by reference to Exhibit 4(k) to Post Effective
Amendment No. 4 to the Company's Registration Statement (No. 33-18278)
on Form S-8).
10(s). Group Annuity Contract No. GA70867 between Philadelphia Life (formerly
Bankers Life Company) and Trustees of Circus Circus Employees' Profit
Sharing and Investment Plan (Incorporated by reference to Exhibit 4(c)
to the Company's Registration Statement (No. 33-1459) on Form S-8).
10(t). Lease, dated as of November 1, 1981, between Novus Property Company,
as landlord, and the Company, as tenant (Incorporated by reference to
Exhibit 4(h) to the Company's Registration Statement (No. 2-85794) on
Form S-1).
10(u). First Addendum and First Amendment, each dated as of June 15, 1983, to
Lease dated as of November 1, 1981 (Incorporated by reference to
Exhibit 4(i) to the Company's Annual Report on Form 10-K for the year
ended January 31, 1984).
10(v). Second Amendment, dated as of April 1, 1984, to Lease dated as of
November l, 1981 (Incorporated by reference to Exhibit 10(o) to the
Company's Registration Statement (No. 33-4475) on Form S-1).
10(w). Lease by and between Robert Lewis Uccelli, guardian, as lessor, and
Nevada Greens, a limited partnership, William N. Pennington, as
trustee, and William G. Bennett, as trustee, and related Assignment of
Lease (Incorporated by reference to Exhibit 10(p) to the Company's
Registration Statement (No. 33-4475) on Form S-1).
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<PAGE>
10(x). Agreement of Purchase, dated March 15, 1985, by and between Denio
Brothers Trucking Company, as seller, and the Company, as buyer, and
related lease by and between Denio Brothers Trucking Co., as lessor,
and Nevada Greens, a limited partnership, William N. Pennington, as
trustee, and William G. Bennett, as trustee, and related Assignment of
Lease (Incorporated by reference to Exhibit 10(q) to the Company's
Registration Statement (No. 33-4475) on Form S-1).
10(y). Agreement of Joint Venture, dated as of March 1, 1994, by and among
Eldorado Limited Liability Company, Galleon, Inc., and the Company.
(Incorporated by reference to Exhibit 10(cc) to the Company's Annual
Report on Form 10-K for the year ended January 31, 1994.
10(z) Amended and Restated Operating Agreement of American Entertainment
L.L.C., dated as of February 8, 1995, by and between Circus Louisiana,
Inc., and American Entertainment Corporation.
10(aa). Interim Casino Operating Agreement, dated as of May 14, 1994, by and
among Ontario Casino Corporation as agent of Her Majesty the Queen in
Right of Ontario and Windsor Casino Limited and Caesars World, Inc.,
Circus Circus Enterprises, Inc. and Hilton Hotels Corporation.
(Incorporated by reference to Exhibit 10(l) to the Company's Quarterly
Report on Form 10-Q for the quarterly period ended April 30, 1994).
10(bb). Heads of Agreement, dated as of May 14, 1994, by and among Ontario
Casino Corporation as agent of Her Majesty the Queen in Right of
Ontario and Windsor Casino Limited sand Caesars World, Inc., Circus
Circus Enterprises, Inc. and Hilton Hotels Corporation. (Incorporated
by reference to Exhibit 10(2) to the Company's Quarterly Report on
Form 10-Q for the quarterly period ended April 30, 1994).
10(cc).* Agreement, dated December 16, 1994, between the Company and Terry L.
Caudill.
10(dd). Purchase and Sale Agreement, dated January 10, 1995, by and between
Hacienda Hotel, Inc. and William G. Bennett of the Hacienda Hotel and
Casino, and the related Assignment and Consent to Assignment to the
Company, dated March 5, 1995.
10(ee). Agreement and Plan of Merger, dated March 19, 1995, by and among the
Company and M.S.E. Investments,
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Incorporated, Last Chance Investments, Incorporated, Gold Strike
Investments, Incorporated, Diamond Gold, Inc., Gold Strike Aviation,
Incorporated, Gold Strike Finance Company, Inc., Oasis Development
Company, Inc., Michael S. Ensign, William A. Richardson, David R.
Belding, Peter A. Simon II and Robert J. Verchota.
10(ff). Exchange Agreement, dated March 19, 1995, by and among the Company and
New Way, Inc., a wholly owned subsidiary of the Company, Glenn W.
Schaeffer, Gregg H. Solomon, Antonio C. Alamo, Anthony Korfman and
William Ensign.
10(gg).* 1995 Special Stock Option Plan and Forms of Non-Qualified Stock Option
Certificate and Agreement.
10(hh).* Executive Officer Bonus Plan.
10(ii).* Retirement Plan for Outside Directors.
13. Portions of the Annual Report to Stockholders for the Year Ended
January 31, 1995 specifically incorporated by reference as part of
this Report.
21. Subsidiaries of the Company.
23. Consent of Arthur Andersen LLP. (See page 58).
27. Financial Data Schedule.
_____________
* This exhibit is a management contract or compensatory plan or arrangement
required to be filed as an exhibit to this Report.
Certain instruments with respect to long-term debt have not been filed
hereunder or incorporated by reference herein where the total amount of such
debt thereunder does not exceed 10% of the consolidated total assets of the
Company. Copies of such instruments will be furnished to the Securities and
Exchange Commission upon request.
(b) During the fourth quarter of the fiscal year ended January 31, 1995,
the Company filed no Current Report on Form 8-K.
(c) The exhibits required by Item 601 of Regulation S-K filed as part of
this Report or incorporated herein by reference are listed in Item 14(a)(3)
above, and the exhibits filed herewith are listed on the Index to Exhibits which
accompanies this Report.
(d) See Item 14(a)(2) of this Report.
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<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
CIRCUS CIRCUS ENTERPRISES, INC.
Dated: April 26, 1995 By: CLYDE T. TURNER
-----------------------------
Clyde T. Turner, Chairman
of the Board
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on
the dates indicated.
Signature Title Date
--------- ----- ----
CLYDE T. TURNER Chairman of the Board, April 26, 1995
- ---------------------- President and (Principal
Clyde T. Turner Executive Officer)
DANIEL N. COPP Chief Financial Officer, April 26, 1995
- ---------------------- Treasurer and Executive
Daniel N. Copp Vice President
(Principal Financial
Officer)
Director April , 1995
- ----------------------
William N. Pennington
LES MARTIN Controller (Principal) April 26, 1995
- ---------------------- Accounting Officer)
Les Martin
Director April , 1995
- ----------------------
Tony Coehlo
CARL F. DODGE Director April 21, 1995
- ----------------------
Carl F. Dodge
ARTHUR M. SMITH, JR. Director April 21, 1995
- ----------------------
Arthur M. Smith, Jr.
FRED W. SMITH Director April 26, 1995
- ----------------------
Fred W. Smith
KURT SULLIVAN Director April 26, 1995
- ----------------------
Kurt Sullivan
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<PAGE>
INDEX TO EXHIBITS
FORM 10-K
Fiscal Year Ended
January 31, 1995
Exhibit
Number
- ------
3(ii). Restated Bylaws of the Company dated March 19, 1995
4(d). Instrument of Joinder, dated April 20, 1995, by Circus Circus
Mississippi, Inc., pursuant to the Subsidiary Guaranty dated as of
September 30, 1993 by Circus Circus Casinos, Inc., New Castle Corp.,
Ramparts, Inc. Edgewater Hotel Corporation, Colorado Belle Corp.,
and Slots-A-Fun, Inc., with respect to the $250 Million Revolving
Loan Agreement, in favor of Bank of America National Trust and
Savings Association, as managing agent for the Banks.
4(e). Instrument of Joinder, dated April 20, 1995, by Galleon, Inc.,
pursuant to the Subsidiary Guaranty dated as of September 30, 1993
by Circus Circus Casinos, Inc., New Castle Corp., Ramparts, Inc.
Edgewater Hotel Corporation, Colorado Belle Corp., and Slots-A-Fun,
Inc., with respect to the $250 Million Revolving Loan Agreement, in
favor of Bank of America National Trust and Savings Association, as
managing agent for the Banks.
4(f). Instrument of Joinder, dated April 20, 1995, by Circus Circus
Louisiana, Inc., pursuant to the Subsidiary Guaranty dated as of
September 30, 1993 by Circus Circus Casinos, Inc., New Castle Corp.,
Ramparts, Inc. Edgewater Hotel Corporation, Colorado Belle Corp.,
and Slots-A-Fun, Inc., with respect to the $250 Million Revolving
Loan Agreement, in favor of Bank of America National Trust and
Savings Association, as managing agent for the Banks.
4(j). Instrument of Joinder, dated March 28, 1995, by Circus Circus
Mississippi, Inc., pursuant to the Subsidiary Guaranty dated as of
September 30, 1993 by Circus Circus Casinos Inc., New Castle Corp.,
Ramparts, Inc., Edgewater Hotel Corporation, Colorado Belle Corp.,
and Slots-A-Fun, Inc. with respect to the $500 Million Reducing
Revolving Loan Agreement, in favor of Bank of America National Trust
and Savings Association, as managing agent for the Banks.
-59-
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4(k). Instrument of Joinder, dated April 14, 1995, by Galleon, Inc.
pursuant to the Subsidiary Guaranty dated as of September 30, 1993
by Circus Circus Casinos Inc., New Castle Corp., Ramparts, Inc.,
Edgewater Hotel Corporation, Colorado Belle Corp., and Slots-A-Fun,
Inc. with respect to the $500 Million Reducing Revolving Loan
Agreement, in favor of Bank of America National Trust and Savings
Association, as managing agent for the Banks.
4(l). Instrument of Joinder, dated April 20, 1995, by Circus Circus
Mississippi, Inc., pursuant to the Subsidiary Guaranty dated as of
September 30, 1993 by Circus Circus Casinos Inc., New Castle Corp.,
Ramparts, Inc., Edgewater Hotel Corporation, Colorado Belle Corp.,
and Slots-A-Fun, Inc. with respect to the $500 Million Reducing
Revolving Loan Agreement, in favor of Bank of America National Trust
and Savings Association, as managing agent for the Banks.
10(z). Amended and Restated Operating Agreement of American Entertainment
L.L.C., dated as of February 8, 1995, by and between Circus
Louisana, Inc., and American Entertainment Corporation.
10(cc).* Agreement, dated December 16, 1994, between the Company and Terry L.
Caudill.
10(dd). Purchase and Sale Agreement, dated January 10, 1995, by and between
Hacienda Hotel and Casino, and the related Assignment and Consent to
Assignment to the Company dated March 5, 1995.
10(ee). Agreement and Plan of Merger, dated March 19, 1995, by and among the
Company and M.S.E. Investments, Incorporated, Last Chance
Investments, Incorporated, Gold Strike Investments, Incorporated,
Diamond Gold, Inc., Gold Strike Aviation, Incorporated, Gold Strike
Finance Company, Inc., Oasis Development Company, Inc., Michael S.
Ensign, William A. Richardson, David R. Belding, Peter A. Simon II
and Robert J. Verchota.
10(ff). Exchange Agreement, dated March 19, 1995, by and among the Company
and New Way, Inc., a wholly owned subsidiary of the Company, Glenn
W. Schaeffer, Gregg H. Solomon, Antonio C. Alamo, Anthony Korfman
and William Ensign.
10(gg).* 1995 Special Stock Option Plan and Forms of Non-Qualified Stock
Option Cetificate and Agreement.
10(hh).* Executive Officer Bonus Plan.
10(ii).* Retirement Plan for Outside Directors.
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13. Portions of the Annual Report to Stockholders for the Year Ended
January 31, 1995 specifically incorporated by reference as part of
this Report.
21. Subsidiaries of the Company.
23. Consent of Arthur Andersen LLP.
27. Financial Data Schedule
- -------------
* This exhibit is a management contract or compensatory plan or arrangement
required to be filed as an exhibit to this Report.
-61-
<PAGE>
Exhibit 3(ii)
RESTATED BY-LAWS OF
CIRCUS CIRCUS ENTERPRISES, INC.
(A Nevada Corporation)
ARTICLE I
Offices
SECTION 1.1. Principal Office. The principal office of the corporation in
-----------------
the State of Nevada is 2880 Las Vegas Boulevard South, Las Vegas, Clark County,
Nevada 89109.
SECTION 1.2. Other Offices. The corporation may also have offices at such
--------------
other places both within and without the State of Nevada as the Board of
Directors may from time to time determine or the business of the corporation may
require.
ARTICLE II
Meetings of Stockholders
SECTION 2.1. Place of Meeting. All meetings of stockholders shall be held
-----------------
at such place, either within or without the State of Nevada, as shall be
designated from time to time by the Board of Directors and stated in the notice
of the meeting.
SECTION 2.2. Annual Meetings. The annual meeting of stockholders shall be
----------------
held at such date and time as shall be designated from time to time by the Board
of Directors and stated in the notice of the meeting.
SECTION 2.3. Voting List. The officer who has charge of the stock ledger
------------
of the corporation shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice, or if not
so specified, at the place where the meeting is to be held. The list shall also
be produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
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SECTION 2.4. Special Meetings. Special meetings of the stockholders, for
-----------------
any purpose or purposes, unless otherwise prescribed by statute or by the
Articles of Incorporation of the corporation, as amended (the "Articles of
Incorporation"), may be called by the Chairman of the Board, the President or by
the Board of Directors or by written order of a majority of the directors and
shall be called by the Chairman of the Board, the President or the Secretary at
the request in writing of stockholders owning a majority in amount of the entire
capital stock of the corporation issued and outstanding and entitled vote. Such
request shall state the purposes of the proposed meeting. The officers or
directors shall fix the time and any place, either within or without the State
of Nevada, as the place for holding such meeting.
SECTION 2.5. Notice of Meeting. Written notice of the annual and each
------------------
special meeting of stockholders, stating the date, time, place and purpose or
purposes thereof, shall be given to each stockholder entitled to vote thereat,
not less than 10 nor more than 60 days before the meeting. The president, a
vice president, the secretary, an assistant secretary or any other person
designated by the Board of Directors shall sign and deliver such written notice.
The written certificate of the individual signing a notice of meeting, setting
forth the substance of the notice or having a copy thereof attached, the date
the notice was mailed or personally delivered to the stockholders and the
addresses to which the notice was mailed, shall be prima facie evidence of the
manner and fact of giving such notice.
SECTION 2.6. Quorum. The holders of a majority of the stock issued and
-------
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at any meeting of stockholders for the
transaction of business except when stockholders are required to vote by class,
in which event a majority of the issued and outstanding shares of the
appropriate class shall be present in person or by proxy, and except as
otherwise provided by statute or by the Articles of Incorporation.
Notwithstanding any other provision of the Articles of Incorporation or these
by-laws, the holders of a majority of the shares of capital stock entitled to
vote thereat, present in person or represented by proxy, whether or not a quorum
is present, shall have power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present
or represented. If the adjournment is for more than 30 days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting. At such adjourned meeting at which a quorum shall be
present or represented any business may be transacted which might have been
transacted at the meeting as originally notified.
SECTION 2.7. Voting. When a quorum is present at any meeting of the
-------
stockholders, the vote of the holders of a majority of the
2
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stock having voting power present in person or represented by proxy shall decide
any question brought before such meeting, unless the question is one upon which,
by express provision of the statutes, of the Articles of Incorporation or of
these by-laws, a different vote is required, in which case such express
provision shall govern and control the decision of such question. Every
stockholder having the right to vote shall be entitled to vote in person, or by
proxy appointed by an instrument in writing subscribed by such stockholder, and
filed with the Secretary of the corporation before, or at the time of, the
meeting. Provided, however, no such proxy shall be valid after the expiration
of six months from the date of its execution, unless coupled with an interest,
or unless the person executing it specifies therein the length of time for which
it is to continue in force, which in no case shall exceed seven years from the
date of its execution. If such instrument shall designate two or more persons
to act as proxies, unless such instrument shall provide the contrary, a majority
of such persons present at any meeting at which their powers thereunder are to
be exercised shall have and may exercise all the powers of voting or giving
consents thereby conferred, or if only one be present, then such powers may be
exercised by that one; or, if an even number attend and a majority do not agree
on any particular issue, each proxy so attending shall be entitled to exercise
such powers in respect of the same portion of the shares as he is of the proxies
representing such shares. Unless required by statute or determined by the
Chairman of the meeting to be advisable, the vote on any question need not be by
written ballot.
SECTION 2.8. Consent of Stockholders. Whenever the vote of stockholders
------------------------
at a meeting thereof is required or permitted to be taken for or in connection
with any corporate action by any provision of the statutes, the meeting and vote
of stockholders may be dispensed with if all the stockholders who would have
been entitled to vote upon the action if such meeting were held shall consent in
writing to such corporate action being taken; or if the Articles of
Incorporation authorize the action to be taken with the written consent of the
holders of less than all the stock who would have been entitled to vote upon the
action if a meeting were held, then on the written consent of the stockholders
having not less than such percentage of the number of votes as may be authorized
in the Articles of Incorporation; provided that in no case shall the written
consent be by the holders of stock having less than the minimum percentage of
the vote required by statutes for the proposed corporate action, and provided
that prompt notice must be given to all stockholders of the taking of corporate
action without a meeting and less than unanimous written consent.
SECTION 2.9. Voting of Stock of Certain Holders. Shares standing in the
-----------------------------------
name of another corporation, domestic or foreign, may be voted by such officer,
agent or proxy as the by-laws of such corporation may prescribe, or in the
absence of such provision, as the Board of Directors of such corporation may
determine. Shares
3
<PAGE>
standing in the name of a deceased person may be voted by the executor or
administrator of such deceased person, either in person or by proxy. Shares
standing in the name of a guardian, conservator or trustee may be voted by such
fiduciary, either in person or by proxy, but no such fiduciary shall be entitled
to vote shares held in such fiduciary capacity without a transfer of such shares
into the name of such fiduciary. Shares standing in the name of a receiver may
be voted by such receiver. A stockholder whose shares are pledged shall be
entitled to vote such shares, unless in the transfer by the pledgor on the books
of the corporation, he has expressly empowered the pledgee to vote thereon, in
which case only the pledgee, or his proxy, may represent the stock and vote
thereon.
SECTION 2.10. Treasury Stock. The corporation shall not vote, directly or
---------------
indirectly, shares of its own stock owned by it; and such shares shall not be
counted in determining the total number of outstanding shares.
SECTION 2.11. Fixing Record Date. The Board of Directors may fix in
-------------------
advance a date, not exceeding 60 nor less than 10 days preceding the date of any
meeting of stockholders, or the date for payment of any dividend or
distribution, or the date for the allotment of rights, or the date when any
change or conversion or exchange of capital stock shall go into effect, or a
date in connection with obtaining a consent, as a record date for the
determination of the stockholders entitled to notice of, and to vote at any such
meeting and any adjournment thereof, or entitled to receive payment of any such
dividend or distribution, or to receive any such allotment of rights, or to
exercise the rights in respect of any such change, conversion or exchange of
capital stock, or to give such consent, and in such case such stockholders and
only such stockholders as shall be stockholders of record on the date so fixed
shall be entitled to such notice of and to vote at any such meeting and any
adjournment thereof, or to receive payment of such dividend or distribution, or
to receive such allotment of rights, or to exercise such rights, or to give such
consent, as the case may be, notwithstanding any transfer of any stock on the
books of the corporation after any such record date fixed as aforesaid.
ARTICLE III
Board of Directors
SECTION 3.1. Powers. The business and affairs of the corporation shall be
-------
managed by its Board of Directors, which may exercise all such powers of the
corporation and do all such lawful acts and things as are not by statute or by
the Articles of Incorporation or by these by-laws directed or required to be
exercised or done by the stockholders.
4
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SECTION 3.2. Number, Election and Term. The directors shall be elected at
--------------------------
the annual meeting of stockholders, except as provided in Section 3.3, and each
director elected shall hold office until his successor shall be elected and
shall qualify. Directors need not be residents of Nevada or stockholders of the
corporation. Commencing with the election of directors at the annual meeting of
stockholders in 1991, the directors shall be classified with respect to the time
for which they shall hold office by dividing them into three classes, to be
known as Class I, Class II and Class III. The total number of directors elected
to serve at any time shall be no less than six (6) and no more than nine (9) as
determined from time to time by resolution of the Board of Directors, and the
number of directors in each Class shall be two (2) or three (3), as determined
from time to time by resolution of the Board of Directors, provided, however,
that no reduction in the number of directors of a Class from three (3) to two
(2) shall be effective for any period for which three (3) duly elected directors
continue to serve as members of such Class. At the annual meeting of
stockholders in 1991, directors of Class I shall be elected for a term of one
(1) year, directors of Class II shall be elected for a term of two (2) years,
and directors of Class III shall be elected for a term of three (3) years. At
each annual meeting of stockholders after 1991, successors of the directors of
the Class whose term of office expires in that year shall be elected for a term
of three (3) years.
SECTION 3.3. Vacancies, Additional Directors and Removal From Office. If
--------------------------------------------------------
any vacancy occurs in the Board of Directors caused by death, resignation,
retirement, disqualification or removal from office of any director, or
otherwise, or if any new directorship is created by an increase in the
authorized number of directors, a majority of the directors then in office,
though less than a quorum, or a sole remaining director, may choose a successor
director or a director to fill the newly created directorship, as the case may
be; and a director so chosen shall hold office until the next annual meeting of
stockholders at which the directors of the Class in which such director serves
are to be elected and until his successor shall be duly elected and shall
qualify, unless such director is sooner displaced. Any director may be removed
either for or without cause at any special meeting of stockholders duly called
and held for such purpose.
SECTION 3.4. Regular Meetings. A regular meeting of the Board of
-----------------
Directors shall be held each year, without other notice than this by-law, at the
place of, and immediately following, the annual meeting of stockholders; and
other regular meetings of the Board of Directors shall be held during each year,
at such time and place as the Board of Directors may from time to time provide
by resolution, either within or without the State of Nevada, without other
notice than such resolution.
SECTION 3.5. Special Meetings. A special meeting of the
-----------------
5
<PAGE>
Board of Directors may be called by the Chairman of the Board or by the
President and shall be called by the Secretary on the written request of any two
directors. The Chairman of the Board or President so calling, or the directors
so requesting, any such meeting shall fix the time and any place, either within
or without the State of Nevada, as the place for holding such meeting.
SECTION 3.6. Notice of Special Meeting. Written notice of special
--------------------------
meetings of the Board of Directors shall be given to each director at least 48
hours prior to the time of such meeting. Any director may waive notice of any
meeting. The attendance of a director at any meeting shall constitute a waiver
of notice of such meeting, except where a director attends a meeting solely for
the purpose of objecting to the transaction of any business because the meeting
is not lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, any special meeting of the Board of Directors need be
specified in the notice or waiver of notice of such meeting, except that notice
shall be given of any proposed amendment to the by-laws if it is to be adopted
at any special meeting or with respect to any other matter where notice is
required by statute.
SECTION 3.7. Quorum. A majority of the Board of Directors shall
-------
constitute a quorum for the transaction of business at any meeting of the Board
of Directors, and the act of a majority of the directors present at any meeting
at which there is a quorum shall be the act of the Board of Directors, except as
may be otherwise specifically provided by statute, by the Articles of
Incorporation or by these by-laws. If a quorum shall not be present at any
meeting of the Board of Directors, the directors present thereat may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
SECTION 3.8. Action Without Meeting. Unless otherwise restricted by the
-----------------------
Articles of Incorporation or these by-laws, any action required or permitted to
be taken at any meeting of the Board of Directors, or of any committee thereof
as provided in Article IV of these by-laws, may be taken without a meeting, if a
written consent thereto is signed by all members of the Board or of such
committee, as the case may be, and such written consent is filed with the
minutes of proceedings of the Board or committee.
SECTION 3.9. Meeting By Telephone. Any action required or permitted to be
---------------------
taken by the Board of Directors or any committee thereof may be taken by means
of a meeting by conference telephone network or similar communications method so
long as all persons participating in the meeting can hear each other. Any
person participating in such meeting shall be deemed to be present in person at
such meeting.
SECTION 3.10. Compensation. Except as otherwise provided in this Section
-------------
3.10, directors, as such, shall not be entitled to any
6
<PAGE>
compensation for their services unless voted by the stockholders; but by
resolution of the Board of Directors, there may be allowed (a) to "outside"
directors, as that term is defined in Section 4.2 of these by-laws, a stated
salary and/or a fixed sum for each regular or special meeting of the Board of
Directors or any meeting of a committee of directors attended, and (b) to all
directors, expenses of attendance, if any, for each regular or special meeting
of the Board of Directors or any meeting of a committee of directors attended.
No provision of these by-laws shall be construed to preclude any director from
serving the corporation in any other capacity and receiving compensation
therefor.
ARTICLE IV
Committees of Directors
SECTION 4.1. Executive Committee. The Executive Committee of the Board of
--------------------
Directors (the "Executive Committee") shall consist of not less than two
directors to be designated by the Board of Directors annually at its first
regular meeting held pursuant to Section 3.4 of these by-laws after the annual
meeting of stockholders or as soon thereafter as conveniently possible. None of
the members of the Executive Committee need be officers of the corporation. The
Executive Committee shall have and may exercise all of the powers of the Board
of Directors during the period between meetings of the Board of Directors except
as reserved to the Board of Directors or as delegated by these by-laws or by the
Board of Directors to another standing or special committee or as may be
prohibited by law and, except further, that the Executive Committee shall not
have the power to elect officers of the corporation.
SECTION 4.2. Audit Committee. The Audit Committee of the Board of
----------------
Directors (the "Audit Committee") shall consist solely of directors, one or
more, each of whom shall be an "outside" director of the corporation, to be
designated annually by the Board of Directors at its first regular meeting held
pursuant to Section 3.4 of these by-laws after the annual meeting of
stockholders or as soon thereafter as conveniently possible. The term "outside"
director, as used in this Section 4.2, shall mean a director of the corporation
who is independent of management, not an officer, employee, consultant, agent or
affiliate (except as a director) of the corporation and who is free of any
relationship that, in the opinion of the Board of Directors, would interfere
with the designated director's exercise of independent judgment as a member of
the Audit Committee. The Audit Committee shall have and may exercise all of the
powers of the Board of Directors during the period between meetings of the Board
of Directors, except as may be prohibited by law, with respect to (i) the
selection and recommendation for employment by the corporation, subject to
approval by the Board of Directors and the stockholders, of a firm of certified
public accountants whose duty it shall be to audit the
7
<PAGE>
books and accounts of the corporation and its subsidiaries for the fiscal year
in which they are appointed and who shall report to the Audit Committee,
provided, that in selecting and recommending for employment any firm of
certified public accountants, the Audit Committee shall make a thorough
investigation to insure the "independence" of such accountants as defined in the
applicable rules and regulations of the Securities and Exchange Commission; (ii)
instructing the certified public accountants to expand the scope and extent of
the annual audits of the corporation into areas of any concern to the Audit
Committee, which may be beyond that necessary for the certified public
accountants to report on the financial statements of the corporation, and, at
its discretion, directing other special investigations to insure the objectivity
of the financial reporting of the corporation; (iii) reviewing the reports
submitted by the certified public accountants, conferring with the auditors and
reporting thereon to the Board of Directors with such recommendations as the
Audit Committee may deem appropriate; (iv) meeting with the corporation's
principal accounting and financial officers, the certified public accountants
and auditors, and other officers or department managers of the corporation as
the Audit Committee shall deem necessary in order to determine the adequacy of
the corporation's accounting principles and financial and operating policies,
controls and practices, its public financial reporting policies and practices,
and the results of the corporation's annual audit; (v) conducting inquiries into
any of the foregoing, the underlying and related facts, including such matters
as the conduct of the personnel of the corporation, the integrity of the records
of the corporation, the adequacy of the procedures and the legal and financial
consequences of such facts; and (vi) retaining and deploying such professional
assistance, including outside counsel and auditors and any others, as the Audit
Committee shall deem necessary or appropriate, in connection with the exercise
of its powers on such terms as the Audit Committee shall deem necessary or
appropriate to protect the interests of the stockholders of the corporation.
SECTION 4.3. Other Committees. The Board of Directors may, by resolution
-----------------
passed by a majority of the whole Board, designate one or more additional
special or standing committees other than the Executive Committee and Audit
Committee, each such additional committee to consist of one or more of the
directors of the corporation. Each such committee shall have and may exercise
such of the powers of the Board of Directors in the management of the business
and affairs of the corporation as may be provided in such resolution, except as
delegated by these by-laws or by the Board of Directors to another standing or
special committee or as may be prohibited by law.
SECTION 4.4. Committee Operations. A majority of a committee shall
---------------------
constitute a quorum for the transaction of any committee business. Such
committee or committees shall have such name or names and such limitations of
authority as provided in these by-
8
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laws or as may be determined from time to time by resolution adopted by the
Board of Directors. The corporation shall pay all expenses of committee
operations. The Board of Directors may designate one or more appropriate
directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of such committee. In the absence or
disqualification of any members of such committee or committees, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not he or they constitute a quorum, may unanimously appoint another
appropriate member of the Board of Directors to act at the meeting in the place
of any absent or disqualified member.
SECTION 4.5. Minutes. Each committee of directors shall keep regular
--------
minutes of its proceedings and report the same to the Board of Directors when
required. The Secretary or any Assistant Secretary of the corporation shall (i)
serve as the Secretary of the Executive Committee, the Audit Committee and any
other special or standing committee of the Board of Directors of the
corporation, (ii) keep regular minutes of standing or special committee
proceedings, (iii) make available to the Board of Directors, as required, copies
of all resolutions adopted or minutes or reports of other actions recommended or
taken by any such standing or special committee and (iv) otherwise as requested
keep the members of the Board of Directors apprised of the actions taken by such
standing or special committees.
SECTION 4.6. Compensation. Members of special or standing committees who
-------------
are "outside" directors, as that term is defined elsewhere in this Article, may
be allowed compensation for serving as a member of any such committee and all
members may be compensated for expenses of attending committee meetings, if the
stockholders or Board of Directors shall so determine in accordance with Section
3.10.
ARTICLE V
Notice
SECTION 5.1. Methods of Giving Notice. Whenever under the provisions of
-------------------------
the statutes, the Articles of Incorporation or these by-laws, notice is required
to be given to any director, member of any committee or stockholder, such notice
shall be in writing and delivered personally or mailed, postage prepaid, to such
director, member or stockholder; provided that in the case of a director or a
member of any committee such notice may be given orally, by telephone, by
telegram or by facsimile. If mailed, notice to a director, member of a
committee or stockholder shall be deemed to be given when deposited in the
United States mail, in a sealed envelope, with first class postage thereon
prepaid, addressed, in the case of a stockholder, to the stockholder at the
stockholder's address as it appears on the records of the corporation or, in the
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case of a director or a member of a committee, to such person at his business
address. If sent by telegraph, notice to a director or member of a committee
shall be deemed to be given when the telegram, so addressed, is delivered to the
telegraph company. If sent by facsimile, notice to a director or member of a
committee shall be deemed to be given when the transmission from the
transmitting facsimile machine .has been completed
SECTION 5.2. Written Waiver. Whenever any notice is required to be given
---------------
under the provisions of the statutes, the Articles of Incorporation or these by-
laws, a waiver thereof in writing, signed by the person or persons entitled to
said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE IV
Officers
SECTION 6.1. Officers. The executive officers of the corporation shall be
---------
the Chairman of the Board, President, Secretary and Treasurer. The Board of
Directors shall elect and, when applicable, appoint all the executive officers
of the corporation. The Board of Directors and the Chairman of the Board may
appoint such other officers and agents, including but not limited to one or more
Vice Presidents (any one or more of which may be designated Executive Vice
President or Senior Vice President), Assistant Vice Presidents, Assistant
Secretaries and Assistant Treasurers, as they deem necessary, who shall hold
their offices for such terms and shall exercise such powers and perform such
duties as prescribed by the Board of Directors or Chairman of the Board. Any
two or more offices may be held by the same person. No officer shall execute,
acknowledge, verify or countersign any instrument on behalf of the corporation
in more than one capacity, if such instrument is required by law, by these by-
laws or by any act of the corporation to be executed, acknowledged, verified or
countersigned by two or more officers. The Chairman of the Board shall be
elected from among the directors. With the foregoing exception, none of the
other officers need be a director, and none of the officers need be a
stockholder of the corporation.
SECTION 6.2. Election and Term of Office. The executive officers of the
----------------------------
corporation shall be elected annually by the Board of Directors at its first
regular meeting held after the annual meeting of stockholders or as soon
thereafter as conveniently possible. Each executive officer shall hold office
until his successor shall have been chosen and shall have qualified or until his
death or the effective date of his resignation or removal, or until he shall
cease to be a director in the case of the Chairman of the Board.
SECTION 6.3. Removal and Resignation. Any executive officer or other
------------------------
officer or agent appointed by the Board of Directors may
10
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be removed, either with or without cause, by the affirmative vote of a majority
of the Board of Directors whenever, in its judgment, the best interests of the
corporation shall be served thereby, but such removal shall be without prejudice
to the contractual rights, if any, of the person so removed. Any other officer
or agent may be removed, either with or without cause, in the sole discretion of
the Chairman of the Board. Any executive officer or other officer or agent may
resign at any time by giving written notice to the corporation. Any such
resignation shall take effect at the date of the receipt of such notice or at
any later time specified therein, and unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
SECTION 6.4. Vacancies. Any vacancy occurring in any executive office of
----------
the corporation by death, resignation, removal or otherwise, may be filled by
the Board of Directors for the unexpired portion of the term.
SECTION 6.5. Salaries. The salaries of all executive officers of the
---------
corporation shall be fixed by the Board of Directors or pursuant to the
direction of the Board of Directors; and no executive officer shall be prevented
from receiving such salary by reason of his also being a director. Compensation
of officers and agents not appointed by the Board of Directors shall be
established by the Chairman of the Board and President, but subject to review by
the Board of Directors.
SECTION 6.6. Chairman of the Board. The Chairman of the Board shall
----------------------
preside at all meetings of the Board of Directors and of the stockholders of the
corporation. In the Chairman's absence, such duties shall be attended to by the
President. The Chairman of the Board shall hold the position of chief executive
officer of the corporation and shall perform such duties as usually pertain to
the position of chief executive officer and such duties as may be prescribed by
the Board of Directors or the Executive Committee. The Chairman of the Board
shall formulate and submit to the Board of Directors or the Executive Committee
matters of general policy for the corporation and shall perform such other
duties as usually appertain to the office or as may be prescribed by the Board
of Directors. He shall have the power to appoint and remove subordinate
officers, agents and employees, except those elected or appointed by the Board
of Directors. He may sign with the President or any other officer of the
corporation thereunto authorized by the Board of Directors certificates for
shares of the corporation, the issuance of which shall have been authorized by
resolution of the Board of Directors, and any deeds, bonds, mortgages,
contracts, checks, notes, drafts or other instruments which the Board of
Directors or the Executive Committee has authorized to be executed, except in
cases where the signing and execution thereof has been expressly delegated or
reserved by these by-laws or by the Board of Directors or the Executive
Committee to
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some other officer or agent of the corporation, or shall be required by law to
be otherwise executed.
SECTION 6.7. President. The President, subject to the control of the
----------
Board of Directors, the Executive Committee, and the Chairman of the Board,
shall in general supervise and control the business and affairs of the
corporation. He shall have the power to appoint and remove subordinate
officers, agents and employees, except those elected or appointed by the Board
of Directors or the Chairman of the Board. The President shall keep the Board
of Directors, the Executive Committee and the Chairman of the Board fully
informed as they or any of them shall request and shall consult them concerning
the business of the corporation. He may sign with the Chairman of the Board or
any other officer of the corporation thereunto authorized by the Board of
Directors, certificates for shares of capital stock of the corporation, the
issuance of which shall have been authorized by resolution of the Board of
Directors, and any deeds, bonds, mortgages, contracts, checks, notes, drafts or
other instruments which the Board of Directors or the Executive Committee has
authorized to be executed, except in cases where the signing and execution
thereof has been expressly delegated by these by-laws or by the Board of
Directors or the Executive Committee to some other officer or agent of the
corporation, or shall be required by law to be otherwise executed. In general
he shall perform all other duties normally incident to the office of the
President, except any duties expressly delegated to other persons by these by-
laws, the Board of Directors, or the Executive Committee, and such other duties
as may be prescribed by the stockholders, Chairman of the Board, the Board of
Directors or the Executive Committee, from time to time.
SECTION 6.8. Vice Presidents. In the absence of the President, or in the
----------------
event of his inability or refusal to act, the Executive Vice President (or in
the event there shall be no Vice President or more than one Vice President
designated Executive Vice President, any Vice President designated by the Board)
shall perform the duties and exercise the powers of the President. Any Vice
President authorized by resolution of the Board of Directors to do so, may sign
with any other officer of the corporation thereunto authorized by the Board of
Directors, certificates for shares of capital stock of the corporation, the
issuance of which shall have been authorized by resolution of the Board of
Directors. The Vice Presidents shall perform such other duties as from time to
time may be assigned to them by the Chairman of the Board, the President, the
Board of Directors or the Executive Committee.
SECTION 6.9. Secretary. The Secretary shall (a) keep the minutes of the
----------
meetings of the stockholders, the Board of Directors and committees of
directors; (b) see that all notices are duly given in accordance with provisions
of these by-laws and as required by law; (c) be custodian of the corporate
records and of the seal of the corporation, and see that the seal of the
12
<PAGE>
corporation or a facsimile thereof is affixed to all certificates for shares
prior to the issuance thereof and to all documents, the execution of which on
behalf of the corporation under its seal is duly authorized in accordance with
the provisions of these by-laws; (d) keep or cause to be kept a register of the
post office address of each stockholder which shall be furnished by such
stockholder; (e) have general charge of the stock transfer books of the
corporation; and (f) in general, perform all duties normally incident to the
office of Secretary and such other duties as from time to time may be assigned
to him by the Chairman of the Board, the President, the Board of Directors or
the Executive Committee.
SECTION 6.10. Treasurer. The Treasurer shall (a) have charge and custody
----------
of and be responsible for all funds and securities of the corporation; receive
and give receipts for moneys due and payable to the corporation from any source
whatsoever and deposit all such moneys in the name of the corporation in such
banks, trust companies or other depositories as shall be selected in accordance
with the provisions of Section 7.3 of these by-laws; (b) prepare, or cause to be
prepared, for submission at each regular meeting of the Board of Directors, at
each annual meeting of stockholders, and at such other times as may be required
by the Board of Directors, the Chairman of the Board, the President or the
Executive Committee, a statement of financial condition of the corporation in
such detail as may be required; and (c) in general, perform all the duties
incident to the office of Treasurer and such other duties as from time to time
may be assigned to him by the Chairman of the Board, the President, the Board of
Directors or the Executive Committee. If required by the Board of Directors or
the Executive Committee, the Treasurer shall give a bond for the faithful
discharge of his duties as such sum and with such surety or sureties as the
Board of Directors or the Executive Committee shall determine.
SECTION 6.11. Assistant Secretary or Treasurer. The Assistant Secretaries
---------------------------------
and Assistant Treasurers shall, in general, perform such duties as shall be
assigned to them by the Secretary or the Treasurer, respectively, or by the
Chairman of the Board, the President, the Board of Directors or the Executive
Committee. The Assistant Secretaries or Assistant Treasurers shall, in the
absence of the Secretary or Treasurer, respectively, perform all functions and
duties which such absent officers may delegate, but such delegation shall not
relieve the absent officer from the responsibilities and liabilities of his
office. The Assistant Treasurers shall respectively, if required by the Board
of Directors or the Executive Committee, give bonds for the faithful discharge
of their duties in such sums and with such sureties as the Board of Directors or
the Executive Committee shall determine.
ARTICLE VII
Contracts, Checks and Deposits
13
<PAGE>
SECTION 7.1. Contracts. Subject to the provisions of Section 6.1., the
----------
Board of Directors or the Executive Committee may authorize any officer,
officers, agent or agents, to enter into any contract or execute and deliver an
instrument in the name of and on behalf of the corporation, and such authority
may be general or confined to specific instances.
SECTION 7.2. Checks, etc. All checks, demands, drafts or other orders for
------------
the payment of money, notes or other evidences of indebtedness issued in the
name of the corporation, shall be signed by such officer or officers or such
agent or agents of the corporation, and in such manner, as shall be determined
by the Board of Directors or the Executive Committee.
SECTION 7.3. Deposits. All funds of the corporation not otherwise
---------
employed shall be deposited from time to time to the credit of the corporation
in such banks, trust companies or other depositories as the Chairman of the
Board, the President or the Treasurer may be empowered by the Board of Directors
or the Executive Committee to select or as the Board of Directors or the
Executive Committee may select.
ARTICLE VIII
Certificate of Stock
SECTION 8.1. Issuance. Each stockholder of this corporation shall be
---------
entitled to a certificate or certificates showing the number of shares of stock
registered in his name on the books of the corporation. The certificates shall
be in such form as may be determined by the Board of Directors or the Executive
Committee, shall be issued in numerical order and shall be entered in the books
of the corporation as they are issued. They shall exhibit the holder's name and
the number of shares and shall be signed by the Chairman of the Board and the
President or such other officers as may from time to time be authorized by
resolution of the Board of Directors. Any of or all the signatures on the
certificate may be a facsimile. The seal of the corporation shall be impressed,
by original or by facsimile, printed or engraved, on all such certificates. In
case any officer who has signed or whose facsimile signature has been placed
upon any such certificate shall have ceased to be such officer before such
certificate is issued, such certificate may nevertheless be issued by the
corporation with the same effect as if such officer had not ceased to be such
officer at the date of its issue. If the corporation shall be authorized to
issue more than one class of stock or more than one series of any class, the
designation, preferences and relative, participating, option or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and rights shall be set forth in
full or summarized on the face or back of the certificate which the
14
<PAGE>
corporation shall issue to represent such class of stock; provided that except
as otherwise provided by statute, in lieu of the foregoing requirements there
may be set forth on the face or back of the certificate which the corporation
shall issue to represent such class or series of stock, a statement that the
corporation will furnish to each stockholder who so requests the designations,
preferences and relative, participating, option or other special rights of each
class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and rights. All certificates surrendered to
the corporation for transfer shall be canceled and no new certificate shall be
issued until the former certificate for a like number of shares shall have been
surrendered and canceled, except that in the case of a lost, stolen, destroyed
or mutilated certificate a new one may be issued therefor upon such terms and
with such indemnity, if any, to the corporation as the Board of Directors may
prescribe. In addition to the above, all certificates evidencing shares of the
corporation's stock or other securities issued by the corporation shall contain
such legend or legends as may from time to time be required by the Nevada
Revised Statutes and/or the Nevada Gaming Commission Regulations then in effect.
SECTION 8.2. Lost Certificates. The Board of Directors may direct that a
------------------
new certificate or certificates be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require or to give the corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the corporation
with respect to the certificate or certificates alleged to have been lost,
stolen or destroyed, or both.
SECTION 8.3. Transfers. Upon surrender to the corporation or the transfer
----------
agent of the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books. Transfers of shares shall be made only on the books
of the corporation by the registered holder thereof, or by his attorney
thereunto authorized by power of attorney and filed with the Secretary of the
corporation or the transfer agent.
SECTION 8.4. Registered Stockholders. The corporation shall be entitled
------------------------
to treat the holder of record of any share or shares of stock as the holder in
fact thereof and, accordingly, shall not be
15
<PAGE>
bound to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person, whether or not it shall have express or
other notice thereof, except as otherwise provided by laws of the State of
Nevada.
ARTICLE IX
Dividends
SECTION 9.1. Declaration. Dividends upon the capital stock of the
------------
corporation, subject to the provisions of the Articles of Incorporation, if any,
may be declared by the Board of Directors at any regular or special meeting,
pursuant to law. Dividends may be paid in cash, in property or in shares of
capital stock, subject to the provisions of the Articles of Incorporation.
SECTION 9.2. Reserve. Before payment of any dividend, there may be set
--------
aside out of any funds of the corporation available for dividends such sum or
sums as the Board of Directors from time to time, in their absolute discretion,
think proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the corporation, or
for such other purpose as the Board of Directors shall think conducive to the
interests of the corporation, and the Board of Directors may modify or abolish
any such reserve in the manner in which it was created.
ARTICLE X
Indemnification
SECTION 10.1. Third Party Actions. The corporation shall indemnify any
--------------------
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation) by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interest of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the
16
<PAGE>
best interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
SECTION 10.2. Actions by or in the Right of the Corporation. The
----------------------------------------------
corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
corporation unless and only to the extent that the court in which such action or
suit was brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses as the court shall
deem proper.
SECTION 10.3. Successful Defense. To the extent that a director, officer,
-------------------
employee or agent of the corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in Sections
10.1 and 10.2, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
SECTION 10.4. Determination of Conduct. Any indemnification under Section
-------------------------
10.1 or 10.2 (unless ordered by a court) shall be made by the corporation only
as authorized in the specific case upon a determination that indemnification of
the director, officer, employee or agent is proper in the circumstances because
he has met the applicable standard of conduct set forth in Sections 10.1 and
10.2. Such determination shall be made (1) by the Board of Directors or the
Executive Committee by a majority vote of a quorum consisting of directors who
were not parties to such action, suit or proceeding, or (2) if such quorum is
not obtainable or, even if obtainable, a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (3) by the
stockholders.
SECTION 10.5. Payment of Expenses in Advance. Expenses incurred in
-------------------------------
defending a civil or criminal action, suit or proceeding shall be paid by the
corporation in advance of the final
17
<PAGE>
disposition of such action, suit or proceeding as authorized by the Board of
Directors in the specific case upon receipt of an undertaking by or on behalf of
the director, officer, employee or agent to repay such amount unless it shall
ultimately be determined that he is entitled to be indemnified by the
corporation as authorized in this Article X.
SECTION 10.6. Indemnity Not Exclusive. The indemnification provided
------------------------
hereunder shall not be deemed exclusive of any other rights to which those
seeking indemnification may be entitled under any other by-law, agreement, vote
of stockholders or disinterested directors or otherwise, both as to action in
his official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
SECTION 10.7. The Corporation. For purposes of this Article X, references
----------------
to "the corporation" shall include, in addition to the resulting corporation,
any constituent corporation (including any constituent of a constituent)
absorbed in a consolidation or merger which, if its separate existence had
continued, would have had power and authority to indemnify its directors,
officers, and employees or agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is or was serving
at the request of such constituent corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under and subject to the provisions
of this Article X (including, without limitation the provisions of Section 10.4)
with respect to the resulting or surviving corporation as he would have with
respect to such constituent corporation if its separate existence had continued.
SECTION 10.8. Insurance Indemnification. The corporation shall have the
--------------------------
power to purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprises
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the corporation
would have the power to indemnify him against such liability under the
provisions of this Article X.
18
<PAGE>
ARTICLE XI
Miscellaneous
SECTION 11.1. Seal. The corporate seal shall have inscribed thereon the
-----
name of the corporation, and the words "Corporate Seal, Nevada". The seal may
be used by causing it or a facsimile thereof to be impressed or affixed or
otherwise reproduced.
SECTION 11.2. Books. The books of the corporation may be kept within or
------
without the State of Nevada (subject to any provisions contained in the
statutes) at such place or places as may be designated from time to time by the
Board of Directors or the Executive Committee.
SECTION 11.3. Fiscal Year. The fiscal year of the corporation shall be
------------
fixed by resolution of the Board of Directors.
ARTICLE XII
Amendment
These by-laws may be altered, amended or repealed at any regular meeting of
the Board of Directors without prior notice, or at any special meeting of the
Board of Directors if notice of such alteration, amendment or repeal be
contained in the notice of such special meeting.
___________________________
OFFICER'S CERTIFICATE
The undersigned, MIKE H. SLOAN, Secretary of Circus Circus Enterprises,
Inc., a Nevada corporation, hereby certifies that the above and foregoing
Restated By-Laws of Circus Circus Enterprises, Inc., were duly adopted by the
Board of Directors of said corporation at a regularly scheduled meeting of the
Board of Directors held on March 19, 1995.
(Corporate Seal)
MIKE H. SLOAN
---------------------------------------
MIKE H. SLOAN, Secretary
Dated: March 19, 1995
---------------------------------
19
<PAGE>
Exhibit 4(d)
INSTRUMENT OF JOINDER
---------------------
THIS INSTRUMENT OF JOINDER ("Joinder") is executed as of April 20, 1995, by
Circus Circus Mississippi, Inc., a Mississippi corporation ("Joining Party"),
and delivered to Bank of America National Trust and Savings Association, as
Managing Agent, pursuant to the Subsidiary Guaranty dated as of September 30,
1993, made by Circus Circus Casinos, Inc., a Nevada corporation, New Castle
Corporation, a Nevada corporation, Colorado Belle Corp., a Nevada corporation,
Edgewater Hotel Corporation, a Nevada corporation, and Ramparts, Inc., a Nevada
corporation (collectively, the "Guarantors") in favor of the Managing Agent and
the Banks (the "Guaranty"). Terms used but not defined in this Joinder shall
have the meanings defined for those terms in the Guaranty.
RECITALS
--------
(a) The Guaranty was made by the Guarantors in favor of the Managing
Agent for the benefit of the Banks that are parties to that certain Revolving
Loan Agreement dated as of September 30, 1993, by and among Circus Circus
Enterprises, Inc., a Nevada corporation, ("Borrower"), the Banks that are
parties thereto, The Long-Term Credit Bank of Japan, Ltd., Los Angeles, Agency,
First Interstate Bank of Nevada, N.A., Societe Generale and Credit Lyonnais, as
Co-Agents, CIBC Inc., as Co-Managing Agent, and Bank of America National Trust
and Savings Association, as the Managing Agent for the Banks.
(b) Joining Party has become a Significant Subsidiary of Borrower,
and as such, is required pursuant to Section 5.10 of the Revolving Loan
----
Agreement to become a Guarantor.
(c) Joining Party expects to realize direct and indirect benefits as
a result of the availability to Borrower of the credit facilities under the
Revolving Loan Agreement.
NOW, THEREFORE, Joining Party agrees as follows:
AGREEMENT
---------
(1) By this Joinder, Joining Party becomes a "Guarantor" under and
pursuant to Section 15 of the Guaranty. Joining Party agrees that, upon its
--
execution hereof, it will become a Guarantor under the Guaranty with respect to
all
-1-
<PAGE>
Obligations of Borrower hereunder or hereafter incurred under the Loan
Documents, and will be bound by all terms, conditions, and duties applicable to
a Guarantor under the Guaranty.
(2) The effective date of this Joinder is April 20, 1995.
"Joining Party"
CIRCUS CIRCUS MISSISSIPPI, INC.,
a Mississippi corporation
By: CLYDE T. TURNER
----------------------------
Its:CLYDE T. TURNER, PRESIDENT
----------------------------
[Printed Name and Title]
ACKNOWLEDGED:
BANK OF AMERICA NATIONAL TRUST
AND SAVING ASSOCIATION,
as Managing Agent
By: PEGGY FUJIMOTO
-----------------------------
Its:PEGGY FUJIMOTO, VICE PRESIDENT
------------------------------
[Printed Name and Title]
-2-
<PAGE>
Exhibit 4(e)
INSTRUMENT OF JOINDER
---------------------
THIS INSTRUMENT OF JOINDER ("Joinder") is executed as of April 20, 1995, by
Galleon Inc., a Nevada corporation ("Joining Party"), and delivered to Bank of
America National Trust and Savings Association, as Managing Agent, pursuant to
the Subsidiary Guaranty dated as of September 30, 1993, made by Circus Circus
Casinos, Inc., a Nevada corporation, New Castle Corporation, a Nevada
corporation, Colorado Belle Corp., a Nevada corporation, Edgewater Hotel
Corporation, a Nevada corporation, and Ramparts, Inc., a Nevada corporation
(collectively, the "Guarantors") in favor of the Managing Agent and the Banks
(the "Guaranty"). Terms used but not defined in this Joinder shall have the
meanings defined for those terms in the Guaranty.
RECITALS
--------
(a) The Guaranty was made by the Guarantors in favor of the Managing
Agent for the benefit of the Banks that are parties to that certain Revolving
Loan Agreement dated as of September 30, 1993, by and among Circus Circus
Enterprises, Inc., a Nevada corporation, ("Borrower"), the Banks that are
parties thereto, The Long-Term Credit Bank of Japan, Ltd., Los Angeles, Agency,
First Interstate Bank of Nevada, N.A., Societe Generale and Credit Lyonnais, as
Co-Agents, CIBC Inc., as Co-Managing Agent, and Bank of America National Trust
and Savings Association, as the Managing Agent for the Banks.
(b) Joining Party has become a Significant Subsidiary of Borrower,
and as such, is required pursuant to Section 5.10 of the Revolving Loan
----
Agreement to become a Guarantor.
(c) Joining Party expects to realize direct and indirect benefits as
a result of the availability to Borrower of the credit facilities under the
Revolving Loan Agreement.
NOW, THEREFORE, Joining Party agrees as follows:
AGREEMENT
---------
(1) By this Joinder, Joining Party becomes a "Guarantor" under and
pursuant to Section 15 of the Guaranty. Joining Party agrees that, upon its
--
execution hereof, it will become a Guarantor under the Guaranty with respect to
all
-1-
<PAGE>
Obligations of Borrower hereunder or hereafter incurred under the Loan
Documents, and will be bound by all terms, conditions, and duties applicable to
a Guarantor under the Guaranty.
(2) The effective date of this Joinder is April 20, 1995.
"Joining Party"
GALLEON INC.,
a Nevada corporation
By:CLYDE T. TURNER
------------------------------
Its:CLYDE T. TURNER, PRESIDENT
-----------------------------
[Printed Name and Title]
ACKNOWLEDGED:
BANK OF AMERICA NATIONAL TRUST
AND SAVING ASSOCIATION,
as Managing Agent
By: PEGGY FUJIMOTO
------------------------------
Its:PEGGY FUJIMOTO, VICE PRESIDENT
------------------------------
[Printed Name and Title]
-2-
<PAGE>
Exhibit 4(f)
INSTRUMENT OF JOINDER
---------------------
THIS INSTRUMENT OF JOINDER ("Joinder") is executed as of April 20, 1995, by
Circus Circus Louisiana, Inc., a Louisiana corporation ("Joining Party"), and
delivered to Bank of America National Trust and Savings Association, as Managing
Agent, pursuant to the Subsidiary Guaranty dated as of September 30, 1993, made
by Circus Circus Casinos, Inc., a Nevada corporation, New Castle Corporation, a
Nevada corporation, Colorado Belle Corp., a Nevada corporation, Edgewater Hotel
Corporation, a Nevada corporation, and Ramparts, Inc., a Nevada corporation
(collectively, the "Guarantors") in favor of the Managing Agent and the Banks
(the "Guaranty"). Terms used but not defined in this Joinder shall have the
meanings defined for those terms in the Guaranty.
RECITALS
--------
(a) The Guaranty was made by the Guarantors in favor of the Managing
Agent for the benefit of the Banks that are parties to that certain Revolving
Loan Agreement dated as of September 30, 1993, by and among Circus Circus
Enterprises, Inc., a Nevada corporation, ("Borrower"), the Banks that are
parties thereto, The Long-Term Credit Bank of Japan, Ltd., Los Angeles, Agency,
First Interstate Bank of Nevada, N.A., Societe Generale and Credit Lyonnais, as
Co-Agents, CIBC Inc., as Co-Managing Agent, and Bank of America National Trust
and Savings Association, as the Managing Agent for the Banks.
(b) Joining Party has become a Significant Subsidiary of Borrower,
and as such, is required pursuant to Section 5.10 of the Revolving Loan
----
Agreement to become a Guarantor.
(c) Joining Party expects to realize direct and indirect benefits as
a result of the availability to Borrower of the credit facilities under the
Revolving Loan Agreement.
NOW, THEREFORE, Joining Party agrees as follows:
AGREEMENT
---------
(1) By this Joinder, Joining Party becomes a "Guarantor" under and
pursuant to Section 15 of the Guaranty. Joining Party agrees that, upon its
--
execution hereof, it will become a Guarantor under the Guaranty with respect to
all
-1-
<PAGE>
Obligations of Borrower hereunder or hereafter incurred under the Loan
Documents, and will be bound by all terms, conditions, and duties applicable to
a Guarantor under the Guaranty.
(2) The effective date of this Joinder is April 20, 1995.
"Joining Party"
CIRCUS CIRCUS LOUISIANA, INC.,
a Louisiana corporation
By:CLYDE T. TURNER
------------------------------
Its:CLYDE T. TURNER, PRESIDENT
-----------------------------
[Printed Name and Title]
ACKNOWLEDGED:
BANK OF AMERICA NATIONAL TRUST
AND SAVING ASSOCIATION,
as Managing Agent
By: PEGGY FUJIMOTO
------------------------------
Its:PEGGY FUJIMOTO, VICE PRESIDENT
------------------------------
[Printed Name and Title]
-2-
<PAGE>
Exhibit 4(j)
INSTRUMENT OF JOINDER
---------------------
THIS INSTRUMENT OF JOINDER ("Joinder") is executed as of March 28, 1995, by
Circus Circus Mississippi, Inc., a Mississippi corporation ("Joining Party"),
and delivered to Bank of America National Trust and Savings Association, as
Managing Agent, pursuant to the Subsidiary Guaranty dated as of September 30,
1993, made by Circus Circus Casinos, Inc., a Nevada corporation, New Castle
Corporation, a Nevada corporation, Colorado Belle Corp., a Nevada corporation,
Edgewater Hotel Corporation, a Nevada corporation, and Ramparts, Inc., a Nevada
corporation (collectively, the "Guarantors") in favor of the Managing Agent and
the Banks (the "Guaranty"). Terms used but not defined in this Joinder shall
have the meanings defined for those terms in the Guaranty.
RECITALS
--------
(a) The Guaranty was made by the Guarantors in favor of the Managing
Agent for the benefit of the Banks that are parties to that certain Reducing
Revolving Loan Agreement dated as of September 30, 1993, by and among Circus
Circus Enterprises, Inc., a Nevada corporation, ("Borrower"), the Banks that are
parties thereto, The Long-Term Credit Bank of Japan, Ltd., Los Angeles, Agency,
First Interstate Bank of Nevada, N.A., Societe Generale and Credit Lyonnais, as
Co-Agents, CIBC Inc., as Co-Managing Agent, and Bank of America National Trust
and Savings Association, as the Managing Agent for the Banks.
(b) Joining Party has become a Significant Subsidiary of Borrower,
and as such, is required pursuant to Section 5.10 of the Reducing Revolving Loan
----
Agreement to become a Guarantor.
(c) Joining Party expects to realize direct and indirect benefits as
a result of the availability to Borrower of the credit facilities under the
Reducing Revolving Loan Agreement.
NOW, THEREFORE, Joining Party agrees as follows:
AGREEMENT
---------
(1) By this Joinder, Joining Party becomes a "Guarantor" under and
pursuant to Section 15 of the Guaranty. Joining Party agrees that, upon its
--
execution hereof, it will become a Guarantor under the Guaranty with respect to
all
-1-
<PAGE>
Obligations of Borrower hereunder or hereafter incurred under the Loan
Documents, and will be bound by all terms, conditions, and duties applicable to
a Guarantor under the Guaranty.
(2) The effective date of this Joinder is March 28, 1995.
"Joining Party"
CIRCUS CIRCUS MISSISSIPPI, INC.,
a Mississippi corporation
By: CLYDE T. TURNER
----------------------------
Its: CLYDE T. TURNER, PRESIDENT
----------------------------
[Printed Name and Title]
ACKNOWLEDGED:
BANK OF AMERICA NATIONAL TRUST
AND SAVING ASSOCIATION,
as Managing Agent
By: PEGGY FUJIMOTO
-----------------------------
Its:PEGGY FUJIMOTO, VICE PRESIDENT
------------------------------
[Printed Name and Title]
-2-
<PAGE>
Exhibit 4(k)
INSTRUMENT OF JOINDER
---------------------
THIS INSTRUMENT OF JOINDER ("Joinder") is executed as of April 14, 1995, by
Galleon Inc., a Nevada corporation ("Joining Party"), and delivered to Bank of
America National Trust and Savings Association, as Managing Agent, pursuant to
the Subsidiary Guaranty dated as of September 30, 1993, made by Circus Circus
Casinos, Inc., a Nevada corporation, New Castle Corporation, a Nevada
corporation, Colorado Belle Corp., a Nevada corporation, Edgewater Hotel
Corporation, a Nevada corporation, and Ramparts, Inc., a Nevada corporation
(collectively, the "Guarantors") in favor of the Managing Agent and the Banks
(the "Guaranty"). Terms used but not defined in this Joinder shall have the
meanings defined for those terms in the Guaranty.
RECITALS
--------
(a) The Guaranty was made by the Guarantors in favor of the Managing
Agent for the benefit of the Banks that are parties to that certain Reducing
Revolving Loan Agreement dated as of September 30, 1993, by and among Circus
Circus Enterprises, Inc., a Nevada corporation, ("Borrower"), the Banks that are
parties thereto, The Long-Term Credit Bank of Japan, Ltd., Los Angeles, Agency,
First Interstate Bank of Nevada, N.A., Societe Generale and Credit Lyonnais, as
Co-Agents, CIBC Inc., as Co-Managing Agent, and Bank of America National Trust
and Savings Association, as the Managing Agent for the Banks.
(b) Joining Party has become a Significant Subsidiary of Borrower,
and as such, is required pursuant to Section 5.10 of the Reducing Revolving Loan
----
Agreement to become a Guarantor.
(c) Joining Party expects to realize direct and indirect benefits as
a result of the availability to Borrower of the credit facilities under the
Reducing Revolving Loan Agreement.
NOW, THEREFORE, Joining Party agrees as follows:
AGREEMENT
---------
(1) By this Joinder, Joining Party becomes a "Guarantor" under and
pursuant to Section 15 of the Guaranty. Joining Party agrees that, upon its
--
execution hereof, it will become a Guarantor under the Guaranty with respect to
all
-1-
<PAGE>
Obligations of Borrower hereunder or hereafter incurred under the Loan
Documents, and will be bound by all terms, conditions, and duties applicable to
a Guarantor under the Guaranty.
(2) The effective date of this Joinder is April 14, 1995.
"Joining Party"
GALLEON INC.,
a Nevada corporation
By:CLYDE T. TURNER
------------------------------
Its:CLYDE T. TURNER, PRESIDENT
-----------------------------
[Printed Name and Title]
ACKNOWLEDGED:
BANK OF AMERICA NATIONAL TRUST
AND SAVING ASSOCIATION,
as Managing Agent
By:PEGGY FUJIMOTO
--------------------------------
Its:PEGGY FUJIMOTO, VICE PRESIDENT
-------------------------------
[Printed Name and Title]
-2-
<PAGE>
Exhibit 4(l)
INSTRUMENT OF JOINDER
---------------------
THIS INSTRUMENT OF JOINDER ("Joinder") is executed as of April 20, 1995, by
Circus Circus Louisiana, Inc., a Louisiana corporation ("Joining Party"), and
delivered to Bank of America National Trust and Savings Association, as Managing
Agent, pursuant to the Subsidiary Guaranty dated as of September 30, 1993, made
by Circus Circus Casinos, Inc., a Nevada corporation, New Castle Corporation, a
Nevada corporation, Colorado Belle Corp., a Nevada corporation, Edgewater Hotel
Corporation, a Nevada corporation, and Ramparts, Inc., a Nevada corporation
(collectively, the "Guarantors") in favor of the Managing Agent and the Banks
(the "Guaranty"). Terms used but not defined in this Joinder shall have the
meanings defined for those terms in the Guaranty.
RECITALS
--------
(a) The Guaranty was made by the Guarantors in favor of the
Managing Agent for the benefit of the Banks that are parties to that certain
Reducing Revolving Loan Agreement dated as of September 30, 1993, by and among
Circus Circus Enterprises, Inc., a Nevada corporation, ("Borrower"), the Banks
that are parties thereto, The Long-Term Credit Bank of Japan, Ltd., Los Angeles,
Agency, First Interstate Bank of Nevada, N.A., Societe Generale and Credit
Lyonnais, as Co-Agents, CIBC Inc., as Co-Managing Agent, and Bank of America
National Trust and Savings Association, as the Managing Agent for the Banks.
(b) Joining Party has become a Significant Subsidiary of Borrower,
and as such, is required pursuant to Section 5.10 of the Reducing Revolving Loan
----
Agreement to become a Guarantor.
(c) Joining Party expects to realize direct and indirect benefits as
a result of the availability to Borrower of the credit facilities under the
Reducing Revolving Loan Agreement.
NOW, THEREFORE, Joining Party agrees as follows:
AGREEMENT
---------
(1) By this Joinder, Joining Party becomes a "Guarantor" under and
pursuant to Section 15 of the Guaranty. Joining Party agrees that, upon its
--
execution hereof, it will become a Guarantor under the Guaranty with respect to
all
-1-
<PAGE>
Obligations of Borrower hereunder or hereafter incurred under the Loan
Documents, and will be bound by all terms, conditions, and duties applicable to
a Guarantor under the Guaranty.
(2) The effective date of this Joinder is April 20, 1995.
"Joining Party"
CIRCUS CIRCUS LOUSIANA, INC.,
a Lousiana corporation
By: CLYDE T. TURNER
------------------------------
Its:CLYDE T. TURNER, PRESIDENT
-----------------------------
[Printed Name and Title]
ACKNOWLEDGED:
BANK OF AMERICA NATIONAL TRUST
AND SAVING ASSOCIATION,
as Managing Agent
By:PEGGY FUJIMOTO
-------------------------------
Its:PEGGY FUJIMOTO, VICE PRESIDENT
------------------------------
[Printed Name and Title]
-2-
<PAGE>
EXHIBIT 10(z)
AMENDED AND RESTATED
OPERATING AGREEMENT
OF
AMERICAN ENTERTAINMENT, L.L.C., A LOUISIANA LIMITED-LIABILITY COMPANY
This Amended and Restated Operating Agreement (the "Agreement") is entered
into as of this 8th day of February, 1995, by and between CIRCUS CIRCUS
LOUISIANA, INC., a Louisiana corporation ("CCLI") and AMERICAN ENTERTAINMENT
CORPORATION, a Louisiana corporation ("AEC"), collectively referred to as the
"Members." Subject to the provisions of Section 14.12 below, this Agreement
amends and restates in its entirety that certain Operating Agreement dated as of
January 14, 1994, as heretofore amended by an Amendment thereto dated as of
February 8, 1994.
ARTICLE 1. NAME; DEFINED TERMS
Section 1.1 Name. The name of the Company shall be: "American
----
Entertainment, L.L.C."
Section 1.2 Identification of Company. The abbreviation "L.L.C." must
-------------------------
appear in the name of the Company on all correspondence, stationery, checks,
invoices, and all documents executed by the Company.
Section 1.3 Certain Definitions. As used in this Agreement, the following
-------------------
terms shall have the following meanings:
"Additional Capital Contributions" means the amount or amounts
--------------------------------
contributed to or for the benefit of the Company pursuant to Section 6.2.
"AEC Loan" means the loan made by CCEI to AEC as more particularly
---------
described in Section 6.6.
"AEC Parties" means AEC and Georgusis.
------------
"AEC Preferred Capital Balance" means the amount of AEC's Additional
------------------------------
Capital Contribution pursuant to Section 6.2(a), as reduced (but not below
zero) by the aggregate amount of all prior distributions of Net Available
Cash to or for the account of AEC pursuant to Sections 7.3(a)(iii) and
7.3(a)(v).
"Affiliate" means any person or entity controlling, controlled by or
-----------
under common control with any other person or entity, including without
limitation, any officer, director, employee, agent, partner or member of
any such person or entity.
"Appointing Member" means the Member entitled to initially appoint a
-------------------
Manager or to fill a vacancy of a Manager on the Management Committee
pursuant to Section 5.3(c).
"B of A Prime Rate" means the "prime rate" of interest charged from
-------------------
time to time by Bank of America, N.T. & S.A. to its best commercial
customers for short term unsecured loans.
"CCEI" means Circus Circus Enterprises, Inc., a Nevada corporation, an
------
Affiliate of CCLI.
"CCLI Additional Capital Contributions" means the amounts contributed
----------------------------------------
to or for the benefit of the Company by CCLI pursuant to Section 6.2(b).
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<PAGE>
"CCLI Loans" means loans made by CCLI or an Affiliate to or for the
-----------
benefit of the Company pursuant to Section 6.2(d); provided that any such
CCLI Loans pursuant to Section 6.2(d) below (i) shall bear interest from
the date of each advance until repaid, at a rate equal to ten percent (10%)
per annum, (ii) may be secured by deeds of trust and/or other security
interests in the Property, the Project and/or other assets of the Company,
as contemplated in the Financing Outline, and (iii) shall be made upon and
subject to such commercially reasonable terms and conditions as proposed
from time to time by CCLI or such Affiliate, consistent with the Financing
Outline.
"CCLI Preferred Capital Balance" means the aggregate amount of CCLI's
--------------------------------
Additional Capital Contributions pursuant to Section 6.2(b), as reduced
(but not below zero) by the aggregate amount of all prior distributions of
Net Available Cash to CCLI pursuant to Sections 7.3(a)(iii) and 7.3(a)(v).
"Capital Account" shall have the meaning ascribed to it in Section
-----------------
6.5.
"Capital Contribution" of a Member means the aggregate amount of such
----------------------
Member's Initial Capital Contribution and Additional Capital Contributions.
"Circus Parties" means CCLI and CCEI.
----------------
"Code" means the Internal Revenue Code of 1986, as amended.
------
"Conditional Approval" means the certificate of approval for a gaming
----------------------
license granted to the Company by the Gaming Authorities after completion
of all suitability investigations and all required public hearings, which
license is conditioned (if at all) only upon the completion of construction
of the Project and the satisfaction of other non-discretionary conditions
(which conditions shall have been approved by the Management Committee).
"Construction Budget" means the written budgets and schedules and any
---------------------
amendments thereto, approved by the Management Committee pursuant to
Section 5.3, setting forth in reasonable detail on a line item basis, in
compliance with the prescribed CCEI construction budget format, all costs
and expenses (including without limitation, both "hard" and "soft" costs
for both off-site and on-site work) incurred or to be incurred in
connection with the acquisition and development of the Property and any
additional property and the design, development, construction, fixturizing,
equipping, preopening expenses and initial bankroll for operation of the
Project. Any change in a line item or related series of line items
(including without limitation, any reallocation of amounts between or among
line items) resulting in a change in any such line item of more than 15%
(and in all events, any such change in a line item or reallocation of funds
among line items which involves more than $100,000), shall be deemed an
amendment requiring the approval of the Management Committee. Unless
otherwise expressly approved by the Management Committee, the total
Construction Budget shall not exceed $107,000,000.
"Construction-Related Agreement(s)" means any contracts or
-----------------------------------
subcontracts for the furnishing of materials or equipment or for the
rendering of labor or other services in connection with the development of
the Property and the development, design and construction of the Project.
"Consulting Agreement" means that certain Riverboat Casino Consulting
----------------------
Agreement to be entered into concurrently herewith between the Company as
owner
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<PAGE>
and AEC as consultant, in form and substance as set forth on attached
Exhibit E.
---------
"Consulting Fees" means the consulting fees payable to AEC pursuant to
-----------------
the Consulting Agreement.
"Current Year Amortization" means for each fiscal year with respect to
-------------------------
each CCLI Loan the aggregate amount that would be payable by the Company
with respect to such fiscal year to amortize each such CCLI Loan ratably
over a five-year period commencing with the date of such CCLI Loan;
provided, however, that for any fiscal year in which the Liquidation of the
Company shall occur, "Current Year Amortization" with respect to each CCLI
Loan shall mean the outstanding principal balance and all accrued but
unpaid interest of such CCLI Loan.
"Depreciation" means, for each fiscal year or other period, an amount
--------------
equal to the depreciation, amortization or other cost recovery deduction
allowable with respect to an asset for such year or other period, except
that if the Gross Asset Value of an asset differs from its adjusted basis
for federal income tax purposes at the beginning of such year or other
period, Depreciation shall be an amount which bears the same ratio to such
beginning Gross Asset Value as the federal income tax depreciation,
amortization or other cost recovery deduction for such year or other period
bears to such beginning adjusted tax basis.
"Event of Default" shall have the meaning ascribed to it in Section
------------------
9.1.
"Financing Outline" means the outline of anticipated terms of Third
-------------------
Party Loans and CCLI Loans to finance the initial development and
construction of the Project up to the amount of the approved Construction
Budget, as set forth in a letter dated as of February 2, 1995 from Don Copp
of CCEI to Lewis Frank of AEC.
"Final Approval" means the satisfaction or waiver of all conditions
----------------
imposed pursuant to the Conditional Approval, so that all gaming licenses
have become effective and the Company is entitled to conduct all
contemplated gaming activities and substantially all other contemplated
activities at the Project.
"Gaming Authorities" means the Louisiana Riverboat Gaming Commission,
--------------------
the Louisiana Riverboat Gaming Enforcement Division and/or any other
governmental or quasi-governmental authority possessing and exercising
jurisdiction over the Property, the Project, the Company, any Member, any
of their respective Affiliates, or any officers or directors of any of the
foregoing, with respect to gaming activities.
"Georgusis" means Joseph Georgusis, an Affiliate of AEC.
-----------
"Gross Appraised Value" means the fair market value of the Property,
-----------------------
the Project and any other material assets of the Company, and shall
represent the amount that a single buyer would reasonably be expected to
pay for the entire Property, Project and other material assets, free and
clear of all liens and encumbrances, in a single cash purchase, taking into
account the then-current condition, use, zoning and income of the Property
and Project, and including the value of any gaming licenses and similar
intangible assets, but excluding any good will attributable to the Circus
Circus names, logos, marks, trade dress and other intellectual property,
and/or CCEI business operations. Such fair market value shall be
determined by mutual agreement of the Members or if they are unable to
mutually agree within 30 days after request by either Member, then by
appraisal by a reputable disinterested appraiser who is experienced in the
appraisal of casino properties, and who shall be instructed to
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<PAGE>
complete and deliver the appraisal report within 30 days after engagement.
For purposes of Section 8.2(c), the appraiser shall be selected by CCLI,
subject to AEC's approval, which approval shall not be unreasonably
withheld or delayed. For purposes of Section 8.2(d), the appraiser shall
be selected by the non-defaulting Member. The cost of the appraisal shall
be borne equally by the Members in the event of a buy-sell pursuant to
Section 8.2(c) and shall be borne by the Defaulter in the event of a buy-
sell pursuant to Section 8.2(d).
"Gross Asset Value" means, with respect to any asset, the asset's
-------------------
adjusted basis for federal income tax purposes, except as follows: (i) the
initial Gross Asset Value of any asset contributed by a Member to the
Company shall be the gross fair market value of such asset, as determined
by the Members; and (ii) the Gross Asset Value of all assets whose Gross
Asset Value has been adjusted pursuant to Section 7.5(f) shall be adjusted
pursuant to the last sentence of Section 7.5(f).
"Initial Capital Contribution" means the amount contributed to or for
------------------------------
the benefit of the Company by a Member pursuant to Section 6.1.
"Intangibles" means (i) the Preliminary Approval, (ii) the Conditional
-------------
Approval, (iii) the Final Approval and (iv) all other leases, contracts,
building or other permits, licenses and other assets (excluding cash)
necessary to develop, construct, market and operate the Project.
"Liquidation" means (i) when used with reference to the Company, the
-------------
earlier of (a) the date upon which the Company is terminated under Section
708(b)(1) of the Code, or any similar provision enacted in lieu thereof, or
(b) the date upon which the Company ceases to be a going concern, and (ii)
when used with reference to any Member, the earlier of (a) the date upon
which there is a Liquidation of the Company or (b) the date upon which such
Member's entire interest in the Company is terminated by means of a
distribution or series of distributions by the Company to the Member.
"Major Decision" shall have the meaning ascribed to it in Section
----------------
8.2(a).
"Management Agreement" means that certain Riverboat Casino Management
----------------------
Agreement to be entered into concurrently herewith between the Company as
owner and CCLI or an Affiliate of CCLI as manager, relating to the
management and operation of the Project, in form and substance as set forth
on attached Exhibit D.
---------
"Management Fees" means the base management fees payable to CCLI or
-----------------
its Affiliate pursuant to the Management Agreement.
"Management Committee" shall have the meaning ascribed to it in
----------------------
Section 5.3(a).
"Manager" shall have the meaning ascribed to it in Section 5.3.
---------
"Member Nonrecourse Debt" means any Company liability to the extent
-------------------------
the liability is nonrecourse for purposes of Regulations Section 1.1001-2,
and a Member (or a related person within the meaning of Regulations Section
1.752-4(b)) bears the economic risk of loss (within the meaning of
Regulations Section 1.752-2).
"Member Nonrecourse Debt Minimum Gain" means Minimum Gain attributable
--------------------------------------
to Member Nonrecourse Debt.
"Minimum Gain" means the sum of the separately computed amount of
--------------
gain, if any, that would be realized by the Company if, with respect to
each nonrecourse
-4-
<PAGE>
liability of the Company, the Company disposed of the property subject to
such nonrecourse liability for no other consideration than full
satisfaction of such liability in accordance with Regulations Section
1.704-2(d). For this purpose, the term "nonrecourse liability" shall have
the meaning set forth in Regulations Section 1.752-1(a)(2).
"Minimum Purchase Price" of a Member's Interest in the Company means,
------------------------
in the case of CCLI, the sum of the unpaid balance of all CCLI Loans and
the CCLI Preferred Capital Balance, and, in the case of AEC, the amount of
the AEC Preferred Capital Balance.
"Net Available Cash" of the Company means, for each fiscal year or
--------------------
other period, an amount equal to the total cash revenues and receipts of
the Company from any source (including financings and refinancings) for
such period, less the sum of (i) cash payments made by the Company during
such period in connection with the conduct of the Company's business
(including the repayment of any Third Party Loans, current principal and
interest payments on other Company debt, and payment of the Project
Management and Consulting Fees, but excluding any payments or distributions
pursuant to Section 7.3) and (ii) the amount of any increase during such
period in, or amounts established during such period for, reasonable
reserves for anticipated costs, expenses, liabilities and obligations of
the Company, working capital needs of the Company or other appropriate
Company purposes, as determined by the Management Committee pursuant to
Section 5.3.
"Net Equity" of a Member's Interest in the Company means the amount
-----------
that would be distributed to such Member in liquidation of the Company
pursuant to Section 11.2 if (i) all the Company's assets were sold for
their Gross Appraised Values; (ii) the Company paid its unpaid liabilities
and established reserves for the payment of reasonably anticipated
contingent and unknown liabilities; and (iii) the Company distributed the
remaining proceeds to the Members in liquidation. The Net Equity of a
Member's Interest in the Company shall be determined from the books and
records of the Company by the firm of independent certified public
accountants regularly employed by the Company. Net Equity of a Member's
Interest shall be determined within thirty (30) days after receipt in
writing of the Gross Appraised Value of the Project and the Property. The
amount of such Net Equity shall be disclosed in writing to the Company and
each of the Members. The Net Equity determination of such accountants
shall be final and binding in the absence of a showing of gross negligence
or willful misconduct.
"Opening Date" means the date of initial opening of the Project for
------------
business, as more particularly defined in the Management Agreement.
"Operating Budgets" means the annual written budgets and schedules and
-------------------
any amendments thereto, approved by the Management Committee pursuant to
Section 5.3, setting forth in reasonable detail, all costs and expenses
incurred or to be incurred in connection with the maintenance (including
capital improvements), management, marketing and operation of the Project.
"Percentage Interest" or "Interest" means the percentage ownership
-----------------------------------
interest of a Member in the Company, as set forth in Section 7.1.
"Permitted Title Exceptions" means those matters affecting title to
----------------------------
the Property
-5-
<PAGE>
which have been approved by CCLI, as set forth on attached Exhibit B.
---------
"Preliminary Approval" means the certificate of preliminary approval
----------------------
for a gaming license granted to AEC, as heretofore modified by a certain
modification of preliminary approval.
"Profits" and "Losses" means the taxable income or loss for federal
--------- --------
income tax purposes of the Company for each fiscal year, plus income and
gain of the Company exempt from federal income tax for such fiscal year,
and minus Section 705(a)(2)(B) Expenditures for such fiscal year. Any item
of income, gain, loss, deduction or Section 705(a)(2)(B) Expenditure that
is allocated in any fiscal year pursuant to Section 7.5(a), (b), (c) or (d)
shall be excluded from the computation of Profits or Losses to be allocated
for such fiscal year pursuant to Section 7.4. Profits or Losses resulting
from any disposition of Company property shall be computed by reference to
the Gross Asset Value of the property disposed of, notwithstanding that the
adjusted tax basis of such property differs from its Gross Asset Value. In
lieu of the depreciation, amortization or other cost recovery deductions
taken into account in computing income for federal income tax purposes,
there shall be taken into account Depreciation for such fiscal year.
"Project" means a riverboat gaming operation and related facilities to
---------
be developed on or adjacent to the Property, including a riverboat gaming
vessel, a dockside facility and related parking, all as determined by the
Management Committee pursuant to Section 5.3(c)(i).
"Property" means those certain parcels of land containing
----------
approximately 26 contiguous acres, located on Paris Road in St. Bernard
Parish, State of Louisiana, as more particularly described on attached
Exhibit A.
---------
"Regulations" means the Income Tax Regulations promulgated under the
-------------
Code, as such regulations may be amended from time to time.
"Reimbursement Agreement" means that certain Reimbursement and
-------------------------
Guaranty Agreement to be entered into concurrently herewith between the AEC
Parties and the Circus Parties, in form and substance as set forth on
attached Exhibit F.
---------
"Section 705(a)(2)(B) Expenditure" means any expenditure of the
---------------------------------
Company described in Section 705(a)(2)(B) of the Code or treated as such
pursuant to Regulations Section 1.704-1(b)(2)(iv)(i).
"Submerged Property" means those certain submerged portions of land
--------------------
bordering the eastern edge of the Property and containing approximately 5
acres.
"Third Party Loans" means secured or unsecured financings arranged by
-------------------
CCLI or its Affiliates and obtained from unaffiliated third parties upon
the terms and conditions as generally outlined in the Financing Outline or
as otherwise approved by the Management Committee.
ARTICLE 2. PRINCIPAL OFFICE; REGISTERED OFFICE AND AGENT
Section 2.1 Principal Office. The initial principal office of the Company
----------------
in the State of Louisiana shall be located at 8301 West Judge Perez Drive, Suite
305, Chalmette, Louisiana 70043. The Company may have all such other offices,
either within or without the State of Louisiana, as the Management Committee may
designate from time to time.
Section 2.2 Registered Office and Agent. The address of the initial
---------------------------
registered
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<PAGE>
office of the Company is 8301 West Judge Perez Drive, Suite 305, Chalmette,
Louisiana 70043, and the initial registered agent at such address is Lewis S.
Frank. The registered office and agent may be changed from time to time by
action of the Management Committee and by filing the prescribed form with the
Louisiana Secretary of State. The Company shall keep at its registered office,
originals or copies of the records and information required pursuant to R.S.
12:1319.
ARTICLE 3. PURPOSE
Section 3.1 Purpose. The purposes for which the Company is organized
-------
include, without limiting those enumerated in the Articles of Organization, the
acquisition of the Property and the development, improvement, construction and
operation thereon of the Project, and for any other lawful purposes incidental
thereto for which a limited-liability company may be organized under the laws of
the State of Louisiana, except banking or insurance.
Section 3.2 Powers. The Company shall have all the powers granted to a
------
limited-liability company under the laws of the State of Louisiana.
ARTICLE 4. TERM
Section 4.1 Duration. The Company commenced its existence on December 22,
--------
1993 and shall terminate fifty (50) years from that date, unless earlier
dissolved as provided by law, in this Agreement or in the Articles of
Organization.
ARTICLE 5. MEMBERS; MANAGEMENT OF COMPANY
Section 5.1 Members' Voting Rights.
----------------------
(a) Each Member shall be entitled to cast a single vote on all
matters properly brought before the Members, and except as otherwise expressly
provided in this Agreement or in the Articles of Organization, all decisions of
the Members shall be made by a majority vote of the Members. (By way of
clarification but not as a modification of the foregoing, it is acknowledged
that so long as there are only two Members of the Company, a "majority vote of
the Members" shall mean the affirmative vote of both Members.)
(b) Notwithstanding R.S. 12:1318 B, only the following matters shall
require approval by the Members (except to the extent such approval rights have
been delegated to the Management Committee pursuant to Sections 5.3 and 6.2):
(i) The election to dissolve and wind up the Company pursuant
to Section 10.01(b).
(ii) The sale, exchange or other transfer of all or
substantially all of the assets of the Company (expressly excluding any lease,
mortgage, pledge or similar financing transactions).
(iii) The lease, mortgage, pledge or other hypothecation of all
or substantially all of the assets of the Company, unless such transaction(s) is
contemplated in an approved Construction Budget or Operating Budget, in which
event such transaction(s) shall not require the independent approval of the
Members.
(iv) The merger or consolidation of the Company.
(v) The incurrence of indebtedness by the Company other than in
the ordinary course of its business; it being expressly agreed and understood
that any
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<PAGE>
incurrence of indebtedness as contemplated in an approved Construction Budget or
Operating Budget shall be deemed in the ordinary course of the Company's
business.
(vi) The alienation, lease or encumbrance of any immovables of
the Company other than in the ordinary course of its business, it being
expressly agreed and understood that any such alienation, lease or encumbrance
contemplated in an approved Construction Budget or Operating Budget shall be
deemed in the ordinary course of the Company's business.
(vii) An amendment to the Articles of Organization or this
Agreement.
(viii) Subject to Section 5.3, the selection and removal of the
Managers, the determination of their compensation and the prescription of such
powers and duties for them as may be consistent with law, the Articles of
Organization and this Agreement.
(ix) Such other matters as are expressly reserved to the
Members pursuant to any provisions of this Agreement.
Section 5.2 New Members. A new Member may only be admitted as a Member in
-----------
the Company with the unanimous consent of the existing Members; provided
however, upon the occurrence of any of the acts or events set forth in Section
10.1(c), the remaining Member, acting alone, may admit one or more new Members.
In any such event, the new Member shall execute a written consent to be bound by
the terms and provisions of this Agreement. The new Member and all existing
Members shall also execute Amended Articles of Organization to be filed with the
Secretary of State before the new Member becomes a Member of the Company.
Section 5.3 Managers; Management Committee.
-------------------------------
(a) The management of the Company's business shall be vested in a
Management Committee composed of six (6) Managers, of which three of such
Managers shall be appointed by AEC and three of such Managers shall be appointed
by CCLI. The vote of a majority in number of the Managers comprising the
Management Committee shall be required to act on any matter requiring Management
Committee approval; provided however, that so long as CCLI is not in default of
its obligations under the Management Agreement, until such time as the AEC Loan
has been paid in full, CCLI shall have the right, after consultation with AEC,
to break any tie vote of the Management Committee, other than the following
matters, for which the vote of a majority in number of the Managers shall be
required: (i) any increase in the Construction Budget to an amount in excess of
$107,000,000; (ii) approval of the matters described in Section 5.3(c)(i); (iii)
approval of the Annual Plans (including the annual Operating Budgets); and (iv)
the election of the Company to terminate the Management Agreement, provided that
the CCLI-appointed Managers on the Management Committee shall abstain from the
vote to exercise the limited right of termination pursuant to Section 2.4 of the
Management Agreement (if it has been determined that the performance standards
set forth in said Section 2.4 have not been met), and provided further that the
CCLI-appointed Managers shall be entitled to vote on the selection of any
replacement Project managers and the approval of any replacement management
agreements.
(b) The powers granted to the Management Committee shall include,
without limitation, the express powers:
(i) To conduct, manage and control the affairs and business of
the
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<PAGE>
Company, and to make such rules and regulations therefor consistent with law,
the Articles of Organization and this Agreement.
(ii) To change the principal office of the Company from one
location to another within Louisiana; to fix and locate from time to time one or
more subsidiary offices of the Company within or without the State of Louisiana;
and to designate any place within or without the State of Louisiana for the
holding of any Members' or Management Committee meeting or meetings.
(iii) To borrow money and incur indebtedness for the purposes of
the Company, in accordance with the approved Construction Budgets and Operating
Budgets and as directed by CCLI pursuant to Sections 6.2(c) and (d), and to
cause to be executed and delivered therefor, in the Company's name, promissory
notes, bonds, debentures, deeds of trust, mortgages, pledges, hypothecations or
other evidence of debt and securities.
(c) Matters requiring Management Committee approval shall include,
without limitation, the following:
(i) Decisions relating to the development of the Project, based
upon submittals presented to the Management Committee by AEC, including, without
limitation, the scope and design of the Project (including without limitation,
the plans and specifications for the riverboat gaming vessel and the land-based
facilities), Construction Budget, construction schedule and selection of general
contractors, major subcontractors and major equipment and materials suppliers,
and any amendments, modifications and supplements to any of the foregoing
(including without limitation, any expansions, remodeling or other alteration of
the Project or any portion thereof).
(ii) Approval of the Annual Plans, Pre-Opening Budget, Annual
Operating Budget, Annual Capital Replacements Budget, Annual Riverboat
Replacements Budget, Operating Guidelines and Training Plan (as such terms are
defined in the Management Agreement), and any amendments to any of the
foregoing; based upon submittals presented to the Management Committee by CCLI.
(d) The Managers appointed to the Management Committee by one
Appointing Member may be removed at any time either with or without cause, but
only by such Appointing Member. Any Manager may resign at any time by giving
written notice to the Members. Any such resignation shall take effect at the
date of receipt of such notice or at any later time specified therein; and
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective. The applicable Appointing Member shall
replace any vacancy in the office of any Manager appointed by such Appointing
Member. The Management Committee shall endeavor to defer voting on any material
matters while a vacancy exists. However, if a majority of the remaining
Managers on the Management Committee determine that it is necessary or advisable
to vote on a material matter prior to appointment of a replacement Manager by
the Appointing Member, then the Management Committee may vote on such matter,
but the remaining Manager(s) appointed by the Appointing Member shall have the
right to cast an additional vote, so that each Appointing Member shall be
represented by an equal number of votes on the Management Committee. Each
Manager on the Management Committee shall be chosen annually by the applicable
Appointing Member and each shall hold office until such Manager shall resign or
shall be removed or otherwise disqualified to serve, or the Manager's successor
shall be elected and qualified.
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(e) The Management Committee may from time to time authorize one or
more Managers, acting alone or in concert, to take such actions as may be
necessary or advisable to implement the policies and decisions of the Management
Committee including, without limitation, the execution and delivery of documents
and instruments as contemplated in Section 5.3(b)(iii).
Section 5.4 CCLI Decisions. Subject to Section 5.3(a), decisions relating
--------------
to the operation of the riverboat gaming facility comprising the Project
including, without limitation, the layout of the casino, marketing and credit
policies, internal control and security procedures, and decisions concerning
employment and operation of the Project, shall be determined exclusively by
CCLI, in its capacity as a Member of the Company or by CCLI or an Affiliate in
its capacity as manager of the Project pursuant to the Management Agreement;
provided however, that CCLI shall consult with AEC prior to making such
decisions. It is acknowledged that employment decisions shall be made with due
consideration to guidelines recommended by the Gaming Authorities on local
employment and procurement, and the use of minority and women owned business
enterprises.
Section 5.5 Books of Account. Each of the Members shall have the right at
----------------
all reasonable times to review all books of account and physical books and
records of the Company. Each Member shall be entitled to review, for at least
thirty (30) days prior to filing, the annual Form 1065, income tax returns, tax
elections and other tax filings proposed to be filed for the Company with the
Internal Revenue Service. At the completion of each fiscal year, the books of
account and physical records of the Company shall be audited by a certified
public accounting firm selected by the Management Committee.
Section 5.6 Banking. The Company shall establish one or more general
-------
business bank accounts with such bank or banks as may be determined by the
Management Committee from time to time. All Company receipts shall be deposited
to said account or accounts of the Company, and all expenses of the Company
shall be paid from said account or accounts.
Section 5.7 Authorization of Disbursement of Company Funds. Disbursement
----------------------------------------------
of Company funds, in payment of business expenses or otherwise, shall be by
appropriate check, draft or other instrument and shall be drawn upon those
signatures as determined from time to time by the Management Committee.
Section 5.8 General Restrictions. No Member or Manager shall have the
--------------------
right, power or authority to do any of the following acts without the prior
written consent of the Members:
(a) expend or use any Company money or property except upon the
account of and for the benefit of the Company;
(b) mortgage, lease, pledge or otherwise dispose of all, or
substantially all, of the assets of the Company, other than in the ordinary
course of business; it being expressly acknowledged that any transactions
contemplated in an approved Construction Budget or Operating Budget shall be
deemed "in the ordinary course of business;"
(c) pledge any of the Company's credit or property for other than
Company purposes;
(d) compromise, settle or release any debt due the Company except
upon full payment thereof or except in the ordinary course of business;
(e) assign the Company's property in trust for creditors or on the
assignee's promise to pay the debts of the Company;
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(f) confess a judgment against the Company, the Company's property or
any of the Members;
(g) dispose of any of the goodwill of the Company business; or
(h) do any other act which would make it impossible to carry on the
ordinary business of the Company.
Section 5.9 Progress Reports; Meetings. The Management Committee shall
--------------------------
report to the Members not less frequently than monthly during the development
and construction phase (including the first three months after the Project
initially opens for business to the public) and not less frequently than
quarterly thereafter, concerning the progress of the development, construction
and operation of the Project. Any Member may call a special meeting of the
Members and/or the Management Committee for any purpose on giving three (3) days
prior written notice of the meeting (shorter notice may be agreed upon by the
parties in writing). The notice shall provide information as to time, place and
agenda of the meeting.
Section 5.10 Salaries and Compensation to Members. Except as specifically
------------------------------------
provided in the Management Agreement or the Consulting Agreement or as otherwise
approved from time to time by the Management Committee, the Company shall have
no duty or obligation to reimburse or compensate the Members, their employees,
assigns or Affiliates, for services rendered on behalf of the Company, nor shall
a Member be entitled to salary or other compensation; provided however, that
pursuant to the Management Agreement only, CCLI and/or its Affiliates shall be
entitled to compensation from the Company for the provision of accounting,
bookkeeping, computer services and management information and similar central
office services at a cost not to exceed the reasonable direct costs incurred by
CCLI or such Affiliate in providing such services; and provided further that the
Company shall be responsible for all Project costs as set forth in approved
Construction and Operating Budgets, and to the extent that such costs are paid
or loaned to the Company by a Member or Affiliates, such Member shall be
entitled to reimbursement by the Company in the manner and at such times as is
specifically herein set forth (including reimbursement to AEC for its reasonable
time and costs incurred in carrying out its duties under Section 5.13 below in
the amounts as expressly provided for in the approved Construction Budget).
Each Member shall pay its own licensing costs and fees.
Section 5.11 Company Property. All property originally brought into or
----------------
transferred to the Company as capital contributions of the Members or
subsequently acquired by purchase or otherwise by or on behalf of the Company,
shall be owned by and held in the name of the Company or in such fictitious
business names as are approved by the Management Committee.
Section 5.12 Other Business Activities.
-------------------------
(a) Each reference in this Section 5.12 to a "Member" shall also mean
and include each and every Affiliate of such Member; it being expressly agreed
and understood that this Section 5.12 shall be deemed to apply to (and each
Member shall cause the provisions of this Section 5.12 to become binding upon)
each and every Affiliate of such Member.
(b) Each Member may be interested, directly or indirectly, in various
other businesses and undertakings not included in the Company, including non-
gaming-related entertainment ventures wherever situated and gaming-related
ventures located outside of the
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radii specified in Section 5.12(c) below and/or in Article 8 below. The Members
hereby agree that the creation of the Company and the assumption by each of the
Members of their duties hereunder shall, subject to the provisions of Section
5.12(c) below and/or in Article 8 below, be without prejudice to their rights to
have such other interests and activities and to receive and enjoy profits and
compensation therefrom. Subject to the provisions of Section 5.12(c) below
and/or in Article 8 below, each Member waives any rights it might otherwise have
to share or participate in such other interests or activities of the other
Members. Subject to the provisions of Section 5.12(c) below and/or in Article 8
below, any Member may engage in or possess any interest in any other business
venture of any nature or description independently or with others, and neither
the Company nor any other Member shall have any right by virtue of this
Agreement in and to such venture or the income or profits derived therefrom.
(c) Notwithstanding the provisions of Section 5.12(b) above, in the
event that (i) prior to the commencement of operations at the Project and for a
period of three (3) years thereafter, any Member shall desire to directly or
indirectly participate (as an owner, operator, manager, developer, lender,
investor or in any other similar capacity) in any gaming-related venture (a
"Gaming Project") within that area of Louisiana falling within a 150 mile radius
(to include Lafayette) of the Property or (ii) during the balance of the term of
this Agreement, any Member shall desire to so participate in any such Gaming
Project within that area of Louisiana falling within a 75 mile radius (to
include Baton Rouge) of the Property, such Member (the "Offering Member") shall
offer to the other Member (the "Receiving Member") the right to participate with
the Offering Member in such proposed Gaming Project, upon such terms and
conditions as the Offering Member shall reasonably propose, consistent with
then-current market conditions. The Offering Member shall give written notice
thereof to the Receiving Member, which notice shall include (i) a general
description of the proposed Gaming Project, including such detail as a prudent
investor would customarily require in order to make an informed investment
decision, (ii) to the extent reasonably available, pro forma budgets of
development and construction costs and projections of income and expense and
(iii) the proposed economic terms and conditions upon which the Offering Member
and the Receiving Member would jointly participate in such proposed Gaming
Project. The Receiving Member shall have ten (10) days after receipt of such
notice and supporting documentation in which to negotiate a mutually acceptable
agreement whereby the Offering Member and the Receiving Member will jointly
participate in the development of the Proposed Development Project. If the
Receiving Member declines the Offering Member's offer, or if the parties, after
proceeding in good faith and with due diligence, are unable to reach agreement
within said 10-day period, then, unless otherwise approved by both Members in
their sole and absolute discretion, the offer shall be deemed to have expired
and neither Member shall participate in any manner in such proposed Gaming
Project without the involvement of the other Member.
Section 5.13 Project Development.
-------------------
(a) AEC shall be responsible for, and shall diligently and
continuously pursue to completion, the day-to-day development and construction
of the Project, in accordance with and subject to the approved plans and
specifications, the approved Construction Budget and all applicable laws
(including without limitation, all applicable gaming laws, orders, rules and
regulations).
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(b) All Construction-Related Agreements shall contain the following
minimum provisions: (i) a statement as to whether the contractee is a certified
minority business enterprise, woman-owned business enterprise or disadvantaged
business enterprise; (ii) any requirements for licensing (if necessary) before
the Gaming Authorities; and (iii) a requirement that if the contractee is found
unsuitable by the Gaming Authorities, that the contract will become null and
void.
(c) All Construction-Related Agreements shall include provisions
reasonably necessary to protect the ability of the Company, the Members, their
respective Affiliates, and their respective officers and directors to obtain and
maintain gaming licenses in any jurisdiction. AEC shall not select any firms or
persons to provide services that would potentially result in a revocation,
finding of non-suitability or disqualification as to gaming licenses or a
material sanction or penalty in respect of such gaming licenses of the Company,
the Members, their respective Affiliates, or any of their respective officers or
directors in Louisiana or any other jurisdiction, and all such firms and persons
shall be competent and have good reputations. AEC shall consult with the
Management Committee prior to the execution of any Construction-Related
Agreement regarding any possible material impact the Construction-Related
Agreement might have on the management and operation of the Company and the
Project and the Management Committee shall have the right to approve or consent
to any such Construction-Related Agreements.
Section 5.14 Project Management.
------------------
(a) Concurrently with the execution and delivery of this Agreement,
the Company shall enter into the Management Agreement with CCLI (or an Affiliate
designated by CCLI) and the Consulting Agreement with AEC. The termination of
the Management Agreement for any reason whatsoever shall, without the necessity
of further action by any party, result in the automatic termination of the
Consulting Agreement, effective as of the termination date of the Management
Agreement. So long as the Company owns the Project and AEC is a Member of the
Company, a termination of the Consulting Agreement (other than a voluntary
termination thereof) shall, without the necessity of further action by any
party, result in the automatic termination of the Management Agreement,
effective as of the date of termination of the Consulting Agreement.
(b) Notwithstanding anything to the contrary contained in this
Agreement or in the Management Agreement or the Consulting Agreement, if, with
respect to any annual period, the full amount of Management Fees and Consulting
Fees cannot be paid without reducing the Net Available Cash to an amount less
than the amount necessary to pay the Current Year Amortization with respect to
any outstanding CCLI Loans, then the aggregate amount of Management Fees and
Consulting Fees shall be reduced by the amount of such shortfall. Such
aggregate reduction shall be apportioned between the Management Fees and the
Consulting Fees in the ratio of 3.5 to 1. Any resulting Net Available Cash will
be applied toward payment of the CCLI Loans. Any unpaid amounts of Management
Fees and Consulting Fees will be deferred until sufficient funds are available
for their payment.
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ARTICLE 6. CAPITAL CONTRIBUTIONS; LOANS; INITIAL PUBLIC OFFERING
Section 6.1 Initial Capital Contributions.
-----------------------------
(a) (i) As its Initial Capital Contribution AEC has initially
contributed (or shall as soon as possible hereafter contribute) to the Company,
fee simple title to the Property, subject only to any Permitted Title
Exceptions. Such contribution shall be deemed to have an agreed value of
$5,000,000.
(ii) If it has not already done so, AEC shall execute and
deliver to the Company, such deeds, bills of sale, assignments and other
instruments of conveyance as may, in the opinion of CCLI and its counsel, be
necessary or advisable to vest title to the Property and the Intangibles in the
Company. If it has not already done so, AEC shall cause to be issued in favor of
and delivered to the Company, an ALTA extended coverage owner's policy of title
insurance (or equivalent) in a liability amount as approved by CCLI, showing fee
simple title to the Property to be vested in the Company, subject only to the
Permitted Title Exceptions and/or such other matters affecting title to the
Property as shall have been approved in advance in writing by the Members in
their sole and absolute discretion.
(iii) As soon as possible following the date hereof, AEC shall
cause to be conveyed to the Company, fee simple title to the Submerged Property,
subject only to such title exceptions as shall have been approved by CCLI, at a
price to the Company equal to AEC's or its Affiliates' actual out-of-pocket
costs in acquiring the Submerged Property from unaffiliated third parties, and
without any profit, mark-up, commission, finder's fee or similar payment of
whatsoever nature to AEC or its Affiliate. In addition, in the event that the
Members determine that any additional properties, purchase agreements, options,
leases or governmental approvals, permits, licenses and/or waivers are necessary
or advisable for the full development and operation of the Project, AEC shall
proceed with due diligence and use its best efforts to cause such other property
rights and entitlements to be transferred, assigned and conveyed to the Company
at a price to the Company equal to AEC's or its Affiliate's actual out-of-pocket
costs (as approved by CCLI), and without any profit, mark-up, commission,
finder's fee or similar payment of whatsoever nature to AEC or its Affiliates.
(b) As its Initial Capital Contribution, CCLI has contributed to the
Company, cash in the amount of $5,000,000.
Section 6.2 Additional Capital Requirements.
-------------------------------
(a) As an Additional Capital Contribution, AEC has contributed (or
shall as soon as possible hereafter contribute) to the Company the Intangibles,
free and clear of all liens and third party claims, except as shall have been
expressly approved in advance in writing by CCLI. Such contribution shall be
deemed to have an agreed value of $15,000,000, unless the Company is dissolved
prior to the Opening Date, in which event such contribution shall be deemed to
have an agreed value of $1.
(b) As Additional Capital Contributions, CCLI has heretofore
contributed and/or shall hereafter contribute to the Company, from time to time
as needed, additional cash in an aggregate amount of $15,000,000.
(c) CCLI and AEC shall use their best good faith efforts (and shall
cause their respective Affiliates, CCEI and Georgusis, to use their respective
good faith efforts, including giving the guarantees provided below, if required)
to obtain Third Party Loans on behalf of the Company upon terms and conditions
commensurate with those offered on
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<PAGE>
similar projects. The presently contemplated terms are as outlined in the
Financing Outline, which Financing Outline is hereby approved by the Members and
by the Management Committee. Each Member and its respective Affiliates shall be
entitled to promptly receive copies of all material correspondence and
communications in connection with the application and commitment for any Third
Party Loans including prior disclosure of interest rates and amortization
schedules; provided, however, that no additional approvals or consents with
respect to the terms and conditions of such Third Party Loans shall be required
to be obtained from the Management Committee or a Member or its Affiliates
unless CCEI proposes to accept a higher interest rate, shorter amortization
schedule, shorter term or higher commitment fee than as set forth in the
Financing Outline. If any additional approvals or consents are required from the
Management Committee, such approvals or consents shall not be unreasonably
withheld. If the third party lender requires personal guarantees, they will be
provided on a joint and several basis to the third party lender by the AEC
Parties and the Circus Parties. Although such guarantees shall be joint and
several vis-a-vis the third party lender, the AEC Parties and the Circus Parties
have agreed (as more particularly memorialized in the Reimbursement Agreement)
that the AEC Parties as a group and the Circus Parties as a group, shall each be
liable for only 50% of the total guaranteed obligations, and that should any
party be required to pay more than its agreed-upon share of the total guaranteed
obligations, the other party will be obligated to promptly reimburse the paying
party for the amount of such excess payments.
(d) It is anticipated that the total Project cost will exceed the sum
of the cash portion of the Initial Capital Contributions, the CCLI Additional
Capital Contributions and the proceeds of the Third Party Loan. CCEI shall make
available to CCLI, and CCLI shall provide to the Company, additional funds in
the form of CCLI Loans to fund Project costs in accordance with the approved
Construction Budget, but in no event to exceed (i) the lesser of (A) the amount
of the approved Construction Budget or (B) $107,000,000, less (ii) the sum of
the Initial Capital Contributions, CCLI Additional Capital Contributions and
proceeds of any Third Party Loans. As more particularly described in the
Reimbursement Agreement, the AEC Parties shall jointly and severally guarantee
repayment of 50% of the total amount of CCLI Loans. CCLI may at any time and
from time to time replace all or any part of any CCLI Loans with a Third Party
Loan at rates and on terms commensurate with those outlined in the Financing
Outline or upon such other terms and conditions as shall have been approved by
the Management Committee.
(e) If and to the extent the approved Construction Budget exceeds
$107,000,000 and/or if, after the initial development, construction and start-up
of the Project, the Management Committee determines that additional funds are or
will be required for the payment of Project costs, expenses and obligations (as
set forth in approved Operating Budgets), CCLI and AEC shall each be obligated
to fund 50% of such required funds as additional capital contributions to the
Company. The failure of a Member to duly and timely fund any such additional
capital contribution shall be deemed a default under this Agreement.
(f) Except as provided in Sections 6.2(a) through 6.2(e), any other
loans or advances to or for the benefit of the Company shall be subject to the
prior written approval of the Management Committee.
(g) The provisions of this Article 6 are solely and exclusively for
the
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<PAGE>
benefit of the Members (and their permitted successors and assigns), and may
only be enforced by, the Members (or such permitted successors and assigns), and
shall not inure to the benefit of, or be enforceable by, any third parties,
including without limitation, any creditors of the Company.
Section 6.3 Interest. No Member shall be entitled to interest on its
--------
Initial Capital Contributions; however, the provision of this Section shall not
impair the obligation of the Company and the right of CCLI to receive interest
upon its Loans to the Company as hereinabove provided.
Section 6.4 Withdrawal of Capital. No Member shall withdraw any
---------------------
portion of the capital of the Company without the express consent of the
Management Committee.
Section 6.5 Capital Account. An individual Capital Account shall be
---------------
established and maintained for each Member. The Capital Account of each Member
shall be equal to the aggregate amount of cash contributed by such Member to the
Company, increased by (i) the fair market value of property contributed by such
Member to the Company (other than a promissory note by such Member who is the
maker of such note), net of liabilities secured by such property that the
Company assumes or takes the property subject to, (ii) the amount of any Company
liabilities assumed by such Member other than liabilities secured by property
distributed to such Member, (iii) such Member's distributive share of Profits of
the Company and (iv) any items in the nature of income and gain which are
excluded from the definitions of Profits and Losses and allocated to such
Member, and reduced by (i) such Member's distributive share of Losses, (ii) the
amount of any distributions of cash to such Member, (iii) the amount of
liabilities of such Member assumed by the Company, other than liabilities
secured by property contributed by such Member, (iv) the fair market value of
property (net of liabilities assumed by such Member and liabilities to which
such distributed property is subject) distributed to such Member, and (v) any
items in the nature of deductions or losses which are excluded from the
definitions of Profits and Losses and allocated to such Member. Upon a
distribution of property, other than one described in Section 7.5(f), the
Capital Account of each Member shall be adjusted as provided in Regulations
Section 1.704-1(b)(2)(iv)(e). In the event the Gross Asset Values of Company
assets are adjusted pursuant to Section 7.5(f), the Capital Account of each
Member shall be adjusted simultaneously to reflect the aggregate net adjustment
as if the Company recognized gain or loss equal to the amount of such aggregate
net adjustment. The foregoing provisions and the other provisions of this
Agreement relating to the maintenance of Capital Accounts are intended to comply
with Regulations Sections 1.704-1(b) and 1.704-2 and shall be interpreted and
applied in a manner consistent with such Regulations. For purposes of this
section, the term Member shall include any predecessor in interest of such
Member.
Section 6.6 AEC Loan. Prior hereto, CCEI loaned to AEC the principal
--------
sum of $10,000,000, which AEC Loan is evidenced by a recourse, interest-bearing
promissory note, secured by a security and pledge agreement encumbering AEC's
interest in the Company, and guaranteed by Georgusis pursuant to a guaranty
(collectively, the "AEC Loan Documents"). Contemporaneously herewith, the AEC
Loan Documents have been amended (collectively, the "Amended AEC Loan
Documents"), copies of which are attached hereto as Exhibits G-1 through G-3.
------------------------
Pursuant to the Amended AEC Loan Documents, AEC has absolutely and
unconditionally assigned and transferred to CCEI, all Net Available Cash
otherwise payable to AEC pursuant to Sections 7.3(a) and/or 11.2 of this
Agreement, and all
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consulting fees otherwise payable to AEC pursuant to the Consulting Agreement;
provided however, that prior to the occurrence of any default by AEC or its
Affiliates under the Amended AEC Loan Documents, AEC shall have a license to
receive and retain such consulting fees. In this connection, AEC hereby agrees
and acknowledges that the Company is hereby irrevocably authorized and
instructed to pay directly to or to the order of CCEI, as and when otherwise
payable to AEC or its Affiliates, all such Net Available Cash (and after
occurrence of any such default by AEC or its Affiliates, the consulting fees)
until the outstanding principal balance and all accrued but unpaid interest and
other charges due under the Amended AEC Loan Documents shall have been paid in
full to or to the order of CCEI. Notwithstanding such assignment of proceeds by
AEC to CCEI, AEC expressly agrees and acknowledges that Profits and Losses of
the Company shall be allocated in accordance with Section 7.4 below. Annual
payments on the AEC Loan equal to the greater of (i) the amount of accrued but
unpaid interest or (ii) the amount of Net Available Cash payable to AEC with
respect to the prior 12 month period, shall be payable by AEC to CCEI commencing
November 1, 1995 and continuing on the first day of each November thereafter,
with mandatory prepayments to CCEI to the extent of any interim distributions of
Net Available Cash otherwise payable to AEC, until November 1, 2001, at which
time the outstanding balance of principal and accrued but unpaid interest shall
be due and payable. At the election of CCEI, the outstanding balance of the AEC
Loan may be accelerated upon (i) the failure of AEC to make any payment when due
under the AEC Loan which failure remains uncured for a period of ten (10) days
after notice or the occurrence of any non-monetary default under the AEC Loan
Documents which default remains uncured for a period of thirty (30) days after
notice; (ii) the occurrence of any Event of Default by AEC under this Agreement,
(iii) the occurrence of any event requiring dissolution of the Company pursuant
to Section 10.1, or (iv) the occurrence of any event which results in the
exercise of the "buy-sell" provisions pursuant to Sections 8.1(b) or 8.2. The
AEC Loan may be prepaid in whole or in part at any time without premium or
penalty therefor. Pursuant to Section 8.1(b), CCLI hereby consents to AEC's
pledge of its Membership Interest in the Company to CCEI pursuant to the above-
referenced Amended AEC Loan Documents.
Section 6.7 Initial Public Offering. After the Project is in
-----------------------
operation, the Management Committee will cause the Company to engage a national
investment banking/underwriting firm to advise the Company on the
advisability/feasibility of retiring debt and invested capital and commencing an
initial public offering or institutional private placement of equity or debt
interests in the Company's business. Upon approval by the Members, the Company
will take the actions reasonably necessary or advisable to proceed with such
initial public offering or private placement.
ARTICLE 7. PERCENTAGE INTERESTS;
CASH DISTRIBUTIONS; ALLOCATIONS OF PROFIT AND LOSS
Section 7.1 Percentage Interests. The Members shall have the
--------------------
following Percentage Interests in the Company:
AEC 50%
CCLI 50%
Section 7.2 Periodic Determination of Net Available Cash. Not more
--------------------------------------------
frequently than monthly and not less than annually, the Management Committee
shall review the cash
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flow of the Company and, consistent with prudent business practices, shall
determine the amounts, if any, of funds available for designation and
distribution as Net Available Cash.
Section 7.3 Distribution of Net Available Cash.
----------------------------------
(a) Net Available Cash with respect to each fiscal year shall be
distributed in the following order of priority:
(i) First, to each Member, an amount equal to (or in proportion
to if less than) 39% (or such other percentage as the Members shall
mutually agree) of the net income for federal income tax purposes
allocated to such Member by the Company with respect to such fiscal
year;
(ii) Second, to CCLI, an amount equal to the Current Year
Amortization with respect to any outstanding CCLI Loans;
(iii) Third, 50% to CCLI and 50% to AEC until AEC has
received (or is deemed to have received) distributions of Net
Available Cash pursuant to this Section 7.3(a)(iii) equal to the
outstanding balance of the AEC Loan, all of which distributions shall
be applied in reduction of AEC's and CCLI's respective Preferred
Capital Balances;
(iv) Fourth, to CCLI, an amount equal to the outstanding
balances of any CCLI Loans;
(v) Fifth, 50% to CCLI and 50% to AEC until CCLI and AEC have
received distributions of Net Available Cash pursuant to this Section
7.3(a)(v) equal to their respective Preferred Capital Balances; and
(vi) Sixth, the balance of any Net Available Cash, to the
Members, pro rata in accordance with their respective Percentage
Interests.
(b) The amount of any distributions of Net Available Cash to CCLI
pursuant to Sections 7.3(a)(ii) and 7.3(a)(iv) shall be applied first to accrued
but unpaid interest and then to the outstanding principal balance of the CCLI
Loans.
Section 7.4 Determination and Allocation of Profits and Losses.
--------------------------------------------------
(a) Losses of the Company for each fiscal year shall be allocated to
the Members, pro rata in accordance with their respective Percentage Interests.
(b) Profits of the Company for each fiscal year shall be allocated to
the Members, pro rata in accordance with their respective Percentage Interests.
Section 7.5 Tax Regulatory Provisions.
-------------------------
(a) Notwithstanding the provisions of Section 7.4, in no event shall
any allocation of Losses (or any other loss, deduction or Section 705(a)(2)(B)
Expenditure) to any Member cause such Member to have or increase a deficit
balance in its Capital Account.
(b) If a Member receives an adjustment, allocation or distribution
described in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6) which
creates or increases a deficit balance (taking into account distributions, other
than distributions in liquidation of the Company, reasonably expected to be
made) in the Member's Capital Account (as provided in Regulations Section 1.704-
1(b)(2)(ii)(d)(4), (5) or (6)), the Company shall allocate items of income or
gain (as those terms are used in Regulations Section 1.704-1(b)(2)(ii)(d)) to
such Member in an amount and manner to eliminate the Member's Capital Account
deficit attributable to such adjustment, allocation or distribution as quickly
as possible.
(c) If there is a net decrease in the Company's Minimum Gain during
any fiscal year, each Member shall be allocated items of income and gain for
such fiscal year
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<PAGE>
equal to such Member's share of the net decrease in Minimum Gain during such
fiscal year in accordance with Regulations Sections 1.704-2(f) and (g).
(d) Any item of Company loss, deduction or Section 705(a)(2)(B)
Expenditure that is attributable to Member Nonrecourse Debt shall be allocated
to the Member or Members that bear the economic risk of loss with respect to
such Member Nonrecourse Debt in accordance with Regulations Section 1.704-2(i).
If there is a net decrease during any fiscal year in the minimum gain
attributable to a Member Nonrecourse Debt (within the meaning of Regulations
Section 1.704-2(i)(3)), then any Member with a share of the minimum gain
attributable to such Member Nonrecourse Debt at the beginning of such fiscal
year shall be allocated items of Company income and gain for such fiscal year
(and, if necessary, for subsequent fiscal years) equal to such Member's share of
the net decrease in Member Nonrecourse Debt Minimum Gain as provided in
Regulations Section 1.704-2(i)(4).
(e) In accordance with Section 704(c) of the Code and Regulations
Section 1.704-1(b)(2)(iv)(d), income, gain, loss and deduction with respect to
any property contributed to the capital of the Company shall, solely for tax
purposes, be allocated among the Members so as to take account of any variation
between adjusted basis of such property to the Company and its initial Gross
Asset Value. In the event the Gross Asset Value of any Company property is
adjusted (other than for Depreciation) subsequent allocations of income, gain,
loss and deduction with respect to such property shall take account of any
variation between the adjusted basis of such property and its Gross Asset Value
in the same manner as under Section 704(c) and the Regulations thereunder. Any
elections or other decisions relating to such allocation shall be made by the
Members in a manner that reasonably reflects the purpose and intention of this
Agreement.
(f) The Gross Asset Values of all Company assets may be adjusted by
the Members in accordance with Regulations Section 1.704-1(b)(2)(iv) to equal
their respective gross fair market values as reasonably determined by the
Members as of the following times: (i) the acquisition of an additional
interest in the Company by any new or existing Member in exchange for more than
a de minimis capital contribution; (ii) the distribution by the Company to a
retiring or continuing Member as consideration for an interest in the Company of
more than a de minimis amount of money or other Company property; and (iii) the
Liquidation of the Company. In such event, if the Gross Asset Value of an asset
does not equal its adjusted basis for federal income tax purposes, such Gross
Asset Value shall thereafter be adjusted by the Depreciation taken into account
with respect to such asset for purposes of computing Profits and Losses.
(g) For purposes of Sections 7.5(a), (b), (c) and (d), there shall be
excluded from any deficit in a Member's Capital Account any amount such Member
is obligated to restore to its Capital Account under Regulations Section 1.704-
1(b)(2)(ii)(c), as well as any addition thereto pursuant to the penultimate
sentences of Regulations Sections 1.704-2(g)(l) and 1.704-2(i)(5) after taking
into account thereunder any changes during such fiscal year in Minimum Gain and
Member Nonrecourse Debt Minimum Gain.
(h) For purposes of Sections 7.5(a), (c) and (d), each Member's
Capital Account shall be reduced by the items described in Regulations Section
1.704-1(b)(2)(ii)(d)(4), (5) and (6).
(i) To the extent that Profits includes any income or gain which for
federal
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income tax purposes is treated as ordinary income from recapture of
depreciation, such Profits treated as ordinary income shall be apportioned among
the Members, to the extent of Profits allocated to the Members, pro rata in
accordance with the prior allocation of depreciation to which such recapture is
attributable.
(j) If there is any conflict in the application of the following
Sections, they shall be applied in the following order of priority: (i) Section
7.5(c), (ii) Section 7.5(d), (iii) Section 7.5(b), (iv) Section 7.5(a) and (v)
Section 7.4.
(k) If there is a Liquidation of the Company, the Capital Accounts of
the Members shall be adjusted to reflect the actual or anticipated Profits or
Losses allocable among the Members shall be adjusted in accordance with, or as
if there had been, an actual disposition of the Company's property at its fair
market value.
(l) Upon the transfer of an Interest in the Company, the Transferor's
Capital Account that is attributable to the transferred Interest shall carry
over to the transferee Member. If the transfer of any Interest in the Company
causes a termination of the Company under Section 708(b)(1)(B) of the Code, the
Capital Account that carries over to the transferee Member shall be adjusted in
accordance with Regulations Section 1.704-1(b)(2)(iv). The constructive
reformation of the Company shall be treated as the formation of a new limited
liability company, and the capital accounts of the Members of such new limited
liability company shall be determined and maintained accordingly.
Section 7.6 Taxable Year and Accounting Method. Except as otherwise
----------------------------------
required by the Code or the Regulations, the Company's taxable year shall be the
calendar year. The Company shall use the accrual method of accounting for
federal income tax purposes.
Section 7.7 Tax Elections. CCLI shall have the authority to make any
-------------
election or other determination on behalf of the Company provided for under the
Code or any provision of state or local tax law. In making such elections, CCLI
shall consider the interests of both Members as well as that of the Company.
Section 7.8 Tax Matters Partner. The Tax Matters Partner (within the
-------------------
meaning of Section 6231(a)(7) of the Code) of the Company shall be CCLI. In the
event of an administrative or judicial proceeding, the Tax Matters Partner shall
regularly consult with AEC regarding all significant decisions affecting such
proceeding. The Tax Matters Partner shall have the right to determine whether
to challenge a final partnership administrative adjustment by initiating an
action in the Tax Court or, if advised by counsel to do so and with the consent
of AEC, in the United States District Court or the Claims Court.
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ARTICLE 8. TRANSFER OF MEMBERS' INTERESTS
Section 8.1 Transfer of Members' Interests.
------------------------------
(a) The Interest of each Member of the Company is personal
property. Except as otherwise provided in this Agreement, the "transfer" of a
Member's Interest or portion thereof or interest therein and/or the "transfer"
of any legal and/or beneficial ownership interests in, or control of, each
Member, shall include a gift, sale, transfer, assignment, hypothecation, pledge,
encumbrance or any other disposition, whether voluntary or involuntary, by
operation of law or otherwise, including without limitation, any transfer
occurring upon or by virtue of the dissolution, bankruptcy or insolvency of a
Member; the appointment of a receiver, trustee or conservator or guardian for a
Member or its property; or pursuant to the will of a Member or the laws of
descent and distribution in the event of a Member's death; pursuant to court
order in the event of divorce, marital dissolution, legal separation or similar
proceedings; or pursuant to any loan or security agreement under which any of
the Member's Interest is pledged or otherwise serve as collateral, as well as
the transfer of any such Interest in the event recourse is made to such
collateral, but shall expressly exclude any changes in ownership of CCEI's
equity securities.
(b) Except as otherwise provided in Sections 6.6 and 8.2(c), neither
Member shall transfer all or any portion of its Interest in the Company, nor
shall either Member permit any transfer of legal and/or beneficial ownership
interest in, or control of, such Member during the period prior to the
expiration of the first three years following the Opening Date (as defined in
the Management Agreement). Thereafter, neither Member shall transfer or permit
any such transfer without the prior written consent of the other Member, which
consent may be granted or withheld in its sole discretion; provided however,
that CCEI shall have the right at any time (including the three-year period
referred to in the preceding sentence) to transfer all or any portion of its
ownership interest in CCLI in connection with (i) the sale or other disposition
of all or substantially all of the assets of CCEI, or (ii) any corporate
reorganization, financing transaction or similar transaction involving CCEI or
its Affiliates or any material assets of any such companies, so long as CCEI or
its successor shall remain the owner, directly or indirectly, of all or
substantially all of the CCLI interest. Without limiting the right of a Member
to grant or withhold in its sole discretion the consent to a transfer by the
other Member, if a Member (the "Offering Member") desires to transfer all or any
portion of its Interest in the Company (a "Sale Interest"), the other Member
(the "Receiving Member") shall have the right, but not the obligation, to
require the Offering Member to (i) sell the Sale Interest to the Receiving
Member (or an Affiliate) on the same terms and conditions on which the Sale
Interest is proposed to be sold to the third party; or (ii) purchase, or require
the third party to purchase, all or any portion of the Receiving Member's
Interest in the Company on the same terms and conditions on which the Sale
Interest in proposed to be sold to the third party, but in all events for cash
at closing in an amount at least sufficient to pay the Receiving Member its
Minimum Purchase Price. In the event of a sale of all or substantially all of
the Receiving Member's Interest, the Offering Member or third party transferee
shall cause the Receiving Member and its Affiliates to be released from all
guarantees and other liabilities with respect to any Third Party Debt or other
obligations of the Company for which such Member or its Affiliates may have
personal liability. In all events, the identity of the third party (including
financial statements, business experience and such other information as may be
reasonably
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required by the Receiving Member) must be disclosed by the Offering Member. All
transfers shall be subject to any required approvals by the Louisiana State
Gaming authorities and any third party lenders. Notwithstanding anything to the
contrary contained in this Agreement, the Member whose Interest is transferred
(and its Affiliates) shall not, for a period of three years from the date of
such transfer, directly or indirectly participate in a gaming-related venture
within that part of Louisiana constituting the New Orleans metropolitan area.
(c) Notwithstanding any other provision contained in this Agreement,
any transferee of an Interest in the Company or a portion thereof shall not
become a substituted Member without the unanimous consent of all Members other
than the transferor.
Section 8.2 Major Decisions: Deadlock: Buy-Sell Agreement.
----------------------------------------------
(a) For purposes of this Section, the term "Major Decision" shall
mean any action (or election not to act) by or on behalf of the Company which,
pursuant to the provisions of this Agreement, requires the approval of all or a
majority of the Members or a majority of the Management Committee, and which may
have, or which may be anticipated to have, a material effect on the business and
operation of the Company.
(b) In the event the voting rights of the Members or the Management
Committee are evenly divided with respect to a Major Decision and the Members or
the Management Committee are unable to reach agreement with respect to a
proposed course of action within fifteen (15) days after a written request for
action by any Member, then in such an event (except as otherwise provided in
Section 5.3(a) above), a deadlock (the "Deadlock") shall be deemed to exist.
(c) At any time after the occurrence of a Deadlock and prior to a
resolution thereof among the Members or the Management Committee, as applicable,
CCLI may, but shall not be obligated to, require AEC (i) to sell to CCLI all of
AEC's Interest in the Company or (ii) to buy from CCLI all of CCLI's Interest in
the Company. Provided that the Project has been in operation for at least
twenty-four (24) months, at any time after the occurrence of a Deadlock and
prior to a resolution thereof among the Members or the Management Committee, as
applicable, AEC may, but shall not be obligated to, request CCLI to sell all of
CCLI's Interest in the Company, whereupon CCLI shall, within thirty (30) days
after receipt of AEC's request, notify AEC that CCLI has elected one of the
following: (i) agree to sell its entire Interest to AEC; (ii) require that all
Members sell their enitre Interests (or cause the entire Project and all other
material assets of the Company to be sold) to a bona fide third party (and in
such event the Members shall cooperate to effect such a third party sale as
expeditiously as possible); or (iii) require AEC to sell its entire Interest to
CCLI. The purchase price for the selling Member's Interest shall be the greater
of (i) the Minimum Purchase Price or (ii) the Net Equity of such Member's
Interest. Unless otherwise approved by the Members, such purchase and sale
shall be consummated within nine (9) months after the initiating party's notice
to the other party and twenty percent (20%) of the purchase price for the
Interest being sold or purchased shall be payable at the closing in cash (or by
wire transfer in immediately available funds); provided however, (i) if CCLI is
the initiating party, if the Gross Appraised Value results in a Net Equity which
is equal to or greater than the Minimum Purchase Price, then at least the
Minimum Purchase Price shall be payable in cash at closing, or if the Net Equity
is less than the Minimum Purchase Price, then at least an amount equal to the
Net Equity shall be payable in cash at closing, or (ii) if
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AEC is the initiating party, at least the Minimum Purchase Price shall be
payable in cash at Closing. The balance of the purchase price shall be paid in
five (5) equal annual installments of principal, together with interest on the
unpaid principal balance at one percent (1%) per annum in excess of the B of A
Prime Rate, and shall be secured by (i) a deed of trust (or equivalent)
encumbering the Project (subject and subordinate only to any secured debt
existing as of the date of closing of such purchase) and (ii) an assignment of
all rights to receive any proceeds from the Project. Notwithstanding any other
provisions hereof to the contrary, any Member shall not be required to close on
the purchase of any Interest in accordance with this Section unless the
representations and warranties of the selling Member as set forth in Section 8.3
shall be true and correct in all material respects as of the date of such
closing, and the selling Member shall deliver a certificate to such effect to
the purchasing party dated as of the closing date. Notwithstanding anything to
the contrary contained in this Agreement, the selling Member and its Affiliates
shall not, for a period of three years from the date of such transfer, directly
or indirectly participate in a gaming-related venture within that part of
Louisiana constituting the New Orleans Metropolitan Area. Concurrently with the
initial closing of such purchase and sale, the purchasing Member shall cause the
selling Member and its Affiliates to be released from all guarantees and other
liabilities with respect to any Third Party Debt or other obligations of the
Company for which such Member or Affiliates may have personal liability.
(d) At any time after the occurrence of an Event of Default under
this Agreement, the non-defaulting Member, without limiting any other rights or
remedies it may have under this Agreement, any other agreement or instrument
relating to or arising out of this Agreement, at law or in equity, may, upon
written notice to the Defaulter, elect to either sell its Interest to the
Defaulter or purchase the Interest of the Defaulter. If the non-defaulting
Member is the selling Member, the purchase price shall be the greater of (i) the
Minimum Purchase Price or (ii) the Net Equity of such selling Member's Interest.
If AEC is the Defaulter and is the selling Member, the purchase price shall be
90% of the Net Equity of AEC's Interest. If CCLI is the Defaulter and is the
selling Member, the purchase price shall be the sum of (i) 100% of the
outstanding balance of any CCLI Loans and (ii) 90% of any other amounts
comprising the Net Equity of CCLI's Interest. Unless otherwise approved by the
Members, such purchase and sale shall be consummated within nine (9) months
after the non-defaulting Member's notice, and the terms of payment of the
purchase price shall be as set forth in Section 8.2(c) above; provided however,
if the non-defaulting Member is the seller, then the cash portion of the
purchase price shall at least equal the Minimum Purchase Price of the selling
Member's Interest. Notwithstanding anything to the contrary contained in this
Agreement, if the Defaulter is the seller, the Defaulter (and its Affiliates)
shall not, for a period of three years from the date of such transfer, directly
or indirectly participate in a gaming-related venture within that part of
Louisiana constituting the New Orleans metropolitan area. Concurrently with the
initial closing of such purchase and sale, if the non-defaulting Member is the
seller, the Defaulter shall cause the non-defaulting Member and its Affiliates
to be released from all guarantees and other liabilities with respect to any
Third Party Debt or other obligations of the Company for which the non-
defaulting Member or its Affiliates may have personal liability.
Section 8.3 Representations and Warranties of the Members. As of the
---------------------------------------------
date of exercise of any option and closing of any sale pursuant to this Article
8, each of the
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Members represents and warrants to the Company and the other Members with
respect to itself as follows:
(a) Such Member is the lawful owner of and has the full right, power
and authority to sell, transfer and deliver the Interest of the Company which it
purports to own, and the sale, transfer and delivery of such Interests of the
Company in accordance therewith will transfer good and marketable title thereto
free and clear of all liens, encumbrances, claims or right of the third parties
of every kind and nature whatsoever, subject only to the provisions of this
Agreement.
(b) The Interests of the Company owned by such Member have been duly
authorized and are fully paid and non-assessable (except as otherwise stated).
There are no existing options, warrants, calls or commitments on the part of any
Member relating to such Interests. No voting agreements or restrictions of any
kind other than those set forth in this Agreement affect the rights of any such
Interests of the Company or such Member.
(c) Such Member has the right and power to enter into this Agreement,
and this Agreement has been fully executed and delivered and constitutes the
valid and binding obligation of such Member. No consent of any person not a
party to this Agreement and no consent of any governmental authority is
required to be obtained on the part of such Member in connection with or
resulting from the execution or performance of this Agreement.
ARTICLE 9. EVENTS OF DEFAULT
Section 9.1 Events of Default. The occurrence of any of the
-----------------
following events shall constitute an event of default ("Event of Default")
hereunder on the part of the Member to whom such event occurs (the "Defaulter")
if within thirty (30) days following the Defaulter's receipt of notice of such
default from the other Member, or within ten (10) days where the default is due
solely to the non-payment of monies, whichever is applicable, the Defaulter
fails to pay such monies or in the case of non-monetary defaults, fails to
commence substantial efforts to cure such default or thereafter fails within a
reasonable time to prosecute to completion with diligence and continuity the
curing of such default; provided, however, that the occurrence of any of the
events described in Section 9.1(b) below shall constitute an Event of Default
immediately upon such occurrence without any requirement of notice or the
passage of time except as specifically set forth in any such subparagraph.
(a) the violation by a Member of any of the restrictions set forth in
Article 8 of this Agreement upon the right of a Member to transfer its Interest;
(b) (i) institution by a Member of proceedings under any laws of the
United States or any state, whether now existing or subsequently enacted or
amended, for the relief of debtors wherein such Member is seeking relief as
debtor; (ii) a general assignment by a Member for the benefit of creditors;
(iii) the institution by a Member of a proceeding under any section or chapter
of the Federal Bankruptcy Code as now existing or hereafter amended or becoming
effective; (iv) the institution against a Member of a proceeding under any
section or chapter of the Federal Bankruptcy Code as now existing or as
hereafter amended or becoming effective, which proceeding is not dismissed,
stayed or discharged within a period of sixty (60) days after the filing thereof
or, if stayed, which stay is thereafter lifted without a contemporaneous
discharge or dismissal of such proceeding; (v) a proposed plan of arrangement or
other action by a Member's creditors taken as a result of a
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general meeting of the creditor of such Member; (vi) admission by a member in
writing of its inability to pay its debts as they mature; (vii) the attachment,
execution or other judicial seizure of all or any substantial part of a Member's
assets or of a Member's Percentage Interest, or any part thereof, such
attachment, execution or seizure being with respect to an amount not less than
Five Thousand Dollars ($5,000.00) and remaining undismissed or undischarged for
a period of fifteen (15) days after the levy thereof, if the occurrence of such
attachment, execution or other judicial seizure would reasonably tend to have a
materially adverse effect upon the performance by such Member of its obligations
under this Agreement; provided, however, that any such attachment, execution or
seizure shall not constitute an Event of Default hereunder if such Member posts
a bond sufficient to fully satisfy the amount of such claim or judgment within
fifteen (15) days after the levy thereof and the Member's assets are thereby
released from the lien of such attachment (any of the foregoing hereinafter
referred to as an "Act of Insolvency");
(c) any breach by a Member of its representations and warranties
pursuant to Article 13 or any material default in performance of, or failure to
comply with any other agreements, obligations or undertakings of a Member herein
contained, or any default in payment or performance by a Member or an Affiliate
of such Member of its or their obligations pursuant to the Reimbursement
Agreement;
(d) causing or permitting an event of default under any Third Party
Loan, any CCLI Loans, or other permitted mortgage loan encumbering the Project;
(e) any default in the payment or performance
of the AEC Loan and the Georgusis Guaranty; and
(f) the rejection of a Member for licensing by the Gaming Authorities
or any other event involving a Member which (i) results in the Company or a
Member becoming unable to conduct a gaming business or (ii) in the reasonable
and good faith judgment of the other Member, poses a serious threat of
revocation or suspension of a gaming license of the Company or any of its
Members.
Section 9.2 Remedies Upon Default. Upon the occurrence of any Event
---------------------
of Default, the non-defaulting Member shall have the right, without limitation,
to exercise any and all rights and remedies set forth in Agreement and/or as may
otherwise be available at law and in equity against Defaulter. Notwithstanding
anything to the contrary contained in this Agreement, during the continuation of
any Event of Default, the Defaulter and the Managers on the Management Committee
appointed by the Defaulter shall have no voting rights to participate in the
management of the Company.
ARTICLE 10. EVENTS REQUIRING DISSOLUTION OF THE
COMPANY/CONSENT TO CONTINUE
Section 10.1 Events Requiring Dissolution. The Company shall be
----------------------------
dissolved upon the occurrence of any of the following events:
(a) The expiration of the fifty (50) year term of the Company;
(b) The unanimous written consent of all Members;
(c) The death, interdiction, withdrawal, expulsion, bankruptcy
or dissolution of a Member, or the occurrence of any other event which
terminates a Member's continued membership in the Company, unless within ninety
(90) days after such event the remaining Members unanimously consent in writing
to continue the business of the
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Company, or if there is only one remaining Member, the admission of one or more
new Members pursuant to Sections 5.2 and 10.2;
(d) At the election of the non-defaulting Member, the occurrence
of an Event of Default by a Defaulter (or if applicable, by an Affiliate of the
Defaulter);
(e) The final and non-appealable rejection of the Company's
application for a gaming license for the Project or, after issuance, the final
and non-appealable revocation of such license;
(f) The sale or other disposition of all or substantially all of
the assets of the Company and the collection of the proceeds thereof.
Section 10.2 Members' Consent to Continue the Company's Business.
---------------------------------------------------
Upon the occurrence of any event described in Section 10.1 which may cause the
dissolution of the Company, or subsequent discovery of the occurrence of such an
event (a "triggering event"), the Company shall immediately notify in writing
each of the Members of the occurrence of the triggering event, each of the
remaining Members shall notify the Company, in writing, whether or not such
Member consents to continue the business of the Company. If all of the
remaining Members consent to continue the Company's business, and there are at
least two (2) remaining Members, the Company shall not be dissolved and the
remaining Members shall continue the Company's business. If there is only one
(1) remaining Member and it consents to continue the Company's business, such
Member shall have the absolute right, notwithstanding any contrary provisions of
this Agreement, to transfer a portion of its Interest to a transferee (who may
be an Affiliate of such Member) and to unilaterally admit such transferee as a
new Member in the Company, so that such two (2) Members may continue the
Company's business. In the event the business of the Company is not continued,
the provisions of Article 11 shall apply.
ARTICLE 11. DISSOLUTION
Section 11.1 Liquidation. Upon the occurrence of any event requiring
-----------
dissolution as set forth in Section 10.1, if the business of the Company is not
continued by the remaining Members pursuant to Section 10.2, the Company shall
immediately execute and deliver to the Secretary of State a statement of its
intent to dissolve. Upon filing the statement of intent to dissolve, the
Company shall cease to carry on its business and shall wind up its affairs and
liquidate.
In the course of the dissolution and winding up the affairs of the
Company, every effort shall be made to sell the assets of the Company for cash
so that the distribution may be made to the Members in cash. If the Company's
assets include notes secured by deeds of trust (or equivalent) on properties
which the Company or an Affiliate has sold, said notes and deeds of trust may be
distributed in kind to the Members if the Members may legally accept same, and
shall be valued at one hundred percent (100%) of the unpaid principal balance of
said notes, plus accrued interest at the time of such distribution. Any assets
including notes secured by deeds of trust which are owned by the Company and
cannot conveniently or economically be converted into cash, may be distributed
in kind to the Members. Unless the Members otherwise agree in writing, each
Member shall receive a proportionate share of each of those assets which are to
be distributed in kind.
Section 11.2 Distribution of Assets. During the liquidation of the
----------------------
Company, the Members shall continue to share profits and losses in the same
proportions as before
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dissolution. In settling accounts after dissolution, (i) the aggregate amount of
all prior distributions of Net Available Cash to a Member pursuant to Section
7.3(a)(i) in excess of the additional amount of Net Available Cash that such
Member would receive if the aggregate amount of all prior distributions of Net
Available Cash to the Members pursuant to Section 7.3(a)(i) were repaid to the
Company and distributed to the Members as Net Available Cash in liquidation of
the Company pursuant to this Section 11.2 and Section 7.3(a)(ii) through (vi)
shall be paid by such Member to the other Member, and (ii) the proceeds from the
liquidation of the Company's assets shall be applied as follows:
(a) To creditors of the Company, in the order of priority as provided
by law, other than debts owed to Members for their contributions; and
(b) To the Members in accordance with Section 7.3(a)(ii) through
(vi); provided, however, that if the dissolution of the Company occurs prior to
the Opening Date, the remaining proceeds from the liquidation of the Company's
assets shall be applied (i) first, to pay the outstanding balance of any CCLI
Loans,(ii) second, to the Members, an amount equal to (or in proportion to if
less than) each Member's Capital Contribution, (iii) third, to AEC, an amount
equal to $15,000,000, and (iv) fourth, to the Members, pro rata in accordance
with their respective Percentage Interests..
ARTICLE 12. INDEMNIFICATION
Section 12.1 Indemnification of Manager, Member, Employee or Agent:
------------------------------------------------------
Proceeding Other than by Company. The Company shall indemnify any person who
- --------------------------------
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, except an action by or in the right of the Company, by reason
of the fact that he is or was a Manager, Member, employee or agent of this
Company, or is or was serving at the request of this Company as Manager, Member,
director, officer, employee or agent of another limited-liability company
partnership, joint venture, trust or other entity, against expenses, including
attorney fees, judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with the action, suit or proceeding if
he acted in good faith and in a manner which he reasonably believed to be in or
not opposed to the best interests of this Company, and, with respect to a
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction or upon a plea of nolo contendere or its
equivalent, does not, of itself, create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interest of this Company, and that, with respect to any
criminal action or proceeding, he had reasonable cause to believe that his
conduct was unlawful.
Section 12.2 Indemnification of Manager, Member, Employee or Agent:
-------------------------------------------------------
Proceeding by Company. The Company shall indemnify any person who was or is a
- ---------------------
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of this Company to procure a
judgment in its favor by reason of the fact that he is or was a Manager, Member,
employee or agent of the Company, or is or was serving at the request of the
Company as a Manager, Member, director, officer, employee or agent of another
limited-liability company, corporation, partnership, joint venture, trust or
other enterprise against expenses, including amounts paid in settlement and
attorney fees actually
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and reasonably incurred by him in connection with the defense or settlement of
the actions or suit if he acted in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of this
Company. Indemnification may not be made for any claim, issue or matter as to
which such a person has been adjudged by a court of competent jurisdiction,
after exhaustion of all appeals therefrom, to be liable to this Company or for
amounts paid in settlement to this Company, unless and only to the extent that
the court in which the action was brought or other court of competent
jurisdiction determines upon application that in view of all the circumstances
of the case, the person is fairly and reasonably entitled to indemnity for such
expenses as the court deems proper.
Section 12.3 Indemnity if Successful. To the extent that a Manager,
-----------------------
Member, employee or agent of the Company has been successful on the merits or
otherwise in defense of any action, suit or proceeding described in Section 12.1
or 12.2, or in defense of any claim, issue or matter therein, the Company shall
indemnify the Manager, Member, employee or agent against expenses, including
attorney fees, actually and reasonably incurred in connection with the defense.
Section 12.4 Expenses. Any indemnification under Sections 12.1 and
--------
12.2, unless ordered by a court or advanced pursuant to Section 12.5 below, must
be made by this Company only as authorized in the specific case upon a
determination that indemnification of the Manager, Member, employee or agent is
proper in the circumstances. The determination must be made:
(a) By the Members;
(b) By the owners of more than 50% of the interests owned by
Members who were not parties to the act, suit or proceeding; or
(c) If Members who own more than 50% of the interests owned by
Members who are not parties to the act, suit or proceeding so order, by
independent legal counsel in a written opinion; or
(d) If Managers who were not parties to the act, suit or
proceeding cannot be obtained, by independent legal counsel in a written
opinion.
Section 12.5 Advancement of Expenses. The expenses of Members and
-----------------------
Managers incurred in defending a civil or criminal action, suit or proceeding
must be paid by the Company as they are incurred and in advance of the final
disposition of the action, suit or proceeding, upon receipt of an undertaking by
or on behalf of the Manager or Member to repay the amount if it is ultimately
determined by a court of competent jurisdiction that the Member or Manager is
not entitled to be indemnified by the Company.
ARTICLE 13. REPRESENTATIONS AND WARRANTIES
Section 13.1 CCLI Representations and Warranties. As a material
------------------------------------
inducement to AEC to enter into this Agreement, CCLI represents and warrants to
AEC that, as of the date hereof, CCLI knows of no facts or circumstances that
are likely to affect the ability of CCLI, AEC or the Company to receive all
gaming licenses and approvals necessary to operate the Project.
Section 13.2 AEC Representations and Warranties. As a material
-----------------------------------
inducement to CCLI to enter into this Agreement, AEC represents and warrants to
CCLI that, as of the date hereof, AEC knows of no facts or circumstances that
are likely to affect the ability of CCLI, AEC or the Company to receive (i) all
gaming licenses and approvals necessary to operate
-28-
<PAGE>
the Project or that would constitute a violation of Louisiana Gaming Laws or the
Louisiana Code of Ethics for Public Employees and (ii) all other licenses,
permits and approvals necessary or advisable for the construction, completion,
operation, ownership and use of the Property and the Project as a riverboat
gaming facility. AEC shall proceed with due diligence and (i) take all actions
necessary or advisable to apply for all necessary licenses, permits and
approvals, and will use its best efforts to cause all such licenses, permits and
approvals to be issued to the Company in due course, at a cost to the Company
not to exceed the actual out-of-pocket costs reasonably incurred in furtherance
of the terms of the application processes, and (ii) use its best good faith
efforts to cause the Project to be duly and timely completed in accordance with
and subject to the approved plans and specifications, the approved Construction
Budget and all applicable laws (including without limitation, all applicable
gaming laws, orders, rules and regulations).
Section 13.3 Breach. In the event any representation or warranty
-------
made by a Member is discovered to be untrue or is breached, the non-defaulting
Member may, without limiting the other rights or remedies it may have, declare
an Event of Default and elect to dissolve the Company pursuant to Article 10.
In such event, the defaulting Member shall, within thirty (30) days after
demand, reimburse the non-defaulting Member for all Capital Contributions and
loans or other advances made, and all expenses incurred, by the non-defaulting
Member in connection with the Project, the Preliminary Approval and the Company.
ARTICLE 14. MISCELLANEOUS PROVISIONS
Section 14.1 Agreement to Perform Necessary Acts. Each Member agrees
-----------------------------------
to perform any further acts and execute and deliver any documents that may be
reasonably necessary to carry out the provisions of this Agreement.
Section 14.2 Amendments. The provisions of this Agreement may not be
----------
waived, altered, amended or repealed, in whole or in part, except with the
unanimous written consent of the Members.
Section 14.3 Successors and Assigns. This Agreement shall be binding
----------------------
on, and shall inure to the benefit of, the Members and their respective heirs,
legal representatives, successors and assigns.
Section 14.4 Validity of Agreement. It is intended that each Section
---------------------
of this Agreement shall be viewed as separate and divisible, and in the event
that any Section shall be held to be invalid, the remaining Sections shall
continue to be in full force and effect.
Section 14.5 Notices. All notices, requests, demands and other
-------
communications under this Agreement shall be in writing and shall be deemed to
have been duly given on the date of service if served personally on the party to
whom notice is given, or on the next business day if sent by confirmed
electronic facsimile transmission ("fax") or on the date of actual delivery (as
set forth in the courier's or carrier's receipt) if sent by overnight commercial
courier or by first class mail, registered or certified, postage prepaid and
properly addressed to the party at his address set forth below, or any other
address that any party may from time to time designate by written notice to the
others:
-29-
<PAGE>
If to CCLI:
Circus Circus Louisiana, Inc.
2880 Las Vegas Boulevard South
Las Vegas, Nevada 89109
Attention: General Counsel
If to AEC:
American Entertainment Corporation
8301 Judge Perez Drive, Suite 305
Chalmette, Louisiana 70043
Attention: Mr. Bill Bueck
Section 14.6 Governing Law; Binding Arbitration. This Agreement
----------------------------------
shall be governed by and construed in accordance with the laws of the State of
Louisiana; provided however, that either Member shall have sixty (60) days after
the inception of any disputes concerning the enforcement or interpretation of
this Agreement or the compliance by a Member with the terms and provisions of
this Agreement, to elect that such dispute be settled by binding arbitration in
St. Bernard Parish, Louisiana. The Member whose performance is in dispute may
commence the running of such 60-day period by delivering written notice of a
dispute to the other Member. Such election shall be made by such other Member
by commencing the arbitration or delivering a notice to the contrary to the
Member whose performance is in dispute.
(a) Arbitrators. The arbitration shall be conducted by three (3)
-----------
arbitrators appointed in accordance with the provisions hereof and, to the
extent consistent with this Section 14.6, in accordance with the then prevailing
rules regarding commercial arbitration of the American Arbitration Association
(or any organization successor thereto) in the metropolitan area of New Orleans,
Louisiana. Each Member shall prepare a list of five (5) individuals to serve as
arbitrators, each of which prospective arbitrators shall be experienced in the
casino business. Each Member shall choose one individual from the other's list
to serve as an arbitrator. If either Member fails to timely select an
arbitrator then the party that has timely selected an arbitrator shall be
permitted to choose the second arbitrator. The parties shall respond to any
proposed list of arbitrators within ten (10) days after the receipt thereof.
The two (2) arbitrators shall then agree on a third arbitrator within ten (10)
days. The arbitrators shall have the right to retain and consult experts and
competent authorities skilled in the matters under arbitration. The arbitrators
shall render their decision and award, upon the concurrence of at least two (2)
of their number, within three (3) months after the appointment of the last
arbitrator. In all arbitration proceedings submitted to the arbitrators, the
arbitrators shall be required to agree upon and approve the substantive position
advocated by either Member with respect to each disputed issue and shall not
adopt an alternative or compromise position. Judgment may be entered on the
determination and award made by the arbitrators in any court of competent
jurisdiction and may be enforced in accordance with the laws of the State of
Louisiana. The arbitrators will follow and apply the terms of this Agreement
and Louisiana law in rendering their decisions.
(b) Procedures and Discovery. The Members hereby agree that in any
------------------------
such arbitration each party shall be entitled to discovery of the other party as
provided by Louisiana law; provided, however, any such discovery shall be
completed within two (2)
-30-
<PAGE>
months from the date the last arbitrator is appointed, unless such period is
extended by agreement of the Members. Any disputes concerning discovery shall be
determined by the arbitrators with any such determination being binding on the
parties. Each Member shall cooperate with the other with respect to the timely
completion of such discovery. The arbitrators shall apply Louisiana substantive
law and the Louisiana evidence law, as appropriate, to the proceeding. The
arbitrators shall prepare in writing and provide to the parties factual findings
and the reasons on which the decision is based. Each Member shall bear its own
expenses related to the arbitration including, without limitation, attorneys'
fees, and shall divide the arbitration expenses and fees equally.
(c) No Timely Decision. If for any reason whatsoever the written
------------------
decision and award of the arbitrators shall not be rendered within the time
limits set forth in this Section 14.6, either party may apply to any court of
------------
competent jurisdiction to determine the question in dispute consistently with
the provisions of this Agreement by action, proceeding or otherwise (but not by
a new arbitration proceeding).
(d) Extension of Time. Any time periods for performance of a matter
-----------------
submitted to arbitration hereunder shall be extended by the amount of time taken
by the arbitration.
(e) Choice of Forum. By their execution of this Agreement, the
---------------
Members agree to pursue the enforcement of and be bound by the enforcement of
any arbitration awards which result from arbitrations pursuant to this Section
-------
14.6 in the 34th Judicial District for the Parish of St. Bernard, Louisiana.
- ----
(f) Conflict. In the event of any conflict or inconsistency between
--------
the provisions of this Section 14.6 and the provisions of Article 21 of the
Management Agreement, the provisions of Article 21 of the Management Agreement
shall govern and prevail.
Section 14.7 Counterparts. This Agreement may be executed in one or
------------
more counterparts, each of which shall be deemed an original, but all of which
together shall be constitute one and the same instrument.
Section 14.8 Gender and Number. As used in this Agreement, and
-----------------
masculine, feminine, and neuter gender, and the singular or plural number shall
be considered to include the others whenever the context so indicates.
Section 14.9 Attorney Fees. Subject to Section 14.6 above, in the
-------------
event any party shall bring an action or proceeding for damages against the
other party for an alleged breach of any provision of this Agreement, or to
enforce, protect, or establish any right or remedy of either party, the
prevailing party shall be entitled to recover as a part of such action or
proceeding reasonable attorney fees and court costs.
Section 14.10 Exhibits. The Exhibits referred to herein and attached
--------
hereto are hereby incorporated by reference as though set forth in full. Unless
the context otherwise expressly requires, any reference to "this Agreement"
shall mean and include all such Exhibits.
Section 14.11 Complete Agreement. Subject to Section 14.12 below;
------------------
(a) this
-31-
<PAGE>
Agreement and the Articles of Organization constitute the complete and
exclusive statement among the Members with respect to the subject matter
contained therein and (b) this Agreement and the Articles of Organization
supersede all prior agreements by and among the Members.
Section 14.12 Approval of Gaming Authorities. It is the intention of
-------------------------------
the Members that this Agreement shall become effective and binding immediately
upon the full execution and delivery hereof by the Members. However, the Members
acknowledge that this Agreement is subject to the review and approval by the
Gaming Authorities. Accordingly, if this Agreement (or any material provision
hereof is disapproved by any Gaming Authority, this Agreement and the Amended
AEC Loan Documents shall be deemed null and void and the original Operating
Agreement dated as of January 14, 1994, as heretofore amended by the Amendment
thereto dated as of February 8, 1994, together with the original AEC Loan
Documents, shall be deemed automatically revived and reinstated, as though never
amended or superseded by this Agreement or the Amended AEC Loan Documents.
Promptly upon execution and delivery of this Agreement, the Company shall cause
its counsel to apply for and pursue the approval of this Agreement and the
transactions contemplated hereby, by any necessary Governmental Authorities.
IN WITNESS WHEREOF, this Agreement was adopted by a unanimous vote of
all the Members of this Company at a meeting thereof held on the 8th day of
February, 1995.
CIRCUS CIRCUS LOUISIANA, INC., a Louisiana
corporation
By: CLYDE T. TURNER
Name: Clyde T. Turner
Title: President
AMERICAN ENTERTAINMENT CORPORATION, a Louisiana
corporation
By: JOSEPH H. GEORGUSIS
Name: Joseph H. Georgusis
Title: President
-32-
<PAGE>
EXHIBIT A
---------
LEGAL DESCRIPTION OF PARCELS
----------------------------
CONTRIBUTED BY AEC
------------------
1. Legal description contained in Schedule A, Item 5 of First American Title
Insurance Policy No. FA-10962 dated July 19, 1994 - Lots 7-Z-1, 7-Z-2 and
7-Z-3.
2. Legal description contained in Schedule A, Item 5 of First American Title
Insurance Policy No. FA-10961 dated August 2, 1994 - Lots 6-B-1, 6-B-3 and
6-B-4.
3. Legal description contained in Schedule A, Item 5 of First American Title
Insurance Policy No. FA-10955 dated October 2, 1994 - Halter Marine Lot.
<PAGE>
EXHIBIT B
---------
PERMITTED TITLE EXCEPTIONS
1. Title exceptions contained in Schedule B of First American Title Insurance
Policy No. FA-10962 dated July 19, 1994 - Lots 7-Z-1, 7-Z-2 and 7-Z-3.
2. Title exceptions contained in Schedule B of First American Title Insurance
Policy No. FA-10961 dated August 2, 1994 - Lots 6-B-1, 6-B-3 and 6-B-4.
3. Title exceptions contained in Schedule B of First American Title Insurance
Policy No. FA-10955 dated October 2, 1994 - Halter Marine Lot.
<PAGE>
EXHIBIT C
---------
INTENTIONALLY DELETED
<PAGE>
AMENDED AND RESTATED
OPERATING AGREEMENT
OF
AMERICAN ENTERTAINMENT, L.L.C., A LOUISIANA LIMITED-LIABILITY
COMPANY
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
ARTICLE 1. NAME; DEFINED TERMS.................................. 1
1.1 Name................................................. 1
1.2 Identification of Company............................ 1
1.3 Certain Definitions.................................. 1
ARTICLE 2. PRINCIPAL OFFICE; REGISTERED OFFICE AND AGENT........ 8
2.1 Principal Office..................................... 8
2.2 Registered Office and Agent.......................... 8
ARTICLE 3. PURPOSE.............................................. 8
3.1 Purpose.............................................. 8
3.2 Powers............................................... 8
ARTICLE 4. TERM................................................. 8
4.1 Duration............................................. 8
ARTICLE 5. MEMBERS; MANAGEMENT OF COMPANY....................... 9
5.1 Members' Voting Rights............................... 9
5.2 New Members.......................................... 10
5.3 Managers; Management Committee....................... 10
5.4 CCLI Decisions....................................... 12
5.5 Books of Account..................................... 12
5.6 Banking.............................................. 12
5.7 Authorization of Disbursement of Company Funds....... 12
5.8 General Restrictions................................. 12
5.9 Progress Reports; Meetings........................... 13
5.10 Salaries and Compensation to Members................. 13
5.11 Company Property..................................... 13
5.12 Other Business Activities............................ 14
5.13 Project Development.................................. 15
5.14 Project Management................................... 15
ARTICLE 6. CAPITAL CONTRIBUTIONS; LOANS; INITIAL PUBLIC
OFFERING............................................ 16
6.1 Initial Capital Contributions........................ 16
6.2 Additional Capital Requirements...................... 17
6.3 Interest............................................. 18
6.4 Withdrawal of Capital................................ 18
6.5 Capital Account...................................... 18
6.6 AEC Loan............................................. 19
6.7 Initial Public Offering.............................. 20
ARTICLE 7. PERCENTAGE INTERESTS; CASH DISTRIBUTIONS;
ALLOCATIONS OF PROFIT AND LOSS...................... 20
7.1 Percentage Interests................................. 20
7.2 Periodic Determination of Net Available Cash......... 20
7.3 Distribution of Net Available Cash................... 20
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C> <C>
7.4 Determination and Allocation of Profits and Losses... 21
7.5 Tax Regulatory Provisions............................ 21
7.6 Taxable Year and Accounting Method................... 23
7.7 Taxable Elections.................................... 23
7.8 Tax Matters Partner.................................. 23
ARTICLE 8. TRANSFER OF MEMBERS' INTERESTS....................... 23
8.1 Transfer of Members' Interests....................... 23
8.2 Major Decisions: Deadlock: Buy-Sell Agreement........ 25
8.3 Representations and Warranties of the Members........ 26
ARTICLE 9. EVENTS OF DEFAULT.................................... 27
9.1 Events of Default.................................... 27
9.2 Remedies Upon Default................................ 28
ARTICLE 10. EVENTS REQUIRING DISSOLUTION OF THE
COMPANY/CONSENT TO CONTINUE......................... 28
10.1 Events Requiring Dissolution......................... 28
10.2 Members' Consent to Continue the Company's Business.. 29
ARTICLE 11. DISSOLUTION......................................... 29
11.1 Liquidation.......................................... 29
11.2 Distribution of Assets............................... 30
ARTICLE 12. INDEMNIFICATION..................................... 30
12.1 Indemnification of Manager, Member, Employee or Agent:
Proceeding Other than by Company.................... 30
12.2 Indemnification of Manager, Member, Employee or Agent:
Proceeding by Company............................... 30
12.3 Indemnity if Successful.............................. 31
12.4 Expenses............................................. 31
12.5 Advancement of Expenses.............................. 31
ARTICLE 13. REPRESENTATIONS AND WARRANTIES...................... 32
13.1 CCLI Representations and Warranties.................. 32
13.2 AEC Representations and Warranties................... 32
13.3 Breach............................................... 32
ARTICLE 14. MISCELLANEOUS PROVISIONS............................ 32
14.1 Agreement to Perform Necessary Acts.................. 32
14.2 Amendments........................................... 32
14.3 Successors and Assigns............................... 32
14.4 Validity of Agreement................................ 33
14.5 Notices.............................................. 33
14.6 Governing Law; Binding Arbitration................... 33
14.7 Counterparts......................................... 35
14.8 Gender and Number.................................... 35
14.9 Attorney Fees........................................ 35
14.10 Exhibits............................................. 35
14.11 Complete Agreement................................... 35
14.12 Approval of Gaming Authorities....................... 35
</TABLE>
-ii-
<PAGE>
EXHIBITS
- --------
A Legal Description
B Permitted Title Exceptions
C INTENTIONALLY DELETED
D Management Agreement
E Consulting Agreement
F Reimbursement Agreement
G-1 AEC Note
G-2 AEC Security Agreement
G-3 Georgusis Guaranty
-iii-
<PAGE>
February 8, 1995
American Entertainment, L.L.C.
700 Camp Street
New Orleans, Louisiana 70130
Gentlemen:
Reference is made to that certain Amended and Restated Operating
Agreement of American Entertainment, L.L.C., a Louisiana limited liability
company, dated as of February 8, 1995 (the "Operating Agreement"). Unless
otherwise expressly stated, any defined term used in this letter shall have the
same meaning as set forth in the Operating Agreement.
The undersigned, Circus Circus Enterprises, Inc., a Nevada
corporation, an Affiliate of CCLI, hereby acknowledges and agrees to be bound by
the obligations set forth in Sections 6.2(c) and 6.2(d) of the Operating
Agreement as fully and to the same extent as if the undersigned were a signatory
to the Operating Agreement.
This letter shall be binding upon the undersigned and its successors
in interest and assigns, and shall inure to the benefit of, and shall be
enforceable by, the Company, any Member and any substituted or additional Member
admitted to the Company pursuant to the terms and provisions of the Operating
Agreement, but shall not inure to the benefit of or be enforceable by any other
third party.
Very truly yours,
CIRCUS CIRCUS ENTERPRISES, INC., a
Nevada corporation
By: CLYDE T. TURNER
--------------------------------------------
Clyde T. Turner, Chief Executive Officer
<PAGE>
February 8, 1995
American Entertainment, L.L.C.
700 Camp Street
New Orleans, Louisiana 70130
Gentlemen:
Reference is made to that certain Amended and Restated Operating
Agreement of American Entertainment, L.L.C., a Louisiana limited liability
company, dated as of February 8, 1995 (the "Operating Agreement"). Unless
otherwise expressly stated, any defined term used in this letter shall have the
same meaning as set forth in the Operating Agreement.
The undersigned, Joseph H. Georgusis, an Affiliate of AEC, hereby
acknowledges and agrees to be bound by the obligations set forth in Sections
6.2(c) and 6.2(d) of the Operating Agreement as fully and to the same extent as
if the undersigned were a signatory to the Operating Agreement.
This letter shall be binding upon the undersigned and his successors
in interest and assigns, and shall inure to the benefit of, and shall be
enforceable by, the Company, any Member and any substituted or additional Member
admitted to the Company pursuant to the terms and provisions of the Operating
Agreement, but shall not inure to the benefit of or be enforceable by any other
third party.
Very truly yours,
JOSEPH H. GEORGUSIS
-------------------
Joseph H. Georgusis
<PAGE>
RIVERBOAT CASINO MANAGEMENT AGREEMENT
-------------------------------------
This Agreement is made and entered into this 8th day of February, 1995, by
and among AMERICAN ENTERTAINMENT, L.L.C., a Louisiana limited liability company
("Owner"), and CIRCUS CIRCUS LOUISIANA, INC., a Louisiana corporation
("Manager").
R E C I T A L S
A. Owners desires to own and operate a riverboat gaming operation based
in St. Bernard Parish, Louisiana at Bayou Bienvenue which shall operate on the
inland waterways of Bayou Bienvenue within the State of Louisiana or other
navigational limits established by any Operating Permit or Law (as each is
defined herein).
B. Owner has received a Certificate of Preliminary Approval from the
Louisiana Riverboat Gaming Commission (the "Commission") describing in detail
the riverboat gaming and incidental operations Owner desires to conduct, as such
Certificate may be amended and approved from time to time with the prior written
consent of Manager (the "Proposal").
C. Owner desires to engage a third party to manage the gaming operations
on the riverboat and any landside or other related operations necessary,
required or incidental to the riverboat gaming operations as described in the
Proposal and as such plans are modified in accordance with any Related Contract
or Governmental Requirements.
D. Affiliates of Manager are experienced in managing gaming
establishments.
E. Owner desires to engage Manager and Manager desires to be engaged to
manage the Project (as defined herein), including the gaming operations on the
riverboat and the landside or other related operations necessary, required or
incidental to the riverboat gaming operations. This Agreement, and to the extent
applicable, the Vessel Operating Agreement and the Owner's Operating Agreement,
will serve as the sole management agreement pertaining to the operation and
maintenance of the Project.
AGREEMENTS
----------
NOW THEREFORE, for cause and in consideration of the mutual covenants,
promises and agreements herein contained, the parties hereto do hereby agree as
follows:
1. DEFINITION/ARTICLES, SECTIONS, PARAGRAPHS AND CLAUSES
-----------------------------------------------------
1.1. Definitions. All capitalized terms referenced or used in this
-----------
Agreement and not specifically defined herein shall have the meaning set forth
on Exhibit "A", which is attached hereto and incorporated herein by this
-----------
reference.
1.2. Articles, Sections, Paragraphs and Clauses. All references to
------------------------------------------
"Article", "Section", "Paragraph" and "Clauses" in this Agreement shall refer to
a major section designated by a single Arabic number with a caption entirely in
capital letters, a section designated by two Arabic numbers and/or a caption
having initial capital letters and a paragraph designated by three Arabic
letters and/or a caption having initial capital letters, respectively. Clauses
are indicated by parenthetical lower case Arabic letters or Roman numerals.
Titles or captions in this Agreement are included only as a matter of
convenience and reference, and are in no way intended to define, limit, extend
or describe the scope of this Agreement. References to Articles, Sections,
Paragraphs and clauses in this Agreement shall be deemed references to the
Articles, Sections, Paragraphs and clauses of this Agreement unless otherwise
explicitly indicated.
2. TERM
----
2.1. Initial Term. This Agreement shall be effective upon its execution
------------
by Owner and Manager. The Initial Term of this Agreement shall be for a period
of five (5) years from the Opening Date, unless sooner terminated in accordance
with this Agreement.
2.2. Extended Term. Provided that (i) Manager is not then in Default
-------------
pursuant to
<PAGE>
the terms of this Agreement and (ii) (a) Owner has not previously notified
Manager of its intent to terminate the Agreement pursuant to Paragraph 16.1.1 or
(b) the Agreement has not otherwise been terminated pursuant to the terms of
this Agreement, then Manager shall have three (3) options to extend the Initial
Term for consecutive periods of five (5) additional years each (each such
additional five (5) year period being designated as an "Extension Period").
Subject to the foregoing conditions, if Manager gives written notice to Owner
that it has elected to exercise an option to extend the Term at least one
hundred eighty (180) days prior to the date of the expiration of the Initial
Term or an Extension Period then in effect, then this Agreement shall be
extended for an Extension Period, if any remain, upon the terms, conditions,
covenants and provisions set forth herein without the necessity of executing any
new management agreement or other instruments or agreements. If Manager does not
give written notice to Owner that it has elected to exercise an option to extend
prior to the later of (i) the beginning of such 180-day period and (ii) ten (10)
days after the receipt by Manager of a "reminder" notice from Owner that an
option to extend is about to expire, then this Agreement shall end on the
expiration of the Initial Term or then-current Extension Period, if any was
previously exercised, if not sooner terminated pursuant to the terms of this
Agreement.
2.3. Pre-Opening Conditions. The satisfaction, or waiver by Owner, of
----------------------
the following conditions (collectively, the "Pre-Opening Conditions") are
necessary preconditions to the commencement of the operation of the Business:
(i) Owner shall have obtained the Owner Operating Permits other than
those listed on Exhibit "B", if any, and all conditions thereof shall have
-----------
been satisfied;
(ii) Subject to Paragraph 17.2.1(a), Manager shall have obtained the
-------------------
Manager Operating Permits and the Owner Operating Permits listed on Exhibit "B",
-----------
if any, and all conditions to the effectiveness thereof shall have been
satisfied;
(iii) The Construction Conditions are satisfied;
(iv) Owner shall have obtained, as a cost of development of the
Project, an environmental site assessment covering the real property necessary
for the Related Amenities demonstrating to Owner's satisfaction that there is no
evidence of any hazardous or toxic material or substance which has been
generated, treated, stored, released or disposed of at the Related Amenities in
violation of any Environmental Requirements, and there is no evidence of any
violation of any other Environmental Requirements and no evidence of any
Environmental Damage on or pertaining to the Related Amenities;
(v) Owner shall have taken possession of the Riverboat and Related
Amenities and all construction and/or renovation necessary to commence operating
the Business shall have been completed; and
(vi) Owner shall have obtained all insurance coverage contemplated
in Sections 11.1 and 11.2.
------------- ----
Owner and Manager each shall use its good faith and diligent efforts to satisfy
the Pre-Opening Conditions or cooperate with the other's efforts to satisfy the
Pre-Opening Conditions as soon as reasonably practical after the date of this
Agreement.
2.4. Limited Right of Termination. In the event the Net Operating Income
-----------------------------
of the Project for four (4) consecutive fiscal quarters during the term of this
Agreement is less than eighty percent (80%) of the amount of projected Net
Operating Income as set forth in the Annual Plan for such period(s), after
adjustment for casualties or other factors beyond the
-2-
<PAGE>
reasonable control of Manager and after adjustment for factors affecting similar
businesses in the vicinity of the Project, Owner shall have the right to
terminate this Agreement upon at least sixty (60) days prior written notice to
Manager; provided that such right of termination shall expire (with respect to
prior sub-standard performance, but not as to future sub-standard performance)
if, prior to Manager's receipt of Owner's notice of termination, the Project
achieves at least eighty percent (80%) of projected Net Operating Income
(adjusted for the factors described above) for any fiscal quarter.
Notwithstanding the foregoing, within thirty (30) days after the receipt by
Manager of Owner's notice of termination, Manager may (but shall not be
obligated to) elect to pay to Owner in arrears, the amount by which eighty
percent (80%) of projected Net Operating Income (adjusted for the factors
described above) exceeded the actual Net Operating Income during such four (4)
or more consecutive fiscal quarters, in which event Owner's notice of
termination shall be deemed withdrawn and this Agreement shall remain in full
force and effect.
3. CONSTRUCTION AND TECHNICAL SERVICES
-----------------------------------
3.1. Construction Conditions. Prior to and including the Opening Date,
-----------------------
Owner and Manager shall cooperate and use all reasonable efforts to satisfy the
following conditions (collectively, the "Construction Conditions"):
(i) All Construction Permits shall have been issued or obtained;
(ii) Financial Commitments shall have been obtained for the funds
budgeted to develop, construct and/or renovate the Project and operate the
Business on terms and conditions acceptable to Owner ; and
(iii) Operator shall have delivered to Owner its certification that
it is prepared to commence operation of the Riverboat.
3.2. Owner's Obligations to Construct and Deliver. If the Construction
--------------------------------------------
Conditions are satisfied, or waived by Owner, Owner shall, at its sole expense
and with all reasonable diligence, construct, renovate, furnish, equip, outfit
and deliver the Project to Manager in accordance with the Plans and
Specifications, FF&E Specifications and the Construction Schedule and in
conformity with all applicable Laws. The Project shall be of a first class
quality.
3.3. Plans and Specifications.
------------------------
3.3.1. Owner has engaged and retained, or will engage and retain, at
Owner's sole cost and expense, such architects, engineers, contractors,
designers and other specialists as Owner deems necessary to prepare all site
plans, grading plans, construction drawings, surveys, materials, specifications,
architectural plans and drawings, elevations, construction models, engineering
plans and drawings, approved plats and all other plans, drawings, studies or
reports required for renovation, construction and/or outfitting of the Project
(the "Plans and Specifications") and for the purchase and installation of the
FF&E (the FF&E Specifications"). Owner, in consultation with Manager, shall
select the architects (the "Project Architects") and the interior designers (the
"Project Interior Designers") for the Project. The Project Architects and
Project Interior Designers shall have the technical expertise to perform the
specific services for which they are to be employed, their fee proposals shall
be consistent with the Construction Budget and they shall have the ability to
meet the time schedules contemplated in the Construction Schedule.
3.3.2. The Plans and Specifications shall be consistent in all
material respects with and based upon Owner's conceptual plans as set forth in
the Proposal and shall be
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subject to any changes necessary to meet applicable Governmental Requirements or
comply with any Related Contract. Manager shall have the right, without
limitation, to approve the Plans and Specifications with respect to (i) the
selection and layout of the FF&E and the interior design of the Project as such
relate to the conduct of Gaming Activities and (ii) the sufficiency, integrity
and specification of the security system at the Project. Manager's advice with
respect to and approval of such matters shall be given in a manner that will
assure that the time deadlines in the Construction Schedule are met, provided
Owner shall have give Manager reasonably sufficient time for such a review.
Owner and Manager acknowledge that the various Governmental Authorities have
certain approval rights over the Plans and Specifications.
3.3.3. The FF&E Specifications shall be prepared by Owner with the
advice and recommendations of Manager and shall be delivered to Manager for its
review and approval prior to the ordering of any of the items set forth therein.
Manager's advice and recommendations shall be given in a manner that will assure
that the time deadlines in the Construction Schedule are met, provided Owner
shall have given Manager a reasonably sufficient time for such a review.
3.3.4. FF&E shall (i) be consistent with the Construction Budget and
the requirements of the Loan Documents, (ii) bear the name or identifying
characteristic or logo of the Riverboat, where appropriate, (iii) be of a class
or grade generally consistent in quality and relative scope with that used at
other first class gaming operations, taking into consideration local conditions,
image and target markets of the Business, (iv) comply with all applicable Laws
and other Governmental Requirements, (v) be available in quantities required by
the FF&E Specifications and in a manner to timely meet the Construction Schedule
and (vi) satisfy the cost parameters established by the FF&E Budget
(collectively, the "FF&E Requirements"). Manager shall have the right to approve
the FF&E Requirements. Such approval shall be give in a manner that will assure
that the time deadlines in the Construction Schedule are met, provided Owner
shall have presented the FF&E Requirements to Manager in time sufficient to
allow Manager reasonable time to complete its review.
3.3.5. Any aspects of the conceptual, preliminary and final Plans
and Specifications and the FF&E Specifications which are otherwise subject to
Manager's approval shall not be changed in any material manner after approval by
Manager without the approval of Manager and shall be given in a manner that will
assure that the time deadlines in the Construction Schedule are met. Manager may
recommend, subject to Owner's approval, such further changes in the Plans and
Specifications and the FF&E Specifications as are necessary to address problems
that may arise during the period of constructing, furnishing, outfitting and
equipping the Project, subject at all times to the limitations imposed by the
Construction Budget and the FF&E Budget.
3.3.6. If requested by Owner, Manager shall purchase gaming equipment
in accordance with Section 5.4 and shall use commercially reasonable
-----------
efforts to assure that the gaming equipment is delivered and available for
installation in accordance with the Construction Schedule. Subject to Section
-------
5.4, Manager shall use its best efforts to ensure that the purchase of all
- ---
gaming equipment complies with applicable Governmental Requirements, including
without limitation, the Federal Transporting Gambling Devices Act (15 U.S.C.
Sec. 1172-73 (1962)) (the "FTGDA"). Further, Manager shall pass on to
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<PAGE>
Owner any agreements or understandings whereby Manager receives any price
concessions or reductions from suppliers of gaming equipment.
3.4. Construction Schedule. Manager will assist Owner, the Project
---------------------
Architects and the Project Interior Designers during the preparation of a
construction schedule with respect to the completion of the Plans and
Specifications and coordination and completion of all phases of the construction
and/or renovation and equipping of the Project (the "Construction Schedule").
3.5. INTENTIONALLY DELETED.
3.6. Technical Services. From the date hereof until the Opening Date,
------------------
Manager, either directly or through one or more of its Affiliates, in a manner
consistent with the scheduling requirements imposed by the Construction
Schedule, shall provide on behalf of and for the account of Owner the technical
services described in Paragraphs 3.6.1 through 3.6.7 (collectively, the
---------------- -----
"Technical Services"), subject to the conditions and limitations provided in
this Agreement:
3.6.1. Manager will provide Owner with specific operational and
functional criteria for the Business for use by the Project Architects and the
Project Interior Designers in the preparation of the Plans and Specifications
and the FF&E Specifications;
3.6.2. Manager will consult with Owner in the preparation and
evaluation of (i) the construction and/or renovation budget for the Project (the
"Construction Budget"), which shall include a breakdown of estimated costs of
construction, specialty finishes and professional fees and (ii) the FF&E budget
(the "FF&E Budget"), which shall include a breakdown of the estimated costs of
each item of FF&E;
3.6.3. Manager shall advise and consult with Owner and the Project
Architects in the development of schematic, preliminary and working Plans and
Specifications and the Project Interior Designers in the selection and
specification of FF&E, wall and floor coverings, design and color, wall
hangings, signage, art, accouterments, space planning requirements and
functional design criteria and all other aesthetic and operational elements of
design and other nonstructural elements of the Project related to the Business;
3.6.4. Manager shall advise and consult with Owner, the Project
Architects and the Project Interior Designers regarding various key systems,
including without limitation, mechanical, electrical, plumbing and life safety;
3.6.5. Manager shall advise and consult with Owner in all operational
and all functional requirements of the Business including without limitation,
recreational and gaming areas, food facilities layout and equipment, and such
other areas as management information systems, energy, signage, lighting, sound,
communications, laundry, housekeeping, maintenance, personnel, data processing
equipment and software, point of sale systems, surveillance and security
systems, marketing and entertainment;
3.6.6. Manager shall review, critique and make recommendations to
Owner, the Project Architects and the Project Interior Designers in the
selection, purchase and ordering of the FF&E and the installation and layout of
the FF&E in accordance with the FF&E Requirements, FF&E Specifications and the
Plans and Specifications; and
3.6.7. Manager shall use commercially reasonable efforts to
coordinate with Owner's construction manager during all phases of the
construction and/or renovation of the Project with respect to providing the
Technical Services as described in Paragraphs 3.6.1 through 3.6.6 so as to allow
---------------- -----
the construction and/or renovation of the Project to progress in
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<PAGE>
accordance with the Construction Schedule. Owner and Manager acknowledge and
agree that many of the Technical Services may be performed, at least in part, by
Owner's employees and consultants under Manager's supervision or by other
persons the expense for which shall be Owner's under Section 6.1.
-----------
3.7. Opening the Project. The Project shall be opened to the public on
-------------------
a date established by mutual agreement of Manager and Owner upon satisfaction of
the following: (i) the Project Architects have issued to Owner a certificate
(s) of substantial completion confirming that the Project has been substantially
completed in accordance with the Plans and Specifications, (ii) the Project
Interior Designers have issued to Owner a certificate(s) of substantial
completion confirming that the FF&E has been substantially installed and laid
out therein in accordance with the FF&E Specifications and the Plans and
Specifications, (iii) Pre-Opening Conditions shall have been satisfied, or
waived by Owner, (iv) the Working Capital necessary to commence operation of the
Business has been furnished by Owner, (v) Manager is satisfied that all
operational systems have been adequately tested on a "dry-run" basis to the
satisfaction of Manager and any appropriate Governmental Authorities, (vi)
Operator has conducted a "shake down" of the Riverboat operating and life safety
systems and (vii) all other Governmental Requirements necessary to open, occupy
and operate the Business at the Riverboat and Related Amenities have been
satisfied, including without limitation, issuance of American Bureau of Shipping
Certificates and any registration or license required by the United States Coast
Guard. Manager shall use commercially reasonable efforts in the performance of
its duties under this Agreement to assist Owner and Operator in achieving the
satisfaction of all of the foregoing requirements by the Estimated Opening Date.
4. PRE-OPENING PHASE
-----------------
4.1. Pre-Opening Services. Prior to the Opening Date, Manager, as agent
--------------------
of Owner, shall perform or cause others to perform the following services (in
addition to the Technical Services) on behalf of and for the account of Owner
(the "Pre-Opening Services"), subject to the Pre-Opening Budget. Owner and
Manager acknowledge and agree that, in accordance with the Pre-Opening Plan,
many of the Pre-Opening Services will be performed by Owner's employees,
Manager's employees chargeable to Owner pursuant to Section 6.1 and consultants
-----------
under Manager's supervision chargeable to Owner pursuant to Section 6.1. To the
-----------
extent required for Manager to exercise its duties under Article 4, Manager and
---------
Operator shall cooperate with each other in the preparation of the various plans
and budgets required hereby.
4.1.1. No later than 120 days before the Estimated Opening Date,
Manager shall present to Owner for Owner's approval, a preliminary Pre-Opening
Plan in the form attached hereto as Exhibit "C". The preliminary Pre-Opening
-----------
Plan will be a first draft of Manager's plan and schedule for implementing and
performing the Pre-Opening Services and will include the preliminary projected
cost of performing the Pre-Opening Services as well as the budgeted expenses to
be incurred by Operator in accordance with the Vessel Operating Agreement prior
to the Opening Date (the "Pre-Opening Budget").
4.1.2. No later than 120 days before the Estimated Opening Date,
Manager shall develop and present to Owner for Owner's approval a preliminary
budget based upon the projected monthly operations of the Business for the first
year of operation which shall include the budgeted expenses to be incurred by
Operator in accordance with the Vessel
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<PAGE>
Operating Agreement in connection with Operator's operation of the Riverboat as
a passenger vessel for such periods (the "Operating Budget"). The budget format
to be used is set forth in Exhibit"D" attached hereto.
---------
4.1.3. No later than 60 days before the Estimated Opening Date,
Manager shall prepare and submit to Owner for Owner's approval, (i) a revised
Pre-Opening Plan setting forth the remaining Pre-Opening Services to be
performed by Manager and the Pre-Opening Budget and (ii) an adjusted preliminary
Operating Budget for the first year of operation of the Business and the
Riverboat as a passenger vessel and as a dockside gaming operation (law
permitting) based upon the most current market information.
4.1.4. All Pre-Opening Plans shall be subject to the same revision
procedures as are applicable to Annual Plans.
4.1.5. No later than forty-five (45) days prior to the Estimated
Opening Date, Manager shall prepare and deliver to Owner for Owner's approval,
the Annual Plan for the first Fiscal Year of Business operations.
4.1.6. Manager shall implement the marketing portion of the approved
Pre-Opening Plan, including but not limited to, direct sales, media and direct
mail advertising, promotion, publicity and public relations designed to attract
customers to the Riverboat from and after the Opening Date in accordance with
the provisions of Section 6.14.
------------
4.1.7. Manager, in its discretion, shall recruit, hire, orient and
train all Senior Staff and Employees, including all such personnel to be
utilized during the period from the date hereof until the Opening Date in
accordance with the preliminary Pre-Opening Plan approved by Owner pursuant to
Paragraph 4.1.1 and the requirements of Article 6 below; provided however, if so
- --------------- ---------
requested by Owner on a case by case basis, Manager shall consult with Owner
prior to hiring a Senior Staff member.
4.1.8. Subject to Article 6, Manager shall negotiate and execute
---------
agreements regarding concessions for services to be performed or provided at the
Project.
4.1.9. Manager shall use commercially reasonable efforts in applying
for, processing and procuring all Manager Operating Permits and in assisting
Owner in applying for, processing and procuring all Owner Operating Permits
within the timetables established by the Pre-Opening Plan as revised from time
to time.
4.1.10. Subject to Article 6, Manager shall, after consultation with
---------
Owner and/or Owner's designated consultants, negotiate and execute service
contracts for the Business. Service Contracts shall contain the following
minimum provisions: (a) a statement as to whether contractee is a certified
minority business enterprise, woman owned business enterprise, or disadvantaged
business enterprise; (b) requirements for licensing (if necessary) before the
Louisiana Riverboat Gaming Enforcement Division; and (c) a requirement that if
contractee is found unsuitable by the Louisiana Riverboat Gaming Enforcement
Division that the contract becomes null and void.
4.1.11. Manager shall use its best efforts to ensure that all
service contractors comply with the Community Commitment Program.
4.1.12. Manager shall, after consultation with Owner and/or Owner's
designated Consultants, purchase all Operating Supplies necessary to operate the
Business from Approved Vendors with funds furnished by Owner in accordance with
the amounts allocated therefor in the Pre-Opening Budget and any applicable
requirements of the Community Commitment Program. Manager shall advise and
consult with Owner with
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<PAGE>
respect to the inaugural ceremonies for the Business and plan and implement such
ceremonies.
4.2. Approval by Owner. With respect to the preparation and submission
-----------------
of the Pre-Opening Plan, the Pre-Opening Budget and the Operating Budget, Owner
will meet with Manager within fifteen (15) days after the delivery of each of
such items for an in-depth review, including a discussion of the Construction
Schedule, marketing strategy, operations format and rationale for proposed
expenditures embodied in the Pre-Opening Plan, the Pre-Opening Budget and the
Operating Budget. Owner shall be required to approve or disapprove the Pre-
Opening Plan or the applicable Budget within fifteen (15) days after the date
Owner and Manager last meet to discuss such matter by giving written notice to
Manager. The parties shall use all reasonable efforts to complete the review no
later than forty-five (45) days after the initial delivery of the applicable
Plan or Budget. Any notice that disapproves a Pre-Opening Plan, Pre-Opening
Budget or Operating Budget must contain reasonably detailed specific objections
along with suggestions as to what corrective measures can be taken to make the
Plan or Budget acceptable to Owner. If Owner fails to provide written notice to
Manager of its objections within fifteen (15) days after the last meeting
between Owner and Manager, such proposed Plan or Budget, as the case may be,
shall be deemed to be approved as submitted. Owner may review the Operating
Budgets on a line-by-line basis. If Owner disapproves or objects to any items
contained in any Operating Budget or any revisions thereto, Owner and Manager
shall cooperate with each other in good faith to attempt to expeditiously
resolve the disputed or objectionable proposed items. If Owner and Manager are
unable to reach a mutually acceptable agreement concerning the disputed or
objectionable item within fifteen (15) days after the date Owner advises Manager
of its objections as aforesaid, either party shall be entitled to submit the
dispute to arbitration in accordance with Article 22. Notwithstanding Owner's
----------
approval of an Operating Budget, the Pre-Opening Budget, an Annual Capital
Replacements Budget or an Annual Riverboat Replacements Budget, on a line-by-
line basis, Manager shall have the right in its discretion from time to time to
adjust the amount of any line item and/or to reallocate funds among the various
line items within any such Budget, including without limitation, the allocation
and reallocation of contingency funds to specific line items; provided however,
that any reallocation of funds among various line items in an Annual Capital
Replacements Budget or an Annual Riverboat Replacements Budget in excess of
fifteen percent (15%) of the amount theretofore allocated to the line items(s)
to which funds are being reallocated shall require Owner's approval; provided
further, that any increase in a line item of the Pre-Opening Budget or an
Operating Budget in excess of fifteen percent (15%), or any aggregate increase
in the Pre-Opening Budget or such Operating Budget in excess of ten percent
(10%) shall require the prior approval of Owner.
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<PAGE>
4.3. Payment of Pre-Opening Expenses.
-------------------------------
4.3.1. Source of Funds. All costs and expenses properly incurred in
---------------
connection with implementing the Pre-Opening Plan, as revised from time to time
pursuant to Section 4.2 (the "Pre-Opening Expenses"), shall be paid from the
-----------
Bank Accounts. Pre-Opening Expenses and the time schedule for incurring such
expenses shall be established in the Pre-Opening Budget and Pre-Opening Plan
approved in accordance with the provisions of Section 4.2. Owner shall timely
-----------
deposit such sums in accordance with the schedules as shall be established in
the Pre-Opening Plan or any revisions thereof and Owner shall maintain
sufficient funds therein to pay all Pre-Opening Expenses in accordance with
monthly schedules to be prepared by Manager and submitted to Owner.
4.3.2. Expenditures in Excess of Budgets. Manager shall not incur
---------------------------------
any expenses or make any disbursements that are not provided for in, or are in
excess of, the Pre-Opening Budget, without Owner's prior written consent except
as otherwise provided in Section 4.2.
-----------
4.4. Manager Advances. Manager may, but is not required to, advance
----------------
funds to pay Pre-Opening Expenses on behalf of Owner. All such Pre-Opening
Expenses advanced by Manager shall be itemized, scheduled and submitted to Owner
on a calendar month basis and reimbursement shall be made by Owner or by Manager
from the Bank Accounts, within ten (10) Business Days after such submission
provided that Manager has timely supplied Owner with such documentation of the
advances as Owner may reasonably require.
5. APPOINTMENT OF MANAGER
----------------------
5.1. Appointment. Owner hereby appoints, hires and employs Manager, as
-----------
Owner's exclusive agent, to manage and operate the Project, including all
Business conducted thereon or related thereto, on behalf of and for the account
of Owner during the Term in accordance with the terms, conditions, covenants and
provisions of this Agreement. In addition, Owner hereby appoints, hires and
employs Manager, as Owner's exclusive agent, to perform on Owner's behalf,
Owner's duties and obligations and exercise Owner's rights (including without
limitation, the exercise of any rights arising out of or relating to any breach
or default by Operator) under the Vessel Operating Agreement on and after the
Opening Date except as may be otherwise specifically set forth therein. Manager
acknowledges that the operation of the Riverboat as a vessel will be conducted
by the Operator, which shall be Owner's agent in that regard. Manager hereby
accepts such appointment upon and subject to the terms, conditions, covenants
and provisions set forth herein and in the Vessel Operating Agreement and
recognizes that a relationship of trust and confidence with Owner is created by
this Agreement. Manager agrees to execute its duties hereunder in the best
interest of Owner, subject to the budgetary limitations imposed upon Manager and
any applicable Governmental Requirements.
5.2. Management of the Business. Manager shall use commercially
---------------------------
reasonable efforts to supervise, manage, direct and operate the Business and
perform its duties hereunder consistent with the operational quality of other
first class gaming establishments, after taking into account differences with
respect to local conditions, budgeting limitation and the nature of the
Business' market, as well as the limitations imposed upon Manager by this
Agreement (including without limitation, items (i) through (vii) below), and any
applicable Governmental Requirements in (i) a manner that promotes the long-
term profitability of the Business, (ii) compliance with this Agreement and any
Governmental Requirements, (iii)
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<PAGE>
accordance with the terms and conditions of any Loan Documents, (iv) accordance
with the requirements of any carrier of insurance on the Business or the Project
or any part thereof , (v) a manner that will comply with the Community
Commitment, (vi) compliance with the applicable Annual Plan and Operating
Guidelines and (vii) in accordance with the practices necessary to operate the
Riverboat as a passenger vessel (all of the foregoing being hereinafter
collectively referred to as the "Operating Goals"); provided however, that in no
event shall Manager or any Affiliate be deemed a guarantor of the success of the
Business and/or the achievement of the Operating Goals.
5.3. Community Commitment. Manager acknowledges that the Proposal
--------------------
includes a commitment for the Owner (the "Community Commitment") to comply with
the program to be developed by the Commission and Owner regarding the Community
Commitment Program (the "Community Commitment Program") in the construction,
planning, development and operation of the Project and the Business. Manager,
in accepting its appointment under Section 5.1, hereby agrees to use its best
-----------
efforts to perform its obligations under this Agreement in a manner that
complies in all material respects with the Community Commitment Program.
Manager acknowledges that the Community Commitment Program includes a
requirement that at least eighty percent (80%) of those employed at the Project
or in the Business must be residents of the State of Louisiana. The Manager
shall use its best efforts to work and cooperate with Owner's representatives
responsible for the implementation of the Community Commitment Program on behalf
of the Owner.
5.4. Purchasing.
----------
5.4.1. Approved Vendors. Manager, in its sole discretion, but after
----------------
consultation with Owner and/or Owner's designated consultants, shall have the
right to specify, from time to time, individuals, manufacturers, wholesalers,
vendors, suppliers, firms or businesses, including without limitation, Persons
who may be Affiliates of Manager, that shall be used by Manager to furnish or
provide supplies, equipment, services and other needs of the Business (the
"Approved Vendors"). The Approved Vendors must: (i) not adversely affect any
gaming license currently held or to be obtained by Owner, Manager or any of
their respective Affiliates or any of their respective officers or directors in
Louisiana or any other jurisdiction and must comply with all Governmental
Requirements, including without limitation the Community Commitment Program and
(ii) be covered by appropriate insurance, if any, in connection with their
provision of goods or services to the Business.
5.5. Contracts and Expenses. Manager is authorized to, and shall, make,
----------------------
enter into and perform, in the name of, for the account of, on behalf of, and at
the expense of Owner, any contracts and agreements provided for under this
Agreement and each Annual Plan, so long as Manager has complied with all
material requirements of this Agreement with respect to such contracts and
agreements. These contracts shall have the following minimum terms: a) a
requirement that in the event the contractor is found unsuitable by the
Riverboat Gaming Enforcement Division, the contract would become null and void;
b) a statement as to whether the contractor is a certified minority business
enterprise, woman owned business enterprise, or disadvantaged business
enterprise. Unless this Agreement expressly provides for an item or service to
be at Manager's own expense, all costs and expenses reasonably incurred by
Manager or an Affiliate of Manager in accordance with this Agreement and/or an
Annual Plan shall be for and on behalf of Owner and for Owner's account.
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<PAGE>
5.6. Owner's Representative.
----------------------
5.6.1. Appointment, Duties and Access. Owner shall have the right
------------------------------
to designate by written notice to Manager a representative of Owner (the person
so designated is referred to herein as "Owner's Representative"), which may or
may not be the same person(s) referred to in Section 23.1. An office for Owner
------------
(which office may be used by AEC and/or CCLI only for Project - related office
purposes) may be maintained at the Related Amenities in the same area(s) in
which the Senior Staff maintains its offices. Subject to Governmental
Requirements, Owner's Representative shall have access to all areas of the
Project at all times and shall have access to, and the right to review, the
Books and Records. Manager and the Senior Staff shall cooperate with Owner's
Representative to provide such information and access as Owner's Representative
may request from time to time. Owner's Representative shall not interfere with
Manager's conduct of the Business.
5.6.2. Approval/Removal. Prior to appointment of Owner's
----------------
Representative by Owner, Owner shall submit to Manager the resume of such
individual and Manager shall have the right to interview such person prior to
such individual being appointed as Owner's Representative. If Manager objects
to the performance of the Owner's Representative, Manager shall notify Owner of
such objection and Owner shall meet with Manager with respect to such objection.
Subject to compliance with applicable General Laws, Owner shall take such steps
as Manager may reasonably request with respect to the Owner's Representative
that are reasonably necessary to satisfy Manager's objections. Owner may advise
Manager in writing that Owner's Representative is authorized to grant certain
consents and approvals pursuant to this Agreement on Owner's behalf. Owner
shall have the right to replace Owner's Representative from time to time by
written notice to Manager.
6. CERTAIN SPECIFIC AUTHORITIES AND RESPONSIBILITIES OF MANAGER.
------------------------------------------------------------
6.1. Personnel Matters. Manager shall have the authority and
-----------------
responsibility, acting through the Senior Staff, appropriate consultants and the
Employees, to perform or to cause Affiliates of Manager to perform the following
acts for the account and at the cost of Owner, subject to Section 6.3 and
-----------
sufficient Owner funds being available. The cost of employing such Employees
and consultants shall be chargeable to Owner. If any such Employee or
consultant is an employee of Manager or an Affiliate of Manager, such Employee
or consultant may continue on the payroll of Manager or such Affiliate and may
retain all the benefits of such employment; provided, however, that Manager or
such Affiliate shall be reimbursed on a monthly basis from Owner's account for
the compensation (including direct and indirect labor burden) attributable to
such Employee or consultant (or an equitable portion thereof if such Employee or
consultant devotes less than full-time to the Business). With respect to
departmental services provided by Manager and/or its Affiliates, including
without limitation, accounting, bookkeeping, computer services and management
information and similar central office services, such services shall be provided
to the Project at a cost to Owner not to exceed the reasonable direct costs
incurred by Manager or such Affiliate(s) in providing such services.
6.1.1. Recruitment. Manager shall establish and implement
-----------
effective procedures, techniques and programs, consistent with the Operating
Goals (including specifically, the Community Commitment Program with respect to
which Manager shall use commercially reasonable efforts to comply), to screen,
evaluate, hire, orient and train qualified applicants to become Employees,
including without limitation (if and to the extent
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<PAGE>
Manager deems it necessary or desirable to fill any such position) the
department managers, marketing manager, general coordinator, government
relations manager, legal and compliance officers, public relations manager, slot
operations manager, credit manager and credit executives, casino cage personnel,
service personnel, internal audit personnel, purchasing personnel, management
information services personnel, security and surveillance personnel, casino
hosts, shift managers, pit bosses, floormen, boxmen, dealers, maintenance,
cleaning and engineering staffs. Manager shall have the sole authority to hire,
promote, discharge, and supervise all Employees; shall in all material respects
comply with all applicable federal and state employment laws and regulations,
including but not limited to the Community Commitment Program and the "Equal
Employment Opportunity" laws and regulations. Manager shall use its best efforts
to comply with all Governmental Requirements, including the, Community
Commitment Program regarding the employment and payment of Employees.
6.1.2. Manager's Personnel Decisions. (a) Prior to Manager's
-----------------------------
employment of the chairman, president/general manager, vice president/casino
manager, general counsel, chief of security and vice president/chief financial
officer or any other vice president (or the equivalent of a vice president) and
any officer above a vice president (collectively, the "Senior Staff"), Manager
shall submit to Owner the resumes of such individuals and Owner shall have the
right to consult with Manager regarding each of such individuals prior to such
individuals being hired for the Business; provided, however, that in all events,
all hiring decisions, including without limitation the hiring and firing of
Senior Staff, shall be made by Manager, in its sole discretion.
(b) Manager shall promptly notify Owner of any actual or
contemplated changes in any of the Senior Staff and shall comply with the
requirements of this Paragraph 6.1.2 with respect to any replacements of such
---------------
Senior Staff.
(c) The compensation structure, incentive plans, benefit
plans and programs for Employees as well as the Senior Staff employed by Owner
shall comply with the Operating Goals, the applicable Annual Operating Budget
and shall be formulated in consultation with Owner. In any event, expenses and
costs pertaining to the employment of the Senior Staff, including without
limitation, affiliate incentive and stock plans, severance pay and the costs of
retirement benefits pertaining to such individuals, shall be Operating Expenses
and reimbursed to Manager on a monthly basis. If any such Senior Staff is an
employee of Manager or an Affiliate of Manager, such Senior Staff may continue
on the payroll of Manager or such Affiliate and may retain all benefits of such
employment; provided however, that Manager shall be reimbursed, as aforesaid,
for such expenses and costs attributable to such individuals (or an equitable
portion thereof if any such individual devotes less than full time to the
Business).
6.1.3. Operator Training of Employees. To the extent required by
------------------------------
any Governmental Requirement, Manager agrees to cooperate with Operator should
Operator be required to train any and all Employees in procedures necessary to
operate the Riverboat as a vessel and to ensure the safety of Riverboat patrons.
6.1.4. Union Contracts. Manager and Owner shall join in
---------------
negotiations with any labor union lawfully entitled to represent any of the
Employees. After execution by Owner, all decisions regarding implementation and
enforcement of union contracts applicable to any of the Employees at the
Riverboat and/or Related Amenities shall be made by
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<PAGE>
Manager in its sole discretion; however, Manager shall consult with Owner and
keep Owner informed with respect to such matters.
6.1.5. Payroll Checks. Payroll checks for all Employees shall be
--------------
in a form, contain such identifications and be signed by persons specified by
Owner.
6.2. Financial Management. Manager shall be responsible for the
--------------------
management of the day-to-day financial affairs of the Business.
6.3. Annual Plans. No later than sixty (60) days prior to the end of
------------
each Fiscal Year, Manager shall submit to Owner, after consultation with
Operator regarding any Riverboat Replacements and other matters related to the
operation of the Riverboat as a passenger vessel, for Owner's approval, an
annual plan for the operation of the Business for the forthcoming Fiscal Year
(each such annual plan is referred to herein as an "Annual Plan"). Each
proposed Annual Plan shall consist of the following:
(i) An annual marketing plan ("Annual Marketing Plan"). Such
marketing programs may include but not be limited to, direct sales, direct mail
and media advertising, promotion, public relations and publicity efforts;
(ii) An annual line item operating budget ("Annual Operating
Budget"); provided however, that Manager shall have the right in its discretion
from time to time to adjust the amount of any line item and/or to reallocate
funds among the various line items, including without limitation, the allocation
and reallocation of contingency funds to specific line items; provided however,
that any such adjustment of amounts or reallocation of funds which results in
the increase of a line item by more than fifteen percent (15%) or any aggregate
increase in such Annual Operating Budget by more than ten percent (10%) shall
require the approval of Owner;
(iii) An annual projection of sources and uses of cash by month; and
(iv) An annual capital expenditures budget regarding Capital
Replacements ("Annual Capital Replacements Budget") and an annual capital
expenditures budget regarding Riverboat Replacements ("Annual Riverboat
Replacements Budget").
6.3.1. Preparation of Annual Plan. Each proposed Annual Plan
--------------------------
shall be prepared by Manager based on the actual and projected results of the
current Fiscal Year, the standard of maintaining the Riverboat and the Related
Amenities and operating the Business as a first class gaming establishment, the
Operating Goals, information with respect to possible occurrences which may
impact the marketing and/or operating of the Business in the future, changes
from the previous Fiscal Year's results, reasonable predictions for the future
and such other information and assumptions that shall be reasonable under the
circumstances. The Annual Plan shall include sufficient amounts for maintenance
and repairs to keep the Riverboat and the Related Amenities in a seaworthy and
first class condition which shall mean that it shall be in keeping with the
standards and requirements of the U.S. Coast Guard and other government
authorities with jurisdiction over this vessel.
6.3.2. Review and Approval. In connection with the preparation and
-------------------
submission of a proposed Annual Plan, Owner will meet with Manager within
fifteen (15) days after delivery of the proposed Annual Plan for an in-depth
review, including a discussion of the marketing strategy, operations format and
rationale for proposed expenditures embodied in the proposed Annual Plan. Owner
shall be required, by giving written notice to Manager, to approve or disapprove
each proposed Annual Plan within fifteen (15) days after the date Owner and
Manager last meet to discuss the proposed Annual
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<PAGE>
Plan. The parties shall use all reasonable efforts to complete the review of the
proposed Annual Plan no later than forty-five (45) days after the initial
delivery of the proposed Annual Plan to Owner. Any notice that disapproves a
proposed Annual Plan must contain reasonably detailed specific objections along
with suggestions as to what corrective measures can be taken to make such
proposed Annual Plan acceptable to Owner.
6.3.3. Disagreements Regarding Annual Plans. If Owner fails to
------------------------------------
provide written notice to Manager of its objections within fifteen (15) days
after the last meeting between Owner and Manager, such proposed Annual Plan
shall be deemed to be approved as submitted, subject to any changes upon which
Owner and Manager have previously agreed. If Owner disapproves or objects to
any items contained in the proposed Annual Plan or any revisions thereto, Owner
and Manager shall cooperate with each other in good faith to attempt to
expeditiously resolve the disputed or objectionable proposed items. If Owner
and Manager are unable to reach a mutually acceptable agreement concerning the
disputed or objectionable items within fifteen (15) days after the date Owner
advises Manager of its objections as aforesaid, either party shall be entitled
to submit the dispute to arbitration in accordance with Article 21. If Owner's
----------
objections relate only to certain portions of the proposed Annual Plan or a
Budget contained therein, the undisputed portions of the proposed Annual Plan
shall be deemed to be adopted and approved and only those Budgets under dispute
shall be submitted to arbitration. Notwithstanding the foregoing, in the event
of any transfer of ownership of the Project or in the event of any change in
Control of Owner, then, from and after the effective date of any such transfer
or change, regarding elements of the Annual Plan other than Budgets, Manager
shall consult with Owner and shall consider Owner's comments and/or objections,
but Manager's decisions regarding such matters shall be controlling and final,
and not subject to arbitration or other dispute-resolution mechanisms. Any
disagreements regarding Budgets for Riverboat Replacements shall be resolved by
Operator and Owner in the manner set forth in the Vessel Operating Agreement;
provided however, that such Budgets shall in all events be acceptable to
Manager.
6.3.4. Disagreements Regarding Annual Operating Budgets. With
------------------------------------------------
respect to objectionable items in any Annual Operating Budget, pending
resolution by arbitration or other agreement between Owner and Manager, the
corresponding item contained in the Annual Operating Budget for the preceding
Fiscal Year shall be substituted in lieu of the disputed portions of the
proposed Annual Operating Budget, excluding, however, line items in the previous
Annual Operating Budget for extraordinary expenses or revenues. In any instance
where a portion of an Annual Operating Budget from a preceding Fiscal Year is
deemed to be applicable to the Annual Operating Budget in effect until a new
Annual Operating Budget is fully approved, corresponding items contained in the
Annual Operating Budget for the preceding Fiscal Year shall be automatically
adjusted by a percentage equal to the percentage change in the Consumer Price
Index during the preceding Fiscal Year. Such calculation of percentage change
in the Consumer Price Index shall be made by Manager based upon the then most
recently published Consumer Price Index data at the time the calculation is
made.
6.3.5. Disagreements Regarding Annual Capital Replacements Budgets.
-----------------------------------------------------------
If Owner and Manager are unable to agree on the amount of any item in an Annual
Capital Replacements Budget, or Manager and Operator are unable to agree on the
amount of any item in an Annual Riverboat Replacements Budget, only those
capital expenditures with
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<PAGE>
respect to which Owner and Manager or Manager and Operator, as appropriate, have
reached an agreement (or the undisputed portion of an amount in dispute) that
are approved by Owner or are required to be made by Lender or any Governmental
Authority shall be made until Owner and Manager or Manager and Operator, as
appropriate, otherwise agree on the terms of such Annual Capital or Riverboat
Replacements Budget or the matter is decided by arbitration. The applicable
Annual Plan will be appropriately adjusted to reflect the effect of any delay in
capital expenditures.
6.3.6. Manager's Discretion Regarding Budgets. Except as otherwise
--------------------------------------
provided in Sections 4.2, 6.12 or 6.13, Manager shall not, without Owner's prior
------------------ ----
written consent, expend for a matter in any Fiscal Year more than the amount
approved for such matter included in the Budget for such Fiscal Year unless
otherwise permitted by Sections 6.5. Except as otherwise permitted by Section
------------ -------
6.5, any request by Manager to make any expenditure or incur any obligation in
- ---
excess of an amount set forth in a Budget contained in the applicable Annual
Plan, shall be submitted to Owner in writing with an explanation of and
accompanied by supporting information for the request; Manager shall not make
any such excess expenditure without Owner's prior written consent. Owner shall
respond to any request within fifteen (15) days after the receipt thereof.
6.4. Capital and Riverboat Replacements Funds.
----------------------------------------
6.4.1. Capital Replacements. Manager shall have the responsibility
--------------------
and sole authority to plan, contract for, account for and supervise all capital
replacements and improvements to the Related Amenities or any portion thereof
and the gaming-related portion of the Riverboat (collectively, "Capital
Replacements") that are contemplated in any approved Annual Plan. Any changes
in the structure or layout of the Related Amenities and the gaming-related
portions of the Riverboat shall comply with the requirements of any Lender,
Related Contract or any Governmental Requirements.
(i) Manager shall diligently supervise the general contractor or
other Person responsible for performing the Capital Replacements. To the extent
the proposed Capital Replacements will have a material adverse effort on the
operation of the Business during the performance of the work, the plans and
specifications applicable thereto shall comply with the applicable Annual Plan,
Lender's requirements and applicable Governmental Requirements.
(ii) Manager shall establish on the books of the Business, a separate
interest-bearing account in Owner's name at a bank selected by Owner in which to
deposit the amounts described below for Capital Replacements (the "Capital
Replacements Fund"), with Manager's designees being authorized signatories on
such account. Such designees shall be covered by the fidelity insurance referred
to in Paragraph 11.1(v). After occurrence of an Event of Default by Manager,
-----------------
Owner shall have the right, upon five (5) Business Days written notice to
Manager, to assume sole control of the Capital Replacements Fund. Commencing on
the first day of the thirteenth (13th) full calendar month after the Opening
Date, Manager shall deposit into the Capital Replacements Fund from Business
operations or from other assets which Owner shall make available to Manager, an
amount equal to two and one-half percent (2.5%) of Gross Revenue or such amount
as is otherwise approved from time to time in an Annual Operating Budget, to pay
for Capital Replacements. Subject to the availability of funds for such purpose,
such deposits shall be made by Manager monthly on the first day of each month
and the aggregate deposit shall be adjusted within five (5) days of
-15-
<PAGE>
the end of each Fiscal Year to equal two and one-half percent (2.5%) of Gross
Revenue (or such other amount as shall have been approved in the Annual
Operating Budget) for such Fiscal Year. The funds in the Capital Replacements
Fund shall be utilized first for any necessary repairs and replacements to the
Related Amenities and FF&E and then for improvements. In the event that Gross
Revenue in any month is insufficient, after paying Operating Expenses, to permit
a deposit to the Capital Replacements Fund, the amount of the deficiency shall
be carried over and added to the amount to be deposited in the Capital
Replacements Fund in the next succeeding months, subject however, to Section
6.4.3. To the extent available, expenditures shall be made by Manager from the
Capital Replacements Fund (including accrued interest and unused accumulation
from earlier years). Any amounts remaining in the Capital Replacements Fund at
the close of each Fiscal Year shall be carried forward and retained in the
Capital Replacements Fund until fully used in accordance with this Agreement. To
the extent the balance in the Capital Replacements Fund is insufficient at the
time expenditures are planned to be made in accordance with an Annual Plan,
Owner shall supply such shortfall by making a deposit into the Capital
Replacements Fund or making payments for such expenditure directly as soon as
practicable but in no event later than thirty (30) days after receipt of notice
from Manager.
(iii) Notwithstanding the foregoing, Manager shall not make cash
deposits from Business operations into the Capital Replacements Fund, and shall
withdraw any funds in the Capital Replacements Fund at Owner's request, if: (a)
Owner is able to demonstrate, to Manager's reasonable satisfaction, that funds
in an amount equal to that which would otherwise be deposited in the Capital
Replacements Fund are available to Owner on a timely basis from a third party;
(b) during the twelve (12) months preceding the deposit to which Owner objects
and during the succeeding twelve (12) months there is projected to be, cash flow
from operations of the Business after payment of Debt Service, taxes , Base
Management Fee and Operator Fee in an amount at least equal to the amount
projected to be deposited in the Capital Replacements Fund in accordance with
the applicable Annual Capital Replacements Budget in the next twelve (12)
months; or (c) the balance in the Capital Replacements Fund presently equals or
exceeds one hundred ten percent (110%) of the amount budgeted for Capital
Replacements in the applicable Annual Capital Replacements Budget at any time
during a Fiscal Year (after taking into consideration Capital Replacements
scheduled for such Fiscal Year which are in process or have not yet been
undertaken). Any amounts withdrawn from the Capital Replacements Fund by
Manager at Owner's request shall be payable to or at the direction of Owner.
(iv) All net proceeds from the disposition of capital items no
longer needed for the operation of the Business (other than the Riverboat and
the items on the Riverboat essential to the operation of the Riverboat as a
vessel) shall be deposited into the Capital Replacements Fund. The disposition
of such items shall be conducted by Manager in a commercially reasonable manner.
6.4.2. Riverboat Replacements. Manager shall have the
----------------------
responsibility and sole authority, on Owner's behalf, to cause Operator to plan,
contract for, account for and supervise all capital replacements and
improvements to the Riverboat as a passenger vessel (collectively, "Riverboat
Replacements") that are contemplated in any approved Annual Plan. Except as
provided in the Vessel Operating Agreement, Manager shall have the right to
approve plans and specifications, select architects, engineers, general
contractors,
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<PAGE>
subcontractors, interior designers, suppliers and materialmen with respect to
Riverboat Replacements (taking into consideration any applicable requirements of
the Community Commitment Program and the criteria set forth in Section 5.4 with
-----------
respect to which Manager shall use commercially reasonable efforts to comply)
and in such event Manager shall be required to cause Operator to contract with
(or require the general contractor, if applicable, to contract with) those
persons or entities selected by Manager.
(i) Manager shall have the right to approve the plans and
specifications for any Riverboat Replacements and Manager shall use commercially
reasonable efforts to ensure that such Riverboat Replacements are installed in a
good workmanlike manner in accordance with such approved plans and
specifications.
(ii) Manager shall or cause Operator to diligently supervise the
general contractor or other Person responsible for performing the Riverboat
Replacements. To the extent the proposed Riverboat Replacements will have a
material adverse effect on the operation of the Business during the performance
of the work, the plans and specifications applicable thereto shall comply with
the applicable Annual Plan, Lender's requirements and applicable Governmental
Requirements.
(iii) Manager shall establish a separate interest-bearing account in
Owner's name at a bank selected by Owner in which to deposit the amounts
described below for Riverboat Replacements (the "Riverboat Replacements Fund"),
with Manager's designees being authorized signatories on such account.
Commencing on the first date of the thirteenth (13th) full calendar month after
the Opening Date, Manager shall deposit into the Riverboat Replacements Fund
from Business operations or from other assets which Owner shall make available
to Manager, an amount equal to one percent (1%) of Gross Revenue or such amount
as is otherwise approved from time to time in an Annual Operating Budget, to pay
for Riverboat Replacements. Such deposits shall be made by Manager monthly on
the first day of each month and the aggregate deposit shall be adjusted within
thirty (30) days of the end of each Fiscal Year to equal one percent (1%) of
Gross Revenue (or such other amount as shall have been approved in the Annual
Operating Budget) for such Fiscal year. The funds in the Riverboat Replacements
Fund shall be utilized first for any necessary repairs and replacements to the
Riverboat and then for improvements thereto. Any expenditures for Riverboat
Replacements during any Fiscal Year shall be made in accordance with the
applicable Annual Plan. In the event that Gross Revenue in any month is
insufficient, after paying Operating Expenses, to permit a deposit to the
Riverboat Replacements Fund, the amount of the deficiency shall be carried over
and added to the amount to be deposited in the Riverboat Replacements Fund in
the next succeeding months, subject however, to Section 6.4.3. Any amounts
remaining in the Riverboat Replacements Fund at the close of each Fiscal Year
shall be carried forward and retained in the Riverboat Replacements Fund until
fully used in accordance with the Operating Agreement. To the extent the balance
in the Riverboat Replacements Fund is insufficient at the time expenditures are
planned to be made in accordance with an Annual Plan, Owner shall supply such
shorfall of funds by making a deposit into the Riverboat Replacements Fund as
soon as practicable but in no event later than thirty (30) days after receipt of
notice from Operator or Manager.
(iv) Notwithstanding the foregoing, Manager shall not make cash
deposits from Business operations into the Riverboat Replacements Fund, and
shall withdraw any funds in the Riverboat Replacements Fund at Owner's request,
if: (a) Owner is able to
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<PAGE>
demonstrate, to Manager's reasonable satisfaction, that funds in an amount equal
to that which would otherwise be deposited in the Riverboat Replacements Fund
are available to Owner on a timely basis from a third party; (b) during the
twelve (12) months preceding the deposit to which Owner objects and during the
succeeding twelve (12) months there is projected to be, cash flow from
operations of the Business after payment of Debt Service, taxes, Base Management
Fee and Operator Fee in an amount at least equal to the amount projected to be
deposited in the Riverboat Replacements Fund in accordance with the applicable
Annual Riverboat Replacements Budget in the next twelve (12) months; or (c) the
balance in the Riverboat Replacements Fund presently equals or exceeds one
hundred ten percent (110%) of the amount budgeted for Riverboat Replacements in
the applicable Annual Riverboat Replacements Budget at any time during a Fiscal
Year (after taking into consideration Riverboat Replacements scheduled for such
Fiscal Year which are in process or have not yet been undertaken). Any amounts
withdrawn from the Riverboat Replacements Fund by Manager at Owner's request
shall be payable to or at the direction of Owner.
(v) All net proceeds from the disposition of capital items no longer
needed for the operation of the Riverboat as a vessel shall be deposited into
the Riverboat Replacements Fund. The disposition of such items shall be
conducted by Manager in a commercially reasonable manner.
6.4.3. Insufficient Monthly Gross Revenue. In the event that Gross
----------------------------------
Revenue in any month is insufficient, after paying Operating Expenses, to permit
deposits to both the Capital and Riverboat Replacements Funds, then deposits
shall be made first to the Riverboat Replacements Fund and then to the Capital
Replacements Fund. The amount of any deficiency to the Riverboat and/or Capital
Replacements Funds shall be carried over and added to the amount to be deposited
in the Capital and/or Riverboat Replacements Funds in the next succeeding
months; provided, however, if any such deficiency shall have been carried over
for sixty (60) days or more, Owner shall, upon at least ten (10) Business Days
prior written notice from Manager, deposit the amount of such deficiency into
the appropriate Replacements Funds from Owner's own funds.
6.5. Revisions to Annual Plan and Reallocation of Funds. If, in
--------------------------------------------------
Manager's good faith business judgment, revisions to the Annual Plan are
appropriate, Manager shall revise the Annual Plan and submit such revised Annual
Plan to Owner for review and comment as to non-Budget elements and for approval
as to Budget elements, in accordance with the procedures set forth in Section
-------
6.3. Any revisions to the Annual Riverboat Replacements Fund Budget shall be
- ---
made in consultation with Operator prior to submission to Owner for approval.
Owner shall have the right to suggest revisions to the Annual Plan, with
disagreements being resolved as set forth in Paragraph 6.3.3. Notwithstanding
----------------
anything to the contrary contained in this Agreement, Manager, without Owner's
consent, may reallocate all or any portion of any line item in a Budget
(including contingency funds) to another item in such Budget in any Fiscal Year;
provided however, that any reallocation of funds among various line items in an
Annual Capital Replacements Budget or an Annual Riverboat Replacements Budget in
excess of fifteen percent (15%) of the amount theretofore allocated to the line
items(s) to which funds are being reallocated shall require Owner's approval;
provided further, that any increase in a line item of an Operating Budget in
excess of fifteen percent (15%), or any aggregate increase in such Operating
Budget in excess of ten percent (10%) shall require the prior approval of Owner.
Manager shall not make any payments or
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<PAGE>
disbursements in excess of the total amounts in an Annual Plan, except as
permitted in the preceding sentence hereof, or as follows:
(i) Pursuant to Section 6.12 or 6.13;
------------ ----
(ii) Any expenditure for which Owner's prior written consent has
been obtained;
(iii) For taxes, insurance and utilities to reflect actual costs
thereof, subject to Owner's right to contest or cause Manager to contest the
validity of such items; and
(iv) For payment of any final judgment in litigation involving the
Business or the Project.
6.6. Accounting Records. During the Term, Manager shall maintain full
------------------
and adequate books of account and records ("Books and Records") reflecting the
results of the operation of the Business on an accrual basis, all in accordance
with Generally Accepted Accounting Principles consistently applied in all
material respects. The Riverboat ship's log shall be kept by the Operator at
such location and under such conditions as set forth in the Operating Agreement.
The Riverboat ship's log shall not be part of the Books and Records. The Books
and Records shall be kept separate and distinct from all other operations and
business of Manager or Affiliates of Manager. Manager shall keep all Books and
Records, including without limitation, current vendor invoices, payroll records,
general ledgers, credit transactions and other records relating to the Business
at the Riverboat, Related Amenities or such other location as shall be
reasonably approved by Owner in writing, subject to such record retention and
storage policies and access rights required by any Lender or any applicable
Governmental Requirements, Laws or Gaming Laws. All such Books and Records and
the Riverboat ship's log shall at all times be the property of Owner and shall
not be removed by Manager from the approved location without Owner's written
approval except as required by Laws. Upon any termination of this Agreement,
all Books and Records shall immediately be turned over to Owner to ensure the
orderly continuance of the operation of the Business, but such Books and Records
shall be available to Manager for a period of five (5) years at all reasonable
times and upon prior written request to Owner for inspection, audit, examination
and transcription of particulars relating to the period in which Manager managed
the Business.
6.7. Financial Statements; Meetings.
------------------------------
6.7.1. Manager shall provide Owner with accurate unaudited Financial
Statements of the Business for each calendar month within twenty (20) days after
the end of each calendar month. Each month the Business operations for the
prior month will be presented and explained to Owner and its designees at a
meeting organized and presented by the general manager and the chief financial
officer. Manager also shall also provide Owner with (i) a three (3) month cash
projection for the Business, (ii) a statistical analysis of the Business' gaming
operations, (iii) accounts receivable aging, (iv) written explanation of
material budget variances, (v) written analysis of performance trends, (vi)
trends, challenges and opportunities anticipated by Manager over the three (3)
month period immediately succeeding the month under review and (vii) an employee
turnover report. Manager also shall provide Owner with such other information,
analyses and reports as Owner may reasonably request in writing ten (10) days
prior to the applicable monthly meeting.
6.7.2. At each monthly meeting which occurs during a month which
follows the close of a Fiscal Quarter, Owner and Manager also shall review the
quarterly results
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<PAGE>
compared to the applicable Annual Plan.
6.8. Access, Review and Audit. Owner, any Gaming Authority and Lender
------------------------
(or their respective duly appointed agents) shall have the right at reasonable
times and during normal business hours, after reasonable written notice to
Manager, to examine, audit, inspect and transcribe the Books and Records. With
respect to such reviews, Owner, any Lender and their respective agents shall be
subject to the confidentiality covenants in Paragraph 23.4.1. The annual
----------------
Financial Statements shall be audited by the Auditors at Owners' expense and
Manager shall cause such statements to be provided to Owner within ninety (90)
days after the end of each Fiscal Year. In addition to the annual audited
Financial Statements, the Books and Records shall be audited at the termination
of this Agreement. Owner acknowledges that the calculation of the Base
Management Fee and the accounting information set forth in the Financial
Statements for a Fiscal Year shall be binding and conclusive on the parties
unless a written statement setting forth any objection and the basis for the
objections is received by Manager within sixty (60) days after Owner received
the audited Financial Statements applicable to such Fiscal Year. If the parties
cannot resolve the disputed items within thirty (30) days after Manager received
the written objections, then the disputed matters shall be submitted to
arbitration pursuant to the provisions of Article 21.
-----------
6.9. Limitation of Responsibility for Budgets. All Budgets are intended
----------------------------------------
only to be reasonable estimates based on Manager's best business judgment and
except as otherwise expressly provided in Paragraph 2.4, Manager shall not be
-------------
liable or responsible in any event if any of the budgeted figures are not
attained or there is any variance between the actual revenues and expenditures
and the amounts set forth in any Budgets, provided that Manager has otherwise
complied with the provisions of this Agreement (including, specifically, those
provisions limiting Manager's right to expend funds in excess of the amounts
allocated therefor in the Budgets). Owner acknowledges that Manager has not
made any guarantee, warranty or representation of any nature concerning or
related to the amounts of Gross Revenues to be generated or the Operating
Expenses to be incurred in connection with the operation of the Business during
the Term.
6.10. Management. Manager, after consultation with Owner, shall have the
----------
sole and exclusive discretion and authority to determine operating policies and
procedures, standards of operation, staffing levels and organization, standards
of service and maintenance of the Related Amenities and those portions of the
Riverboat related to Gaming Activities, food and beverage quality and service,
pricing, and other policies affecting the Business, or the operation thereof, to
implement all such policies and procedures, and to perform any act on behalf of
Owner which Manager deems necessary or desirable in its good faith business
judgment for the operation and maintenance of the Business on behalf, for the
account and at the expense of Owner, including but not limited to the
following, as applicable:
6.10.1. Service Agreements. Manager shall negotiate and consummate
------------------
such agreements necessary for the furnishing of utilities, services, security
and supplies for the maintenance of the Related Amenities and those portions of
the riverboat related to Gaming Activities and operation of the Business. All
service agreements shall be consistent with the applicable Annual Plan(s). In
addition, Manager shall use commercially reasonable efforts to cause all service
agreements to comply with any applicable requirements of the Community
Commitment.
6.10.2. Concessions and Leases. All concessions and leases must
----------------------
comply
-20-
<PAGE>
with any applicable requirements of the Community Commitment Program and all
other applicable Governmental Requirements. Manager, on behalf of Owner, shall
negotiate and grant concessions and leases for (i) the space in the Related
Amenities, (ii) one or more services, subject to Section 5.4, customarily
-----------
subject to concessions and leases for gaming establishments and (iii) any other
concessions and leases applicable to the Project. Manager shall use commercially
reasonable efforts for (i) carrying out Owner's responsibilities under any such
concession or lease after Owner provides Manager with a copy of the applicable
agreement and, (ii) requiring such tenants and concessionaires to operate their
businesses in a quality manner and in accordance with Governmental Requirements,
Operating Goals and Operating Guidelines and (iii) complying with any reporting
requirements applicable to concessions or leases that are set forth in the
Community Commitment Program. Neither Owner nor Manager shall enter into any
concession or lease unless the concessionaires and tenants maintain casualty or
liability insurance in such amounts as Owner may require naming Owner, Manager
and Lender and their respective Affiliates, officers, directors, employees and
agents as additional insureds as their interests may appear, and Manager or
Owner shall cause the applicable concessionaire or tenant to furnish evidence of
such insurance concurrently with the delivery of any certificate, policy, or
other evidence of such insurance to Owner, Manager and Lender and a certificate
of insurance as soon as is reasonably possible.
6.10.3. Supplies Agreements. Manager shall purchase such food,
-------------------
beverages, Operating Supplies, and other materials and services as shall be
necessary for the operation of the Business. Manager will use commercially
reasonable efforts to comply with any applicable requirements of the Community
Commitment Program.
6.10.4. Maintenance and Repairs. Subject to Sections 6.3 and 6.4,
----------------------- ------------ ---
Manager shall maintain the Related Amenities and portions of the Riverboat
related to Gaming Activities in first class condition and shall have the sole
responsibility and authority to make all repairs, replacements and improvements
which are necessary or appropriate for such purpose and as required by the Loan
Documents and in accordance with the Operating Guidelines. Manager shall
implement a preventive maintenance program for the Related Amenities and
portions of the Riverboat related to Gaming Activities. Manager shall make no
material alterations, additions or improvements in or to the Related Amenities
or portions of the Riverboat related to Gaming Activities unless (i)
contemplated in an Annual Plan, (ii) permitted under Section 6.12 or (iii)
------------
required to comply with any Governmental Requirements pursuant to Section 6.13.
------------
The foregoing sentence is not intended to preclude Manager from rearranging
existing FF&E in the ordinary course of operating the Business.
6.10.5. Licenses, Permits, Reports and Accreditation. From and
--------------------------------------------
after the Opening Date, Manager shall apply for, process, obtain and maintain
all Manager Operating Permits [and, to the extent set forth on Exhibit "B",
-----------
Owner Operating Permits,] in a manner and within the time periods that will
permit the Business to be operated on a continuous and uninterrupted basis. The
foregoing shall not obligate Manager to obtain any Operating Permit or Approval
required to be obtained by Operator or Owner; however, Manager agrees to
cooperate with Operator in the application or renewal of any such Operating
Permit or Approval. Manager shall file all reports required by all Governmental
Authorities pertaining to the Business and itself on or prior to their due date.
Owner shall file all such other reports pertaining to itself. Owner shall
prepare, maintain and provide to Manager a list of
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<PAGE>
all Operating Permits, Approvals and reports required by any Governmental
Authority in connection with the operation of the Business and the term,
duration or frequency of such Operating Permits, Approvals and reports. All
costs related to Manager's efforts to obtain, maintain or renew Manager
Operating Permits shall be reimbursable to Manager by Owner as Operating Costs
of the Project. Owner shall reimburse Manager for all Manager expenses incurred
in connection with Manager's efforts to obtain, maintain or renew Owner
Operating Permits. Owner shall provide the required information for all of the
above promptly upon request and shall use its best efforts to ensure that such
information is accurate. Owner shall advise Manager of all requirements for
reports and permits applicable to Owner.
6.10.6. Government Regulations. Owner or Manager may contest the
----------------------
validity and/or application of any Law or Governmental Requirement provided that
such contest does not subject Owner or Manager to the risk of liability or
penalty and does not result in the suspension of, or, in either party's good
faith business judgment, any material limitation on, the operation of the
Business. Notwithstanding the foregoing, Manager shall have the absolute right,
without Owner's consent, to contest the validity and/or application of any Law
or Governmental requirement which, in Manager's opinion, could affect in any
manner, any gaming license of Manager or any of its Affiliates, in any
jurisdiction.
6.10.7. Legal Actions. All matters of a legal nature involving the
-------------
Business shall be handled by legal counsel selected by Manager and reasonably
acceptable to Owner (such legal counsel is hereinafter referred to as "Approved
Legal Counsel"). Manager shall notify Owner in writing of the commencement of
any legal action or proceeding concerning the Business as soon as practicable
after Manager receives actual notice of the commencement of such legal action
unless such action is for money damages only and such damages are reasonably
anticipated to be either fully covered by insurance or not in excess of Twenty
Five Thousand Dollars ($25,000) or could result in a lien in excess of such
amount against the Riverboat and/or any of the Related Amenities.
Notwithstanding the foregoing, Manager shall notify Owner immediately of any
action filed against the Business, the Project, Owner, Manager or the Riverboat
as a vessel which could result in seizure of the Riverboat or any threat of such
actions. Except with respect to those legal matters in which Owner advises
Manager that it desires to be directly involved, Manager shall be responsible
for retaining on behalf of Owner the Approved Legal Counsel to take any
reasonable or necessary legal actions to protect Owner's assets and to ensure
compliance with the contractual obligations of others and all Governmental
Requirements. In any legal action or proceeding in which Owner is to be the
plaintiff or complainant, then Manager may not commence such legal action or
proceeding without first obtaining the prior written consent of Owner.
6.10.8. Accounting Services. Manager shall establish and maintain
-------------------
a casino accounting system, internal controls and reporting systems in
accordance with the Operating Guidelines that are (i) consistent in all material
respects with customary policies and procedures used by Manager's Affiliates
engaged in such businesses, (ii) reasonably adequate to provide Owner and
Manager with the necessary information about the Business and to safeguard
Owner's assets, (iii) which complies with all Governmental Requirements and (iv)
approved by all Governmental Authorities which are required to be obtained.
Owner shall have the right to request Manager to provide to Owner (and in such
event Manager shall provide) any managerial reports produced by Manager
regarding the Business in the ordinary
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course of business.
6.10.9. Bank Accounts. Owner shall establish one or more bank
-------------
accounts for the operation of the Business and the maximum amounts to be
deposited in such accounts at various banking institutions chosen by Owner (such
accounts are hereinafter collectively referred to as the "Bank Accounts"). The
financial institutions chosen by Owner shall have at least Eighty Million
($80,000,000) Dollars on deposit. Owner shall continuously monitor such
institution's financial condition and promptly report to Manager any adverse
changes in the financial condition of such institutions. The Bank Accounts
shall be in the name of Owner, but Owner's and Manager's designees shall be
authorized to draw upon the Bank Accounts; provided, however, that if there
exists an uncured Manager Default and upon two (2) Business Days prior written
notice, Owner shall have the right to assume sole control of the Bank Accounts.
Checks drawn on the Bank Accounts shall be signed only by designees of Owner or
Manager who are covered by the fidelity insurance described in Paragraph
---------
11.1(v). The Bank Accounts shall be interest-bearing accounts if such accounts
- -------
are reasonably available and all interest thereon shall be credited to the Bank
Accounts. All Gross Revenue received by Manager from the operations of the
Business shall be deposited in the Bank Accounts and Manager shall pay from the
Bank Accounts, to the extent of the funds therein, from time to time, all
Operating Expenses and other amounts reasonably required by Manager to perform
its obligations under this Agreement. All funds in the Bank Accounts shall be
separate from any other funds, including the Capital and Riverboat Replacements
Funds, and Manager may not commingle any of Manager's funds with the funds in
the Bank Accounts. Owner shall bear the risk of the insolvency of any financial
institution holding such Bank Accounts.
6.10.10. Credit. All decisions regarding the granting and
------
collection of credit shall be governed by the Operating Goals and the Credit
Policy to be developed by Manager.
6.10.11. Quality Assurance Program. Manager shall design and
-------------------------
implement a quality assurance program to evaluate compliance with its
maintenance, housekeeping, service and other standards, with the objective that
the Business is operated with high levels of cleanliness, repair, service,
safety and efficiency consistent with the Operating Goals and Operating
Guidelines.
6.10.12. Sales Taxes, Etc. Manager shall use commercially
----------------
reasonable efforts to comply in all material respects with all applicable Laws
with respect to collecting, accounting for and paying to the appropriate
Governmental Authorities all applicable excise, sales use taxes and any
reporting requirements regarding patron winnings and other similar governmental
charges resulting from the operation of the Business.
6.10.13. Manager Mark-Ups Prohibited. Manager shall not include in
---------------------------
any service agreement any mark-up, profit or overhead for the account of Manager
or its Affiliates.
6.11. Collection of Base Management Fee. So long as no Manager Default
---------------------------------
has occurred or if a Manager Default has occurred, the applicable cure period
has not expired, Manager shall have the right to collect for itself the Base
Management Fee and reimbursable expenses from any of the Bank Accounts.
6.12. Emergency Expenditures. Without limiting the generality of this
----------------------
Article 6, in the event that a condition exists in, on, or about the Riverboat
or Related Amenities of an
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<PAGE>
emergency nature which requires immediate repairs to preserve and protect the
Riverboat and/or Related Amenities and assure the continued operation of the
Business and to protect the safety and welfare of the patrons, guests, or
employees of the Riverboat and Related Amenities or those of Manager or Owner,
Manager, on behalf of and at the expense of Owner, shall take all reasonable
steps and make all reasonable expenditures necessary to repair and correct any
such condition, whether or not provisions have been made in the applicable
Budgets for any such emergency expenditures, subject to Owner funds being
available therefor. Manager shall make emergency repairs and replacements only
after Manager has made a reasonable (under the circumstances) attempt to consult
with Owner as to the existence of such emergency, the repairs and replacements
Manager proposes to make and the estimated amount of expenditures to be
incurred, subject to Owner funds being available therefor. If Manager is unable
to advise Owner or Operator (with respect to emergency repairs required for the
continued safe operation of the Riverboat as a passenger vessel) in advance, it
shall promptly notify Owner or Operator, as appropriate, after taking any action
permitted under this Section 6.12. Notwithstanding the foregoing, the Operator
------------
shall be responsible for causing any emergency condition on or about the
Riverboat or Related Amenities which directly affects the seaworthiness or safe
operation of the Riverboat as a passenger vessel to be remedied. Expenditures
made by Manager in connection with an emergency shall be drawn first from the
Capital Replacements Fund to the extent available and then, in Manager's sole
discretion, from the Bank Accounts. Owner shall replenish funds paid from the
Capital Replacements Fund and the Bank Accounts with any insurance proceeds
received by Owner in respect of such emergency condition or situation, and Owner
shall replace any difference between the insurance proceeds and the amount used
for such emergency from the Capital Replacements Fund, subject to the
limitations on Owner's obligation set forth in Section 6.4. If circumstances
-----------
require, Owner shall also immediately replenish the Bank Accounts. To the extent
such repairs constitute Riverboat Replacements, Owner shall cause funds, to the
extent available, to be transferred to the Capital Replacements Fund and/or the
Bank Accounts, as appropriate, and otherwise restore the Capital Replacements
Fund and/or Bank Accounts from insurance proceeds or Owner's funds.
Notwithstanding the provisions of this Section 6.12, any action taken or funds
------------
expended pursuant to this Section 6.12 are subject to the provisions of Sections
------------ --------
12.1 and 12.2.
- ---- ----
6.13. Expenditures Required for Compliance with Law.
---------------------------------------------
6.13.1. Manager Responsibilities. Without limiting the generality
------------------------
of this Article 6, if at any time during the Term repairs, additions, changes or
---------
corrections of any nature to the Related Amenities or portions of the Riverboat
related to Gaming Activities shall be required by reason of any Governmental
Requirements now or hereafter in force or as reasonably requested by Operator,
such repairs, additions, changes or corrections shall be made at the direction
of Manager and shall be paid for by Owner. Manager shall inform Owner of the
existence of any Governmental Requirements, whether requiring expenditures under
this Section 6.13 or under the Operating Agreement, as soon as practicable after
------- ----
learning of such Governmental Requirements. With respect to those repairs,
additions, changes or corrections which Manager believes are required to be made
pursuant to this Section 6.13, Manager shall specify the work Manager believes
------------
is necessary and the estimated expenses to be incurred. Owner and Manager, in
consultation with Operator as
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<PAGE>
appropriate, shall agree upon the work to be performed and the schedule for its
implementation.
6.13.2. Contest. Owner or Manager may contest the validity or
-------
application of any Governmental Requirements provided that such contest does not
subject Manager to the risk of any material liability and does not result in the
suspension or a material limitation of the operation of the Business or any
other gaming business conducted by Manager or its Affiliates. If compliance
with any Governmental Requirements that are the subject of this Section 6.13
------------
will require expenditures which will make the continued operation of the
Business uneconomical to Owner, Owner shall have the right to cease operating
the Business (to the extent the cessation of such operations will not result in
any material liability to Manager not indemnified by Owner) and in connection
therewith, to terminate this Agreement, which termination shall not constitute a
Default by Owner hereunder. In the event Owner reopens the Business within one
hundred eighty (180) days after so ceasing operations, Manager shall be
reinstated and shall resume as Manager in accordance with the terms, conditions,
covenants and provisions of this Agreement.
6.14. Marketing Programs. Manager shall develop a marketing program to
------------------
implement the marketing plans contained in each Annual Marketing Plan. Manager
shall select the outside marketing consultants, advertising agencies and public
relations firms that will be responsible for any aspect of the marketing program
(provided that Manager shall not select any firms to provide such services that
would potentially result in a revocation, finding of non-suitability or
disqualification as to gaming licenses or a material sanction or penalty in
respect of such gaming licenses of Owner or Manager or any of their respective
Affiliates or their respective officers or directors in Louisiana or any other
jurisdiction and all such selected firms shall be competent and have good
reputations). Manager shall approve the form of any advertising and promotional
materials and identify particular media sources (whether it be particular
newspapers, radio stations, television stations or networks or other mass
marketing outlets) with respect to which the marketing efforts are to be
directed. Manager may, at its option, also provide or seek to cause an
Affiliate to so provide the following: (i) joint marketing or advertising with
other gaming units owned or operated by Affiliates of Manager and (ii) major
entertainment, sporting events or special attractions sponsored by the Business.
Manager shall use commercially reasonable efforts to cooperate with Owner in the
development of any joint marketing efforts which it determines at its option to
provide for the Business. Any joint marketing, advertising, or sharing of
events and promotions shall be subject to Owner's prior written consent. The
total costs and expenses associated with any such joint marketing or
advertising, to the extent approved in writing by Owner, shall be shared on a
reasonable basis between properties and the portion allocable to the Business
shall be an Operating Expense and set forth in the applicable Annual Operating
Budget.
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<PAGE>
6.15. Use of Names and Logos.
----------------------
6.15.1. Limitations. Owner acknowledges that neither this
-----------
Agreement nor the exercise of any Owner's rights in respect of the Riverboat or
Related Amenities shall give Owner any rights to the name "Circus Circus" (or
any other trade names, trademarks or logos of Manager or any of its Affiliates),
except as set forth in a written license agreement which shall be entered into
between Owner and Manager. If (but only for so long as) Manager and Owner
mutually agree to use the name "Circus Circus" in connection with the Business,
then pursuant to such license agreement, Owner shall have the royalty-free right
to use the name "Circus Circus" with respect to (i) the Business, (ii) any
merchandise sold on the Riverboat and/or in the Related Amenities and (iii)
dining or lounge facilities at the Project. Manager acknowledges that neither
this Agreement nor the exercise by Manager of any rights in respect of the
riverboat or Related Amenities shall give Manager any rights in the name
"American Entertainment."
6.15.2. Changes. Owner and Manager shall mutually agree on the
-------
initial name for the Business and any changes thereto.
6.16. Remittances to Owner. Contemporaneously with furnishing the
--------------------
Financial Statements for each calendar month to Owner pursuant to Section 6.7,
-----------
Manager shall remit to Owner, subject to Gaming Laws, General Laws and the
Related Contracts, from the Bank Accounts, an amount by which the total funds in
the Bank Accounts exceed the sum of Working Capital and the current amount
deposited in the Capital and Riverboat Replacements Funds.
6.17. Owner Payments by Manager. To the extent funds are available from
-------------------------
Owner or from Business operations, Manager shall make all payments due under the
Loan Documents and Related Contracts.
6.18. INTENTIONALLY DELETED.
6.19. Supervisory Services. In connection with Manager's obligations
--------------------
under this Agreement, Manager agrees to provide such reasonable supervisory
services to Manager as are generally provided by Circus Circus Enterprises, Inc.
to its other gaming units. The general supervisory services provided by the
Chief Executive Officer, Chief Operating Officer and other senior executives of
Circus Circus Enterprises, Inc., shall be provided at Manager's sole cost and
expense. However, departmental and other services providing a direct benefit to
the Project will be charged to Owner as provided in Section 6.1.
6.20. Certain Agreements. Owner shall advise Manager with respect to
------------------
any agreements or contractual arrangements between Owner and any Person that
relate to the Project or the Business (the "Related Contracts"). All Related
Contracts shall be subject to review by Manager conducted in accordance with the
Operating Guidelines to determine potential licensing problems as defined in
Article 17 and shall include provisions reasonably necessary to protect Owner's
- ----------
and Manager's and their Affiliates' respective officers' and directors' ability
to obtain and maintain gaming licenses in any jurisdiction. Owner and Manager
shall consult prior to execution of any Related Contracts entered into after the
date hereof regarding any possible material impact the Related Contracts might
have on the management and operation of the Business and Manager shall have the
right to approve or consent to any such Related Contracts. In the event Owner
enters into any Related Contracts, Owner shall provide copies of such Related
Contracts to Manager in a timely manner. Thereafter, subject to Section 5.2 of
-----------
this Agreement, Manager shall operate the
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<PAGE>
Business in compliance with the Related Contracts; provided, however, that
Manager shall not be bound to comply with any provision of a Related Contract
which is inconsistent with the terms of this Agreement or imposes any financial
obligation or cost on Manager in addition to or inconsistent with the
liabilities, financial obligations or costs imposed upon Manager by this
Agreement or affects any gaming license of Manager or any Affiliate, unless
Manager expressly consents thereto in writing. In the event that Manager's
actions or failure to act shall cause a default under a Related Contract which
has been expressly approved in advance in writing by Manager, such default shall
not be a Manager Default under this Agreement until the cure period for such
default provided in the Related Contract has expired. Owner shall use its best
efforts to ensure that all Related Contracts comply with the Community
Commitment Program. Manager shall not be bound by any Related Contracts except
as otherwise set forth herein and shall be obligated to perform under such
Related Contracts only on behalf of Owner as Owner's agent.
7. CERTAIN RIGHTS AND RESPONSIBILITIES OF OWNER
--------------------------------------------
7.1. Owner's Advances. Owner shall advance to Manager, on a timely
----------------
basis, immediately available funds with which to conduct the affairs of the
Business and the Project (hereafter referred to as "Owner's Advances") as set
forth in this Agreement.
7.1.1. Working Capital. During the Term, within five (5) Business
---------------
Days after receipt of written notice from Manager, Owner shall fund Owner's
Advances adequate to ensure that the Working Capital set forth in the applicable
Annual Plan (as revised pursuant to the provisions of Section 6.5) is sufficient
-----------
to support the uninterrupted and efficient ongoing operation of the Business.
The written request for any additional Working Capital shall be submitted by
Manager to Owner on a monthly basis based on the Financial Statements and the
applicable Annual Plan (as revised pursuant to the provisions of Section 6.5) at
-----------
least fifteen (15) days prior to the date Manager requires such funds.
7.1.2. Payment of Expenses. Manager shall pay from Gross Revenue
-------------------
the following items in the order of priority listed below, except as otherwise
required pursuant to Section 5.14(b) of the Operating Agreement and, subject to
the General Laws and Gaming Laws, on or before their applicable due date:
(i) Payment of state and federal taxes;
(ii) payments due or required by any Governmental Authority
specific to gaming;
(iii) Operating Expenses (excluding the Base Management Fee);
(iv) Base Management Fee and Operating Fee;
(v) Expenditures permitted pursuant to Sections 6.12 and 6.13;
----------------------
(vi) Debt Service payments and any escrow or impound payments
required by any Loan Documents;
(vii) payments due on any lease or other financing arrangements
relating to the FF&E, any other expenditures permitted by any Annual Plan and
payments due under any Related Contracts.
(viii) deposits in the Capital Replacements and Riverboat
Replacements Funds pursuant to Section 6.4.;
------------
Manager's responsibility to make any of the foregoing payments is subject
to and conditioned upon Owner making available funds sufficient to make such
payments from Gross Revenue or otherwise in the order set forth above. Owner
shall have the right to elect
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<PAGE>
to pay directly (rather than have Manager pay) (a) Debt Service or (b) payments
due any Governmental Authority, upon five (5) days written notice to Manager. If
Owner so elects, Manager shall disburse to Owner from Gross Revenue (subject to
the preceding sentence) funds in such amounts and at such times as may be
necessary to pay such expenses on or before the date such expenses are due,
subject to Working Capital requirements. Owner shall timely make all payments
required by this Paragraph 7.1.2 in those instances in which Owner has
---------------
requested the right to make such payments directly. If Owner fails to make such
payments, Owner's right to make such payments directly shall cease until Owner
has brought all such obligations current. Manager shall advise Owner as soon as
possible of any anticipated requirements for additional Working Capital. Nothing
in this Paragraph 7.1.2 shall be deemed to relieve Owner of its obligation to
---------------
pay the Base Management Fee in accordance with Article 8 or to comply with the
---------
time requirements set forth in Articles 8 and 15 or to pay any other obligation
---------- --
of Owner under this Agreement.
7.1.3. Optional Funding by Manager. In the event Owner fails to
---------------------------
fund any Owner's Advance within the specific time period set forth in this
Section 7.1 or make any other payment required to be made by Owner hereunder, or
- -----------
if sums are required prior to such time as Owner is obligated to advance the
same, Manager may, at its sole option, without assuming any liability for the
payment of any account, advance the amount required, or any portion thereof, on
behalf of Owner. The amount advanced and paid on behalf of Owner ("Manager's
Advances") shall be reimbursed on demand and shall bear interest at the Default
Rate until Manager is reimbursed in full, including all accrued interest. The
funding of any Manager's Advance does not in any manner waive any rights or
remedies granted to Manager under the terms of this Agreement, including the
right to declare Owner in Default as provided in Article 15 and to proceed with
----------
any remedies granted under Article 16.
----------
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<PAGE>
8. MANAGEMENT FEES
---------------
8.1. Base Management Fee. During the Term, Manager shall be paid the
-------------------
Base Management Fee described below. So long as no Manager Default has occurred
or the applicable cure period has not expired, Manager may collect the Base
Management Fee by withdrawing the same from the Bank Accounts at any time after
Manager delivers the Financial Statements to Owner for such month. The Base
Management Fee for each Fiscal Year shall be equal to three and one-half percent
(3.5%) of the first One Hundred Million Dollars ($100,000,000.00) of Gross
Revenue of the Project and one and one-half percent (1.5%) of Gross Revenue in
excess of One Hundred Million Dollars ($100,000,000.00) for such Fiscal Year,
(the "Base Management Fee"). The Base Management Fee shall be due and payable
monthly in arrears on the date the monthly Financial Statements are delivered to
Owner; provided, however, if Gross Revenue is not sufficient in any month to pay
the Base Management Fee when due according to the payment priority set forth in
Paragraph 7.1.2, Owner may defer such payment (or portion thereof) until the
- ---------------
earlier of (i) such time as Gross Revenue is sufficient to pay the Base
Management Fee or portion thereof that has been deferred or (ii) sixty (60) days
from the due date, at which time Owner shall pay Manager any unpaid portion of
the Base Management Fee from Owner's own funds. Such deferral shall not
constitute an Owner Default. The Base Management Fee (or portion thereof) so
deferred shall bear interest at the Default Rate until paid. The Base
Management Fee shall be adjusted quarterly based on actual reported results for
each such Fiscal Quarter and, if necessary, annually based on actual reported
results for each Fiscal Year. A partial Fiscal Year at the beginning and end of
the Term shall be treated as a Fiscal Year for purposes of this Paragraph 8.1.
8.2. Adjustments to Management Fees Following Termination. Following the
----------------------------------------------------
expiration or termination of this Agreement for any reason, if Owner collects
amounts with respect to Bad Debts in an amount in excess of the amount reserved
on the Financial Statements, then Manager shall be entitled to an adjustment to
the Base Management Fee paid for the applicable periods as if such excess amount
had been part of Gross Revenue for the applicable period of the operation of the
Business.
9. OWNER'S COVENANTS AND REPRESENTATIONS
-------------------------------------
9.1. Owner's Covenants and Representations. Owner makes the following
-------------------------------------
covenants and representations to Manager, which representations and covenants
shall, unless otherwise stated herein, survive the execution and delivery of
this Agreement and the Opening Date and shall continue to be true during the
Term.
9.1.1. Corporate Status. Owner is a limited liability company
----------------
duly organized, validly existing, and in good standing under the laws of the
State of Louisiana, is qualified to do business in the State of Louisiana, and
has full power to enter into this Agreement and execute all documents required
hereunder.
9.1.2. Authorization. The making, execution, delivery and
-------------
performance of this Agreement by Owner has been duly authorized and approved by
all requisite action of the Members and Management Committee of Owner, and this
Agreement has been duly executed and delivered by Owner and constitutes a valid
and binding obligation of Owner, enforceable in accordance with its terms.
9.1.3. Other Agreements. Neither the execution and delivery of
----------------
this Agreement by Owner nor Owner's performance of its obligations hereunder
will result in a
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<PAGE>
violation or breach of, or constitute a default with respect to
or accelerate the performance required under any other agreement or obligation
to which Owner is a party or is otherwise bound or to which the Riverboat,
Related Amenities or any part thereof is subject, and will not constitute a
violation of any General Law to which Owner, the Riverboat or Related Amenities
is subject.
9.1.4. Documentation. If necessary to carry out the intent of this
-------------
Agreement, Owner agrees to execute and provide to Manager, on or after the date
hereof, any and all other instruments, documents and agreements necessary to
make this Agreement fully and legally effective, binding and enforceable between
the parties hereto and as against third parties.
9.1.5. Communications. Owner shall provide Manager with copies of
--------------
any communications directed to Owner or any constituent member of Owner relating
to any actual, alleged, suspected or threatened violation of any Environmental
Requirements or Governmental Requirements that relate to the Riverboat, the
Related Amenities, the Business or the Project within five (5) days of receipt
of such communication.
9.1.6. Related Contracts. Owner shall use its best efforts to
-----------------
cause the timely payment and performance of all its obligations under all
Related Contracts other than such responsibilities as are imposed upon Manager
pursuant to this Agreement.
10. MANAGER'S COVENANTS AND REPRESENTATIONS
---------------------------------------
10.1. Manager makes the following covenants and representations to Owner,
which covenants and representations shall, unless otherwise stated herein,
survive the execution and delivery of this Agreement and the Opening Date and
continue to be true during the Term.
10.1.1. Corporate Status. Manager is a corporation duly organized,
----------------
validly existing, and in good standing under the laws of the State of Louisiana,
with full corporate power to enter into this Agreement and execute all documents
required hereunder.
10.1.2. Authorization. The making, execution, delivery and
-------------
performance of this Agreement by Manager has been duly authorized and approved
by all requisite action of the Board of Directors of Manager, and this Agreement
has been duly executed and delivered by Manager and constitutes a valid and
binding obligation of Manager, enforceable in accordance with its terms.
10.1.3. Other Agreements. Neither the execution and delivery of
----------------
this Agreement by Manager nor Manager's performance of its obligations hereunder
will result in a violation or breach of, or constitute a default with respect to
or accelerate the performance required under any other agreement or obligation
to which Manager is a party or is otherwise bound and will not constitute a
violation of any General Law to which Manager is subject.
10.1.4. Documentation. If necessary to carry out the intent of
-------------
this Agreement, Manager agrees to execute and provide to Owner, on or after the
date hereof, any and all other instruments, documents and agreements that may be
necessary to make this Agreement fully and legally effective, binding and
enforceable between the parties hereto and against third parties.
10.1.5. No Hazardous Material on Property. Except to the extent
---------------------------------
commonly used in day-to-day operation of the Business, Manager shall require
that no Hazardous Material shall be brought upon, treated, kept, stored,
disposed of, discharged, released, produced, manufactured, generated, refined or
used upon, about or beneath the Related Amenities or any portion of the
Riverboat related to Gaming Activities by Manager,
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<PAGE>
its agents, employees, contractors, tenants, or invitees or by any other Person,
unless such Hazardous Material is stored, used and disposed of in a manner that
complies with all Environmental Requirements applicable to such Hazardous
Material.
10.1.6. No Violations of Environmental Requirements. Manager shall
-------------------------------------------
use commercially reasonable efforts to avoid the commission by its agents,
employees, contractors or invitees, or by any other Person, of a violation of
any Environmental Requirements upon, about or beneath the Related Amenities or
any portion of the Riverboat related to Gaming Activities.
10.1.7. Communications. Manager shall use commercially reasonable
--------------
efforts to provide Owner with copies of any communications directed to Manager
relating to any actual, alleged, suspected or threatened violation of any
Environmental Requirements or Governmental Requirements that relate to the
Riverboat, the Related Amenities, the Business or the Project within five (5)
days of receipt of such communications.
10.1.8. Seaworthiness of Riverboat. Manager shall be obligated to
--------------------------
operate the Busines in a manner which does not violate any of the Rules and
Regulations of the U.S. Coast Guard and does not adversely affect the
seaworthiness of the Riverboat on and after the Opening Date.
11. INSURANCE.
---------
11.1. Operating Insurance. The Owner shall procure from agents/brokers
-------------------
and insurers selected by the Owner and reasonably acceptable to Manager certain
insurance coverages (the "Required Coverages") that may include but not be
limited to the following (all policies should include the appropriate additional
insureds and waivers of subrogation clauses):
(i) Workers' Compensation, including coverage for employees of
Owner and Manager working at the Riverboat or Related Amenities and a borrowing
employer/alternate employer endorsement, to the extent commercially available as
well as the appropriate insurance to protect Owner in the event of injury or
death to Jones Act seamen and Employees covered by the U.S. Longshoremen and
Harbor Workers Act;
(ii) Commercial General Liability on an occurrence basis in the
amount of Two Million Dollars ($2,000,000) per occurrence, with no aggregate
limit; CSL, Bodily Injury and Property Damage must have the watercraft exclusion
deleted;
(iii) Automobile Liability Insurance on an occurrence basis in the
amount of One Million Dollars ($1,000,000) CSL, Bodily Injury and Property
Damage Liability;
(iv) Umbrella Liability written on an occurrence basis with a limit
of at least One Hundred Million Dollars ($100,000,000);
(v) Crime Insurance which includes Fidelity and such other crime
coverages as may be desired in the amount of Five Hundred Thousand Dollars
($500,000), with a Twenty-Five Thousand Dollar ($25,000) deductible;
(vi) Protection and Indemnity coverage in the amount of One Hundred
Million Dollars ($100,000,000);
(vii) To the extent not included in other insurance, WCEL Package
(with Longshore endorsement) coverage in the amount of One Million Dollars
($1,000,000), with a borrowing employer/alternate employer endorsement, to the
extent commercially available;
(viii) Any additional insurance coverage required by the Loan
Documents, any Governmental Authorities or Related Contracts; and
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<PAGE>
(ix) Such other and similar insurance as Owner or Manager shall
deem necessary or appropriate.
The Required Coverages shall be reevaluated every two (2) years in comparison
with industry standards, the purchasing power of the dollar, and events or
trends of liability affecting risks of owning and operating a riverboat casino
and amenities incidental thereto after taking into consideration the insurance
requirements of the Loan Documents, any Governmental Authorities and the Related
Contracts. The premiums for all insurance obtained in accordance with this
Section 11.1, shall be Operating Expenses; provided, however, that should
- ------------
Manager's gross negligence or willful misconduct result in a loss of all or a
portion of which is uninsured, such amounts shall be deducted from Base
Management Fees payable pursuant to Paragraph 8.1, if necessary to reimburse
-------------
Owner for such loss within twelve (12) months of the occurrence.
The Required Coverages shall be maintained at all times during the Initial
Term and/or any Extension Period, as appropriate, in the name and on behalf of
and for the account of Owner in relation to the operation of the Business.
The Manager shall use commercially reasonable efforts to provide the
following:
(a) Prompt reporting of any incident or potential claim on or about
the Riverboat or Related Amenities;
(b) Assist and cooperate in the adjustment of all claims;
(c) Implementation and monitoring of all loss control practices as
required by Owner or various insurance companies;
(d) Advise the Owner of any unsafe conditions or hazards on or about
the Riverboat or Related Amenities brought to the attention of the Manager
during the Term; and
(e) Any on-going reporting or other requirements of the Required
Coverages.
11.2. Property and Other Insurance. Owner shall procure and Manager
----------------------------
shall at all times during the Term maintain, at Owner's expense, insurance
protecting the real and personal property of the Business (including hull and
machinery and casino equipment) against fire, with all risk coverage against
other perils, including vandalism, malicious mischief, flood, hurricane,
tornado, earthquake, lightning, aircraft and explosion, and also including
boiler and machinery and business interruption with ordinary payroll coverage
and such other insurance as is required by the Loan Documents (excluding,
however, insurance described in Section 11.3), any Governmental Requirements,
------------
any Related Contracts, or commonly or prudently maintained by owners of similar
properties similarly used, in the full replacement value at an agreed amount,
including cost of debris removal and increased cost of construction ("Property
Insurance"). Owner shall also obtain builder's risk and worker's compensation,
commercial general liability and automobile liability coverage during all
construction. Owner may also procure such additional kinds of coverage that
Owner determines shall be reasonable and prudent with respect to the Business or
as required by the Loan Documents, any Governmental Requirements or any Related
Contracts.
11.3. Dishonored Check Insurance. Owner shall not obtain insurance
--------------------------
against loss due to dishonored checks unless such insurance is required by any
Lender or the Credit Policy, and then only if commercially available.
11.4. Parties to be Covered by Insurance; Location of Policies. All
--------------------------------------------------------
policies of insurance procured pursuant to Sections 11.1, 11.2 and 11.3 shall be
------------- ---- ----
in Owner's name and shall name Manager as an additional insured by policy
endorsement where permitted by the
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terms and conditions of the various policies but in all events with respect to
all liability insurance. All policies shall name such other parties as may be
required by the Governmental Requirements or any Related Contract or as may from
time to time be designated by Manager, as the insured persons or additional
insureds thereunder, as their respective interests may appear, and shall provide
that they shall not be canceled, modified or denied renewal without at least
thirty (30) days prior written notice (or such longer period as is required by
Law) to each party that is a named or additional insured thereunder. Owner shall
not be required to cause any Person other than those Persons required to be
named pursuant to this Section 11.4 to be insured by any insurance policy until
thirty (30) days after Owner has received notice of such Person's interest. The
originals of all policies of insurance under Sections 11.1, 11.2 and 11.3 shall
be held by the Owner and duplicates thereof delivered to and held by the
Manager.
11.5. Rights of Manager and Owner to Receive Information on Insurance
---------------------------------------------------------------
Matters. Owner and Manager shall provide each other and Lender with reasonably
- -------
timely notice of coverage and all other information concerning the insurance
under Sections 11.1, 11.2 and 11.3 as they may reasonably request in writing.
11.6. Insurance Coverage Upon Termination of Agreement. In the event of
------------------------------------------------
the termination of this Agreement for any reason, Owner shall, at Owner's sole
cost and expense, continue to name Manager (and, if applicable its Affiliates)
as an additional insured on the liability insurance coverage required by this
Agreement for three (3) years following the date of the termination of this
Agreement, provided that if Owner's performance of its obligations under this
sentence will cost more than one hundred twenty-five percent (125%) of the
premium charged for such insurance prior to termination, Owner shall, if so
directed by Manager, maintain such coverage but Manager shall reimburse Owner
for the portion of such premium in excess of 125% of the premium charged for
such insurance prior to termination. Owner shall provide Manager with evidence
of the foregoing coverages following the date of the termination of this
Agreement by the delivery of certificates of insurance evidencing the current
in-place coverage, together with such other information as may be reasonably
requested, from time to time, by Manager.
11.7. Other Insurance Requirements. All the insurance required under
----------------------------
this Agreement shall be issued by insurance companies authorized to do business
in the State of Louisiana, with a financial rating of at least A- as rated in
the most recent edition of Best Insurance Reports, or an equivalent rating by a
responsible company providing similar services if Best Insurance Reports ceases
to be regularly published. If and to the extent available, all such policies
shall be nonassessable and shall contain language to the effect that (i) any
loss shall be payable notwithstanding any negligence of any named or additional
insured that might otherwise result in a forfeiture of the insurance to the
extent such protection is reasonably available, (ii) the insurer waives the
right of subrogation against Owner and Manager and their respective Affiliates'
and its and their respective officers, directors, employees, agents and
representatives and (iii) the policies are primary and noncontributing with any
insurance that may be carried by any named or additional insured. Neither party
shall voluntarily make material changes in such insurance policies without the
consent of the other party unless required by any Governmental Requirement.
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<PAGE>
12. DAMAGE AND CONDEMNATION
-----------------------
12.1. Material Destruction. In the event (i) the Riverboat and/or the
--------------------
Related Amenities is destroyed or damaged to the extent that the cost of
restoring the damage will exceed fifty percent (50%) of the replacement cost of
the Project immediately prior to such casualty; (ii) the cost of restoring the
damage will exceed the proceeds of insurance payable in connection with such
casualty by an amount equal to twenty-five percent (25%) or more of the cost of
restoring the damage; (iii) the Riverboat is sunk or otherwise lost or (iv) the
Riverboat will be inoperable, in accordance with applicable Governmental
Requirements, for a period of six (6) or more months (in any event, "Material
Destruction"), either party hereto may terminate this Agreement by written
notice to the other party given within ninety (90) days following such casualty.
Notwithstanding the foregoing, if the Related Amenities are subject to a
Material Destruction but the Riverboat has sustained no damage, then Manager
shall not have the right to terminate this Agreement as aforesaid unless Owner
is unable to locate and establish an alternative berthing site within ninety
(90) days of the occurrence of the Material Destruction. In the event of
termination of this Agreement pursuant to this Section 12.1, this Agreement
------------
shall terminate as of the date set forth in such notice as though such date were
the date originally fixed for the expiration of the Term, and neither party
shall have any obligation to the other arising out of or in any way connected
with the provisions of this Agreement, except for those provisions which by
their terms are intended to survive termination or which obligations have
already accrued. In the event that Owner shall determine within one hundred
eighty (180) days after such casualty to restore the damaged property, Owner
shall give notice to Manager and Manager shall have the right, at its option, to
reinstate this Agreement as of a date within sixty (60) days of the receipt by
Manager of notice from Owner.
12.2. Partial Destruction. In the event the Riverboat or the Related
-------------------
Amenities is damaged by fire or other casualty and such damage does not result
in Material Destruction (a "Partial Destruction"), Owner shall repair the
Riverboat or the Related Amenities, as the case may be, as nearly as practical
to the condition they were in prior to such damage. Casualty insurance proceeds
arising out of any loss or damage to the Riverboat, Related Amenities or any
portion thereof shall be specifically utilized for the repair and restoration of
the portion of the property so damaged. Owner shall cause such repair to be
made with all reasonable dispatch so as to complete the same at the earliest
possible date and shall consult with Manager regarding the allocation and
expenditure of insurance proceeds in connection with any repair and/or
replacement within the Project.
12.3. Excess Proceeds. Any insurance proceeds paid in connection with a
---------------
Material Destruction or Partial Destruction which are in excess of the amount
necessary to restore or rebuild as required by Sections 12.1 and 12.2 shall be
------------- ----
paid to Owner.
12.4. Substantial Condemnation. In the event all or substantially all
------------------------
of the Riverboat and/or Related Amenities shall be taken in any eminent domain,
condemnation, compulsory acquisition, seizure or similar proceeding by any
competent authority for any public or quasi-public use or purpose, or any
portion of the Riverboat and/or Related Amenities is so taken so as to make it
imprudent or unreasonable to continue to operate the Business after making all
reasonable repairs and restoration to the Riverboat and/or Related Amenities (a
"Substantial Condemnation"), then either party shall have the right to terminate
this Agreement upon written notice to the other party within ninety (90) days of
the
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<PAGE>
conclusion of the condemnation proceedings. All award proceeds resulting from a
Substantial Condemnation shall belong to Owner; provided however, that Manager
shall have the right to separately assert, prosecute, collect upon and retain,
any claims for loss or damage suffered by Manager by reason of or relating to a
Substantial Condemnation. Notwithstanding the foregoing, if the Related
Amenities are subject to a Substantial Condemnation but the Riverboat has
sustained no damage, then Manager shall not have the right to terminate this
Agreement as aforesaid unless Owner is unable to locate and establish an
alternative berthing site acceptable to Manager within ninety (90) days of the
occurrence of the Substantial Condemnation.
12.5. Partial Condemnation. In the event a portion of the Riverboat or
--------------------
Related Amenities shall be taken by the events described in Section 12.4, or is
------------
affected, but only on a temporary basis, and as a result, it is not imprudent or
unreasonable to continue to operate the Business (a "Partial Condemnation")
after making all reasonable repairs and restoration, this Agreement shall not
terminate and Owner shall use the award to repair and restore the Riverboat or
Related Amenities, or so much thereof as is reasonably necessary to render it a
complete and satisfactory architectural unit as close as reasonably possible to
its condition prior to such event. The balance of such award, if any, shall
belong to Owner.
12.6. Casualty Management Fees. Manager shall have the right to
------------------------
maintain business interruption insurance as an Operating Expense of the Project
and in the event of a destruction, damage, or condemnation covered under this
Article 12, Manager shall be entitled to retain any payments from such business
- ----------
interruption insurance to the extent of the Base Management Fees and any other
amounts payable to Manager or its Affiliates pursuant to this Agreement. Any
additional business interruption insurance obtained for or on behalf of Owner
shall belong to Owner and Manager shall have no right to any payments made in
respect of such insurance. In the case of a Partial Condemnation which results
in a reduction in the gaming floor area of the Riverboat, the threshold dollar
amounts used in calculating the Base Management Fee shall be equitably reduced.
If Owner rebuilds or restores following any damage, destruction or Partial
Condemnation or Partial Damage, Manager shall provide the construction and pre-
opening consulting services provided in this Agreement at a fee equal to the
actual out-of-pocket costs and expense (including employee compensation)
incurred in providing such services.
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<PAGE>
13. INDEMNIFICATION
---------------
13.1. Owner Indemnity. Owner hereby covenants and agrees to indemnify,
---------------
save and defend, at Owner's sole cost and expense, and hold harmless, Manager
and its Affiliates and their respective officers, directors, employees and
agents (collectively, "Owner Indemnitees"), from and against the full amount of
any and all Losses. For purposes of this Section 13.1, the term "Losses" shall
------------
mean any and all liabilities, claims, suits, administrative proceedings, losses,
damages or costs which may be asserted against an Owner Indemnitee arising from
or relating to the financing, construction, renovation, repair or operation of
the Riverboat and/or Related Amenities, and shall include expenses of defense
including, without limitation, attorneys' fees. The term "Losses" does not
include (and this indemnity shall not apply to) Losses resulting from an Owner
Indemnitee's willful, wanton or criminal misconduct, gross negligence or fraud
or actions taken outside the scope of their duties under this Agreement. Each
Owner Indemnitee will use commercially reasonable efforts to promptly notify
Owner of such action, suit or proceeding which relates to any matter covered by
the indemnity in this Section 13.1.
------------
13.2. Manager Indemnity. Manager hereby covenants and agrees to
-----------------
indemnify, save and defend, at Manager's sole cost and expense, and hold
harmless, Owner and its Affiliates and their respective officers, directors,
employees and agents (collectively, "Manager Indemnitees") from and against any
and all liabilities, claims, losses, damages, costs or expenses that may be
asserted against a Manager Indemnitee arising from or relating to the grossly
negligent, willful or criminal misconduct or fraud of Manager in the operation
of the Business (for purposes of this Section 13.2, "Losses") other than Losses
------------
resulting from Manager's Indemnitees' willful, wanton or criminal misconduct,
negligence or fraud. Owner will promptly notify Manager of such action, suit or
proceeding which relates to any matter covered by the indemnity in this Section
-------
13.2.
- ----
13.3. Legal Fees, Etc.; Procedures. Each indemnitor under this Article
---------------------------- -------
13 shall reimburse each Indemnitee for any legal fees and costs, including
- --
reasonable attorneys' fees and other litigation or proceeding expenses, even if
the claim is groundless, false or fraudulent, reasonably incurred by such
Indemnitee in connection with investigating or defending against Losses with
respect to which indemnity is provided hereunder; provided, however, that an
indemnitor shall not be required to indemnify an Indemnitee for any payment made
by such Indemnitee to any claimant in settlement of Losses (as defined in
Sections 13.1 and/or 13.2) unless such settlement has been previously approved
- ------------- ----
by the indemnitor. If Losses are asserted, or if any action or suit is
commenced with respect thereto, for which indemnity may be sought against an
indemnitor hereunder, the Indemnitee shall notify the indemnitor in writing
within ten (10) days after the Indemnitee shall have had actual knowledge of the
assertion or commencement of the Losses or a claim which could give rise to
Losses, which notice shall specify in reasonable detail the matter for which
indemnity may be sought. The indemnitor shall have the right, upon notice to
the Indemnitee given within thirty (30) days following its receipt of the
Indemnitee's notice (or shorter period if such notice specifies such shorter
period and provides reasonable justification therefor), to take primary
responsibility for the prosecution, defense or settlement of such matter,
including the employment of counsel chosen by the indemnitor with the approval
of the Indemnitee, which approval shall not be unreasonably withheld, delayed or
conditioned, and payment of expenses in connection therewith. The Indemnitee
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<PAGE>
shall provide, without cost to the indemnitor, all relevant records and
information reasonably required by the indemnitor for such prosecution, defense
or settlement and shall cooperate with the indemnitor to the fullest extent
possible. The Indemnitee shall assist in enforcing any rights of contribution or
indemnity against any Person. The Indemnitee shall not admit liability,
voluntarily make any payment, assume any obligation or incur any expense with
respect to any Loss without Indemnitor's written consent. The Indemnitee shall
have the right to employ its own counsel in any such matter with respect to
which the indemnitor has elected to take primary responsibility for prosecution
(without regard to Paragraph 6.10.7), defense or settlement, but the fees and
----------------
expenses of such counsel shall be the expense of the Indemnitee except when an
Indemnitee has engaged its own counsel due to a conflict of interest between
indemnitor's and Indemnitee's interests in which case such fees and expenses
shall be paid in accordance with this Section 13.3.
------------
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<PAGE>
14. ASSIGNMENT.
----------
14.1. Sale/Assignment. Owner may assign or otherwise transfer all or
---------------
any portion of its interest in the Business, the Project or this Agreement at
any time after the date hereof only with Manager's prior written approval (which
approval may be granted or withheld in Manager's sole discretion; provided that
so long as Manager or an Affiliate is a Member of Owner, any such transfer shall
be governed by Owner's Operating Agreement) and, unless otherwise approved by
Manager, only if this Agreement remains in full force and effect and the
transferee assumes Owner's obligations hereunder. Owner may from time to time
mortgage or otherwise encumber its interest in the Project provided that the
mortgagee agrees to be bound by Owner's covenants and agreements contained in
this Agreement and not to disturb Manager's rights under this Agreement in the
event of a foreclosure. In the event of any such transfer or mortgage, the
transferee shall not be a competitor of Manager. Except as set forth below,
Manager may not assign or otherwise transfer this Agreement without first (i)
obtaining the consent of Owner and (ii) complying with any other Governmental
Requirements. The bad reputation or financial condition of the proposed
assignee or reasonably anticipated licensing problems shall be a reasonable
basis for denial of such consent by Owner but shall not be the only basis for
such denial. In addition, a lack of extensive successful casino or riverboat
operating experience in respect of first class casinos in the United States,
poor or mediocre historical operating performance, previously unsatisfactory
relationships with the proposed transferee, likelihood of significant conflicts
of interest, restrictions imposed by any Governmental Requirements or the
unwillingness of any Lender or Governmental Authority to consent to any transfer
shall be reasonable basis for denial of such consent by Owner but shall not be
the only basis of such denial. The following shall not be subject to the
restrictions on Manager set forth in this Section 14.1: (a) assignment or other
------------
transfer of publicly-held stock in a publicly-traded corporation, (b) any
transfer or assignment necessary to satisfy any condition, or required by any
covenant, condition or provision contained in any Loan Documents, provided that
such transferee or assignee shall not adversely affect Owner's or Manager's or
either of their Affiliates' ability to obtain or maintain gaming licenses in
Louisiana or any other jurisdiction, (c) any transfer of Manager's Interest
under this Agreement to an Affiliate of Manager or in the event of a merger,
consolidation or reorganization of Manager or in connection with the acquisition
of Manager or of all or substantially all of the assets of Manager; (d) any
transfer or assignment of this Agreement in connection with any transfer by
foreclosure or deed in lieu of foreclosure of the Riverboat and/or Related
Amenities or any part thereof, provided that such transferee or assignee shall
not adversely affect Owner's or Manager's or any of their Affiliates' ability to
obtain or maintain gaming licenses in Louisiana or any other jurisdiction; or
(e) any transfer required by any gaming or other governmental authority.
Notwithstanding anything to the contrary contained herein, in the event of any
change in Control of Owner or any transfer by Owner of its interest in the
Business, the Project or this Agreement, Manager shall have the right at any
time thereafter, but upon at least ninety (90) days prior written notice, to
terminate this Agreement as though the date set forth in such notice was the
date originally fixed for the expiration of the Term.
14.2. Effect of Assignment. In the event the necessary consents to an
--------------------
assignment of this Agreement are given, no further assignment that is restricted
by Section 14.1 shall be made without the express written consent of the parties
------------
whose consent is required in Section
-------
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<PAGE>
14.1. An assignment to which the other party (and any other necessary Person)
- ----
has expressly consented in writing shall relieve the assignor of its obligations
under this Agreement after the effective date of such assignment provided that
the assignee specifically assumes all of the assignor's obligations and duties
recited herein after the effective date of such assignment pursuant to a written
assignment. An assignment by either Owner or Manager of its interest in this
Agreement which is permitted hereby shall inure to the benefit of and be binding
upon their respective successors, heirs, legal representatives or assigns to the
same extent as if such successors were an original party to this Agreement.
15. DEFAULT/STEP-IN RIGHTS
----------------------
15.1. Definition. The occurrence of any one or more of the following
----------
events which is not cured within the time permitted shall constitute a default
under this Agreement (hereinafter referred to as a "Default" or an "Event of
Default") as to the party failing in the performance or effecting the breaching
act:
15.1.1. Manager's Defaults. If Manager shall (a) fail to make any
------------------
monetary payment required hereunder on or before the due date and such failure
continues for five (5) Business Days after receipt by Manager of a written
notice from Owner specifying such failure (excluding, however, any failure that
is attributable to sufficient Owner funds not being available to make such
payment), (b) (i) fail to obtain or maintain or (ii) have revoked any Manager
Operating Permits or Owner Operating Permits which Manager is obligated to
obtain or maintain as set forth on Exhibit "B," if any, (excluding, however, any
such failure which is caused by a Person other than Manager or its Affiliates),
(c) fail to perform or comply with any of the covenants, agreements, terms or
conditions contained in this Agreement applicable to Manager (other than
monetary payments) and such failure shall continue for a period of thirty (30)
days after written notice thereof from Owner to Manager specifying in reasonable
detail the nature of such failure, or, in the case such failure is of a nature
that it cannot, with due diligence and good faith, be cured within thirty (30)
days, if Manager fails to proceed promptly and with all due diligence and in
good faith to cure the same and thereafter to prosecute to completion the curing
of such failure with all due diligence, or (d) take or fail to take any action
to the extent required of Manager under this Agreement that creates a default
under or breach of any Loan Document, any Related Contract or any Governmental
Requirement unless Manager cures such default or breach prior to the expiration
of applicable notice, grace and cure periods, if any (excluding, however, any
such failure which is caused by a Person other than Manager or its Affiliates).
Manager shall only be required to cure any defaults with respect to which
Manager has a duty hereunder.
15.1.2. Owner's Default. If Owner shall (a) fail to make any
---------------
monetary payment required under this Agreement or any Related Contract or under
Owner's Operating Agreement, which duty has not been delegated to Manager,
including Owner's Advances, on or before the due date recited herein and said
failure continues for five (5) Business Days after written notice from Manager
specifying such failure, (b) (i) fail to obtain or maintain or (ii) have revoked
any Owner Operating Permits, (c) cause (i) the rejection of a Manager's
application for or (ii) the revocation of, any Manager Operating Permits, (d)
cause any gaming authority in any jurisdiction to (i) reject or threaten to
reject any application for a gaming license or (ii) revoke or threaten to revoke
a gaming license for Manager or any Affiliate of Manager for any other gaming
facility in any jurisdiction, or (e) fail to perform
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<PAGE>
or comply with any of the other covenants, agreements, terms or conditions
contained in this Agreement or any Related Contract or in Owner's Operating
Agreement, applicable to Owner (other than monetary payments) and such failure
shall continue for a period of thirty (30) days after written notice thereof
from Manager to Owner specifying in reasonable detail the nature of such
failure, or, in the case such failure is of a nature that it cannot, with due
diligence and good faith, cure within thirty (30) days, if Owner fails to
proceed promptly and with all due diligence and in good faith to cure the same
and thereafter to prosecute the curing of such failure to completion with all
due diligence. In addition, any other event described elsewhere as an Event of
Default with respect to Owner shall constitute an Owner Default.
15.1.3. Bankruptcy. If either party (i) applies for or consents
----------
to the appointment of a receiver, trustee or liquidator of itself or any of its
property, (ii) makes a general assignment for the benefit of creditors, (iii) is
adjudicated a bankrupt or insolvent or (iv) files a voluntary petition in
bankruptcy or a petition or an answer seeking reorganization or an arrangement
with creditors, takes advantage of any bankruptcy, reorganization, insolvency,
readjustment of debt, dissolution or liquidation law, or admits the material
allegations of a petition filed against it in any proceedings under any such
General Law then such event shall constitute an Event of Default with respect to
the party to the Agreement to which it has occurred.
15.1.4. Reorganization/Receiver. If an order, judgment or decree
-----------------------
is entered by any court of competent jurisdiction approving a petition seeking
reorganization of Manager or Owner, as the case may be, or appointing a
receiver, trustee or liquidator of Manager or Owner, as the case may be, or of
all or a substantial part of any of the assets of Manager or Owner, as the case
may be, and such order, judgment or decree continues unstayed and in effect for
a period of sixty (60) days from the date of entry thereof then such event shall
constitute an Event of Default with respect to the party to the Agreement to
which it has occurred.
15.2. Delays and Omissions. No delay or omission as to the exercise of
--------------------
any right or power accruing upon any Event of Default shall impair the non-
defaulting party's exercise of any right or power or shall be construed to be a
waiver of any Event of Default or acquiescence therein.
15.3. Disputes in Arbitration. Notwithstanding the provisions of this
-----------------------
Article 15, any occurrence which would otherwise constitute a Default or Event
- ----------
of Default hereunder shall not constitute a Default or Event of Default if such
occurrence relates to or arises out of a dispute which is subject to arbitration
pursuant to the arbitration provisions of Article 21 and the party claimed to be
----------
in Default is timely complying with the arbitration procedures and requirements
set forth in Article 21.
----------
16. REMEDIES AND TERMINATION
------------------------
16.1. Owner's Remedies. Upon the occurrence of a Default by Manager,
----------------
Owner shall be entitled to:
16.1.1. Terminate this Agreement by Owner's written notice to
Manager with such termination being effective thirty (30) days after delivery of
such notice;
16.1.2. Obtain specific performance of Manager's obligations
hereunder and injunctive relief; or
16.1.3. Exercise Owner's "step-in" rights pursuant to Paragraph
16.1.4.
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<PAGE>
16.1.4. Step In Rights. (a) If sufficient Owner funds are
--------------
available, and Manager fails to pay when due any amount which it is Manager's
responsibility to pay from such Owner funds pursuant to this Agreement, upon
five (5) days written notice to Manager with respect to any Operating Expense,
and with respect to Debt Service or any other non-Operating Expense with such
notice, if any, as may be reasonable under the circumstances (except in the
event that Manager has exposure to potential material liability in connection
with making such payments in which case Owner shall give Manager two (2) days
written notice), and without waiving or releasing Manager from any
responsibility hereunder, Owner may (but shall not be required to) pay such
amounts (including fines, penalty interest and late payment fees) and take all
such action as may be necessary in respect thereof. Manager shall, following
such payments by Owner, promptly reimburse Owner from the Bank Accounts to the
extent funds are available for the amount which Manager failed to pay when due.
In addition, if Manager's failure to make such payments has resulted in fines,
penalty interest or late payment fees being assessed and Owner has made such
payments, then Manager shall immediately disburse to Owner from the Bank
Accounts such amounts as may be necessary to reimburse Owner for payments of
fines, penalty interest or late payment fees assessed as a consequence of
Manager's failure to pay and Manager shall promptly deposit into the appropriate
Bank Accounts, from Manager's own funds, the full amount of any such fines,
penalty interest or late payment fees.
(b) If Manager fails to take any action which it is Manager's
responsibility under this Agreement to take and a consequence is to expose Owner
to a material loss or Business patrons to a material risk of physical safety,
upon five (5) days written notice to Manager (except in any emergency in which
case Owner shall give Manager such notice, if any, as is reasonable under the
circumstances), without waiving or releasing Manager from any obligation of
Manager hereunder, Owner may (but shall not be required to) take such actions as
may be necessary to protect the Owner from such a material loss and/or to
protect the Business patrons. Manager shall, following any payments by Owner
made with respect to such actions, promptly reimburse Owner from the Bank
Accounts, to the extent funds are available, the amount which Owner has
expended. In addition, if Manager's failure to take such action has resulted in
fines or late payment fees being assessed and Owner has made such payments, then
Manager shall immediately disburse to Owner from the Bank Accounts such amounts
as are necessary to reimburse Owner for any fines or late payment fees paid by
Owner in connection with taking such action on Manager's behalf and Manager also
shall deposit into the appropriate Bank Account, from Manager's own funds, the
full amount of such payment made to Owner.
16.2. Manager's Remedies. Upon the occurrence of a Default by Owner,
------------------
Manager shall be entitled to:
16.2.1. Terminate this Agreement by Manager's written notice to
Owner, with such termination being effective thirty (30) days after delivery of
such notice, provided that Manager has given Lender written notice of an
opportunity to cure Owner's Default; or
16.2.2. Obtain specific performance of Owner's obligations hereunder
and injunctive relief.
16.2.3. Lender Rights to Cure. If Owner fails to timely make any
---------------------
payment required under this Agreement, Lender shall have fifteen (15) Business
Days after written notice from Owner or Manager (whichever comes first) to cure
such Default by making such
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<PAGE>
payment. In the event Owner shall fail to timely perform or comply with any of
the covenants, agreements, terms or conditions in this Agreement applicable to
Owner, Manager shall give written notice to Lender, prior to declaring Owner in
Default and Lender shall have cure rights which are the same as Owner's. All
such cure rights vested in Lender under this Paragraph 16.2.3 shall run
----------------
consecutively with those vested in Owner under Paragraph 16.1.4.
----------------
16.3. Remedies Nonexclusive. No remedy granted to either Owner or
---------------------
Manager under Sections 16.1 and 16.2, respectively, is intended to be exclusive
------------- ----
of any other remedy herein or by General Law provided, but each shall be
cumulative and shall be in addition to every other remedy given hereunder or now
or hereafter existing at law or in equity.
16.4. Termination. This Agreement shall terminate upon the occurrence
-----------
of any of the following events:
16.4.1. The expiration of the stated Term including any extensions
effected by Manager in accordance with the terms hereof;
16.4.2. Agreement by both parties in writing to terminate this
Agreement;
16.4.3. If the Pre-Opening Conditions are not waived by Owner or
Manager or appropriate Governmental Authority or satisfied by Owner or Manager
within twelve (12) months from the date hereof, Owner or Manager shall have the
option to terminate this Agreement by written notice to the other in which event
this Agreement shall terminate and neither Owner nor Manager shall have any
further duties or obligations whatsoever to the other and each party shall pay
all of its costs and expenses incurred in connection with this Agreement through
the date of termination.
16.4.4. Owner is not awarded a Riverboat Gaming License from the
Louisiana Riverboat Gaming Enforcement Division for the operation of the
Business at the Project, Owner and Manager shall each have the option to
terminate this Agreement at any time after written receipt of notice thereof or
in the event such license is revoked or suspended for in excess of ten (10) days
by written notice to the other, in which event this Agreement shall immediately
terminate and neither Owner nor Manager shall have any further duties or
obligations whatsoever to the other;
16.4.5. Manager is unable or unwilling to comply with the terms or
conditions, including financial obligations, imposed by any Governmental
Authority in connection with any Operating Permit, at the election of Owner,
effective upon delivery of written notice to Manager;
16.4.6. The exercise of any termination right expressly granted to
either Owner or Manager in this Agreement.
16.5. Effect of Termination. Upon termination of this Agreement, all
---------------------
sums owed by either party to the other shall be paid within thirty (30) days of
the termination date. In the event of any termination of this Agreement for any
reason other than as a consequence of Manager's Default, or the failure of one
or more of the Pre-Opening Conditions to be satisfied or pursuant to Paragraph
---------
16.4.4, Owner shall, notwithstanding such termination, be liable to Manager for
- ------
the fees earned and reasonable out-of-pocket expenses incurred by Manager in
conformity with this Agreement prior to such termination as follows: (i) unpaid
accrued and payable Base Management Fee and Manager's Advances (including any
unpaid accrued interest thereon), if any, plus (ii) all reimbursable costs to
Manager which were properly incurred prior to termination in connection with the
performance of Manager's
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<PAGE>
obligations in conformity with this Agreement, plus (iii) such losses and
damages as Manager may have incurred or suffered by reason of such termination.
If the termination of this Agreement is a consequence of Manager's Default,
Manager shall not have the right to collect any amounts due Manager under this
Section 16.5 from the Bank Accounts, nor shall Manager have the right to
- ------------
exercise set-off with respect to such amounts owed. In such event, Owner shall
pay Manager the amounts owed Manager described in clauses (i) and (ii) above
through the date of termination, after deducting therefrom any amounts owed by
Manager to Owner together with the amount of any damages or expenses incurred by
Owner as a result of Manager's Default.
16.6. Proprietary Information. In the event of termination of this
-----------------------
Agreement, Manager will, subject to applicable Gaming and/or General Laws,
relinquish to Owner all of the Books and Records and the marketing, credit and
customer data contained in operating records of the Business and which are
generated by Manager in connection with its duties hereunder. As of the
termination of this Agreement, Manager shall have the right to copy such records
prior to relinquishing control over them to Owner. Owner and Manager
acknowledge that pursuant to the sharing of information by and among Owner,
Manager and Manager's Affiliates, Owner, Manager and Manager's Affiliates will
have information and copies of records from the Business prior to termination
and nothing herein shall prevent the use of such information so obtained. Upon
termination of this Agreement for any reason, Manager's marketing, credit and
customer data and proprietary computer programs generated prior to the date
hereof shall remain the sole property of Manager, and shall not be used or
disclosed to other Persons by Owner or its agents or Affiliates. Owner
recognizes, acknowledges and agrees that Manager and/or its Affiliates manage
other casinos in addition to the Business and that Manager and/or its Affiliates
shall, during the Term and thereafter, have and enjoy the continuing right to
use all portions of its national marketing database in conjunction with
management, operation or ownership by Manager and/or its Affiliates of any other
such properties.
16.7. Manager Responsibilities. In the event of termination of this
------------------------
Agreement, Manager will relinquish control of (i) all Bank Accounts, (ii) the
Capital and Riverboat Replacements Funds and (iii) all funds in or accounts in
Manager's control which relate to the Related Amenities or the portion of the
Riverboat related to Gaming Activities other than the amount of the Bankroll to
which Manager is entitled pursuant to Section 22.2. Manager shall make its
Senior Staff available to Owner for a period of sixty (60) days at Owner's
expense to ensure an orderly and uninterrupted transition of the management of
the Business.
16.8. Survival of Representations and Indemnifications. Notwithstanding
------------------------------------------------
anything contained herein to the contrary, the parties acknowledge that the
representations, covenants and indemnifications set forth in Articles 9, 10, 11,
--------
13, 16 and Sections 6.6, 23.4, 23.6, 23.8, 23.9, 23.10 and 23.14 shall survive
--------
the termination or expiration of this Agreement. All amounts due and payable
from either party to the other shall survive the termination of this Agreement.
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<PAGE>
17. LICENSE PROTECTION
------------------
17.1. Owner Denial. If at any time (a) either Owner or any Person
------------
owning any of the issued and outstanding stock of (or beneficial interest in)
either Owner or an Affiliate of Owner or an officer, director, partner or member
of any of them is denied a license, found unsuitable, or is denied any other
Approval with respect to the Business or any other gaming operation in the
United States or any other jurisdiction by a Gaming Authority because of such
Person's misconduct or association with any other Person, or is required by any
Gaming Authority to apply for an Approval, does not apply within any required
time limit (including extensions, if any) or wrongfully withdraws any
application for Approval, and if the result of the foregoing has or would have
an adverse effect on Manager or any Affiliate of Manager with respect to its
operation or ownership of a gaming establishment under any Gaming Authority in
the United States or any other jurisdiction or does or would materially delay
obtaining any Approval affecting Manager or any Affiliate of Manager, or (b) any
Gaming Authority commences or threatens to commence any suit or proceeding
against either Manager or an Affiliate or to terminate or deny any right or
Approval of Manager or any Affiliate because of the reputation or misconduct of
Owner, any Affiliate of Owner or any Person owning a beneficial interest in
Owner (all of the foregoing events described in clauses (a) and (b) above are
collectively referred to as an "Owner Denial"), said Owner Denial shall be a
Default and shall entitle Manager to its remedies under Article 16. If Manager
----------
exercises its right to terminate this Agreement pursuant to Article 16 solely as
----------
the result of an association of Owner or any Person associated with Owner, there
shall be no Default and this Agreement shall not terminate if Owner ends such
association within thirty (30) days after Manager's notice or such other period
of time, if any, as the Gaming Authority gives for termination of such
association. Owner and all Persons associated with Owner shall promptly, and in
all events within any time limit established by Law or such Gaming Authority,
furnish each Gaming Authority with any information requested by such Gaming
Authority and shall otherwise fully cooperate with all Gaming Authorities
including any required inspections. The purpose of this Section 17.1 is solely
to protect existing licenses of Manager and Manager's Affiliates. This Section
17.1 does not apply to any event described above that does not jeopardize the
continued viability of such licenses. Any Owner Denial that is attributable in
whole or in part to the acts or omissions of Manager shall not constitute an
Owner Default.
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17.2. Manager's Louisiana Licensing.
-----------------------------
17.2.1. Manager Licensing. Manager shall use commercially
-----------------
reasonable efforts to apply for and pursue all Manager Operating Permits and
those Owner Operating Permits identified on Exhibit "B," if any, expeditiously
as possible. If Manager must apply for any such Operating Permit earlier than
set forth above to avoid being disqualified or adversely affecting the
Construction Schedule or the Estimated Opening Date, Manager shall do so. If,
by final and non-appealable action, Manager shall have been denied any Manager
Operating Permits, Owner shall have the right to terminate this Agreement upon
written notice to Manager by Owner. In the event Manager is issued any Manager
Operating Permit which is subject to or conditioned upon: (i) a requirement of
Manager which is ministerial in nature, then if Manager promptly gives Owner
reasonably satisfactory written assurance that such condition can reasonably be
complied with on or before the Estimated Opening Date, Manager shall be deemed
licensed for purposes hereof; or (ii) any other requirement of Manager, then if
Manager gives Owner reasonably satisfactory written assurance that such
condition can reasonably be complied with on or before the Estimated Opening
Date within the earlier of: (a) the Estimated Opening Date; or (b) fifteen (15)
Business Days after Manager receives notice of such condition, then Manager
shall be deemed licensed for purposes hereof. If Manager is unable or unwilling
to give Owner such reasonably satisfactory written assurance, Owner shall have
the right, upon written notice to Manager, to terminate this Agreement.
17.2.2. Manager Denial. If at any time (a) Manager, any Affiliate
--------------
of Manager or any Person associated in any way with Manager is (1) denied a
license, found unsuitable, or is denied any other Approval with respect to the
Business or any other gaming operation elsewhere in the United States by a
Gaming Authority or (2) required by any Gaming Authority to apply for an
Approval, does not apply within any required time limit (including extensions,
if any) or wrongfully withdraws any application for Approval, and if the result
of the foregoing has or would have an adverse effect on Owner or any Affiliate
of Owner or any officer or director of Owner or its Affiliates with respect to
such Person's or Owner's or its Affiliates' operation of a gaming establishment
under any Gaming Authority in the United States, or does or would materially
delay obtaining any Approval affecting Owner or any Affiliate of Owner, or (b)
any Gaming Authority commences or threatens to commence any suit or proceeding
against either Owner or an Affiliate or to terminate or deny any right or
Approval of Owner or any Affiliate because of the reputation or misconduct of
Manager, any Affiliate of Manager or any Person owning a beneficial interest in
Manager (all of the foregoing events described in (a) and (b) above are
collectively referred to as a "Manager Denial"), said Manager Denial shall
entitle Owner to terminate this Agreement upon written notice to Manager. If
Owner exercises its right to terminate this Agreement pursuant to this Paragraph
---------
17.2.2 solely as the result of an association of Manager or any Person
- ------
associated with Manager, this Agreement shall not terminate if Manager ends such
association within such period of time, if any, as the Gaming Authority gives
for terminating such association. Manager and all Persons associated with
Manager shall promptly, and in all events within any time limit established by
General Law or such Gaming Authority, furnish each Gaming Authority any
information requested by such Gaming Authority and shall otherwise fully
cooperate with all Gaming Authorities including any required inspections. The
purpose of this Paragraph 17.2.2 is solely to protect existing
----------------
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<PAGE>
and future licenses of Owner and Owner's Affiliates and of their respective
officers and directors. Notwithstanding the foregoing, this Paragraph 17.2.2
----------------
does not apply to any event described herein that does not jeopardize the
continued viability of such licenses. Any Manager Denial that is attributable in
whole or in part to the acts or omissions of Owner shall not entitle Owner to
terminate this Agreement.
17.3. Owner's Louisiana Licensing. Owner shall maintain any Owner
---------------------------
Operating Permits the responsibility for the maintenance of which Owner has not
requested of Manager in writing pursuant to this Agreement. Notwithstanding the
foregoing, Manager shall maintain the Owner Operating Permits listed on Exhibit
"B" unless otherwise instructed by Owner in writing.
18. UNAVOIDABLE DELAYS
------------------
The provisions of this Article 18 shall be applicable if there shall occur
----------
during the Term any (i) strike(s), lockout(s) or labor dispute(s), (ii)
inability to obtain labor or materials, or reasonable substitutes therefor,
(iii) acts of God, governmental restrictions, regulations or controls, enemy or
hostile governmental action, civil commotion, fire or other casualty, (iv) delay
attributable to the failure to obtain any Construction Permit, Operating Permit
or any Approval for reasons that are not the fault of or beyond the reasonable
control of the party obligated or (v) other conditions similar to those
enumerated in this Article 18 beyond the reasonable control of the party
----------
obligated to perform (collectively referred to as "Unavoidable Delay"). If
Manager or Owner shall, as the result of any of the above-described events, fail
to timely perform any of its obligations under this Agreement, then, upon
written notice to the other within a reasonable time that such event has
occurred, such failure shall be excused and not be a breach of this Agreement by
the party claiming an Unavoidable Delay, but only to the extent occasioned by
such event. If any right or option of either party to take any action under or
with respect to the Term is conditioned upon the same being exercised within any
prescribed period of time or at or before a named date, then such prescribed
period of time or such named date shall be deemed to be extended or delayed, as
the case may be, upon written notice, as provided above, for a time equal to the
period of the Unavoidable Delay. Notwithstanding anything contained herein to
the contrary, the provisions of this Article 18 shall not be applicable to the
time periods for satisfying Manager's or Owner's obligation to make any payments
to the other pursuant to the terms of this Agreement nor shall this Article
operate to extend any time period set forth in Section 16.5.
------------
19. RELATIONSHIP, AUTHORITY AND FURTHER ACTIONS
-------------------------------------------
19.1. No Joint Venture or Ownership. Nothing contained in this
-----------------------------
Agreement shall be deemed or construed by the parties or by any third party as
(i) creating the relationship of a partnership or joint venture between the
parties to this Agreement, or (ii) creating or vesting any right, title,
interest, estate, equity participation or beneficial ownership interest in favor
of Manager in or to the Riverboat or the Related Amenities except the
contractual rights created in Manager by this Agreement. Neither any provisions
contained herein nor any acts of the parties pursuant to this Agreement shall be
deemed to create any relationship between the parties other than the
relationship of owner and manager, as provided in this Agreement.
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<PAGE>
19.2. Affiliates.
----------
19.2.1. The parent of Manager and/or other Affiliates of Manager may
provide services to, provide loans and funds to, negotiate for, provide
personnel to, and, from time to time, take actions on behalf of or for the
benefit of Manager by direct dealings with Owner or those acting for it.
Manager shall be responsible to Owner under this Agreement for the acts of
Affiliates in the performance of services of Manager under this Agreement as if
such Affiliates were Manager's employees or agents.
19.2.2. The parent corporations of Manager shall not be liable to
Owner and the parent corporations of Owner shall not be liable to Manager for
obligations or liabilities of Manager or Owner, respectively, in the absence of
a direct and independent contract right between such parent corporations and
Owner or Manager, as the case may be.
19.2.3. All contracts and other arrangements with Affiliates of
Manager shall automatically terminate within sixty (60) days of terminating this
Agreement. The parties acknowledge that in the event of a dispute between the
parties concerning the services, fees or charges of an Affiliate of Manager, if
the parties cannot resolve the matter within thirty (30) days, it shall be
submitted to arbitration pursuant to the provisions of Article 21, and the
----------
results of the arbitration shall be final on both parties and any adjustment, if
required, shall be paid by the applicable party.
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<PAGE>
20. FINANCING MATTERS
-----------------
20.1. Restrictions on Financing Representations. In no event may either
-----------------------------------------
party represent that the other party or any Affiliate thereof is or in any way
may be liable for the obligations of such party in connection with (i) any
financing agreement or (ii) any public or private offering or sale of
securities. If Owner, or any Affiliate of Owner shall, at any time, sell or
offer to sell any securities issued by Owner or any Affiliate of Owner through
the medium of any prospectus or otherwise which relates to the Riverboat and/or
Related Amenities or the Business, it shall do so only in compliance with all
applicable General Laws, and shall clearly disclose to all purchasers and
offerees that (a) neither Manager nor any of its Affiliates, officers,
directors, agents or employees shall in any way be deemed to be an issuer or
underwriter of such securities and (b) Manager and its Affiliates, officers,
directors, agents and employees have not assumed and shall not have any
liability arising out of or related to the sale or offer of such securities,
including without limitation, any liability arising out of or related to the
sale or offer of such securities, including without limitation, any liability or
responsibility for any financial statements, projections or other information
contained in any prospectus or similar written or oral communication unless
Manager has consented to such disclosure or provided such information to Owner
or its Affiliate in writing. Manager shall have the right to approve any
description of Manager or its Affiliates, or any description of this Agreement
or of Owner's relationship with Manager hereunder, which may be contained in any
prospectus or other similar communication (unless such information was furnished
to Owner by Manager in writing), and Owner agrees to furnish copies of all such
materials to Manager for such purposes not less than twenty (20) days prior to
the delivery thereof to any prospective purchaser or offeree. Owner agrees to
indemnify, defend or hold Manager and its Affiliates, officers, directors,
agents and emploees, free and harmless from any and all liabilities, costs,
damages, claims or expenses arising out of or related to the breach of its
obligations under this Section 20.1. Manager agrees to reasonably cooperate
------------
with Owner in the preparation of such agreements and offerings.
20.2. Permissible Disclosure. Subject to Manager's right of review set
----------------------
forth in Section 20.1, Owner may represent that the Business shall be managed by
Manager and Manager may represent that it manages the Business and both may
describe the terms of this Agreement and the physical characteristics of the
Project in regulatory filings and public or private offerings. Moreover,
nothing in this Article 20 shall preclude the disclosure of (i) already public
----------
information, (ii) audited or unaudited Financial Statements from the Business
required to be prepared by the terms of this Agreement, (iii) any information or
documents required to be disclosed to or filed with any Governmental Authority
or pursuant to General Laws or (iv) the amount of the Base Management Fee earned
in any period. Both parties shall use commercially reasonable efforts to
consult with the other concerning disclosures as to the Business. Owner and
Manager shall cooperate with each other in providing financial information
concerning the Business and Manager that may be requested by any Lender or
required by any Governmental Authority.
20.3. Compliance by Affiliates. Both parties shall use commercially
------------------------
reasonable efforts to cause their respective Affiliates or controlling Persons,
and any partner or joint venturer, to comply with all provisions of this Article
-------
20 that are applicable to such party.
- --
20.4. Estoppel Certificates. Each party shall cooperate with the other
---------------------
in providing
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<PAGE>
information about the status of this Agreement to facilitate financing
requirements of either party including absence of defaults or potential
defaults, nonmodification and other pertinent information. Information will be
provided within ten (10) days after any request therefor, on the form requested
and at no charge to the requesting party.
21. ARBITRATION
-----------
21.1. Financial Disputes. As to the financial disputes listed below,
------------------
the arbitration provisions shall be the exclusive dispute resolution procedures
and no such dispute shall be a Default by either Owner or Manager under this
Agreement until such time as either party fails to comply with an arbitrator's
decision with respect thereto within the time period given by the arbitrator.
21.1.1. Covered Disputes. In the case of a dispute with respect to
----------------
any of the following matters, either party may submit such matter to
arbitration, which shall be conducted by the Arbitration Accountants (as
described in Section 21.1.2):
--------------
(a) computation of the Base Management Fee under the provisions of
Article 8;
(b) reimbursements due to Manager under this Agreement;
(c) any adjustment in the Working Capital under the provisions of
Paragraph 7.1.1;
(d) any dispute as to whether a given expenditure should be
capitalized or expensed;
(e) any dispute concerning the approval of any Budget, or any
revisions thereto;
(f) any dispute concerning the replacement cost of the Riverboat or
Related Amenities, the full insurable value of the Riverboat or Related
Amenities, or the amount or nature of the insurance to be obtained or maintained
pursuant to Article 11;
(g) any dispute concerning the destruction or condemnation of all or
a portion of the Riverboat or Related Amenities or the respective rights of
Owner and Manager pursuant to Article 12 with respect to such destruction or
condemnation; or
(h) any dispute arising under Section 6.8.
The decision of the Arbitration Accountants with respect to any matters
submitted to them under this Article 21 shall be binding on both parties hereto
----------
(subject, however, to the provisions of Section 21.3) and shall not be subject
-------
to further review or appeal. Judgment upon any arbitration decision or award
may be entered by any court of competent jurisdiction.
21.1.2. Arbitration Accountants. The "Arbitration Accountants"
-----------------------
(herein so called) shall be one of the six (6) largest firms of independent
certified public accountants in the United States (but shall not be the Auditors
or any firm of independent certified public accountants engaged by either Owner
or Manager or any Affiliates of either of them as auditors). In the event the
conditions set forth in the preceding sentence eliminate all six (6) of the
largest firms of independent certified public accountants, then the Arbitration
Accountants shall be chosen from other national accounting firms.
Notwithstanding the foregoing, the Arbitration Accountants shall have expertise
in gaming operations and/or maritime matters to the extent such expertise is
applicable to the dispute at hand. The party desiring to submit any matter to
arbitration under clauses (a) through (h) of Section 21.1.1 shall do so by
--------------
written notice to the other party, which notice shall set forth the items to be
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arbitrated, a list of five (5) eligible firms of accountants and such party's
choice of one of the five (5) firms of accountants. The party receiving such
notice shall within three (3) Business Days after receipt of such notice either
approve such choice or designate one of the remaining four (4) firms by written
notice given to the first party, and the first party shall within three (3)
Business Days after receipt of such notice either approve such choice or
disapprove the same. If both parties shall have agreed under the preceding
sentence, then such firm shall be the Arbitration Accountants for the purposes
of arbitrating the dispute; otherwise, within three (3) Business Days the two
(2) firms chosen will select a firm from among the remaining three (3) to be the
Arbitration Accountants for such purpose. The Arbitration Accountants shall
render a decision in accordance with the procedures described in Paragraph
---------
21.1.3 within twenty (20) Business Days after being notified of their selection.
- ------
The fees and expenses of the Arbitration Accountants will be paid by the non-
prevailing party, unless the dispute involves insurance, in which case they
shall be an Operating Expense. In connection with a dispute described in clause
(g) of Paragraph 21.1.1., staff members of the Arbitration Accountants or
----------------
consultants possessing such expertise hired by the Arbitration Accountants with
recognized expertise in the valuation of casino properties will be used.
21.1.3. Arbitration Procedures and Discovery. The parties hereby
------------------------------------
agree that in any such arbitration each party shall be entitled to discovery of
the other party as provided by Louisiana law; provided, however, any such
discovery shall be completed within two (2) months from the date the Arbitration
Accountants are appointed unless such period is extended by agreement of the
parties. Any disputes concerning discovery shall be determined by the
Arbitration Accountants with any such determination being binding on the
parties. Each party shall cooperate with the other with respect to the timely
completion of such discovery. In all arbitration proceedings submitted to the
Arbitration Accountants, the Arbitration Accountants shall be required to agree
upon and approve the substantive position advocated by Owner or Manager with
respect to each disputed item and shall not adopt an alternative or compromise
position. Any decision rendered by the Arbitration Accountants that does not
reflect a substantive position advocated by Owner or Manager shall be beyond the
scope of authority granted to the Arbitration Accountants and consequently may
be rejected by either party. All proceedings by the Arbitration Accountants
shall be conducted in accordance with the then current rules regarding
commercial arbitration of the American Arbitration Association, except to the
extent the provisions of such rules are modified by this Agreement or the mutual
agreement of the parties on the occasion of an arbitration. Unless otherwise
agreed, all arbitration proceedings shall be conducted in New Orleans,
Louisiana. In rendering their decision, the Arbitration Accountants shall issue
a decision of their findings and conclusions and shall not add to, subtract from
or otherwise modify the provisions of this Agreement except to the extent
required to conclude the dispute.
21.1.4. No Timely Decision. To the maximum extent practicable,
------------------
the Arbitration Accountants and the parties shall take any action necessary to
require that the arbitration proceeding be concluded within the required 20-day
period but in any event within thirty-five (35) days after the Arbitration
Accountants have received notice of their selection as such.
21.2. General Arbitration. Either party shall have sixty (60) days
-------------------
after the inception of any disputes concerning the compliance of the other
party's performance with
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<PAGE>
the standards established by this Agreement not covered by Section 21.1 to elect
that such dispute be settled by binding arbitration in St. Bernard Parish,
Louisiana. The party whose performance is in dispute may commence the running of
such 60-day period by delivering written notice of a dispute to the other party.
Such election shall be made by such other party by commencing the arbitration or
delivering a notice to the contrary to the party whose performance is in
dispute.
21.2.1. Arbitrators. The arbitration shall be conducted by three
-----------
(3) arbitrators appointed in accordance with the provisions hereof and, to the
extent consistent with this Article 22, in accordance with the then prevailing
rules regarding commercial arbitration of the American Arbitration Association
(or any organization successor thereto) in metropolitan New Orleans, Louisiana.
Owner and Manager shall each prepare a list of five (5) individuals to serve as
arbitrators. Owner and Manager shall each choose one individual from the
other's list to serve as an arbitrator. If Owner or Manager fails to timely
select an arbitrator then the party that has timely selected an arbitrator shall
be permitted to choose the second arbitrator. The parties shall respond to any
proposed list of arbitrators within ten (10) days after the receipt thereof.
The two (2) arbitrators shall then agree on a third arbitrator within ten (10)
days. The arbitrators shall have the right to retain and consult experts and
competent authorities skilled in the matters under arbitration. The arbitrators
shall render their decision and award, upon the concurrence of at least two (2)
of their number, within three (3) months after the appointment of the last
arbitrator. In all arbitration proceedings submitted to the arbitrators, the
arbitrators shall be required to agree upon and approve the substantive position
advocated by Owner or Manager with respect to each disputed issue and shall not
adopt an alternative or compromise position. Judgment may be entered on the
determination and award made by the arbitrators in any court of competent
jurisdiction and may be enforced in accordance with the laws of the State of
Louisiana. The arbitrators will follow and apply the terms of this Agreement
and Louisiana law in rendering their decisions.
21.2.2. Procedures and Discovery. The parties hereby agree that in
------------------------
any such arbitration each party shall be entitled to discovery of the other
party as provided by Louisiana law; provided, however, any such discovery shall
be completed within two (2) months from the date the last arbitrator is
appointed, unless such period is extended by agreement of the parties. Any
disputes concerning discovery shall be determined by the arbitrators with any
such determination being binding on the parties. Each party shall cooperate
with the other with respect to the timely completion of such discovery. The
arbitrators shall apply Louisiana substantive law and the Louisiana evidence
law, as appropriate, to the proceeding. The arbitrators shall prepare in
writing and provide to the parties factual findings and the reasons on which the
decision is based. Each party shall bear its own expenses related to the
arbitration including, without limitation, attorneys' fees, and shall divide the
arbitration expenses and fees equally.
21.2.3. No Timely Decision. If for any reason whatsoever the
------------------
written decision and award of the arbitrators shall not be rendered within the
time limits set forth in this Article 21, either party may apply to any court of
----------
competent jurisdiction to determine the question in dispute consistently with
the provisions of this Agreement by action, proceeding or otherwise (but not be
a new arbitration proceeding).
21.2.4. Extension of Time. Any time periods for performance of a
-----------------
matter
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<PAGE>
submitted to arbitration hereunder shall be extended by the amount of
time taken by the arbitration.
21.3. Choice of Forum. By their execution of this Agreement, Owner and
---------------
Manager agree to pursue the enforcement of and be bound by the enforcement of
any arbitration awards which result from arbitrations pursuant to this Article
-------
21 in the 34th Judicial District for the Parish of St. Bernard, Louisiana.
- --
22. BANKROLL
--------
At least fifteen (15) days prior to the Estimated Opening Date, Owner shall
provide the amount of cash Manager reasonably determines to be necessary to fund
the Gaming Activities, but in no event less than the amount required by Law or
Gaming Authorities (the "Bankroll").
23. MISCELLANEOUS
-------------
23.1. Authorizations. Until Manager shall advise Owner to the contrary,
--------------
Owner may rely on the general manager of the Project as being authorized to
take, approve or consent to any action required or permitted to be taken or
approved by Manager. Owner shall advise Manager as soon as practicable after
the date hereof as to the individuals upon whom Manager may rely with respect to
any actions, consents or approvals required hereunder.
23.2. Notices. Any notices or other communications required or
-------
permitted hereunder shall be sufficiently given if in writing and addressed as
shown below and (i) delivered personally, (ii) sent by overnight commercial
courier, (iii) sent by registered or certified mail, return receipt requested,
postage prepaid or (iv) transmitted by facsimile machine. All notices
personally delivered or sent by overnight courier shall be deemed received on
the date of delivery. Notices sent by facsimile transmission shall be deemed
received by the addressee upon the transmitter's receipt of acknowledgment of
receipt from the offices of such addressee provided that hard copy sent to the
address indicated herein for such addressee is put in the mail with sufficient
postage within twenty-four (24) hours of transmission. All notices forwarded by
registered or certified mail shall be deemed received on a date five (5) regular
United States Postal Service delivery days immediately following date of deposit
in the mail. Notwithstanding anything to the contrary herein, the return
receipt indicating the date upon which all notices were received shall be prima
facie evidence that such notices were received on the date on the return
receipt.
If to Owner:
American Entertainment, L.L.C.
c/o Circus Circus Louisiana, Inc.
2880 Las Vegas Boulevard South
Las Vegas, Nevada 89109
Attn: General Counsel
With a copy to:
American Entertainment, L.L.C.
c/o American Entertainment Corporation
8301 West Judge Perez Drive, Suite 305
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<PAGE>
Chalmette, Louisiana 70043
If to Manager:
Circus Circus Louisiana, Inc.
2880 Las Vegas Boulevard South
Las Vegas, Nevada 89109
Attn: General Counsel
The addresses and addressees may be changed by giving notice of such change
in the manner provided herein for giving notice. Unless and until such written
notice is received, the last address and addressee given shall be deemed to
continue in effect for all purposes. No notice to either Owner or Manager shall
be deemed given or received unless the entity noted "With a copy to" is
simultaneously delivered notice in the same manner as any notice given to either
Owner or Manager.
23.3. Entire Agreement. This Agreement embodies the entire agreement
----------------
and understanding of Owner and Manager relating to the subject matter hereof and
supersedes all prior representations, agreements and understandings, oral or
written, relating to such subject matter.
23.4. Confidentiality.
---------------
23.4.1. Generally. Except as otherwise set forth in Section 20.2
--------- ------------
and Article 17, both parties shall maintain confidentiality with respect to
----------
material developments in the course of development of the Project and operation
of the Business, subject to Governmental Requirements, Gaming Law and General
Law. Except for the provisions of Section 23.6 and as required by any General
------------
Law (including, without limitation, federal securities and stock exchange or
NASD requirements) and Gaming Authorities, material confidential information
shall be made available only to such of Owner's or Manager's employees and
consultants as are required to have access to the same in order for the
recipient party to adequately use such information for the purposes for which it
was furnished. Any Person to whom such information is disclosed shall be
informed of its confidential nature and the party disclosing such information
shall obtain a confidentiality agreement from such Person the terms of which
shall be consistent with the provisions of this Section 23.4. Information
------------
provided by one party to the other shall be presumed confidential unless the
information is (a) published or in the public domain other than as a result of
any action by the recipient thereof, (b) disclosed to the recipient by a third
party or (c) presented to the recipient under circumstances which clearly and
directly indicate the delivering party does not intend such information to be
confidential.
23.4.2. Securities Law Requirements. Owner acknowledges that
---------------------------
Manager's parent is a publicly held company and that trading in its securities
based on non-public information or unauthorized disclosure or other use of
material developments could expose both Manager's parent and Owner to
significant penalties. Owner shall take appropriate precautions to inform its
employees and independent contractors of such requirements, although Manager
shall be responsible for advising those employees of or independent contractors
to Owner under Manager's control. In the event Owner or any Affiliate of Owner
becomes a publicly-held company, Manager shall take appropriate precautions to
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inform its employees and independent contractors, as well as the employees of or
independent contractors to Owner under Manager's control, that trading in the
securities of Owner or such Affiliate based on non-public information or
unauthorized disclosure or other use of material developments could expose
Owner, Manager and such Person to significant penalties.
23.5. Approvals. Any consent or approval referred to herein (by
---------
whatever words used) of either party hereto shall not be unreasonably withheld,
delayed or conditioned, except in those situations in which this Agreement
explicitly gives the party absolute or sole discretion to give or withhold such
approval or consent. Except as otherwise expressly provided herein, whenever
either party has called upon the other to execute and deliver a consent or
approval in accordance with the terms of this Agreement, the failure of such
party to expressly disapprove within ten (10) Business Days after written
request therefor in accordance with the terms of Section 23.2, or such other
period as specifically set forth herein is given, shall be deemed to be a
consent or approval. In the event that either party refuses to give its consent
or approval to any request by the other, such refusing party shall indicate by
written notice to the other the reason for such refusal in sufficient detail for
the party requesting such consent or approval to understand the exact basis for
withholding such consent or approval.
23.6. Conflict of Interest/Non-Competition.
------------------------------------
23.6.1. Conflicts. Nothing contained in this Agreement shall be
---------
construed to restrict or prevent, in any manner, any party from engaging in any
other businesses or investments during the Term, including without limitation,
any similar or competitive gaming establishment. Owner acknowledges that
Manager and/or it Affiliates operate other gaming establishments and may in the
future operate additional gaming establishments in different areas of the world
and that marketing efforts may cross over into the same markets and with respect
to the potential customer base of the Business. Manager, in the course of
managing the Business, may refer customers of the Business and other parties to
other facilities operated by Affiliates of Manager to utilize gaming,
entertainment and other amenities without payment of any fees to Owner. Owner
consents to such activities and agrees that such activities will not constitute
a conflict of interest, provided that if Owner uses Manager's marketing
Affiliate, its activities will not constitute a conflict of interest so long as
Manager's marketing Affiliate establishes its compensation structure for
personnel not related to a particular Affiliate in such a manner that the
Business is not generally disadvantaged with respect to other Circus Circus
units. Owner acknowledges and agrees that Manager may have and distribute
promotional materials for the Manager's Affiliates and facilities, including
casinos, at the Project if reciprocal arrangements are made in favor of the
Business at the Manager's Affiliates and other facilities. Manager acknowledges
that Owner and/or its Affiliates may own an interest in other casinos outside
the State of Louisiana and in the future may acquire an interest or operate
other casinos that are in the State of Louisiana or elsewhere and that marketing
efforts may cross over into the same markets and with respect to the same
potential customer base as Manager's or its Affiliates' other gaming facilities.
Manager consents to such activities and agrees that such activitieswill not
constitute a conflict of interest.
23.7. Exhibits. All Exhibits attached hereto are incorporated herein by
--------
this reference as if fully set forth herein.
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<PAGE>
23.8. Choice of Law and Construction of Agreement, Service of Process and
-------------------------------------------------------------------
Jurisdiction. This Agreement shall be governed by and construed under the laws
- ------------
of Louisiana. This Agreement shall be deemed to contain all provisions
required by the Gaming Laws and is subject to any approvals required under the
Gaming Laws. To the extent any provision in this Agreement is inconsistent with
the Gaming Laws, the Gaming Laws shall govern. Should any provision of this
Agreement require judicial interpretation or as to any arbitration under this
Agreement, it is agreed that the court or arbitrators interpreting or
considering such provision shall not apply the presumption that the terms hereof
shall be more strictly construed against a party by reason of the rule or
conclusion that a document should be construed more strictly against the party
who itself or through its agent prepared the same. It is agreed and stipulated
that all parties hereto have participated equally in the preparation of this
Agreement and that legal counsel was consulted by each party before the
execution of this Agreement.
23.9. Amendment and Waiver. This Agreement may not be amended or
--------------------
modified in any way except by an instrument in writing executed by all parties
hereto, except for agreements signed by the waiving party. A waiver by a party
of any of the terms or provisions of this Agreement shall not constitute a
subsequent waiver of any of the terms or provisions of this Agreement.
23.10. INTENTIONALLY DELETED.
23.11. Severability. Except as expressly provided to the contrary
------------
herein, each section, party, term or provision of this Agreement shall be
considered severable, and if for any reason any section, party, term or
provision herein is determined to be invalid and contrary to or in conflict with
any existing or future law or regulation by a court or governmental agency
having valid jurisdiction, such determination shall not impair the operation of
or have any other effect on other sections, parts, terms or provisions of this
Agreement as may otherwise remain enforceable and intelligible, and the latter
shall continue to be given full force and effect and bind the parties hereto,
and said invalid sections, parts, terms or provisions shall not be deemed to be
a part of this Agreement. If any provisions are void or unenforceable if
enforced to their maximum extent, the provisions in question shall be enforced
to the maximum extent such provisions are enforceable.
23.12. Governing Document. This Agreement shall govern in the event of
------------------
any inconsistency between this Agreement and any of the Exhibits attached
hereto.
23.13. Inspection of Project. Owner shall have the right, at any time
---------------------
during the Term, to enter upon the Riverboat or Related Amenities or any portion
thereof, to inspect same and all FF&E located therein. Any Governmental
Authority or Lender, through their respective representatives, shall have the
right, upon reasonable notice to Owner and Manager, to inspect the Project;
provided, however, any Governmental Authority or Lender, through their
respective representatives, shall use their best efforts to minimize any
interruption of or interference with Manager's management of the Business and
operation of the Related Amenities and those portions of the Riverboat related
to Gaming Activities Project.
23.14. Approval of Vessel Operating Agreement. Upon approval of the
--------------------------------------
Vessel Operating Agreement by Owner, Operator and Manager, and the execution
thereof by Owner and Operator, Owner shall deliver to Manager an executed copy
of the Vessel Operating Agreement. Owner agrees to promptly provide Manager
with executed copies of any
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subsequent amendments to the Vessel Operating Agreement, which amendments shall
have been approved in advance in writing by Manager.
23.15. Third-Party Beneficiaries. There shall be no third-party
-------------------------
beneficiaries with respect to this Agreement.
23.16. Regulatory Information. Owner and Manager each to the other
----------------------
shall provide all information pertaining to this arrangement and the Business
and as to their ownership structure, corporate structure, officers and
directors, stockholders' and partners' identity, financing, transfers of
interest, etc., as shall be required by any regulatory authority with
jurisdiction over the other including, without limitation, Louisiana, Colorado,
Nevada, Mississippi, New Jersey and Canada or with respect to any federal, state
or provincial security law requirement.
23.17. Interpretation. In this Agreement, whenever the context so
--------------
requires, the masculine gender includes the feminine and/or neuter, the singular
number includes the plural and vice versa. The captions preceding the text of
Articles, Sections and Paragraphs are included only for convenience of reference
and shall be disregarded in the construction and interpretation of this
Agreement.
23.18. Counterparts. This Agreement may be executed in several
------------
counterparts and all so executed shall constitute one agreement, binding on all
of the parties hereto, notwithstanding that all of the parties are not signatory
to the original or to the same counterpart.
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<PAGE>
23.19. Successors and Assigns. This Agreement and the rights of Owner
----------------------
and Manager evidenced hereby shall inure to the benefit of and be binding upon
the successors and, to the extent permitted hereunder, assigns of the Owner and
Manager.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first written above.
Owner:
American Entertainment, L.L.C., a Louisiana
limited liability company
By: American Entertainment Corporation, a
Louisiana corporation, a Member
By: Joseph Georgusis
____________________________
Name: Joseph Georgusis
Title: President
By: Circus Circus Louisiana, Inc., a Louisiana
corporation, a Member
By: Clyde T. Turner
_________________________
Name: Clyde T. Turner
Title: President
Manager:
Circus Circus Louisiana, Inc., a Louisiana
corporation
By: Clyde T. Turner
_________________________
Name: Clyde T. Turner
Title: President
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<PAGE>
LIST OF EXHIBITS
Exhibit "A" GLOSSARY OF TERMS
Exhibit "B" SCHEDULE OF MANAGER & OWNER OPERATING PERMITS
Exhibit "C" PRE-OPENING PLAN
Exhibit "D" OPERATING BUDGET FORMAT
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<PAGE>
Exhibit A
Definitions
All capitalized terms referenced or used in the Agreement and not
specifically defined therein shall have the meaning set forth below in this
Exhibit "A", which is attached to and made a part of the Agreement for all
purposes. The article, section and paragraph and exhibit references herein
refer to the Articles, Sections, Paragraphs and Exhibits in and to the
Agreement.
Act. The term "Act" shall mean the Louisiana Riverboat Economic
----
Development and Gaming Control Act.
AEC. The term "AEC" means American Entertainment corporation, a Louisiana
---
corporation, a member of Owner.
Affiliate. The term "Affiliate" shall mean a Person that directly or
----------
indirectly, or through one or more intermediaries, Controls, is Controlled by,
or is under common Control with the Person in question and any stockholder or
partner of any Person referred to in the preceding clause owning more than fifty
percent (50%) or more of (i) such Person if such Person is a publicly traded
corporation or (ii) an ownership or beneficial interest in any other Person.
Agreement. The term "Agreement" shall mean the Riverboat Casino
----------
Management Agreement between Owner and Manager to which this Exhibit is
attached.
Annual Capital Replacements Budget. The term "Annual Capital Expenditure
-----------------------------------
Budget" shall have the meaning set forth in Section 6.3.
Annual Plan. The term "Annual Plan" shall have the meaning set forth in
------------
Section 6.3.
Annual Riverboat Replacements Budget. The term "Annual Riverboat
-------------------------------------
Replacements Budget" shall have the meaning set forth in Section 6.3.
Approval. The term "Approval" means any license, finding of suitability,
---------
qualification, approval or permit by or from any Gaming Authority. The Vessel
Operating Agreement and Berthing Rights are Approvals.
Approved Legal Counsel. The term "Approved Legal Counsel" shall have the
-----------------------
meaning set forth in Paragraph 6.10.7.
Approved Vendors. The term "Approved Vendors" shall have the meaning set
-----------------
forth in Section 5.4.
Arbitration Accountants. The term "Arbitration Accountants" shall have
------------------------
the meaning set forth in Section 21.1.2.
Auditors. The term "Auditors" shall mean one of the six (6) largest
---------
independent certified public accounting firms in the United States at the time
of their appointment selected by Owner to prepare the audited annual Financial
Statements unless otherwise agreed by Owner and Manager.
Bad Debts. The term "Bad Debts" shall mean an amount equal to the
----------
provision for doubtful accounts as set forth in the statement of income covering
the gaming operations at the Riverboat.
Bank Accounts. The term "Bank Accounts" shall have the meaning set forth
--------------
in Paragraph 6.10.9.
Base Management Fee. The term "Base Management Fee" shall have the
--------------------
meaning set forth in Paragraph 8.1.
Berthing Rights. The term "Berthing Rights" shall mean the rights to dock
----------------
the
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Riverboat at the site as approved by the Gaming Authorities.
Books and Records. The term "Books and Records" shall have the meaning
------------------
set forth in Section 6.6.
Budget. The term "Budget" means any budget contemplated by the Agreement
-------
that has been approved by Owner or has been arbitrated as set forth in the
Agreement including, without limitation, the Construction Budget, the Pre-
Opening Plan, the annual Operating Budgets and the Annual Capital Replacements
and Riverboat Replacements Budgets.
Business. The term "Business" shall mean all business activities at or
---------
relating to the Project, including, without limitation, the conduct of the
Gaming Activities, and food service, related maintenance and warehousing
activities at the Project related to the Gaming Activities conducted by Manager
on behalf of Owner.
Business Days. The term "Business Days" shall mean all weekdays except
--------------
those that are official holidays of the State of Louisiana or the U.S.
government. Unless specifically stated as "Business Days," a reference to
"days" means calendar days.
Capital Replacements. The term "Capital Replacements" shall have the
---------------------
meaning set forth in Paragraph 6.4.1.
Capital Replacements Fund. The term "Capital Replacements Fund" shall
--------------------------
mean those amounts at any given time deposited to a separate interest-bearing
account established in Owner's name at a financial institution selected by Owner
for the purpose of funding budgeted capital replacements, renewals, non-routine
repairs and maintenance and improvements within and to the Related Amenities and
those portions of the Riverboat related to Gaming Activities pursuant to the
Annual Capital Replacements Budget.
Community Commitment. The term "Community Commitment" shall have the
---------------------
meaning set forth in Section 5.3.
Community Commitment Program. The term ""Community Commitment Program"
----------------------------
shall have the meaning set forth in Section 5.3.
Condemnation. The term "Condemnation" shall mean any taking by eminent
-------------
domain, condemnation or any other governmental action.
Construction Budget. The term "Construction Budget" shall mean the budget
--------------------
relating to the development, construction and/or renovation of the Project
contemplated in Paragraph 3.6.2.
Construction Conditions. The term "Construction Conditions" shall have
------------------------
the meaning set forth in Section 3.1.
Construction Permits. The term "Construction Permits" shall mean all
---------------------
licenses, permits, approvals, consents and authorizations from Governmental
Authorities that are necessary to develop, construct or renovate the Riverboat
and/or Related Amenities (including, without limitation, certificates of
occupancy and other similar permits necessary to occupy the Riverboat or Related
Amenities).
Construction Schedule. The term "Construction Schedule" shall have the
----------------------
meaning as said term is defined in Section 3.4.
Control. The term "Control" (including derivations such as "controlled"
--------
and "controlling") means with respect to a Person, the ownership of more than
fifty percent (50%) or more of the beneficial interest or voting power of such
Person.
Credit Policy. The term "Credit Policy" means the policies established
--------------
from time to time by Manager regarding the extension and collection of credit to
and from gaming patrons
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<PAGE>
of the Business, which Credit Policy shall be prepared by Manager based on (i)
the target markets of the Business, (ii) prudent business judgment, and (iii)
such changes and refinements as Manager deems necessary or advisable to comply
and conform in all respects with any applicable Governmental Requirements
(including, without limitation, the rules and regulations of the Louisiana
Riverboat Economic Development and Gaming Corporation).
Debt Service. The term "Debt Service" shall mean payments (including,
-------------
without limitation, principal, interest and expense reimbursement) with respect
to (i) capitalized leases, as defined in accordance with Generally Accepted
Accounting Principles, (ii) all third party borrowed funds related to the
Business and (iii) any construction or permanent financing related to the
Riverboat or Related Amenities.
Default/Event of Default. The term "Default" and "Event of Default" shall
-------------------------
have the meaning set forth in Article 15.
Default Rate. The term "Default Rate" shall mean the lesser of (i) the
-------------
reference or prime commercial lending rate established by Chase Manhattan Bank,
New York, New York, plus three percent (3%) per annum or (ii) the highest rate
permitted by applicable Law, to the extent applicable Law establishes a maximum
rate of interest which may be charged with respect to obligations of the type in
question, until paid.
Development Budget. The term "Development Budget" shall mean Owner's
-------------------
budget for developing, constructing and/or renovating the Project, including
both "hard costs" and "soft costs" related to construction, financing, pre-
opening activities and development activities.
EBITDA. The term "EBITDA" shall mean Owner's annual earnings before
-------
interest expense, income taxes, depreciation and amortization.
Employee. The term "Employee" shall mean any employee of either Owner,
---------
Manager or an Affiliate of Manager or Owner, engaged by Manager to work in or
about the Riverboat and/or Related Amenities in connection with the conduct of
the Business and any employee of Owner, Manager or an Affiliate of Manager or
Owner, engaged by Operator to operate the Riverboat as a passenger vessel.
Environmental Damages. The term "Environmental Damages" means all claims,
----------------------
judgments, damages, losses, penalties, fines, liabilities (including strict
liability), encumbrances, liens, costs and expenses of investigation and defense
of any claim, whether or not such claim is ultimately defeated, and of any good
faith settlement of judgment, of whatever kind or nature, contingent or
otherwise, matured or unmatured, foreseeable or unforeseeable, including without
limitation reasonable attorneys' fees and disbursements and consultants' fees,
any of which are incurred at any time as a result of the existence of Hazardous
Material upon, about or beneath the Riverboat or the Related Amenities or
migrating or threatening to migrate to or from the Riverboat or the Related
Amenities, or the existence of a violation of Environmental Requirements
pertaining to the Riverboat or the Related Amenities, regardless of whether the
existence of such Hazardous Material or the violation of Environmental
Requirements arose prior to the present ownership or operation of the Riverboat
or the Related Amenities, and including without limitation: (i) damages for
personal injury, or injury to property or natural resources occurring upon, off
of or from the Riverboat or the Related Amenities, including, without
limitation, lost profits, consequential damages, the cost of demolition and
rebuilding of any improvements on real property, interest and penalties; (ii)
fees incurred for the services of attorney's consultants, contractors,
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<PAGE>
experts, laboratories and all other costs incurred in connection with the
investigation or remediation of such Hazardous Materials or violation of
Environmental Requirements, including, but not limited to, the preparation of
any feasibility studies or reports or the performance of any cleanup,
remediation, removal, response, abatement, containment, closure, restoration or
monitoring work required by any federal, state or local governmental agency or
political subdivision, or reasonably necessary to make full economic use of the
Riverbat or the Related Amenities or any other property or otherwise expended in
connection with such conditions, and including without limitation any attorneys'
fees, costs and expenses incurred in enforcing this agreement or collecting any
sums due hereunder; and (iii) liability to any third person or governmental
agency to indemnify such person or agency for costs expended in connection with
the items referenced in clause (ii) hereof.
Environmental Requirements. The term "Environmental Requirements" means
---------------------------
all applicable present and future statutes, regulations, rules, ordinances,
codes, licenses, permits, orders, approvals, plans, authorizations, concessions,
franchises, and similar items, of all governmental agencies, departments,
commissions, boards, bureaus, or instrumentalities of the United States, states
and political subdivisions thereof and all applicable judicial, administrative,
and regulatory decrees, judgments and orders relating to the protection of human
health or the environment, including without limitation: (i) all requirements,
including but not limited to those pertaining to reporting, licensing,
permitting, investigation and remediation or emissions, discharges, releases or
threatened releases of Hazardous Materials, chemical substances, pollutants,
contaminants or hazardous or toxic substances, materials or wastes whether
solid, liquid or gaseous in nature, into the air, surface water, groundwater or
land, or relating to the manufacture, processing, distribution, use, treatment,
stores, disposal, transport or handling of chemical substances, pollutants,
contaminants or hazardous or toxic substances, materials or wastes, whether
solid, liquid or gaseous in nature; and (ii) all requirements pertaining to the
protection of the health and safety of employees or the public.
Estimated Opening Date. The term "Estimated Opening Date" shall mean that
-----------------------
projected opening date of the Business at the Project as set forth in the agreed
upon Construction Schedule.
Extension Period. The term "Extension Period" shall have the meaning set
-----------------
forth in Section 2.2.
FF&E. The term "FF&E" shall mean all furniture, furnishings, equipment,
-----
and fixtures, including gaming equipment, POS and computers, housekeeping and
maintenance equipment, life jackets and inflatable boats and other items
necessary or appropriate to operate the Riverboat and Related Amenities in
conformity with this Agreement.
FF&E Budget. The term "FF&E Budget" shall have the meanings set forth in
------------
Paragraph 3.6.2.
FF&E Requirements. The term "FF&E Requirements" shall have the meaning
------------------
set forth in Paragraph 3.3.4.
FF&E Specifications. The term "FF&E Specifications" shall have the
--------------------
meaning set forth in Paragraph 3.3.1.
Financial Commitments. The term "Financial Commitments" means any
----------------------
agreements between Owner and another Person to underwrite the sale of equity or
debt, to make a loan or to contribute equity with respect to the construction
and operation of the Riverboat and/or Related Amenities including without
limitation, any CCLI Loans pursuant to the Owner's
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Operating Agreement, any construction loan commitment, bridge loan commitment,
subscription agreement or other contractual arrangement relating to the
foregoing, all of which shall be in form and substance satisfactory in all
respects to Owner.
Financial Statements. The term "Financial Statements" shall mean an
---------------------
income statement, balance sheet and a sources and uses of cash statement, in the
forms attached hereto as part of Exhibit "D" all prepared in conformity with
Generally Accepted Accounting Principles and on a basis consistent in all
material respects with that of the preceding period (except as to those changes
or exceptions disclosed in such Financial Statements).
Fiscal Quarter. The term "Fiscal Quarter" shall mean the four (4)
---------------
quarters corresponding to the Fiscal Year commencing on the first day of each
Fiscal Year.
Fiscal Year. The term "Fiscal Year" shall mean a period beginning and
------------
ending on January 1 and December 31, respectively. In the event the Opening
Date occurs on a date other than the first day of a Fiscal Year, "Fiscal Year"
shall also refer to the period commencing on the Opening Date and ending on the
last day of the calendar year in which the Opening Date occurs. In the event
this Agreement terminates on a date other than the last day of a calendar year,
the term "Fiscal Year" shall include the period from the first day of the Fiscal
Year during which this Agreement terminates to and including the date of such
termination.
FTGDA. The term "FTGDA" shall have the meaning set forth in Paragraph
------
3.3.6.
Gaming Activities. The term "Gaming Activities" shall mean the casino
------------------
cage, table games (such as blackjack, baccarat, roulette, craps, mini-baccarat,
pai gow, poker and pai gow poker), coin-operated or token-operated machines and
gaming devices and other casino-type games operated by Manager on the Riverboat.
Gaming Authorities. The term "Gaming Authorities" or "Authority" shall
-------------------
mean all agencies, authorities and instrumentalities of any state, nation, or
other governmental entity, or any subdivision thereof, regulating gaming or
related activities, including without limitation, the Louisiana Riverboat
Economic Development and Gaming Corporation.
Gaming Laws. The term "Gaming Laws" shall mean any statute, ordinance,
------------
promulgation, law, rule, regulation, code, judicial or administrative precedent
or order of any state, nation, court or other body or agency or subdivision
thereof which regulates the conduct of the Gaming Activities.
General Laws. The term "General Laws" shall mean any statute, ordinance
-------------
promulgation, law, treaty, rule, regulation, code, judicial or administrative
precedent or order of any court or other body of the United States and any state
law or subdivision thereof, any foreign countries or subdivisions thereof, and
shall include all Laws.
Generally Accepted Accounting Principles. The term "Generally Accepted
-----------------------------------------
Accounting Principles" shall mean generally accepted accounting principles in
all material respects as established from time to time by the American Institute
of Certified Public Accountants.
Governmental Authorities. The term "Governmental Authorities" or
-------------------------
"Authority" means the United States, the State of Louisiana or any other
political subdivision in which the Riverboat operates or the Related Amenities
are located, and any court or political subdivision, agency, commission, board
or instrumentality or officer thereof, whether federal, state, local, having or
exercising a jurisdiction over Owner, Manager or the Riverboat and/or Related
Amenities, including without limitation, any Gaming Authority.
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Governmental Requirements. The term "Governmental Requirements" means all
--------------------------
Laws and agreements with any Governmental Authority that are applicable to the
acquisition, development, construction and/or renovation of the Project or the
operation of the Project or the Business including without limitation, all
Required Contracts, Approvals and any rules, guidelines or restrictions created
by or imposed by Governmental Authorities.
Gross Operating Profit. The term "Gross Operating Profit" shall mean: (a)
-----------------------
Gross Revenue less (b) Operating Expenses and (ii) budgeted deposits to the
Capital and Riverboat Replacements Funds.
Gross Revenue. The term "Gross Revenue" shall include all of the revenues
--------------
and income of any nature whatsoever derived directly or indirectly from the
operation of the Business and the Project or the use thereof, computed on an
accrual basis in accordance with Generally Accepted Accounting Principles and
shall include but not be limited to, the net win from gaming activities, (which
is the difference between gaming wins and losses); food and beverage revenue;
telephone, telegraph, satellite or cable video and telex revenue; entertainment
revenue; amusement revenue; rental payments from lessees or concessionaires;
merchandise sale revenue; interest income; and the actual cash proceeds of
business interruption, increased cost of operation, use, occupancy or similar
insurance.
Hazardous Material. The term "Hazardous Material" means any substance: (i)
------------------
the presence of which requires investigation or remediation under any federal,
state or local statute, regulation, ordinance, order, action, policy or common
law; or (ii) which is or becomes defined as a "hazardous waste," "hazardous
substance," pollutant or contaminant under any federal, state or local statute,
regulation, rule or ordinance or amendments thereto, including without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act (42 U.S.C. section 9601 et seq.) and/or the Resource Conservation and
Recovery Act (42 U.S.C. section 6901 et seq.); and/or the Louisiana
Environmental Quality Act (La. R.S. 30:2001, et seq.), as amended from time to
time; or (iii) which is toxic, explosive, corrosive, flammable, infectious,
radioactive, carcinogenic, mutagenic or otherwise hazardous and is or becomes
regulated by any governmental authority, agency, department, commission, board,
agency or instrumentality of the United States, the State of Louisiana or any
political subdivision thereof; or (iv) the presence of which on the Riverboat or
the Related Amenities causes or threatens to cause a nuisance upon the Riverboat
or the Related Amenities or to adjacent properties or poses or threatens to pose
a hazard to the health or safety of persons on or about the Riverboat or the
Related Amenities; or (v) the presence of which on adjacent properties could
constitute a trespass by Owner or Manager; or (vi) without limitation which
contains gasoline, diesel fuel or other petroleum hydrocarbons, or any
"regulated substance" as defined under the Underground Storage Tank Regulations,
40 C.F.R. 280.12, or La. Admin. Code 33:IX.307; or (vii) without limitation
which contains polychlorinated bipheynols (PCBs), asbestos or urea formaldehyde
foam insulation.
Initial Term. The term "Initial Term" shall mean the period from the date
-------------
hereof until five (5) years from the Opening Date.
Jones Act. The term "Jones Act" shall mean 46 U.S.C. Sec. 688 (1975) as
----------
amended.
Law. The term "Law" means any statute, ordinance, promulgation, law,
----
treaty, rule, regulation, code, judicial or administrative precedent or order of
any court or any other Governmental Authority, as well as the orders or
requirements of any local board of fire
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underwriters or any other body which may exercise similar functions, including
without limitation, the Act and the FTDGA.
Lender. The term "Lender" shall mean (i) any Person that has extended
-------
credit to Owner secured by, among other things, a mortgage encumbering the
Riverboat and/or Related Amenities and/or (ii) any unsecured creditors as
designated from time to time by Owner.
Loan Documents. The term "Loan Documents" means all of the documents
---------------
evidencing, securing and relating to any indebtedness owing by Owner to a
Lender, including without limitation, all promissory notes, loan agreements,
mortgages, pledges, assignments, certificates, indemnities and other agreements.
Manager Denial. The term "Manager Denial" shall have the meaning set forth
---------------
in Paragraph 17.2.2.
Manager Indemnitees. The term "Manager Indemnitees" shall have the
--------------------
meaning set forth in Section 13.2.
Manager Operating Permits. The term "Manager Operating Permits" shall mean
--------------------------
all licenses, permits, approvals, consents and authorizations which Manager is
required to obtain from any Governmental Authority to perform and carry out its
obligations under this Agreement, including any permits or licenses Manager is
required by Law to obtain specifically related to the operation of a riverboat
casino and landside facilities with respect thereto.
Manager's Advances. The term "Manager's Advances" shall have the meaning
-------------------
set forth in Section 4.4.
Net Operating Income. The term "Net Operating Income" shall mean, with
--------------------
respect to any annual or other period, the amount by which the Gross Revenues
exceeds the Operating Expenses for such period.
Opening Date. The term "Opening Date" shall mean the first date a revenue-
-------------
paying customer is admitted to the Riverboat and/or Related Amenities to
participate in Gaming Activities. The parties shall hereafter confirm the
Opening Date in an Addendum to Management Agreement which shall be attached
hereto and made a part hereof.
Operating Budget. The term "Operating Budget" shall have the meaning set
-----------------
forth in Section 4.1.2.
Operating Expenses. The term "Operating Expenses" shall mean those
-------------------
necessary or reasonable operating expenses incurred by or at the direction of
Manager in connection with the operation of the Project after the Opening Date
computed on an accrual basis under Generally Accepted Accounting Principles,
including without limitation, all costs of compensation including related
benefits and taxes; promotional allowances and complimentaries; Operating
Supplies; all costs of marketing and advertising for the Project; the cost of
Employee training programs; the cost of utilities and energy; insurance; taxes,
licenses, and fees required for the operation of the Project; the cost of
repairs and maintenance expenditures, the cost of professional fees and services
or other fees provided by third parties or by Affiliates for services reasonably
required in the operation of the Project; the Base Management and Consulting
Fees; and reimbursable expenses due to Manager or Owner.
Operating Goals. The term "Operating Goals" shall have the meaning set
----------------
forth in Section 5.2.
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Operating Guidelines. The term "Operating Guidelines" means the general
---------------------
guidelines for the operation of the Business which shall be determined from time
to time by Manager and shall be included in and constitute a part of each Annual
Plan. Operating Guidelines shall include the safety guidelines and procedures
with respect to Riverboat patrons, the Credit Policy and Manager's policy
regarding reimbursable expenses and travel of employees of Owner and manager
pertaining to the Business.
Operating Permits. The term "Operating Permits" shall mean Manager
------------------
Operating Permits and Owner Operating Permits.
Operating Supplies. The term "Operating Supplies" shall mean food &
-------------------
beverages (alcoholic and non-alcoholic) and other consumable items used in the
operation of a casino such as playing cards, tokens, chips, dice, and other
gaming supplies; cleaning materials, guest supplies; maintenance supplies;
stationary and paper supplies; office supplies, replacements of linen, china,
glassware, uniforms, and kitchen utensils; computer supplies, and all other
consumable supplies and materials used in the operation of the Business.
Operator. The term "Operator" shall mean the Person engaged by Owner
---------
pursuant to the Vessel Operating Agreement to conduct the operations of the
Riverboat as a vessel.
Owner Denial. The term "Owner Denial" shall have the meaning set forth in
-------------
Section 17.1.
Owner Indemnitees. The term "Owner Indemnitees" shall have the meaning set
------------------
forth in Section 13.1.
Owner Operating Permits. The term "Owner Operating Permits" shall mean all
------------------------
licenses, permits, approvals, consents and authorizations from Governmental
Authorities that are necessary to own, open and occupy the Project and operate
the Business, including any permits or licenses Owner is required by law to
obtain and have in effect specifically related to the operations of a riverboat
and landside facilities with respect thereto, including without limitation, the
Riverboat Operating Contract, other than Manager Operating Permits and the
Construction Permits.
Owner's Advances. The term "Owner's Advances" shall mean the amounts to be
-----------------
advanced by Owner to Manager pursuant to Section 7.1.
Owner's Operating Agreement. The term "Owner's Operating Agreement" shall
---------------------------
mean that certain Operating Agreement of AMERICAN ENTERTAINMENT, L.L.C., dated
as of January 14, 1994 between AEC and Circus Circus Louisiana, Inc., as amended
by that certain Amended and Restated Operating Agreement of even date herewith.
Owner's Representatives. The term "Owner's Representative" shall have the
------------------------
meaning set forth in Section 5.6.
Partial Condemnation. The term "Partial Condemnation" shall have the
---------------------
meaning set forth in Section 12.5.
Person. The term "Person" shall mean any individual, partnership,
-------
corporation, association or other entity, including, but not limited to, any
government or agency subdivision thereof, and the heirs, executors,
administrators, legal representatives, successors and assigns of such Person
where the context so admits.
Plans and Specifications. The term "Plans and Specifications: shall have
-------------------------
the meaning set forth in Section 3.3.
Pre-Opening Budget. The term "Pre-Opening Budget" shall mean the budget of
-------------------
expenses to be incurred prior to the Opening Date pursuant to Article 4 and with
respect to
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any other provision of the Agreement pertaining to the period prior to the
Opening Date. Such expenses shall include all budgeted expenses incurred by
Manager or by any of Manager's Affiliates in implementing the Pre-Opening Plan,
the cost of recruitment and training for all Employees, costs of licensing or
other qualification of Employees prior to the Opening Date, the cost of pre-
opening sales, marketing, advertising, promotion and publicity, permits for
employees, including the fees of lawyers and other consultants incident thereto,
and other Pre-Opening Expenses.
Pre-Opening Conditions. The term "Pre-Opening Conditions" shall have the
-----------------------
meaning set forth in Section 2.3.
Pre-Opening Expenses. The term "Pre-Opening Expenses" shall have the
---------------------
meaning set forth in Section 4.3.1.
Pre-Opening Plan. The term "Pre-Opening Plan" shall mean the plans
-----------------
prepared by Manager and reviewed by Owner in connection with the preparation of
the Project for the Opening Date, as more particularly described in Article 4.
Pre-Opening Services. The term "Pre-Opening Services" shall have the
---------------------
meaning set forth in Section 4.1.
Project. The term "Project" shall mean the vessel and the real property
--------
comprising the Riverboat and Related Amenities.
Project Architects. The term "Project Architects" shall have the meaning
-------------------
set forth in Paragraph 3.3.1.
Project Interior Designers. The term "Project Interior Designers" shall
---------------------------
have the meaning set forth in Section 3.3.1.
Related Amenities. The term "Related Amenities" shall mean the dock,
------------------
ticket pavilion, parking facilities, patron and employee lounges, bars,
restaurants, gift and souvenir booths or shops, warehouse facilities, buses,
trams and other facilities incidental to or for use by, or to accommodate,
Riverboat patrons, Senior Staff and/or Employees in the conduct of the Business
or the operation of the Riverboat as a passenger vessel by the Operator.
Related Contracts. The term "Related Contracts" shall have the meaning set
------------------
forth in Section 6.20.
Required Coverages. The term "Required Coverages" shall have the meaning
-------------------
set forth in Section 11.1.
Riverboat. The term "Riverboat" shall mean the excursion gaming vessel to
----------
be owned by Owner and operated from the Bayou Bienvenue which will feature
casino style gaming to the extent permitted by the Act, and which may also
include food and beverage service, entertainment and other related activities.
Riverboat Replacements. The term "Riverboat Replacements" shall mean all
-----------------------
the capital replacements and improvements to the structure or operation of the
Riverboat as a waterborne vessel which are necessary to maintain the Riverboat
in seaworthy condition, in compliance with all applicable Governmental
Requirements and to assure the safe transport of all Riverboat patrons.
Riverboat Replacements Fund. The term "Riverboat Replacements Fund" shall
----------------------------
mean those amounts at any given time deposited to a separate interest-bearing
account established in Owner's name at a financial institution selected by Owner
for the purpose of funding budgeted capital replacements, renewals, non-routine
repairs and maintenance and improvements within and to the Riverboat for
Riverboat Capital Replacements pursuant to the
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<PAGE>
Annual Capital Replacements Budget.
Senior Staff. The term "Senior Staff" shall have the meaning set forth in
-------------
Paragraph 6.1.2.
Substantial Condemnation. The term "Substantial Condemnation" shall have
-------------------------
the meaning set forth in Section 12.4.
Technical Services. The term "Technical Services" shall have the meaning
-------------------
set forth in Section 3.6.
Term. The term "Term" shall mean the Initial Term plus any Extension
-----
Period for which the option to extend as provided in the Agreement has been
properly exercised and effected.
Unavoidable Delay. The term "Unavoidable Delay" shall have the meaning set
------------------
forth in Article 18.
Vessel Operating Agreement. The term "Vessel Operating Agreement" shall
---------------------------
mean that certain agreement to be entered into between Owner and Operator
regarding the crewing and non-gaming operation, including maintenance, of the
Riverboat as a vessel, which agreement shall have been approved in advance in
writing by Owner and Manager and which shall be amended, modified, supplemented,
terminated or replaced only with the prior written approval of Manager.
Working Capital. The term "Working Capital" shall mean such amount in the
----------------
Bank Accounts as will be sufficient to reasonably assure the timely payment of
all current liabilities of the Business, including without limitation, the Base
Management Fee and any other amounts payable to Manager or its Affiliates, and
the uninterrupted and efficient operation of the Business during the Term to
permit the Manager to perform its responsibilities and obligations hereunder,
all as contemplated by the applicable Annual Plan with reasonable reserves for
unanticipated contingencies and for short term business fluctuations resulting
from monthly variations between the Annual Plan and actual operating expenses.
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<PAGE>
TABLE OF CONTENTS
Riverboat Casino Management Agreement
R E C I T A L S ........................................................... 1
AGREEMENTS ................................................................. 1
1. DEFINITION/ARTICLES, SECTIONS, PARAGRAPHS AND CLAUSES ................. 1
1.1. Definitions .............................................. 1
1.2. Articles, Sections, Paragraphs
and Clauses ........................................... 1
2. TERM .................................................................. 2
2.1. Initial Term ............................................. 2
2.2. Extended Term ............................................ 2
2.3. Pre-Opening Conditions ................................... 2
3. CONSTRUCTION AND TECHNICAL SERVICES ................................... 3
3.1 Construction Conditions .................................. 3
3.2 Owner's Obligations to Construct and Deliver ............. 4
3.3 Plans and Specifications ................................. 4
3.4 Construction Schedule .................................... 5
3.5 INTENTIONALLY DELETED .................................... 5
3.6 Technical Services ....................................... 5
3.7 Opening the Project ...................................... 7
4. PRE-OPENING PHASE ..................................................... 7
4.1 Pre-Opening Services ..................................... 7
4.2 Approval by Owner ........................................ 9
4.3 Payment of Pre-Opening Expenses .......................... 10
4.4 Manager Advances ......................................... 10
5. APPOINTMENT OF MANAGER ................................................ 10
5.1 Appointment .............................................. 10
5.2 Management of the Business ............................... 10
5.3 Community Commitment ..................................... 11
5.4 Purchasing ............................................... 11
5.5 Contracts and Expenses ................................... 11
5.6 Owner's Representative ................................... 12
6. CERTAIN SPECIFIC AUTHORITIES AND RESPONSIBILITIES OF
MANAGER ................................................ 12
<PAGE>
6.1 Personnel Matters ....................................... 12
6.2 Financial Management .................................... 14
6.3 Annual Plans ............................................ 14
6.4 Capital and Riverboat
Replacement Funds .................................... 17
6.5 Revisions to Annual Plan and
Reallocation of Funds ................................ 20
6.6 Accounting Records ...................................... 21
6.7 Financial Statements; Meetings .......................... 21
6.8 Access, Review and Audit ................................ 22
6.9 Limitation of Responsibility
for Budgets .......................................... 22
6.10 Management .............................................. 22
6.11 Collection of Base Management Fee ....................... 26
6.12 Emergency Expenditures .................................. 26
6.13 Expenditures Required for
Compliance with Law .................................. 27
6.14 Marketing Programs ...................................... 27
6.15 Use of Names and Logos .................................. 28
6.16 Remittances to Owner .................................... 28
6.17 Owner Payments by Manager ............................... 28
6.18 INTENTIONALLY DELETED ................................... 28
6.19 Supervisory Services .................................... 29
6.20 Certain Agreements ...................................... 29
7. CERTAIN RIGHTS AND RESPONSIBILITIES OF OWNER ......................... 29
7.1 Owner's Advances ........................................ 29
8. MANAGEMENT FEES ...................................................... 31
8.1 Base Management Fee ..................................... 31
8.2 Adjustments to Management Fees Following Termination .... 31
9. OWNER'S COVENANTS AND REPRESENTATIONS ................................ 32
9.1 Owner's Covenants and Representations ................... 32
10. MANAGER'S COVENANTS AND REPRESENTATIONS .............................. 33
11. INSURANCE............................................................. 34
11.1 Operating Insurance ..................................... 34
11.2 Property and Other Insurance ............................ 35
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<PAGE>
11.3 Dishonored Check Insurance .............................. 36
11.4 Parties to be Covered by Insurance; Location of Policies. 36
11.5 Rights of Manager and Owner to Receive Information on
Insurance Matters ....................................... 36
11.6 Insurance Coverage Upon Termination of Agreement ........ 36
11.7 Other Insurance Requirements ............................ 36
12. DAMAGE AND CONDEMNATION .............................................. 37
12.1 Material Destruction .................................... 37
12.2 Partial Destruction ..................................... 37
12.3 Excess Proceeds ......................................... 38
12.4 Substantial Condemnation ................................ 38
12.5 Partial Condemnation .................................... 38
12.6 Casualty Management Fees ................................ 38
13. INDEMNIFICATION ...................................................... 39
13.1 Owner Indemnity ......................................... 39
13.2 Manager Indemnity ....................................... 39
13.3 Legal Fees, Etc.; Procedures ............................ 39
14. ASSIGNMENT ........................................................... 40
14.1 Sale/Assignment ......................................... 40
14.2 Effect of Assignment .................................... 41
15. DEFAULT/STEP-IN RIGHTS ............................................... 41
15.1 Definition .............................................. 41
15.2 Delays and Omissions .................................... 43
15.3 Disputes in Arbitration ................................. 43
16. REMEDIES AND TERMINATION ............................................. 43
16.1 Owner's Remedies ........................................ 43
16.2 Manager's Remedies ...................................... 44
16.3 Remedies Nonexclusive ................................... 44
16.4 Termination ............................................. 45
16.5 Effect of Termination ................................... 45
16.6 Proprietary Information ................................. 46
16.7 Manager Responsibilities ................................ 46
16.8 Survival of Representations and Indemnifications ........ 46
17. LICENSE PROTECTION ................................................... 46
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<PAGE>
17.1 Owner Denial ............................................ 46
17.2 Manager's Louisiana Licensing ........................... 47
17.3 Owner's Louisiana Licensing ............................. 48
18. UNAVOIDABLE DELAYS ................................................... 49
19. RELATIONSHIP, AUTHORITY AND FURTHER ACTIONS .......................... 49
19.1 No Joint Venture or Ownership ........................... 49
19.2 Affiliates .............................................. 49
20. FINANCING MATTERS .................................................... 50
20.1 Restrictions on Financing
Representations ...................................... 50
20.2 Permissible Disclosure .................................. 50
20.3 Compliance by Affiliates ................................ 51
20.4 Estoppel Certificates ................................... 51
21. ARBITRATION .......................................................... 51
21.1 Financial Disputes ...................................... 51
21.2 General Arbitration ..................................... 53
21.3 Choice of Forum ......................................... 54
22. BANKROLL ............................................................. 55
23. MISCELLANEOUS ........................................................ 55
23.1 Authorizations .......................................... 55
23.2 Notices ................................................. 55
23.3 Entire Agreement ........................................ 56
23.4 Confidentiality ......................................... 56
23.5 Approvals ............................................... 57
23.6 Conflict of Interest/Non-Competition .................... 57
23.7 Exhibits ................................................ 58
23.8 Choice of Law and Construction of Agreement, Service of
Process and Jurisdiction ............................. 58
23.9 Amendment and Waiver .................................... 58
23.10 INTENTIONALLY DELETED ................................... 58
23.11 Severability ............................................ 58
23.12 Governing Document ...................................... 58
23.13 Inspection of Project ................................... 58
23.14 Acknowledgment of Operating Agreement ................... 59
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<PAGE>
23.15 Third-Party Beneficiaries ............................... 59
23.16 Regulatory Information .................................. 59
23.17 Interpretation .......................................... 59
23.18 Counterparts ............................................ 59
23.19 Successors and Assigns .................................. 60
Exhibit A ................................................................. 62
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<PAGE>
RIVERBOAT CASINO MANAGEMENT AGREEMENT
by and among
AMERICAN ENTERTAINMENT, L.L.C. ("Owner")
and
CIRCUS CIRCUS LOUISIANA, INC.,
a Louisiana Corporation
("Manager")
Date: February 8, 1995
<PAGE>
CONSULTING AGREEMENT
This Consulting Agreement (the "Agreement") is made, effective February
8th , 1995 by and between AMERICAN ENTERTAINMENT, L.L.C. (the "Company"), a
--------
Louisiana Limited Liability Company, represented herein by its duly authorized
members, Circus Circus Louisiana, Inc. and American Entertainment Corporation
and AMERICAN ENTERTAINMENT CORPORATION (the "Consultant").
WITNESSETH
WHEREAS, Company has been awarded a Certificate of Preliminary Approval
from the Louisiana Riverboat Gaming Commission and a riverboat gaming license
from the Louisiana Riverboat Gaming Enforcement Division and intends to build
and operate a Riverboat and Related Amenities in accordance with the Louisiana
Riverboat Economic Development and Gaming Control Act and regulations
promulgated thereunder; and
WHEREAS, the Company and the Consultant have entered into a certain
Operating Agreement governing the operation of the Company (the "Operating
Agreement") of even date herewith; and
WHEREAS, the Company and Circus Circus Louisiana, Inc. have entered into a
certain Management Agreement governing the management of the Project (the
"Management Agreement") of even date herewith; and
WHEREAS, Consultant possesses special skills and knowledge of the local
business environment; and
WHEREAS, Company wishes to retain the services of Consultant in order to
avail itself of the special expertise and abilities of Consultant.
<PAGE>
NOW THEREFORE, intending to be legally bound hereby, and in consideration
of mutual covenants contained herein, and other good and valuable consideration,
parties herein mutually agree as follows:
1. DEFINITIONS. Capitalized terms used herein undefined shall have the
-----------
meanings assigned thereto in the Management Agreement or Operating Agreement.
2. EMPLOYMENT. The Company hereby retains and hires Consultant, and
----------
Consultant shall serve the Company upon terms and conditions hereinafter set
forth.
3. INITIAL TERM. The Initial Term of this Agreement shall be effective
------------
upon the execution of this Agreement. The Initial Term of this Agreement shall
be for a period of five (5) years from the Opening Date as that term is defined
in the Management Agreement.
4. EXTENDED TERM. Provided that this Agreement has not otherwise been
-------------
terminated pursuant to the terms of this Agreement, then the Consultant shall
have three (3) options to extend the Initial Term for consecutive periods of
five (5) additional years each (each such additional five (5) year period being
designated as an "Extension Period"). Subject to the foregoing conditions,
Consultant shall give written notice to Company that it has elected to exercise
an option to extend the term at least one hundred eighty (180) days prior to
the date of the expiration of the Initial Term or an Extension Period then in
effect in order to extend this Agreement for an Extension Period, if any remain,
upon the terms, conditions, covenants and provisions set forth herein
2
<PAGE>
without the necessity of executing any new consulting agreement or other
instruments or agreements. If Consultant does not give written notice to
Company that it has elected to exercise an option to extend prior to the later
of (i) the beginning of such 180-day period and (ii) ten (10) days after the
receipt by Consultant of a "reminder" notice from Company that an option to
extend is about to expire, then this Agreement shall end on the expiration date
of the Initial Term or then-current Extension Period, if any was previously
exercised, if not sooner terminated pursuant to the terms of this Agreement.
5. DUTIES. During the term of this Agreement, Consultant shall serve the
------
Company and shall provide consultation to assist the Company in the development
and operation of Company's Riverboat and Related Amenities. Consultant's duties
shall include but not be limited to providing assistance to the Company in
locating and evaluating appropriate local vendors to supply the goods and
services necessary for the operation of the riverboat casino; meeting with
governmental and regulatory authorities under whose jurisdiction the venture
will operate to ensure regulatory compliance; aiding the Company in the
establishment of its Louisiana office and such other duties as make use of
Consultant's skills and expertise.
6. TIME REQUIREMENTS. The Company acknowledges that Consultant may provide
-----------------
services to other companies and that Consultant may not necessarily be available
to serve the Company at any specific time. Consultant shall not be required to
devote a specified number of hours or days to his duties contracted for
hereunder; however, Consultant will devote his full energy and skill when
serving the
3
<PAGE>
Company.
7. COMPENSATION. (i) The Company shall pay to Consultant as compensation
------------
for his services for each Fiscal Year the sum of one percent (1%) of the first
One Hundred Million ($100,000,000.00) Dollars of annual Gross Revenues of the
Project and one-half percent (.5%) of annual Gross Revenues of the Project in
excess of One Hundred Million ($100,000,000.00) Dollars, which compensation
shall be payable to Consultant concurrently with the payment to Circus Circus
Louisiana, Inc. of the Base Management Fee pursuant to the Management Agreement.
(ii) All terms and conditions contained in section 7(i) of this Agreement
are subordinate and subject to section 5.14(b) of the Operating Agreement
controlling compensation in the event the full amount of Project Management and
Consulting Fees (as these terms are defined in the Operating Agreement) cannot
be paid in any annual period without reducing the Net Available Cash (as defined
in the Operating Agreement) to an amount less than the amount necessary to pay
the Current Year Amortization (as defined in the Operating Agreement) with
respect to any outstanding Circus Circus Louisiana, Inc. loans.
8. EXPENSES. Provided Consultant adheres to the requirements set forth in
--------
this section, the reasonable and accountable expenses of Consultant incurred
during the term of this Agreement in furtherance of Company business and as
permitted by applicable laws will be reimbursed to Consultant. The following
requirements shall be adhered to by the Consultant in order to obtain
reimbursement for expenses incurred:
(i) Adequate records or other documentation as may be required by
4
<PAGE>
law, regulation, or Company's standard procedures shall be submitted for
expenses.
(ii) All expenses must be reasonable and in keeping with prevailing local
rates, costs, and prices.
(iii) All expenses incurred by Consultant shall have been approved in the Pre-
Opening Budget as the term is defined and used in Section 4.1, 4.2 and 4.3 of
the Management Agreement.
(iv) All expenses incurred by Consultant shall have been approved in all Annual
Plans as the term is defined and used in Section 6.3 of the Management
Agreement.
(v) If not already in the approved Pre-Opening Budget or Annual Plan, before
incurring any expenses, Consultant must submit in writing a request, and obtain
approval from, the Management Committee as that term is defined in section 5.3
of the Operating Agreement. Requests from the Consultant shall set forth a
description of the proposed expense item, a statement of the estimated cost, the
purpose for incurring such expense and the name and address of the individual,
manufacturer, wholesaler, vendor, supplier or business from whom the Consultant
intends to procure the goods or services.
(vi) Consultant agrees to adhere to the Community Commitment Program as that
term is used in Section 5.3 of the Management Agreement in the procurement of
goods or services from individuals, manufacturers, wholesalers, vendors,
suppliers or businesses.
9. INDEPENDENT CONTRACTOR RELATIONSHIP. Consultant is retained and
-----------------------------------
employed by the Company only for the purposes and to the extent set forth in
this Agreement, and his relationship to the Company shall, during the term
hereof, be that of an independent
5
<PAGE>
contractor. Consultant shall not be considered as having employee status or as
being entitled to participate in any plans, arrangements, or distributions by
the Company pertaining to or in connection with any pension, stock, bonus,
profit sharing, or similar benefits for Company's regular employees. Consultant
shall be responsible for the payment of any and all taxes resulting from the
receipt by Consultant of the compensation provided hereunder required by any
present or future statute, law, ordinance, regulation, order, judgment or
decree, and Consultant hereby indemnifies and holds Company harmless from any
and all liability therefor.
10. TERMINATION. This Agreement shall terminate upon the occurrence of
-----------
any one of the following events:
(i) The expiration of the stated Term including any extensions effected
by Consultant in accordance with the terms hereof.
(ii) Agreement by both parties in writing to terminate this Agreement.
(iii) Consultant is unable or unwilling to comply with the terms and
conditions, including financial obligations, imposed by any Governmental
Authority, at the election of Company, effective upon delivery of written
notice to Consultant.
(iv) Upon termination of the Management Agreement for any reason other
than a voluntary termination.
(v) If an Owner Denial pursuant to Section 17.1 of the Management
Agreement and/or a Manager Denial pursuant to Section 17.2 of the
Management Agreement shall occur or be threatened by reason of any act or
omission of Consultant or
6
<PAGE>
any Affiliate of Consultant, the Company shall have the right to terminate
this Agreement upon written notice to Consultant, and such termination
shall not cause the termination of the Management Agreement. In no event
shall this Agreement be terminated without the written consent of Circus
Circus Louisiana, Inc., if the effect of the termination of this Agreement
would be to also terminate the Management Agreement.
(vi) Upon the sale, assignment, transfer or other disposition (A) by the
Company of all or substantially all of its ownership interest in the
Riverboat and Related Amenities to an entity which is not an Affiliate of
the Company or (B) by Consultant of all or substantially all of its
ownership interest in the Company to an entity which is not an Affiliate of
Consultant.
11. BINDING EFFECT AND BENEFIT. This Agreement shall inure to the benefit
--------------------------
of and be binding upon the Company and Consultant, its successors and to the
extent permitted hereunder, assigns. This Agreement may be assigned by Company
or Consultant upon the same terms and conditions governing assignment of the
Management Agreement by Owner (as to Company) and Manager (as to Consultant) in
the Management Agreement, provided, however, a proposed assignee of Consultant
shall not be required to have any experience operating casinos or riverboats, or
any historical operating performance, as required by the Management Agreement.
12. ENTIRE AGREEMENT. This Agreement, the Management Agreement and the
----------------
Operating Agreement contain the entire agreement among the parties and may not
be amended, modified, or supplemented in any respect except by subsequent
written agreement entered into
7
<PAGE>
by both parties.
13. GOVERNING LAWS. This Agreement shall be construed in accordance with
--------------
the governed by the laws of the State of Louisiana.
14. NOTICES. Any notice or other communication under this Agreement shall
-------
be in writing and shall be sufficient if sent by registered mail, return receipt
requested, to the parties, at the addresses set forth below, or at such other
address as the Company or Consultant may from time specify.
If to Company:
American Entertainment, L.L.C.
8301 W. Judge Perez Drive
Suite 305
Chalmette, LA 70043
With a copy to:
Circus Circus Louisiana, Inc.
c/o Circus Circus Enterprises, Inc.
2880 Las Vegas Blvd. South
Las Vegas, NV 89109
Attention: Corporate Counsel
If to Consultant:
American Entertainment Corporation
8301 W. Judge Perez Drive
Suite 305
Chalmette, LA 70043
IN WITNESS WHEREOF, the parties have executed this Agreement this 8th day
of February, 1995.
WITNESSES: AMERICAN ENTERTAINMENT, L.L.C.
BY: CIRCUS CIRCUS LOUISIANA, MEMBER
_____________________________________ BY:CLYDE T. TURNER
------------------------------
CLYDE T. TURNER
TITLE: PRESIDENT
BY: AMERICAN ENTERTAINMENT
CORPORATION, MEMBER
8
<PAGE>
____________________________________ BY:JOSEPH H. GEORGUSIS
------------------------------
JOSEPH H. GEORGUSIS, PRESIDENT
BY: AMERICAN ENTERTAINMENT
CORPORATION, CONSULTANT
____________________________________ BY: JOSEPH H. GEORGUSIS
------------------------------
JOSEPH H. GEORGUSIS, PRESIDENT
9
<PAGE>
REIMBURSEMENT AND GUARANTY AGREEMENT
THIS REIMBURSEMENT AND GUARANTY AGREEMENT (the "Agreement"), is made as of
February 8, 1995, between and among CIRCUS CIRCUS ENTERPRISES, INC., a Nevada
corporation ("CCEI"), CIRCUS CIRCUS LOUISIANA, INC., a Louisiana corporation
("CCLI"), AMERICAN ENTERTAINMENT CORPORATION, a Louisiana corporation ("AEC")
and JOSEPH H. GEORGUSIS ("Georgusis"), with reference to the following:
A. CCLI and AEC are the members of AMERICAN ENTERTAINMENT, L.L.C., a
Louisiana limited liability company (the "Company"), which is operating pursuant
to a certain Amended and Restated Operating Agreement dated as of February 8,
1995 (the "Operating Agreement"). Unless otherwise expressly stated, any defined
term used in this Agreement shall have the same meaning as set forth in the
Operating Agreement.
B. CCEI is the sole shareholder of CCLI. CCEI and CCLI are sometimes
collectively referred to herein as the "Circus Parties."
C. Georgusis is the controlling shareholder, director and executive
officer of AEC. Georgusis and AEC are sometimes collectively referred to herein
as the "AEC Parties."
D. The parties acknowledge that this Agreement may, in part, be subject
to the Louisiana Riverboat Economic Development and Gaming Control Act, La.R.S.
-------
4:501 et. seq. (the "Riverboat Gaming Act"). In particular, they acknowledge
- ----- --- ----
that the terms of this Agreement and, if necessary, the enforcement of this
Agreement, may require certain regulatory approvals pursuant to the Riverboat
Gaming Act, which approvals are referred to herein as the "Gaming Approvals."
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of
which are hereby acknowledge, the parties hereto hereby agree as follows:
1. Obligation to Provide Guarantees.
---------------------------------
(a) If and to the extent personal guarantees are required by third
party lenders as conditions precedent to the making of Third Party Loans
pursuant to Section 6.2(b) of the Operating Agreement, the AEC Parties and the
Circus Parties agree to provide such guarantees, which guarantees shall be in
form and substance consistent with commercial lending practices for comparable
transactions. In this connection the parties acknowledge that such guarantees
may impose unconditional, absolute, joint and several liability on the
respective guarantors for the full payment and performance of the obligations so
guaranteed.
(b) The AEC Parties hereby jointly, severally, absolutely,
unconditionally, and irrevocably guarantee to the Circus Parties, the full and
timely payment when due, of fifty percent (50%) of the total amount of any CCLI
Loans made pursuant to Section 6.2(c) of the Operating Agreement (including
without limitation, any Third Party Loans made in replacement of all or any part
of such CCLI Loans). Without limiting the foregoing, the AEC Parties agree from
time to time upon request, to execute and deliver such documents and
instruments, in form and substance consistent with commercial lending practices
for comparable transactions, as may be requested to further evidence or confirm
such guaranty obligations.
<PAGE>
2. Reimbursement and Payment Obligations.
-------------------------------------
(a) If and to the extent the guarantees given pursuant to Section
1(a) above provide for joint and several liability of the guarantors vis-a-vis
the third party lenders, it is agreed that, as among the parties hereto, the AEC
Parties as a group and the Circus Parties as a group shall each be liable for
only fifty percent (50%) of the total guaranteed obligations. If the third party
lender or other obligee makes demand on the AEC Parties or the Circus Parties
for more than their proportionate share of a guaranteed obligation, and such
party reasonably determines that it is legally obligated to make such payment,
such party may, upon written notice to the other party, demand that the other
party pay its proportionate share of the guaranteed obligation when due, so that
the first party shall not be required to advance more than its proportionate
share of the guaranteed obligation to the third party lender or other obligee.
In all events however, should the AEC Parties or the Circus Parties, as the case
may be, be required to pay more than its proportionate share of a guaranteed
obligation, the other party will be absolutely and unconditionally obligated to
reimburse the paying party for the amount of any such excess payment promptly
after the delivery by the paying party of written notice that such excess
payment has been made. Any amounts to be reimbursed shall bear interest from the
date advanced by the paying party until repaid, at the default rate charged
pursuant to the underlying guaranteed obligation.
(b) If and to the extent the Net Available Cash of the Company is not
sufficient to pay the outstanding principal balance and accrued but unpaid
interest of each CCLI Loan when due at maturity or earlier acceleration, within
ten (10) days after the due date thereof, the AEC Parties shall be
unconditionally obligated to pay 50% of such shortfall to the holder of such
CCLI Loan, but may defer the payment of such obligation for up to five years
from the date of such maturity or earlier acceleration: provided that during
said five year period, the unpaid balance of said obligation shall bear interest
at the rate of ten percent (10%) per annum and all Net Available Cash,
Consulting Fees and other amounts of whatsoever nature otherwise payable to AEC
or its Affiliates pursuant to the Operating Agreement, the Consulting Agreement
or any other related agreement, shall be paid directly to the holder of such
CCLI Loan (and applied first to accrued interest and then to principal);
provided further, however, in the event of an acceleration of the maturity of
any such CCLI Loan (i) by reason of any default by any of the AEC Parties under
the Operating Agreement, this Reimbursement Agreement, the Amended AEC Loan
Documents or any other related agreements, or (ii) pursuant to Sections 8.1(b),
8.2(c) or 8.2(d) of the Operating Agreement, then the AEC Parties shall pay the
unpaid balance of such obligation, together with the amount of any accrued but
unpaid interest, (x) within ten (10) days after written demand therefor in the
event of an acceleration under clause (i) above or (y) on the applicable closing
date in the event of an acceleration under clause (ii) above. Any such amounts
not so paid within said ten (10) days after demand, shall bear interest from the
due date of such obligation until paid, at 5% per annum in excess of the B of A
Prime Rate.
3. Nature of Obligations. The reimbursement and guaranty obligations
---------------------
provided for in this Agreement are absolute, unconditional, irrevocable,
continuing guarantees of payment, not of collectibility, and are in no way
conditioned upon or limited by: (a) any attempt to collect from the Company;
(b) any attempt to collect from, or the exercise of any rights or remedies
against, any person or entity other than the Company who may at any time, now or
hereafter, be primarily or secondarily liable for any or all of the Third Party
Loans
-2-
<PAGE>
and/or the CCLI Loans (collectively, the "Underlying Indebtedness") (all of the
aforementioned persons in this clause (b) other than the Company being herein
sometimes collectively referred to as the "Obligors" and individually as an
"Obligor"; or (c) any resort or recourse to or against any security or
collateral now or hereafter pledged, assigned or granted to the holders of any
Underlying Indebtedness, when and as the same shall become due and payable
(whether by acceleration, declaration, extension or otherwise, but only after
the expiration of any cure period or grace period applicable thereto). The CCLI
parties and/or the AEC parties, as the case may be, shall on demand, pay the
amounts of their respective obligations under Section 2 above, in immediately
available funds of lawful money of the United States of America to the
respective payee of such obligations.
4. Obligations Absolute. The indebtedness, liabilities and obligations
--------------------
of the AEC Parties and the Circus Parties, as set forth in Sections 1 and 2
above, are primary, solidary obligations as to all parties within each such
group, are continuing, irrevocable, absolute and unconditional, shall not be
subject to any counterclaim, recoupment, set-off, reduction or defense based
upon any claim that such party may have against the Company or any of the other
Obligors, are independent of any other guarantee or guarantees at any time in
effect with respect to all or any part of the Underlying Indebtedness, and may
be enforced regardless of the existence of such other guarantee or guarantees.
The indebtedness, liabilities and obligations of each party under this Agreement
shall not be affected, impaired, lessened, modified, waived or released by the
invalidity or unenforceability of any of the loan documents evidencing or
securing the Underlying Indebtedness or by the death of or bankruptcy,
reorganization, dissolution, liquidation or similar proceedings affecting the
Company or one or more of the other Obligors or the sale or other disposition of
all or substantially all of the assets of any of the foregoing.
5. Waivers. Each party hereto hereby unconditionally waives: (a) notice
-------
of acceptance, presentment, demand, dishonor, protest, notice of non-payment and
notice of dishonor of the Underlying Indebtedness and any property or other
security serving as collateral Underlying Indebtedness; and (b) all notices
required by statute or otherwise to preserve any rights against any party
hereunder or under any of the loan documents evidencing or securing the
Underlying Indebtedness, including without limitation, any demand, proof or
notice of non-payment of any of the Underlying Indebtedness by the Company or
any of the Obligors and notice of any failure or default on the part of the
Company or any of the Obligors to perform or comply with any term of any of such
loan documents to which the Company or any of the Obligors is a party.
6. Covenants. The AEC Parties covenant and agree that they will not
---------
carry on or cease to carry on their business and/or personal affairs in such a
manner the effect of which would be to materially adversely change the ability
of AEC to pay and perform its obligations under the Operating Agreement and
Amended AEC Loan Documents and/or the ability of the AEC Parties to pay and
perform their respective reimbursement and guaranty obligations under this
Agreement.
7. Gaming Approvals. Promptly upon execution and delivery of this
----------------
Agreement, the parties shall cause the Company's counsel to apply for and
diligently pursue obtaining the Gaming Approvals and the parties agree to
cooperate and assist in connection therewith.
8. Default; Remedies. The failure of any party to pay or perform when
-----------------
due, any of its obligations under this Agreement, which failure continues for a
period of ten (10) days
-3-
<PAGE>
after delivery of written notice by another party hereto, shall constitute an
event of default by such party and its Affiliates under this Agreement and, at
the election of the non-defaulting party, shall constitute and event of default
by the defaulting party and its Affiliates under the Operating Agreement.
Without limiting any other rights or remedies available at law, in equity or
pursuant to any applicable agreement, a non-defaulting party may institute
judicial proceedings for the collection of the sums or the performance of the
indebtedness so due and unpaid or unperformed, and may prosecute such
proceedings to judgment for final decree, and may enforce the same against the
defaulting party or parties and collected the monies adjudged or decreed to be
payable in the manner provided by law out of the property of such defaulting
parties wherever situated. Without limiting the foregoing, a non-defaulting
party shall have the right to proceed first and directly against the defaulting
parties under this Agreement without proceeding against the Company or any other
person or entity (including other Obligors), without exhausting any other
remedies which the non-defaulting party may have and without resorting to any
other security held by the non-defaulting party. For purposes hereof, AEC and
Georgusis shall be deemed Affiliates of each other and CCEI and CCLI shall be
deemed Affiliates of each other, but the AEC Parties and the Circus Parties
shall not be deemed Affiliates of each other.
9. Enforcement Expenses. The Circus Parties and the AEC parties each
--------------------
agree to indemnify and hold the other harmless from and against any loss, cost,
liability or expense, including reasonable attorneys fees and disbursements and
any other fees and disbursements, that may be incurred by or on behalf of the
indemnified party in enforcing any obligation or liability of the indemnifying
party hereunder.
10. Notices. All notices, requests, demands and other communications
-------
under this Agreement shall be in writing and shall be deemed to have been duly
given on the date of service if served personally on the party to whom notice is
given, or on the next business day if sent by confirmed electronic facsimile
transmission ("fax") or on the date of actual delivery (as set forth in the
courier's or carrier's receipt) if sent by overnight commercial courier or by
first class mail, registered or certified, postage prepaid and properly
addressed to the party at his address set forth below, or any other address that
any party may from time to time designate by written notice to the others:
If to CCEI or to CCLI:
Circus Circus Enterprises, Inc.
2880 Las Vegas Boulevard South
Las Vegas, Nevada 89109
Attention: General Counsel
If to AEC or to Georgusis:
American Entertainment Corporation
8301 Judge Perez Drive, Suite 305
Chalmette, Louisiana 70043
Attention: Mr. Joseph H. Georgusis
11. Miscellaneous.
-------------
(a) Amendment. Neither this Agreement nor any provisions hereof may
---------
be changed, waived, discharged or terminated orally or in any manner other than
by an instrument in writing signed by the party against whom enforcement of the
change, waiver, discharge or termination is sought.
-4-
<PAGE>
(b) Waivers. No course of dealing on the part of any party hereto or
-------
its officers, employees, consultants or agents, nor any failure or delay by any
party with respect to exercising any of its rights, powers or privileges under
this Agreement shall operated as a waiver thereof.
(c) Cumulative Rights. The rights and remedies of the parties under
-----------------
this Agreement shall be cumulative, and the exercise or partial exercise of any
such right or remedy shall not preclude the exercise of any other right or
remedy.
(d) Titles of Articles, Sections and Subsections. All titles or
--------------------------------------------
headings to articles, sections, subsections or other divisions of this Agreement
are only for the convenience of the parties and shall not be construed to have
any effect or meaning with respect to the other content of such articles,
sections, subsections or other divisions, such other content being controlling
as to the agreement between the parties hereto.
(e) Singular and Plural. Words used herein in the singular, where
-------------------
the context so permits, shall be deemed to include the plural and vice versa.
The definition of words in the singular herein shall apply to such word when
used in the plural where the context so permits and vice versa.
(f) Governing Law. This Agreement is a contract made under and shall
-------------
be construed in accordance with and governed by the laws of the United States of
America and the State of Louisiana.
(g) Termination. Upon full and final payment and performance of the
-----------
Third Party Loans, the CCLI Loans and any reimbursement obligations hereunder,
this Agreement shall terminate. Notwithstanding the foregoing, if at any time,
any payment or part thereof by a party hereto with respect to any reimbursement
or guarantee obligations is rescinded or must otherwise be restored by the payee
pursuant to any insolvency, bankruptcy, reorganization, receivership or any
other debt relief granted to the Company or to any other Obligor, this Agreement
and such party's (and its Affiliates) indebtedness, liabilities and obligations
hereunder shall automatically and retroactively be reinstated.
(h) Successor and Assigns. No party shall have the right to assign
---------------------
its rights or delegate its obligations under this Agreement, provided that CCLI
and CCEI may so assign or delegate to any Affiliate of CCEI or CCLI. Subject to
the foregoing, this Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors in interest and
assigns; provided however, that the provisions of this Agreement are solely and
exclusively for the benefit of the parties hereto (and their respective
permitted successors in interest and assigns), and may only be enforced by, the
parties hereto (or their respective successors in interest and assigns) and
shall not inure to the benefit of, or be enforceable by, any third parties,
including without limitation, any third party creditors of the Company.
-5-
<PAGE>
(i) Counterparts. This Agreement may be executed in two or more
------------
counterparts, and it shall not be necessary that the signatures of all parties
hereto be contained on any one counterpart hereof; each counterpart shall be
deemed an original, and all of which together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement as
of the day and year first above written.
AMERICAN ENTERTAINMENT CIRCUS CIRCUS ENTERPRISES,
INC.,
CORPORATION, a Louisiana corporation a Nevada corporation
By: JOSEPH H. GEORGUSIS By: CLYDE T. TURNER
------------------- ---------------
Joseph H. Georgusis, President Clyde T. Turner, President
JOSEPH H. GEORGUSIS CIRCUS CIRCUS LOUISIANA, INC.,
- -------------------
Joseph H. Georgusis a Louisiana corporation
By: CLYDE T. TURNER
---------------
Clyde T. Turner, President
-6-
<PAGE>
AMENDED AND RESTATED
PROMISSORY NOTE
THIS AMENDED AND RESTATED PROMISSORY NOTE AMENDS AND RESTATES IN ITS ENTIRETY,
THAT CERTAIN PROMISSORY NOTE DATED JULY 22, 1994 IN THE ORIGINAL FACE AMOUNT OF
$10,000,000, MADE BY AMERICAN ENTERTAINMENT CORPORATION TO THE ORDER OF AMERICAN
ENTERTAINMENT, L.L.C., AS FOLLOWS:
$10,000,000.00 FEBRUARY 8, 1995
CHALMETTE, LOUISIANA
FOR VALUE RECEIVED, AMERICAN ENTERTAINMENT CORPORATION, a Louisiana
corporation (the "Borrower"), promises to pay to the order of CIRCUS CIRCUS
ENTERPRISES, INC. (the "Lender"), 2880 Las Vegas Boulevard South, Las Vegas,
Nevada 89109, the principal sum of Ten Million and No/100 ($10,000,000.00)
Dollars, or so much thereof as remains unpaid from time to time.
Borrower acknowledges that the principal amount of this Note was disbursed
to Borrower in a series of advances (each, an "Advance" and collectively, the
"Advances") at the times and in the amounts as set forth on Schedule I attached
hereto.
The outstanding amounts of principal borrowed hereunder shall bear interest
at a rate equal to one (1%) percent per annum in excess of the interest rate
charged from time to time by Bank of America, N.T.& S.A. to its best commercial
customers for short term unsecured loans, from the date of each Advance until
paid. All payments of interest shall be computed on the per annum basis of a
year of 365 days or 366 days, as the case may be, for the actual number of days
(including the first day, but excluding the last day) elapsed.
Accrued interest on Advances hereunder and the aggregate principal of the
Advances outstanding hereunder shall be due and repaid as follows:
(1) Beginning on November 1, 1995 and on the first day of each November
thereafter, the Borrower shall be obligated to pay to the Lender the
greater of (a) the accrued and unpaid interest hereunder, or (b) the
amount of Net Available Cash (as defined in that Amended and Restated
--------------------
Operating Agreement of American Entertainment, L.L.C., A Louisiana
------------------------------------------------------------------
Limited Liability Company, dated February __, 1995 (as further
-------------------------
amended, modified, supplemented and restated from time to time, the
"Operating Agreement") of American Entertainment, L.L.C. (the
"Company") between the Borrower and Circus Circus Louisiana, Inc., a
Louisiana corporation ("CCLI")) distributed to or for the benefit of
the Borrower under Section 7.3(a) of the Operating Agreement during
the prior 12 month period, payments being received by the
<PAGE>
Lender under this clause (b) to be applied first to accrued and unpaid
interest hereunder and then to the outstanding principal balance
hereunder.
(2) On any date that the Borrower is entitled to receive a distribution of
Net Available Cash pursuant to Sections 7.3(a) or 11.2 of the
Operating Agreement, the Borrower shall cause such amount to be paid
directly by the Company to the Lender for the account of the Borrower
as a mandatory prepayment hereunder; any such prepayment to be applied
first to accrued and unpaid interest hereunder and then to the
outstanding principal balance hereunder.
(3) On November 1, 2001, all accrued and unpaid interest hereunder and the
aggregate principal balance outstanding hereunder shall be due and
payable, and shall be paid by the Borrower to the Lender in full (the
"Final Payment")
(4) Within ten (10) days prior to each due date hereunder, Lender shall
provide Borrower with a written statement calculating the interest due
and payable for the preceding fiscal year. However, with respect to
the Final Payment hereunder, Lender shall provide Borrower with a
written statement, submitted within ten (10) days prior to the date
such Final Payment is due, of the interest due and payable for the
preceding fiscal year and for any additional period thereafter through
---
the date that such Final Payment is due. Lender's failure to provide
such written notice shall not void Borrower's payment obligations
hereunder. In the event that Borrower fails to receive such written
notice within ten (10) days prior to any due date hereunder, Borrower
shall so notify Lender, who will then provide such notice as quickly
as is practicable.
At any time and from time to time, the Borrower may pre-pay this Note in
whole or in part, without premium or penalty, payments to be applied first to
accrued and unpaid interest hereunder and then to the outstanding principal
balance hereunder.
All payments and prepayments made by the Borrower hereunder shall be made
in lawful money of the United States to the Lender in immediately available
funds before 2:00 p.m. (Pacific Time) on the date that such payment is required
to be made. Any payment received and accepted by the Lender after such time
shall be considered for all purposes (including the calculation of interest, to
the extent permitted by law) as having been made on the Lender's next following
Business Day. If the day for any payment or prepayment hereunder falls on a day
which is not a Business Day, then for all purposes of this Note, the same shall
be deemed to have fallen on the next following Business Day, and such extension
of time shall in such case be included in the computation of payments of
interest. For the purposes of this Note, "Business Day" shall mean a day other
than a Saturday, Sunday or legal holiday for commercial banks in New Orleans,
Louisiana.
All indebtedness of outstanding principal under this Note shall bear
interest (computed in the same manner as interest on this Note prior to
maturity) after maturity, whether at
-2-
<PAGE>
stated maturity, by acceleration, or otherwise, at a rate equal to five (5%)
percent per annum in excess of the interest rate charged from time to time by
Bank of America, N.T. & S.A. to its best commercial customers for short term
unsecured loans (the "Default Rate"), and all such interest shall be payable on
demand.
The Borrower and any guarantor, accommodation party, endorser or other
person or entity liable for the demand or collection of this Note expressly
waive demand and presentment for payment, notice of nonpayment, protest, notice
of protest, notice of dishonor, bringing of suit, diligence in taking any action
to collect amounts called for hereunder and in the handling of property at any
time existing as security in connection herewith, and shall be directly and
primarily liable for the payment of all sums owing and to be owing hereon,
regardless of and without any notice, diligence, act or omission as or with
respect to the collection of any amount called for hereunder or in connection
with any right, lien, interest or property at any and all times had or existing
as security for any amount called for hereunder.
Any of the following events shall be considered an "Event of Default" as
that term is used herein: (i) the Borrower fails to make payment when due of any
principal or interest installment on this Note, which default remains uncured
for a period of ten (10) days after notice thereof having been given by the
Lender; (ii) any guarantor of the indebtedness, liabilities and obligations of
the Borrower to the Lender under and in connection with this Note (in any such
case, a "Guarantor") defaults in the payment of any amounts owed to Lender under
such Guarantor's guaranty, provided that if there shall not then exist an Event
of Default under this Note, such default shall also remain uncured for a period
of ten (10) days after notice thereof having been given to such Guarantor by the
Lender; (iii) any Guarantor defaults in the observance or performance of any of
the covenants or agreements contained in such Guarantor's guaranty (other than
with respect to the payment of money), which default remains uncured for a
period of thirty (30) days after notice thereof having been given to such
Guarantor by the Lender; (iv) the occurrence of any "Event of Default" by the
Borrower under and as defined in the Operating Agreement; (v) the occurrence of
any event under Section 10.1 of the Operating Agreement requiring the Company be
dissolved; (vi) a receiver, conservator, liquidator or trustee of the Borrower,
or of any of its property, is appointed by order or decree of any court or
agency or supervisory authority having jurisdiction; or an order for relief is
entered against the Borrower under the Federal Bankruptcy Code; or the borrower
is adjudicated bankrupt or insolvent; or any material portion of the property of
the Borrower is sequestered by court order and such order remains in effect for
more than 30 days after such party obtains knowledge thereof; or a petition is
filed against the borrower under any state, reorganization, arrangement,
insolvency, readjustment of debt, dissolution, liquidation or receivership law
of any jurisdiction, whether now or hereafter in effect, and such petition is
not dismissed within 60 days; (vii) the Borrower files a cause under the Federal
Bankruptcy Code or seeking relief under any provision of any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction, whether now or hereafter in effect, or
consents to the filing of any case or petition against it under any such law;
(viii) the Borrower makes an assignment for the benefit of its creditors, or
admits in writing its
-3-
<PAGE>
inability to pay its debts generally as they become due, or consents to the
appointment of a receiver, trustee or liquidator of the Borrower or of all or
any part of its property; or (ix) a write or warrant of attachment or any
similar process shall be issued by any court against all or any material portion
of the property of the borrower, and such writ or warrant of attachment of any
similar process is not released or bonded within 30 days after its entry.
Upon the happening of any Event of Default specified in the preceding
paragraph (other than clauses (vi) and (vii) thereof), the Lender may be written
notice to the Borrower declare the entire principal amount of this Note plus
interest accrued hereon to be immediately due and payable without presentment,
demand, protest, notice of protest or dishonor or other notice of default of any
kind, all of which are hereby expressly waived by the borrower. Upon the
happening of any Event of Default specified in clauses (vi) or (vii) of the
preceding paragraph, the entire principal amount of this Note plus interest
accrued hereon shall, without notice or action by the Lender, be immediately due
and payable without presentment, demand, protest, notice of protest or dishonor
or other notice of default of any kind, all of which are hereby expressly waived
by the Borrower.
Upon the occurrence of any Event of Default, the Lender shall have the
right to set-off any funds of the Borrower in the possession of the Lender
against any amounts then due by the Borrower to the Lender on this Note.
If an Event of Default occurs and this Note is placed in the hands of an
attorney for collection, or suit is filed herein, or proceedings are had in
bankruptcy, probate, receivership or other judicial proceedings for the
establishment or collection of any amount called for hereunder, or any amount
payable or to be payable hereunder is collected through any such proceedings,
the Borrower agrees it is also to pay the owner and holder of this Note a
reasonable amount as attorneys' fees.
The Lender is hereby authorized by the Borrower to recorded on the schedule
annexed to this Note (or on a supplemental schedule thereto) the amount of each
Advance made by the Lender to the Borrower and the amount of each payment or
prepayment of principal of such Advances received by the Lender, it being
understood, however, that failure to make any such notation shall not affect the
rights of the Lender or the obligations of the Borrower hereunder in respect of
this Note. The Lender may, at its option, record shall matters in its internal
records rather than on such schedule.
Any notice or demand which, by provision of this Note, is required or
permitted to be given or served shall be deemed to have been sufficiently given
and served for all purposes (if mailed) three calendar days after being
deposited, postage prepaid, in the United States mail, registered or certified
mail, or (if delivered by express courier), or (if delivered in person) the same
day as delivery, in each case addressed (until another address or addresses are
given in writing in accordance with this paragraph) as follows:
-4-
<PAGE>
If to the Borrower:
American Entertainment Corporation
8301 West Judge Perez Drive, Suite 305
Chalmette, Louisiana 70043
Attn: Mr. William F. Beuck
and
Joseph H. Georgusis
8301 West Judge Perez Drive, Suite 305
Chalmette, Louisiana
If to the Lender:
Circus Circus Enterprises, Inc.
2880 Las Vegas Boulevard South
Las Vegas, Nevada 89109
Attn: Chief Financial Officer
This Note shall be governed by and construed under the laws of the State of
Louisiana.
IN WITNESS WHEREOF, the Borrower has caused this Note to be executed and
delivered on the day first written above.
AMERICAN ENTERTAINMENT CORPORATION
By: JOSEPH H. GEORGUSIS
-------------------
Name: Joseph H. Georgusis
Title: President
-5-
<PAGE>
SCHEDULE I TO
PROMISSORY NOTE
This Note evidences Advances made in the principal amounts, and on the
dates set forth below, subject to the payments or prepayments of principal set
forth below:
<TABLE>
<CAPTION>
Principal Principal
Principal Amount Paid or Balance
Date Made Amount of Loan Prepaid Outstanding Initials
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
2/8/94 $2,000,000 -0- $2,000,000
8/29/94 3,000,000 -0- 5,000,000
9/16/94 5,000,000 -0- 10,000,000
</TABLE>
<PAGE>
AMENDED SECURITY AND PLEDGE AGREEMENT
THIS AMENDED SECURITY AND PLEDGE AGREEMENT (this "Amended Security and
Pledge Agreement"), dated as of February 8, 1995, is made by and among AMERICAN
----------
ENTERTAINMENT CORPORATION, a Louisiana corporation (the "Debtor"); the
individual shareholders of the Debtor, as named below (collectively, the
"Shareholders"), who intervene herein under and pursuant to Section 11 hereof;
and CIRCUS CIRCUS ENTERPRISES, INC., a Nevada corporation (the "Lender"), who
agree as follows:
RECITALS
A. In connection with the recapitalization of American Entertainment,
L.L.C., a Louisiana limited liability company (the "Company"), the members,
American Entertainment Corporation ("AEC") and Circus Circus Louisiana, Inc.,
have entered into an Amended and Restated Operating Agreement, dated as of
February 8, 1995 (the "Amended Operating Agreement"), which amends and restates,
- ----------
in its entirety, that Operating Agreement, dated as of January 14, 1994, as
later amended through an Amendment, dated as of February 8, 1994.
B. Pursuant to Section 6.6 of the Amended Operating Agreement, Circus
Circus Enterprises, Inc. ("CCEI") is Lender under the AEC Loan Documents,
including (i) that Promissory Note, dated July 22, 1994, between AEC, as
Borrower, and the Company, as Lender, in an aggregate principal amount not to
exceed Ten Million ($10,000,000.00) Dollars (the "Note"); and (ii) that Security
and Pledge Agreement, dated as of July 22, 1994, by and between AEC, the
individual shareholders of AEC, and the Company, as Lender (the "Security and
Pledge Agreement").
C. CCEI and AEC have amended and restated the Note in the form of an
Amended Note, dated February 8, 1995 (the "Amended Note").
----------
D. CCEI and Guarantor have amended and restated the Security and
Pledge Agreement through this Amended Security and Pledge Agreement, dated
February 8, 1995 (again, the "Amended Security and Pledge Agreement").
- ----------
E. Debtor is indebted unto the Lender for a loan made or to be made
pursuant to the terms of the Amended Note (as amended, supplemented, extended,
renewed or restated from time to time). As used in this Amended Security and
Pledge Agreement, the term "Indebtedness" means all present and future amounts,
liabilities, and obligations of the Borrower to the Lender or to any successor
or transferee of the Lender under or pursuant to the Amended Note, whether said
amounts, liabilities, or obligations are liquidated or unliquidated, now
existing or hereafter arising, in principal, interest, deferral and delinquency
charges, costs and attorneys' fees, as therein stipulated, including any
amounts, liabilities or obligations under and pursuant to all amendments,
supplements, renewals and restatements to the Amended Note.
F. The Debtor will derive and will continue to derive benefits from
the aforementioned loan, under the Amended Note, made by the Lender to the
Debtor.
<PAGE>
G. In order to secure the full and punctual payment of the Amended
Note, and in accordance with Section 6.6 of the Amended Operating Agreement the
Debtor has agreed to execute and deliver this Amended Security and Pledge
Agreement and to pledge, deliver and grant to the Lender a continuing security
interest in and to the Collateral (as hereinafter defined).
H. The parties acknowledge that this Amended Security and Pledge
Agreement may, in part, be subject to the Louisiana Riverboat Economic
Development and Gaming Control Act, La. R.S. 4:501 et seq. (the "Riverboat
--------
Gaming Act"). In particular, they acknowledge that the terms of this Amended
Security and Pledge Agreement and, if necessary, the enforcement of this Amended
Security and Pledge Agreement, may require certain regulatory approvals pursuant
to the Riverboat Gaming Act.
AGREEMENT
NOW, THEREFORE, in consideration of the premises, the Debtor and the
Lender hereby agree as follows:
Section 1. Definitions.
-----------
a. As used in this Amended Security and Pledge Agreement,
the terms "Amended Operating Agreement," "Debtor," "Lender," "Shareholders,"
"Amended Note," and "Indebtedness" shall have the meanings indicated above.
b. As used in this Amended Security and Pledge Agreement,
the terms "Company" and "Collateral" shall have the respective meaning defined
in Section 2 below.
c. As used in this Amended Security and Pledge Agreement,
the term, "Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint stock company, trust,
unincorporated organization, government or any other agency or political
subdivision thereof, or any other form of entity.
Section 2. Security Interest.
-----------------
a. To secure the full and punctual payment and performance
of any and all present and future Indebtedness of the Debtor to the Lender or
any successor or transferee of the Lender under or pursuant to the Amended Note,
the Debtor hereby pledges, pawns and transfers to the Lender and grants to the
Lender a continuing security interest in and to all of the following property of
the Debtor, whether now owned or existing or hereafter acquired or arising
(collectively the "Collateral"):
i) All of the Debtor's interest in the Company and all of
the Debtor's right, title and interest in, to, and
under the Amended Operating Agreement (including any
amendments, supplements, and renewals) including,
without limitation, the Debtor's right to receive the
value of its share of, or
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<PAGE>
capital account or interest in, the Company,
whether upon withdrawal or other cessation of
Debtor's membership in the Company or the
termination of the Amended Operating
Agreement or otherwise, and all other
interests issued by or created in the Company
that the Debtor acquires or has the right to
acquire, from time to time, in any manner, in
substitution for or in addition to any of the
foregoing, and all certificates, agreements
and instruments representing or evidencing
all such interests, and all additions to or
replacements for any of the foregoing, and
all proceeds, fees, revenues, distributions,
reimbursements, or other amounts payable to
the Debtor and attributable to the Debtor's
ownership interest in the Company, and
together with all rights, powers and
privileges of the Debtor under or with
respect to any of the foregoing, including
all rights, powers and privileges of the
Debtor as a member of the Lender, including
all voting, management and other rights under
the Amended Operating Agreement;
ii) All consulting, management, incentive and
other fees of any nature owing or to become
owing, to the Debtor by or from the Company,
or by or from any Affiliate or Affiliates of
the Company, whether pursuant to management
agreements, letter agreements, partnership
agreements or any other source (including,
without limitation, the Amended Operating
Agreement, as supplemented or amended from
time to time) and all other proceeds,
revenues or other amounts payable to the
Debtor in connection with services or assets
provided to the Company; provided further
that upon the occurrence of an event that,
with the passage of time, would constitute an
Event of Default under the Amended Note, the
Company will, at the Lender's direction,
suspend all consulting, management, incentive
and other fees of any nature owing or to
become owing to the Debtor, subject to the
Company's obligation to release
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<PAGE>
immediately to the Debtor any and all such suspended
payments once the Debtor cures or avoids any such
occurrence that, with the passage of time, would
constitute an Event of Default under the Amended Note.
b. Payments made on the Amended Note by any Person will not
discharge or diminish the obligations and liability of the Debtor under this
Amended Security and Pledge Agreement for any remaining and succeeding
Indebtedness.
Section 3. Delivery of Collateral. The Lender hereby accepts the
----------------------
delivery of the Collateral on behalf of itself and on behalf of any future
transferee of the Indebtedness. The Debtor will execute and deliver to the
Lender all assignments, endorsements, powers and other documents requested at
any time and from time to time by the Lender with respect to the Collateral and
the rights and powers granted to the Lender hereunder, and will deliver to the
Lender any certificates representing the Collateral from time to time, or
substitutions of any of the Collateral.
Section 4. Representations. The Debtor has not performed any acts or
---------------
signed any agreements which might prevent the Lender from enforcing any of the
terms of this Amended Security and Pledge Agreement or which would limit the
Lender in any such enforcement. No security agreement or similar or equivalent
document or instrument covering all or any part of the Collateral has been
executed by the Debtor and remains in effect. No Collateral is in the
possession of any Person (other than the Debtor) asserting any claim thereto or
security interest therein, except that the Lender or its designee may have
possession of Collateral as contemplated hereby. The Debtor further represents
and warrants:
a. The Collateral is owned legally, directly and beneficially
and of record by the Debtor, is not subject to any interest, option or right of
any other Person, and the Collateral constitutes all of the interest that Debtor
owns in the Company, that being a fifty percent (50.0%) interest in the Lender;
b. All of the Debtor's interests in the Collateral have been
duly and validly issued to and are owned by the Debtor, all in compliance with
applicable laws and regulations including, without limitation, applicable state
and federal securities and gaming laws and regulations;
c. Upon delivery of the Collateral to the Lender or an agent
for the Lender, and registration of the pledge in the records of the Lender,
this Amended Security and Pledge Agreement creates and grants a valid first lien
on and perfected security interest in the Collateral, subject to no prior
security interest, lien, charge or encumbrance or to any agreement purporting to
grant to any third party a security interest in the property or assets of the
Debtor, which include the Collateral;
d. The Debtor's federal employer identification number is 72-
1234682; and
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<PAGE>
e. All authorizations, approvals or other actions by, and
notices to and filings with, any governmental authority or other third party
required for the grant by the Debtor of the security interest in the Collateral
and the perfection thereof and the exercise by the Lender of its rights provided
for in this Amended Security and Pledge Agreement, including, without
limitation, the approval of the Louisiana Riverboat Gaming Commission and the
Louisiana State Police, have been identified to the Lender and have been
obtained and remain in full force and effect.
Section 5. Covenants.
---------
a. The Debtor hereby covenants that so long as the Indebtedness
shall be outstanding and unpaid, in whole or in part, the Debtor will not sell,
offer to sell, convey or otherwise transfer or dispose of any of the Collateral
or any interest therein, nor will the Debtor create, incur or permit to exist
any pledge, mortgage, lien, charge, encumbrance, security interest, restriction
on transfer, right to purchase, option, right of first refusal or other
impediment to title whatsoever with respect to any of such Collateral other than
that created hereby.
b. The Debtor warrants and will defend the Lender's right, title
and security interest in and to the Collateral against the claims of any Person.
Section 6. Voting Rights.
-------------
a. So long as no Event of Default shall have occurred under the
Amended Note, the Debtor shall have the right, from time to time, to exercise
voting and other consensual rights to give approvals, ratifications and waivers
pertaining to the Collateral, for any purpose not inconsistent with the terms
of, or causing a default under, this Amended Security and Pledge Agreement and
the Amended Operating Agreement.
b. Upon the occurrence of an Event of Default under the Amended
Note (but only after the expiration of any cure period or grace period
applicable thereto), the Lender shall have the right, at Lender's option, to
exercise the voting and other consensual rights to give approvals, ratifications
and waivers and to take any other action with respect to all or any of the
Collateral with the same force and effect as if the Lender were the absolute and
sole owner thereof, and the Debtor's right to exercise such voting and other
consensual rights shall, at Lender's option, cease and become vested in the
Lender.
Section 7. Remedies Upon Default.
---------------------
a. Upon the occurrence of an Event of Default under the Amended
Note, the Lender may exercise all rights of a secured party under the Louisiana
Commercial Laws -- Secured Transactions (the "UCC") and other applicable law
(including the Uniform Commercial Code, as in effect in any other applicable
jurisdiction) and, in addition, the Lender may, without being required to give
any notice, except as herein provided or as may be required by mandatory
provisions of law (i) transfer the whole or any part of the Collateral into the
name of the Lender or its nominee, (ii) sell the Collateral or any part thereof
at a broker's board or on a securities exchange, or (iii) sell the Collateral or
any part thereof at public or private sale, for cash, upon credit or for future
delivery, and at such price or prices as the Lender may deem
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<PAGE>
satisfactory. The Lender may be the purchaser of any or all of the Collateral
so sold at any public sale (or, if the Collateral is of a type customarily sold
in a recognized market or is of a type which is the subject of widely
distributed standard price quotations, at any private sale). The Debtor will
execute and deliver such documents and take such other action as the Lender
deems necessary or advisable in order that any such sale may be made in
compliance with law. Upon any such sale the Lender shall have the right to
deliver, assign and transfer to the purchaser thereof the Collateral so sold.
Each purchaser at any such sale shall hold the Collateral so sold to it
absolutely free from any claim or right of whatsoever kind, including any equity
or right of redemption of the Debtor which may be waived, and the Debtor, to the
extent permitted by law, hereby specifically waives all rights of redemption,
stay or appraisal which it has or may have under any law, now existing or
hereafter adopted. The Debtor agrees that ten (10) days prior written notice of
the time and place of any sale or other intended disposition of any of the
Collateral constitutes "reasonable notification" within the meaning of Section
9-504(3) of the UCC, except that shorter or no notice shall be reasonable as to
any Collateral which is perishable or threatens to decline speedily in value or
is of a type customarily sold on a recognized market. The notice (if any) of
such sale shall (1) in the case of a public sale, state the time and place fixed
for such sale, and (2) in the case of a private sale, state the day after which
such sale may be consummated. Any such public sale shall be held at such time
or times within ordinary business hours and at such place or places as the
Lender may fix in the notice of such sale. At any such sale the Collateral may
be sold in one lot as an entirety or in separate parcels, as the Lender may
determine. The Lender shall not be obligated to make any such sale pursuant to
any such notice. The Lender may, without notice or publication, adjourn any
public or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for the sale, and such sale may be made
at any time or place to which the same may be so adjourned. In case of any sale
of all or any part of the Collateral on credit or for future delivery, the
Collateral so sold may be retained by the Lender until the selling price is paid
by the purchaser thereof, but the Lender shall not incur any liability in case
of the failure of such purchaser to take up and pay for the Collateral so sold
and, in case of any such failure, such Collateral may again be sold upon like
notice.
b. The Lender, instead of exercising the power of sale herein
conferred upon it, may proceed by a suit or suits at law or in equity to
foreclose the security interests and sell the Collateral, or any portion
thereof, under a judgment or decree of a court or courts of competent
jurisdiction. For the purposes of Louisiana executory process procedures, the
Debtor does hereby acknowledge the Indebtedness and does hereby confess judgment
in favor of the Lender for the full amount of the Indebtedness. The Debtor does
by these presents consent, agree and stipulate that upon the occurrence of an
Event of Default under the Amended Note it shall be lawful for the Lender, and
the Debtor does hereby authorize the Lender, to cause all and singular the
Collateral to be seized and sold under executory or ordinary process, at the
Lender's sole option, without appraisement, appraisement being hereby expressly
waived, in one lot as an entirety or in separate portions or parcels as the
Lender may determine, to the highest bidder, and otherwise exercise the rights,
powers and remedies afforded herein and under applicable Louisiana law. Any and
all declarations of fact made by authentic act before a Notary Public in the
presence of two witnesses by a person declaring that such facts lie within his
knowledge shall constitute authentic evidence of such facts for the purpose of
executory process. The Debtor hereby waives in favor of the Lender: (i) the
benefit of appraisement as provided in Louisiana Code of Civil Procedure
Articles 2332, 2336, 2723 and 2724, and all other laws conferring the same; (ii)
the demand and three days delay accorded by
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<PAGE>
Louisiana Code of Civil Procedure Articles 2639 and 2721; (iii) the notice of
seizure required by Louisiana Code of Civil Procedure Articles 2293 and 2721;
(iv) the three days delay provided by Louisiana Code of Civil Procedure Articles
2331 and 2722; and (v) the benefit of the other provisions of Louisiana Code of
Civil Procedure Articles 2331, 2722 and 2723, not specifically mentioned above.
c. The Debtor recognizes that the Lender may be unable to effect
a public sale of all or part of the Collateral by reason of certain prohibitions
contained in the Securities Act of 1933, as amended (the "Act"), and applicable
state securities laws and authorizes the Lender to resort to one or more private
sales to a restricted group of bidders and purchasers who will be obligated to
agree, among other things, to acquire all or a part of the Collateral for their
own account, for investment, and not with a view to the distribution or resale
thereof. If the Lender deems it advisable to do so for the foregoing or for
other reasons, the Lender is authorized to limit the prospective bidders on or
purchasers of any of the Collateral to such a restricted group of purchasers and
may cause to be placed on certificates or agreements for any or all of the
Collateral a legend to the effect that such security has not been registered
under the Act, and may not be disposed of in violation of the provision of said
Act, and to impose such other limitations or conditions in connection with any
such sale as the Lender deems necessary or advisable in order to comply with
said Act or any other securities or other laws. The Debtor acknowledges and
agrees that any private sale so made may be at prices and on other terms less
favorable to the seller than if such Collateral were sold at public sale and
that the Lender has no obligation to delay the sale of such Collateral for the
period of time necessary to permit the registration of such Collateral for
public sale under any securities laws. The Debtor agrees that a private sale or
sales made under the foregoing circumstances shall be deemed to have been made
in a commercially reasonable manner. If any consent, approval, or authorization
of any federal, state, municipal or other governmental department, agency or
authority should be necessary to effectuate any sale or other disposition of the
Collateral, or any partial sale or other disposition of the Collateral, the
Debtor will execute all applications and other instruments as may be required in
connection with securing any such consent, approval or authorization and will
otherwise use its best efforts to secure same. In addition, if the Collateral is
disposed of pursuant to Rule 144 under the Act, the Debtor agrees to complete
and execute a Form 144, or comparable successor form, at the Lender's request;
and the Debtor agrees to provide any material adverse information in regard to
the current and prospective operations of any company (including, without
limitation, the Company) an interest in which constitutes all or a portion of
the Collateral of which the Debtor has knowledge and which has not been publicly
disclosed, and the Debtor hereby acknowledges that the Debtor's failure to
provide such information may result in criminal and/or civil liability.
d. If the Lender shall determine to exercise its right to sell
all or any part of the Collateral and if in the opinion of counsel to Lender it
is advisable to have the Collateral or the portion thereof to be sold registered
under the provisions of the Act, the Debtor hereby agrees, at its own cost and
expense (i) to effectuate a reorganization of the Company (the "Reorganized
Company") into the form of entity requested by the Lender or any underwriter in
order to best accomplish a public offering, (ii) to execute and deliver, and to
use its best efforts to cause the Reorganized Company and its management, the
partners or members of the Reorganized Company and such partners' or members'
directors and officers to execute and deliver, all such instruments and
documents, and to do or cause to be done all other such acts and things, as may
be necessary or, in the opinion of the Lender, advisable to register the
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<PAGE>
Collateral, or the portion thereof to be sold, under the provisions of the Act
and to cause the registration statement relating thereto to become effective and
to remain effective for such period as prospectuses are required by law to be
furnished, and to make or cause to be made all amendments and supplements
thereto and to the related prospectus which, in the opinion of the Lender, are
necessary or advisable, all in conformity with the requirements of the Act and
the rules and regulations of the Securities and Exchange Commission applicable
thereto, (iii) to use its best efforts to cause the Reorganized Company to agree
to make, and to make available to its security holders as soon as practicable,
an earnings statement (which need not be audited) covering a period of at least
12 months, beginning with the first month after the effective date of any such
registration statement, which earnings statement will satisfy the provisions of
Section 11(a) of the Act, (iv) to use its best efforts to qualify the Collateral
under state Blue Sky or securities laws and to obtain the approval of any
governmental authorities for the public sale of the Collateral, including all
necessary gaming authorities' approvals, as requested by the Lender, and (v) at
the request of the Lender, to indemnify and hold harmless the Lender, the holder
or holders of the Indebtedness and any underwriters, including any Person
controlling any of the foregoing, from and against any loss, liability, claim,
damage and expense, including reasonable attorneys' fees incurred in connection
therewith, under the Act or otherwise insofar as such loss, liability, claim,
damage or expense arises out of or is based upon any actual or alleged untrue
statement of a material fact contained in such registration statement or
supplement thereto, or arises out of or is based upon any omission or alleged
omission to state therein a material fact required to be stated or necessary to
make the statements therein not misleading, such indemnification to remain
operative regardless of any investigation made by or on behalf of the Lender,
the holder or holders of the Indebtedness or any underwriters, including any
Person controlling any of the foregoing; provided, however, that the Debtor
shall not be liable in any case to the extent that any such loss, liability,
claim, damage or expense arises out of or is based on an untrue statement or
alleged untrue statement or an omission or an alleged omission made in reliance
upon and in conformity with written information furnished specifically to the
Debtor by the Lender, any holder or holder of the Indebtedness or any
underwriter.
Expenses payable by the Debtor in connection with any disposition
under the provisions above shall include, but shall not be limited to, all costs
of a registration under the Act of any Collateral or of sale of any Collateral
pursuant to any applicable regulation under the Act, brokers' or underwriters'
commissions, fees or discounts, accounting and legal fees, costs of printing and
other expenses of transfer and sale. The Debtor agrees to pay to the Lender on
demand following any Event of Default under the Amended Note and in advance of
any such registration, sale or other realization on the Collateral, such amount
which, in the estimation of counsel to the Lender, will cover all of such costs
and expenses described above, and all other costs and expenses of enforcing the
Indebtedness and of realizing on the Collateral, including reasonable attorneys'
fees and legal expenses.
Section 8. Limitation on Duty of Lender. The security interests are
----------------------------
granted as security only and the execution and delivery of the Amended Note,
this Amended Security and Pledge Agreement, and the Amended Guaranty shall not,
by their terms and conditions, subject the Lender to, or transfer or in any way
affect or modify, any obligation or liability of the Debtor with respect to any
of the Collateral or any transaction in connection therewith. The Debtor shall
remain liable under the Amended Operating Agreement to the extent set forth
therein to perform its duties and obligations thereunder to the same extent as
if this Amended Security and Pledge Agreement had not been executed. The
exercise by the Lender of any of
-8-
<PAGE>
its rights hereunder shall not release the Debtor from any of its duties or
obligations under the Amended Operating Agreement and the Lender shall not have
any obligation or liability under the Amended Operating Agreement by reason of
this Amended Security and Pledge Agreement, nor shall the Lender be obligated to
perform any of the obligations or duties of the Debtor under the Amended
Operating Agreement. The Lender shall not by reason of this Amended Security and
Pledge Agreement or the exercise of any remedies hereunder become responsible or
liable in any manner or to any extent for any obligations and liabilities of the
Debtor, whether now existing or hereafter incurred, including, without
limitation, the Indebtedness and any obligations and liabilities under the
Amended Operating Agreement. The Debtor specifically understands and agrees that
the Lender, solely by reason of having executed this Security and Pledge
Agreement, shall have no responsibility for (i) collecting or protecting any
income, earnings, or proceeds with regard to the Collateral, (ii) preserving any
of the Debtor's rights against parties to the Collateral or against third
persons, (iii) ascertaining any maturities, calls, conversion rights, exchanges,
offers, tenders or similar matters relating to the Collateral, or (iv) informing
the Debtor about any of these matters, whether or not the Lender actually has or
is deemed to have knowledge thereof. Beyond the exercise of reasonable care in
the custody thereof, the Lender shall have no duty as to any Collateral in its
possession or control or in the possession or control of any agent or bailee or
any income thereon. The Lender shall be deemed to have exercised reasonable care
in the custody of the Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which it accords its own property, and
shall not be liable or responsible for any loss or damage to any of the
Collateral, or for any diminution in the value thereof, by reason of the act or
omission of any broker or other agent or bailee selected by the Lender in good
faith. The Lender shall be deemed to have exercised reasonable care with respect
to any of the Collateral in its possession if the Lender takes such action for
that purpose as the Debtor shall reasonably request in writing; but no failure
to comply with any such request shall, of itself, be deemed a failure to
exercise reasonable care in the custody thereof. The Debtor hereby agrees to
indemnify and hold harmless the Lender and its directors, officers, employees
and agents against any and all claims, actions, liabilities, costs and expenses
of any kind or nature whatsoever (including reasonable fees and disbursements of
counsel) that may be imposed on, incurred by, or asserted against any of them,
in any way relating to or arising out of this Amended Security and Pledge
Agreement or any action taken or omitted by them hereunder (including such
obligations and liabilities of the Debtor), except to the extent that they
directly resulted from the gross negligence or willful misconduct of such
Persons.
Section 9. Appointment of Agent. At any time or times, in order to
--------------------
comply with any legal requirement in any jurisdiction, the Lender may appoint a
bank or trust company or one or more other Persons with such power and authority
as may be necessary for the effectual operation of the provisions hereof and may
be specified in the instrument of appointment.
Section 10. Expenses. In the event that the Debtor fails to comply
--------
with any provision in this Amended Security and Pledge Agreement, such that the
value of any Collateral or the validity, perfection, rank or value of any
security interest hereunder is thereby diminished or potentially diminished or
put at risk, the Lender may, but shall not be required to, effect such
compliance on behalf of the Debtor, and the Debtor shall reimburse the Lender
for the costs thereof on demand. All insurance expenses and all expenses of
protecting, appraising, and preparing the Collateral for sale, any and all
excise, property, sales, and use taxes imposed by any federal, state or local
authority on any of the Collateral, and all expenses in respect of the
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<PAGE>
sale or other disposition of the Collateral shall be borne and paid by the
Debtor; and if the Debtor fails to promptly pay any portion thereof when due,
the Lender may, at its option, but shall not be required to, pay the same and
charge the Debtor's account therefor, and the Debtor agrees to reimburse the
Lender therefor on demand. All sums so paid or incurred by the Lender for any of
the foregoing and any and all other sums for which the Debtor may become liable
hereunder and all costs and expenses (including reasonable attorneys' fees,
legal expenses and court costs) incurred by the Lender in enforcing or
protecting any of the rights or remedies under this Amended Security and Pledge
Agreement, together with interest thereon until paid at the rate equal to the
Default Rate (as defined in the Amended Note), shall be additional Indebtedness
and the Debtor agrees to pay all of the foregoing sums promptly on demand. The
Debtor shall be liable for all state, federal, local and other taxes on Debtor's
income from the Lender for any and all periods up to and including the date that
Lender or its transferee or other purchaser of the Collateral is admitted as a
member of the Company.
Section 11. Intervention by Shareholders of Debtor. The Shareholders
--------------------------------------
are all of the shareholders of Debtor and, as such, will derive and will
continue to derive, benefits from the loan made by the Lender to the Debtor
pursuant to the Amended Note. In furtherance of Section 6.6 of the Amended
Operating Agreement, the Shareholders agree to intervene in, execute and deliver
this Amended Security and Pledge Agreement and to pledge, deliver and grant to
the Lender a continuing security interest in and to all right, title and
interest the Shareholders, or any of them, has or may have in and to the
Collateral, by virtue of their respective interests as shareholders of the
Debtor. Accordingly, to secure the full and punctual payment of the
Indebtedness, and all extensions, increases and renewals thereof, each
Shareholder hereby pledges, pawns and transfers to the Lender and grants to the
Lender a continuing security interest in and to all right, title and interest
that such Shareholder has or may have, directly or indirectly, whether now
existing or hereafter arising, in and to the Collateral, in his capacity as a
shareholder of the Debtor (and for purposes hereof all references to "Debtor" in
Section 2 of this Amended Security and Pledge Agreement shall be deemed to be
references to "Shareholder," as the context requires); and this pledge by each
Shareholder shall specifically include, without limitation, all consulting,
management, incentive and other fees of any nature directly or indirectly owing
to or to become owing to such Shareholder from the Company, or from any
Affiliate or Affiliates of the Company. However, the parties hereto acknowledge
that this provision does not and is not intended to create personal liability on
the part of the Shareholders.
Section 12. Termination. Upon the payment in full of the
-----------
Indebtedness and the termination of the Amended Note, this Amended Security and
Pledge Agreement shall terminate. Upon request of the Debtor, the Lender shall
deliver the remaining Collateral (if any) to the Debtor. Notwithstanding the
foregoing, if at any time, any payment or part thereof to the Lender with
respect to any of the Indebtedness is rescinded or must otherwise be restored by
the Lender pursuant to any insolvency, bankruptcy, reorganization, receivership
or any other debt relief granted to the Debtor, this Amended Security and Pledge
Agreement and the Debtor's and the Shareholders' obligations hereunder shall
automatically and retroactively be reinstated and the Debtor and the
Shareholders shall re-deliver the Collateral to the Lender and otherwise comply
with the terms and conditions of this Amended Security and Pledge Agreement. In
the event that the Lender must rescind or restore any payment received in total
or partial satisfaction of the Indebtedness, any prior release or discharge from
the terms of this Amended Security and Pledge Agreement and the Debtor's and
Shareholders' obligations hereunder shall automatically
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<PAGE>
and retroactively be renewed and reinstated and shall remain in full force and
effect to the same degree and extent as if such release or discharge had never
been granted and the Debtor and the Shareholders shall re-deliver the Collateral
to the Lender and otherwise comply with the terms and conditions of this Amended
Security and Pledge Agreement. It is the intention of the Debtor, the
Shareholders, and the Lender that the Debtor's and the Shareholders' obligations
hereunder shall not be discharged except by the full and complete payment of the
Indebtedness, and then only to the extent of such payment and performance.
Section 13. Notices. Any notice or demand which, by provision of
-------
this Amended Security and Pledge Agreement, is required or permitted to be given
or served by the Lender to or on the Debtor or the Shareholders shall be deemed
to have been sufficiently given and served for all purposes (if mailed) three
calendar days after being deposited, postage prepaid, in the United States mail,
registered or certified mail, or (if delivered by express courier) one calendar
day after being delivered to such courier, or (if delivered in person) the same
day as delivery, in each case addressed (until another address or addresses are
given in writing by any such party to the Lender) to such parties as follows:
If to the Debtor:
American Entertainment Corporation
8301 West Judge Perez Drive, Suite 305
Chalmette, Louisiana 70043
Attention: William E. Beuck
If to any Shareholder:
Joseph H. Georgusis
8301 West Judge Perez Drive, Suite 305
Chalmette, Louisiana 70043
Any notice or demand which, by any provision of this Amended Security
and Pledge Agreement, is required or permitted to be given or served by any
party to or on the Lender shall be deemed to have been sufficiently given and
served for all purposes (if mailed) three calendar days after being deposited,
postage prepaid, in the United States mail, registered or certified mail, or (if
delivered by express courier) one calendar day after being delivered to such
courier, or (if delivered in person) the same day as delivery, in each case
addressed (until another address or addresses are given in writing by the Lender
to any such party) to the Lender as follows:
Circus Circus Enterprises, Inc.
2880 Las Vegas Boulevard South
Las Vegas, Nevada 89109
Attention: General Counsel
Section 14. Amendment. Neither this Amended Security and Pledge
---------
Agreement nor any provisions hereof may be changed, waived, discharged or
terminated orally or in any manner other than by an instrument in writing signed
by the party against whom enforcement of the change, waiver, discharge or
termination is sought.
-11-
<PAGE>
Section 15. Waivers. No course of dealing on the part of the Lender,
-------
its members, managers, officers, employees, consultants or agents, nor any
failure or delay by the Lender with respect to exercising any of its rights,
powers or privileges under this Amended Security and Pledge Agreement shall
operate as a waiver thereof.
Section 16. Cumulative Rights. The rights and remedies of the Lender
-----------------
under this Amended Security and Pledge Agreement shall be cumulative, and the
exercise or partial exercise of any such right or remedy shall not preclude the
exercise of any other right or remedy.
Section 17. Titles of Sections. All titles or headings to sections
------------------
of this Amended Security and Pledge Agreement are only for the convenience of
the parties and shall not be construed to have any effect or meaning with
respect to the other content of such sections, such other content being
controlling as to the agreement between the parties hereto.
Section 18. Singular and Plural. Words used herein in the singular,
-------------------
where the context so permits, shall be deemed to include the plural and vice
versa. The definitions of words in the singular herein shall apply to such
words when used in the plural where the context so permits and vice versa.
Section 19. Governing Law. This Amended Security and Pledge
-------------
Agreement is a contract made under and shall be construed in accordance with and
governed by the laws of the United States of America and the State of Louisiana.
Section 20. Severability. The provisions of this Amended Security
------------
and Pledge Agreement are severable. If any clause or provision shall be held
invalid or unenforceable in whole or in part in any jurisdiction, then such
invalidity or unenforceability shall affect only such clause or provision, or
part thereof, in such jurisdiction and shall not in any manner affect such
clause or provision in any other jurisdiction, or any other clause or provision
in this Amended Security and Pledge Agreement in any jurisdiction.
Section 21. Successors and Assigns.
----------------------
a. All covenants and agreements contained by or on behalf
of the Debtor and the Shareholders in this Amended Security and Pledge Agreement
shall bind the Debtor's and the Shareholders' heirs, executors, administrators,
successors and assigns and shall inure to the benefit of the Lender and its
successors and assigns.
b. This Amended Security and Pledge Agreement is for the
benefit of the Lender and for such other Person or Persons as may from time to
time become or be the holders of any of the Indebtedness, and this Amended
Security and Pledge Agreement shall be transferable and negotiable with the same
force and effect and to the same extent as the Indebtedness may be transferable,
it being understood that, upon the transfer or assignment by the Lender of any
of the Indebtedness, the legal holder of such Indebtedness shall have all of the
rights granted to the Lender under this Amended Security and Pledge Agreement.
-12-
<PAGE>
c. The Debtor and the Shareholders specifically agree that
upon any transfer of all or any portion of the Indebtedness, the Lender may
transfer and deliver all or any of the Collateral to the transferee of such
Indebtedness and such Collateral shall secure any and all of the Indebtedness in
favor of such a transferee, that such transfer of the Collateral shall not
affect the priority and ranking thereof, and that the Collateral shall secure
with retroactive rank the then existing Indebtedness of the Debtor to the
transferee arising thereafter. After any such transfer has taken place, the
Lender shall be fully discharged from any and all future liability and
responsibility to the Debtor and the Shareholders with respect to the Collateral
and the transferee thereafter shall be vested with all the powers, rights and
duties with respect to the Collateral.
Section 22. Counterparts. This Amended Security and Pledge Agreement
------------
may be executed in two or more counterparts, and it shall not be necessary that
the signatures of all parties hereto be contained on any one counterpart hereof;
each counterpart shall be deemed an original, but all of which when taken
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Debtor, the Shareholders and the Lender have
caused this Security and Pledge Agreement to be duly executed as of the date
first above written.
DEBTOR:
AMERICAN ENTERTAINMENT CORPORATION
By: JOSEPH H. GEORGUSIS
-------------------
Name: Joseph H. Georgusis
---------------------------
Title: President
----------------------------
LENDER:
CIRCUS CIRCUS ENTERPRISES, INC.
By: CLYDE T. TURNER
-----------------------------------
Name: Clyde T. Turner
----------------------------
Title: Chief Executive Officer
----------------------------
SHAREHOLDERS:
JOSEPH H. GEORGUSIS
-----------------------------------
Name: Joseph H. Georgusis
-13-
<PAGE>
FRANK LEWIS
-----------------------------------
Name: Lewis Frank
DR. CHARLES MARY
-----------------------------------
Name: Dr. Charles Mary
-14-
<PAGE>
AMENDED GUARANTY AGREEMENT
THIS AMENDED GUARANTY AGREEMENT (this "Amended Guaranty Agreement")
dated as of ____________________, 1995, is made by JOSEPH GEORGUSIS (the
"Guarantor"), in favor of CIRCUS CIRCUS ENTERPRISES, INC., a Nevada corporation
(the "Lender"), who agree as follows:
RECITALS
--------
A. In connection with the recapitalization of American Entertainment,
L.L.C., a Louisiana limited liability company (the "Company"), the members,
American Entertainment Corporation ("AEC") and Circus Circus Louisiana, Inc.,
have entered into an Amended and Restated Operating Agreement, dated as of
_________________________, 1995 (the "Amended Operating Agreement"), which
amends and restates, in its entirety, that Operating Agreement, dated as of
January 14, 1994, as later amended through an Amendment, dated as of February 8,
1994.
B. Pursuant to Section 6.6 of the Amended Operating Agreement, Circus
Circus Enterprises, Inc. ("CCEI") is Lender under the AEC Loan Documents,
including (i) that Promissory Note, dated July 22, 1994, between AEC, as
Borrower, and the Company, as Lender, in an aggregate principal amount not to
exceed Ten Million ($10,000,000.00) Dollars (the "Note"); and (ii) that Guaranty
Agreement, dated as of July 22, 1994, by and between Joseph Georgusis, as
Guarantor, and the Company, as Lender (the "Guaranty Agreement").
C. CCEI and AEC have amended and restated the Note in the form of an
Amended Note, dated _____________________, 1995 (the "Amended Note").
D. CCEI and Guarantor have amended and restated the Guaranty
Agreement through this Amended Guaranty Agreement, dated ____________________,
1995 (again, the "Amended Guaranty Agreement").
E. AEC (hereinafter, the "Borrower") is indebted unto the Lender for
a loan made pursuant to the terms of the Amended Note (as amended, supplemented,
extended, renewed or restated from time to time). As used in this Amended
Guaranty Agreement, the term "Loan Documents" means, collectively, any
instrument or agreement previously, simultaneously or hereafter executed and
delivered by the Guarantor, the Borrower, or any other person or entity as
evidence of, security for, guarantee of or in connection with, the Indebtedness
(as hereinafter defined), including, without limitation, the Amended Note and
the Amended Security and Pledge Agreement, also dated even date herewith, by the
Borrower in favor of the Lender, as said instruments or agreements may from time
to time be amended, supplemented, extended or restated.
F. The loan to the Borrower, under the Amended Note, benefits the
Guarantor.
<PAGE>
G. The Lender has required, as a condition to making the aforesaid
loan, that the Guarantor execute this Guaranty Agreement.
H. The parties acknowledge that this Amended Guaranty Agreement may,
in part, be subject to the Louisiana Riverboat Economic Development and Gaming
Control Act, La.R.S. 4:501 et seq. (the "Riverboat Gaming Act"). In particular,
-------
they acknowledge that the terms of this Guaranty Agreement and, if necessary,
the enforcement of this Guaranty Agreement, may require certain regulatory
approvals pursuant to the Riverboat Gaming Act.
NOW, THEREFORE, in order to induce the Lender to assume the loan under
the Amended Note, the Guarantor covenants and agrees with the Lender as follows:
Section 1. Guaranty. The Guarantor hereby absolutely,
--------
unconditionally and irrevocably guarantees to the Lender the full and punctual
payment and performance of all present and future amounts, liabilities and
obligations of the Borrower to the Lender or to any successor or transferee
thereof under or pursuant to the Amended Note, the Amended Security and Pledge
Agreement, this Amended Guaranty Agreement, or any other AEC Loan Documents,
whether said amounts, liabilities or obligations are liquidated or unliquidated,
now existing or hereafter arising, in principal, interest, deferral and
delinquency charges, prepayment premiums (if any), costs and attorneys' fees, as
therein stipulated, and under and pursuant to all amendments, supplements,
renewals and restatements to any of said documents (collectively, the
"Indebtedness"). Payments made on the Indebtedness will not discharge or
diminish the obligations and liability of the Guarantor under this Amended
Guaranty Agreement for any remaining and succeeding Indebtedness. The guarantee
provided for in this Amended Guaranty Agreement is an absolute, unconditional,
irrevocable continuing guarantee of payment, not of collectability, and is in no
way conditioned upon or limited by: (a) any attempt to collect from the
Borrower; (b) any attempt to collect from, or the exercise of any rights and
remedies against, any person or entity other than the Borrower who may at any
time, now or hereafter, be primarily or secondarily liable for any or all of the
Indebtedness, and any other maker, endorser, surety, or guarantor of all or a
portion of the Indebtedness or any person or entity who is now or hereafter a
party to any of the AEC Loan Documents (all of the aforementioned persons in
this clause (b) other than the Borrower being herein sometimes called
collectively the "Obligors" and, individually, an "Obligor"); or (c) any resort
or recourse to or against any security or collateral now or hereafter pledged,
assigned, or granted to the Lender under the provisions of any instrument or
agreement (including, without limitation, the AEC Loan Documents) or otherwise
assigned or conveyed to it. If the Borrower fails to pay any of the
Indebtedness, when and as the same shall become due and payable (whether by
acceleration, declaration, extension or otherwise, but only after the expiration
of any cure period or grace period applicable thereto), the Guarantor shall on
demand, pay the same to the Lender in immediately available funds, in lawful
money of the United States of America, at its address specified in or pursuant
to Section 9 of this Amended Guaranty Agreement.
Section 2. Solidary Obligation. The Guarantor hereby binds and
-------------------
obligates said Guarantor and said Guarantor's heirs, executors, administrators
and assigns in solido with the Borrower and with the other Obligors for the full
and punctual payment and performance of all of the Indebtedness precisely as if
the same had been contracted and were due and owing by
-2-
<PAGE>
such Guarantor personally. It is agreed and understood that the Guarantor shall
be bound by all of the Indebtedness precisely as if the same had been contracted
and were due and owing by such Guarantor personally. It is agreed and understood
that the Guarantor shall be bound by all the provisions of this Amended Guaranty
Agreement and for the payment and performance of the Indebtedness in the same
manner as if he were the only person or entity guarantying the Indebtedness.
Section 3. Obligations Absolute. The indebtedness, liabilities and
--------------------
obligations of the Guarantor under this Amended Guaranty Agreement are primary,
solidary obligations of the Guarantor, are continuing, irrevocable, absolute,
and unconditional, shall not be subject to any counterclaim, recoupment, set-
off, reduction, or defense based upon any claim that the Guarantor may have
against the Borrower or any of the Obligors, are independent of any other
guaranty or guaranties at any time in effect with respect to all or any part of
the Indebtedness, and may be enforced regardless of the existence of such other
guaranty or guaranties. The indebtedness, liabilities and obligations of
Guarantor under this Amended Guaranty Agreement shall not be affected, impaired,
lessened, modified, waived or released by the invalidity or unenforceability of
any or all of the AEC Loan Documents or by the death of or bankruptcy,
reorganization, dissolution, liquidation or similar proceedings affecting the
Borrower or one or more of the other Obligors or the sale or other disposition
of all or substantially all of the assets of any of the foregoing. The
Guarantor hereby solidarily consents that at any time and from time to time, the
Lender may, without in any manner affecting, impairing, lessening, modifying,
waiving or releasing any or all of the indebtedness, liabilities and obligations
of the Guarantor under this Amended Guaranty Agreement, and whether or not any
of the following actions shall modify or affect the rights of the Guarantor as
to subrogation, reimbursement or indemnity against any other parties (including
the other Obligors), do any one or more of the following, all without notice to,
or further consent of, the Guarantor:
a. renew, extend or otherwise change the time or terms for
payment of the principal of, or interest on, any of the Indebtedness or any
renewals or extensions thereof;
b. extend or change the time or terms for performance of any
other obligations, covenants or agreements under the AEC Loan Documents of the
Borrower or any of the Obligors;
c. amend, compromise, release, terminate, waive, surrender, or
otherwise deal with in any manner satisfactory to the Lender:
i) any or all of the provisions of any or all of the AEC
Loan Documents,
ii) any or all of the Indebtedness,
iii) any or all of the indebtedness, liabilities and
obligations of the Borrower, or one or more or all of
the other Obligors under the Amended Note or under any
and all AEC Loan Documents (without remission of any
part of the Indebtedness) or any or all property or
other security given at any time as collateral by the
Borrower or any other
-3-
<PAGE>
Obligor, without affecting, impairing, lessening or
releasing any or all of the indebtedness, liabilities
and obligations of Guarantor under this Amended Guaranty
Agreement or under any and all of the AEC Loan Documents
to which Guarantor is a party, and
iv) any or all of the Obligors; and
d. sell, assign, collect, substitute, exchange or release any
or all property or other security now or hereafter serving as collateral for any
or all of the Indebtedness or under any or all of the AEC Loan Documents;
e. receive additional property or other security as collateral
for any or all of the Indebtedness or under any or all of the AEC Loan
Documents;
f. fail or delay to enforce, assert or exercise any right,
power, privilege or remedy conferred upon the Lender under the provisions of any
of the AEC Loan Documents or under applicable laws;
g. grant consents or indulgences or take action or omit to take
action under, or in respect of, any or all of the AEC Loan Documents; and
h. apply any payment received by the Lender of, or on account
of, any of the Indebtedness from the Borrower, from any of the Obligors or from
any source other than the Guarantor to the Indebtedness only in the order of
priority established under the Amended Note, and any payment received by the
Lender from the Guarantor for or on account of this Amended Guaranty Agreement
may only be applied by the Lender to any of the Indebtedness in the order of
priority established under the Amended Note.
Section 4. Waiver by Guarantor. Guarantor unconditionally waives,
-------------------
except as required by the terms and conditions of the Amended Note: (a) notice
of the execution and delivery of the AEC Loan Documents; (b) notice of the
Lender's acceptance of and reliance on this Amended Guaranty Agreement or of the
creation of any of the Indebtedness; (c) presentment, demand, dishonor, protest,
notice of non-payment and notice of dishonor of the Indebtedness, the AEC Loan
Documents, and any property or other security serving at any time as collateral
under the AEC Loan Documents; (d) notice of transfer or assignment of the
Indebtedness and this Amended Guaranty Agreement; and (e) all notices required
by statute or otherwise to preserve any rights against the Guarantor hereunder
or under any of the AEC Loan Documents, including, without limitation, any
demand, proof, or notice of non-payment of any of the Indebtedness by the
Borrower or any of the Obligors and notice of any failure or default on the part
of the Borrower or any of the Obligors to perform or comply with any term of any
of the AEC Loan Documents to which the Borrower or any of the Obligors is a
party.
Section 5. Representations and Warranties. Guarantor represents and
------------------------------
warrants to the Lender that (a) the execution and delivery of this Amended
Guaranty Agreement or of any of the AEC Loan Documents to which such Guarantor
is a party will not result in any violation of, or be in conflict with, or
constitute a default under any mortgage, indenture, deed of trust, security
agreement, lease, contract, agreement, instrument, obligation, judgment, decree,
order,
-4-
<PAGE>
statute, regulation, or rule applicable to such Guarantor, (b) this Amended
Guaranty Agreement and any of the AEC Loan Documents to which such Guarantor is
or may be a party are valid, enforceable, and binding upon such Guarantor in
accordance with their respective terms, conditions, and provisions, and (c) such
Guarantor has examined or has had an opportunity to examine each of the AEC Loan
Documents executed and delivered prior to or on the date hereof.
Section 6. Subrogation. Until such time as the Indebtedness has been
-----------
paid and performed in full and the provisions of this Amended Guaranty Agreement
are no longer in effect, Guarantor shall not exercise any right to subrogation,
reimbursement or contribution against the Borrower or another Obligor resulting
from the payment of Indebtedness nor any right to subrogation, reimbursement and
indemnity against any property or other security serving at any time as
collateral for any or all of the Indebtedness under any of the AEC Loan
Documents resulting from the payment of Indebtedness, all of which rights of
subrogation, reimbursement, contribution and indemnity the Guarantor solidarily
subordinates to the full and punctual payment and performance of the
Indebtedness. Notwithstanding any provision of this Amended Guaranty Agreement
to the contrary, if Guarantor is or becomes at any time an "insider" as defined
from time to time in the Federal Bankruptcy Code with respect to the Borrower or
any Obligor or any affiliates thereof, then Guarantor irrevocably and
unconditionally agrees not to seek or obtain, and shall have no rights of,
subrogation, reimbursement, contribution, indemnification or any similar rights
against the Borrower and/or any such Obligor or any affiliates thereof with
respect to this Amended Guaranty Agreement, whether such rights arise by an
express or implied contract or by operation of law, until the thirteenth (13th)
month anniversary date following the full payment and performance of the
Indebtedness, it being the intention of the parties that the Guarantor shall not
be deemed to be a "creditor" as defined in the Federal Bankruptcy Code of the
Borrower or any such Obligor or any affiliates thereof by reason of the
existence of this Amended Guaranty Agreement in the event that the Borrower or
any such Obligor or any affiliate thereof becomes a debtor in any proceeding
under the Federal Bankruptcy Code. The Guarantor agrees not to execute any
indemnity, contribution or other agreement of any kind which establishes in
favor of the Borrower or any such Obligor or affiliates thereof any rights
waived by the preceding sentence so long as any of the Indebtedness remains
outstanding or thereafter until the 13th-month anniversary date following the
full payment and performance of the Indebtedness.
Section 7. Subordination. In the event that Guarantor should for any
-------------
reason advance or lend monies to the Borrower, whether or not such funds are
used by the Borrower to make a payment of the Indebtedness, Guarantor hereby
agrees that any and all rights that such Guarantor may have or acquire to
collect from or to be reimbursed by the Borrower (or from or by any other
Obligor of the Indebtedness), shall in all respects, whether or not the Borrower
presently is or subsequently becomes insolvent, be subordinate to the rights of
the Lender to collect and enforce the payment and performance of the
Indebtedness, until such time as the Indebtedness has been fully paid and
performed and the provisions of this Amended Guaranty Agreement are no longer in
effect.
Section 8. Financials. Guarantor will furnish to the Lender, at such
----------
time as the Lender specifies, such financial statements and other information
concerning the financial condition of Guarantor as the Lender may require.
-5-
<PAGE>
Section 9. Remedies. Upon the failure in the payment or performance
--------
of any of the Indebtedness when due (whether by acceleration or otherwise, but
only after the expiration of any cure period or grace period applicable thereto)
the Lender may institute a judicial proceeding for the collection of the sums or
the performance of the Indebtedness so due and unpaid or unperformed, and may
prosecute such proceeding to judgment for final decree, and may enforce the same
against the Guarantor and collect the monies adjudged or decreed to be payable
in the manner provided by law out of the property of such Guarantor, wherever
situated. In the event of such a failure, the Lender shall have the right to
proceed first and directly against the Guarantor under this Amended Guaranty
Agreement without proceeding against the Borrower or any other person or entity
(including other Obligors), without exhausting any other remedies which it may
have and without resorting to any other security held by the Lender.
Section 10. Enforcement Expenses. The Guarantor agrees to indemnify
--------------------
and hold harmless the Lender against any loss, liability, or expense, including
reasonable attorneys' fees and disbursements and any other fees and
disbursements, that may result from any failure of the Borrower to pay any of
the Indebtedness when and as due and payable or that may be incurred by or on
behalf of the Lender in enforcing any obligation of the Borrower to pay any of
the Indebtedness. The Guarantor also agrees to indemnify and hold harmless the
Lender against any expense, including reasonable attorneys' fees and
disbursements and other fees and disbursements that may be incurred by or on
behalf of the Lender in enforcing any obligation or liability of the Guarantor
hereunder.
Section 11. Notices. Any notice or demand which, by provision of
-------
this Amended Guaranty Agreement, is required or permitted to be given or served
by the Lender to or on Guarantor shall be deemed to have been sufficiently given
and served for all purposes (if mailed) three calendar days after being
deposited, postage prepaid, in the United States Mail, registered or certified
mail, or (if delivered by express courier) one business day after being
delivered to such courier, or (if delivered in person) the same day as delivery,
in each case addressed (until another address or addresses is given in writing
by such Guarantor to the Lender) as follows:
Mr. Joseph H. Georgusis
8301 West Judge Perez Drive, Suite 305
Chalmette, Louisiana 70043
Any notice or demand which, by any provision of this Amended Guaranty
Agreement, is required or permitted to be given or served by the Guarantor to or
on the Lender shall be deemed to have been sufficiently given and served for all
purposes (if mailed) three calendar days after being deposited, postage prepaid,
in the United States Mail, registered or certified mail, or (if delivered by
express courier) one business day after being delivered to such courier, or (if
delivered in person) the same day as delivery, in each case addressed (until
another address or addresses are given in writing by the Lender to such
Guarantor) as follows:
Circus Circus Enterprises, Inc.
2880 Las Vegas Boulevard South
Las Vegas, Nevada 89109
Attention: General Counsel
-6-
<PAGE>
Section 12. Amendment. Neither this Amended Guaranty Agreement nor
---------
any provisions hereof may be changed, waived, discharged or terminated orally or
in any manner other than by an instrument in writing signed by the party against
whom enforcement of the change, waiver, discharge or termination is sought.
Section 13. Waivers. No course of dealing on the part of the Lender,
-------
its officers, employees, consultants or agents, nor any failure or delay by the
Lender with respect to exercising any of its rights, powers or privileges under
this Amended Guaranty Agreement shall operate as a waiver thereof.
Section 14. Cumulative Rights. The rights and remedies of the Lender
-----------------
under this Amended Guaranty Agreement and the AEC Loan Documents shall be
cumulative, and the exercise or partial exercise of any such right or remedy
shall not preclude the exercise of any other right or remedy.
Section 15. Titles of Articles, Sections and Subsections. All titles
--------------------------------------------
or headings to articles, sections, subsections or other divisions of this
Amended Guaranty Agreement are only for the convenience of the parties and shall
not be construed to have any effect or meaning with respect to the other content
of such articles, sections, subsections or other divisions, such other content
being controlling as to the agreement between the parties hereto.
Section 16. Singular and Plural. Words used herein in the singular,
-------------------
where the context so permits, shall be deemed to include the plural and vice
versa. The definitions of words in the singular herein shall apply to such
words when used in the plural where the context so permits and vice versa.
Section 17. Governing Law. This Amended Guaranty Agreement is a
-------------
contract made under and shall be construed in accordance with and governed by
the laws of the United States of America and the State of Louisiana.
Section 18. Termination. Upon full and final payment and performance
-----------
of the Indebtedness and the termination of the Note, this Amended Guaranty
Agreement shall terminate. Notwithstanding the foregoing, if at any time, any
payment or part thereof to the Lender with respect to any of the Indebtedness is
rescinded or must otherwise be restored by the Lender pursuant to any
insolvency, bankruptcy, reorganization, receivership or any other debt relief
granted to the Borrower or to any other Obligor, this Amended Guaranty Agreement
and the Guarantor's indebtedness, liabilities and obligations hereunder shall
automatically and retroactively be reinstated. In the event that the Lender
must rescind or restore any payment received in total or partial satisfaction of
the Indebtedness, any prior release or discharge from the terms of this Amended
Guaranty Agreement and the Guarantor's indebtedness, liabilities and obligations
hereunder shall automatically and retroactively be renewed and reinstated and
shall remain in full force and effect to the same degree and extent as if such
release or discharge had never been granted. It is the intention of the
Guarantor, the Borrower and the Lender that the Guarantor's indebtedness,
liabilities and obligations hereunder shall not be discharged except by the full
and complete payment and performance of such Indebtedness, and then only to the
extent of such payment and performance.
-7-
<PAGE>
Section 19. Successors and Assigns.
----------------------
a. All covenants and agreements contained by or on behalf of
the Guarantor in this Amended Guaranty Agreement shall bind Guarantor's heirs,
administrators, executors, successors and assigns and shall inure to the benefit
of the Lender and its successors and assigns.
b. This Amended Guaranty Agreement is for the benefit of the
Lender and for such other person or persons as may from time to time become or
be the holders of any of the Indebtedness, and, subject to the limitations
provided in (c) below, this Amended Guaranty Agreement shall be transferrable
and negotiable, with the same force and effect and to the same extent as the
Indebtedness may be transferrable, it being understood that, upon the transfer
or assignment by the Lender of any of the Indebtedness, the legal holder of such
Indebtedness shall have all of the rights granted to the Lender under this
Amended Guaranty Agreement.
c. The Guarantor hereby recognizes and agrees that the Lender
may, from time to time, one or more times, transfer all or any portion of the
Indebtedness to one or more third parties. Such transfers may include, but are
not limited to, sales of participation interests in such Indebtedness in favor
of one or more third party lenders. Upon any transfer of all or any portion of
the Indebtedness, the Lender may, upon Guarantor's written consent, transfer and
deliver any or all of its rights under this Amended Guaranty Agreement to the
transferee of such Indebtedness, and after any such transfer has taken place,
the transferee thereafter shall be vested with all the powers, rights and duties
with respect hereto. However, the Guarantor further agrees that the Lender may,
without Guarantor's consent, transfer and deliver any or all of its rights under
this Amended Guaranty Agreement to Circus Circus Louisiana, Inc.
Section 20. Counterparts. This Amended Guaranty Agreement may be
------------
executed in two or more counterparts, and it shall not be necessary that the
signatures of all parties hereto be contained on any one counterpart hereof;
each counterpart shall be deemed an original, but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the Guarantor has caused this Amended Guaranty
Agreement to be duly executed as of the date first written above.
GUARANTOR:
JOSEPH H. GEORGUSIS
-------------------
Joseph H. Georgusis
-8-
<PAGE>
Accepted by:
LENDER:
CLYDE T. TURNER
- ---------------
Circus Circus Enterprises, Inc.
Clyde T. Turner
Chief Executive Officer
-9-
<PAGE>
INTELLECTUAL PROPERTY AGREEMENT
American Entertainment, L.L.C. Riverboat
THIS AGREEMENT is made and entered into this 8th day of February, 1995, by
--- --------
and among CIRCUS CIRCUS ENTERPRISES, INC., a Nevada corporation ("CCEI");
AMERICAN ENTERTAINMENT, L.L.C., a Louisiana limited liability company ("Owner");
CIRCUS CIRCUS LOUISIANA, INC., a Louisiana corporation ("Manager"); and AMERICAN
ENTERTAINMENT CORPORATION, a Louisiana corporation ("AEC").
RECITALS
--------
A. Manager and AEC have caused the formation of Owner for the purpose of
owning and operating a riverboat gaming Project in St. Bernard Parish,
Louisiana. Manager and AEC, as the sole Members of Owner, have entered into an
Operating Agreement of American Entertainment L.L.C., a Louisiana Limited
Liability Company, dated January 14, 1994, as amended by an Amended and Restated
Operating Agreement dated February 8, 1995.
B. Owner and Manager have entered a Riverboat Casino Management Agreement
dated February 8, 1995 ("Management Agreement"), in which Manager has been
engaged to manage the Project, including the riverboat and the land site and
other related operations incidental to the riverboat gaming operations.
C. Owner has determined that, because of CCEI's extensive and valuable
experience in operating resort, lodging, gaming and related businesses, and
because of the valuable goodwill attendant to CCEI's existing business
operations, Owner can derive substantial benefit by having the right to use
various CCEI
<PAGE>
Intellectual Properties in the operation of the Project. CCEI has agreed to make
available, at its discretion, certain of its intellectual properties for use by
Owner at the Project, as set forth in this Agreement.
AGREEMENTS
----------
1. DEFINITIONS.
-----------
1.1 All capitalized terms used in this Agreement and not specifically
defined herein shall have the meaning set forth in Article 1 and Exhibit "A" of
the Management Agreement.
1.2 "CCEI" shall mean Circus Circus Enterprises, Inc., a Nevada
corporation.
1.3 "Owner" shall mean American Entertainment, L.L.C., a Louisiana
limited liability company.
1.4 "AEC" shall mean American Entertainment Corporation, a Louisiana
corporation.
1.5 "Manager" shall mean Circus Circus Louisiana, Inc., a Louisiana
corporation.
1.6 "Project" shall mean the vessel and real property including the
riverboat and Related Amenities (as said term is defined in the Management
Agreement).
1.7 "CCEI Intellectual Properties" shall mean any patents and
patentable inventions; trademarks, service marks, and trade dress of CCEI or its
affiliates, whether registered or not; copyrights; rights of publicity; and
Confidential
2
<PAGE>
Information, to the extent owned or licensable by CCEI, which are in fact
licensed by CCEI to Owner hereunder.
1.8 "Confidential Information" shall mean such business and/or technical
information and knowledge as may be provided by, or on behalf of, CCEI to Owner
for use by Owner at the Project, provided:
(a) that the information is disclosed, or the disclosure is
confirmed, in writing or other tangible medium of expression;
(b) that information shall not be Confidential Information if:
(i) It is in the public knowledge or literature;
(ii) It is received by Owner without secrecy binder from a
person having an unqualified right to make such
disclosure; or
(iii) It is already known to Owner as evidenced by documents in
Owner's files shown to CCEI or its designee within fifteen
(15) days of its receipt.
2. AVAILABILITY OF CCEI INTELLECTUAL PROPERTIES TO PROJECT.
-------------------------------------------------------
2.1 Specific Availability. CCEI shall make available, at its sole
---------------------
discretion, such of its intellectual properties as it desires to make available
to the Project and as it believes would be helpful or desirable to the business
success of the Project. CCEI shall have no obligation to make available any
specific item of intellectual property, including any proprietary business
systems, nor shall Owner
3
<PAGE>
be obligated to accept any item or article of CCEI intellectual property which
it elects not to accept. All items of CCEI Intellectual Property and
Confidential Information shall be provided to Owner subject to any third party
rights which govern CCEI's ability to grant such a license.
2.2 License Terms. The licensed CCEI Intellectual Properties shall
-------------
be made available on a non-exclusive basis for use at the Project only, and only
for so long as the Management Agreement is in effect. Furthermore, the CCEI
Intellectual Properties shall be provided subject to any preexisting contractual
obligations and third-party rights which govern CCEI's ability to grant this
license to Owner. Owner shall pay all out-of-pocket costs and reasonable fees
for the design, installation, modification, and testing of any CCEI Intellectual
Properties, including computer software systems, which may need to be adapted
for use by Owner.
3. CONFIDENTIAL INFORMATION.
------------------------
3.1 Identification. Upon receipt of the Confidential Information,
--------------
Owner, and each recipient designated by CCEI to have possession of the
Confidential Information, shall take possession of the Confidential Information
subject to the restrictions and obligations set forth herein. At CCEI's option,
any non-party recipient approved by CCEI shall be required to execute a separate
document reflecting the relevant terms hereof prior to receipt of any such
Confidential Information.
3.2 Non-disclosure Agreement. Owner shall cause each recipient to
------------------------
agree not to disclose any CCEI Confidential Information to any person not
similarly
4
<PAGE>
bound hereunder, and not to use the Confidential Information except to benefit
Owner at the Project location. At the request of CCEI, for Confidential
Information which CCEI regards as particularly sensitive or valuable (for
example, software source codes or certain credit information), Owner shall limit
the availability of such Confidential Information to those personnel who (i)
have an absolute need to know the Confidential Information and (ii) if requested
by CCEI, are pre-approved by CCEI and/or have executed a separate
confidentiality agreement with CCEI.
4. TRADEMARK, SERVICE MARK, AND TRADE DRESS LICENSE.
------------------------------------------------
4.1 Identification of Licensed Properties. CCEI shall grant to Owner
-------------------------------------
the right to use such trademark, service mark, and trade dress elements of CCEI
Intellectual Properties (hereinafter referred to collectively as the "CCEI
Trademark Properties") as CCEI, in its discretion, elects to make available and
Owner, in its discretion, elects to use at the Project. This license of the
CCEI Trademark Properties shall include the goodwill associated with said CCEI
Trademark Properties. Use of the CCEI Trademark Properties shall be limited to
the Project, and shall not be used by Owner for any purpose not benefiting the
Project. Upon agreement by the parties on the specific CCEI Trademark
Properties to be used at the Project, the parties shall make a list of such
properties and shall append the list to this Agreement as Exhibit "A." The
parties shall amend Exhibit "A" from time-to-time to reflect any mutually agreed
changes of use of CCEI Trademark Properties at the Project.
4.2 Rights Exclusively in CCEI. Owner acknowledges that CCEI is
--------------------------
5
<PAGE>
the sole and exclusive owner of the CCEI Trademark Properties, and that it will
not register or attempt to register the CCEI Trademark Properties or any other
marks, names, or trade dress confusingly similar to the CCEI Trademark
Properties. Owner may use the CCEI Trademark Properties during the term of this
Agreement as part of its trade name, decor, merchandise, and services, but
agrees that it shall not acquire or claim any title in or to the CCEI Trademark
Properties adverse to CCEI by virtue of this Agreement or Owner's use thereof.
Owner agrees that any and all goodwill arising from and in connection with
Owner's use of the CCEI Trademark Properties shall inure to the benefit of, and
belong exclusively to, CCEI.
4.3 Marking; Approval of Advertising. Owner agrees to mark any uses
--------------------------------
of CCEI Trademark Properties with appropriate indicia of registration or
trademark claim as reasonably requested by CCEI. Any advertising or promotional
materials produced by Owner which contain CCEI Trademark Properties shall be
submitted to CCEI or its designee in advance of said use for CCEI's approval.
Each such request shall contain a sample or specimen of the intended use. In
the event that CCEI does not respond to any request by Owner within ten (10)
days of receipt of such request, CCEI shall be deemed to have approved such use.
4.4 Quality Maintenance. Owner understands and appreciates that CCEI
-------------------
has generated substantial goodwill in the CCEI Trademark Properties, and that
CCEI's ongoing business is importantly dependent upon maintaining high standards
of quality of products and services which are associated with said Properties.
The willingness to make available the CCEI Trademark Properties for the use by
Owner
6
<PAGE>
is completely dependent upon Manager's sole and exclusive discretion and
authority to determine operating policies and procedures, standards of
operation, staffing levels and organization, standards of service and
maintenance offered and conducted at the Project, food and beverage quality and
service, pricing, and other policies affecting the Project and its operation,
all as guaranteed by the Management Agreement. CCEI hereby appoints Manager as
its agent to conduct such inspections and effect such undertakings as are
necessary to protect CCEI's goodwill in the CCEI Trademark Properties.
5. GRANT BACK.
----------
Owner hereby agrees to grant to CCEI a non-exclusive, irrevocable,
world-wide, paid up right of CCEI and its affiliates to use any improvement made
by or for Owner in any business or technical information, system, confidential
information, software, hardware, patent, copyright, or any other product or
technology provided by CCEI to Owner. This right shall include rights under any
applicable patents or copyrights owned or licensable by Owner based on
improvements of CCEI Intellectual Properties.
6. TERMINATION.
-----------
6.1 Coextensive with Management Agreement. The term of this
-------------------------------------
Agreement shall be coextensive with the Management Agreement and shall terminate
automatically upon expiration or any other termination for any reason whatsoever
of the Management Agreement.
6.2 Events Preceding Termination. Promptly upon learning of an
----------------------------
7
<PAGE>
impending termination of the Management Agreement, and in any event not later
than six months prior to expiration of the Management Agreement if said
Management Agreement is not to be renewed, the parties shall meet to identify
the then-current list of licensed CCEI Intellectual Properties and shall discuss
any problems which may arise from cessation of use thereof by the anticipated
date of termination. The parties recognize that it may be necessary to phase out
various licensed CCEI Intellectual Properties over a period of time so as to not
interrupt Owner's business activities at the Project. Accordingly, the parties
shall agree in good faith as to which CCEI Intellectual Properties can be phased
out prior to termination, and shall compile a list of all CCEI Intellectual
Properties which will require a phase-out period extending past the termination
date, said latter Properties being referred to herein as "Post-termination
Properties." The list of Post-termination Properties shall identify each such
property and shall estimate the amount of time required for each such Property
to be phased out from use.
6.3 License of Post-termination Properties. Prior to termination of
--------------------------------------
the Management Agreement, CCEI and Owner shall enter into a license agreement
for use of the Post-termination Properties which shall provide for phase-out of
use of the Post-termination Properties within the time periods set forth in said
agreement. In no event shall CCEI be obligated to license use of any of the
Post-termination Properties for a period to exceed six months following
termination. The Post-termination Properties license agreement shall include
provisions acceptable to CCEI suitable for protecting confidentiality of its
Confidential Information and
8
<PAGE>
quality control of the products and services being offered at the Project during
the term of the license. In no event, however, shall CCEI be obligated to permit
Owner the continued use of any of its particularly sensitive business
information, such as software source codes or customer credit information. Said
Post-termination Properties license agreement shall also include a reasonable
royalty for continued use of the Post-termination Properties, which royalty
shall be two (2%) percent of Project gross income if the "Circus Circus" name is
used as a trade name for the Project, and which shall be a negotiated sum less
than two (2%) percent of Project gross income, depending on the extent and
importance of the Post-termination Properties actually used, if the "Circus
Circus" name is not used as a trade name for the Project.
6.4 Incidents of Termination. Except for those specific items of
------------------------
CCEI intellectual property which are the subject of the Post-termination
Properties license agreement, Owner shall cease use of all CCEI Intellectual
Properties upon termination of the Management Agreement. Owner's obligations of
confidentiality under Section 3.2 hereof shall survive termination and shall
continue for so long as said information is Confidential Information.
7. MISCELLANEOUS.
-------------
7.1 Assignability of Rights. This Agreement, and any rights provided
-----------------------
to Owner hereunder, shall not be assignable or extendable to any party or other
person without the prior written consent of CCEI. CCEI shall have the sole and
exclusive discretion as to whether or not to approve any request for
9
<PAGE>
assignment or extension of rights hereunder.
7.2 Amendment and Waiver. This Agreement may not be amended or
--------------------
modified in any way except by an instrument in writing executed by all parties
hereto, except for agreement signed by the waiving party. Waiver by a party of
any of the terms or provisions of this Agreement shall not constitute a
subsequent waiver of any of the terms or provisions of this Agreement.
7.3 Governing Document. This Agreement shall govern in the event of
------------------
any inconsistencies between this Agreement and any other agreements between or
among the parties hereto.
7.4 Severability. Any provision of this Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction.
7.5 Notices. Any notices or other communications required or
-------
permitted hereunder shall be sufficiently given if in writing and addressed as
shown below and (i) delivered personally, (ii) sent by overnight commercial
courier, (iii) sent by registered or certified mail, return receipt requested,
postage prepaid or (iv) transmitted by facsimile machine. All notices
personally delivered or sent by overnight courier shall be deemed received on
the date of delivery. Notices sent by facsimile transmission shall be deemed
received by the addressee upon the transmitter's receipt of acknowledgement of
receipt from the offices of such
10
<PAGE>
addressee provided that hard copy sent to the address indicated herein for such
addressee is put in the mail with sufficient postage within twenty-four (24)
hours of transmission. All notices forwarded by registered or certified mail
shall be deemed received on a date five (5) regular United States Postal Service
delivery days immediately following date of deposit in the mail. Notwithstanding
anything to the contrary herein, the return receipt indicating the date upon
which all notices were received shall be prima facie evidence that such notices
were received on the date on the return receipt.
If to Owner:
American Entertainment, L.L.C.
8301 West Judge Perez Drive
Suite 305
Chalmette, Louisiana 70043
If to Manager:
Circus Circus Louisiana, Inc.
2880 Las Vegas Boulevard South
Las Vegas, Nevada 89109
Attention: General Counsel
If to CCEI:
Circus Circus Enterprises, Inc.
2880 Las Vegas Boulevard South
Las Vegas, Nevada 89109
Attention: General Counsel
If to AEC:
American Entertainment Corporation
8301 West Judge Perez Drive
Suite 305
Chalmette, Louisiana 70043
11
<PAGE>
The names and addressees may be changed by giving notice of such change in
the manner provided herein for giving notice. Unless and until such written
notice is received, the last address and addressee given shall be deemed to
continue in effect for all purposes.
7.6 Amendment, Entire Agreement. This Agreement constitutes the entire
---------------------------
agreement among the parties with respect to the subject matter hereof and
supersedes and extinguishes all prior agreements and understandings among the
parties with respect to the matters covered by this Agreement. This Agreement
may only be amended by written agreement by the necessary parties.
7.7 Governing Law. This Agreement is made in the state of Nevada, and
-------------
shall be governed by and construed in accordance with the laws of Nevada. The
parties consent to jurisdiction of the courts of Nevada in any legal action
arising under, or relating to the subject matter of, this Agreement.
CIRCUS CIRCUS ENTERPRISES, INC.
By: CLYDE T. TURNER Date: February 8, 1995
--------------------------------- -----------------------------
CLYDE T. TURNER, PRESIDENT
AMERICAN ENTERTAINMENT, L.L.C.
By: CLYDE T. TURNER Date: February 8, 1995
--------------------------------- -----------------------------
CLYDE T. TURNER, PRESIDENT
CIRCUS CIRCUS LOUISIANA, INC.
By: CLYDE T. TURNER Date: February 8, 1995
--------------------------------- -----------------------------
CLYDE T. TURNER, PRESIDENT
12
<PAGE>
AMERICAN ENTERTAINMENT CORPORATION
By: JOSEPH H. GEORGUSIS Date: February 8, 1995
--------------------------------- -----------------------------
JOSEPH H. GEORGUSIS, PRESIDENT
13
<PAGE>
Exhibit 10(cc)
AGREEMENT
---------
THIS AGREEMENT by and between CIRCUS CIRCUS ENTERPRISES, INC., a Nevada
corporation (hereinafter, the "Company"), and Terry L. Caudill (hereinafter,
"Caudill") is entered into this 16th day of December, 1994.
WHEREAS, Caudill desires to tender his resignation as Vice President &
Chief Accounting Officer, and from all other positions with the Company or its
subsidiaries, in anticipation of his termination of employment with the Company;
and
WHEREAS, Caudill and the Company desire to enter into an agreement
providing for Caudill's continuation of employment by the Company for a period
of at least two years in order to provide consultation to the Company concerning
such matters as the Chairman of the Board or his designee may determine.
NOW, THEREFORE, for and in consideration of the mutual agreements
hereinafter set forth, the parties hereto agree as follows:
1. Caudill agrees to continue his employment with the Company until
October 5, 1996 or until Caudill's earlier termination of employment as provided
in this Section 1 (such period of employment being hereinafter referred to as
the "Term") to provide consultation to the Company with respect to such matters
as the Chairman of the Board may determine. Notwithstanding any provision to
the contrary, Caudill shall be entitled to terminate this Agreement on or after
March 31, 1995 by giving at least ten (10) days prior written notice to the
Company. Such notice shall be sent by certified or registered mail, return
receipt requested, and shall be addressed to Circus Circus Enterprises, Inc.,
<PAGE>
Attention: Mike Sloan, General Counsel, 2880 Las Vegas Boulevard South, Las
Vegas, Nevada 89109. The Company agrees Caudill shall receive his regular
salary and accrued bonus through October 5, 1994, payable at such time as
bonuses are generally paid for the third quarter of 1994.
2. In consideration for his services pursuant to this Agreement, Caudill
shall be compensated during the Term at the rate of One Hundred and Fifty
Thousand Dollars ($150,000), in two payments of $75,000 each, less such amounts
as the Company shall deduct for applicable federal and state withholding,
income, payroll and other taxes. The first such payment shall be made
concurrent with the execution hereof and the remaining payment shall be made on
February 1, 1995.
3. During the Term, Caudill shall be entitled to receive Company paid or
provided health and medical benefits and insurance benefits at his levels of
coverage immediately prior to his resignation as Vice President of the Company,
it being the intention of the parties that the Company shall not be required to
provide benefits not currently available under the Company's existing programs
or insurance policies. The Company and Caudill agree that upon the expiration
of the Term, Caudill is entitled to receive certain benefits pursuant to the
federal law commonly known as COBRA, and Caudill acknowledges that it shall be
his sole obligation to pay for such benefits following the expiration of the
Term (the "Termination Date"). Caudill acknowledges that his failure to make
such payments in a timely fashion may result in suspension or termination of
such benefits.
4. Upon the expiration of the Term, it is the intention of the parties
that Caudill
2
<PAGE>
shall be entitled (i) to exercise such rights under any stock options or stock
purchase warrants held by him on the Termination Date in accordance with and
subject to the terms, conditions and limitations applicable to such options or
warrants in general, as determined by the Committee which administers the
plan(s) pursuant to which such options and warrants were granted, including any
right of reset as to price which may be provided to any other holders of such
options or warrants, (ii) to receive any benefits to which he may be entitled
pursuant to the Circus Circus Employees' Profit Sharing, Investment and Employee
Stock Ownership Plan (the "Plan") in accordance with the terms and conditions of
the Plan, and (iii) to receive the benefits of any indemnification provisions
under the Company's By-Laws or otherwise provided by law applicable to his
service as an officer, director or employee of the Company or any subsidiary of
the Company through the Termination Date, it being the intention of the parties
that Caudill's rights under such options and warrants, the Plan and such
indemnification provisions shall be affected by his termination of employment in
accordance with their respective terms but shall not otherwise be increased or
decreased as a result of the execution of this Agreement.
5. Caudill represents and warrants to the Company that other than as
required in order to perform his duties pursuant to this Agreement, he is not in
possession of any documents containing the Company's internal financial
information, wage and salary information, customer information, managerial
reports, or other information which is not available to the general public from
the Company's filings with the Securities and
3
<PAGE>
Exchange Commission. 6. In further consideration of the agreements and
undertakings of the Company pursuant hereto:
(a) Caudill agrees that, until February 1, 1995 or the Termination
Date, whichever is later, he will not, without the prior written consent of the
Company (which may be granted or withheld in the sole discretion of the
Company), directly or indirectly, as principal or as agent, officer, director,
employee, or otherwise, alone or in association with any other person or entity,
carry on, be engaged in, render services to, or own, share in the earnings of,
or invest in any person or entity engaged in gaming within the State of Nevada
provided, however, that this subsection 6(a) shall not prohibit him from owning
publicly traded securities acquired for investment purposes, so long as the
securities of any class owned by him do not represent in excess of 5% of all the
securities of such class then issued and outstanding or from owning an interest
in one or more restricted gaming locations.
(b) Other than as required in order to perform his duties pursuant
to this Agreement, Caudill shall not at any time during the Term or at any time
after the Termination Date disclose, communicate or divulge to any person, or
use for the direct or indirect benefit of himself or any other person or entity,
any secret or confidential information of the Company made known to, or learned
or acquired by, him while an employee of the Company which is a trade secret or
proprietary to the Company (such as supplier lists, proprietary computer
programs, employee information and relations, Project plans and financial
information), unless and until (i) such information shall have first
4
<PAGE>
become public knowledge otherwise than by his violation of his duty of
confidentiality to the Company, or (ii) he is compelled to disclose such
information by order of a court of competent jurisdiction or by a state or
governmental body or agency having proper jurisdiction over such matters.
Caudill further agrees that he shall promptly notify the Chairman of the Board
of the Company in writing of any proceeding by any court or governmental body or
agency pursuant to which he may be required to disclose or otherwise divulge any
information otherwise prohibited by this subsection 6(b) promptly upon his
learning of such proceeding.
(c) In addition to the restrictions contained in subsections 6(a)
and 6(b), Caudill and the Company recognize and agree that it is vital to the
Company and its stockholders and other investors and potential investors that
only current and accurate information concerning the Company and its operations
be made available to the investing public. Caudill acknowledges that he will
cease, as of the date hereof, to have access to the Company's detailed day-to-
day operational and financial information, and agrees that unless compelled by a
court of competent jurisdiction or a governmental body or agency having proper
jurisdiction over such matters, for a period of one (1) year from the date
hereof, he shall not, other than as required in order to perform his duties
pursuant to this Agreement, without the prior written consent of the Company,
discuss, disclose or otherwise divulge any information, opinions or assessments
he has, has had, or may have with respect to the Company which would reasonably
be deemed to be adverse, including without limitation, any such information or
assessment relating to the Company's
5
<PAGE>
operations, management, succession plans, current or planned capital projects,
or employees, whether or not such information or assessment is otherwise in the
public domain or constitutes confidential information.
7. (a) In consideration of the agreements and undertakings of the Company
pursuant hereto, Caudill hereby releases and forever discharges the Company, its
subsidiaries, and each of their respective stockholders, agents, directors,
officers, employees and each such party's successors, heirs and assigns, from
any and all claims, demands, actions or causes of action of any and every kind
whatsoever, in law or in equity, known or unknown, whether existing or claimed
to exist, which he has, has had, or may hereafter have, and which arise out of
his employment or tenure with the Company or any subsidiary of the Company in
any capacity whatsoever (including but not limited to any and all claims arising
out of alleged violations of any express or implied contracts, any covenant of
good faith and fair dealing, any tort, or any federal, state, or municipal
statute, regulation, or ordinance, including Title VII of the Civil Rights Act
of 1964, the Age Discrimination in Employment Act, and the Nevada Fair
Employment Practices Act), other than any such claim or cause of action based on
the Company's breach of this Agreement. Caudill further covenants not to file
suit on account of any cause or claim waived or released by him pursuant to this
Section 7.
(b) In consideration of Caudill's execution of this Agreement and
the promises of Caudill contained herein, the Company hereby releases and
forever discharges Caudill and his heirs and assigns from any and all claims,
demands, actions or causes of
6
<PAGE>
action of any and every kind whatsoever, in law or in equity, known or unknown,
whether existing or claimed to exist, which the Company has, has had or may
hereafter have, and which arise out of Caudill's employment or tenure with the
Company or any subsidiary of the Company in any capacity whatsoever, except any
such claim or cause of action (i) arising out of any criminal or fraudulent act
or willful misconduct on the part of Caudill, or (ii) based on Caudill's breach
of any provision of this Agreement. The Company further covenants not to file
suit on account of any cause or claim waived or released by the Company pursuant
to this Section 7.
8. Caudill declares and represents that no promise, inducement, or
agreement not herein expressed has been made to him, that this Agreement
contains the entire agreement between the parties hereto; that the terms of this
Agreement are contractual and not a mere recital; and, that Caudill is not only
of legal age, but legally competent to execute this Agreement and accepts full
responsibility therefor. For a period of sixty (60) days from the Termination
Date, Caudill agrees to promptly execute any and all documents which the Company
may request in connection herewith and in furtherance of this Agreement.
9. This Agreement is being executed by the parties in, and shall be
construed in accordance with the laws of, the State of Nevada.
10. The Company and Caudill have read the foregoing Agreement, have had
the opportunity to consider its terms and the opportunity to consult with their
respective counsel, understand all of its terms, and do hereby execute it
voluntarily and with full knowledge of its significance. This Agreement shall
be binding on the parties hereto and
7
<PAGE>
their respective successors, heirs and assigns.
ATTEST: CIRCUS CIRCUS ENTERPRISES, INC.
a Nevada Corporation
_________________________ By:MIKE H. SLOAN
-----------------------------
SECRETARY MIKE H. SLOAN
VICE PRESIDENT & GENERAL COUNSEL
WITNESS:
_________________________ TERRY L. CAUDILL
-----------------------------
TERRY L. CAUDILL
8
<PAGE>
EXHIBIT 10(dd)
PURCHASE AND SALE BY AND BETWEEN
HACIENDA HOTEL, INC. ("Seller")
and
WILLIAM G. BENNETT and/or Assigns ("Buyer")
of the
HACIENDA HOTEL AND CASINO
Las Vegas, Nevada
Dated: January 10 , 1995 .
------------------------------- --
Counsel for Counsel for
"Seller" "Buyer"
William J. Raggio, Esq. George P. Kelesis, Esq.
John P. Sande, III, Esq. Cherry, Bailus & Kelesis
Vargas & Bartlett 600 S. 8th Street
201 W. Liberty St. Las Vegas, Nevada 89101
P. O. Box 281 702/385-3788
Reno, Nevada 89504
702/786-5000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I................................................................. 1
1 Definitions........................................................ 1
-----------
ARTICLE II................................................................ 2
2 Sale of Property................................................... 2
----------------
2.1 Closing Date.............................................. 2
------------
2.2 Property Exceptions....................................... 4
-------------------
2.3 Prorations and Allocations................................ 6
--------------------------
ARTICLE III............................................................... 7
3 Purchase Price..................................................... 7
--------------
3.1 Purchase Price............................................ 7
--------------
3.2 Payment................................................... 7
-------
3.3 Costs..................................................... 9
-----
3.4 Gaming Taxes.............................................. 9
------------
3.5 Allocation of Purchase Price.............................. 9
----------------------------
ARTICLE IV................................................................ 10
4 Contracts and Assumption of Liabilities............................ 10
---------------------------------------
4.1 Contracts................................................. 10
---------
4.2 Assumption of Liabilities by Buyer........................ 12
----------------------------------
4.3 Excluded Liabilities...................................... 14
--------------------
ARTICLE V................................................................. 14
5 Title to Real Property............................................. 14
----------------------
5.1 Title Reports and Exceptions.............................. 14
----------------------------
5.2 Title Policy.............................................. 16
------------
ARTICLE VI................................................................ 17
6 Representations and Warranties..................................... 17
------------------------------
6.1 Seller's Representations and Warranties................... 17
---------------------------------------
(a) Due Organization..................................... 17
----------------
(b) Binding Effect....................................... 17
--------------
(c) Notices and Approvals; No Violation of Agreement..... 17
------------------------------------------------
(d) Compliance with Laws................................. 18
--------------------
(e) Contracts............................................ 18
---------
(f) Litigation........................................... 19
----------
(g) Employees, Officers and Directors: Employment and
-------------------------------------------------
Similar Contracts: Benefits.......................... 19
---------------------------
(h) Eminent Domain or Other Proceedings.................. 20
-----------------------------------
(i) Properties........................................... 20
----------
(j) Leases............................................... 21
------
(k) Insurance............................................ 21
---------
(l) Condition............................................ 21
---------
(m) Hazardous Waste...................................... 22
---------------
(n) Reports.............................................. 23
-------
(o) Condemnation Proceeding.............................. 23
-----------------------
(p) Zoning............................................... 23
------
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
(q) Affiliated Parties................................... 23
------------------
6.2 Buyer's Representation and Warranties..................... 24
-------------------------------------
(a) Due Organization..................................... 24
----------------
(b) Binding Effect....................................... 24
--------------
(c) Notices and Approvals, No Violation of Agreements.... 24
-------------------------------------------------
(d) Litigation........................................... 25
----------
ARTICLE VII............................................................... 25
7 Condition of the Property; Access and Observers; Independent
------------------------------------------------------------
Investigation...................................................... 25
-------------
7.1 Access and Observers...................................... 25
--------------------
7.2 Inspections............................................... 26
-----------
7.3 Maintenance of Property................................... 26
-----------------------
ARTICLE VIII.............................................................. 27
8 Conditions Precedent to Closing and Covenants...................... 27
---------------------------------------------
8.1 Buyer's Conditions........................................ 27
------------------
8.2 Seller's Conditions....................................... 28
-------------------
8.3 Hart-Scott-Rodino Filing.................................. 28
------------------------
8.4 Cooperation............................................... 29
-----------
8.5 Asset Transfer............................................ 29
--------------
8.6 Gaming Licenses........................................... 30
---------------
ARTICLE IX................................................................ 30
9 Conduct of Business................................................ 30
-------------------
9.1 Seller's Conduct of Business.............................. 30
----------------------------
9.2 No Solicitation........................................... 33
---------------
ARTICLE X................................................................. 34
10 Risk of Loss...................................................... 34
------------
10.1 Risk of Loss............................................. 34
------------
10.2 Material Loss............................................ 35
-------------
10.3 Uniform Act.............................................. 35
-----------
ARTICLE XI................................................................ 35
11 Termination; Remedies............................................. 35
---------------------
11.1 Termination.............................................. 35
-----------
11.2 Effect of Termination.................................... 36
---------------------
11.3 Notice of Seller's Breach; Right to Cure................. 37
----------------------------------------
11.4 Specific Performance..................................... 39
--------------------
ARTICLE XII............................................................... 39
12 Closing........................................................... 39
-------
12.1 Closing.................................................. 39
-------
12.2 Seller's Delivery........................................ 39
-----------------
12.3 Buyer's Delivery......................................... 42
----------------
12.4 Approval of Closing Documents............................ 43
-----------------------------
12.5 Possession............................................... 43
----------
12.6 No Merger................................................ 43
---------
ARTICLE XIII.............................................................. 43
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
13 Post Closing Covenant............................................. 43
---------------------
13.1 Further Assurances....................................... 43
------------------
13.2 Cooperation Retention of Records......................... 43
--------------------------------
13.3 Labor Arbitration and Grievances of Sellers.............. 44
-------------------------------------------
ARTICLE XIV............................................................... 45
14 Brokerage Fees.................................................... 45
--------------
ARTICLE XV................................................................ 45
15 Survival of Representations and Warranties: Indemnification...... 45
------------------------------------------------------------
15.1 Seller's Indemnity....................................... 45
------------------
15.2 Buyer's Indemnity........................................ 46
-----------------
15.3 Notice of Claim.......................................... 46
---------------
ARTICLE XVI............................................................... 48
16 Guarantor......................................................... 48
---------
16.1 Guarantee (Bennett)...................................... 48
-------------------
16.2 Guarantee (Sahara Gaming Corp.).......................... 48
-------------------------------
ARTICLE XVII.............................................................. 48
17 Notices........................................................... 48
-------
ARTICLE XVIII............................................................. 49
18 Miscellaneous..................................................... 49
-------------
18.1 Nevada Law............................................... 49
----------
18.2 Assignment; Binding Effect............................... 49
--------------------------
18.3 Partial Invalidity....................................... 49
------------------
18.4 Time of Essence.......................................... 49
---------------
18.5 Captions................................................. 50
--------
18.6 Pronouns................................................. 50
--------
18.7 Knowledge of Party....................................... 50
------------------
18.8 Entire Agreement; Amendment; Waiver...................... 50
-----------------------------------
18.9 No Third Party Beneficiary............................... 50
--------------------------
18.10 Counterparts............................................ 51
------------
18.11 Attorney's Fees......................................... 51
---------------
18.12 Jurisdiction............................................ 51
------------
18.13 No Party Deemed Drafter................................. 51
-----------------------
EXHIBIT(S)................................................................ 52
"A" Real Property Description................................... 53
-------------------------
"B" Choses in Action............................................ 54
----------------
"C" Third Party (Tangible Personal Property).................... 55
----------------------------------------
"D" Personal Property Retained by Seller........................ 56
------------------------------------
"E" Other Assets Retained by Seller............................. 57
-------------------------------
"F" Purchase Price Allocation................................... 58
-------------------------
"G" Material Contracts.......................................... 59
------------------
"H" Contracts (Excluding Material Contracts).................... 60
----------------------------------------
"I" Assumed Liabilities......................................... 61
-------------------
"J" Assumed Customer Benefits................................... 62
-------------------------
"K" Contracts (Other than those described in Exhibits "G"
------------------------------------------------------
and "H"..................................................... 63
-------
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
"L" Affiliated Parties.......................................... 64
------------------
"M" Seller Litigation and Other Actions......................... 65
-----------------------------------
"N" Employee Benefit Plans...................................... 66
----------------------
"O" Leases and Licenses......................................... 67
-------------------
"P" Insurance Policies and Contracts............................ 68
--------------------------------
"Q" Buyer Litigation and Other Actions.......................... 69
----------------------------------
</TABLE>
iv
<PAGE>
AGREEMENT FOR PURCHASE AND SALE
THIS AGREEMENT FOR PURCHASE AND SALE ("Agreement") is made and entered into
by and among Hacienda Hotel, Inc., a Nevada corporation, doing business as
Hacienda Resort Hotel & Casino ("Seller") and Sahara Gaming Corporation
("Guarantor") and WILLIAM G. BENNETT and/or Assigns ("Buyer").
W I T N E S S E T H :
---------------------
WHEREAS, Seller is the owner of certain improved Real Property located in
Clark County, Nevada, commonly known as the Hacienda Resort Hotel and Casino,
which is more particularly described on Exhibit "A" attached hereto; and
WHEREAS, the parties hereto have reached an understanding with respect to
the sale by Seller and the purchase by Buyer of the Real Property and of the
assets of the Business, except as hereinafter specifically excluded; and
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, and upon and subject to the terms and conditions
hereinafter set forth, Seller and Buyer agree as follows:
ARTICLE I
1 Definitions
-----------
1.1 Reference is made to Exhibit "A" attached hereto (which Exhibit is,
and any and all Exhibits hereinafter referred to in this Agreement are, by such
reference, incorporated herein and made a part hereof for all purposes) for the
meaning of capitalized terms used herein and defined for purposes of this
Agreement.
. . . . .
. . . . .
1
<PAGE>
ARTICLE II
2 Sale of Property
----------------
2.1 Closing Date. At the Closing, Seller agrees to sell, transfer and
------------
convey to Buyer, and Buyer agrees to purchase from Seller, for the consideration
hereinafter provided, the following assets owned by Seller (which assets are
herein collectively called the "Property"):
(a) Certain improved real property located in Clark County, Nevada,
owned by Seller, and more particularly described in Exhibit "A", attached hereto
(the "Hacienda Parcel"), together with rights, appurtenances, buildings and
improvements thereto and thereon, including the following:
(i) All of Seller's right, title and interest in and to (A) all
rights, privileges and easements appurtenant to the Hacienda Parcel, and (B) all
development rights, air rights, water, water rights and all of Seller's right,
title and interest in and to any minerals, oil, gas and other hydrocarbon
substances on or under said real property relating to the Hacienda Parcel; and
(ii) All of Seller's right, title and interest in and to the
improvements and fixtures (including heating and air conditioning systems and
fixtures used to provide any utility services, food and beverage services,
recreation, and other services or activities) located on the Hacienda Parcel.
The Hacienda Parcel, together with all rights and appurtenances
thereto and all buildings, improvements, fixtures and other items of real
property thereon is hereinafter referred to as the "Real Property".
(a) All of Seller's right, title and interest in and to the
furniture and furnishings, equipment, appliances, motor vehicles and other
transportation equipment, tools, signs and signage, utensils, tableware,
chinaware, glassware, silverware, telephone
2
<PAGE>
equipment and all of its related software, all computer hardware, computer
software, owned or licensed by Seller, including, without limitation, all
source codes and data whether on tape, disc, or other computerized format, all
related user manuals, computer records, service codes, programs, stored material
and data bases, all access codes and instructions to obtain access and/or
utilize the information contained on such computer records, all internal
manuals, all operational manuals, all personnel manuals, all administrative
manuals, and all other tangible personal property owned by Seller on the Closing
Date and used in the ownership, operation and maintenance of the business
(hereinafter "Personal Property" and/or "Business"), including, but not
limited to, all assignable warranties and guarantees on any such items of
Personal Property.
(b) All of Seller's right, title and interest, if any, in and to any
intangible personal property owned by Seller and used in the ownership, use and
operation of the Business ("Intangible Personal Property"), including without
limitation, the name "Hacienda Resort Hotel & Casino", displays, symbols, color
arrangements, logos, trademarks, copyrights, licenses, patents and words and
devices, relating directly or indirectly to and used by Seller solely in
connection with the Business, or which identify the products or services of the
Business (and any goodwill associated with such name and with such marks).
Seller specifically makes no representations regarding the validity of any marks
or registrations of record, if any, with regards to the name or use of Hacienda
Resort Hotel & Casino and makes no representations or warranties concerning the
name or use of Hacienda Resort Hotel & Casino;
(c) All of Seller's right, title and interest in and to all customer
lists, and customer mailing lists, relating to the business;
. . . . .
. . . . .
3
<PAGE>
(d) All of Seller's right, title and interest in and to all advance
reservations, bookings, originals of casino credit cards and credit files. In
addition to the foregoing, copies of such accounting records and reports
relating to the Business as Buyer may reasonably request or which are necessary
for the continued and uninterrupted operation of the Business by Buyer from and
after the Closing Date;
(e) All of Seller's right, title and interest in and to any
telephone numbers used exclusively in connection with the business;
(f) All assignable Contracts as described in Section 4.1 hereof;
(h) Upon final licensing approval to transfer the gaming devices by
Nevada State Gaming Control Board and Commission and Clark County authorities,
all of Seller's right, title and interest to all gaming devices and/or equipment
used in connection with the Business.
(g) The Real Property and the Personal Property, described herein
above, shall be conveyed to Buyer free and clear of all liabilities,
obligations, security interest, liens and encumbrances except for those
expressly approved by the Buyer.
2.2 Property Exceptions. Anything in Section 2.1 of this Agreement to
-------------------
the contrary notwithstanding, the Property does not include and Seller reserves
and retains all right, title and interest in and to:
(a) All cash and cash equivalents;
(b) All Hacienda gaming chips (including reserve chips) and tokens;
(c) All contracts for the use of the Recreational Vehicle Park
located on the Real Property that were entered into pursuant to the "Hacienda
Adventure Program".
. . . . .
. . . . .
4
<PAGE>
Seller shall take such steps as are necessary to terminate within eighteen (18)
months of the Closing Date (hereinafter "Termination Period") any rights of the
members of the program to use the Recreational Vehicle Park or any part of the
Real Property. During the Termination Period, Seller shall pay monthly to Buyer
all direct expenses that Buyer incurs in operating the recreational vehicle
park, including, but not limited to, utilities and labor; but at the end of the
Termination Period, Seller shall have no obligation to remove any improvements
or facilities from the Recreational Vehicle Park. Except for Buyer's
obligations to maintain and operate the Recreational Vehicle Park during the
period, Buyer assumes no obligations or duties to any of the members of the
Hacienda Adventure Program after the period and any such obligations or duties
shall be Excluded Liabilities under Section 4.3 and be subject to
Indemnification by Seller. To the extent necessary for Seller to transfer said
memberships, Seller shall be entitled to receive that portion of rights required
of well permit 25324, or its equivalent thereof in Buyer's discretion, and Buyer
and Seller shall cooperate fully to effect such transfer.
(d) All Seller's inventories of food and beverage stocks, and gift
shop inventory, unless Buyer elects to purchase any or all of such items at
Closing. Should Buyer so elect, the purchase price of any such items shall be
its cost to Seller. (Seller and Buyer shall complete the inventory Twenty-Four
(24) hours prior to Closing)
(e) All of Seller's right, title and interest in and to all markers,
guest ledger receivables (lounge, restaurant and others), rents and other
accounts and notes receivable relating to the Business accrued on or before the
Closing Date.
(f) Seller's books and records, except as provided in Section
2.1(d).
(g) Securities, investments, bank accounts, deposits by Seller and
refund claims, whether or not such assets relate to Seller's ownership of the
Property or operation of the Business;
5
<PAGE>
(h) Any insurance and rights thereunder except as otherwise provided
in this Agreement;
(i) Choses in action, claims and litigation, described in Exhibit
"B";
(j) Any tangible personal property, described in Exhibit "C", owned
by third parties, leased, or loaned to Seller for use in the Business, unless
the lease therefor is a Contract;
(k) Any items of equipment or other personal property (other than
any books and records covered by Section 2.1(e) hereof) which are not used
exclusively in connection with the ownership, or necessary to, the operation of
the Business, described in Exhibit "D";
(l) Any other assets which are not designated for use or exclusively
used in connection with the ownership, operation or maintenance of the Business,
described in Exhibit "E";
(m) That certain real property located in Las Vegas, Nevada, known
as the "Cambridge Building", any assets used in connection with Hacienda
Hawaiian and the Mount Charleston Properties.
2.3 Prorations and Allocations
--------------------------
(a) Credits and payments shall be prorated as of the Closing (except
as otherwise indicated), including, but not limited to:
(i) Non-delinquent real and personal property taxes and
assessments (and including any supplemental assessments);
(ii) Utilities shall be prorated as of the Closing (or as soon
as practicable theretofore or thereafter). Buyer shall make appropriate
arrangements for transfer of all necessary utility and other services in its own
name to be effective as of the Closing (or as soon as practicable theretofore or
thereafter);
6
<PAGE>
(iii) rents or periodic payments on any leases, contracts, and
hotel rooms;
(iv) security deposits on any leases and contracts; and
(v) premiums on any insurance policies retained by the Buyer.
(b) Concerning Seller's Gold Key Time Share Memberships, which are
to be assumed by Buyer, the parties acknowledge that certain of the membership
contracts are fully paid (the purchase price has been fully paid and the member
only pays an annual maintenance fee in January of each year), and certain
contracts not fully paid, since the purchase price (together with interest and
maintenance fees) is paid in monthly installments. Any annual maintenance fees
paid under fully paid contracts shall be prorated as of the Closing, the
proration shall be based on the total contract term and total contract
payments. There shall be no proration of payments under contracts not fully
paid, but Buyer shall be entitled to any monthly payments under such contracts
which become due and payable after Closing.
ARTICLE III
3 Purchase Price
--------------
3.1 Purchase Price. For and in consideration of the Property, Buyer
--------------
shall pay to Seller a purchase price of Eighty Million dollars ($80,000,000.00)
("Purchase Price"). The Purchase Price may be adjusted for any insurance or
condemnation proceeds which may accrue or be paid on or prior to Closing as
provided in Section 10.1 and under other circumstances expressly set forth in
this Agreement.
3.2 Payment. The Purchase Price shall be paid as follows:
-------
(a) Earnest money deposit of Five Million Dollars ($5,000,000.00)
("Deposit") shall be deposited by Buyer with United Title Company ("Title
Company") prior
7
<PAGE>
to execution of this Agreement in an interest-bearing account, with interest
accruing in favor of Buyer. Any interest accruing as of the Closing Date on the
Deposit shall be applied as a credit against the Purchase Price. If Buyer fails
to complete the purchase of the Property in accordance with the terms of this
Agreement for any reason, Seller shall retain and be entitled to the Deposit
as liquidated damages for breach of contract as Seller's sole and
exclusive remedy. Notwithstanding anything to the contrary in this Agreement,
if Buyer fails to complete the purchase due to Buyer's inability to obtain the
licenses and/or a finding of suitability by the Nevada Gaming Authorities to
enable Buyer to conduct gaming at the Real Property, or for Seller's
misrepresentation, default and/or breach of any terms and conditions of this
Agreement and/or the failure to receive approval of the Department of Justice of
the United States of America and/or the Federal Trade Commission of the United
States of America pursuant to the Hart-Scott Act in such event the Title Company
shall return to the Buyer the Deposit and any interest thereon.
(b) At the Closing, Buyer shall pay Seller subject to offsets and/or
reductions as stated in this Agreement, the remaining balance of the purchase
price in cash or by bank cashiers or certified check payable in immediately
available federal funds, or by wire transfer of funds to a bank account of
Seller, said account identity to be provided to Buyer.
(c) If Buyer so instructs in writing, Title Company shall invest the
Deposit in (a) direct obligations of the United States of America or any agency
thereof, (b) certificates of deposit issued by any bank organized under the laws
of the United States or any state thereof, provided such bank has capital,
surplus and undivided profits aggregating at least Fifty Million Dollars
($50,000,000) or (c) commercial paper given the highest rating by a nationally
recognized credit rating agency. If the transactions provided for herein close,
income or interest on such investments shall be applied as provided in Section
3.2(a).
8
<PAGE>
Should the investment not have matured at the Closing, income or interest
therefrom earned as of the Closing shall be calculated, Buyer and Title Company
shall assign all of their interest in the Deposit to Seller and the amount of
income or interest accrued as of the Closing will be credited against the
payments due pursuant to Section 3.2(a).
3.3 Costs. Costs and expenses relating to the transactions contemplated
-----
by this Agreement shall be borne and paid as follows:
(a) All motor vehicle transfer taxes, vehicle registration fees,
sales, use and excise taxes and documentary stamp or transfer taxes (including,
but not limited to, those set forth in Nevada Revised Statutes Section 375.020)
relating to the purchase and sale of the Property shall be borne and paid one-
half (1/2) by Buyer and one-half (1/2) by Seller;
(b) All fees for recording any grant, bargain and sale deed or deeds
and assignments of the Real Property to be conveyed and assigned pursuant hereto
shall be borne and paid by Buyer. Fees for the Title Policy shall be paid as
provided in Section 5.2 hereof;
(c) Any fees and expenses of the Title Company shall be paid one-
half (1/2) by Buyer and one-half (1/2) by Seller;
(d) Except as otherwise specifically provided in this Agreement,
Seller and Buyer shall bear their own costs and expenses arising out of the
negotiation, execution, delivery and performance of this Agreement, and the
consummation of the transactions contemplated herein, including without
limitation, legal and accounting fees and expenses.
3.4 Gaming Taxes. Seller shall be and remain liable for any fees or
------------
taxes due pursuant to Chapter 463 of the Nevada Revised Statutes which accrue
prior to the Closing Date.
3.5 Allocation of Purchase Price. The purchase price shall be allocated
----------------------------
in accordance with the agreed value as of the Closing Date as set forth in
Exhibit "F":
9
<PAGE>
Seller and Buyer shall timely comply with its Internal Revenue Service
information reporting requirements by completing and attaching all required
forms to its Income Tax Return for the tax year that includes the date on which
the sale and purchase of the property is consummated. Such information reporting
obligations shall be discharged in accordance with the terms of this Agreement.
ARTICLE IV
4 Contracts and Assumption of Liabilities:
---------------------------------------
4.1 Contracts.
---------
(a) For purposes of this Agreement, the term "Material Contract"
shall mean: any contract or agreement to which Seller is a party which relates
to the Business and (i) was not incurred in the normal and ordinary course of
business, or (ii) represents an obligation of Seller during the remaining term
thereof in an amount greater than Ten Thousand Dollars ($10,000), (e.g.,
Seller's existing contract with YESCO for the construction and installation of a
new free-standing sign, which Buyer has agreed to assume) and/or (iii) is listed
on Exhibit "G" attached hereto. For purposes of this Agreement, the term
"Contracts" shall mean and include: (1) all Material Contracts existing on the
date hereof; (2) all current collective bargaining agreements or other contracts
or commitments to or with any labor unions or other employee representative or
groups of employees, and all such future agreements, contracts, or commitments
made or entered into before closing, provided that Buyer is allowed to
participate in any negotiations with such labor unions or other employee
representative or groups of employees; (3) all contracts and agreements incurred
in connection with the Business which would not constitute Material Contracts,
currently existing or incurred after the date hereof prior to the Closing Date
in the normal and ordinary course of business; (4) any Contracts approved (or
deemed approved) by Buyer
10
<PAGE>
as herein provided; and (5) any other contracts and agreements incurred by
Seller before or after the date hereof in connection with the Business and
approved in writing by Buyer. (Collectively referred to as the Contracts
described in Exhibit "H").
(b) Seller has made Buyer aware of the general nature of the
Contracts, which Buyer would assume. Within fifteen (15) business days of
Seller's Board of Directors approval of this Agreement, Seller will deliver to
Buyer a copy of any Contracts which will be in force on or after the Closing
Date. Within fifteen (15) business days after receipt by Buyer of such
Contracts, Buyer shall notify Seller in writing of any objections thereto; it
being acknowledged and agreed by Buyer that Buyer shall not object to any such
Contract which (i) was incurred in the normal and ordinary course of the
business by Seller; (ii) which is not a Material Contract as defined in this
Agreement (iii) contains terms and conditions which are not materially less
favorable than those which would have been available for such product or service
as of the date of execution of such Contract; (iv) is not between Seller and any
third party affiliated with or related to Seller; and (v) was approved by the
Chairman of the Board, Chief Financial Officer or Chief Operating Officer of
Sahara Gaming. Buyer and Seller shall undertake in good faith to resolve any
objections which Buyer may have to any such Contracts. However, if Buyer's
objections are not resolved, Seller shall retain said Contract and remain solely
liable and responsible for the same. Buyer shall be deemed to have approved all
Contracts which are not objected to as hereinabove provided. Any Contract that
Seller becomes aware of that were not listed on Exhibits "G" and "H" or provided
to Buyer within fifteen (15) days of execution of this Agreement shall be
submitted to Buyer as soon as Seller becomes aware of such Contracts and Buyer
will have fifteen (15) days to notify Seller of any objections;
(c) Seller, upon execution of this Agreement, and prior to Closing,
shall not enter into any agreement, contract or incur any obligation which term
or duration
11
<PAGE>
exceeds a period of thirty (30) days or is not incurred in the ordinary course
of business without Buyer's written consent;
(d) At the Closing, subject to Section 4.1(b), Seller shall assign
and transfer to buyer all of Seller's right, title and interest in and to the
Contracts and Buyer agrees to assume and perform all obligations and liabilities
on the part of Seller under the Contracts accruing after the Closing Date;
provided, that to the extent that the assignment of any Contract is not
- --------
permitted without the consent of the other party or parties to such Contract,
this Agreement shall not be effective to assign such Contract if such consent is
not given; provided, further, that at the request of Buyer, Seller shall use all
-------- -------
reasonable efforts to obtain such consent. If (i) any such consent is not
obtained or (ii) if Buyer's assumption of such Contract is prohibited by law,
Seller agrees, to the extent permitted by law, to undertake with Buyer to
enter into a subcontract or other arrangement pursuant to which Buyer shall
receive the benefits of such Contract upon Buyer's payment of the consideration
provided in the Contract and assumption of the obligation to perform the same;
provided, however, that with respect to (i) above, if any Contract may only be
- -------- -------
assigned upon payment, directly or indirectly, of additional consideration, then
Buyer may either (1) pay any such additional consideration whereupon Seller
shall assign such Contract to Buyer or (2) elect not to assume such Contract,
which shall be and remain the sole responsibility of Seller, and Buyer shall
have no rights under any such Contract. In the event Buyer's assumption of any
such Contract is prohibited by law, Buyer shall not be required to assume such
Contract, which shall be and remain the sole responsibility of Seller's and
Buyer shall have no rights under any such Contract;
4.1 Assumption of Liabilities by Buyer. At the Closing, Buyer shall
----------------------------------
agree to assume and pay, perform and discharge, and indemnify and hold Seller
harmless from and against, the following obligations and liabilities of Seller
(collectively, "Assumed Liabilities"):
12
<PAGE>
(a) All of Seller's obligations and commitments under the Contracts,
arising after, and concerning the period after, the Closing Date listed on
Exhibit "I";
(b) All liability of Seller existing as of the Closing with respect
to amounts shown on internal progressive slot machines, meters, or meters for
other games or gaming devices, provided, however, that the amount of such
liability shall be applied as a credit against the Purchase Price. With respect
to progressive pool programs in which Seller participates with other gaming
entities, Buyer shall assume all liability and any payments under such programs
which become due and payable after the Closing Date listed on Exhibit "I".
(c) Any commitments or coupons or slot club points for free or
discounted accommodations, services, tickets, food or beverages issued or
granted by Seller to customers or others in the ordinary course of the Business
and which remain outstanding after the Closing Date and which were issued or
granted pursuant to any Contract, listed on Exhibit "J";
(d) Any and all claims, liabilities, loss, cost, damage or expense
(including reasonable counsel fees and expenses) resulting or arising out of
ownership of the Property or conduct of the Business, or caused by or occurring
upon the Property, after the Closing Date.
The assumption by Buyer of the Assumed Liabilities shall not enlarge any
rights or remedies of any third party under any Contracts with Seller. Buyer
shall not be prevented from contesting in good faith any of the Assumed
Liabilities. Buyer agrees to indemnify, defend and hold Seller and its
directors, officers, employees, agents, successors and assigns harmless from and
against any and all liability, loss, cost, damage and/or expense (including,
without limitation, reasonable attorneys' fees and costs) pertaining to the
Assumed Liabilities.
13
<PAGE>
4.2 Excluded Liabilities. Except as provided in Section 4.2 with respect
--------------------
to the Assumed Liabilities, Buyer expressly disclaims responsibility for and
shall not assume or be obligated to pay, perform or discharge, and Seller shall
pay, perform, discharge and indemnify and hold Buyer harmless from and against,
any debt, obligation, expense or liability of Seller, whether absolute or
contingent, arising out of or in connection with the Property or the Business,
including, without limitation, any liabilities or obligations arising out of
ownership or operation of the Property or the conduct of the Business by Seller
prior to the Closing Date (collectively, "Excluded Liabilities"). Seller and
Seller's Parent Corporation agrees to indemnify, defend and hold Buyer, and its
employees, officers, agents, successors and assigns and Guarantor harmless from
and against any and all liability, loss, cost, damage and/or expense (including,
without limitation, reasonable attorneys' fees and costs) directly or indirectly
arising out of or attributable to Excluded Liabilities.
ARTICLE V
5 Title to Real Property.
----------------------
5.1 Title Reports and Exceptions.
----------------------------
(a) Seller shall, within Fifteen (150 days of the Seller's Board of
Director's approval, deliver to Buyer a preliminary report (and a survey within
a reasonable time thereafter) of the Real Property ("Preliminary Title Report")
from the Title Company. Buyer shall have ten (10) business days after receipt of
the Preliminary Title Report in which to review such report. "Title Objection"
shall mean any item or matter appearing in a Preliminary Title Report other than
(i) inchoate statutory liens for taxes or assessments not due and payable, (ii)
any such matter which does not in fact create a material impairment to the
continued operation of the Business on the Real Property; (iii) any matter of
which Buyer has not notified Seller in writing (stating the reason Buyer
contends that such matter constitutes a Title Objection) within ten (10)
business days after receipt of a continuation
14
<PAGE>
report from the Title Company in which such matter not previously referenced in
a continuation report or the Preliminary Title Report first appears, together
with a copy of the document, if any, creating such new matter (each such period
herein called the "Title Review Period") stating in good faith the reason Buyer
contends such matter constitutes a Title Objection; (iv) any matter approved by
Buyer; or (v) any matter which is caused by, or otherwise results from the
actions of Buyer. Upon termination of any applicable Title Review Period, any
matter not timely listed as a Title Objection by Buyer as of such date shall be
deemed approved as a Permitted Exception and not constitute a Title Objection.
Seller shall have until the Closing to remove or cure any Title Objection
subject to subparagraph (b) hereinbelow;
(b) If, after the date hereof, a matter is disclosed to Buyer which
Buyer contends to be a Title Objection, Seller shall notify Buyer within ten
(10) business days after notice from Buyer to Seller of the matter which Buyer
contends to be a Title Objection, whether Seller will undertake to cure or
otherwise remove such matter on or prior to Closing. If Seller gives written
notice to Buyer that Seller is unable or unwilling to cure such matter on or
prior to Closing, Buyer, as its sole and exclusive remedy, shall have the right
and option, if such matter is a Title Objection, exercisable by written notice
to Seller within seven (7) business days after Buyer has received Seller's
notice that Seller will not undertake to cure, to (i) waive same and agree to
accept conveyance of the Property subject to such Title Objection at closing
with offset, reimbursement or payment or (ii) terminate this Agreement and
receive a complete and total refund of any and all monies (the Deposit)
described in Paragraph 3.2. Should Buyer not give any notice within the seven
(7) business day period referenced above, such title matter shall be
conclusively deemed waived by Buyer and be conclusively deemed a Permitted
Exception.
(c) A Title Objection other than one involving a matter set forth in
the
15
<PAGE>
Preliminary Title Report shall be deemed cured by Seller and no longer to
constitute a Title Objection if such matter is either removed of record by
appropriate release or other instrument, removed as an exception in a
continuation report, (whether by reason of "bonding around" or "insured
around") by Seller or otherwise. "Insured Around" as used herein means that the
Title Policy shall affirmatively indemnify and defend the Buyer from and
against any and all loss and liability, including litigation costs and
attorneys' fees in connection therewith. Notwithstanding Seller's election to
"bond around" or "insure around" the title objection the Seller shall
affirmatively effect any action required to remove the title objection. All
exceptions to title of the Property disclosed in the Preliminary Title Report or
in any continuation report thereof which are not Title Objections, or which are
waived by Buyer pursuant to this Agreement, are herein referred to as the
"Permitted Exceptions", and Buyer agrees to take title to the Property at
Closing subject to the Permitted Exceptions. Seller is under no obligation to
initiate legal proceedings or to incur any expense to cure Title Objections,
except that Seller shall remove any voluntary contractual liens created by
Seller.
5.2 Title Policy. Except as otherwise provided in Section 5.1 at the
------------
Closing, Seller shall deliver to Buyer at Seller's expense: (i) a ALTA/ACSM
Owner's Policy ("Title Policy") from a company satisfactory to Buyer dated the
Closing Date in the aggregate amount of Thirty Million Dollars ($30,000,000)
insuring Buyer as owner of fee title to the Real Property subject only to the
Permitted Exceptions. The Parties agree that the Title Policy may be written
on a coinsured or reinsured basis by other title insurance companies to the
extent required by the Title Company, reasonably satisfactory to the Buyer.
Buyer shall pay that portion of the premium expense for such Title Policy
which is attributable to any special endorsements requested by Buyer. Seller
shall pay that portion of the premium expense for such Title Policy which is
attributable to any special endorsements requested by
16
<PAGE>
Seller.
ARTICLE VI
6 Representations and Warranties.
------------------------------
6.1 Seller's Representations and Warranties. Seller represents and
---------------------------------------
warrants to Buyer that:
(a) Due Organization. Seller and Seller's Parent are corporations
----------------
duly organized, validly existing, in good standing and duly qualified to do
business under the laws of the State of Nevada, and upon receiving the approval
of this Agreement by Seller and Seller's Parent's Board of Directors, shall have
all requisite corporate power and authority to enter into, perform and carry out
all of its duties and obligations in the transactions contemplated by this
Agreement;
(b) Binding Effect. This Agreement, subject to the approval of
--------------
Seller's Board of Directors and Seller's Parent's Board of Directors, which
shall be received by Buyer no later than thirty days of the date of this
Agreement and the other documents to be delivered on the part of Seller pursuant
hereto are (or will be when executed and delivered pursuant hereto) legal, valid
and binding obligations of Seller enforceable in accordance with their terms:
(c) Notices and Approvals; No Violation of Agreement. Except for
------------------------------------------------
the notice specified in Section 8.3, the approval of this Agreement by Seller's
Board of Directors, and the consents which may be required to permit assignment
to Buyer of certain of the Contracts or leases, (i) no notice to, or approval or
consent of, any court or governmental authority or other person or entity is
required in connection with the execution, delivery and performance of this
Agreement by Seller and (ii) neither the execution and delivery of this
Agreement, nor consummation of the transactions contemplated thereunder, nor
compliance by Seller with any of the provisions thereof, will (1) conflict with
any
17
<PAGE>
provision of Seller's certificate of incorporation or bylaws, or (2) violate,
conflict with, result in a breach of or constitute a default under or pursuant
to any statute, agreement, judicial or administrative order, injunction, award,
judgment or decree to which Seller is a party or by which Seller is bound, which
violation, conflict, breach or default in the case of (1) or (2) above would
have a material adverse affect on the Real Property, Personal Property, Assets
or Business;
(d) Compliance with Laws. To the best of Seller's knowledge,
--------------------
Seller is in compliance with the requirements of all laws, rules, regulations,
licenses, permits, orders, judgments and decrees of federal, state or local
judicial or governmental authorities ("Regulations") that are applicable to
ownership or operation of the Real Property and the Business conducted thereon,
where any such noncompliance would have a materially adverse affect on the
Business or the Real Property;
(e) Contracts. With respect to Contracts which relate to or
---------
affect ownership of the Real Property or operation of the Business, to the best
of Seller's knowledge,: (1) as of the date of execution of this Agreement, there
are no Material Contracts other than those set forth on Exhibit "G" hereto or
provided pursuant to Section 4.1(b); (ii) except as provided in Exhibit "K" or
otherwise disclosed to Buyer in writing, all Material Contracts and all other
Contracts described in Exhibit "H" are in full force and effect (except any such
Contract which expires by its terms or is terminated by Seller prior to the
Closing Date), Seller has paid all amounts due thereunder and satisfied all
other material obligations accrued thereunder and Seller has not received any
written notice of default in any material respect thereunder and no event has
occurred that with the passage of time or the giving of notice, or both, will
constitute a default in any material respect thereunder (other than any default
which may result from the failure or inability of Seller to obtain the consents
of certain parties to the assignment to Buyer of certain of the Contracts,
Seller shall defend and indemnify
18
<PAGE>
and hold the Buyer harmless of any and all losses, damages and/or obligations
for any default which may result from the failure or inability of the Seller
to obtain the consents of parties to the assignment of the contracts to the
Buyer); and (iii) other than as disclosed by Seller to Buyer in writing prior to
the Closing Date, no other party is in default in any respect under any
Material Contract and/or Contract;
(f) Litigation. On the date hereof, Seller is not a party to any
----------
legal or governmental actions, claims, suits, administrative or other
proceedings or investigations before or by any governmental department,
commission, board, regulatory authority, bureau or agency, whether foreign,
federal, state or municipal, or any court, arbitrator or grand jury which would
prevent or materially interfere with the consummation of the transactions
contemplated by this Agreement or which, individually or in the aggregate, if
resolved against Seller would impair or interfere in any material respect with
the ownership of the Real Property by Buyer or operation by Buyer of the
Business. Except as to those matters as set forth in Exhibit "M", no additional
such proceedings are threatened or contemplated by any governmental authority or
any other person or entity;
(g) Employees, Officers and Directors: Employment and Similar
---------------------------------------------------------
Contracts: Benefits. Except (i) for those medical, dental and other insurance
- -------------------
and employee benefit arrangements, including but not limited to 401(k) deferred
compensation program, VEBA Plan, Cafeteria Plans, Qualified and Non-Qualified
Plans and any other Fringe Benefit Plans for employees of Seller's engaged in
the Business described on Exhibit "N" hereto (which employee benefit
arrangements either are not assumable or are not being assumed by Buyer), (ii)
for such contracts and covenants, if any, as are implied at law between an
employer and employee under applicable laws or are terminable at the will of the
employer. Seller is neither a party to, nor has any express or implied
obligations, with respect to any (A) agreement, contract or commitment with any
employee, officer, director, agent,
19
<PAGE>
consultant, advisor, property manager or other person engaged in the Business;
(B) agreement, contract or arrangement providing for the payment of any wages,
incentive compensation, raise, bonus or commission or containing any deferred
compensation or severance or termination pay liabilities or obligations, or (C)
pension, profitsharing, retirement, group life insurance, hospitalization
insurance, or other employee benefit or welfare plan, agreement or arrangement,
in the foregoing instances which relates to employees engaged in the Business
and will be in effect after the Termination Date;
(h) Eminent Domain or Other Proceedings. Except for the possible
-----------------------------------
condemnation of certain of the Real Property adjacent to Hacienda Boulevard,
which may be required for realignment purposes if Hacienda Boulevard is
extended. Seller has not received any written or oral notice of any initiated or
pending condemnation or eminent domain proceedings, or contemplated sales in
lieu thereof, involving a partial or total taking of any of the Real Property,
nor has Seller received written or oral notice of any zoning or special
assessment proceedings affecting the Real Property;
(i) Properties. On the Closing Date, Seller shall have good and
----------
indefeasible title to all of the Real Property, free and clear of any and all
liens, security interests, mortgages, pledges, claims, options, leases,
imperfections of title, easements, or other encumbrances or rights of third
parties except only for (i) liens for current taxes which are not delinquent and
other constitutional or statutory inchoate liens which shall be prorated as
setforth in Section 2.3; (ii) such minor imperfections of title as do not either
individually or in the aggregate materially adversely affect use of the Real
Property in conduct of the Business, or materially detract from the value of
such Real Property or Business; and (iii) claims
20
<PAGE>
based upon or included in the Assumed Liabilities expressly accepted by Buyer
(such excepted items being herein collectively referred to as "Permitted
Encumbrances");
(j) Leases. Attached hereto as Exhibit "O" is a list of all leases
------
and licenses existing on the date of execution of this Agreement pursuant to
which any third party has the right to occupy any portion of the Real Property
(said lease or license, including all amendments and modifications thereto,
being called individually a "Lease" and collectively "Leases", and the tenant,
occupant or licensee thereunder being called a "Tenant" and collectively
"Tenants"). The Leases are without default in any material respect by Seller,
and there exists no event, occurrence or condition which (with notice or lapse
of time or both) would constitute a default in any material respect by Seller
under any such Lease and, to Seller's knowledge (except as otherwise disclosed
to Buyer in writing) are without default by any other party thereto. Seller
shall provide Buyer with a true, correct and complete copy of each such Lease,
including all amendments and modifications thereto. Seller shall deliver to
Buyer an estoppel certificate to be approved by the Buyer for each Tenant under
each Lease executed by such Tenant not more than ninety (90) days prior to the
Closing Date, Seller shall be released of any liability for breach of this
Section 6.1(i) with respect to such Lease to the extent the matter in dispute is
the subject of such an estoppel certificate;
(k) Insurance. Seller shall provide Buyer with a correct and
---------
complete list of all policies of fire and liability coverage and other forms of
insurance described in Exhibit "P" maintained by Seller on the date of execution
of this Agreement relating to ownership of the Real Property and the operation
of the Business no later than thirty days of the date of this Agreement;
(l) Condition. On the date hereof, Seller has no knowledge of any
---------
condition which would have a material adverse effect on the Real Property or the
Business;
21
<PAGE>
(m) Hazardous Waste. To the best of the Seller's knowledge, except
---------------
for the Report dated May 13, 1993, there is no contamination, hazardous waste or
toxic substance in existence on or below the surface of the Real Estate,
including, without limitation, asbestos in or on the Real Estate, PCB's in any
transformer or other equipment located in or on the Real Estate, contamination
of the soil, subsoil or ground water or any use or storage of hazardous waste
material on the Real Estate, which constitutes a material violation of any law,
rule or regulation or standard of any governmental entity having jurisdiction
thereof. Buyer may, in Buyer's sole discretion, and at Buyer's cost, retain a
Consultant to review and investigate the condition of the property to determine
if there exists a violation or potential violation of any law, rule,
regulation, or standard of any governmental entity having jurisdiction thereof.
If Buyer determines a material violation or potential violation exists, Buyer
shall notify Seller of the violations or potential violations and may elect to:
(1) terminate this Agreement, unless Seller is able to remedy or remove the
cause for such violation or potential violation prior to Closing. In the event
Buyer terminates this Agreement, the Deposit shall be returned to the Buyer
without further obligation or liability; (2) If the Buyer does not terminate
this Agreement Seller shall promptly and thoroughly perform any and all Remedial
Work prescribed by the Consultant to bring the property into compliance with
any and all applicable law, rule, regulation, or standard of any governmental
entity. Seller shall complete the Remedial Work to Buyer's reasonable
satisfaction prior to the Closing date. Notwithstanding the foregoing, if the
Remedial Work costs, as reasonably estimated by the Consultant, exceeds One
Hundred Thousand Dollars ($100,000), Seller may elect not to perform the
Remedial Work by delivering written notice to the Buyer within fifteen days
after Buyer's notice of the Remedial Work to be performed. Upon receipt of
Seller's notice, Buyer shall have the right to elect, within fifteen days
thereof to: (a) terminate this Agreement and in such event the Title Company
shall return the Deposit to the
22
<PAGE>
Buyer; or (b) cause the sale of the property to be completed pursuant to this
Agreement without Seller performing the Remedial Work but with a reduction of
the Purchase Price in the amount of the reasonable costs and expenses to perform
the Remedial Work.
(n) Reports. To the best of the Seller's knowledge, except for
-------
the report dated May 13, 1993 delivered to Buyer there exists no written or
tangible report, synopsis or summary of any asbestos, toxic waste or hazardous
substance investigation made with respect to all or any portion of the Real
Property, Personal Property and Business (whether or not prepared by experts and
whether or not in the possession of Seller).
(o) Condemnation Proceeding. There are no pending or, to the best
-----------------------
of Seller's knowledge, contemplated actions or proceedings which would result in
condemnation of any portion of the Real Estate, except for the possible
condemnation described in Paragraph 6.1(h) or which will have the effect of
modifying in any adverse fashion present land use entitlement of the Real
Estate, including, without limitation, height and bulk, parking lot coverage,
landmark, zoning, moratorium, access to abutting rights-of-way and fire safety.
(p) Zoning. To the Best of Seller's Knowledge, the Real Property
------
is currently zoned to permit all of its present uses.
(q) Affiliated Parties. Except as noted on Exhibit "L", attached
------------------
hereto and incorporated herein by reference, no officer, director or employee
whose annual compensation exceeds Thirty Thousand Dollars ($30,000) or
consultant receiving fees at an annual rate of Twenty Thousand Dollars
($20,000), of Seller, or affiliate of the foregoing, to Seller's knowledge (a)
owns, directly or indirectly any interest in, or is an officer, director,
consultant, agent or employee of any corporation, firm, association or other
business, entity or organization which is a competitor, lessor, lessee, lender,
borrower, customer, supplier or distributor of Seller or any subsidiary or (b)
owns, directly or indirectly, in whole or in part, any property, asset, permit,
license or secret or confidential information which Seller is
23
<PAGE>
using or the use of which is necessary, desirable or material for the conduct of
the Business. Any such transaction involving Seller or any subsidiary on the one
hand, and any such person or entity on the other, which are required in
accordance with generally accepted accounting principles to be reflected in the
financial statements of Seller have been so reflected. Each such transaction has
taken place at prices, interest rates, charges and other terms that are
substantially the same as those that would have been paid or incurred in similar
transactions involving Seller, or any subsidiary, as the case may be, and
unaffiliated parties.
6.1 Buyer's Representation and Warranties. Buyer hereby represents and
-------------------------------------
warrants to Seller that:
(a) Due Organization. In the event Buyer assigns this Agreement
----------------
to a corporation, the corporation shall be duly organized, validly existing, in
good standing and duly qualified to do business under the laws of the State of
Nevada, shall have all requisite corporate power and authority to enter into,
perform and carry out all of its duties and obligations in the transactions
contemplated by this Agreement;
(b) Binding Effect. This Agreement and the other documents to be
--------------
delivered on the part of Buyer pursuant hereto are (or will be when executed and
delivered pursuant hereto) legal, valid and binding obligations of Buyer
enforceable in accordance with their terms;
(c) Notices and Approvals, No Violation of Agreements. Except
-------------------------------------------------
for the notices specified in Sections 8.3 and 8.6 hereto; (i) no notice to, or
approval or consent of, any court or governmental authority or other person or
entity is required in connection with the execution, delivery and performance of
this Agreement by Buyer; and (ii) neither the execution and delivery of this
Agreement by Buyer, nor the consummation of the transactions contemplated
hereunder, nor compliance by Buyer with any of the provisions hereof, will
violate, conflict with, result in a breach of or constitute a default under or
pursuant to any
24
<PAGE>
statute, agreement, judicial or administrative order, injunction, award,
judgment or decree to which Buyer is a party by which it is bound, which
violation, conflict, breach or default would have a material adverse effect on
the assets, business or financial condition of Buyer;
(d) Litigation. Except for the matters set forth on Exhibit "Q"
----------
hereto, Buyer is not a party to any legal governmental actions, claims, suits,
administrative or other proceedings or investigations before or by any
governmental department, commission, board, regulatory authority, bureau or
agency, whether foreign, federal, state or municipal, or any court, arbitrator
or grand jury which would either (i) prevent or materially interfere with the
consummation of the transactions contemplated by this Agreement, or (ii) if
decided adversely to Buyer, have a material adverse effect upon the assets,
Business or financial condition of Buyer. To the best of Buyer's knowledge, no
such proceedings are threatened or contemplated by any governmental authority or
any other person or entity.
ARTICLE VII
7 Condition of the Property; Access and Observers; Independent Investigation.
--------------------------------------------------------------------------
7.1 Access and Observers. Subsequent to Seller's Board of Director's
--------------------
approval and prior to Closing, Seller shall give Buyer, or its designated
agents, access during normal business hours to the Property and to the books
and records relating thereto and shall furnish Buyer during such period with
such information in Seller's possession concerning the Property and its
operation as Buyer may reasonably request; provided, that (a) such access and
--------
the furnishing of such information shall not interfere with Seller's normal
business activities and (b) Buyer shall be accompanied by, or make requests for
information through, those personnel designated by Seller to Buyer in writing.
To the extent permitted by applicable Nevada gaming laws, Buyer will have the
right, prior to Closing and at such times and in such
25
<PAGE>
manner as shall be reasonably specified by Seller, to place its agents on the
Real Property for the purpose of observing the conduct of Seller's Business.
Buyer agrees that such agents shall not interfere with the normal operation of
the Business prior to Closing. Buyer hereby waives any and all claims, demands
or causes of action for personal injury or property damage which Buyer, its
directors, officers, employees and agents may have by reason of entering onto
the Real Property, and Buyer indemnifies and holds Seller, its directors,
officers, employees, agents and guests harmless from any and all claims,
liabilities, loss, cost, damage or expense (including reasonable attorneys' fees
and expenses) arising out of any activities of Buyer, its agents, employees,
representatives or contractors upon the Property, or in connection with
exercise by Buyer of its rights in this Section 7.1.
7.2 Inspections. In making the decision to enter into this Agreement
-----------
and to consummate the transactions contemplated hereby, Buyer has relied solely
on the basis of its own independent investigation of Seller's Business and
Property and upon the express representations, warranties and covenants in this
Agreement. Without diminishing the scope of the express representations,
warranties and covenants of Seller in this Agreement and without affecting or
impairing Buyer's right to rely thereon, Buyer acknowledges that Seller has not
made, and SELLER HEREBY EXPRESSLY DISCLAIMS AND NEGATES ANY OTHER REPRESENTATION
OR WARRANTY, EXPRESS, IMPLIED OR STATUTORY, RELATING TO THE CONDITION OF THE
PROPERTY (INCLUDING WITHOUT LIMITATION ANY IMPLIED OR EXPRESS WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE) AND FURTHER, BUYER ACCEPTS
ALL THE PROPERTY IN ITS "AS IS, WHERE IS" CONDITION.
7.3 Maintenance of Property. Notwithstanding anything in this
-----------------------
Agreement to the contrary, Seller shall be responsible for all costs prior to
the Closing Date, if any, associated
26
<PAGE>
with maintaining applicable compliance with Clark County Building Code and any
other State and Federal law, rule and/or regulation, including the "American
Disability Act" for the property.
ARTICLE VIII
8 Conditions Precedent to Closing and Covenants
---------------------------------------------
8.1 Buyer's Conditions. The obligations of Buyer to purchase the
------------------
Property, to make payments of the Earnest Money Deposit and to make payment of
the remaining balance of the Purchase Price at the closing are subject to the
satisfaction on or prior to the Closing Date of each of the following conditions
(any one or more of which may be waived in writing by Buyer);
(a) All terms, covenants, agreements and conditions of this
Agreement to be complied with and performed by Seller on or prior to the Closing
Date shall have been complied with and performed in all material respects, and
all of the representations and warranties of Seller contained in Section 6.1
shall be true on the Closing Date as if made on and as of such date, except as
any of such representations and warranties may be affected by actions taken
pursuant to or in compliance with this Agreement (including, but not by way of
limitation, the provisions of Section 11.3 hereof), and Seller shall have
delivered to Buyer a certificate, executed by the President or an Executive
Vice-President of Seller and dated as of the Closing, to that effect;
(b) Seller shall have delivered to Buyer the instruments, documents,
certificates, opinions and other matters described in Section 12.2;
27
<PAGE>
(c) Buyer shall have obtained the licenses from and/or a finding of
suitability by the Nevada Gaming Authorities to enable buyer to conduct gaming
at the Real Property.
(d) The notice filing, if required under the Hart-Scott Act, shall
have been complied with and all waiting periods required thereby shall have
expired;
8.2 Seller's Conditions. The obligation of Seller to deliver the
-------------------
Property to Buyer at the Closing is subject to the satisfaction on or prior to
the Closing Date of each of the following conditions (any one or more of which
may be waived in writing by Seller):
(a) The approval of this Agreement by Seller's Board of Directors;
(b) All the terms, covenants, agreements and conditions of this
Agreement to be complied with and performed by Buyer on or prior to the Closing
Date shall have been complied with and performed in all material respects, the
representations and warranties of Buyer contained in Section 6.1 shall be true
on the closing Date as if made on and as of such date except as any of such
representations and warranties may be affected by actions taken pursuant to or
in compliance with this Agreement.
(c) Buyer shall have paid to Seller the Purchase Price as set forth
in Sec-tion 3.1;
(d) Buyer shall have delivered to Seller the instruments, documents,
certificates, opinions and other matters described in Section 12.3;
(e) The notice filing, if required under the Hart-Scott Act, shall
have been complied with and all waiting periods required thereby shall have
expired;
8.3 Hart-Scott-Rodino Filing. If the transaction contemplated herein
------------------------
is determined to be subject to the notification requirements of the (S)7a of the
Clayton Act, 15 U.S.C. (S)18A and the Rules promulgated thereunder as setforth
Chapter 16 CFR (S)(S) 801 and 803, as
28
<PAGE>
amended ("Hart-Scott Act"), Buyer and Seller will file the respective reports
required of them under the Hart-Scott Act, and the regulations thereunder as
soon as possible (and in no event later than Thirty [30] days) after the
Seller's Board of Director's approval. The parties agree to use their best
efforts to satisfy any requests for additional information or other requirements
imposed by the Federal Trade Commission or the Department of Justice in
connection with the transactions contemplated by this Agreement and to request
early termination of any waiting period imposed by statute.
8.4 Cooperation. Each party shall make or file all other required
-----------
notifications and use all reasonable effort to obtain all consents, approvals
and authorizations which must be obtained by such party in order to consummate
the transactions contemplated hereby. Each party shall render the other its full
and complete cooperation in giving such notices or obtaining such consents,
approvals and authorizations; provided, however, that neither party shall be
-------- -------
required to incur any cost or expense in giving any notice or obtaining any
consent, approval or authorization which the other party is required to give or
obtain pursuant to the terms hereof. Each party covenants and agrees promptly to
furnish to the other all information and data in the furnishing party's
possession requested in writing by the requesting party which is reasonable and
necessary in order to assist the requesting party to give the necessary notices
or secure any permits, licenses and approvals required in connection with the
Business.
8.5 Asset Transfer. Seller and Seller's Parent Corporation agrees
---------------
to defend and indemnify and hold Buyer harmless from and against any liability,
loss, cost, damage and/or expense (including, without limitation, reasonable
attorney's fees and costs) incurred by Buyer as a result, directly or
indirectly, of any failure of the Seller to transfer the Personal
29
<PAGE>
Property and Business, free and clear of any and all liens, encumbrances,
security interests and/or obligations of Seller.
8.6 Gaming Licenses. Within thirty (30) days after the approval of
---------------
Seller and its Parent Company Board's of Directors hereof, Buyer covenants and
agrees to submit to the Nevada Gaming Control Board, Nevada Gaming Commission
and the Clark County Liquor and Gaming Licensing Board (collectively, "Nevada
Gaming Authorities") its application for licensing of all persons or entities
who, as of the date hereof, would be required to be licensed under applicable
Nevada gaming laws and regulations, or any other persons who have or are
investing or advancing funds in connection with the transactions set forth
herein, which application, when filed, shall, to the best of Buyer's knowledge,
be complete in all material respects. Buyer covenants and agrees not knowingly
to submit for licensing any person or entity who Buyer reasonably believes is
unable or unwilling to qualify for and obtain whatever licenses or finding of
suitability that may be required of such person by the Nevada Gaming
Authorities. Following submission of such application, Buyer covenants and
agrees to use its best efforts and pursue diligently obtaining the licenses from
and/or a finding of suitability by the Nevada gaming Authorities and to provide
the data reasonably requested by such Authorities in order to obtain such
licenses and/or finding of suitability as soon as reasonably possible after the
execution hereof.
ARTICLE IX
9 Conduct of Business
-------------------
9.1 Seller covenants and agrees that, after the execution hereof and
prior to Closing (unless Buyer consents in writing otherwise):
30
<PAGE>
(a) Seller will conduct the Business at the Property in the ordinary
course and will use all reasonable efforts to preserve its relationships with
suppliers, customers and others having relationships with Seller pertaining to
the Business;
(b) Seller will make such repairs and replacements and perform such
maintenance operations as are necessary to maintain and keep the Property in
substantially the same repair, working order and condition as such Property is
in on the date hereof (reasonable wear and tear and damage from fire or other
casualty excepted), and will not commit to make any capital expenditure relating
to the Property which would be required to be paid or assumed by Buyer after
Closing;
(c) Seller will not voluntarily sell or otherwise dispose of (i) any
Real Property; or (ii) any other Property, except in the ordinary course of
business as previously conducted. To the extent Seller sells or disposes of any
Property other than Real Property, Seller shall replace same with a similar item
or a suitable alternative therefor approved by the Buyer.
(d) Seller will maintain in full force and effect its existing
insurance covering the improvements on the Property and the contents thereof.
Buyer acknowledges that such insurance coverages are not assumable by Buyer. At
the request of Buyer and at Buyer's sole cost and expense (which shall be paid
or secured in advance to the reasonable satisfaction of Seller), the amount of
insurance against fire and other casualties which, at the date of this
Agreement, Seller carries on the Real Property, shall be increased by such
amount or amounts as Buyer shall reasonably specify to Seller in writing;
(e) Seller will not terminate or waive any rights under any
Material Contract or Contract to be assigned to and assumed by Buyer hereunder
without the express consent of the Buyer;
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<PAGE>
(f) Seller shall not enter into any contract or agreement following
the execution of this Agreement which has a duration in excess of thirty (30)
days, without Buyer's written consent;
(g) Seller shall promptly comply with any and all notices of
violation of laws, federal, state, municipal or county ordinances, regulations,
orders or requirements of departments of housing, building, fire, or other
federal, state, municipal or county departments or other governmental
authorities having jurisdiction over the Property or the use or operation
thereof;
(h) Seller shall promptly disclose in writing to Buyer any change in
any facts or circumstances which would make any of the Representations
inaccurate, incomplete or misleading to the detriment of Buyer;
(i) From the date hereof through and including the Closing,
except as expressly provided herein or with Buyer's written consent, Seller
shall not (1) mortgage, pledge, or subject to lien, encumbrance or charge any
of the Assets; (ii) sell or transfer any of the Assets; (iii) permit any
damage, destruction or loss (whether or not covered by insurance) which would
materially and adversely affect the Assets; or (iv) waive any material rights
with respect to the Real Property, Personal Property and/or Business.
(j) All federal and state tax returns and reports of Seller for
the Business required by law to be filed have been and will be duly filed on a
timely basis (subject to timely and properly filed extensions), and all
federal, state and other material taxes, assessments, fees and other
governmental charges with respect to the Personal Property or the Business which
are due and payable, the nonpayment of which would interfere with Buyer's
ownership, use and/or operation of the Business, have been and will be paid on a
timely basis.
32
<PAGE>
(k) Other than (i) for customary review and wage increases for
Seller's employees consistent with historical practices of Seller, and (ii) for
commitments which arise by Seller's hiring of employees in the ordinary course
of the Business, Seller shall not adopt or amend any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation,
employment or other employee benefit plan, agreement, trust, plan, fund or other
arrangement for the benefit or welfare of any employee or increase in any manner
the compensation or fringe benefits of any employee or pay any benefit not
required by any existing plan, current practice or arrangement. No Represented
Employee Agreement which results from the renegotiation of any prior Represented
Employee Agreement between the date hereof and the Closing Date (the
"Renegotiated Agreements") or other Represented Employee Agreement which relates
to the Business shall be entered into; provided, however, that Seller may enter
into Renegotiated Agreements if the same shall generally be no less favorable to
the Business than those pertaining to the other hotel-casinos of comparable
size, status and character in the metropolitan Las Vegas area, Seller provides
Buyer with notice prior to entering into such Renegotiated Agreements and, after
receipt of such notice, Buyer approves, in writing, the terms of the
Renegotiated Agreements and Seller will take all actions necessary to comply
with the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended,
(l) Seller shall not make any representation to any employee of
Seller that is inconsistent with or contrary to the provisions of this
Agreement.
9.2 No Solicitation. From and after the date hereof, and continuing
---------------
unless and until Buyer fails or refuses to proceed toward the Closing hereunder
or is in default, Seller shall not in any way make, solicit, accept,
negotiate, consider or request other offers or proposals for the purchase or
sale (or change of ultimate ownership in any form) of the Property or the
33
<PAGE>
Business, enter into discussions therefor, or disclose the terms of this
Agreement to any actual, proposed or potential alternative purchaser. This
Section 9.02 shall have no further effect after the Closing Date as defined
herein this Agreement, or such later date to which Closing is extended, or if
Buyer is in default of this Agreement.
ARTICLE X
10 Risk of Loss
------------
10.1Risk of Loss. In the event of material destruction or damage of
------------
any buildings or other improvements located on the Real Property or the
condemnation of a material portion of the Real Property (as such terms are
defined in Section 10.2 hereof) prior to Closing, Seller shall either (i) upon
providing Buyer with a description thereof, repair such damage and destruction
at Seller's expense prior to Closing or (ii) promptly notify Buyer of the damage
or destruction and Seller's inability or decision not to repair it. Within ten
(10) days after receipt by Buyer of Seller's notification of its inability or
decision not to repair, Buyer shall have the right to notify Seller of Buyer's
election to terminate this Agreement or Buyer's election to offset and reduce
the purchase price. If any destruction, damage or condemnation of any building
or other improvement on the Real Property is not material, or if such
destruction, damage or condemnation is material and unrepaired by Seller prior
to Closing but Buyer does not elect to terminate this Agreement as hereinabove
provided, Buyer shall be entitled to a credit against the Purchase Price of an
amount equal to the cost to replace or repair the property by reason of such
damage, destruction, or condemnation (to the extent such funds have not been
expended on, or committed to, the repair or restoration of such damaged,
destroyed or condemned property), shall otherwise be consummated as though such
destruction, damage or condemnation (except for necessary changes in matters
relative to title set forth in the Title Policy and Deed resulting from any
condemnation) had not occurred.
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<PAGE>
10.2 Material Loss. For the purposes of Section 10.1 hereof
-------------
"material destruction or damage" shall be deemed to have occurred if the damage
is such that it may be reasonably expected to prevent or materially and
adversely affect the conduct of gaming operations, or operation of the Business,
for a period in excess of sixty (60) days, or result in an uninsured loss in
excess of One Hundred Thousand Dollars ($100,000.00) for which Seller is
unwilling to assume responsibility thereof. In the case of condemnation, for
purposes of Section 10.1 hereof, the affected Real Property shall be deemed to
be a "material portion of the Real Property" if such condemnation may be
reasonably expected to interfere with the operation of the Business as presently
being conducted or the ability of Buyer to further develop a portion of the Real
Property for hotel/casino purposes.
10.3 Uniform Act. This Article X is intended as an express provision
-----------
with respect to destruction and condemnation which supersedes the provisions of
the Nevada Uniform Vendor and Purchaser Risk Act, Nev. State. Section 113.030 et
--
seq.
- --
ARTICLE XI
11 Termination; Remedies
---------------------
11.1 Termination. Subject to the provisions of Sections 11.1 and
-----------
11.2 hereof, this Agreement may be terminated at any time prior to Closing by:
(a) The mutual consent of Seller and Buyer in the event the
Seller and Buyer agree to terminate this Agreement, Buyer shall be entitled to
and receive all of the Deposit described in Paragraph 3.2.;
(b) Seller or Buyer, on or at any time after nine months from the
Date of this Agreement, if the Closing or the transactions contemplated
hereunder shall not have occurred by such date for any reason, provided,
however, that at the request of Buyer, this
35
<PAGE>
time period shall be extended for an additional six months upon Buyer releasing
the Deposit to Seller. If the Closing occurs within such six month extended
period, the Deposit shall be applied to the Purchase Price; otherwise, this
Agreement shall be deemed to be terminated and the Deposit shall be retained
unconditionally by Seller as liquidated damages as its sole and exclusive
remedy;
(c) Seller at any time on or prior to the Closing if (i) any of
the representations or warranties of Buyer contained herein shall prove to be
inaccurate or incomplete in any material respect or Buyer shall materially
breach any covenant or other obligation imposed on it pursuant to this
Agreement or (ii) if the conditions set forth in Section 8.2 hereof shall not
have been met by the Closing Date;
(d) Buyer at any time on or prior to the Closing Date if (i) any
of the representations or warranties of Seller contained herein shall prove to
be inaccurate or incomplete in any respect, or Seller shall breach any covenant
or other obligation imposed on it pursuant to this Agreement, or (ii) if the
conditions set forth in Section 8.1 hereof shall not have been met by the
Closing Date; or (iii) under the circumstances described in Sections 5.1,
10.1, and 11.3 hereof.
11.2 Effect of Termination. Except for any obligations of a party
---------------------
accrued as of the effective time of any termination or as otherwise expressly
provided in this Agreement, in the event of termination of this Agreement, this
Agreement shall become void and have no effect, without any liability on the
part of any party or its directors, officers or stockholders and Buyer shall be
entitled to receive the Deposit described in Paragraph 3.2. Notwithstanding,
Buyer and Seller agree:
(a) If this Agreement is terminated by a party under circumstances
in which the other party has willfully or in bad faith failed to satisfy a
covenant or condition of
36
<PAGE>
the Closing ("Defaulting Party"), the Defaulting Party shall be and remain
responsible for any and all liability, loss, cost, damage and expense which
does or may result from such action and the resulting failure or inability to
consummate the transactions contemplated by this Agreement;
(b) The provisions of this Section 11.2 shall survive any
termination of this Agreement.
11.3 Notice of Seller's Breach; Right to Cure.
----------------------------------------
(a) If at any time between the date hereof and the Closing Date,
Buyer becomes aware of any fact or circumstances which leads Buyer to believe
that any representation or warranty made by Seller hereunder either was
inaccurate in a material respect when made or will be inaccurate in a material
respect as of the Closing Date, or that any covenant or condition of Seller
cannot be performed by Seller in a material respect on or before the Closing
date (any such inaccuracy or inability being herein referred to as a
"Noncompliance Matter", but excluding any representation, warranty, covenant or
condition pertaining to title to Real Property, which matters are treated
exclusively in Article V of this Agreement ), the Buyer shall give prompt
written notice to the Seller, which notice shall set forth in reasonable
detail the asserted Noncompliance Matter on the part of Seller. Seller shall
have the right at its option (but shall not be obligated) either to (i) cure
such Noncompliance Matter or (ii) reduce or grant a credit against the Purchase
Price in an amount required to cure such Noncompliance Matter, in which event
such Noncompliance Matter shall not constitute a default hereunder. In the
event that Seller shall on or prior to Closing correct any Noncompliance Matter
or grant a credit against the Purchase Price as aforesaid, Buyer may not
subsequently terminate or decline to consummate this Agreement on the grounds of
the inaccu-
37
<PAGE>
racy of the representation or warranty or failure of the covenant or condition,
nor shall Buyer have any rights to recover damages by reason thereof;
(b) If the Noncompliance Matter is one which is not a liquidated
claim which can be discharged by the payment of money alone ("Unliquidated
Noncompliance Matter"), Seller shall have the right (but shall not be
obligated) to undertake to cure and remove same prior to Closing or, if Seller
is unable (or unwilling to state that Seller will be able to do so) Seller
shall have the sole right and option, based upon its evaluation of the asserted
Unliquidated Noncompliance Matter, to determine whether Seller will agree to
indemnify Buyer against any claim, liability, loss, cost, damage or expense
(including reasonable attorneys' fees and expenses) which is the direct and
proximate result of the Unliquidated Noncompliance Matter in question, in which
event:
(i) If Seller and Seller's Parent will agree to indemnify Buyer
as aforesaid with respect to such Unliquidated Noncompliance Matter, then Buyer
shall be obligated to consummate the transactions contemplated by this Agreement
unless such Unliquidated Noncompliance Matter can reasonably be expected to have
a materially adverse effect on the Property or operation of the Business. Any
indemnification instrument shall exclude any liability on the part of Seller for
any special or consequential damages and shall be in a form approved by the
Buyer.
(ii) If either (A) Seller will not agree to indemnify Buyer as
aforesaid in connection with such Unliquidated Noncompliance Matter or (B) such
Unliquidated Noncompliance Matter can reasonably be expected to have a
materially adverse effect on the Property or operation of the Business, Buyer
shall have the right and option either to (1) waive such Unliquidated
Noncompliance Matter and proceed with Closing with credit and offset against the
Purchase price or (2) terminate this Agreement;
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<PAGE>
(iii) If prior to Closing a dispute arises between the parties
hereto as to (i) whether any matter asserted is a Noncompliance Matter or
Unliquidated Noncompliance Matter; (ii) the cost to correct any Noncompliance
Matter; or (iii) whether any Unliquidated Noncompliance Matter can reasonably be
expected to have a materially adverse effect on the Property or operation of the
Business, such dispute shall be resolved by final and binding arbitration in
accordance with the p rovisions of the Nevada Uniform Arbitration Act, Nev. Rev.
Stat. Section 38.015 et seq. ("Arbitration Act").
-------
11.4 Specific Performance. Buyer and Seller each acknowledge that
--------------------
the transactions contemplated by this Agreement are unique and there may be no
adequate remedy at law if Seller fail to perform any of their obligations
hereunder. In addition to any other rights or remedies Buyer may have, Buyer
shall have the right to obtain specific performance of the obligations of Seller
hereunder.
ARTICLE XII
12 Closing
-------
12.1 Closing. Unless extended as permitted in this Agreement, the
-------
closing ("Closing") shall be held at the offices of United Title Company, on or
before the tenth (10th) day after Buyer obtains the licenses from and/or a
finding of suitability by the Nevada Gaming Authorities to enable Buyer to
conduct gaming on the Real Property, or at such other time and place in
metropolitan Las Vegas, Nevada as the parties may agree (the actual date of
closing being herein referred to as the "Closing Date").
12.2 Seller's Delivery. At the Closing, Seller shall deliver possession
-----------------
of the following to Buyer:
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<PAGE>
(a) A grant, bargain and sale deed ("Deed") conveying the Real
Property to Buyer subject only to the Permitted Exceptions and other matters
permitted under Section 5.2;
(b) A bill of sale conveying the Personal Property to Buyer, subject
to no liens or encumbrances other than Permitted Encumbrances;
(c) An assignment to Buyer of all of Seller's right, title and
interest in and to the Intangible Personal Property;
(d) An assignment to Buyer of all of Seller's right, title and
interest in and to all assignable Contracts, to be effective at the Closing
Date;
(e) An assignment to Buyer of all of Seller's right, title and
interest in and to the Leases to be effective at the Closing Date;
(f) The Material Contracts and other Contracts, except to the
extent previously delivered to Buyer or located at the Real Property;
(g) All consents obtained by Seller with respect to assignment of
any of the Contracts;
(h) The Title Policy and Reinsurance Agreements (if any);
(i) A "non-foreign affidavit," properly executed by officers of
Seller in recordable form, containing such information as shall be required by
Section 1445(b)(2) of the Internal Revenue Code of 1986, as amended ("Code")
and the temporary regulations issued thereunder. In the event that final
regulations shall have been issued under Section 1445(b)(2) of the Code by the
Closing Date, such non-foreign affidavit shall be in the form required
thereunder;
40
<PAGE>
(j) Possession of the Property shall be delivered to Buyer as of
midnight on the Closing Date, to the extent applicable, the transfer of
possession shall be pursuant to the closing memorandum approved by the Nevada
Gaming Authorities.
(k) On the Closing Date, authorized representatives of Buyer and
Seller shall take inventory of (i) all baggage, suitcases, luggage, valises and
trunks of hotel guests checked or left in the care of Seller, (ii) all luggage
or other property of guests retained by Seller as security for unpaid accounts
receivable, and (iii) the contents of the storage room; provided, however, that
no such baggage, suitcases, luggage, valises or trunks shall be opened. Except
for such of the property referred to in (ii) above, which shall be removed from
the Premises by Seller on the Closing Date, all such baggage and other items
shall be sealed in a manner to be agreed upon by the parties and listed in an
inventory prepared and signed jointly by representatives of Buyer and Seller on
the Closing Date. Buyer shall be responsible from and after said date for all
baggage and other items listed in such inventory and, where the seals have been
broken, for the contents thereof. Seller shall be responsible for said contents
if the seals have not been broken and for all luggage or other property of
guests not listed on such inventory or retained by Seller as security for unpaid
accounts receivable. By conveying the Property to Buyer on the Closing Date,
Seller shall be deemed, without further action, to have assigned any storage,
warehouse or innkeepers liens it may have under applicable law.
(l) Safe deposit boxes in use by customers at the Closing Date will
be sealed in a reasonable manner mutually agreeable to Buyer and Seller.
Representatives of both Buyer and Seller shall be given notice and an
opportunity to be present when a seal is broken. Seller will have no further
responsibility for seals broken without the presence of Seller's representative
unless such representative fails to be present after being provided notice
pursuant to this Section.
41
<PAGE>
Buyer will have no responsibility for loss or theft from a safe deposit box
whose seal was broken in the presence of Seller's representative or without the
presence of such representative but after giving such representative notice as
provided below. Seller will make a representative available within one (1) hour
after Buyer notifies the person whom Seller will from time to time designate. At
the Closing, Seller shall designate in writing its initial safe deposit
representative. All safe deposit keys, combinations and records shall be
delivered to Buyer at the Closing.
(m) At the Closing, Seller and Buyer shall perform the following
functions for all motor vehicles that were checked and placed in the care of
Seller: (i) mark all motor vehicles with a sticker or tape; and (ii) prepare an
inventory of such items ("Inventoried Vehicles") indicating the check number
applicable thereto and any damage thereto. Thereafter, Buyer shall be
responsible for the Inventoried Vehicles except for damage indicated in the
inventory and Seller shall be liable for claims with respect to any other
vehicles.
(n) Such other agreements, notices, certificates or other
instruments as are required to be delivered by Seller hereunder, including but
not limited to, any receipts or certificates provided for in NRS 364A.200,
372.620, 612.695 and 244.335.
12.3 Buyer's Delivery. At the Closing Buyer shall deliver or cause to
be delivered to Seller the following:
(a) Payment of the Purchase Price pursuant to Section 3.2
hereof and any other payments to be made on the Closing Date by Buyer as
provided in this Agreement;
(b) An instrument evidencing assumption by Buyer of the Assumed
Liabilities effective as of the Closing Date;
(c) Such other agreements, notices, certificates and other
instruments as are required to be delivered by Buyer hereunder.
42
<PAGE>
12.4 Approval of Closing Documents. All certificates, instruments,
-----------------------------
documents and agreements to be executed and delivered at Closing shall be in
form and substance reasonably acceptable to and approved by the parties and
their counsel.
12.5 Possession. Possession of the Property shall be delivered to Buyer
----------
at Closing.
12.6 No Merger. None of the covenants and agreements of Buyer and
---------
Seller, as the case may be, contained in this Agreement shall merge with any
deed or conveyance, and such covenants and agreements shall survive the Closing
and shall continue in full force and effect until such time, if any, as provided
in such covenant or agreement or otherwise limited by law.
ARTICLE XIII
13 Post Closing Covenants
----------------------
13.1 Further Assurances. Each party shall, at the request of the
------------------
other, at any time and from time to time following the Closing, execute and
deliver to the requesting party all such further instruments as may be
reasonably necessary or appropriate in order more effectively to (a) assign,
transfer and convey to Buyer, or to perfect or record Buyer's title to or
interest in the Property, (b) evidence and confirm the assumption by Buyer of
the liabilities of Seller to be assumed by Buyer pursuant to this Agreement, or
(c) confirm or carry out the provisions of this Agreement.
13.2 Cooperation Retention of Records. Each party acknowledges that
--------------------------------
the other may be a party to legal proceedings following the Closing which
relate to the Business or Property, and covenants to maintain and make
available to the other upon reasonable request and at the expense of the
requesting party, (a) any and all file and business records in its custody or
control relating to the Business or Property, and (b) any and all individuals
employed by
43
<PAGE>
the other party hereto whose testimony or knowledge, in the reasonable
opinion of the other party's counsel, is necessary or useful to it with respect
to the issues involved in such litigation or preparation therefor. Buyer shall
keep and maintain all files, records and other information which Seller shall
deliver to Buyer or leave on the Real Property either at Buyer's offices on the
Real Property or at storage locations in Las Vegas, Nevada for a period of at
least five (5) years after the Closing. Before destroying any such files,
records or information Buyer shall notify Seller and Seller may, at its expense,
retain the same. Seller shall be entitled at all reasonable times to inspect and
make copies at Seller's expense of such files, records and information.
13.3 Labor Arbitration and Grievances of Sellers. In the event there
-------------------------------------------
are any claims concerning or arising from periods prior to the Closing Date
which are unasserted as of the Closing Date or there are pending and unresolved
as of the Closing Date any employee complaints, charges or grievances before
any court, governmental agency or arbitrator between Seller and any applicant,
employee, or discrimination complaints in any state or federal agency or court
filed by or on behalf of any applicants, employees or former employees of
Seller, arising in connection with the Business, Seller shall be solely
responsible for the handling and/or the resolution of said matters subject to
the following conditions:
(a) Buyer shall make available to Seller all records in the
possession of Buyer and all witnesses employed by Buyer which Seller reasonably
believes are necessary or appropriate in connection with the handling or
resolution of such matters. Buyer agrees to cooperate with Seller in any other
manner reasonably requested by Seller for the satisfactory resolution of such
matters;
(b) In the event the resolution of any such matter requires that any
terminated employee be reinstated, Buyer agrees to reinstate said employee in
its operation in ac-
44
<PAGE>
cordance with said resolution provided that no voluntary resolution shall result
--------
in a reinstatement without the consent of Buyer, which consent shall not be
unreasonably withheld;
(c) Any duty to pay wages or benefits to or on behalf of a
terminated employee from the date of termination to the date of reinstatement
shall remain the obligation of Seller. Any such obligation accruing after
reinstatement shall be the responsibility of Buyer.
ARTICLE XIV
14 Brokerage Fees
--------------
Each of the parties hereto agree to indemnify and hold and save the
other or others harmless from any brokerage or finder's fees, commissions,
compensation or expenses (including reasonable attorneys' fees and other
expenses incurred in connection with any such claim) which may be due or
asserted by reason of any such agreement or purported agreement by the
indemnifying party regarding the transaction contemplated herein.
ARTICLE XV
15 Survival of Representations and Warranties: Indemnification
------------------------------------------------------------
15.1 Seller's Indemnity. Seller and its Parent Corporation
------------------
(Guarantor) covenants and agrees to defend and indemnify and save and hold Buyer
and Guarantor harmless at all times after the Closing in respect of any and
all claims, liabilities, loss, cost, damage and expense, including reasonable
attorneys' fees and expenses arising from, by reason of or in connection with
any untruth, breach or inaccuracy in any material respect of any representation
or warranty on the part of Seller under Section 6.1 of this Agreement, or in
any certificate or other instrument provided for in this Agreement.
45
<PAGE>
15.2 Buyer's Indemnity. Buyer covenants and agrees to indemnify and save
and hold Seller and it's Parent Corporation harmless at all times after the
Closing in respect of any and all claims, liabilities, loss, cost, damage and
expense, including reasonable attorneys' fees and expenses any and all damages,
arising from, by reason of, or in connection with any untruth, breach or
inaccuracy in any material respect of any representation or warranty on the part
of Buyer under Section 6.2 of this Agreement, or in any certificate or other
instrument provided for in this Agreement.
Further, Buyer further covenants and agrees to indemnify and save and hold
Seller harmless at all times after the execution of this Agreement in respect of
any and all claims, liabilities, loss, cost, damage and expense, including
reasonable attorneys' fees and expenses arising from any claim by a third party
asserting that Buyer's execution of and performance of this Agreement is
unlawful and/or violates any duty of Guarantor to such third party.
15.3 Notice of Claim. Each indemnified party hereunder agrees that
---------------
promptly upon its discovery of any event, occurrence, fact, circumstance or
other matter which, in its reasonable judgment, gives rise to a claim for
indemnity under the provisions of this Agreement, including receipt by it of
notice of any demand, assertion, claim, action or proceeding, judicial or
otherwise, by any third party (any such third party action being collectively
referred to herein as a "Claim") with respect to any matter as to which it is
entitled to indemnity under the provisions of this Agreement, it will give
prompt notice thereof in writing to the indemnifying party together with a
statement of such information respecting such Claim as it shall then have and
that such Claim is one as to which such party is entitled to indemnification
under this Agreement. The omission of any indemnified party so to notify an
indemnifying party of any such Claim shall not relieve the indemnifying party
from any liability in respect of such Claim which it may have otherwise had to
such indemnified party on
46
<PAGE>
account of any damages which are the subject of such Claim except and only to
the extent that the indemnifying party is prejudiced thereby, and in no event
shall the indemnifying party be relieved of any other liability which it may
have to such indemnified party pursuant to this Agreement. Upon receiving such
notice, the indemnifying party, at its election, shall have the right of
defense against such Claim, by counsel of its own choosing, at the
indemnifying party's expense. The indemnified party shall cooperate fully in
all respects with the indemnifying party in any such defense, including,
without limitation, by making available to the indemnifying party all
pertinent information under the control of the indemnified party (including
consultation with, and testimony, advise and assistance of officers, employees
and agents of the indemnified party having knowledge of the matters in
dispute). If the indemnifying party does not notify the indemnified party,
within ten (10) days of the indemnified party's notice to the indemnifying
party of a Claim, that the indemnifying party will defend the same, or should
the indemnifying party fail to file any answer or other pleading at least five
(5) days before the same is due, the indemnified party may defend or settle
such Claim in such manner as the indemnified party deems appropriate, in its
sole discretion. If the indemnifying party so notifies the indemnified party
concurrently with the indemnifying party's notice of election to defend, the
indemnifying party may defend, but not settle, a Claim with out waiving its
rights to assert that such Claim is not subject to the indemnity agreements in
this Article 15. If the indemnifying party elects to defend a Claim, the
indemnified party may, at the indemnified party's expense, participate in such
matter with counsel of the indemnified party's own choosing.
. . . . .
. . . . .
. . . . .
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<PAGE>
ARTICLE XVI
16 Guarantor
---------
16.1 In the event that William G. Bennett assigns this Agreement pursuant
to Paragraph 18.2 to an entity which he is the majority owner, William G.
Bennett hereby guarantees prompt and satisfactory performance of this
Agreement in accordance with all its terms and conditions.
16.2 Sahara Gaming Corporation, the Parent Company of Seller, hereby
guarantees prompt and satisfactory performance of this Agreement in accordance
with all its terms and conditions.
ARTICLE XVII
17 Notices
-------
17.1 Any and all notices or demands permitted or required to be given
hereunder shall be in writing and shall be validly given or made when personally
delivered or when actually received as prepaid, certified or registered mail,
return receipt requested, or by commercial courier service, addressed as
follows:
If to Seller, to: with copies to:
Hacienda Hotel, Inc. Vargas & Bartlett
c/o Paul Lowden c/o William Raggio
2535 Las Vegas Blvd., South P.O. Box 281
Las Vegas, NV 89109 Reno, NV 89504
If to Buyer, to: with copies to:
William G. Bennett Cherry, Bailus & Kelesis
6170 W. Desert Inn Road c/o George P. Kelesis
Las Vegas, NV 89134 600 So. Eighth Street
Las Vegas, NV 89101
Any party hereto may change its address for the purpose of receiving
notices
48
<PAGE>
or demands by written notice to the other party hereto given as herein
provided.
ARTICLE XVII
18 Miscellaneous
-------------
18.1 Nevada Law. The laws of the State of Nevada applicable to
----------
contracts made and wholly performed therein shall govern the validity,
construction, performance and effect of this Agreement.
18.2 Assignment; Binding Effect. Buyer may not assign, transfer or
--------------------------
convey any of its rights herein or hereunder to any person or entity whatsoever
without the prior written consent of Seller. Notwithstanding the foregoing,
Buyer may assign his rights and interests hereunder, without obtaining Seller's
consent, to any entity Buyer is a majority owner thereof. Other than stated
herein, any attempt to assign or transfer this Agreement without such consent
shall, at Seller's option, be considered null and void and of no force and
effect. This Agreement shall inure to the benefit of and be binding upon the
parties hereto, their respective successors and permitted assigns.
18.3 Partial Invalidity. If any term, provision, covenant or
------------------
condition of this Agreement, or any application thereof, should be held by a
court of competent jurisdiction to be invalid, void or unenforceable, all
provisions, covenants and conditions of this Agreement, and all applications
thereof, not held invalid, void or unenforceable, shall continue in full force
and effect and shall in no way be affected, impaired or invalidated.
18.4 Time of Essence. Time is of the essence of this Agreement and
---------------
all of the terms, provisions, covenants and conditions hereof.
49
<PAGE>
18.5 Captions. The captions appearing at the commencement of the
--------
Articles and Sections hereof are descriptive only and for convenience in
reference to this Agreement and in no way whatsoever define, limit or describe
the scope or intent of this Agreement.
18.6 Pronouns. Masculine or feminine pronouns shall be substituted
--------
for the neuter form and vice versa in any place or places herein in which the
context requires such substitution or substitutions.
18.7 Knowledge of Party. Any representation or warranty herein
------------------
contained made by or on behalf of a party to the knowledge of such party shall
be deemed to mean and be limited to actual knowledge of an executive officer
of such party of the matter in question, or actual knowledge of such facts as
would charge such executive officer of such party with knowledge of the matter
in question.
18.8 Entire Agreement; Amendment; Waiver. This Agreement constitutes
-----------------------------------
the entire agreement between the parties pertaining to the subject matter
contained in it and supersedes all prior agreements, brochures, informational
memoranda, representations and understandings of the parties. No amendment or
modification of this Agreement shall be binding unless executed in writing by
the parties. Except as may be otherwise provided in this Agreement, no waiver of
any of the provisions, 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 executed by the party against whom the waiver is sought
to be enforced.
18.9 No Third Party Beneficiary. This Agreement is for the benefit
--------------------------
of, and may be enforced only by, Seller and Buyer and their respective
successors and permitted assigns, and is not for the benefit of, nor intended to
be for the benefit of, and may not be enforced by, any third party.
50
<PAGE>
18.10 Counterparts. This Agreement may be executed in any number of
------------
counterparts, with each counterpart being deemed to be an original instrument,
but all such counterparts together shall constitute but one agreement.
18.11 Attorney's Fees. If any action is brought by any party hereto
---------------
concerning a breach of any of the provisions of this Agreement, the prevailing
party shall be entitled to recover from the other party the reasonable
attorneys' fees and expenses of the prevailing party incurred in connection
therewith.
18.12 Jurisdiction. Seller and Buyer agree that the State of Nevada
------------
shall have sole and exclusive jurisdiction over any action brought to enforce
the terms of this Agreement.
18.13 No Party Deemed Drafter. The parties agree that neither party
-----------------------
shall be deemed to be the drafter of this Agreement and that in the event this
Agreement is ever construed by a court of law or entity, such court shall not
construe this Agreement or any provision hereof against either party as the
drafter of the Agreement, Seller and Buyer acknowledging that each has
contributed substantially and materially to the preparation hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
for Purchase and Sale as of the 10th day of January
---------------------- ------------------,
1995.
"SELLER" "SELLER'S PARENT CORPORATION
GUARANTOR""
HACIENDA HOTEL, INC. SAHARA GAMING CORPORATION
By: PAUL LOWDEN By: PAUL LOWDEN
-------------------------------- ---------------------
Its: President Its: President
--------------------------------- --------------------
"BUYER"
WILLIAM G. BENNETT
------------------
WILLIAM G. BENNETT
51
<PAGE>
EXHIBITS
52
<PAGE>
"A"
(SECTION 2.1(A))
REAL PROPERTY DESCRIPTION
-------------------------
2.1a Real Property description (see attached)
53
<PAGE>
"A"
PARCEL I:
- ---------
A portion of the Northwest Quarter (NW 1/4) of the Southeast Quarter (SE 1/4) of
Section 29, Township 21 South, Range 61 East, M.D.B. & M., Clark County, Nevada,
being more particularly described as follows:
COMMENCING at the Northeast corner of the Southeast Quarter (SE 1/4) Section 29;
thence North 89.46'53" West along the Northerly line of the Southeast Quarter
(SE 1/4) of said Section 29, a distance of 150.01 feet to a point on the
Westerly right-of-way of U.S> Highway No. 91 (Las Vegas Blvd., South); thence
continuing North 89.46'53" West along the Northerly line of the Southeast
Quarter (SE 1/4) of said Section 10 a distance of 2052.58 feet to a point on the
Easterly right-of-way line of Interstate No. 15 & U.S. 91 & 466; thence South
00.07'28" West along said right-of-way a distance of 1000.00 feet to a point;
thence South 89.46'53" East a distance of 2061.15 feet to a point on the
Westerly right-of-way line of U.S. Highway 91 (Las Vegas Blvd. South); thence
North 00.22'00" West along said right-of-way a distance of 1000.05 feet to the
TRUE POINT OF BEGINNING.
EXCEPT THEREFROM with a non-exclusive easement for ingress and egress over the
following described property:
That portion of the Northeast Quarter (NW 1/4) of Section 29, Township 21 South,
Range 61 East, M.D.M., Clark County, Nevada, being more particularly described
as follows:
COMMENCING at the Southeast corner of the Northeast Quarter (NE 1/4) of Section
29; thence South 00.22'00" East along the East line thereof. (said line also
being the centerline of Las Vegas Blvd. South) a distance of 1000.05 feet;
thence North 89.46'40" West along a line 1000 feet Southerly and parallel to the
North line of the Southeast Quarter (SE 1/4/) of said Section 29, a distance of
150.00 feet to a point on the Westerly right-of-way line of Las Vegas Blvd.
South (300.00 feet wide); thence North 00.20'00" West along the Westerly right-
of-way line a distance of 67.00 feet; thence North 89.46'40" West a distance of
343.16 feet; thence North 00.33'20" East a distance of 237.00 feet; thence North
89.46'40" West a distance of 101.00 feet to the TRUE POINT OF BEGINNING; thence
continuing North 89.46'40" West a distance of 375.00 feet; thence North
00.13'20" East a distance of 78.00 feet; thence South 89.46'40" East a distance
of 375.00; thence South 00.13'20" West a distance of 78.00 feet to the TRUE
POINT OF BEGINNING.
54
<PAGE>
"A" CONTINUED
--------------
PARCEL II:
- ----------
That portion of the Southeast Quarter (SE 1/4) of Section 29, Township 21 South,
Range 61 East, M.D.M., more particularly described as follows:
COMMENCING at the Northeast corner of the Southeast Quarter (SE 1/4) of said
Section 29; thence South 00.22'00" East along the East line thereof. (said line
also being the centerline of Las Vegas Blvd. South) a distance of 1000.05 feet;
thence North 89.46'40" West along a line 1000 feet Southerly and parallel to the
North Line of the Southeast Quarter (SE 1/4) of said Section 29, a distance of
150.00 feet to a point on the Westerly right-of-way line of Las Vegas Blvd.
South (300.00 feet wide); thence North 00.33'20" West along the Westerly right
of way line a distance of 67.00 feet; thence North 89.46'40" West a distance of
343.16 feet; thence North 00.33'20" East a distance of 237.00 feet; thence North
89.46'40" West a distance of 101.00 feet to the TRUE POINT OF BEGINNING; thence
continuing North 89.46'40" West a distance of 375.00 feet; thence North
00.13'20" East a distance of 78.00 feet; thence South 89.46'40" East a distance
of 375.00 feet; thence South 00.13'20" West a distance 78.00 feet to the TRUE
POINT OF BEGINNING.
55
<PAGE>
"B"
(SECTION 2.2(1))
CHOSES IN ACTION
----------------
Sales Tax Refund - Chartwell Sales Tax Advisors
56
<PAGE>
"C"
(SECTION 2.2(J))
THIRD PARTY (TANGIBLE PERSONAL PROPERTY)
----------------------------------------
<TABLE>
<CAPTION>
VOL. NAME DATE TERM
- --------------------------------------------------------------------------------
TYPE
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
- SAHARA HOTEL - - SHOWER OF CASH MACHINE
(ASSET OF SAHARA NEVADA CORP.)
- SAHARA HOTEL - - CONVENTION RISERS
(ASSET OF SAHARA NEVADA CORP.)
</TABLE>
57
<PAGE>
"D"
SECTION 2.2 (K))
PERSONAL PROPERTY RETAINED BY SELLER
------------------------------------
1. Personal property of Mr. Paul Lowden stored in the suite located on the
11th floor
2. Personal tools of the mechanics
3. Hacienda Classic Slot Machines
58
<PAGE>
"E"
SECTION 2.2(L)
OTHER ASSETS RETAINED BY SELLER
-------------------------------
None.
59
<PAGE>
"F"
SECTION 3.5
PURCHASE PRICE ALLOCATION
-------------------------
The purchase price shall be allocated in accordance with the agreed fair
market value as of the closing date as follows:
<TABLE>
<CAPTION>
Assets Purchase Price
------ --------------
<S> <C>
Leasehold Improvements $
Furniture and Furnishings 600,000
Fixtures
Equipment and Appliances 6,000,000
Inventory and Supplies
Real Property 14,000,000
Buildings and Structures 34,000,000
Motor Vehicles and other
transportation equipment 75,000
All other tangible personal property 1,050,000
Goodwill and other intangibles 24,275,000
-----------
$80,000,000
===========
</TABLE>
Seller and Buyer shall timely comply with their respective Internal Revenue
Service information reporting requirements by completing and attaching all
required forms to their respective Income Tax Returns for the tax year that
includes the date on which the sale and purchase of the property is consummated.
60
<PAGE>
"G"
----
MATERIAL CONTRACTS
------------------
<TABLE>
<CAPTION>
Vol. NAME DATE TERM DESCRIPTION
- ---------- ---- ---- -----------
<S> <C> <C> <C>
GAMING EQUIPMENT
- ----------------
I DP STUD, INC. 4/93 ANNUAL RENEWAL *CARIBBEAN STUD
I GAMES OF NEVADA 2/8/93 ANNUAL RENEWAL *FLIP IT MACHINE LEASE
I THE CIT GROUP 8/6/91 FOUR YEARS SLOT EQUIP FINANCING
I INTL GAME TECH 1/5/94 21 MONTHS SLOT EQUIP FINANCING
I IGT MEGABUCKS 12/23/94 *NEVADA MEGABUCKS
PROGRESSIVE AGREEMENT
I INTL GAME TECH 11/24/92 3/1/93-2/3/95 SLOT EQUIP FINANCING
I BALLY GAMING 11/16/94 24 MONTHS SLOT EQUIP FINANCING
I SIGMA GAME, INC. 1/19/94 12 MONTHS SLOT EQUIP FINANCING
- - UNIVERAL 7/1/93 MONTHLY BIG BERTHA MIDAS TOUCH
HOTEL EQUIPMENT AND RELATED
- ---------------------------
I HOSPITALITY 11/10/90 THROUGH 12/95 *IN-ROOM MOVIES
I SVS DATA CORP. 8/3/94 TWO YEARS *CASH ADVANCE EQUIP.
INSTALLATION
I COPELCO 5/31/91 SEVEN YEARS ELECTRONIC SIGN
FINANCING
I PITNEY BOWES 6/11/92 51 MONTHS MAIL EQUIPMENT LEASE
I HOTELEX 1/19/87 ANNUAL RENEWAL *ROOM AVAILABILTY
SYSTEM
I SILVER STATE 8/31/90 ANNUAL RENEWAL *TRASH COMPACTER LEASE/
DISPOSAL SERVICE
I ECOLAB 6/5/92 ANNUAL RENEWAL DISHWASHER SERVICE
II NEVADA PAY PHONE 10/14/94 1/28/95-1/28/99 PAY PHONE CONCESSION
II ON SITE TV 12/7/94 90 DAY TRIAL IN-ROOM TV SERVICE
II PALISADES VIDEO AMUSEMENT DEVICES
AMUSEMENTS
- - TRIPLE CROWN - - DART STANDARDS (#160)
PRODUCTS SHRED IN HACIENDA WRHSE
</TABLE>
"G"
61
<PAGE>
Material Contracts
------------------
<TABLE>
<CAPTION>
Vol. NAME DATE TERM DESCRIPTION
- --------- ---- ---- -----------
<S> <C> <C> <C>
HOTEL OPERATIONS
- ----------------
I ASCAP 7/5/94 ANNUAL RENEWAL MUSIC LICENSING
I US PLAYING CARDS 6/17/91 ANNUAL RENEWAL PLAYING CARDS
II MISSION INDUSTRIES 8/11/94 THROUGH 7/9/99 GUEST LINEN SERVICE
II CASHMAN 12/1/92 FIVE YEARS PHOTO CONCESSION
PHOTOGRAPHY
II WCT COMMUNICATIONS 10/17/94 12/17/94- LONG DISTANCE SERVICE
12/17/96 CONTRACT
II PEPSI COLA COMPANY 7/12/91 8/1/91- BEVERAGE SUPPLY &
8/1/96 SERVICE
LABOR CONTRACTS
- ---------------
V CULINARY WORKERS 9/19/90 6/1/89- UNION LABOR CONTRACT
LOCAL 226 & BARTENDERS 6/1/94*
UNION, LOCAL 165
V TEAMSTERS LOCAL 995 9/2/92 4/2/91- UNION LABOR CONTRACT
4/1/94*
V IATSE (STAGEHANDS) 6/1/89- UNION LABOR CONTRACT
6/1/94*
V UNITED BROTHERHOOD OF 8/1/94- UNION LABOR CONTRACT
CARPENTERS & JOINERS OF 7/31/98
AMERICA
V INTL. BROTHERHOOD OF 8/11/94- UNION LABOR CONTRACT
PAINTERS 7/31/98
V INTL. UNION OF OPERATING 8/11/94- UNION LABOR CONTRACT
ENGINEERS LOCAL 501 3/31/98
V UNITED BROTHEROOD OF 8/1/94- UNION LABOR CONTRACT
CARPENTERS 7/31/98
</TABLE>
*CONTRACT RENEWALS ARE IN THE NEGOTIATION PROCESS
62
<PAGE>
"G"
Material Contracts
------------------
<TABLE>
<CAPTION>
Vol. NAME DATE TERM DESCRIPTION
- --------- ---- ---- -----------
<S> <C> <C> <C>
OTHER CONTRACTS
- -----------------
- - YESCO 3/14/94 - HACIENDA SIGN,
ELECTRONIC MSG UNIT
- - GOLD KEY TIMES VARIOUS VARIOUS RIGHT TO USE
SHARE PROGRAM
</TABLE>
63
<PAGE>
"G"
Contracts (Excluding Material Contracts)
-----------------------------------------
<TABLE>
<CAPTION>
Vol. NAME DATE TERM DESCRIPTION
- --------- ---- ---- -----------
<S> <C> <C> <C>
FACILITY MAINTENANCE
- --------------------
I WILTEL, INC. 5/26/92 THREE YEARS PHONE EQUIP. MAINTENACE
I IMAGINEERING 2/1/94 ANNUAL RENEWAL KENO EQUIPMENT LEASE
SYSTEMS
I JOE BUNTROCK 1/10/94 2/1/94- POOL SERVICE
1/31/95
I DON BELL SIGN CO. 5/31/91 SEVEN YEARS ELECTRONIC SIGN MAINT.
I YOUNG ELECTRIC 10/5/92 FIVE YEARS MARQUEE MAINTENANCE
SIGN COMPANY
I CUMMINS-ALLISON, 12/23/92 ANNUAL RENEWAL COIN HANDLING EQUIP.
CORPORATION #54628
I CUMMINS-ALLISON, 12/23/92 ANNUAL RENEWAL COIN HANDLING EQUIP.
CORPORATION #54635
I CUMMINS-ALLISON, 12/23/92 ANNUAL RENEWAL COIN HANDLING EQUIP.
CORPORATION #54634
I AMERICAN OFFICE 1/26/94 ONE YEAR PHOTOCOPY SVS CONTRACT
EQUIPMENT
I BETZ-ENTEC, INC. 3/24/92 ANNUAL RENEWAL WATER TREATMENT
CHEMICALS AND SERVICE
I VALLEY MAINT. 2/14/81 ANNUAL RENEWAL WINDOW WASHING SERVICE
I MILLAR ELEVATOR 1/27/92 2/1/92-2/1/97 ELEVATOR SERVICE
I INDOOR JUNGLE 3/11/92 ANNUAL RENEWAL PLANT RENTAL
I SIMPLEX 10/30/91 ANNUAL RENEWAL TIME CLOCK SERVICE
I ECOLAB 11/8/91 ANNUAL RENEWAL PEST CONTROL
I TISCOR 1/29/92 ANNUAL RENEWAL TWO-WAY RADIO SERVICE
</TABLE>
64
<PAGE>
"G"
Contracts (Excluding Material Contracts)
----------------------------------------
<TABLE>
<CAPTION>
Vol. NAME DATE TERM DESCRIPTION
- --------- ---- ---- -----------
<S> <C> <C> <C>
WHOLESALE ROOM CONTRACTS
- ------------------------
III AAFFORDABLE 10/27/94 1/3/95- WHOLESALE ROOM CONTRACT
AMERICA VACATIONS 1/2/96
III AC GROUP SERVICES 9/26/94 1/2/95- WHOLESALE ROOM CONTRACT
12/29/95
III ADVENTURE TOURS, 8/29/94 1/1/95- WHOLESALE ROOM CONTRACT
INC. 12/28/95
III AIRTOURS HOLIDAYS, 8/24/94 1/9/95- WHOLESALE ROOM CONTRACT
LTD. 3/27/95
III AMBER VACATIONS 6/24/94 1/1/95- WHOLESALE ROOM CONTRACT
12/29/95
III AMERICAN AIRLINES 6/15/94 1/2/95- WHOLESALE ROOM CONTRACT
FLYAWAY VACATIONS 12/28/95
III AMERICANA WEST 8/31/94 1/1/95- WHOLESALE ROOM CONTRACTS
TOURS 12/29/95
III AMERICAN TOURS 12/7/94 4/1/95- WHOLESALE ROOM CONTRACTS
INTL. 3/31/96
III APPLE VACATIONS 7/21/94 1/2/95 WHOLESALE ROOM CONTRACT
12/29/95
III AVISA 12/9/94 1/1/95- WHOLESALE ROOM CONTRACT
12/22/95
III BEST RESERVATIONS, 9/13/94 1/2/95- WHOLESALE ROOM CONTRACT
INC. 12/29/95
III BLACKJACK TOURS 8/30/94 1/1/95 WHOLESALE ROOM CONTRACT
12/28/95
III CANADIAN HOLIDAYS 6/21/94 9/2/94- WHOLESALE ROOM CONTRACCT
9/1/95
III CITYWIDE 11/8/94 1/3/95- WHOLESALE ROOM CONTRACT
RESERVATIONS 12/22/95
</TABLE>
65
<PAGE>
"G"
Contracts (Excluding Material Contracts)
--------------------------------------------
<TABLE>
<CAPTION>
Vol. NAME DATE TERM DESCRIPTION
- --------- ---- ---- -----------
<S> <C> <C> <C>
WHOLESALE ROOM CONTRACTS (CON'T)
- ----------------------------------
III CONTIKI HOLIDAYS 6/28/93 4/3/94- WHOLESALE ROOM CONTRACT
USA 4/5/95
III COSMOS HOLIDAYS 9/8/94 1/2/95- WHOLESALE ROOM CONTRACT
1/6/95
III CUC TRAVEL 11/15/94 1/2/95- WHOLESALE ROOM CONTRACT
12/22/95
III CYPRESS COAST 9/30/94 1/2/95- WHOLESALE ROOM CONTRACT
TOURS 12/29/95
III DESTINATION 7/1/94 7/1/94- WHOLESALE ROOM CONTRACT
AMERICA, INC. 12/29/95
III FUNJET VACATIONS 10/6/94 1/1/95- WHOLESALE ROOM CONTRACT
1/1/96
III GALA TRAVEL 11/2/94 1/2/95- WHOLESALE ROOM CONTRACT
SERVICE 12/22/95
III H.I.S. TOURS 8/13/94 1/1/95- WHOLESALE ROOM CONTRACT
12/29/95
III I.T.H., LTD 6/21/94 9/2/94- WHOLESALE ROOM CONTRACT
9/1/95
III KAMAAINA 9/12/94 1/2/95 WHOLESALE ROOM CONTRACT
DESTINATIONS 12/21/95
III KINGDOM TOURS 8/20/94 1/2/95- WHOLESALE ROOM CONTRACT
1/1/96
III LAS VEGAS TOURIST 10/31/94 1/2/95- WHOLESALE ROOM CONTRACT
BUREAU 12/29/95
III LAS VEGAS TRAVEL 11/9/94 1/1/95- WHOLESALE ROOM CONTRACT
12/22/95
III LAS VEGAS ROOM 11/21/94 1/2/95- WHOLESALE ROOM CONTRACTS
RESERVATIONS 12/22/95
III MLT VACATIONS, 10/17/94 1/1/95 WHOLESALE ROOM CONTRACT
INC. 1/1/96
</TABLE>
66
<PAGE>
"G"
Contracts (Excluding Material Contracts)
-------------------------------------------
<TABLE>
<CAPTION>
Vol. NAME DATE TERM DESCRIPTION
- --------- ---- ---- -----------
<S> <C> <C> <C>
WHOLESALE ROOM CONTRACTS (CON'T)
- --------------------------------
III MR. TRAVEL, 8/12/94 1/2/95- WHOLESALE ROOM CONTRACT
INC. 1/1/96
III MTI VACATIONS 9/14/94 1/2/95 WHOLESALE ROOM CONTRACT
1/1/96
III ORIENTAL PLAYERS 10/20/94 1/2/95- WHOLESALE ROOM CONTRACT
EXPRESS, INC. 6/1/95
III PLAYER EXPRESS 10/27/94 10/5/94- WHOLESALE ROOM CONTRACT
VACATIONS 12/22/95
III RELIANCE TRAVEL, 8/5/94 1/2/95- WHOLESALE ROOM CONTRACT
INC. 12/29/95
III SILVERWING 9/21/94 1/2/95- WHOLESALE ROOM CONTRACT
HOLIDAYS 12/29/95
III SUNMAKERS 7/15/94 1/1/95- WHOLESALE ROOM CONTRACT
12/29/95
III SUNQUEST VACATIONS 12/8/94 11/27/94- WHOLESALE ROOM CONTRACT
12/22/95
III TRADEMARK 9/15/94 1/1/95- WHOLESALE ROOM CONTRACT
VACATIONS, INC. 12/28/95
III VIVA LAS VEGAS 12/9/94 1/1/95- WHOLESALE ROOM CONTRACT
12/22/95
</TABLE>
67
<PAGE>
<TABLE>
<CAPTION>
Vol. NAME DATE TERM DESCRIPTION
- --------- ---- ---- -----------
<S> <C> <C> <C>
CONVENTION AND GROUP CONTRACT (DEFINITE)
- ----------------------------------------
IV CONSUMER 2/10/94 1/1/95 CONVENTION/GROUP
ELECTRONICS SHOW 1/15/95
IV LAS VEGAS 1/3/94 1/8/95- CONVENTION/GROUP
HORSESHOE TOURNAMENT 1/13/95
IV BLUE RIDGE 10/27/94 1/8/85- CONVENTION/GROUP
CHARTERS 1/15/95
IV INTL. ASSN. OF 10/14/94 1/11/95- CONVENTION/GROUP
ARSON INVESTIGATORS 1/15/95
IV BUCHANON-PRATT 9/8/94 1/13/95- CONVENTION/GROUP
WEDDING PARTY 1/15/95
IV FORD JENSEN 1/19/94 1/15/95- CONVENTION/GROUP
REAL ESTATE SEMINAR 1/18/95
IV LAS VEGAS STAMP 5/30/94 1/19/95- CONVENTION/GROUP
FAIR 1/22/95
IV GRAPHIC 1/28/94 1/19/95- CONVENTION/GROUP
COMMUNICATIONS 1/22/95
INTL. UNION
IV CARROLL-GILMORE 11/28/94 1/20/95- CONVENTION/GROUP
WEDDING 1/23/95
IV SIXTH US ARMY UNIT 3/2/94 1/22/95- CONVENTION/GROUP
1/26/95
IV MINUTE MUFFLER 9/14/94 1/29/95- CONVENTION/GROUP
2/2/95
IV KINGDOM TOURS 9/20/94 1/30/95- CONVENTION/GROUP
2/3/95
IV LAS VEGAS OPEN 8/26/91 2/3/95- CONVENTION/GROUP
DART TOURNAMENT 2/5/95
IV USPA & IRA - WEST 5/27/94 2/5/95- CONVENTION GROUP
REGION 2/9/95
</TABLE>
68
<PAGE>
<TABLE>
<CAPTION>
Vol. NAME DATE TERM DESCRIPTION
- --------- ---- ---- -----------
<S> <C> <C> <C>
CONVENTION AND GROUP CONTRACT (DEFINITE CON'T)
- ------------------------------------------------
IV MCDERMOTT 9/16/94 2/5/95- CONVENTION GROUP
ANNIVERSARY PARTY 2/9/95
IV WESTERN FLOOR 5/16/94 2/8/95- CONVENTION GROUP
COVERING ASSN 2/12/95
IV E&L ENTERTAINMENT 11/2/93 2/9/95- CONVENTION GROUP
2/13/95
IV MORREALE/RHODES 11/9/94 2/12/95- CONVENTION GROUP
WEDDING 2/14/95
IV CYPRESS COAST 7/20/94 2/15/95- CONVENTION GROUP
TOURS 2/17/95
IV SO NV NARCOTICS 4/19/94 2/23/95- CONVENTION/GROUP
ANONYMOUS 2/27/95
IV 21ST CENTURY 9/7/94 2/27/95 CONVENTION/GROUP
TRAVEL GROUP 3/3/95
IV LONG BEACH 10/19/94 3/3/95- CONVENTION/GROUP
BASKETBALL 3/5/95
IV CANADIAN OLDTIMERS 9/14/94 3/12/95- CONVENTION/GROUP
HOCKEY 3/17/95
IV THOMSON TRAVEL 11/28/94 3/16/95- CONVENTION/GROUP
GROUP 3/19/95
IV MARCH MULTI 11/9/94 3/16/95- CONVENTION/GROUP
CULTURAL CONFERENCE 3/18/95
IV RUDESILL WEDDING 11/28/94 3/17/95- CONVENTION/GROUP
3/19/95
IV WILD WEST ARTS CLUB 7/15/94 3/23/95- CONVENTION/GROUP
3/27/95
IV NETWORLD&INTERLOP 6/30/94 3/26/95- CONVENTION/GROUP
'95 4/2/95
</TABLE>
69
<PAGE>
"G"
Contracts (Excluding Material Contracts)
----------------------------------------
<TABLE>
<CAPTION>
Vol. NAME DATE TERM DESCRIPTION
- --------- ---- ---- -----------
<S> <C> <C> <C>
CONVENTION AND GROUP CONTRACT (DEFINITE CON'T)
- ------------------------------------------------
IV ERHART/DEMPSEY 10/10/94 3/27/95- CONVENTION/GROUP
GROUP 3/31/95
IV CHILD FREE NETWORK 7/11/94 3/29/95- CONVENTION/GROUP
4/3/95
IV PRINCE HALL GRAND 6/20/94 3/30/95- CONVENTION/GROUP
LODGE OF NEV. 4/2/95
IV HAPPY TRAIL TOURS 11/11/94 4/2/95- CONVENTION/GROUP
4/5/95
IV LA POLICE 4/22/94 4/6/95- CONVENTION/GROUP
REVOLVER CLUB 4/10/95
IV LAPD VEGAS 11/18/94 4/7/95- CONVENTION/GROUP
BAKER RUN 4/10/95
IV DUCHARME FAMILY 2/24/94 4/7/95- CONVENTION/GROUP
REUNION 4/9/95
IV NATL. ASSN. OF 11/3/94 4/9/95- CONVENTION/GROUP
BROADCASTERS 4/14/95
IV POULENCE GROUP 10/26/94 4/11/95- CONVENTION/GROUP
4/12/95
IV LOUIES GOLF GROUP 12/14/94 4/12/95- CONVENTION/GROUP
4/16/95
IV LIBERTY VOYAGES 10/1/94 4/13/95- CONVENTION/GROUP
GROUP 4/14/95
IV GOLD PROSPECTORS 4/20/94 4/14/95- CONVENTION/GROUP
ASSN. OF AMERICA 4/17/95
IV H/3/5 REUNION 9/6/94 4/18/95- CONVENTION/GROUP
4/23/95
IV BOURGINON GROUP 9/2/94 4/19/95- CONVENTION GROUP
4/20/95
IV INSTITUTE OF MGT. 8/10/94 4/21/95- CONVENTION/GROUP
ACCOUNTANTS 4/23/95
</TABLE>
70
<PAGE>
<TABLE>
<CAPTION>
Vol. NAME DATE TERM DESCRIPTION
- --------- ---- ---- -----------
<S> <C> <C> <C>
CONVENTION AND GROUP CONTRACT (DEFINITE CON'T)
- -----------------------------------------------
IV UNIVERSELLE GROUP 9/1/94 4/23/95- CONVENTION GROUP
4/26/95
IV MESSICK GROUP 11/17/94 4/24/95- CONVENTION GROUP
4/28/95
IV BONJOUR TOURS 9/12/94 4/25/95- CONVENTION GROUP
4/26/95
IV USS FOND DU LAC 5/16/94 5/1/95- CONVENTION GROUP
REUNION 5/5/95
IV VILLAGE CHARTERS 7/22/94 5/8/95- CONVENTION/GROUP
5/10/95
IV USS BISBEE 7/20/94 5/8/95- CONVENTION/GROUP
5/11/95
IV NV APARTMENT 6/20/94 5/15/95- CONVENTION/GROUP
ASSN. 5/16/95
IV DESTINATION 10/27/94 5/17/95- CONVENTION/GROUP
AMERICA 5/18/95
IV CUMMINGS/NEILAND 11/1/94 5/18/95- CONVENTION/GROUP
WEDDING 5/21/94
IV ERHART/DEMPSEY 10/10/94 5/22/95- CONVENTION/GROUP
GROUP 5/26/95
IV NURSING EDUCATION 6/16/94 6/2/95- CONVENTION/GROUP
OF AMERICA 6/7/95
IV 77TH STREET 6/16/94 6/11/95- CONVENTION/GROUP
ALUMNI REUNION 6/14/95
IV NIGERIAN REUNION 4/20/94 6/15/95- CONVENTION/GROUP
6/18/95
IV AAA WORTHINGTON 10/25/94 7/2/95- CONVENTION/GROUPP
GROUP 7/3/95
IV LOU PARKS GROUP 11/15/94 7/9/95- CONVENTION/GROUP
7/13/95
</TABLE>
71
<PAGE>
<TABLE>
<CAPTION>
Vol. NAME DATE TERM DESCRIPTION
- --------- ---- ---- -----------
<S> <C> <C> <C>
CONVENTION AND GROUP CONTRACT (DEFINITE CON'T)
- -----------------------------------------------
IV TURNER FAMILY 6/28/94 7/9/95- CONVENTION/GROUP
REUNION 7/13/95
IV KINGDOM TOURS 10/21/94 7/10/95- CONVENTION/GROUP
7/14/95
IV ENHANCEMENT 12/7/94 7/12/95- CONVENTION/GROUP
NETWORK 7/17/95
IV INTL. JUGGLERS 5/31/94 7/16/95 CONVENTION/GROUP
ASSN. 7/21/95
IV SMENTEK 50TH 1/31/94 7/21/95- CONVENTION/GROUP
7/23/95
IV DIMERY/WATSON 5/11/94 7/27/95 CONVENTION/GROUP
FAMILY REUNION 7/29/95
IV CHESS 50TH 10/27/94 8/3/95- CONVENTION/GROUP
WEDDING ANNIVERSARY 8/6/95
IV SOCIETY OF WILD 7/22/94 9/5/95- CONVENTION/GROUP
WEASELS 9/8/95
IV VILLAGE TOURS 9/19/94 9/6/95 CONVENTION/GROUP
9/8/95
IV KNIGHTS OF PYTHIAS 4/21/94 9/7/95 CONVENTION/GROUP
OF NV. 9/10/95
IV FIEMS FAMILY 3/30/94 9/8/95- CONVENTION/GROUP
REUNION 9/12/95
IV SO NV STREET ROD 8/4/94 9/15/95 CONVENTION/GROUP
ASSN 9/18/95
IV ERHART/DEMPSEY 10/10/94 9/18/95- CONVENTION/GROUP
GROUP 9/22/95
IV CRAM GROUP 12/9/94 9/21/95- CONVENTION/GROUP
9/22/95
IV ATC KERMEN GROUP 11/18/94 9/25/95- CONVENTION/GROUP
9/26/95
</TABLE>
72
<PAGE>
"G"
Contracts (Excluding Material Contracts)
----------------------------------------
<TABLE>
<CAPTION>
Vol. NAME DATE TERM DESCRIPTION
- --------- ---- ---- -----------
<S> <C> <C> <C>
CONVENTION AND GROUP CONTRACT (DEFINITE CON'T)
- ------------------------------------------------
IV SO. NV BUICK 11/1/94 9/28/95- CONVENTION/GROUP
CLUB 10/1/95
IV AMERICAN DENTAL 12/30/93 10/1/95- CONVENTION/GROUP
ASSN 10/10/95
IV ERHART/DEMPSEY 10/10/94 10/23/95- CONVENTION/GROUP
GROUP 10/27/95
IV CHAPTER 1 STATE 1/26/94 11/6/95- CONVENTION/GROUP
CONFERENCE 11/8/95
IV CALIFORNIA HOCKEY 8/13/94 11/9/95- CONVENTION/GROUP
PRODUCTIONS 11/12/95
IV ERHART/DEMPSEY 10/10/94 11/20/95- CONVENTION/GROUP
VIP GROUP 10/24/95
IV WACWEE 10/14/94 1/18/96- CONVENTION/GROUP
1/21/96
IV LAS VEGAS OPEN 8/28/91 2/2/96- CONVENTION/GROUP
DART TOURNAMENT 2/4/96
IV CREDIT 8/4/93 3/14/96 CONVENTION/GROUP
PROFESSIONAL INTL.
IV QUANTUM 7/11/94 5/15/96- CONVENTION/GROUP
5/20/96
IV USS LAKEWOOD 8/4/94 7/15/96- CONVENTION/GROUP
7/19/96
IV COSMOPOLITAN INTL. 4/14/93 7/29/96 CONVENTION/GROUP
8/2/96
IV 306TH BOMB GROUP 4/12/94 10/6/96- CONVENTION/GROUP
10/11/96
</TABLE>
73
<PAGE>
"G"
Contracts (Excluding Material Contracts)
----------------------------------------
<TABLE>
<CAPTION>
Vol. NAME DATE TERM DESCRIPTION
- --------- ---- ---- -----------
<S> <C> <C> <C>
ADVERTISING RELATED
- ---------------------
I LAS VEGAS 12/18/91 ANNUAL RENEWAL ADVERTISING
RESERVATION SYSTEMS SIGNAGE
I CONNELL OUTDOOR 1/4/94 2/1/94- BILLBOARD
ADVERTISING 1/31/95 ADVERTISING
I ALMAR OUTDOOR 12/27/91 ANNUAL RENEWAL BILLBOARD
COMPANY ADVERTISING
I MARVIN ADVERTISING 10/4/94 11/23/94- CAB BACK DISPLAY
COMPANY 10/19/95 ADVERTISING
I VIDIAD 12/7/94 3/1/95- AIRPORT VIDEO WALL
2/29/96
I NELLIS CAB COMPANY 8/4/94 9/1/94- CAB BACK DISPLAY
9/1/95 ADVERTISING
I UNITED OUTDOOR 2/23/94 9/13/96 BILLBOARD ADVERTISING
ADVERTISING 9/12/96
</TABLE>
74
<PAGE>
"H"
CONTRACTS (EXCLUDING MATERIAL CONTRACTS)
----------------------------------------
All contracts are listed on Exhibit "G".
75
<PAGE>
"I"
SECTION 4.2(N)
ASSUMED LIABILITIES
-------------------
4.2
- ---
(a) Obligations under assumed Contracts (See Exhibits G,H,J and K)
(b) Internal progressive slot machines (credit at closing)
Internal Progressive Table Games (credit at closing)
Caribbean Stud Program
Progressive Pool Programs (Buyer responsibility)
Reserve progressive jackpots
- Mega Bucks
- High Rollers
- Nevada Nickles
- Quartermania
- Quarter Deluxe
76
<PAGE>
"J"
SECTION 4.2(C)
ASSUMED CUSTOMER BENEFITS
-------------------------
4.2
- ---
(c) Unredeemed Bonus Points
Hacienda Slot Club "Club Viva" (See Exhibit J-1)
Advance Hotel Room Reservations
Promotional Coupons
Commitments under Contracts listed on Exhibits G,H, and I
77
<PAGE>
"K"
CONTRACTS (OTHER THAN THOSE DESCRIBED IN EXHIBITS "G" AND "H"
--------------------------------------------------------------
None.
78
<PAGE>
"L"
SECTION 6.1(G)
AFFILIATED PARTIES
------------------
LICO, a company which is wholly owned by Paul W. Lowden, has provided
entertainment services to the Hacienda. Currently, LICO provides entertainment
services at the Hacienda under a "four wall" arrangement. Under the arrangement,
the Hacienda is entitled to receive all beverage revenues from each show and
LICO (i) is entitled to receive all admission fees, (ii) is responsible for all
fixed and nonfixed costs of shows (including advertising and wholesale
commissions), and (iii) pays the Hacienda a rental fee based on the number of
persons attending each show. LICO must look solely to the perhead admission
revenue to cover all costs of the shows and for any profit. The Hacienda is
granted unlimited complimentary admissions for each show provided by LICO.
79
<PAGE>
"M"
SECTION 6.1(F)
SELLER LITIGATION AND OTHER ACTIONS
-----------------------------------
None.
80
<PAGE>
"N"
SECTION 6.1(G)
EMPLOYEE BENEFIT PLANS
----------------------
. Medical, dental, vision-Two plans are offered: Health Plan of Nevada is a
Health Maintenance Organization (HMO) and Silver State is Preferred
Provider Organization (PPO). Both plans require monthly premiums paid by
the employee and both plans allow for a Section 125 (pretax deduction of
the medical premium). Employees are eligible to participate on the first of
the month following completion of 90 days full-time employment.
. Group life & accidental death & dismemberment benefits are provided at no
cost to the employee. Employees are eligible to participate on the first of
the month following completion of 90 days full-time employment.
. Private life insurance is available for purchase from Aetna Life Insurance.
The Universal Life 360 Plan is available to eligible employees who are 21
years old and employed for at least one year.
. Sahara Gaming Corporation Employee Retirement Savings Plan (Section 401K)
is available to each employee who has completed one year of service and is
at least age 21. The plan allows for employee contributions up to 15% of
gross pay on a pretax basis which the company will match 25% on the first
6% of savings. In addition, the employee may contribute up to 10% of gross
pay on an after tax basis.
81
<PAGE>
"O"
(SECTION 6.1(J))
LEASES AND LICENSES
-------------------
<TABLE>
<CAPTION>
Vol. NAME DATE TERM DESCRIPTION
- --------- ---- ---- -----------
<S> <C> <C> <C>
RETAIL AND RESTAURANT LEASE AGREEMENTS
- --------------------------------------
II BAGS AND SHOES,INC. 1/10/94 ONE YEAR SHOP RENTAL
II DOLLY'S BRIDAL AND PROMS 4/15/94 ONE YEAR SHOP RENTAL
II FOR YOU, INC. 4/1/92 FIVE YEARS SHOP RENTAL
RENTAL
II HACIENDA CROWN JEWELS 2/1/92 SEVEN YEARS SHOP RENTAL
SEVEN YEAR OPTION
II HACIENDA HAIR SALON 4/1/92 THREE YEARS SHOP RENTAL
THREE YEAR OPTION
II LANCE BURTON MAGIC SHOP 11/1/92 MONTH TO MONTH SHOP RENTAL
II LUGGAGE 2000 7/8/94 ONE YEAR SHOP RENTAL
II KIEM WILLIAMS (MEN'S SHOP)5/1/94 ONE YEAR SHOP RENTAL
II LITTLE CHURCH OF THE WEST 10/16/78 LEASE EXPIRED 1988 EXTERIOR GROUND
MONTH TO MONTH LEASE
II LEROY'S HORSE AND SPORTS 6/30/94 ONE YEAR SPORTS BOOK
PLACE CONCESSION
II IN FLIGHT PHONE CORP. 8/27/94 9/1/91 - 7/31/96 RENTAL OF ROOF
SPACE FOR ANTENNAS
II GTE AIRFONE, INC. 6/24/94 ONE YEAR RENTAL OF ROOF
SPACE FOR ANTENNAS
II DIMARTINO RESTAURANT 5/1/92 FIVE YEARS RESTAURANT SPACE
FIVE YEAR OPTION RENTAL
II ALLSTATE CAR RENTAL 2/1/94 2/1/94 - 1/31/97 RENTAL CAR
CONCESSION
TIMESHARE PROGRAMS
- ------------------
- - HACIENDA GOLD KEY - HACIENDA ADVENTURE
TIMESHARE PROGRAM CAMPERLAND PROGRAM
</TABLE>
82
<PAGE>
"P"
SECTION 6.1(K)
INSURANCE POLICIES AND CONTRACTS
--------------------------------
See attached Schedule outlining insurance coverage.
- Property
- Boiler and Machinery
- General Liability
- Excess Workers Compensation
- Umbrella Coverage
83
<PAGE>
"Q"
Buyer Litigation and Other Actions
----------------------------------
84
<PAGE>
HACIENDA
3950 S. LAS VEGAS BLVD., LAS VEGAS, NEVADA
<TABLE>
<CAPTION>
<S> <C>
PROPERTY
- --------
INSURANCE CARRIER: AFFILIATED FM INSURANCE COMPANY
BUILDING: $76,407,951
CONTENTS: $18,792,000
BUSINESS INCOME: $14,700,000
EDP, SIGNS, ACCOUNTS RECEIVABLE, VALUABLE PAPERS INCLUDED IN
SAHARA GAMING CORPORATION'S BLANKET
BOILER AND MACHINERY
- --------------------
INSURANCE CARRIER: HARTFORD STEAM BOILER
ACTUAL LOSS SUSTAINED NOT TO EXCEED $100,000,000 AS PART OF SAHARA
CORP. BLANKET
</TABLE>
85
<PAGE>
GENERAL LIABILITY
- -----------------
INSURANCE CARRIER: INSURANCE COMPANY OF THE WEST
LIMITS: PREMISES/OPERATIONS $1,000,000 PER OCCURRENCE
PERSONAL & ADVERTISING INJURY $1,000,000 PER OCCURRENCE
GENERAL AGGREGATE $2,000,000
PRODUCTS/COMPLETED OPERATIONS $1,000,000 PER OCCURRENCE
/$2,000,000 AGGREGATE
EMPLOYERS LIABILITY $1,000,000 (NEVADA)
EMPLOYEE BENEFITS LIABILITY $1,000,000 PER CLAIM
(DED $1,000 PER CLAIM)
BUSINESS AUTO $1,000,000 PER ACCIDENT OR LOSS
UNINSURED MOTORIST $1,000,000
PHYSICAL DAMAGE AS INDICATED ON VEHICLE SCHEDULE ON FILE
WITH CARRIER.
NON-OWNED/HIRED AUTO LIABILITY $1,000,000 (NEVADA)
S.I.R. $5,000
DRIVER OF OTHER CAR COVERAGE - FOR INDIVIDUALS ON FILE
WITH CARRIER
GARAGEKEEPERS COVERAGE $500,000 COMPREHENSIVE/$500,000
COLLISION (DED $2,500 FOR EACH CUSTOMER AUTO)
86
<PAGE>
EXCESS WORKERS COMPENSATION:
- ----------------------------
CONTINENTAL CASUALTY ($1,000,000/$1,000,000)
S.I.R. $300,000 EACH OCCURRENCE
STATUTORY (WORKERS COMPENSATION)
UMBRELLA COVERAGE ($50,000,000 AS FOLLOWS)
- -----------------
CARRIER: FIDELITY & CASUALTY $10,000,000 EXCESS OF
PRIMARY
CARRIER: CHUBB/INTERSTATE FIRE & CASUALTY $15,000,000
EXCESS OF $10,000,000 EXCESS OF PRIMARY
CARRIER: FIREMANS FUND $25,000,000 EXCESS OF
$15,000,000 EXCESS OF $10,000,000 EXCESS OF
PRIMARY
87
<PAGE>
ASSIGNMENT AND CONSENT TO ASSIGNMENT
------------------------------------
For good and valuable consideration, the sufficiency of which is
acknowledged, WILLIAM G. BENNETT ("Bennett"), Buyer under an Agreement for the
Purchase and Sale of the Hacienda Hotel & Casino among the Hacienda Hotel, Inc.
("Hacienda"), Sahara Gaming Corporation ("Sahara") and William G. Bennett dated
January 10, 1995 (the "Agreement"), hereby assigns all right, title and interest
in and to such agreement to Circus Circus Enterprises, Inc. ("Circus Circus").
Hacienda, a Nevada corporation, the Seller under the Agreement, and Sahara,
a Nevada corporation, Guarantor under the Agreement, hereby consent to the
foregoing Assignment. In acknowledging and consenting to the foregoing
Assignment, the undersigned President of Hacienda and Sahara represents that he
has full corporate authority to consent to the Assignment from Bennett to Circus
Circus.
Hacienda and Sahara represent and warrant to Circus Circus that attached
hereto and incorporated herein by reference is a true, correct and complete copy
of the Agreement.
Circus Circus, by acceptance of this Assignment, hereby acknowledges its
obligations to perform as Buyer under the Agreement and the provisions of that
certain Letter Agreement dated March 3, 1995.
-------
Bennett represents, acknowledges and confirms that to the best of his
knowledge, he has fully and faithfully performed as the Buyer pursuant to the
Agreement. Similarly, Sahara and Hacienda represent, acknowledge and confirm
that to the best of their knowledge, Hacienda has fully and faithfully performed
as the Seller pursuant to the Agreement.
Circus Circus represents, acknowledges and confirms that it has performed
due diligence in anticipation of performing as the Buyer's assignee pursuant to
the Agreement, and is unaware of any breach and/or violation or default of any
terms and/or conditions of the Agreement.
88
<PAGE>
DATED this 5th day of March, 1995.
----- -----
HACIENDA HOTEL & CASINO
By PAUL LOWDEN
------------------------
PAUL LOWDEN, President
SAHARA GAMING CORPORATION
By PAUL LOWDEN
------------------------
PAUL LOWDEN, President
WILLIAM G. BENNETT
------------------
WILLIAM G. BENNETT
ACCEPTED AND APPROVED BY:
CIRCUS CIRCUS ENTERPRISES, INC.
By CLYDE T. TURNER
---------------
89
<PAGE>
March 3, 1995
William G. Bennett
6170 West Desert Inn Road
Las Vegas, Nevada 89134
Re: Sale of the Hacienda Resort Hotel and Casino
Dear Mr. Bennett:
This letter sets forth certain modifications and/or clarifications to the
Purchase and Sale Agreement ("Agreement") by and between Hacienda Hotel, Inc.
("Seller"), Sahara Gaming Corporation ("Guarantor") and William G. Bennett
("Buyer") entered into on January 10, 1995, pertaining to the sale of the assets
of the Hacienda Resort Hotel and Casino. The parties to the January 10, 1995
Agreement are hereinafter sometimes referred to as "the Parties". The following
modifications and clarifications to the Agreement are being made to facilitate
the contemplated assignment by Buyer of his rights and obligations under the
Agreement to Circus Circus Enterprises, Inc.
A. Clarifications.
--------------
1. The Parties agree that all assets to be conveyed to the Buyer or
Buyer's assignee in accordance with the Agreement will be conveyed to
Buyer or Buyer's assignee free and clear of all liabilities, security
interests, liens and encumbrances except for those expressly approved
by Buyer or Buyer's assignee.
2. The Parties agree that the title exceptions set forth in Exhibit A,
which is attached hereto and incorporated herein by reference,
constitute reasonable title objections to the Preliminary Title Report
prepared by United Title, dated February 13, 1995, and will be removed
by Seller on or before the Closing. The Parties agree that Buyer or
Buyer's assignee shall have five (5) days from the receipt of an
ALTA/ASCM survey of the real property to notify Seller of any
encroachments or any other matters, which in fact create a material
impairment to the continued operation of the Business on the Real
Property (the "Survey Objections"). Buyer or Buyer's assignee shall be
deemed to have approved all title exceptions, except for the
exceptions set forth in Exhibit A. Except as provided in the
Agreement, Seller shall remove or cure all Survey Objections on or
before Closing. Any title exception in the Preliminary Title Report
approved or deemed approved by Buyer or Buyer's assignee shall
constitute a Permitted Exception. Seller has heretofore disclosed
90
<PAGE>
to Buyer or Buyer's assignee that the Hacienda's variance allowing a
311 parking space reduction expires on or about October, 1995, and that
a renewal of the variance or application for a permit to operate at a
reduced level of parking spaces must be timely filed. Except as
clarified by this paragraph, all other provisions of Article 5 of the
Agreement dealing with the title remain in full force and effect.
3. Seller confirms that as of the effective date of this letter,
Seller has, to the best of its knowledge, provided Buyer or Buyer's
assignee with copies of the contracts and leases affecting the property
that will remain in effect after the Closing. Any contract that Seller
becomes aware of after the date hereof shall be submitted to Buyer or
Buyer's assignee as soon as Seller becomes aware of such contracts and
leases, and Buyer or Buyer's assignee will have fifteen (15) days to
notify Seller of any objections.
4. Seller agrees at Closing to make full and final settlement with
Seller's employees with respect to wages, salaries, bonus payments,
severance pay, union dues, contributions to benefit plans, payroll
taxes, holiday, birthday and other premium pay, and all the liabilities
and obligations related to the employment by Seller, to the extent
earned and accrued to the Closing date, or to reduce the purchase price
by such amount as is acceptable to the Buyer or Buyer's assignee. Buyer
or Buyer's assignee assumes no obligations, responsibilities or
liabilities of any kind resulting or relating from the employment
and/or termination by Seller of its employees, including but not
limited to any obligation to continue to employ such persons. The
Parties agree that Seller will take all reasonable steps to comply with
the requirements of the Worker Adjustment and Retraining Notification
Act (29 U.S.C. (S) 2101 et seq.), and the Parties agree that the
Closing date will not occur prior to the time necessary for the Seller
to comply with said Act.
91
<PAGE>
B. Modifications.
-------------
1. The Parties acknowledge that certain information systems relating
to the operation of the property ("Systems") are connected to or
otherwise supported by Sahara Gaming Corporation, via its AS-400, T124
channel phone circuit, data communication lines between the Hacienda
Hotel and Casino and the Sahara Hotel and Casino. Seller agrees to
provide all computer software, hardware, communications interfaces and
other technical peripheral systems and/or technical support ("Computer
Services") necessary to enable Buyer to continue operation of the
property until Buyer is able to convert the Systems to its own
hardware/software platforms. The Parties shall cooperate to develop a
plan to assure the orderly conversion of the Systems as expeditiously
as possible, consistent with the operation of the property. Buyer
agrees to pay its pro-rata share of the monthly communication line
charges between the Hacienda Hotel and Casino and the Sahara Hotel and
Casino, and a reasonable fee to be determined by the Parties on or
before Closing, for the Computer Services until Buyer is able to
convert the Systems to its own hardware/software platforms.
2. The Parties agree that Section 12.2 (n) of the Agreement is hereby
deleted and that pursuant to and in order to comply with NRS 364A.200,
372.620, 612.695, 244.335 and 244.3352, such amounts as Buyer or
Buyer's assignee and Seller reasonably estimate are necessary to
comply with the provisions of the above-mentioned statutes will be
withheld by United Title out of the purchase price payable to Seller
at Closing until such time as Seller furnishes Buyer or Buyer's
assignee and United Title the receipts or certificates provided for in
such statutes, or if not so provided for, such evidence as Buyer or
Buyer's assignee may reasonably require to assure Buyer or Buyer's
assignee that the applicable obligations have been paid. If Seller
does not produce such receipts or certificates within the time period
provided for in such statutes, or if any lien or claim therefore is
asserted against Buyer or Buyer's assignee or the property, United
Title shall pay such withheld sums to the appropriate authority. Buyer
or Buyer's assignee and Seller shall execute mutual escrow
instructions to carry out the provisions of this paragraph, and to
authorize United Title to deposit such withheld amounts in an interest
bearing account for the benefit of Seller.
92
<PAGE>
3. Seller and Buyer or Buyer's assignee designate United Title as
the "Reporting Person" for the transaction pursuant to Section 6045(e)
of the Internal Revenue Code.
4. The Parties agree that before destroying any files, records or
information of Seller with respect to the property, Seller shall notify
Buyer or Buyer's assignee and Buyer or Buyer's assignee may, at its
sole expense, copy and retain same. Buyer or Buyer's assignee shall be
entitled at all reasonable times to inspect and make copies of such
files, records and information maintained by the Seller with respect to
the property.
5. The Parties agree that references to Buyer's "Guarantor" are
inapplicable and are deleted.
6. The Parties agree that the notice provision of the Agreement is
amended to provide that notices to Buyer shall be as follows:
"Circus Circus Enterprises, Inc., 2880 Las Vegas Boulevard South, Las
Vegas, Nevada 89109, Attention: Mike Sloan, with copies to Lionel,
Sawyer & Collins, 300 South Fourth Street, Suite 1700, Las Vegas,
Nevada 89101, Attention: Jeffrey P. Zucker."
7. The Parties agree that Exhibits "E", "F", "H", "I", "K" and "M"
shall be amended to read as Exhibits "E", "F", "H", "I", "K" and "M"
attached hereto.
8. The Parties agree that except as amended or clarified hereby, the
Agreement shall remain unmodified and in full force and effect. To the
extent of any conflict between the Agreement and this letter, the terms
of this letter shall control.
Yours truly,
PAUL LOWDEN
-----------
Paul Lowden
AGREED AND CONSENTED TO
WILLIAM G. BENNETT
- ------------------
William G. Bennett
EXHIBIT "A"
Legal Description. The legal description appears defective as written. It
- -----------------
contains various discrepancies and does not appear to close.
Exception Nos. 1 and 2. These exceptions relate to taxes and must be updated to
- ----------------------
show no taxes due.
Exception No. 3. This exception is for reservations and exclusions in patents.
- ---------------
An endorsement should be obtained.
Exception No. 15. This exception concerns a transformer indemnity agreement
- ----------------
between Hacienda, Inc. and Nevada Power Company, and must be removed.
93
<PAGE>
Exception Nos. 16, 17, 18, 19, 20, 21, 32 and 39. These exceptions concern a
- ------------------------------------------------
note in the original principal amount of $25.3 million, a deed of trust,
modifications of a deed of trust, UCC financing statements and other security
instruments evidencing the secured interest of the Public Employees Retirement
System of Nevada in real and personal property. These exceptions must be
removed.
Exception No. 22. This is a UCC-1 fixture filing evidencing the security
- ----------------
interest of Nevada National Leasing Co., Inc. in certain personal property.
This exceptions must be removed.
Exception Nos. 24 and 25. These are UCC-1 financing statements evidencing the
- ------------------------
security interest of Intermark Imagineering, Inc. in certain equipment. These
exceptions must be removed.
Exception Nos. 26 and 27. These are non-disturbance agreements whereby Valley
- ------------------------
Bank of Nevada agreed to honor membership rights of Hacienda Adventure and
Hacienda Gold Key members in the event of a foreclosure. These documents
describe a deed of trust benefiting Valley Bank of Nevada securing indebtedness
in the principal amount of $3 million. The deed of trust does not show as an
exception to title and these related non-disturbance agreements must be removed
as title exceptions.
Exception No. 28. This is a UCC-1 financing statement evidencing rights of
- ----------------
Sahara Finance Corp. (as assignee of Sahara Operating Limited Partnership) in
certain payments and disbursements. This exception must be removed.
Exception Nos. 33 and 34 and 35. These are UCC-1 financing statements
- -------------------------------
evidencing various interests of the CIT Group-Equipment Financing, Inc. (as
assignee of Valley Leasing Company, Inc.). These exceptions must be removed.
Exception No. 41. This is a UCC-1 financing statement evidencing a lease by
- ----------------
Young Electric Sign Company, of certain personal property. This exception must
be removed.
<PAGE>
FIRST AMENDMENT TO AGREEMENT FOR PURCHASE AND SALE
--------------------------------------------------
This First Amendment to the Agreement for Purchase and Sale ("Agreement")
dated January 10, 1995, between Hacienda Hotel, Inc. ("Seller") and William G.
Bennett ("Bennett"), and assigned by Bennett to Circus Circus Enterprises, Inc.
("Buyer").
WITNESSETH:
----------
WHEREAS, by the Agreement dated January 10, 1995, Seller, Sahara Gaming
Corporation ("Guarantor") and Bennett entered into an agreement for the purchase
and sale of the Real Property located in Clark, County, Nevada, commonly known
as the Hacienda Resort Hotel and Casino (the "Hacienda") and the assets of the
Business of the Hacienda; and
WHEREAS, the Agreement was clarified and modified by that certain Letter
Agreement signed by Paul Lowden and agreed and consented to by Bennett on March
5, 1995; and
WHEREAS, the Agreement was assigned by Bennett to Buyer pursuant to that
certain Assignment and Consent to Assignment executed by Seller, Guarantor and
Bennett, and accepted and approved by Buyer on March 5, 1995; and
WHEREAS, Buyer and Seller each desire that the Exhibits to the Agreement be
modified as agreed by Buyer and Seller, and that the modified Exhibits be
attached to this First Amendment to Agreement for Purchase and Sale ("First
Amendment") as the final Exhibits to the Agreement; and
WHEREAS, Buyer and Seller each desire to further modify certain terms to
the Agreement.
NOW, THEREFORE, it is hereby agreed by Buyer and Seller as follows:
1. Exhibits. All of the Exhibits to the Agreement, namely Exhibits "A",
--------
"B", "C", "D", "E", "F", "G", "H", "I", "J", "J-1", "K", "L", "M", "N", "O", "P"
and "Q", as modified by Buyer and Seller, shall be amended to read as Exhibits
"A", "B", "C", "D", "E", "F", "G", "H", "I", "J", "J-1", "K", "L", "M", "N",
"O", "P" and "Q" attached hereto.
95
<PAGE>
2. Contracts and Assumption of Liabilities. Article IV of the Agreement
---------------------------------------
is hereby amended to add the following new Section 4.1(e):
(e) For purposes of the Employee Retirement Income Security Act
(ERISA), 29 U.S.C (S) 1381 et seq., Buyer and Seller hereby acknowledge that
this Agreement, with respect to the sale by Seller and the purchase by Buyer, is
a bona fide, arm's-length sale of assets to an unrelated purchaser. Furthermore,
subject to Section 4.1(d), Buyer expressly acknowledges its obligation to
contribute to multi-employer pension plans (collectively, "Plans") to which
Seller has been obligated to contribute. Buyer and Seller hereby agree that
written notification shall be provided to the subject Plans of Buyer's and
Seller's intention that the sale be covered by ERISA pursuant to the
requirements of 29 C.F.R. (S) 2643.11(a). Buyer hereby further agrees to provide
sufficient financial or other information to the Plans to demonstrate to the
satisfaction of the Plans that at least one of the criteria contained in 29
C.F.R. (S) 2643.12, (S) 2643.13, or (S) 2643.14(a) is satisfied, thereby
eliminating the bond or escrow requirement of 29 U.S.C. (S) 1384(a)(1)(B);
provided, Buyer in its sole discretion, may elect to post a bond or
- --------
amount in escrow in satisfaction of 29 U.S.C. (S) 1384(a)(1)(B). Seller hereby
agrees to be secondarily liable, pursuant to 29 U.S.C. 1384(a)(1)(C), for its
deferred withdrawal liability if Buyer withdraws from the Plans, or any single
Plan, within five (5) years after the sale and does not pay its withdrawal
liability.
3. Other Agreement Terms. Except as modified in this First Amendment,
---------------------
all the terms, covenants and conditions of the Agreement shall remain in full
force and effect.
4. Controlling Document. To the extent that the provisions of this
--------------------
First Amendment are inconsistent with the provisions of the Agreement, the terms
of this First Amendment shall control.
IN WITNESS WHEREOF, the parties hereto have executed this First
96
<PAGE>
Amendment to Agreement for Purchase and Sale as of the 10th day of January 1995.
---- -------
"SELLER" "SELLER'S PARENT CORPORATION
GUARANTOR"
HACIENDA HOTEL, INC. SAHARA GAMING CORPORATION
By: PAUL LOWDEN BY: PAUL LOWDEN
----------- -----------
Its: President Its: President
--------- ---------
"BUYER"
CIRCUS CIRCUS ENTERPRISES, INC.
By: Clyde T. Turner
---------------
Its: President
---------
97
<PAGE>
Exhibit 10(ee)
================================================================================
FINAL EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
dated as of March 19, 1995
by and among
CIRCUS CIRCUS ENTERPRISES, INC,
a Nevada corporation
M.S.E. INVESTMENTS, INCORPORATED,
a Nevada corporation
LAST CHANCE INVESTMENTS, INCORPORATED,
a Nevada corporation
GOLDSTRIKE INVESTMENTS, INCORPORATED,
a Nevada corporation
DIAMOND GOLD, INC.,
a Nevada corporation
GOLD STRIKE AVIATION, INCORPORATED,
a Nevada corporation
GOLDSTRIKE FINANCE COMPANY, INC.,
a Nevada corporation
OASIS DEVELOPMENT COMPANY, INC.,
a Nevada corporation
MICHAEL S. ENSIGN
WILLIAM A. RICHARDSON
DAVID R. BELDING
PETER A. SIMON II
and
ROBERT J. VERCHOTA
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1 DEFINITIONS AND RULES OF CONSTRUCTION........................................ 1
1.1 Definitions....................................................................... 1
1.2 Rules of Construction............................................................. 10
ARTICLE 2 THE TRANSACTION.............................................................. 10
2.1 Mergers and Transfers............................................................. 10
2.2 Consideration for the Mergers and the Transfers................................... 11
2.3 Certificate of Incorporation; By-Laws; Directors and Officers..................... 11
2.4 Closing........................................................................... 12
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF EACH OF THE GOLD
STRIKE PERSONS............................................................... 12
3.1 Organization and Qualification of Each of the Joint Ventures...................... 12
3.2 Organization and Qualification of Each of the Acquired Entities................... 12
3.3 Organization and Qualification of Each of the Target Companies.................... 13
3.4 Ownership of Each of the Joint Ventures........................................... 13
3.5 Ownership of Each of the Acquired Entities........................................ 14
3.6 Capitalization of Each of the Target Companies.................................... 15
3.7 Subsidiaries...................................................................... 16
3.8 Authority of Each of the Target Companies......................................... 16
3.9 Authority of Each of the Target Company Shareholders.............................. 17
3.10 Authority of the Individuals..................................................... 17
3.11 No Violation..................................................................... 17
3.12 Consents and Approvals........................................................... 18
3.13 Corporate Instruments and Records................................................ 18
3.14 Partnership Instruments.......................................................... 18
3.15 Tax Matters...................................................................... 18
3.16 Financial Statements............................................................. 19
3.17 Absence of Undisclosed Liabilities............................................... 20
3.18 No Material Adverse Changes...................................................... 20
3.19 Guarantees....................................................................... 21
3.20 Litigation....................................................................... 22
3.21 Nature of Business; Included Assets.............................................. 22
3.22 Condition of Tangible Included Assets............................................ 23
3.23 Contracts........................................................................ 23
3.24 Labor and Employment Matters..................................................... 23
3.25 Employee Plan Matters............................................................ 23
3.26 Insurance........................................................................ 24
3.27 Compliance With Laws............................................................. 24
3.28 Possession of Franchises, Licenses, Etc.......................................... 24
3.29 No Broker, Finder or Underwriter................................................. 25
</TABLE>
i
<PAGE>
<TABLE>
Page
----
<S> <C>
3.30 Environmental Matters............................................................ 25
3.31 Investment Representations....................................................... 25
3.32 Burton Agreement................................................................. 26
3.33 Development Entities............................................................. 26
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY................................ 26
4.1 Organization and Qualification.................................................... 26
4.2 Capitalization.................................................................... 26
4.3 Authority......................................................................... 26
4.4 No Violation...................................................................... 26
4.5 Consents and Approvals............................................................ 28
4.6 Commission Filings................................................................ 28
4.7 Status of Securities.............................................................. 28
4.8 No Material Adverse Changes....................................................... 29
ARTICLE 5 ADDITIONAL COVENANTS AND AGREEMENTS.......................................... 30
5.1 Conduct of Business by Target Companies and Acquired Entities..................... 30
5.2 Conduct of Business by Joint Ventures............................................. 32
5.3 Board Representation.............................................................. 32
5.4 Registration Rights............................................................... 32
5.5 Employment Agreements............................................................. 32
5.6 Additional Agreements............................................................. 32
5.7 No Solicitation of Transactions................................................... 33
5.8 Notification of Certain Matters................................................... 33
5.9 Access to Information............................................................. 33
5.10 Listing.......................................................................... 33
5.11 Expenses......................................................................... 34
5.12 Title Policies................................................................... 34
5.13 Rejected Assets.................................................................. 34
5.14 Information for Tax Returns...................................................... 34
5.15 Other Tax Related Covenants...................................................... 34
5.16 Trademarks, Etc.................................................................. 34
5.17 Financial Statements............................................................. 34
ARTICLE 6 CONDITIONS TO CLOSING........................................................ 35
6.1 Conditions to Obligations of Each Party to Effect the Mergers and the Transfers... 35
6.2 Additional Conditions to the Company's Obligations................................ 35
6.3 Additional Conditions to the Gold Strike Persons' and Verchota's Obligations...... 36
ARTICLE 7 INDEMNIFICATION.............................................................. 37
7.1 Survival of Representations, Etc.................................................. 37
7.2 Indemnification................................................................... 38
7.3 Tax Matters....................................................................... 40
</TABLE>
ii
<PAGE>
<TABLE>
Page
----
<S> <C>
ARTICLE 8 TERMINATION, AMENDMENT AND WAIVER 41
8.1 Termination....................................................................... 41
8.2 Effect of Termination............................................................. 41
8.3 Amendment......................................................................... 41
8.4 Waiver 41
ARTICLE 9 GENERAL PROVISIONS........................................................... 42
9.1 Entire Agreement.................................................................. 42
9.2 No Third-Party Beneficiaries...................................................... 42
9.3 Notices........................................................................... 42
9.4 No Assignment; Binding Effect..................................................... 44
9.5 Severability...................................................................... 44
9.6 Further Assurances................................................................ 44
9.7 Non-Waiver of Breach.............................................................. 45
9.8 Confidentiality; Publicity........................................................ 45
9.9 Governing Law..................................................................... 45
9.10 Counterparts..................................................................... 45
9.11 Representations and Warranties of Verchota....................................... 45
</TABLE>
iii
<PAGE>
LIST OF EXHIBITS
Exhibit "A"........................................Form of Assignment Agreement
Exhibit "B".............................................List of Excluded Assets
Exhibit "C"............................................Form of Merger Agreement
Exhibit "D"...............................Form of Registration Rights Agreement
Exhibit "E"..............................Senior Executive Compensation Schedule
Exhibit "F".......................Form of Senior Executive Employment Agreement
Exhibit "G".............................................Form of Spousal Consent
Exhibit "H"........................................Form of Standstill Agreement
iv
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT AND PLAN OF MERGER, dated as of March 19, 1995, is made and
entered into by and among CIRCUS CIRCUS ENTERPRISES, INC., a Nevada corporation,
M.S.E. INVESTMENTS, INCORPORATED, a Nevada corporation, LAST CHANCE INVESTMENTS,
INCORPORATED, a Nevada corporation, GOLDSTRIKE INVESTMENTS, INCORPORATED, a
Nevada corporation, DIAMOND GOLD, INC., a Nevada corporation, GOLD STRIKE
AVIATION, INCORPORATED, a Nevada corporation, GOLDSTRIKE FINANCE COMPANY, INC.,
a Nevada corporation, OASIS DEVELOPMENT COMPANY, INC., a Nevada corporation,
MICHAEL S. ENSIGN, an individual, WILLIAM A. RICHARDSON, an individual, DAVID R.
BELDING, an individual, PETER A. SIMON II, an individual and ROBERT J. VERCHOTA,
an individual. Capitalized terms used herein shall have the meanings assigned
such terms in Section 1.1.
RECITALS
--------
WHEREAS, the Company and its subsidiaries are multi-jurisdictional operators
of gaming properties;
WHEREAS, the Acquired Entities are operators of gaming properties. The
Acquired Entities' properties include Gold Strike Hotel and Gambling Hall and
Nevada Landing Hotel and Casino and two gasoline service stations located in
Jean, Nevada; Railroad Pass Hotel and Casino located in Henderson, Nevada; a 50%
interest in the Elgin Riverboat Resort, an equal joint venture with RBG that
owns The Grand Victoria Casino, a riverboat casino and land-based entertainment
complex located in Elgin, Illinois; and a 50% interest in the Victoria Partners,
an equal joint venture with MRGS, that owns a two acre parcel, and has a
commitment from MRGS to contribute an additional 43 acre parcel, in Las Vegas,
Nevada which is being developed as a gaming and entertainment resort. The
Acquired Entities are currently developing a wild animal park located in Jean,
Nevada and casinos in Mississippi, Kentucky, Alabama and Indiana. The foregoing
properties and development projects constitute the "Acquired Entities'
Businesses";
WHEREAS, the parties hereto intend that the Mergers each constitute a
reorganization within the meaning of Section 368 of the Code; and
WHEREAS, the parties hereto deem it advisable and in their respective best
interests to enter into this Agreement and consummate the transactions
contemplated hereby.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto agree
as follows:
ARTICLE I.
DEFINITIONS AND RULES OF CONSTRUCTION
A. DEFINITIONS. The following defined terms shall, unless the context
requires otherwise, have the meanings ascribed in this Section 1.1:
v
<PAGE>
"ACQUIRED ENTITIES" shall mean Railroad Pass, Jean Development, Jean West,
Nevada Landing, Jean North, Pine Hills II, Indiana LLC, GSLV, Fuel and Fuel
West.
"ACQUIRED ENTITIES' BUSINESSES" shall have the meaning specified in the
Recitals.
"ACTIONS" shall mean any action, order, writ, injunction, judgment or decree
outstanding or claim, suit, litigation, proceeding, labor dispute (other than
routine grievance procedures or routine, uncontested claims for benefits under
any benefit plans for employees, officers or directors), arbitral action or
investigation.
"AFFILIATE" and "ASSOCIATE" shall have the meanings given to such terms
pursuant to Rule 12b-2 of the General Rules and Regulations under the Securities
Exchange Act of 1934. The term "AFFILIATED" has the meaning correlative to the
foregoing.
"AGREEMENT" shall mean this Agreement and Plan of Merger, as it may be
amended from time to time.
"ANCILLARY AGREEMENTS" shall mean each of the Verchota Assignment Agreement,
the Ensign Assignment Agreement, the Simon Assignment Agreement, the Merger
Agreements, the Registration Rights Agreement, the Senior Executive Employment
Agreements, the Standstill Agreement and the Exchange Agreement.
"APPLICABLE GAMING AUTHORITIES" shall mean the gaming authorities of the
States of Nevada, Illinois, Mississippi and Louisiana and the Province of
Ontario, Canada and all other Governmental Authorities having or asserting
jurisdiction over the establishment or conduct of gaming activities, operations,
management, control, or ownership.
"AVIATION, INC." shall mean Gold Strike Aviation, Incorporated, a Nevada
corporation.
"BALANCE SHEET" shall have the meaning specified in Section 3.17.
"BALANCE SHEET DATE" shall mean December 31, 1994.
"BANK FACILITY AGREEMENT" shall mean the Reducing Revolving Credit
Agreement, dated as of February 11, 1994, as amended by the First Amendment to
Reducing Revolving Credit Agreement, dated as of May 10, 1994, and the Second
Amendment to Reducing Revolving Credit Agreement, dated as of September 16,
1994, by and among First Interstate Bank of Nevada, N.A., The Long-Term Credit
Bank of Japan, Ltd., Los Angeles Agency, U.S. Bank of Nevada, NBD Bank, N.A.,
Bank of America Nevada and Bank of Hawaii (collectively, the "LENDERS") and
Finance, Inc., (as borrower) and Railroad Pass, Lakeview Company, Jean
Development, Jean West, Jean North, Pioneer Investment Group and Lakeview Gaming
(as guarantors), pursuant to which, among other things, Lenders established a
reducing revolving credit facility in an initial principal amount not to exceed
$160 million.
"BELDING" shall mean David R. Belding, an individual.
"BOARD" shall mean the Board of Directors of the Company.
vi
<PAGE>
"BURTON CONTRACT" shall mean the Joint Venture Agreement by and between Gold
Strike Resorts Inc. and Lance Burton Inc. and Lance Burton Merchandising Corp.
"CHARTER DOCUMENTS" shall mean, with respect to any corporation, the
Articles or Certificate of Incorporation and Bylaws, each as amended and
modified through and including the date of this Agreement, of such corporation.
"CIRCUS CIRCUS SENIOR EXECUTIVES" shall mean Clyde Turner, Kurt Sullivan,
Daniel Copp, Mike Sloan and Robert Prince.
"CLAIM" shall have the meaning specified in Section 7.2(d).
"CLAIM NOTICE" shall have the meaning specified in Section 7.2(d).
"CLOSING" shall have the meaning specified in Section 2.4.
"CLOSING DATE" shall have the meaning specified in Section 2.4.
"CODE" shall mean the Internal Revenue Code of 1986, as amended, and the
Treasury Regulations issued thereunder.
"COMMISSION" shall mean the Securities and Exchange Commission.
"COMMON STOCK" shall mean common stock, par value $.01 (one and two-thirds
cents) per share (including the associated Right), of the Company.
"COMPANY" shall mean Circus Circus Enterprises, Inc. a Nevada corporation.
"DAMAGES" shall have the meaning specified in Section 7.2.
"DEVELOPMENT ENTITIES" shall mean Jean North, Lakeview Gaming, Indiana LLC
and Pine Hills II.
"DGI, INC." shall mean Diamond Gold, Inc., a Nevada corporation.
"DRAFT INTERIM FINANCIALS" shall have the meaning specified in Section 3.16.
"DRAFT YEAR-END FINANCIALS" shall have the meaning specified in Section
3.16.
"EFFECTIVE TIME" shall mean the time at which the Mergers are consummated by
the filing of the requisite documents with the Secretary of State of the State
of Nevada for each of the Target Companies.
"ELGIN BALANCE SHEET" shall have the meaning specified in Section 3.17.
"ELGIN DRAFT INTERIM FINANCIALS" shall have the meaning specified in Section
3.16.
"ELGIN YEAR-END FINANCIALS" shall have the meaning specified in Section
3.16.
vii
<PAGE>
"ELGIN RIVERBOAT RESORT" shall mean Elgin Riverboat Resort, an Illinois
general partnership.
"ENCUMBRANCES" shall mean any claim, lien, pledge, option, charge, easement,
security interest, right-of-way, encumbrance or other similar right.
"ENSIGN" shall mean Michael S. Ensign.
"ENSIGN ASSIGNMENT AGREEMENT" shall mean the Ensign Assignment Agreement,
substantially in the form attached hereto as Exhibit A-2.
"ENSIGN INTERESTS" shall mean Ensign's interest in (i) Kentucky land and
(ii) Mississippi land.
"ENVIRONMENTAL LAWS" shall mean any federal, state or local law, statute,
ordinance, order, decree, rule or regulation relating to releases, discharges,
emissions or disposals to air, water, land or groundwater, to the withdrawal or
use of groundwater, to the use, handling or disposal of polychlorinated
biphenyls, asbestos or urea formaldehyde, to the treatment, storage, disposal or
management of Hazardous Materials, to exposure to toxic, hazardous or other
controlled, prohibited or regulated substances, and to the transportation,
release or any other use of Hazardous Materials, including the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. (S) 9601,, et
--
seq. ("CERCLA"), the Resource Conservation and Recovery Act, 42 U.S.C. (S) 6901,
- ---
et seq. ("RCRA"), the Toxic Substances Control Act, 15 U.S.C. (S) 2601, et seq.
- -- --- -- ---
("TSCA"), the Occupational, Safety and Health Act, 29 U.S.C. (S) 651, et seq.,
-- ---
the Clean Air Act, 42 U.S.C. (S) 7401, et seq., the Federal Water Pollution
-- ---
Control Act, 33 U.S.C. (S) 1251, et seq., the Safe Drinking Water Act, 42 U.S.C.
-- ---
(S) 300f et seq., the Hazardous Materials Transportation Act, 49 U.S.C. (S) 1802
-- ---
et seq. ("HMTA") and the Emergency Planning and Community Right to Know Act, 42
- -- ---
U.S.C. 11001 et seq. ("EPCRA"), and other comparable state laws and all rules,
-- ---
regulations and guidance documents promulgated pursuant thereto or published
thereunder.
"ERISA" shall have the meaning specified in Section 3.25.
"EVANSVILLE LANDING" shall mean Evansville Landing, an Indiana general
partnership.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934 as amended,
and the Rules and Regulations promulgated thereunder.
"EXCHANGE AGREEMENT" shall mean an agreement to be entered into by New Day,
Inc., the Company, MSE, Inc., Antonio C. Alamo, an individual, Anthony Korfman,
an individual, Glenn W. Schaeffer, an individual, Gregg H. Solomon, an
individual, and William Ensign, an individual, to transfer their respective
interests (including the Minority Interests) in GSLV, Indiana LLC, Jean North,
and Pine Hills II to New Day, Inc. in exchange for equity of New Day, Inc. as
set forth in such agreement.
"EXCLUDED ASSETS" shall mean those assets of the Target Companies and the
Acquired Entities listed on Exhibit "B" attached hereto, along with all
associated Encumbrances, indebtedness and other liabilities (except for the
approximately $17 million owing under the Bank Facility Agreement attributable
to Lakeview Company), including without limitation, the notes payable reflected
on the financial statements of LCI, Inc. and the debt owing to Bank of America
with respect to ODC.
viii
<PAGE>
"FACILITIES" shall mean the casino-hotels, riverboat, offices, facilities,
administration buildings, and all other real property and related facilities
which are owned or leased by any of the Target Companies, the Acquired Entities
or the Joint Ventures, excluding the Excluded Assets.
"FAMILY LANDS" shall mean Family Lands L.P., a Mississippi limited
partnership.
"FINANCE, INC." shall mean Goldstrike Finance Company, Inc., a Nevada
corporation.
"FIXTURES AND EQUIPMENT" shall mean all of the furniture, fixtures,
furnishings, machinery and equipment owned by each of the Target Companies, the
Acquired Entities and the Joint Ventures and located in, at or upon the
Facilities as of the Balance Sheet Date plus all additions, replacements or
deletions since the Balance Sheet Date in the ordinary course of the Target
Companies', the Acquired Entities' and the Joint Ventures' Businesses.
"FUEL" shall mean Gold Strike Fuel Company, a Nevada general partnership.
"FUEL WEST" shall mean Jean Fuel Company West, a Nevada general partnership.
"GAMING LAWS" shall mean, with respect to any Person, any Federal, state,
local or foreign statute, ordinance, rule, regulation, permit, consent,
approval, license, judgment, order, decree, injunction or other authorization
governing or relating to the current or contemplated casino and gaming
activities and operations of such Person.
"GOLD STRIKE PERSONS" shall mean the Target Companies and the Target Company
Shareholders.
"GOLD STRIKE SENIOR EXECUTIVES" shall mean Messrs. Ensign, Glenn W.
Schaeffer, Richardson, Antonio C. Alamo and Gregg H. Solomon.
"GOVERNMENTAL AUTHORITY" shall mean any agency, authority, board, bureau,
commission, court, department, office or instrumentality of any nature
whatsoever of the United States, any state, any province or any county, city or
other political subdivision, or any officer or official thereof acting in an
official capacity.
"GSI, INC." shall mean Goldstrike Investments, Incorporated, a Nevada
corporation.
"GSLV" shall mean Gold Strike L.V., a Nevada general partnership.
"GUARANTORS" shall mean, with respect to the Bank Facility Agreement,
Railroad Pass, Jean Development, Jean West, Jean North and Lakeview Gaming.
"HAZARDOUS MATERIALS" shall mean each and every element, compound, chemical
mixture, contaminant, pollutant, material, waste or other substance which is
regulated as hazardous or toxic under Environmental Laws or the release of which
is regulated under Environmental Laws. Without limiting the generality of the
foregoing, the term includes: "HAZARDOUS SUBSTANCES" as defined in and regulated
under CERCLA; "EXTREMELY HAZARDOUS SUBSTANCES" as defined in and regulated under
EPCRA; "HAZARDOUS WASTE" as defined in and regulated under RCRA; "HAZARDOUS
MATERIALS" as defined in and regulated under HMTA; "CHEMICAL SUBSTANCES OR
MIXTURE" as defined in and regulated under TSCA; crude oil, petroleum
ix
<PAGE>
products or any fraction thereof; radioactive materials including source,
by-product or special nuclear materials; asbestos or asbestos-containing
materials; and radon.
"HSR ACT" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations thereunder.
"INCLUDED ASSETS" shall have the meaning specified in Section 3.21.
"INDEMNIFIED PARTY" shall have the meaning specified in Section 7.2.
"INDEMNIFYING PARTY" shall have the meaning specified in Section 7.2.
"INDIANA LLC" shall mean Gold Strike Resorts, L.L.C., an Indiana limited
liability company.
"INDIVIDUALS" shall mean Glenn W. Schaeffer, Gregg H. Solomon, Antonio C.
Alamo, Anthony Korfman and William Ensign.
"INSTRUMENT" shall have the meaning specified in Section 3.11.
"JEAN DEVELOPMENT" shall mean Jean Development Company, a Nevada general
partnership.
"JEAN NORTH" shall mean Jean Development North, a Nevada general
partnership.
"JEAN WEST" shall mean Jean Development West, a Nevada general partnership.
"JOINT VENTURES" shall mean (a) Lakeview Gaming, (b) Elgin Riverboat Resort
(but excluding RBG), (c) Pine Hills Development (but excluding Family Lands) and
(d) Victoria Partners (but excluding MRGS).
"LAKEVIEW COMPANY" shall mean Lakeview Company, a Nevada general
partnership.
"LAKEVIEW COMPANY MANAGEMENT AGREEMENT" shall mean a management agreement by
and between Lakeview Company and the Company relating to the management and
operation of the Gold Strike Inn and Casino in Boulder City, Nevada on terms
customary to the industry.
"LAKEVIEW GAMING" shall mean Lakeview Gaming Partnership Joint Venture, a
Nevada general partnership.
"LCI, INC." shall mean Last Chance Investments, Incorporated, a Nevada
corporation.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on the
financial condition, results of operations, business (including without
limitation the business of Victoria Partners, a Nevada general partnership) or
properties of the Target Companies, the Acquired Entities and the Joint Ventures
taken as a whole, excluding any change which adversely affects the gaming
industry in Nevada or Illinois as a whole.
"MATERIAL ADVERSE EFFECT ON THE COMPANY" shall mean, with respect to the
Company, a material adverse effect on the financial condition, results of
operations, business or properties of the Company,
x
<PAGE>
excluding any change which adversely affects the gaming industry in Nevada,
Mississippi, Louisiana or Ontario, Canada as a whole.
"MERGER AGREEMENT" shall mean an Agreement of Merger, substantially in the
form attached hereto as Exhibit "C", with such modifications as may be required
by Nevada law.
"MERGER SUBS" shall mean the direct wholly owned subsidiaries of the Company
formed for purposes of consummating the transactions contemplated by this
Agreement.
"MERGERS" shall mean the merger of a Merger Sub with and into each of the
Target Companies.
"MINORITY INTERESTS" shall mean the equity interests in the Acquired
Entities not owned, as of the date of this Agreement, by either the Target
Companies or Verchota.
"MRGS" shall mean MRGS Corp., a Nevada corporation.
"MRGS AGREEMENT" shall mean the Agreement Pursuant to Joint Venture
Agreement by and between the Company and Messrs. Ensign, Schaeffer and
Richardson in the form previously agreed to by the parties thereto to be entered
into at or prior to the Closing.
"MSE, INC." shall mean M.S.E. Investments, Incorporated, a Nevada
corporation.
"NEVADA LANDING" shall mean Nevada Landing Partnership, an Illinois general
partnership.
"ODC" shall mean Oasis Development Company, Inc., a Nevada corporation.
"OPTIONS" shall have the meaning specified in Section 3.4.
"ORGANIZATIONAL DOCUMENTS" shall mean, with respect to a partnership or
limited liability company, the partnership or operating agreement, as such
agreement has been amended and modified through and including the date of this
Agreement, of such partnership or limited liability company, as the case may be.
"PERMITTED DISTRIBUTION" shall mean, without duplication, (i) the
distribution made or to be made by the Target Companies to their respective
stockholders, representing the accumulated previously-taxed earnings of such
Target Companies for the periods ending on or before March 31, 1995 (less
amounts owing under the Bank Facility Agreement attributable to Lakeview Company
or the Excluded Assets), (ii) the Permitted Tax Distribution, (iii) the
distribution of the Excluded Assets and any Rejected Assets, and (iv) the
distribution of any earnings attributable to the Excluded Assets or any Rejected
Assets, which earnings were generated on and after April 1, 1995. Subject to
verification by Arthur Andersen LLP, as of December 31, 1994, the accumulated
previously-taxed earnings totaled approximately $30,523,615. For purposes of
(i), accumulated previously-taxed earnings shall also include earnings
attributable to tax-exempt income and earnings and profits and shall not be
reduced by any cost or expense incurred in connection with this Agreement, the
Exchange Agreement and the transactions contemplated hereby and thereby, but
shall be reduced by the adjusted tax basis of the Excluded Assets set forth in
items 8, 9, 10, 13, 14, 15 and 16 on Exhibit B.
xi
<PAGE>
"PERMITTED EXCEPTIONS" shall mean (i) any and all federal, state, local,
foreign and other real estate, property, ad valorem, transfer, license, excise
or other taxes, fees, general and special assessments or charges of any kind
which are a lien not yet delinquent, (ii) Encumbrances, including, without
limitation, encroachments, building or use restrictions, exceptions,
reservations or other limitations, which do not in any material respect
interfere with or impair the present and continued use of the Facilities in the
usual and normal conduct of the business of each of the Target Companies, the
Acquired Entities and the Joint Ventures, (iii) Encumbrances, including, without
limitation, encroachments, building or use restrictions, exceptions,
reservations or other limitations, which do not materially detract from the
value of the property or assets subject thereto, (iv) Encumbrances securing any
indebtedness, obligation or liability disclosed on the Balance Sheet, or (v)
matters disclosed on the Title Policies.
"PERMITTED TAX DISTRIBUTION" shall mean a distribution to be made to the
Target Company Shareholders in an aggregate amount equal to 39.6%, plus 3% with
regard to Illinois state income tax (less any federal income tax benefit related
to the payment of such Illinois state income tax), multiplied by the difference
between (i) all items of income attributable to the Target Companies required to
be included in the income of each such Target Company Shareholder during the
period on and after April 1, 1995, and (ii) all items of deduction or loss
attributable to the Target Companies during the period on and after April 1,
1995 that can reduce the income included in (i) without regard to the particular
circumstances of the particular shareholder. In determining (i) and (ii), any
items attributable to the Excluded Assets and any Rejected Assets shall not be
taken into account.
"PERSON" shall mean any individual, firm, corporation, partnership, limited
liability company, trust, unincorporated organization or other entity or a
Government Authority, and shall include any successor (by merger or otherwise)
of such Person.
"PINE HILLS DEVELOPMENT" shall mean Pine Hills Development, a Mississippi
general partnership.
"PINE HILLS II" shall mean Pine Hills Development II, a Mississippi general
partnership.
"PREFERRED STOCK" shall mean preferred stock, par value $0.01 per share, of
the Company.
"RAILROAD PASS" shall mean Railroad Pass Investment Group, a Nevada general
partnership.
"RBG" shall mean RBG, L.P., an Illinois limited partnership.
"REJECTED ASSETS" shall have the meaning specified in Section 5.13.
"REJECTED ASSETS NOTICE" shall have the meaning specified in Section 5.13.
"REGISTRATION RIGHTS AGREEMENT" shall mean the Registration Rights Agreement
by and among the Company and each of the Target Company Shareholders and the
Individuals, substantially in the form attached hereto as Exhibit "D".
"REPRESENTATIVES" shall mean, with respect to any Person, the directors,
officers, employees, agents or representatives of such Person.
"RICHARDSON" shall mean William A. Richardson, an individual.
xii
<PAGE>
"RIGHTS" shall mean the rights to purchase one one-hundredth (1/100th) of a
share of Series A Junior Participating Preferred Stock of the Company issued
pursuant to the Rights Agreement dated as of July 14, 1994, by and between the
Company and First Chicago Trust Company of New York.
"SCHAEFFER" shall mean Glenn W. Schaeffer, an individual.
"SEC REPORTS" shall have the meaning specified in Section 4.6.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, and the
Rules and Regulations promulgated thereunder.
"SENIOR EXECUTIVE COMPENSATION SCHEDULE" shall mean the senior executive
compensation schedule attached hereto as Exhibit "E".
"SENIOR EXECUTIVE EMPLOYMENT AGREEMENTS" shall mean a Senior Executive
Employment Agreement, substantially in the form attached hereto as Exhibit "F".
"SIMON" shall mean Peter A. Simon II, an individual.
"SIMON ASSIGNMENT AGREEMENT" shall mean the Simon Assignment Agreement,
substantially in the form attached hereto as "Exhibit A-3."
"SIMON INTEREST" shall mean Simon's interest in Alabama land.
"SPOUSAL CONSENT" shall mean the spousal consent attached hereto in the form
of Exhibit "G".
"STANDSTILL AGREEMENT" shall mean the Standstill Agreement by and among the
Company and each of the Target Company Shareholders and Schaeffer, substantially
in the form attached hereto as Exhibit "H".
"STOCK ISSUANCE" shall have the meaning specified in Section 2.2.
"SUBSEQUENT FINANCIALS" shall have the meaning specified in Section 5.1(u).
"SURVIVING CORPORATIONS" shall have the meaning specified in Section 2.1(a).
"TARGET COMPANIES" shall mean MSE, Inc., LCI, Inc., GSI, Inc., DGI, Inc.,
Aviation, Inc., Finance, Inc. and ODC.
"TARGET COMPANY SHAREHOLDERS" shall mean Michael S. Ensign, Richardson,
Belding and Simon.
"TITLE POLICIES" shall mean any title policies or title reports identified
in Schedule 3.21 hereto and delivered to the Company prior to the date hereof
with respect to any of the Facilities.
"THIRD PARTY VENTURERS" shall mean RBG, MRGS and Family Lands.
"THRESHOLD" shall have the meaning specified in Section 7.2.
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<PAGE>
"TRANSFERS" shall mean the transfer to the Company, pursuant to Section
2.1(b), of the Verchota Interest by Verchota, the Ensign Interests by Ensign and
the Simon Interest by Simon.
"VERCHOTA" shall mean Robert J. Verchota, an individual.
"VERCHOTA ASSIGNMENT AGREEMENT" shall mean the Agreement of Assignment,
substantially in the form attached hereto as Exhibit "A-1."
"VERCHOTA INTEREST" shall mean Verchota's interest in Railroad Pass.
"VICTORIA PARTNERS" shall mean Victoria Partners, a Nevada general
partnership.
B. RULES OF CONSTRUCTION
1. As used in this Agreement, the singular shall be deemed to refer to the
plural, the masculine gender shall be deemed to refer to the feminine and neuter
genders, and vice versa, as the context requires.
2. Unless otherwise expressly stated herein, each reference to any party in
this Agreement shall include such party's permitted successors and assigns.
3. The table of contents and headings of the various Articles and Sections
of this Agreement are for convenience of reference only and shall not modify,
define or limit any of the terms or provisions hereof.
ARTICLE II.
THE TRANSACTION
A. MERGERS AND TRANSFERS
1. MERGERS. At the Effective Time, upon the terms and subject to the
conditions of this Agreement, a Merger Sub shall merge with and into each of the
Target Companies pursuant to a Merger Agreement, in accordance with the
applicable provisions of Nevada law. Upon consummation of the Mergers, the
separate corporate existence of the Merger Subs shall cease, and each of the
Target Companies, as the surviving corporation in each of the Mergers
(collectively, the "SURVIVING CORPORATIONS"), shall continue its corporate
existence under the laws of the State of Nevada. Pursuant to the Merger
Agreements, all of the issued and outstanding shares of capital stock of the
Target Companies shall be exchanged for newly issued, fully paid and
nonassessable shares of Common Stock of the Company, as provided in Section 2.2,
and the capital stock of the Target Companies shall be cancelled. When the
Mergers have been effected, the Surviving Corporations shall thereupon and
thereafter possess all the rights, privileges, powers and franchises, of a
public as well as of a private nature, of the Merger Subs and the Target
Companies, and shall become subject to all the restrictions, disabilities and
duties of the Merger Subs and the Target Companies; and, all and singular, the
rights, privileges, powers and franchises of the Merger Subs and the Target
Companies, and all property, real, personal and mixed, and all debts due to any
of said Merger Subs and the Target Companies, on whatever account, as well for
stock subscriptions as well as all other choses in action belonging to each of
such corporations, shall become vested in the Surviving Corporations; and the
title to any real estate vested by deed or otherwise or any other interest in
real estate vested by any instrument or otherwise in any such Merger Subs or
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<PAGE>
Target Companies shall not revert or become in any way impaired by reason of the
Mergers; all of the foregoing in accordance with the applicable provisions of
Nevada law.
2. TRANSFERS. On the Closing Date, upon the terms and subject to the
conditions of this Agreement: (i) Verchota shall transfer the Verchota Interest
to the Company pursuant to the Verchota Assignment Agreement free and clear of
all Encumbrances (other than any liabilities arising as a general partner of
Railroad Pass), (ii) Ensign shall transfer the Ensign Interests to the Company
pursuant to the Ensign Assignment Agreement free and clear of all Encumbrances
and (iii) Simon shall transfer the Simon Interest to the Company pursuant to the
Simon Assignment Agreement free and clear of all Encumbrances.
3. ANCILLARY AGREEMENTS. On the Closing Date, upon the terms and subject
to the conditions of this Agreement: the Company and Verchota shall execute and
deliver the Verchota Assignment Agreement, the Company and Ensign shall execute
and deliver the Ensign Assignment Agreement, the Company and Simon shall execute
and deliver the Simon Assignment Agreement, the Company and each of the Target
Company Shareholders and the Individuals shall execute and deliver the
Registration Rights Agreement, each of the Circus Circus Senior Executives and
the Gold Strike Senior Executives and the Company shall execute and deliver a
Senior Executive Employment Agreement and each of the Target Company
Shareholders and Schaeffer and the Company shall execute and deliver the
Standstill Agreement.
B. CONSIDERATION FOR THE MERGERS AND THE TRANSFERS. In consideration of the
Mergers and the Transfers, the Company shall issue (the "STOCK ISSUANCE") fully
paid and nonassessable shares of its Common Stock to the Target Company
Shareholders. The total number of shares of Common Stock to be issued shall be
16,291,551 shares, plus cash of $11,839,535. The cash and shares of Common
Stock to be issued in the Stock Issuance shall be allocated among the Target
Company Shareholders and Verchota as follows:
<TABLE>
<CAPTION>
Total Consideration Total Shares Total Cash
<S> <C> <C> <C>
Michael S. Ensign 39.92616% 6,598,328 $2,324,600
Richardson 39.65520% 6,553,548 $2,308,823
Belding 9.89609% 1,635,459 $ 576,175
Simon 9.10194% 1,504,216 $ 529,937
Verchota 1.42061% 0 $6,100,000
</TABLE>
The Target Company Shareholders acknowledge that the shares of Common Stock to
be issued in the Stock Issuance will not be registered under the Securities Act
or under any state securities law and that they will be listed on the New York
Stock Exchange. Of the cash to be received by Ensign and Simon, $300,000 shall
be allocated to each of the Ensign Assignment Agreement and the Simon Assignment
Agreement.
C. CERTIFICATE OF INCORPORATION; BY-LAWS; DIRECTORS AND OFFICERS. The
Certificate of Incorporation and By-Laws of each of the Target Companies
surviving the Mergers shall be the Certificate of Incorporation and By-Laws of
each such Target Company, as in effect immediately prior to the Effective Time,
until thereafter amended as provided therein and under Nevada Law. The
following Persons shall be the officers and directors of the Company as the
parent corporation of the surviving corporations in the Merger until their
successors shall have been elected and qualified or until otherwise provided by
law or the Certificate of Incorporation or By-Laws of the Company:
xv
<PAGE>
<TABLE>
<CAPTION>
Name Position
- ------------------------ -------------------------------------------
<S> <C>
Tony Coelho Director, Class I
Carl F. Dodge Director, Class I
William M. Pennington Director, Class I
Arthur M. Smith, Jr. Director, Class III
Fred W. Smith Director, Class II
Clyde T. Turner Chairman of the Board, Class II, and Chief
Executive Officer
Michael S. Ensign Vice Chairman of the Board, (Class II or
III), and Chief Operating Officer
Glenn W. Schaeffer President, Chief Financial Officer and
Treasurer
William A. Richardson Director, (Class II or III), Executive
Vice
President
Kurt D. Sullivan Director, Class III and Senior Vice
President
Daniel N. Copp Senior Vice President
David R. Belding Senior Vice President and Secretary
Antonio C. Alamo Senior Vice President
Gregg H. Solomon Senior Vice President
Mike Sloan Senior Vice President and General Counsel
</TABLE>
D. CLOSING. The closing of the Mergers, the Transfers and the Stock Issuance
(the "CLOSING"), shall occur at the offices of the Company, 2880 Las Vegas Blvd.
South, Las Vegas, NV 89109 or at such other place as the parties hereto mutually
agree, on a date and at a time to be specified by the parties, which shall in no
event be later than 10:00 a.m., local time, on the fifth business day following
the satisfaction of the conditions set forth in Article 6 of this Agreement, or
on such other date as the parties hereto mutually agree (the "CLOSING DATE").
The closing of each of the Mergers, the Transfers and the Stock Issuance shall
be concurrent and mutually conditional.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF EACH
OF THE GOLD STRIKE PERSONS
Each of the Gold Strike Persons jointly and severally represents and warrants
to the Company that, as of the date of this Agreement:
A. ORGANIZATION AND QUALIFICATION OF EACH OF THE JOINT VENTURES. Each of the
Joint Ventures is duly formed and validly existing under the laws of its state
of formation and has full power and authority to conduct its business as and to
the extent now conducted and to own, use and lease its assets and properties.
Each of the Joint Ventures is duly qualified, licensed (excluding gaming and
liquor licenses, which are covered by Sections 3.27 and 3.28) or admitted to do
business in each jurisdiction in which the ownership, use or leasing of its
assets and properties, or the conduct or nature of its business, makes such
qualification, licensing or admission necessary, except where the failure to be
so qualified, licensed or admitted would not have a Material Adverse Effect.
xvi
<PAGE>
B. ORGANIZATION AND QUALIFICATION OF EACH OF THE ACQUIRED ENTITIES. Except
as set forth in Schedule 3.2, each of the Acquired Entities is duly formed and
validly existing under the laws of its state of formation and has full power and
authority to conduct its business as and to the extent now conducted and to own,
use and lease its assets and properties. Each of the Acquired Entities is duly
qualified, licensed (excluding gaming and liquor licenses, which are covered by
Sections 3.27 and 3.28) or admitted to do business in each jurisdiction in which
the ownership, use or leasing of its assets and properties, or the conduct or
nature of its business, makes such qualification, licensing or admission
necessary, except where the failure to be so qualified, licensed or admitted
would not have a Material Adverse Effect.
C. ORGANIZATION AND QUALIFICATION OF EACH OF THE TARGET COMPANIES. Each of
the Target Companies is a corporation duly organized, validly existing and in
good standing under the laws of the State of Nevada and has full corporate power
and authority to conduct its business as and to the extent now conducted and to
own, use and lease its assets and properties. Each of the Target Companies is
duly qualified, licensed (excluding gaming and liquor licenses, which are
covered by Sections 3.27 and 3.28) or admitted to do business and is in good
standing in each jurisdiction in which the ownership, use or leasing of its
assets and properties, or the conduct or nature of its business, makes such
qualification, licensing or admission necessary, except where the failure to be
so qualified, licensed or admitted and in good standing would not have a
Material Adverse Effect.
D. OWNERSHIP OF EACH OF THE JOINT VENTURES. The ownership of each of the
Joint Ventures is as follows:
<TABLE>
<CAPTION>
ENTITY PARTNERS/ OWNERSHIP
MEMBERS INTEREST
<S> <C> <C>
Lakeview Gaming Lakeview Company 16.66 2/3%
Railroad Pass 16.66 2/3%
Jean Development 16.66 2/3%
Jean West 16.66 2/3%
Jean North 16.66 2/3%
Pioneer Investment Group 16.66 2/3%
Elgin Riverboat Resort Nevada Landing 50%
RBG 50%
Pine Hills Development Pine Hills II 90%
Family Lands 10.00%
Victoria Partners GSLV 50%
MRGS Corp. 50%
Evansville Landing Indiana LLC 25%
HCCC Corp.,
a Delaware corporation 25%
Ellis Indiana Corporation,
an Indiana corporation 25%
Evansim Entertainment, L.L.C.,
</TABLE>
xvii
<PAGE>
<TABLE>
<S> <C> <C>
an Indiana limited
liability company 25%
</TABLE>
All of the foregoing partnership or membership interests are duly authorized,
validly issued, fully paid and nonassessable. Except as set forth in Schedule
3.4, and except pursuant to this Agreement or the Ancillary Agreements, there
are no outstanding options, warrants, subscriptions, rights (including "phantom"
rights), preemptive rights or other contracts, commitments, calls,
understandings or arrangements, including any right of conversion or exchange
under any outstanding security, instrument or agreement (together, "OPTIONS"),
obligating any of the Joint Ventures or, to the knowledge of the Gold Strike
Persons, any partner or member, to issue, sell or assign any partnership or
membership interests or to grant, extend or enter into any Option with respect
thereto. Except as set forth in Schedule 3.4, none of the Joint Ventures has
any commitments or obligations or rights to issue, purchase or redeem any of its
partnership or membership interests. Except as set forth in Schedule 3.4, each
of the Acquired Entities owns of record the equity interests in each of the
Joint Ventures listed in this Section for such Acquired Entity, free and clear
of any and all Encumbrances.
E. OWNERSHIP OF EACH OF THE ACQUIRED ENTITIES. The ownership of each of the
Acquired Entities is as follows:
<TABLE>
<CAPTION>
ENTITY PARTNERS/ OWNERSHIP
MEMBERS INTEREST
<S> <C> <C>
Railroad Pass MSE, Inc. 30%
LCI, Inc. 20%
GSI, Inc. 10%
Verchota 40%
Jean Development MSE, Inc. 40%
LCI, Inc. 40%
GSI, Inc. 20%
Jean West MSE, Inc. 40%
LCI, Inc. 40%
GSI, Inc. 12%
DGI, Inc. 8%
Nevada Landing MSE, Inc. 40%
LCI, Inc. 40%
GSI, Inc. 5%
DGI, Inc. 15%
Jean North MSE, Inc. 38.5%
LCI, Inc. 38.5%
GSI, Inc. 5.0%
DGI, Inc. 9.0%
Glenn W. Schaeffer 9.0%
</TABLE>
xviii
<PAGE>
<TABLE>
<S> <C> <C>
Pine Hills II MSE, Inc. 50.5%
LCI, Inc. 32.0%
GSI, Inc. 7.5%
DGI, Inc. 2.5%
Glenn W. Schaeffer 7.5%
Indiana LLC MSE, Inc. 40%
LCI, Inc. 36%
GSI, Inc. 10%
DGI, Inc. 2%
Glenn W. Schaeffer 10%
Greg H. Solomon 2%
GSLV MSE, Inc. 39.00%
LCI, Inc. 39.00%
GSI, Inc. 6.50%
DGI, Inc. 2.50%
Glenn W. Schaeffer 5.25%
Gregg H. Solomon 1.00%
Antonio C. Alamo 5.25%
Anthony Korfman 0.75%
William Ensign 0.75%
Fuel MSE, Inc. 16.66 2/3%
LCI, Inc. 16.66 2/3%
GSI, Inc. 16.66 2/3%
ODC 50.000%
Fuel West MSE, Inc. 40%
LCI, Inc. 40%
GSI, Inc. 12%
ODC 8%
</TABLE>
All of the foregoing partnership or membership interests are duly authorized,
validly issued, fully paid and nonassessable. Except as set forth in Schedule
3.5, and except pursuant to this Agreement or the Ancillary Agreements, there
are no outstanding Options obligating any of the Acquired Entities or, to the
knowledge of the Gold Strike Persons, any partner or member, to issue, sell or
assign any partnership or membership interests or to grant, extend or enter into
any Option with respect thereto. Except as set forth in Schedule 3.5, none of
the Acquired Entities has any commitments or obligations or rights to issue,
purchase or redeem any of its partnership or membership interests. Except as
set forth in Schedule 3.5, each of the Target Companies owns of record the
equity interests in each of the Acquired Entities listed in this Section for
such Target Company, free and clear of any and all Encumbrances. Except as set
forth in Schedule 3.5, each of the Individuals and Verchota owns of record the
equity interests in the Acquired Entities listed in this Section for himself,
free and clear of any and all Encumbrances.
xix
<PAGE>
F. CAPITALIZATION OF EACH OF THE TARGET COMPANIES. Michael S. Ensign is the
sole shareholder of MSE, Inc.; Richardson is the sole shareholder of LCI, Inc.;
Belding is the sole shareholder of GSI, Inc.; Simon is the sole shareholder of
DGI, Inc. and ODC; Michael S. Ensign and Richardson are the sole shareholders of
Aviation, Inc.; and Michael S. Ensign, Richardson and Belding are the sole
shareholders of Finance, Inc. The authorized capital stock of each of the
Target Companies is as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
MSE, Inc. 20,000 shares of Common Stock, no par value
LCI, Inc. 20,000 shares of Common Stock, no par value
GSI, Inc. 20,000 shares of Common Stock, no par value
DGI, Inc. 2,500 shares of Common Stock, no par value
Aviation, Inc. 2,500 shares of Common Stock, no par value
Finance, Inc. 2,500 shares of Common Stock, no par value
ODC 2,500 shares of Common Stock, no par value
</TABLE>
Except as set forth in Schedule 3.6, the Target Company Shareholders own all of
the issued and outstanding capital stock of each of the Target Companies, free
and clear of all Encumbrances, as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Michael S. Ensign: 10,000 shares of Common Stock of MSE, Inc.
500 shares of Common Stock of Aviation, Inc.
40 shares of Common Stock of Finance, Inc.
Richardson: 1,000 shares of Common Stock of LCI, Inc.
500 shares of Common Stock of Aviation, Inc.
40 shares of Common Stock of Finance, Inc.
Belding: 1,500 shares of Common Stock of GSI, Inc.
20 shares of Common Stock of Finance, Inc.
Simon: 1,000 shares of Common Stock of DGI, Inc.
1,000 shares of Common Stock of ODC
</TABLE>
All of such shares are duly authorized, validly issued, fully paid and
nonassessable. Except as set forth in Schedule 3.6, and except pursuant to this
Agreement or the Ancillary Agreements, there are no outstanding Options
obligating any of the Target Companies to issue or sell any shares of capital
stock or to grant, extend or enter into any Option with respect thereto. Except
as set forth in Schedule 3.6, none of the Target Companies has any commitments
or obligations or rights to purchase or redeem any shares of its capital stock.
Except as set forth in Schedule 3.6, each of the Target Company Shareholders
owns of record the shares in the Target Companies listed in this Section for
such Target Company Shareholder, free and clear of any and all Encumbrances.
G. SUBSIDIARIES. Except as set forth in Schedule 3.7, none of the Target
Companies has any wholly or partially owned subsidiaries nor, except as set
forth in Sections 3.4 and 3.5, any equity or debt investments in any
corporation, partnership, joint venture, limited liability company or other
entity.
H. AUTHORITY OF EACH OF THE TARGET COMPANIES. Each of the Target Companies
has full power and authority to enter into this Agreement and each of the
Ancillary Agreements to which it is a party and to perform its obligations
hereunder and thereunder and to consummate the transactions
xx
<PAGE>
contemplated hereby and thereby. The execution and delivery of this Agreement
and each of the Ancillary Agreements to which it is a party, the performance by
such Target Company of its obligations hereunder and thereunder and the
consummation by such Target Company of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action on the part
of such Target Company. Each of this Agreement and the Ancillary Agreements to
which it is a party has been (or, when executed and delivered, will have been)
duly and validly executed and delivered by each of the Target Companies and
constitutes (or, when executed and delivered, will constitute) a legal, valid
and binding obligation of each of the Target Companies enforceable against such
Target Company in accordance with its terms, except to the extent that such
enforceability may be limited by bankruptcy, insolvency, moratorium or other
laws affecting the enforcement of creditor's rights generally or by general
equitable principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
I. AUTHORITY OF EACH OF THE TARGET COMPANY SHAREHOLDERS. Except as set forth
in Schedule 3.9, each of the Target Company Shareholders has legal capacity to
enter into this Agreement and each of the Ancillary Agreements to which it is a
party and to perform his obligations hereunder and thereunder and to consummate
the transactions contemplated hereby and thereby. Except as set forth in
Schedule 3.9 each of this Agreement and the Ancillary Agreements to which it is
a party has been (or, when executed and delivered, will have been) duly and
validly executed and delivered by each of the Target Company Shareholders and
constitutes (or, when executed and delivered, will constitute) a legal, valid
and binding obligation of each of the Target Company Shareholders enforceable
against each of them in accordance with its terms, except to the extent that
such enforceability may be limited by bankruptcy, insolvency, moratorium or
other laws affecting the enforcement of creditor's rights generally or by
general equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
J. AUTHORITY OF THE INDIVIDUALS AND VERCHOTA. Except as set forth in
Schedule 3.10, each of the Individuals and Verchota has the legal capacity to
enter into this Agreement and each of the Ancillary Agreements to which he is a
party and to perform his obligations hereunder and thereunder and to consummate
the transactions contemplated hereby and thereby. Except as set forth in
Schedule 3.10, each of this Agreement and the Ancillary Agreements to which he
is a party has been (or, when executed and delivered, will have been) duly and
validly executed and delivered by each of the Individuals and Verchota and
constitutes (or, when executed and delivered, will constitute) a legal, valid
and binding obligation of each of the Individuals and Verchota enforceable
against each of the Individuals and Verchota in accordance with its terms,
except to the extent that such enforceability may be limited by bankruptcy,
insolvency, moratorium or other laws affecting the enforcement of creditor's
rights generally or by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
K. NO VIOLATION. Except as set forth in Schedule 3.11, none of the Target
Companies is in default under or in violation of any provision of its Charter
Documents, and none of the Target Companies is in default beyond any applicable
grace period under or in violation (other than technical or other similar
violations that could not cause a default under such Instrument) of any material
agreement, indenture, contract, lease, sublease, loan agreement, note,
restriction, obligation or liability (each an "INSTRUMENT") to which it is a
party or by which it is bound or to which any of its properties or assets is
subject. Except as set forth in Schedule 3.11, none of the Acquired Entities or
Joint Ventures is in default beyond any applicable grace period under or in
violation of any provisions of its Organizational Documents, and none of the
Acquired Entities or the Joint Ventures is in default under or in violation of
(other than technical or
xxi
<PAGE>
other similar violations that could not cause a default under such Instrument)
any Instrument to which it is a party or by which it is bound or to which any of
its properties or assets are subject. Except as set forth in Schedule 3.11,
none of Verchota's or the Target Company Shareholders' execution and delivery of
this Agreement, and none of Verchota's, the Individuals' or the Target Company
Shareholders' execution and delivery of each of the Ancillary Agreements to
which it is a party, nor the consummation of the transactions contemplated
hereby and thereby, will conflict with or breach any Charter Document or
Instrument of any of the Target Companies or any Organizational Document or
Instrument of any of the Acquired Entities or the Joint Ventures, or cause any
such default or violation, or accelerate or allow any Person to accelerate,
terminate, modify or cancel any material rights under any Instrument to which
any of the Target Companies, the Acquired Entities or the Joint Ventures is a
party or is subject, or will result in the creation of any material Encumbrance
on the assets or properties of any of the Target Companies, the Acquired
Entities or the Joint Ventures. Except as set forth in Schedule 3.11, such
execution, delivery and consummation will not violate or breach or constitute a
default under any material law, rule, judgment, order, decree or regulation of
any Governmental Authority to which any of Verchota, the Individuals, the Target
Company Shareholders, the Target Companies, the Acquired Entities or the Joint
Ventures is a party or is subject or to which any of the Target Companies', the
Acquired Entities' or the Joint Ventures' properties, or Included Assets, are
subject.
L. CONSENTS AND APPROVALS. Except as set forth in Schedule 3.12, and except
as noted in the following sentence, no consent, authorization, order, license,
permit, or approval of (or filing or registration with) any Governmental
Authority or any other Person is required in connection with each of Verchota's,
the Target Companies' and the Target Company Shareholders' execution, delivery
and performance of this Agreement and each of Verchota's, the Individuals', the
Target Companies' and the Target Company Shareholders' execution, delivery and
performance of each of the Ancillary Agreements to which it is a party. The
exceptions referred to above are: (i) filings and approvals required under
Nevada Law in respect of corporate mergers, (ii) filings and approvals of pre-
merger notification and report forms and related documents under the HSR Act,
(iii) filings with and the receipt of all required prior approvals, consents,
authorizations, orders, permits, findings of suitability and licenses from,
Applicable Gaming Authorities under the Gaming Laws, (iv) transfer
notifications, filings or approvals that may be required under any state
Environmental Law, including without limitation, the states of Illinois and
Indiana, and (v) where the failure to obtain such non-gaming consents,
authorizations, orders, licenses or permits, or to make such filings or
registrations, individually or in the aggregate, would not have a Material
Adverse Effect.
M. CORPORATE INSTRUMENTS AND RECORDS. Each of the Target Companies' Charter
Documents previously furnished to the Company is correct and complete and each
reflects all amendments made through the date of this Agreement. Each of the
Target Companies' minute books and stock certificate books and ledgers as made
available to the Company for inspection are substantially correct and complete,
and contain the true signatures of the Persons purporting to have signed them.
All material corporate actions taken by each of the Target Companies since
incorporation have been duly authorized or ratified by all requisite action.
N. PARTNERSHIP INSTRUMENTS. Each of the Acquired Entities' and the Joint
Ventures' Organizational Documents previously furnished to the Company is
correct and complete and each reflects all amendments made through the date of
this Agreement.
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O. TAX MATTERS. Each of the Target Companies is currently and at all times
since January 1, 1987 has been qualified as an "S" corporation under the Code.
None of the material tax returns of any of the Target Companies, the Acquired
Entities or the Joint Ventures is currently under examination by any taxing
authority, and no such examination has been proposed. Each of the Target
Companies, the Acquired Entities and the Joint Ventures has duly filed all
material tax returns that it is required to file. Each of the Target Companies,
the Acquired Entities and the Joint Ventures has paid (or made adequate
provision for payment of) all taxes shown as due on those returns as well as all
material taxes, interest, penalties, assessments and deficiencies due or claimed
due from foreign, federal, state or local taxing authorities (including, without
limitation, taxes on properties, income, franchises, licenses, sales and
payrolls). The filed returns are correct in all material respects. Each of the
Target Companies', the Acquired Entities' and the Joint Ventures' federal income
tax returns have been audited by the Internal Revenue Service as disclosed on
Schedule 3.15 hereto, and all additional taxes and assessments resulting from
such audits have been paid by each of the Target Companies, the Acquired
Entities and the Joint Ventures, as the case may be. The provision for taxes on
the Balance Sheet and the Elgin Balance Sheet is adequate to cover all accrued
and unpaid taxes as of the Balance Sheet Date, and no material deficiencies for
any taxes have been proposed in writing or assessed which are not reserved for.
None of the Target Companies, the Acquired Entities or the Joint Ventures has
granted any extension of limitation periods applicable to audits or claims by
any taxing authority.
P. FINANCIAL STATEMENTS.
(A) COMBINED FINANCIALS. The Target Companies have previously delivered to
the Company copies of the Target Companies' (excluding ODC and investments in
Fuel and Fuel West), the Acquired Entities' and the Joint Ventures' (except that
the investment in the Elgin Riverboat Resort is recorded under the equity method
of accounting) draft audited combined financial statements for their year ended
December 31, 1994 (the "Draft Year-End Financials"), and draft unaudited
combined financial statements for the entities provided therein for the two
months ended February 28, 1995 (the "Draft Interim Financials"). The Draft
Year-End Financials fairly present in all material respects the financial
position and results of operations of the Target Companies (excluding ODC and
investments in Fuel and Fuel West), the Acquired Entities and the Joint Ventures
on a combined basis in accordance with generally accepted accounting principles
applied on a basis consistent with prior periods, except as may be indicated in
the notes or schedules thereto, and except (i) the income of Fuel and Fuel West
is presented in discontinued operations and (ii) the financial position and
results of operations of the Elgin Riverboat Resort are recorded under the
equity method of accounting. When delivered pursuant to Section 5.17, the
audited versions of the Draft Year-End Financials will have been audited by, and
will include the related opinions of, Arthur Andersen LLP, independent public
accountants, which will place reliance on Coopers & Lybrand with regard to the
investment in, and equity income derived from, the Elgin Riverboat Resort. The
Draft Interim Financials (and the Subsequent Financials will when delivered)
fairly present in all material respects the net income, assets, liabilities and
equity for the entities provided therein, except (i) such statements do not
reflect write-offs related to the aborted initial public offering of the Target
Companies (excluding ODC), costs related to applications for a gaming license
for Evansville Landing (which applications were denied) or accruals for
construction payables of Victoria Partners and (ii) the financial position and
results of operations of the Elgin Riverboat Resort are recorded under the
equity method of accounting. The combined balance sheets included in the Draft
Year-End Financials fairly present in all material respects the combined
financial condition of the entities set forth therein as at their respective
dates, and the statements of income and retained earnings and of cash flows,
fairly present in all
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material respects the combined operations of the entities set forth therein for
the periods ended on the respective dates of the related balance sheets.
(B) ELGIN RIVERBOAT RESORT FINANCIALS. The Target Companies have
previously delivered to the Company copies of the Elgin Riverboat Resort's
audited financial statements for its year ended December 31, 1994 (the "Elgin
Year-End Financials"), and draft unaudited financial statements for such entity
for the two months ended February 28, 1995 (the "Elgin Draft Interim
Financials"). The Elgin Year-End Financials fairly present in all material
respects the financial position and results of operations of the Elgin Riverboat
Resort in accordance with generally accepted accounting principles applied on a
basis consistent with prior periods, except as may be indicated in the notes or
schedules thereto, and have been audited by, and include the related opinions
of, Coopers & Lybrand, independent public accountants. The Elgin Draft Interim
Financials (and the Subsequent Financials will when delivered) fairly present in
all material respects the net income, assets, liabilities and equity for the
Elgin Riverboat Resort. The balance sheets included in the Elgin Year-End
Financials fairly present in all material respects the Elgin Riverboat Resort's
financial condition as at their respective dates, and the statements of
operations and partners equity and cash flows, fairly present in all material
respects the Elgin Riverboat Resort's operations for the periods ended on the
respective dates of the related balance sheets.
Q. ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed on Schedule 3.17,
none of the Target Companies, the Acquired Entities or the Joint Ventures
(except for Fuel, Fuel West and ODC) has any liabilities of any nature, whether
absolute, contingent or otherwise, and whether due or to become due, except (i)
those disclosed or reserved against in the Target Companies', the Acquired
Entities' or the Joint Ventures' combined balance sheet as at December 31, 1994
(the "BALANCE SHEET") included in the Draft Year-End Financials and which are
not material in amount, including the footnotes thereto, (ii) those disclosed or
reserved against in the Elgin Riverboat Resort's balance sheet as at December
31, 1994 (the "ELGIN BALANCE SHEET") included in the Elgin Year-End Financials
and which are not material in amount, including the footnotes thereto, (iii)
those arising in the ordinary course of business and consistent with past
practice after the Balance Sheet Date, (iv) those relating to guarantees of
completion of any project, and (v) any other contingent liabilities that would
not materially adversely affect any of the Target Companies, the Acquired
Entities or the Joint Ventures (excluding the Development Entities).
R. NO MATERIAL ADVERSE CHANGES. Since the Balance Sheet Date, none of the
following has occurred.
1. CONDITION. Any change or effect (or any development that, insofar as
can reasonably be foreseen, is likely to result in any change or effect) or
threatened change which has had, or would reasonably be expected to have, a
Material Adverse Effect.
2. DIVIDEND; REDEMPTION. Except as set forth in Schedule 3.18, the
declaration, setting aside or payment of any dividend or other distribution in
respect of any shares of the Target Companies' capital stock or the Acquired
Entities' or Joint Ventures' partnership or membership capital or interests
(including without limitation any distributions by the Target Companies to their
respective stockholders representing any of the accumulated earnings of such
Target Companies subsequent to March 31, 1995 but excluding any Permitted
Distribution), or the purchase, redemption, issue, sale or other disposition of
any such shares or capital or interests, or the sale or grant of any options,
warrants or other rights to purchase or convert into shares of capital stock or
capital or interests or indebtedness of any of the Target Companies, the
Acquired Entities or the Joint Ventures.
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3. SECURITY INTEREST. Except as set forth in Schedule 3.18, any mortgage
or pledge of, or creation of any Encumbrance respecting, any material property
or assets of any of the Target Companies, the Acquired Entities or the Joint
Ventures (excluding the Development Entities), except for Encumbrances for
current taxes, payment of which is not yet delinquent, and security interests
normally arising in the ordinary course of business.
4. CASUALTY. Any damage, destruction or loss, whether or not covered by
insurance, materially adversely affecting the material properties or operations
of any of the Target Companies, the Acquired Entities or the Joint Ventures
(excluding the Development Entities).
5. ASSET DISPOSITION. Except as set forth in Schedule 3.18, any sale,
lease, transfer or assignment of any material asset (tangible or intangible) of
any of the Target Companies, the Acquired Entities or the Joint Ventures
(excluding the Development Entities), except for a fair consideration, in the
ordinary course of business or in a Permitted Distribution.
6. INSTRUMENT CHANGES. Except as set forth in Schedule 3.18, authorization
or accomplishment of any change in the Charter Documents or Organizational
Documents of any of the Target Companies, the Acquired Entities or the Joint
Ventures.
7. CLAIMS DISPOSITION. Any cancellation, settlement or compromise of any
claim or debt due to or owing to any of the Target Companies, the Acquired
Entities or the Joint Ventures, other than in the ordinary course of business.
8. RELEASE OF RIGHTS. Any waiver or release of any rights of value of any
of the Target Companies, the Acquired Entities or the Joint Ventures, other than
in the ordinary course.
9. LONG-TERM CONTRACTS. Except as set forth in Schedule 3.18, negotiation
or execution of any material arrangement, agreement or understanding to which
any of the Target Companies, the Acquired Entities or the Joint Ventures is a
party which cannot be terminated by it on notice of 90 days or less without cost
or penalty, other than in the ordinary course of business.
10. LOANS; ETC. Any material loan, or other transaction not in the
ordinary course of business, with any Person who is an officer, director,
shareholder, partner (other than the Third Party Venturers) or member of any of
the Target Companies, the Acquired Entities or the Joint Ventures, or who is an
Affiliate or Associate of such a Person, giving rise to any claim between that
Person and any of the Target Companies, the Acquired Entities or the Joint
Ventures.
11. COMPENSATION INCREASES. Any increase in salary, bonus, fringe benefit,
or incentive or other compensation payable or to become payable to any officer,
director, employee or other Person receiving compensation of any nature from any
of the Target Companies, the Acquired Entities or the Joint Ventures or any
entities controlled by the foregoing, except in the ordinary course of business;
or any increase in the number of shares or partnership or membership interests
obtainable under, or acceleration of the time of exercisability of, any stock or
partnership option, stock bonus or similar plan of any of the Target Companies,
the Acquired Entities or the Joint Ventures.
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12. CAPITAL EXPENDITURES. Except as set forth in Schedule 3.18, any
capital expenditures other than in the ordinary course of business by any of the
Target Companies, the Acquired Entities or the Joint Ventures.
13. ACCOUNTING PROCEDURE. Any change in any accounting practice or
procedure of any of the Target Companies, the Acquired Entities or the Joint
Ventures.
S. GUARANTEES. Except as set forth in Schedule 3.19, none of the Target
Companies, the Acquired Entities or the Joint Ventures has any liability as
guarantor or contingent obligor for any obligation of any other Person (other
than the Target Companies, the Acquired Entities or the Joint Ventures). Except
as set forth in Schedule 3.19, no material assets owned by any of the Target
Companies, the Acquired Entities or the Joint Ventures (excluding the
Development Entities other than Pine Hills II) are or have been pledged,
hypothecated, delivered for safekeeping, subjected to a security interest or
otherwise made available in any way to secure payment or performance of any
obligation of a Person other than any of the Target Companies, the Acquired
Entities or the Joint Ventures.
T. LITIGATION. Except as set forth in Schedule 3.20, there is no Action
pending or, to the knowledge of each of the Target Company Shareholders,
threatened against, (i) any of the Target Companies, the Acquired Entities, or
the Joint Ventures, (ii) any officer, director or shareholder, or to the
knowledge of the Gold Strike Persons, partner or member of, any of the Target
Companies, the Acquired Entities or the Joint Ventures as such, (iii) any
benefit plan for employees, officers or directors or any fiduciary or
administrator thereof or (iv) any of the transactions contemplated by this
Agreement or the Ancillary Agreements. None of the Target Companies, the
Acquired Entities or the Joint Ventures is in default with respect to any
material judgment, order, writ, injunction or decree of any Governmental
Authority, and there are no unsatisfied judgments against any of the Target
Companies, the Acquired Entities or the Joint Ventures or the businesses or
activities of any of the Target Companies, the Acquired Entities or the Joint
Ventures. There is not a reasonable likelihood of an adverse determination of
any pending Actions which would, individually or in the aggregate, have a
Material Adverse Effect.
U. NATURE OF BUSINESS; INCLUDED ASSETS. Except for the Acquired Entities'
Businesses, none of the Acquired Entities or the Joint Ventures engage or
participate in or conduct any other business. All of the businesses,
properties, assets and rights of any kind, whether tangible or intangible, real
or personal and constituting, or used or useful in connection with, or related
to, the Acquired Entities' Businesses, except the Excluded Assets and the
Minority Interests (such assets being referred to herein as the "INCLUDED
ASSETS") are being transferred by the Target Company Shareholders indirectly to
the Company pursuant to this Agreement.
1. TITLE TO INCLUDED ASSETS, ETC. - PRIOR TO THE CONSUMMATION OF THE
MERGERS. Except as set forth in Schedule 3.21(a), and subject only to Permitted
Exceptions, each of the Target Companies, the Acquired Entities and the Joint
Ventures has good and marketable title to, or a valid leasehold interest in, the
Included Assets. There are no pending or, to the knowledge of the Target
Company Shareholders, threatened condemnation proceedings relating to any of the
Facilities. No material improvements, equipment or other assets owned or leased
by the Acquired Entities, the Target Companies or the Joint Ventures at the
Facilities are subject to any commitment or other arrangement for their sale or
lease to third parties.
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2. TITLE TO ASSETS, ETC. - SUBSEQUENT TO THE CONSUMMATION OF THE MERGERS.
Upon consummation of the Mergers, the Transfers and the transactions
contemplated by the Exchange Agreement, the Company shall hold all of the right,
title and interest in and to all of the Included Assets held by the Target
Companies, the Acquired Entities and the Joint Ventures prior to such Mergers,
Transfers and transactions free and clear of any Encumbrances (except
Encumbrances created by the Company) subject to Permitted Exceptions, and none
of the consummation of the Mergers, the Transfers or the consummation of the
transactions contemplated by the Exchange Agreement, nor the dissolution and
termination of the Acquired Entities shall have any material adverse affect on
any such material Included Assets, or the ownership thereof.
V. CONDITION OF TANGIBLE INCLUDED ASSETS. The Facilities and Fixtures and
Equipment are in good operating condition and repair (except for ordinary wear
and tear and any defect the cost of repairing which would not be material), are
sufficient for the operation of the respective businesses of each of the Target
Companies, the Acquired Entities and the Joint Ventures as presently conducted.
W. CONTRACTS. All contracts and agreements of any nature to which any of the
Target Companies, the Acquired Entities or the Joint Ventures is a party and
which are material to the business, assets or properties of any of the Target
Companies, the Acquired Entities or the Joint Ventures taken as a whole are duly
and validly executed by all parties, are in full force and effect as of the date
of this Agreement and will be in full force and effect at the Effective Time.
All such contracts and agreements are identified on Schedule 3.23 hereto. None
of the Target Companies, the Acquired Entities or the Joint Ventures is in
default (either after notice or the passage of time or both) of such contracts
or agreements (other than technical or other similar violations that could not
cause a default under such contracts and agreements) and, to the knowledge of
the Gold Strike Persons, no other Person who is a party to such contracts or
agreements is in default (either after notice or the passage of time or both)
thereunder. All such contracts and agreements will continue, after the
Effective Time, to be binding in accordance with their respective terms until
their respective expiration dates, except for those contracts or agreements that
would expire by their terms prior to the Effective Time.
X. LABOR AND EMPLOYMENT MATTERS. (i) None of the Target Companies, the
Acquired Entities or the Joint Ventures is a party to any collective bargaining
agreement or negotiations with any Person or group with respect to any such
agreement; (ii) none of the Target Companies, the Acquired Entities or the Joint
Ventures knows of any pending, or is now experiencing any strike, grievance,
unfair labor practice claim; (iii) none of the Target Companies, the Acquired
Entities or the Joint Ventures knows of the filing by any employee or employee
group seeking recognition as a collective bargaining representative or unit with
respect to any of the Target Companies, the Acquired Entities or the Joint
Ventures; (v) each of the Target Companies, the Acquired Entities and the Joint
Ventures has complied in all material respects with applicable laws and
regulations relating to employment, civil rights and equal employment
opportunities.
Y. EMPLOYEE PLAN MATTERS. Schedule 3.25 hereto identifies each contract or
agreement of the following nature, to which any of the Target Companies, the
Acquired Entities or the Joint Ventures is a party: (i) employment agreements,
(ii) noncompetition agreements, (iii) consulting agreements, (iv) incentive
compensation plans, agreements or arrangements, (v) pension and profit-sharing
plans, agreements or arrangements, (vi) bonus plans, agreements or arrangements,
(vii) stock purchase or option plans, agreements or arrangements, (viii) medical
benefit, hospitalization, disability or other insurance plans, policies,
agreements or arrangements, (ix) other employee fringe benefit or welfare plans,
policies,
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agreements or arrangements, and (x) parachute, severance or termination pay
plans, policies, agreements or arrangements. With respect to each of the plans,
policies, agreements or arrangements described in clauses (v) through (x) of the
preceding sentence, (i) none is subject to Title IV of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") or Section 412 of the Code,
(ii) there is no unfunded liability of any of the Target Companies, the Acquired
Entities or the Joint Ventures under ERISA, (iii) none provides for the payment
of post-termination or post-retirement medical benefits except to the extent
required by Part 6 of Title I of ERISA, (iv) none of the Target Companies, the
Acquired Entities or the Joint Ventures has ever terminated its participation in
or withdrawn thereunder under circumstances resulting (or that might result) in
liability to any Governmental Authority, the fund by which it is funded, or the
employees (or beneficiaries) for whose benefit it is maintained, (v) there has
been no "reportable event" of the nature described in ERISA Section 4043(b) that
has resulted or may result in liability of any of the Target Companies, the
Acquired Entities or the Joint Ventures and (vi) each has been maintained in all
material respects in compliance with its terms and with the requirements
prescribed by any and all applicable statutes, orders, rules and regulations,
including but not limited to ERISA and the Code. None of the Target Companies,
the Acquired Entities or the Joint Ventures is, or has been during the preceding
five years, a member of a "controlled group of corporations" or under "common
control" (as defined in Section 414(b) or (c) of the Code) with any entity or
trade or business, other than any of the other Target Companies, Acquired
Entities or Joint Ventures, which has maintained a plan, policy or arrangement
which is or has been subject to any part of ERISA.
Z. INSURANCE. Each of the Target Companies, the Acquired Entities and the
Joint Ventures has valid, outstanding and enforceable policies of insurance
issued by reputable insurers covering its material properties, assets and
business against risks of the nature normally insured against by Persons in the
same or similar lines of businesses, in coverage amounts normally carried by
such Persons. Each of the Target Companies, the Acquired Entities and the Joint
Ventures has had general third-party liability coverage continuously in effect
for at least five years. Schedule 3.26 hereto lists information about each
policy providing fire, theft, casualty, liability (including officers and
directors liability) or other coverage under which any of the Target Companies,
the Acquired Entities and the Joint Ventures is the named insured. All such
policies will remain in effect at least through the Effective Time.
AA. COMPLIANCE WITH LAWS. Except as set forth in Schedule 3.27, none of the
Target Companies, the Acquired Entities and the Joint Ventures nor any of their
respective officers, directors or shareholders or, to the knowledge of the Gold
Strike Persons, partners, members, agents or employees has failed to comply in
any respect with all applicable laws and regulations of foreign, federal, state
and local Governmental Authorities applicable to the businesses conducted by any
of the Target Companies, the Acquired Entities and the Joint Ventures (including
without limitation all Gaming Laws), or applicable to the properties owned or
leased and used by any of the Target Companies, the Acquired Entities and the
Joint Ventures, nor is any of the Target Company Shareholders aware of any claim
of violation, or of any actual violation, of any such laws and regulations, by
any of the Target Companies, the Acquired Entities and the Joint Ventures,
except where such failure or violation (whether actual or claimed) would not
have a Material Adverse Effect. None of the Target Companies, the Acquired
Entities and the Joint Ventures nor any employee, officer, director or
shareholder or, to the knowledge of the Gold Strike Persons, member or partner
thereof, has received any written claim, demand, notice, complaint, court order
or administrative order from any Governmental Authority in the past three years,
asserting that a license of it or them, as applicable, under any Gaming Laws
should be revoked or suspended.
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AB. POSSESSION OF FRANCHISES, LICENSES, ETC. Except as set forth in Schedule
3.28, each of the Target Companies, the Acquired Entities and the Joint Ventures
possesses all franchises, certificates, licenses, permits and other
authorizations from Governmental Authorities and all patents, trademarks,
service marks, trade names, copyrights, licenses and other rights, restrictions,
that are necessary to each of the Target Companies, the Acquired Entities and
the Joint Ventures for the present ownership, maintenance and operation of its
business, properties and assets (including without limitation all gaming and
liquor licenses), except where the failure to possess such franchises,
certificates, licenses, permits, and other authorizations, patents, trademarks,
service marks, trade names, copyrights, licenses and other rights (other than
those required to be obtained by Applicable Gaming Authorities) would not have a
Material Adverse Effect; and none of the Target Companies, the Acquired Entities
or the Joint Ventures is in violation of any thereof, except where such
violation would not have a Material Adverse Effect.
AC. NO BROKER, FINDER OR UNDERWRITER. Except as set forth in Schedule 3.29,
none of the Target Companies, the Acquired Entities or the Joint Ventures has
negotiated or contracted with, or obligated itself to, any Person for brokers'
or finders' fees in connection with any of the transactions contemplated by this
Agreement and the Ancillary Agreements. Except as set forth in Schedule 3.29,
none of the Target Companies, the Acquired Entities or the Joint Ventures has
contracted with, or obligated itself to, any Person, firm or other entity for
any fees or any other obligations (other than reimbursement for expenses)
arising from any possible underwriting or offering of securities with respect to
any of the Target Companies, the Acquired Entities or the Joint Ventures which
will survive the Closing.
AD. ENVIRONMENTAL MATTERS.
1. Each of the Target Companies, the Acquired Entities and the Joint
Ventures has obtained all permits and similar authorizations which are required
to be obtained as of the date of this Agreement under Environmental Laws for the
operation of its business, except where the failure to so obtain would not have
a Material Adverse Effect. All such permits and similar authorizations are
currently in effect to the extent that the same are required to be in effect as
of the date of this Agreement, and each of the Target Companies, the Acquired
Entities and the Joint Ventures is in compliance with all material terms and
conditions of such permits and similar authorizations, except where the failure
to so comply would not have a Material Adverse Effect.
2. None of the Target Companies, the Acquired Entities or the Joint
Ventures has received notice of any civil, criminal or administrative action,
suit, claim, hearing, violation, investigation, proceeding or demand against any
of the Target Companies, the Acquired Entities or the Joint Ventures relating in
any way to such entities' use of Hazardous Materials in violation of applicable
Environmental Laws or non-compliance with Environmental Laws, except where such
use or non-compliance would not have a Material Adverse Effect.
3. There are no orders from or agreements with any Governmental Authorities
or private party pertaining to violations of or non-compliance with the
Environmental Laws by any of the Target Companies, the Acquired Entities or the
Joint Ventures, except where such violation or non-compliance would not have a
Material Adverse Effect.
4. There has been no storage, treatment, generation, discharge,
incineration or disposal of Hazardous Materials (other than cleaning and
maintenance supplies which have been used, stored and disposed of in accordance
with applicable Environmental Laws) on the Facilities, except where such
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storage, treatment, generation, discharge, incineration or disposal would not
have a Material Adverse Effect.
AE. INVESTMENT REPRESENTATIONS.
1. Each of the Target Company Shareholders understands that the Common
Stock to be issued and delivered to him in the Stock Issuance has not been
registered pursuant to the registration requirements of the Securities Act by
reason of the reliance on an exemption from the registration requirements of the
Securities Act pursuant to Section 4(2) thereof.
2. Each of the Target Company Shareholders (i) has the capacity to protect
his own interests in connection with the transactions contemplated hereby and
(ii) is able to bear the economic risk thereof. The Company has delivered or
made available to each of the Target Company Shareholders such documents,
materials and information pertaining to the Company as he may have requested and
has afforded him an opportunity to ask questions of and receive answers from the
Company and its executive officers and representatives.
3. Each of the Target Company Shareholders understands that the Common
Stock to be issued in the Stock Issuance may not be sold, transferred or
otherwise disposed of without registration under the Securities Act or an
exemption therefrom, and that in the absence of an effective registration
statement covering the same or an available exemption from registration under
the Securities Act, such Common Stock must be held indefinitely. In the absence
of an effective registration statement under the Securities Act or an exemption
therefrom, each of the Target Company Shareholders will not sell, transfer or
otherwise dispose of any Common Stock received in the Stock Issuance, except in
a manner consistent with his representations set forth in this Section.
4. Each of the Target Company Shareholders understands and acknowledges
that each certificate representing the Common Stock issued to him in the Stock
Issuance will bear a legend to the following effect:
"The securities represented by this certificate have not been registered
under the securities act of 1933, as amended. Such securities may not be
offered, sold, or otherwise transferred, pledged or hypothecated except
pursuant to (i) a registration statement with respect to such securities,
which is effective under such act, or (ii) any exemption from registration
under such act relating to the disposition of securities, including rule
144, provided an opinion of counsel is furnished, reasonably satisfactory
in form and substance to the company, that an exemption from the
registration requirements of such act is available."
5. Each of the Target Company Shareholders represents that he has
carefully read this Section and discussed its requirements and other applicable
limitations upon his ability to sell, transfer or otherwise dispose of the
Common Stock received in the Stock Issuance to the extent that he felt necessary
with his counsel and will not make any sale, transfer or other disposition of
such Common Stock in violation of the Securities Act or the rules and
regulations thereunder.
AF. BURTON AGREEMENT. Gold Strike Resorts, Inc. has transferred all of
its right, title and interest in and to the Burton Agreement to GSLV.
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AG. DEVELOPMENT ENTITIES. Except as set forth on Schedule 3.33, none of
the Development Entities has any material properties, assets, operations or
liabilities.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company hereby represents and warrants to each of the Target Company
Shareholders, that, as of the date of this Agreement:
A. ORGANIZATION AND QUALIFICATION. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Nevada and has full corporate power and authority to conduct its business as and
to the extent now conducted and to own, use and lease its assets and properties.
The Company is duly qualified, licensed or admitted to do business and is in
good standing in each jurisdiction in which the ownership, use or leasing of its
assets and properties, or the conduct or nature of its business, makes such
qualification, licensing or admission necessary, except where the failure to be
so qualified, licensed or admitted and in good standing would not have a
Material Adverse Effect on the Company.
B. CAPITALIZATION. The authorized capital stock of the Company consists
of 450,000,000 shares of Common Stock and 75,000,000 shares of Preferred Stock.
As of the date of this Agreement (i) 85,852,798 shares of Common Stock are
validly issued and outstanding, fully paid and nonassessable, (ii) no shares of
Preferred Stock are issued and outstanding and (iii) 5,677,204 shares of Common
Stock are issuable upon exercise of outstanding Options heretofore granted.
Except as contemplated by clauses (i) through (iii) above or the Exchange
Agreement, and except for the Rights, there are no other shares of capital
stock, or other equity securities of the Company outstanding, and no other
outstanding options, warrants, rights to subscribe to (including any preemptive
rights), calls or commitments of any character whatsoever to which the Company
or any of its subsidiaries is a party or may be bound, requiring the issuance or
sale of shares of any capital stock or other equity securities of the Company or
securities or rights convertible into or exchangeable for such shares or other
equity securities, and there are no contracts, commitments, understandings or
arrangements by which the Company is or may become bound to issue additional
shares of its capital stock or other equity securities or options, warrants or
rights to purchase or acquire any additional shares of its capital stock or
other equity securities or securities convertible into or exchangeable for such
shares or other equity securities.
C. AUTHORITY. The Company has full corporate power and authority to
enter into this Agreement and each of the Ancillary Agreements to which it is a
party and to perform its obligations hereunder and thereunder and to consummate
the transactions contemplated hereby and thereby. The execution and delivery of
this Agreement and each of the Ancillary Agreements to which it is a party, the
performance by the Company of its obligations hereunder and thereunder and the
consummation by the Company of the transactions contemplated hereby and thereby
have been duly authorized by all necessary corporate action on the part of the
Company. This Agreement has been duly and validly executed and delivered by the
Company and constitutes a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except to the
extent that such enforceability may be limited by bankruptcy, insolvency,
moratorium or other laws affecting the enforcement of creditor's rights
generally or by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
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D. NO VIOLATION. The Company is not in default under or in violation of
any provision of its Charter Documents, and the Company is not in default beyond
any applicable grace period under or in violation (other than technical or
similar violations that could not cause a default under such Instrument) of any
Instrument to which it is a party or by which it is bound or to which any of its
properties or assets is subject. Except as set forth in Schedule 4.4, neither
the Company's execution and delivery of this Agreement and each of the Ancillary
Agreements to which it is a party, nor the consummation by the Company of the
transactions contemplated hereby or thereby, will conflict with or breach any
Charter Document or Instrument of the Company, or cause any such default or
violation, or accelerate or allow any Person to accelerate, terminate, modify or
cancel any material rights under any Instrument, or will result in the creation
of any material Encumbrance on the assets or properties of the Company. Such
execution, delivery and consummation will not violate or breach or constitute a
default under any material law, rule, judgment, order, decree or regulation of
any Governmental Authorities to which the Company is a party or is subject or to
which the Company's properties or assets are subject.
E. CONSENTS AND APPROVALS. Except as set forth in Schedule 4.5, and
except as noted in the following sentence, no consent, authorization, order,
license, permit, or approval of (or filing or registration with) any
Governmental Authority or any other Person is required in connection with the
Company's execution, delivery and performance of this Agreement and each of the
Ancillary Agreements to which it is a party. The exceptions referred to above
are: (i) filings and approvals required under Nevada Law in respect of
corporate mergers, (ii) filings and approvals of pre-merger notification and
report forms and related documents under the HSR Act, (iii) filings with and the
receipt of all required prior approvals, consents, authorizations, orders,
permits, findings of suitability and licenses from Applicable Gaming Authorities
under the Gaming Laws, (iv) transfer notifications, filings or approvals that
may be required under any state Environmental Law, including, without
limitation, the states of Nevada, Mississippi, Louisiana and Ontario, Canada,
and (v) where the failure to obtain such non-gaming consents, authorizations,
orders, licenses or permits, or to make such filings or registrations,
individually or in the aggregate, would not have a Material Adverse Effect on
the Company.
F. COMMISSION FILINGS. The Company has filed with the Commission all
reports, registration statements and definitive proxy statements required to be
filed with the Commission since February 1, 1992 (collectively, with any
documents filed as exhibits thereto, the "SEC REPORTS"). The Company has
heretofore made available to the Target Company Shareholders its (i) Annual
Reports on Form 10-K for the years ended January 31, 1993 and January 31, 1994,
as filed with the Commission, (ii) Quarterly Reports on Form 10-Q for the
quarters ended April 30, 1994, July 31, 1994 and October 31, 1994, (iii) proxy
statements relating to all of the Company's meetings of stockholders (whether
annual or special) since February 1, 1992, and (iv) all Current Reports on Form
8-K and registration statements filed by the Company with the Commission since
February 1, 1992. As of their respective dates, such reports and statements
(including all exhibits and schedules thereto and documents incorporated by
reference therein) did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements made, in light of the circumstances under which
they were made, not misleading. The audited consolidated financial statements
and unaudited consolidated interim financial statements of the Company and its
subsidiaries included or incorporated by reference in such reports, and in the
Company's Annual Reports for the years ended January 31, 1993 and January 31,
1994 heretofore delivered to the Target Company Shareholders, have been prepared
in accordance with generally accepted accounting principles applied on a
consistent basis during the periods involved (except as may be indicated in the
notes or schedules thereto and except in the case of the unaudited interim
statements, as may be permitted under Form 10-Q promulgated by the Commission
pursuant to the
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Exchange Act), and fairly present the consolidated financial position of the
Company and its consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and changes in financial position for
the periods then ended (subject, in the case of any unaudited interim financial
statements, to normal year-end adjustments).
G. STATUS OF SECURITIES. The shares of Common Stock to be issued in the
Stock Issuance have been duly authorized by all necessary corporate action on
the part of the Company (no consent or approval of stockholders being required
by law, the Charter Documents of the Company, the qualification criteria of the
New York Stock Exchange or otherwise), and upon issuance hereunder will be
validly issued and outstanding, fully paid and nonassessable, and the issuance
thereof is not subject to preemptive rights of any other stockholder of the
Company.
H. NO MATERIAL ADVERSE CHANGES. Since December 31, 1994, none of the
following has occurred.
1. CONDITION. Any change or effect (or any development that, insofar
as can reasonably be foreseen, is likely to result in any change or effect) or
threatened change which has had, or would reasonably be expected to have, a
Material Adverse Effect on the Company.
2. DIVIDEND; REDEMPTION. Except as set forth in Schedule 4.8, the
declaration, setting aside or payment of any dividend or other distribution in
respect of any shares of the Company's capital stock, or the purchase,
redemption, issue, sale or other disposition of any such shares, or the sale or
grant of any options, warrants or other rights to purchase or convert into
shares of capital stock or indebtedness of the Company.
3. SECURITY INTEREST. Except as set forth in Schedule 4.8, any
mortgage or pledge of, or creation of any Encumbrance respecting, any material
property or assets of the Company, except for Encumbrances and security
interests normally arising in the ordinary course of business.
4. CASUALTY. Any damage, destruction or loss, whether or not covered
by insurance, materially adversely affecting the material properties or
operations of the Company.
5. ASSET DISPOSITION. Any sale, lease, transfer or assignment of any
material asset (tangible or intangible) of the Company, except for a fair
consideration or in the ordinary course of business.
6. INSTRUMENT CHANGES. Except as set forth in Schedule 4.8,
authorization or accomplishment of any change in the Charter Documents of the
Company, except as necessary to effect the changes contemplated by this
Agreement or the Ancillary Agreements.
7. CLAIMS DISPOSITION. Except as set forth in Schedule 4.8, any
cancellation, settlement or compromise of any material claim or debt due to or
owing to the Company, other than in the ordinary course of business.
8. RELEASE OF RIGHTS. Any waiver or release of any rights of
material value of the Company, other than in the ordinary course.
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9. LONG-TERM CONTRACTS. Except as set forth in Schedule 4.8,
negotiation or execution of any material arrangement, agreement or understanding
to which the Company is a party which cannot be terminated by it on notice of 90
days or less without cost or penalty, other than in the ordinary course of
business.
10. LOANS. Except as set forth in Schedule 4.8, any material loan,
or other transaction not in the ordinary course of business with any Person who
is an officer, director or shareholder of the Company, or who is an Affiliate or
Associate of such a Person, giving rise to any claim between that Person and the
Company.
11. COMPENSATION INCREASES. Except as set forth in Schedule 4.8, any
increase in salary, bonus, fringe benefit, or incentive or other compensation
payable or to become payable to any officer, director or employee or other
Person receiving compensation of any nature from the Company or its Affiliates,
except in the ordinary course of business; or any increase in the number of
shares obtainable under, or acceleration of the time of exercisability of, any
stock option, stock bonus or similar plan of the Company.
12. ACCOUNTING PROCEDURE. Except as set forth in Schedule 4.8, any
change in any accounting practice or procedure of the Company.
ARTICLE V.
ADDITIONAL COVENANTS AND AGREEMENTS
A. CONDUCT OF BUSINESS BY TARGET COMPANIES AND ACQUIRED ENTITIES. Except
as set forth in Schedule 5.1 or as contemplated by any other provision of this
Agreement, and except for the Permitted Distribution, prior to the Effective
Time, each of the Target Companies shall, and each of the Target Company
Shareholders shall cause each of the Acquired Entities to, conduct its business
only in the ordinary course consistent with past practice. Without limiting the
generality of the foregoing, each of the Target Companies shall, and each of the
Target Company Shareholders shall cause each of the Acquired Entities to:
1. not enter into any business combination transaction (such as a
merger, consolidation or sale of assets) with any Person other than the Company;
2. preserve intact its business organization and shall endeavor to
retain the services of its officers, employees and agents and keep them
available to the Company, all so as to retain its goodwill and preserve its
business relationships with its customers, suppliers and others;
3. comply in all material respects with the provisions of all laws,
regulations, judicial decrees and orders applicable to it or to the conduct of
its business or to the consummation of the transactions contemplated by this
Agreement;
4. not take any action regarding the amendment of any of the
corporate instruments referred to in Section 3.13 in any manner not contemplated
by this Agreement;
5. not make any change in its authorized or issued capital stock or
partnership interests or capital, or issue any corporate or partnership
securities of any nature, or enter into any contract of any
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nature respecting shares of its capital stock or partnership capital or
interests, or otherwise make any changes in its capital structure;
6. not make any distribution or payment in respect of shares of its
capital stock or its partnership capital or interests (including without
limitation any distributions by the Target Companies to their respective
stockholders representing any of the accumulated earnings of such Target
Companies subsequent to March 31, 1995), and shall not purchase or redeem any
shares of its capital stock or its partnership interests;
7. refrain from entering into any material contract or commitment
extending beyond the Effective Time, except in the ordinary course of business;
8. refrain from terminating, modifying or amending any lease,
license, permit, contract or other agreement, except in the ordinary course of
business or not involving a material increase in liability or reduction in
revenue and in no event entering into any modification, amendment or waiver of
any contract listed on Schedule 3.23 hereto except in connection with obtaining
required consents hereunder, which modifications, amendments and waivers shall
be mutually agreed upon by the Company and the parties hereto;
9. not grant or agree to grant any material increase in the wages,
salary, bonus or other compensation, remuneration or benefits of any employee
except in the ordinary course, nor become a party to any employment or
consulting contract or arrangement, or become a party to any contract or
arrangement providing for payment of bonuses, profit shares, stock benefits,
severance payments or retirement benefits, or increase the number of shares
subject to any stock option or stock bonus plan or reduce the time required for
exercisability of any option granted under any such plan, except that on and
after April 1, 1995, the base salary due pursuant to the Senior Executive
Employment Agreements may be paid to such executives in accordance with the
terms of such agreements;
10. not make capital expenditures in excess of an aggregate of
$2,000,000 per month without the written approval of the Chief Executive Officer
of the Company (or his designee).
11. not incur any indebtedness (including any indebtedness under the
Bank Facility Agreement) in excess of an aggregate of $2 million, except for the
incurrence of up to $25 million indebtedness in connection with GSLV's
contribution obligations pursuant to the Victoria Partners Joint Venture
Agreement dated as of December 9, 1994.
12. maintain its books, records and accounts in its customary and
usual manner, and refrain from introducing methods of accounting inconsistent
with those used in prior periods;
13. prepare and file all federal, state and other tax returns and
amendments required to be filed;
14. refrain from selling or transferring any property otherwise than
in the ordinary course of business, and from acquiring or disposing of any fixed
assets;
15. refrain from making any loan or advance to any Person who is an
officer, director, partner, employee or shareholder of any of the Acquired
Entities, other than routine travel advances;
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16. not release, waive, sell or assign any material debts, claims,
rights or other intangible obligations, or accept or agree to accept less than
the stated or face amount in settlement, discharge or satisfaction of any
material receivable;
17. maintain qualification to do business in those jurisdictions in
which such qualification exists on the date of this Agreement or where such
qualification may hereafter be required, except where the failure so to qualify
would not have a Material Adverse Effect;
18. refrain from discharging any Encumbrance and from paying any
obligation or liability (absolute or contingent) other than current liabilities
shown on the Balance Sheet, current liabilities incurred after the Balance Sheet
Date in the ordinary course of business and in normal amounts and other
liabilities when due;
19. refrain from mortgaging, pledging or subjecting to any
Encumbrance any assets, tangible or intangible, except in the ordinary course of
business;
20. refrain from entering into any transaction other than in the
ordinary course of business, except as contemplated by this Agreement;
21. deliver to the Company all of the Target Companies, the Acquired
Entities and the Joint Ventures monthly and quarterly financial statements for
periods and dates subsequent to December 31, 1994, as soon as the same are
available. All financial statements delivered pursuant to this Section are
referred to collectively as "SUBSEQUENT FINANCIALS"; and
22. promptly notify the Company of any new events that would have
required disclosure under this Agreement had they occurred prior to its
execution had they then existed or been known.
B. CONDUCT OF BUSINESS BY JOINT VENTURES. Prior to the Effective Time,
each of the Target Company Shareholders shall cause each of the Joint Ventures
to conduct its business only in the ordinary course consistent with past
practice. Without the prior written consent of the Company, none of the Target
Company Shareholders or Target Companies shall consent to any action by any
Joint Venture.
C. BOARD REPRESENTATION. The Board currently consists of nine members,
with two vacancies. For a period beginning on the Closing Date and terminating
on the third anniversary of the Closing Date, the Target Company Shareholders
shall be entitled to nominate two individuals to the Board, so long as such
individuals are reasonably acceptable to the Company. Such individuals shall be
elected to a Class II and Class III Board seat, respectively. The Company shall
use its best efforts to cause such individuals to be nominated to the Board for
the full term of their respective class.
D. REGISTRATION RIGHTS. At or prior to the Closing, the Company and each
of the Target Company Shareholders and the Individuals shall enter into the
Registration Rights Agreement.
E. EMPLOYMENT AGREEMENTS. At or prior to the Closing, the Company shall
enter into the Senior Executive Employment Agreement with each of the Circus
Circus Senior Executives and the Gold Strike Senior Executives, providing for
the salary and the option and warrant grants described in the Senior Executive
Compensation Schedule. The exercisability of such options and warrants shall be
conditioned upon (a) any required stockholder approval under Section 312.03 of
the New York Stock
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Exchange Listed Company Manual, (b) the common stock issuable upon exercise of
such options and warrants not being considered as part of the transactions
contemplated by this Agreement under Section 312.03 of the New York Stock
Exchange Listed Company Manual and (c) the closing of the transactions
contemplated by this Agreement.
F. ADDITIONAL AGREEMENTS. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use all reasonable efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by this Agreement and to
cooperate with each other in connection with the foregoing, including using its
or his best efforts (a) to obtain all necessary waivers, consents and approvals
from other parties to material loan agreements, leases and other contracts; (b)
to obtain all necessary consents, approvals and authorizations as are required
to be obtained under any federal, state or foreign law or regulations; (c) to
defend all lawsuits or other legal proceedings, formal or informal, challenging
this Agreement or the consummation of the transactions contemplated hereby; (d)
to lift, rescind or mitigate the effect of any injunction or restraining order
or other order adversely affecting the ability of the parties to consummate the
transactions contemplated hereby; and (e) to effect all necessary registrations
and filings, including, but not limited to, filings under the HSR Act and
submissions of information requested by Governmental Authorities.
G. NO SOLICITATION OF TRANSACTIONS. None of the Target Company
Shareholders shall, directly or indirectly, and shall use its reasonable efforts
to cause its employees, officers, directors, members, partners and agents not
to, solicit, initiate or deliberately encourage submission of, or participate in
discussions concerning, or supply any information in response to, proposals or
offers from any Person (other than the Company) relating to any acquisition or
purchase of all or a material amount of the assets of, or any equity interest
in, any of the Target Companies, the Acquired Entities or the Joint Ventures or
any merger, consolidation or business combination with any of the foregoing
entities. The Target Company Shareholders shall promptly notify the Company if
any such proposal or offer, or any inquiry or contact with any other Person with
respect thereto, is made.
H. NOTIFICATION OF CERTAIN MATTERS. The Target Company Shareholders
shall give prompt notice to the Company, and the Company shall give prompt
notice to the Target Company Shareholders, of (i) the occurrence, or failure to
occur, of any event which occurrence or failure would be likely to cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any respect at any time from the date hereof to the Effective
Time; and (ii) any material failure of the Target Company Shareholders or the
Company, as the case may be, or of any Affiliate, officer, director, employee or
agent thereof, to comply with or satisfy any covenant, condition or agreement to
be complied with or satisfied by it hereunder; provided, however, that no such
notification shall affect the representations or warranties of the parties or
the conditions to the obligations to the parties hereunder.
I. ACCESS TO INFORMATION. From the date hereof to the Effective Time,
each of the Target Company Shareholders and the Company shall allow all
designated officers, attorneys, accountants and other representatives of the
other access at all reasonable times to the records and files, correspondence,
audits and properties, as well as to all information relating to commitments,
contracts, titles and financial position, or otherwise pertaining to the
business and affairs, of the Target Companies, the Acquired Entities, the Joint
Ventures, the Company and their respective Affiliates. No investigation
pursuant to this Section shall affect any representations or warranties of the
parties herein or the conditions to the obligations of the parties hereto.
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J. LISTING. If required by the New York Stock Exchange and/or the Pacific
Stock Exchange, the Company shall prepare and submit to such exchange a listing
application covering the shares of Common Stock issued in the Stock Issuance,
and shall use its best efforts to obtain, prior to the Effective Time, approval
for the listing of such shares, subject to official notice of issuance.
K. EXPENSES. Whether or not the Mergers are consummated, all costs and
expenses incurred in connection with this Agreement and the Exchange Agreement
(including all legal, accounting and investment banking fees) and the
transactions contemplated hereby and thereby shall be paid by the party
incurring such expenses; provided, however, that such costs and expenses of the
Target Companies and the Acquired Entities shall not exceed $2,000,000.
L. TITLE POLICIES. Each of the Target Company Shareholders shall, prior
to the Closing Date, use its reasonable efforts to obtain such reasonable and
customary affidavits as shall permit the Company's title insurer to issue an
endorsement to its title insurance policies insuring title to the real
properties owned or leased by each of the Target Companies and Acquired Entities
to the effect that the title insurer shall not claim as a defense under any such
policy failure of insured to disclose to the title insurer prior to the date of
the relevant policy any defects, liens, encumbrances or adverse claims not shown
by public records and known to the Target Company Shareholders (but not known to
the Company) prior to the Closing Date.
M. REJECTED ASSETS. Prior to the Closing, the Company shall have the
right to exclude from the Mergers and the Transfers any of the Included Assets
and all liabilities associated therewith by providing written notice of such
exclusion to the Target Company Shareholders, along with a schedule attached
thereto identifying the assets to be excluded (such notice being referred to
herein as the "REJECTED ASSETS NOTICE" and such assets being referred to herein
as the "REJECTED ASSETS"); provided, that such notice shall not result in an
--------
adjustment to the number of shares issuable in the Stock Issuance. Upon
delivery of the Rejected Assets Notice, the assets set forth on the schedule
thereto shall be deemed to be Excluded Assets for all purposes hereof and shall
be distributed by the subject Target Company or Acquired Entity to such
company's or entity's respective shareholders, partners, or members.
N. INFORMATION FOR TAX RETURNS. The Company will cooperate with the
Target Company Shareholders and Verchota and their representatives in providing
information necessary for Target Company Shareholders and Verchota to prepare
their tax returns in respect of periods that they owned the Target Companies or
had an interest in the Acquired Entities.
O. OTHER TAX RELATED COVENANTS. The parties hereto agree to prepare or
cause to be prepared all federal and state income tax returns or other
governmental filings and reports, and applicable books and records in accordance
with the treatment of each Merger as a reorganization under section 368(a)(2)(E)
of the Code. The parties agree to take such other actions, or refrain from
taking any action, as may be reasonably necessary so that the Mergers will
qualify for such treatment. No Excluded Asset or Rejected Asset shall be
distributed by any Target Company prior to April 1, 1995.
P. TRADEMARKS, ETC. Each of the Gold Strike Persons shall execute such
documents, and take such actions, as are necessary, proper or advisable in order
to vest in the Company or its affiliates all rights, title and interest free and
clear of any liens or encumbrances in and to any trade name, service mark or
trademark (including the name "Gold Strike" and any derivative or variation
thereof) that is used
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or proposed to be used in connection with the Business of the Target Companies,
the Acquired Entities or the Joint Ventures.
Q. FINANCIAL STATEMENTS. Within 30 days of the execution and delivery of
this Agreement, the Target Companies shall deliver to the Company copies of the
Target Companies', the Acquired Entities' and the Joint Ventures' (except that
the investment in the Elgin Riverboat Resort is recorded under the equity method
of accounting) audited combined financial statements for their year ended
December 31, 1994. Within 45 days of the execution and delivery of this
Agreement, the Target Companies shall deliver to the Company copies of (a) the
Target Companies', the Acquired Companies' and the Joint Ventures' (except that
the investment in the Elgin Riverboat Resort is recorded under the equity method
of accounting) unaudited combined financial statements for the period January 1,
1995 to February 28, 1995 and (b) the Elgin Riverboat Resort's unaudited
financial statements for the period January 1, 1995 to February 28, 1995. By
May 15, 1995, the Target Companies shall deliver to the Company copies of (x)
the Target Companies', the Acquired Companies' and the Joint Ventures' (except
that the investment in the Elgin Riverboat Resort is recorded under the equity
method of accounting) audited combined financial statements for the first
quarter ended March 31, 1995 and (y) the Elgin Riverboat Resort's audited
financial statements for the first quarter ended March 31, 1995. By May 15,
1995, Arthur Andersen LLP shall provide written verification to the Company as
to (a) the balance as of March 31, 1995 of the accumulated adjustments accounts
(as defined in Section 1368(e)(1) of the Code) of each of the Target Companies,
(b) the earnings and profits (as calculated under Section 312 of the Code) as of
March 31, 1995 of each of the Target Companies and (c) the amount of interest,
excludable under Section 103 of the Code, received or accrued, in accordance
with its method of tax accounting, by each of the Target Companies after
December 31, 1986 and before April 1, 1995.
ARTICLE VI.
CONDITIONS TO CLOSING
A. CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGERS AND THE
TRANSFERS. The respective obligations of each party to effect the Mergers and
the Transfers shall be subject to the fulfillment at or prior to the Effective
Time of the following conditions:
1. HSR ACT. Any waiting period (and any extension thereof)
applicable to the consummation of the Mergers and Transfers under the HSR Act
shall have expired or have been terminated.
2. ORDER OR INJUNCTIONS. None of the parties hereto shall be subject
to any order or injunction of a Government Authority of competent jurisdiction
which prohibits the consummation of the transactions contemplated by this
Agreement. In the event any such order or injunction shall have been issued,
each party agrees to use its or his reasonable efforts to have any such
injunction lifted.
B. ADDITIONAL CONDITIONS TO THE COMPANY'S OBLIGATIONS. The obligations
of the Company under this Agreement are also expressly subject to fulfillment of
the conditions set forth in this Section at or prior to the Closing, any or all
of which may be waived in writing by the Company.
1. PERFORMANCE OF AGREEMENTS. Each of the Gold Strike Persons and
Verchota shall have materially performed all obligations and agreements and
shall have materially complied with all covenants and conditions required of it
under the terms of this Agreement.
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2. ACCURACY OF REPRESENTATIONS AND WARRANTIES. None of the Gold
Strike Persons' representations and warranties contained in Article 3 shall be
untrue in any respect, either when made or at and as of the Effective Time
(except as affected by the transactions contemplated by this Agreement and
except that with respect to Section 3.16, the representations and warranties
shall not be untrue in any respect with respect to the final audited version of
the Draft Year-End Financials).
3. CONSENTS. All material consents, authorizations, orders, permits,
findings of suitability, licenses and approvals of (or filings or registrations
with) any Governmental Authority or any other Person (including without
limitation all consents, authorizations, orders, permits, findings of
suitability, licenses and approvals (or filings or registrations) set forth on
Schedule 3.12) required in connection with the execution, delivery and
performance of this Agreement and each of the Ancillary Agreements shall have
been obtained or made, except for filings with the Secretary of State of the
State of Nevada in connection with the Mergers and any other documents or
consents required to be filed or obtained after the Effective Time.
4. ANCILLARY AGREEMENTS. Verchota shall have executed and delivered
to the Company the Verchota Assignment Agreement. Ensign shall have executed
and delivered to the Company the Ensign Assignment Agreement. Simon shall have
executed and delivered to the Company the Simon Assignment Agreement. Each of
the Target Company Shareholders and Schaeffer shall have executed and delivered
to the Company the Standstill Agreement. Lakeview Company shall have executed
and delivered to the Company the Lakeview Company Management Agreement. Each of
the Gold Strike Senior Executives shall have executed and delivered a Senior
Executive Employment Agreement. Each of the Target Company Shareholders'
spouses shall have executed and delivered the Spousal Consent. Each of Messrs.
Ensign, Schaeffer and Richardson shall have executed and delivered the MRGS
Agreement.
5. CERTIFICATES. Each of the Gold Strike Persons and Verchota shall
furnish the Company with such certificates of its officers, partners, members
and others to evidence compliance with the conditions set forth in this Article
6 as may reasonably be requested by the Company.
6. OPINION OF COUNSEL. The Company shall have received opinions of
counsel to the Gold Strike Persons dated the Closing Date and reasonably
acceptable to the Company substantially to the effect specified in Sections 3.1,
3.2, 3.3, 3.4, 3.5, 3.6, 3.8, 3.9, 3.10, 3.11, 3.12 and 3.20, with such
exceptions and qualifications as are customary and reasonable under the law of
the applicable jurisdiction. In rendering such opinion, such counsel may rely
upon certificates of public officers and, as to matters of fact, upon
certificates of duly authorized representatives of the Gold Strike Persons;
provided, that copies of such certificates shall be contemporaneously delivered
- --------
to the Company.
7. DISTRIBUTION OF REJECTED ASSETS. All Rejected Assets, if any,
shall have been distributed by the subject Target Companies and/or Acquired
Entities to their respective shareholders, partners or members.
8. EXCHANGE AGREEMENT. The Exchange Agreement shall have been duly
and validly executed and delivered by each of the Individuals and shall
constitute a legal, valid and binding obligation of each of them.
C. ADDITIONAL CONDITIONS TO THE GOLD STRIKE PERSONS' AND VERCHOTA'S
OBLIGATIONS. The obligations of each of the Gold Strike Persons and Verchota
under this Agreement are also expressly
xl
<PAGE>
subject to fulfillment of the conditions set forth in this Section at or prior
to the Closing, any or all of which may be waived in writing by the Gold Strike
Persons and Verchota.
1. PERFORMANCE OF AGREEMENTS. The Company shall have materially
performed all obligations and agreements and materially complied with all
covenants and conditions required of it under the terms of this Agreement.
2. ACCURACY OF REPRESENTATIONS AND WARRANTIES. None of the Company's
representations and warranties contained in Article 4 of this Agreement shall be
untrue in any respect, either when made or at and as of the Effective Time
(except as necessarily affected by the transactions contemplated by this
Agreement).
3. CONSENTS. All material consents, authorizations, orders, permits,
findings of suitability, licenses and approvals of (or filings or registrations
with) any Governmental Authority or any other Person (excluding all consents,
authorizations, orders, permits, findings of suitability, licenses and approvals
(or filings or registrations) set forth on Schedule 3.12) required in connection
with the execution, delivery and performance of this Agreement and each of the
Ancillary Agreements shall have been obtained or made, except for filings with
the Secretary of State of the State of Nevada in connection with the Mergers and
any other documents or consents required to be filed or obtained after the
Effective Time.
4. REGISTRATION RIGHTS AGREEMENT AND EMPLOYMENT AGREEMENTS. The
Company shall have executed and delivered the Registration Rights Agreement.
Each of the Circus Circus Senior Executives shall have executed and delivered a
Senior Executive Employment Agreement.
5. CERTIFICATES. The Company shall furnish the Target Company
Shareholders with such certificates of its officers and others to evidence
compliance with the conditions set forth in this Article 6 as may reasonably be
requested by the Target Company Shareholders.
6. OPINION OF COUNSEL. The Target Company Shareholders shall have
received opinions of counsel dated the Closing Date and reasonably acceptable to
the Target Company Shareholders to the effect specified in Sections 4.1, 4.2,
4.3, 4.4, 4.5, and 4.7, with such exceptions and qualifications as are customary
and reasonable under the law of the applicable jurisdiction. In rendering such
opinion, such counsel may rely upon certificates of public officers and, as to
matters of fact, upon certificates of duly authorized representatives of the
Company; provided, that copies of such certificates shall be contemporaneously
--------
delivered to the Target Company Shareholders.
7. GOLD STRIKE BANK AGREEMENT. The Company shall have assumed all
rights and obligations of Finance, Inc., the Guarantors (provided, that with
respect to Lakeview Gaming, such assumption shall not apply with respect to
Pioneer Investment Group's allocable portion of the guaranteed debt), Verchota,
and Glenn W. Schaeffer under the Bank Facility Agreement or such agreement shall
have been terminated in accordance with the terms thereof. The personal
security interests granted to the Lenders by each of Richardson, Belding and
Ensign pursuant to section 2.06 of the Bank Facility Agreement shall have been
fully released.
xli
<PAGE>
ARTICLE VII.
INDEMNIFICATION
A. SURVIVAL OF REPRESENTATIONS, ETC. All statements contained in the
Schedules hereto or in any certificate or instrument of conveyance delivered by
or on behalf of the parties pursuant to this Agreement or in connection with the
consummation of the transactions contemplated hereby, shall be deemed to be
representations and warranties by the parties hereunder. The representations and
warranties of the Target Company Shareholders, Verchota and the Company
contained herein shall survive the Closing Date until the date that is the third
anniversary of the Closing Date, without regard to any investigation made by any
of the parties hereto; provided, however, that the representations and
-----------------
warranties set forth in (i) Section 3.15 shall survive until the applicable
statute of limitations expires and (ii) Sections 3.4, 3.5 and 3.6 shall survive
indefinitely.
B. INDEMNIFICATION.
1. BY EACH OF THE TARGET COMPANY SHAREHOLDERS. Each of the Target
Company Shareholders jointly and severally, shall indemnify, save and hold
harmless the Company, its affiliates and subsidiaries, and its and their
respective Representatives, from and against any and all costs, losses,
including without limitation diminution in value, taxes, liabilities,
obligations, damages, lawsuits, deficiencies, claims, demands, and expenses
(whether or not arising out of third-party claims), including without
limitation, interest, penalties, costs of mitigation and losses in connection
with Section 3.32, reasonable attorneys' fees and all amounts paid in
investigation, defense or settlement of any of the foregoing (herein,
"DAMAGES"), incurred in connection with, arising out of, or resulting from (i)
any breach or inaccuracy of any representation or warranty made by any of the
Target Company Shareholders in or pursuant to this Agreement; (ii) any breach of
any covenant or agreement made by any of the Target Company Shareholders in this
Agreement; or (iii) any breach of a representation or warranty contained in
Section 3.12 without giving effect to any exceptions contained in Schedule 3.12
hereto.
The foregoing reference to "diminution in value" shall not constitute
directly or indirectly a representation with respect to projections of the
subject entity. The term "DAMAGES" as used in this Section is not limited to
matters asserted by third parties against any of the Target Company Shareholders
or the Company, but includes Damages incurred or sustained by any of the Target
Company Shareholders or the Company in the absence of third party claims.
Payments by the Company of amounts for which the Company is indemnified
hereunder, and payments by any of the Target Company Shareholders of amounts for
which any of the Target Company Shareholders is indemnified, shall not be a
condition precedent to recovery. Each of the Target Company Shareholders
obligations to indemnify the Company, and the Company's obligation to indemnify
each of the Target Company Shareholders, shall not limit any other rights,
including without limitation rights of contribution which either party may have
under statute or common law. The Target Company Shareholders shall be permitted
at their election to pay any and all Damages asserted pursuant this Section by
the tender of the Common Stock of the Company received as merger consideration
pursuant to Section 2.2 hereof which Common Stock shall be valued for purposes
of satisfying any claim for Damages at the then current market price calculated
as the average of the per share closing sale prices of the Common Stock on the
New York Stock Exchange Composite Tape for the 20 trading days (excluding the 5
lowest and 5 highest closing prices during such period) immediately prior to the
determination of such Damages.
xlii
<PAGE>
2. BY THE COMPANY. The Company shall indemnify and save and hold
harmless each of the Target Company Shareholders, their respective affiliates
and subsidiaries, and their respective Representatives from and against any and
all Damages incurred in connection with, arising out of, resulting from or
incident to (i) any breach or inaccuracy of any representation or warranty made
by the Company in or pursuant to this Agreement; or (ii) any breach of any
covenant or agreement made by the Company in or pursuant to this Agreement.
3. COOPERATION. The indemnified party shall cooperate in all
reasonable respects with the indemnifying party and such attorneys in the
investigation, trial and defense of such lawsuit or action and any appeal
arising therefrom; provided, however, that the indemnified party may, at its own
-------- -------
cost, participate in the investigation, trial and defense of such lawsuit or
action and any appeal arising therefrom. The parties shall cooperate with each
other in any notifications to insurers.
4. DEFENSE OF CLAIMS. If a claim for Damages (a "CLAIM") is to be
made by a party entitled to indemnification hereunder (the "INDEMNIFIED PARTY")
against the indemnifying party (the "INDEMNIFYING PARTY"), the Indemnified Party
claiming such indemnification shall give written notice (a "CLAIM NOTICE") to
the Indemnifying Party as soon as practicable after the Indemnified Party
becomes aware of any fact, condition or event which may give rise to Damages for
which indemnification may be sought under this Section. If any lawsuit or
enforcement action is filed against any Indemnified Party hereunder, written
notice thereof shall be given to the Indemnifying Party as promptly as
practicable (and in any event within 15 calendar days after the service of a
citation or summons). The failure of any Indemnified Party to give timely
notice hereunder shall not affect rights to indemnification hereunder, except to
the extent that the Indemnifying Party demonstrates actual damage caused by such
failure. Subject to Section 7.2(g), after such notice, if the Indemnifying
Party shall acknowledge in writing to the Indemnified Party that the
Indemnifying Party shall be obligated under the terms of its indemnity hereunder
in connection with such lawsuit or action, then the Indemnifying Party shall be
entitled, if it so elects, (i) to take control of the defense and investigation
of such lawsuit or action, (ii) to employ and engage attorneys of its own choice
to handle and defend the same, at the Indemnifying Party's cost, risk and
expense unless the named parties to such action or proceeding include both the
Indemnifying Party and the Indemnified Party and the Indemnified Party has been
advised in writing by counsel that there may be one or more legal defenses
available to such Indemnified Party that are different from or additional to
those available to the Indemnifying Party, and (iii) to compromise or settle
such claim, which compromise or settlement shall be made only with the written
consent of the Indemnified Party, such consent not to be unreasonably withheld;
provided, however, if the remediation or resolution of any such Claim will occur
- -------- -------
on or at any Facility or is reasonably expected to have a direct and significant
adverse effect on the Indemnified Party's business operations, then,
notwithstanding the foregoing, the Indemnified Party shall be entitled to
control such remediation or resolution, including without limitation to take
control of the defense and investigation of such lawsuit or action, to employ
and engage attorneys of its own choice to handle and defend the same, at the
Indemnifying Party's cost, risk and expense, and to compromise or settle such
Claim. If the Indemnifying Party fails to assume the defense of such Claim
within 15 calendar days after receipt of the Claim Notice, the Indemnified Party
against which such Claim has been asserted shall (upon delivering notice to such
effect to the Indemnifying Party) have the right to undertake, at the
Indemnifying Party's cost and expense, the defense, compromise or settlement of
such Claim on behalf of and for the account and risk of the Indemnifying Party;
provided, however, that such Claim shall not be compromised or settled without
- -------- -------
the written consent of the Indemnifying Party, which consent shall not be
unreasonably withheld. In the event the Indemnified Party assumes the defense
of the claim, the Indemnified Party will keep the Indemnifying Party reasonably
informed of the progress of any such
xliii
<PAGE>
defense, compromise or settlement. The Indemnifying Party shall be liable for
any settlement of any action effected pursuant to and in accordance with this
Section and for any final judgment (subject to any right of appeal), and the
Indemnifying Party agrees to indemnify and hold harmless an Indemnified Party
from and against any Damages by reason of such settlement or judgment.
5. BROKERS AND FINDERS. Pursuant to the provisions of this Section,
the Company and each of the Target Company Shareholders shall indemnify, hold
harmless and defend the other party from the payment of any and all broker's and
finder's expenses, commissions, fees or other forms of compensation which may be
due or payable from or by the Indemnifying Party, or may have been earned by any
third party acting on behalf of the Indemnifying Party in connection with the
negotiation and execution hereof and the consummation of the transactions
contemplated hereby.
6. LIMITATIONS. Except as set forth in the next sentence, neither
the Company nor Target Company Shareholders shall be liable to the other under
this Section for any Damages incurred pursuant to Section 7.2(a)(i) or Section
7.2(b)(i) until the aggregate amount otherwise due the Indemnified Party exceeds
an accumulated total of $2,500,000, (the "THRESHOLD") at which time the
Indemnifying Party shall be liable for only those Damages exceeding such amount.
The Target Company Shareholders shall be liable to the Company under this
Section for any and all Damages arising under Section 7.2(a)(ii) and (iii)
without regard to the Threshold, except that Damages arising under claims
arising as a result of a failure to obtain the consent specified in Schedule
3.12(ii) attached hereto shall be limited to the payment of $25,000,000. The
Company shall be liable to the Target Company Shareholders under this Section
for any and all Damages arising under Section 7.2(b)(ii) without regard to the
Threshold.
7. CONTROL. Notwithstanding Section 7.2(d), in the event any claims
are made for Damages arising as a result of a breach of Section 3.12, the
Indemnified Party shall be entitled, if it so elects, to take control of the
defense and investigation of such lawsuit or action, and (ii) to employ and
engage attorneys of its own choice to handle and defend the same, at the
Indemnifying Party's cost, risk and expense.
8. REPRESENTATIVES. No individual Representative of any party shall
be personally liable for any Damages under the provisions contained in this
Section.
C. TAX MATTERS.
1. NOTICE. The Company shall promptly notify each Target Company
Shareholder in writing of the commencement of any claim, audit, examination, or
other proposed change or adjustment by any tax authority concerning any tax or
any other similar claim or assessment for which the Target Company Shareholders
may be responsible under Section 3.15 (a "Tax Claim"); provided, however, that
failure to give such notice shall not relieve any party from its obligations to
indemnify with respect to any such Tax Claim except to the extent of actual
prejudice.
2. PARTICIPATION. The Company shall afford the Target Company
Shareholders the opportunity to participate in any proceedings and review all
correspondence and submissions related to a Tax Claim and shall in good faith
give due consideration to the request of the Target Company Shareholders
regarding the resolution of such claim. The Target Company Shareholders shall
have the
xliv
<PAGE>
right to control the proceedings relating to such Tax Claim if no other
material issues or adjustments, not subject to indemnification under this
Article 7, are proposed in such proceedings.
3. CONSENT TO SETTLE TAX CLAIM. The Company shall receive written
consent from each Target Company Shareholder prior to the settlement of any Tax
Claim, which consent shall not be unreasonably delayed or withheld.
4. GOOD FAITH. The Company will act in good faith with regard to any
claim or issue that may have an impact on the Target Company Shareholders.
Except as required by applicable law or with respect to which there is no
reasonable possibility of success, the Company will also not take any position
which would result in, or have the effect of, (i) the shifting of deductions,
credits, and other similar items into a post-Closing Date period or (ii) the
shifting of income and other similar items into a pre-Closing Date period.
ARTICLE VIII.
TERMINATION, AMENDMENT AND WAIVER
A. TERMINATION. This Agreement may be terminated, and the transactions
contemplated hereby may be abandoned, at any time prior to the Closing on the
Closing Date:
1. by mutual written agreement of the parties hereto;
2. by either the Target Company Shareholders or the Company (i) if a
United States federal or state court of competent jurisdiction or United
States federal or state governmental, regulatory or administrative agency
or commission shall have issued an order, decree or ruling or taken any
other action permanently restraining, enjoining or otherwise prohibiting
the transactions contemplated by this Agreement and such order, decree,
ruling or other action shall have become final and non-appealable or (ii)
if any of the conditions set forth in Section 6.1 is not satisfied.
3. by the Company, if any of the conditions set forth in Section 6.2
is not satisfied by September 30, 1995.
4. by the Target Company Shareholders, if any of the conditions set
forth in Section 6.3 is not satisfied by September 30, 1995.
B. EFFECT OF TERMINATION. If this Agreement is validly terminated by any
party pursuant to Section 8.1, this Agreement will forthwith become null and
void and no party hereto shall have any liability to any other party hereto
under or by reason of this Agreement or the transactions contemplated hereby,
except for any breach of this Agreement occurring prior to or as a result of
termination of this Agreement, and except that the provisions of Sections 8.2
and 9.1 shall continue in full force and effect. The foregoing provisions shall
not limit or restrict the availability of specific performance or other
injunctive relief to the extent that specific performance or such other relief
would otherwise be available to a party hereunder.
C. AMENDMENT. This Agreement may be amended, supplemented or modified by
action taken by or on behalf of the respective parties hereto. No such
amendment, supplement or modification
xlv
<PAGE>
shall be effective unless set forth in a written instrument duly executed by or
on behalf of each party hereto.
D. WAIVER. Any party hereto may to the extent permitted by applicable
law (i) extend the time for the performance of any of the obligations or other
acts of the other parties hereto, (ii) waive any inaccuracies in the
representations and warranties of the other parties hereto contained herein or
in any document delivered pursuant hereto or (iii) waive compliance with any of
the covenants, agreements or conditions of the other parties hereto contained
herein. No such extension or waiver shall be effective unless set forth in a
written instrument duly executed by or on behalf of the party extending the time
of performance or waiving any such inaccuracy or non-compliance.
ARTICLE IX.
GENERAL PROVISIONS
A. ENTIRE AGREEMENT. This Agreement (including all exhibits and
schedules hereto) and the Ancillary Agreements contain the sole and entire
agreement among the parties with respect to the subject matter hereof, and
thereof, and supersede any and all prior agreements, understandings,
negotiations and discussions, whether oral or written, among the parties hereto
with respect to such subject matter; provided, however, that this Agreement
-------- -------
shall not supersede that certain confidentiality and standstill agreement dated
as of March 17, 1995 by and among the Target Company Shareholders and the
Company unless and until the Closing occurs.
B. NO THIRD-PARTY BENEFICIARIES. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors and permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights upon any other Person.
C. NOTICES. Unless otherwise specifically provided herein, all notices,
demands, consents, waivers and other communications required or permitted by the
terms of this Agreement shall be in writing, and any notice shall become
effective three (3) days after deposit in the United States mails, first class
postage prepaid, or one (1) day after delivery to an overnight courier or
express company or immediately upon delivery by hand or in the form of telecopy,
telegram or other electronic means of communication that produces a written
copy, and, if mailed or delivered by courier, express company or hand, shall be
addressed as follows:
xlvi
<PAGE>
If to the Company: Circus Circus Enterprises, Inc.
2880 Las Vegas Blvd., South
Las Vegas, Nevada 89109
Attn: Chief Executive Officer
with a copy to: Circus Circus Enterprises, Inc.
2880 Las Vegas Blvd., South
Las Vegas, Nevada 89109
Attn: General Counsel
with a copy to: Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, California 90071
Attn: Mary Ellen Kanoff, Esq.
If to Michael S. Ensign
or MSE, Inc.: Michael S. Ensign
1 Main Street
P.O. Box 19278
Jean, Nevada 89019
with a copy to: Skadden, Arps, Slate, Meagher & Flom
300 South Grand Avenue
Suite 3400
Los Angeles, California 90071
Attn: Nick P. Saggese, Esq.
If to LCI, Inc. or
Richardson: William A. Richardson
1 Main Street
P.O. Box 19278
Jean, Nevada 89019
with a copy to: Skadden, Arps, Slate, Meagher & Flom
300 South Grand Avenue
Suite 3400
Los Angeles, California 90071
Attn: Nick P. Saggese, Esq.
If to GSI, Inc.
or Belding: David R. Belding
Gold Strike Inn & Casino
U.S. Highway 93
Boulder City, Nevada 89005
with a copy to: Skadden, Arps, Slate, Meagher & Flom
300 South Grand Avenue
Suite 3400
Los Angeles, California 90071
Attn: Nick P. Saggese, Esq.
xlvii
<PAGE>
If to DGI, Inc., ODC
or Simon: P.O. Box 19088
Jean, Nevada 89019
with a copy to: Skadden, Arps, Slate, Meagher & Flom
300 South Grand Avenue
Suite 3400
Los Angeles, California 90071
Attn: Nick P. Saggese, Esq.
If to Aviation, Inc.: Gold Strike Aviation, Inc.
1 Main Street
P.O. Box 19278
Jean, Nevada 89019
Attn.: President
with a copy to: Skadden, Arps, Slate, Meagher & Flom
300 South Grand Avenue
Suite 3400
Los Angeles, California 90071
Attn: Nick P. Saggese, Esq.
If to Finance, Inc.: Goldstrike Finance, Inc.
1 Main Street
P.O. Box 19278
Jean, Nevada 89019
Attn.: President
with a copy to: Skadden, Arps, Slate, Meagher & Flom
300 South Grand Avenue
Suite 3400
Los Angeles, California 90071
Attn: Nick P. Saggese, Esq.
If to Verchota: P.O. Box 80358
Las Vegas, Nevada 89180-0358
D. NO ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor any right,
interest, duty or obligation hereunder may be assigned by any party hereto
without the prior written consent of the other parties hereto, and any attempt
to assign this Agreement or any right, interest, duty or obligation hereunder
without such prior written consent shall be null and void. Subject to the
preceding sentence, this Agreement is binding upon, inures to the benefit of and
is enforceable by the parties hereto and their respective successors and
assigns.
E. SEVERABILITY. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any present or future law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (i) such provision will be fully
xlviii
<PAGE>
severable, (ii) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
and (iii) the remaining provisions of this Agreement will remain in full force
and effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance from this Agreement.
F. FURTHER ASSURANCES. Each of the parties hereto agrees to execute and
deliver any and all further agreements, documents, certificates or instruments
necessary to effectuate this Agreement and the Mergers and the Transfers. Each
party shall promptly notify the other parties of any information delivered to or
obtained by such party that would prevent the consummation of the transactions
contemplated by this Agreement or would indicate a breach of the representations
or warranties of any of the parties to this Agreement, provided that failure so
to notify will not constitute a waiver of such party's rights under this
Agreement.
G. NON-WAIVER OF BREACH. A party hereto may specifically waive any
breach of this Agreement by another party as to any provision in favor of the
party waiving such breach, provided that no such waiver shall be binding or
effective unless in writing and no such waiver shall constitute a continuing
waiver of similar or other breaches. A waiving party may at any time, by notice
given to the breaching party, direct future compliance with the waived term or
terms of this Agreement, in which event the breaching party shall comply as
directed from such time forward.
H. CONFIDENTIALITY; PUBLICITY. The parties acknowledge that the
transactions described herein is of a confidential nature and shall not be
disclosed except to consultants, advisors and Affiliates, or as required by law.
None of the parties hereto shall make any public disclosure of the specific
terms of this Agreement, except as required by law. The parties shall endeavor
to make only those press releases as required by law, provided, however, that no
press release shall be made without prior consultation with the other parties.
I. GOVERNING LAW. This Agreement has been negotiated and executed and
shall be performed in the State of Nevada and shall be governed and construed by
the laws of such State, without giving effect to the conflicts of laws
principles thereof.
J. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
K. REPRESENTATIONS AND WARRANTIES OF VERCHOTA. Verchota represents and
warrants to the Company that, as of the date of this Agreement, each of the
representations and warranties contained in Section 3.5 (with respect to his
proportionate partnership interest in Railroad Pass), Section 3.10 (only with
respect to Verchota) and Section 3.12 (only with respect to Verchota) are true
and correct in all respects.
[Signature page to follow]
xlix
<PAGE>
IN WITNESS WHEREOF, each party has executed this Agreement as of the date
first above written.
CIRCUS CIRCUS ENTERPRISES, INC.,
a Nevada corporation
By CLYDE T. TURNER
-----------------------------------------------
Name: CLYDE T. TURNER
Title: PRESIDENT
M.S.E. INVESTMENTS, INCORPORATED,
a Nevada corporation
By MICHAEL S. ENSIGN
-----------------------------------------------
Name: Michael S. Ensign
Title: President
LAST CHANCE INVESTMENTS, INCORPORATED,
a Nevada corporation
By WILLIAM A. RICHARDSON
------------------------------------------------
Name: William A. Richardson
Title: President
GOLDSTRIKE INVESTMENTS, INCORPORATED,
a Nevada corporation
By DAVID R. BELDING
-----------------------------------------------
Name: David R. Belding
Title: President
DIAMOND GOLD, INC.,
a Nevada corporation
By PETER A. SIMON II
------------------------------------------------
Name: Peter A. Simon II
Title: President
<PAGE>
GOLD STRIKE AVIATION, INCORPORATED,
a Nevada corporation
By WILLIAM A. RICHARDSON
------------------------------------------------
Name: William A. Richardson
Title: President
GOLDSTRIKE FINANCE COMPANY, INC.,
a Nevada corporation
By MICHAEL S. ENSIGN
-----------------------------------------------
Name: Michael S. Ensign
Title: President
OASIS DEVELOPMENT COMPANY, INC.
a Nevada corporation
By PETER A. SIMON II
------------------------------------------------
Name: Peter A. Simon II
Title: President
MICHAEL S.ENSIGN
--------------------------------------------------
Michael S. Ensign
WILLIAM A.RICHARDSON
--------------------------------------------------
William A. Richardson
DAVID R. BELDING
--------------------------------------------------
David R. Belding
PETER A. SIMON II
--------------------------------------------------
Peter A. Simon II
ROBERT J. VERCHOTA
--------------------------------------------------
Robert J. Verchota
<PAGE>
EXHIBIT A-1
FORM OF
ASSIGNMENT AND ASSUMPTION AGREEMENT
DATED AS OF [MAY __,] 1995
BY AND BETWEEN
CIRCUS CIRCUS ENTERPRISES, INC.
A NEVADA CORPORATION
AND
ROBERT J. VERCHOTA
<PAGE>
EXHIBIT A-1
FORM OF
ASSIGNMENT AND ASSUMPTION AGREEMENT
-----------------------------------
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT, dated as of ________ __,
1995 (the "Agreement"), is entered into by and between ___________ ("Assignor")
and New Way, a Delaware corporation ("Assignee"). Capitalized terms used but
not otherwise defined herein shall have the respective meanings ascribed to them
in the Exchange Agreement (as defined below).
RECITALS
--------
WHEREAS, Assignor is a [general partner/member] of _________________,
a _____________ [general partnership/limited liability company] (the "Relevant
Entity");
WHEREAS, pursuant to the Exchange Agreement, dated ______, 1995 (the
"Exchange Agreement"), by and among Circus Circus Enterprises, Inc., a Nevada
corporation (the "Company"), Assignee, Glenn W. Schaeffer, Gregg H. Solomon,
Antonio C. Alamo, Anthony Korfman and William Ensign, Assignor has agreed to
assign [his/its] interest in the Relevant Entity to Assignee; and
WHEREAS, pursuant to the Exchange Agreement, Assignee has agreed to
assume all liabilities and obligations of Assignor relating to Assignor's
interest or previous participation in the Relevant Entity.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
<PAGE>
ARTICLE I
ASSIGNMENT AND ASSUMPTION
1.1 Assignment of Rights and Interest. Assignor hereby transfers,
---------------------------------
assigns and conveys to Assignee, effective as of the Closing Date, all right,
title and interest of Assignor, as [general partner/member], in and to the
Relevant Entity and under that certain [Partnership/Operating] Agreement, dated
__________, by and among Assignor and ____________.
1.2 Acceptance of Assignment and Assumption of Liabilities. Assignee
------------------------------------------------------
hereby accepts the foregoing assignment, effective as of the Closing Date, and
assumes and agrees to pay, perform and discharge, as and when due, all of the
agreements, obligations and liabilities of Assignor, as [general partner/member]
of the Relevant Entity, now existing or hereafter accruing. Nothing herein
shall be deemed to compromise or limit in any manner whatsoever any rights of
the Company or Assignee to indemnification under any other agreement.
1.3 Further Assurances. From time to time, each party, as and when
------------------
requested by the other party hereto, shall execute and deliver, or cause to be
executed and delivered, all such agreements, documents and instruments and shall
take, or cause to be taken, all such further or other actions, as such
requesting party may reasonably deem necessary or desirable to evidence, vest,
confirm, perfect or consummate the assignment of rights and assumption of
liabilities contemplated by this Agreement.
ARTICLE II
GENERAL PROVISIONS
2.1 Entire Agreement. This Agreement contains the sole and entire
----------------
agreement among the parties with respect to the assignment and assumption of the
respective interests and obligations contemplated herein and supersedes any and
all prior agreements, understandings, negotiations and discussions, whether oral
or written, among the parties hereto with respect to such subject matter (other
than the Exchange Agreement).
2.2 Notices. Unless otherwise specifically provided herein, all
-------
notices, demands, consents, waivers and other communications required or
permitted by the terms of this Agreement shall be in writing, and any notice
shall become effective three (3) days after deposit in the United States mails,
first class postage prepaid, or one (1) day after delivery to an overnight
courier or express company or immediately upon delivery by hand or in the form
of telecopy, telegram or other electronic means of communication that produces a
written copy, and, if mailed or delivered by courier, express company or hand,
shall be addressed as follows:
If to Assignor:
If to Assignee:
<PAGE>
2.3 No Assignment; Binding Effect. Neither this Agreement nor any
-----------------------------
right, interest, duty or obligation hereunder may be assigned by any party
hereto without the prior written consent of the other parties hereto, and any
attempt to assign this Agreement or any right, interest, duty or obligation
hereunder without such prior written consent shall be null and void. Subject to
the preceding sentence, this Agreement is binding upon, inures to the benefit of
and is enforceable by the parties hereto and their respective successors and
assigns.
2.4 Severability. If any provision of this Agreement is held to be
------------
illegal, invalid or unenforceable under any present or future law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (i) such provision will be fully
severable, (ii) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
and (iii) the remaining provisions of this Agreement will remain in full force
and effect and will not be affected by illegal, invalid or unenforceable
provision or by its severance from this Agreement.
2.5 Non-Waiver of Breach. A party hereto may specifically waive any
--------------------
breach of this Agreement by another party as to any provision in favor of the
party waiving such breach, provided that no such waiver shall be binding or
effective unless in writing and no such waiver shall constitute a continuing
waiver of similar or other breaches. A waiving party may at any time, by notice
given to the breaching party, direct future compliance with the waived term or
terms of this Agreement, in which event the breaching party shall comply as
directed from such time forward.
2.6 Governing Law. This Agreement has been negotiated and executed
-------------
and shall be performed in the State of Nevada and shall be governed and
construed by the laws of such State, without giving effect to the conflicts of
laws principles thereof.
2.7 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, each party has executed this Agreement as of
the date first above written.
"ASSIGNEE"
NEW WAY, INC.
a Delaware corporation
By: ______________________
Name:
Title:
"ASSIGNOR"
[Name of Assignor]
By: ______________________
Name:
Title:
<PAGE>
EXHIBIT A-2
FORM OF
ASSIGNMENT OF RIGHTS UNDER
OPTION TO LEASE REAL PROPERTY
AND RIGHT OF FIRST REFUSAL
AND OF
KENTUCKY AGREEMENT IN PRINCIPLE
DATED AS OF [MAY __,] 1995
BY AND BETWEEN
CIRCUS CIRCUS ENTERPRISES, INC.
A NEVADA CORPORATION
AND
MICHAEL S. ENSIGN
<PAGE>
ASSIGNMENT OF RIGHTS UNDER OPTION TO LEASE REAL PROPERTY AND RIGHT
OF FIRST REFUSAL AND OF KENTUCKY AGREEMENT IN PRINCIPLE
This Assignment of Rights Under Option to Lease Real Property and
Right of First Refusal and of Kentucky Agreement in Principle (the
"AGREEMENT") is made and entered into as of the [____ day of May,] 1995 by
and between MICHAEL S. ENSIGN, an individual (the "ASSIGNOR") and CIRCUS
CIRCUS ENTERPRISES, INC., a Nevada corporation (the "ASSIGNEE").
Capitalized terms used but not otherwise defined herein shall have the
meanings ascribed thereto in the Agreement and Plan of Merger dated as of
[March __, 1995,] by and between, among others, the Assignor and the
Assignee (the "AGREEMENT AND PLAN OF MERGER").
RECITALS
--------
The Assignor desires to assign to the Assignee, and the Assignee
desires to accept from the Assignor, the Transferred Interests (as defined
below), subject to the terms and conditions of the Agreement and Plan of
Merger.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the mutual covenants
contained herein, and for other good and valuable consideration, as set
forth in the Agreement and Plan of Merger, the receipt and sufficiency
which are hereby acknowledged, the parties hereto, intending to be legally
bound, agree as follows:
ARTICLE I
REPRESENTATIONS AND WARRANTIES OF THE ASSIGNOR
The Assignor represents and warrants to the Assignee that:
1.1 AUTHORITY OF THE ASSIGNOR. This Agreement has been duly and
validly executed and delivered by the Assignor and constitutes a legal,
valid and binding obligation of the Assignor enforceable against him in
accordance with its terms, except to the extent that such enforceability
may be limited by bankruptcy, insolvency, moratorium or other laws
affecting the enforcement of creditor's rights generally or by general
equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
1.2 NO VIOLATION. The Assignor is not in default under or in
violation of any Instrument to which he is a party or by which he is bound
or to which any of his properties or assets is subject. Neither the
Assignor's execution and delivery of this Agreement, nor the consummation
of the transactions contemplated hereby, will conflict with or breach any
Instrument of the Assignor, or cause any such default or violation, or
accelerate
<PAGE>
or allow any Person to accelerate, terminate, modify or cancel any material
rights under any Instrument, or will result in the creation of any material
Encumbrance on the assets or properties of the Assignor. Such execution,
delivery and consummation will not violate or breach or constitute a
default under any material law, rule, judgment, order, decree or regulation
of any Governmental Authority to which the Assignor is a party or is
subject or to which the Assignor's properties or assets is subject.
1.3 CONSENTS AND APPROVALS. Except as noted in the following
sentence, no consent, authorization, order, license, permit, or approval of
(or filing or registration with) any Governmental Authority or any other
Person is required in connection with the execution, delivery and
performance of this Agreement. The exceptions referred to above are: (i)
filings and approvals required under Nevada Law in respect of corporate
mergers, (ii) filings and approvals of pre-merger notification and report
forms and related documents under the HSR Act and (iii) filings with and
the receipt of all required prior approvals, consents, authorizations,
orders, permits, findings of suitability and licenses from, applicable
Gaming Authorities under the Gaming Laws.
1.4. AUTHORITY; NO VIOLATION OF OPTION TO LEASE REAL PROPERTY AND
RIGHT OF FIRST REFUSAL AND OF KENTUCKY AGREEMENT IN PRINCIPLE. The Option
to Lease Real Property and Right of First Refusal has been duly and validly
executed by the parties thereto and is in full force and effect. Neither
the Assignor nor any other Person a party to such agreement is in default
thereunder. The Option to Lease Real Property and Right of First Refusal
shall continue after the date hereof to be binding in accordance with its
terms. The Assignor has not assigned any of its right, title and interest
in the Option to Lease Real Property and Right of First Refusal to any
Person.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE ASSIGNEE
The Assignee represents and warrants to the Assignor that:
2.1 AUTHORITY OF THE ASSIGNEE. This Agreement has been duly and
validly executed and delivered by the Assignee and constitutes a legal,
valid and binding obligation of the Assignee enforceable against it in
accordance with its terms, except to the extent that such enforceability
may be limited by bankruptcy, insolvency, moratorium or other laws
affecting the enforcement of creditor's rights generally or by general
equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
2.2 NO VIOLATION. The Assignee is not in default under or in
violation of any provision of its Charter Documents, and the Assignee is
not in default under or in violation of any Instrument to which it is a
party or by which it is bound or to which any of its material properties or
assets is subject. Neither the Assignee's execution and delivery of this
Agreement, nor the consummation by the Assignee of the transactions
contemplated hereby, will conflict with or breach any Charter Document or
Instrument of the Assignee, or cause to any such default or violation, or
accelerate or allow any Person to accelerate, terminate, modify or cancel
any material rights under any Instrument, or will result in the
<PAGE>
creation of any material Encumbrance on the assets or properties of the
Assignee. Such execution, delivery and consummation will not violate or
breach or constitute a default under any material law, rule, judgment,
order, decree or regulation of any government, governmental agency or court
(including without limitation all Gaming Laws) to which the Assignee is a
party or is subject or to which the Assignee's properties or assets is
subject.
2.3 CONSENTS AND APPROVALS. Except as noted in the following
sentence, no consent, authorization, order, license, permit, or approval of
(or filing or registration with) any Governmental Authority or any other
Person is required in connection with the execution, delivery and
performance of this Agreement. The exceptions referred to above are: (i)
filings and approvals required under Nevada Law in respect of corporate
mergers, (ii) filings and approvals of pre-merger notification and report
forms and related documents under the HSR Act and (iii) filings with and
the receipt of all required prior approvals, consents, authorizations,
orders, permits, findings of suitability and licenses from, applicable
Gaming Authorities under the Gaming Laws.
ARTICLE III
ASSIGNMENT AND ACCEPTANCE
3.1 ASSIGNMENT. The Assignor hereby transfers to the Assignee
all of the Assignor's right, title and interest in and to (i) Option to
Lease Real Property and Right of First Refusal, dated as of January 26,
1993, by and between Gold Strike Resorts and Warren Ware Sullivan, and (ii)
Kentucky Agreement in Principle, dated as of January 10, 1994, by and among
Assignor, Hyatt Development Corporation and Ellis Race Park (collectively,
the "TRANSFERRED INTERESTS"). All such right, title and interest of the
Assignor in and to the Transferred Interests shall become fully and
completely conveyed and transferred by the Assignor to the Assignee by the
making of this instrument by the Assignor without any further action on the
part of any party, provided that, the Assignor agrees, at the request of
-------- ----
the Assignee, to make, execute and deliver to such Assignee such other and
further deeds, assignments and other transfer documents as may be necessary
or desirable to effect and/or evidence the conveyance, assignment and
transfer intended herein.
3.2 ACCEPTANCE. The Assignee accepts the assignment and
transfer from the Assignor of said Transferred Interests.
3.3 FURTHER ASSURANCES. The Assignor hereby agrees to execute
such other instruments and to take such other actions as necessary or
desirable to effect the assignment of the Transferred Interests to the
Assignee.
3.4 GOVERNING LAW. This Agreement has been negotiated and
executed and shall be performed in the State of Nevada and shall be
governed and construed by the laws of such State, without giving effect to
the conflicts of laws principles thereof.
3.5 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the day and year first above written.
_______________________________
Michael S. Ensign
CIRCUS CIRCUS ENTERPRISES, INC.,
a Nevada corporation
By_____________________________
Name:
Title:
<PAGE>
EXHIBIT A-3
FORM OF
ASSIGNMENT OF
RIGHTS UNDER PURCHASE OPTION AGREEMENT
DATED AS OF [MAY __,] 1995
BY AND BETWEEN
CIRCUS CIRCUS ENTERPRISES, INC.
A NEVADA CORPORATION
AND
PETER A. SIMON II
<PAGE>
ASSIGNMENT OF RIGHTS UNDER PURCHASE OPTION AGREEMENT
This Assignment of Rights under Purchase Option Agreement, as
amended (the "AGREEMENT") is made and entered into as of the [____ day of
May,] 1995 by and between PETER A. SIMON II, an individual (the "ASSIGNOR")
and CIRCUS CIRCUS ENTERPRISES, INC., a Nevada corporation (the "ASSIGNEE").
Capitalized terms used but not otherwise defined herein shall have the
meanings ascribed thereto in the Agreement and Plan of Merger dated as of
[March __, 1995,] by and between, among others, the Assignor and the
Assignee (the "AGREEMENT AND PLAN OF MERGER").
RECITALS
--------
The Assignor desires to assign to the Assignee, and the Assignee
desires to accept from the Assignor, the Transferred Interest (as defined
below), subject to the terms and conditions of the Agreement and Plan of
Merger.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the mutual covenants
contained herein, and for other good and valuable consideration, as set
forth in the Agreement and Plan of Merger, the receipt and sufficiency
which are hereby acknowledged, the parties hereto, intending to be legally
bound, agree as follows:
ARTICLE I
REPRESENTATIONS AND WARRANTIES OF THE ASSIGNOR
The Assignor represents and warrants to the Assignee that:
1.1 AUTHORITY OF THE ASSIGNOR. This Agreement has been duly and
validly executed and delivered by the Assignor and constitutes a legal,
valid and binding obligation of the Assignor enforceable against him in
accordance with its terms, except to the extent that such enforceability
may be limited by bankruptcy, insolvency, moratorium or other laws
affecting the enforcement of creditor's rights generally or by general
equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
1.2 NO VIOLATION. The Assignor is not in default under or in
violation of any Instrument to which he is a party or by which he is bound
or to which any of his properties or assets is subject. Neither the
Assignor's execution and delivery of this Agreement, nor the consummation
of the transactions contemplated hereby, will conflict with or breach any
Instrument of the Assignor, or cause any such default or violation, or
accelerate or allow any Person to accelerate, terminate, modify or cancel
any material rights under any Instrument, or will result in the creation of
any material Encumbrance on the assets or
<PAGE>
properties of the Assignor. Such execution, delivery and consummation will
not violate or breach or constitute a default under any material law, rule,
judgment, order, decree or regulation of any Governmental Authority to
which the Assignor is a party or is subject or to which the Assignor's
properties or assets is subject.
1.3 CONSENTS AND APPROVALS. Except as noted in the following
sentence, no consent, authorization, order, license, permit, or approval of
(or filing or registration with) any Governmental Authority or any other
Person is required in connection with the execution, delivery and
performance of this Agreement. The exceptions referred to above are: (i)
filings and approvals required under Nevada Law in respect of corporate
mergers, (ii) filings and approvals of pre-merger notification and report
forms and related documents under the HSR Act and (iii) filings with and
the receipt of all required prior approvals, consents, authorizations,
orders, permits, findings of suitability and licenses from, applicable
Gaming Authorities under the Gaming Laws.
1.4. AUTHORITY, NO VIOLATION OF PURCHASE OPTION AGREEMENT. The
Purchase Option Agreement has been duly and validly executed by the parties
thereto and is in full force and effect. Neither the Assignor nor any
other Person a party to such agreement is in default thereunder. The
Purchase Option Agreement shall continue after the date hereof to be
binding in accordance with its terms. The Assignor has not assigned any of
its right, title and interest in the Purchase Option Agreement to any
Person.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE ASSIGNEE
The Assignee represents and warrants to the Assignor that:
2.1 AUTHORITY OF THE ASSIGNEE. This Agreement has been duly and
validly executed and delivered by the Assignee and constitutes a legal,
valid and binding obligation of the Assignee enforceable against it in
accordance with its terms, except to the extent that such enforceability
may be limited by bankruptcy, insolvency, moratorium or other laws
affecting the enforcement of creditor's rights generally or by general
equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
2.2 NO VIOLATION. The Assignee is not in default under or in
violation of any provision of its Charter Documents, and the Assignee is
not in default under or in violation of any Instrument to which it is a
party or by which it is bound or to which any of its material properties or
assets is subject. Neither the Assignee's execution and delivery of this
Agreement, nor the consummation by the Assignee of the transactions
contemplated hereby, will conflict with or breach any Charter Document or
Instrument of the Assignee, or cause to any such default or violation, or
accelerate or allow any Person to accelerate, terminate, modify or cancel
any material rights under any Instrument, or will result in the creation of
any material Encumbrance on the assets or properties of the Assignee. Such
execution, delivery and consummation will not violate or breach or
constitute a default under any material law, rule, judgment, order, decree
or regulation of any government,
<PAGE>
governmental agency or court (including without limitation all Gaming Laws)
to which the Assignee is a party or is subject or to which the Assignee's
properties or assets is subject.
2.3 CONSENTS AND APPROVALS. Except as noted in the following
sentence, no consent, authorization, order, license, permit, or approval of
(or filing or registration with) any Governmental Authority, or any other
Person is required in connection with the execution, delivery and
performance of this Agreement. The exceptions referred to above are: (i)
filings and approvals required under Nevada Law in respect of corporate
mergers, (ii) filings and approvals of pre-merger notification and report
forms and related documents under the HSR Act and (iii) filings with and
the receipt of all required prior approvals, consents, authorizations,
orders, permits, findings of suitability and licenses from, applicable
Gaming Authorities under the Gaming Laws.
ARTICLE III
ASSIGNMENT, ACCEPTANCE AND SUBSTITUTION
3.1 ASSIGNMENT. The Assignor hereby transfers to the Assignee
all of the Assignor's right, title and interest in and to the Purchase
Option Agreement, dated as of August 25, 1993 and Amendedment No. 1, dated
as of September 14, 1994, among Mildred H. Griffen, D. Keithly Griffin and
Assignee, as assignee of Carey M. Thompson, pursuant to an Assignment of
Option Agreement, dated as of November 11, 1993 (the "Transferred
Interest"). All such right, title and interest of the Assignor in and to
the Transferred Interest shall become fully and completely conveyed and
transferred by the Assignor to the Assignee by the making of this
instrument by the Assignor without any further action on the part of any
party, provided that, the Assignor agrees, at the request of the Assignee,
-------- ----
to make, execute and deliver to such Assignee such other and further deeds,
assignments and other transfer documents as may be necessary or desirable
to effect and/or evidence the conveyance, assignment and transfer intended
herein.
3.2 ACCEPTANCE. The Assignee accepts the assignment and
transfer from the Assignor of said Transferred Interest.
3.3 FURTHER ASSURANCES. The Assignor hereby agrees to execute
such other instruments and to take such other actions as necessary or
desirable to effect the assignment of the Transferred Interest to the
Assignee.
3.4 GOVERNING LAW. This Agreement has been negotiated and
executed and shall be performed in the State of Nevada and shall be
governed and construed by the laws of such State, without giving effect to
the conflicts of laws principles thereof.
3.5 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
[signature page to follow]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.
_______________________________
Peter A. Simon II
CIRCUS CIRCUS ENTERPRISES, INC.,
a Nevada corporation
By_____________________________
Name:
Title:
<PAGE>
EXHIBIT "B"
LIST OF EXCLUDED ASSETS
-----------------------
1. interests in Lakeview Company (Gold Strike Inn and Casino, Boulder City)
2. interests in Pioneer Investment Group (or its assets, if Pioneer is first
liquidated)
3. Oregon property (owned by LCI, Inc.)
4. Las Vegas veterinary hospital (owned by MSE, Inc.)
5. Henderson undeveloped property (owned by GSI, Inc.)
6. vintage and imported automobiles (owned by GSI, Inc.)
7. condominium (including fixtures) located in Spanish Trails (owned by GSI,
Inc.)
8. Paine Webber investment account with a cash balance of $2,881,801.41 at
February 28, 1995, along with interest, dividends and similar accruals
attributed to such balance after February 28, 1995 (owned by GSI, Inc.)
9. Morgan Stanley investment account with a cash balance of $405,363 at
February 28, 1995, along with interest, dividends and similar accruals
attributed to such balance after February 28, 1995 (owned by GSI, Inc.)
10. First Interstate Bank of Nevada investment account with a cash balance of
$8,072.19 at February 28, 1995, along with interest, dividends and similar
accruals attributed to such balance after February 28, 1995 (owned by GSI,
Inc.)
11. Mercedes 380 (owned by MSE, Inc.)
12. all assets owned by ODC, other than those related to Fuel and Fuel West
13. cash accounts with an aggregate balance of approximately $200,000 (owned by
MSE and LCI, Inc.)
14. note receivable in the amount of approximately $310,000 (owned by LCI,
Inc.)
15. miscellaneous investments in the amount of approximately $85,000 (owned by
LCI, Inc.)
16. miscellaneous investments in the amount of approximately $60,000 (owned by
GSI, Inc.)
<PAGE>
EXHIBIT C
FORM OF MERGER AGREEMENT
------------------------
MERGER AGREEMENT
This Merger Agreement is executed as of the ____ day of __________, 1995.
WITNESSETH:
-----------
WHEREAS, the Board of Directors of each of the undersigned corporations has
adopted the Plan of Merger of __________, a Nevada corporation, into
_____________________, a Nevada corporation, attached as Annex 1 (the "PLAN");
and
WHEREAS, all of the stockholders of each such corporation have approved the
Plan;
NOW, THEREFORE, the undersigned corporations hereby agree that the Plan and
the merger contemplated thereby, shall be consummated as provided by the Plan,
unless terminated pursuant to Section (l) of the Plan prior to the filing of
Articles of Merger, and further agree that following consummation of the merger,
this instrument and Annex 1 hereto shall constitute the complete executed Plan
of Merger referred to in Nevada Revised Statutes 78.451 et seq.
-------
IN WITNESS WHEREOF, each of the undersigned corporations has caused this
instrument to be executed as its respective act, deed and agreement, as of the
date first written above.
________________________________
a Nevada corporation
___________________________________________
Name:
Title:
______________________,
a Nevada corporation
___________________________________________
Name:
Title:
<PAGE>
ANNEX 1
PLAN OF MERGER
--------------
Pursuant to the provisions of Nevada Revised Statutes ("NRS") 78.451,
et seq., the following sets forth a plan of merger of _________________, a
- -------
Nevada corporation (the "CONSTITUENT CORPORATION"), into ______________________,
a Nevada corporation (the "SURVIVING CORPORATION"):
a. If this plan of merger is adopted by the stockholders of the
parties in accordance with the laws of the State of Nevada and not terminated or
abandoned as hereinafter provided, the merger of the Constituent Corporation
into the Surviving Corporation shall become effective upon the filing of
Articles of Merger in the office of the Secretary of State of Nevada pursuant to
the provisions of NRS 78.458, or at such later time as may be set forth in the
Articles of Merger (the "EFFECTIVE DATE").
b. At the Effective Date, the separate existence of the Constituent
Corporation shall cease, and the Surviving Corporation shall possess all rights,
privileges and powers, and be subject to all restrictions, disabilities and
duties of the Constituent Corporation.
c. At the Effective Date, the title to all real estate and other
property, real and personal, owned by the Constituent Corporation and all debts
due to the Constituent Corporation shall be vested in the Surviving Corporation
without reversion or impairment.
d. At the Effective Date, the Surviving Corporation shall have all
of the debts, liabilities and duties of the Constituent Corporation, but all
rights of creditors and all liens upon any property of the Constituent
Corporation shall be preserved unimpaired.
e. Any proceeding pending against the Constituent Corporation may be
continued as if the merger had not occurred or the Surviving Corporation may be
substituted in the proceeding for the Constituent Corporation.
f. The Articles of Incorporation of the Surviving Corporation shall
remain in full force and effect as the Articles of Incorporation of the
Surviving Corporation following the Effective Date, without amendment, until
altered or amended as provided by law.
g. The Bylaws of the Surviving Corporation shall remain in full
force and effect as the Bylaws of the Surviving Corporation following the
Effective Date, without amendment, until altered, amended or repealed as
provided therein.
h. The officers and directors of Circus Circus Enterprises, Inc. on
the Effective Date, to wit:
<PAGE>
Name Position
---- --------
Tony Coelho Director, Class I
Carl F. Dodge Director, Class I
William M. Pennington Director, Class I
Arthur M. Smith, Jr. Director, Class III
Fred W. Smith Director, Class II
Clyde Turner Chairman of the Board, Class II, and
Chief Executive Officer
Michael S. Ensign Vice Chairman of the Board, (Class II or
III), and Chief Operating Officer
William A. Richardson Director, (Class II or III), Executive
Vice President
Glenn W. Schaeffer President, Chief Financial Officer and
Treasurer
Kurt Sullivan Director, Class III and Senior Vice
President
Daniel Copp Senior Vice President
David R. Belding Senior Vice President and Secretary
Antonio C. Alamo Senior Vice President
Gregg Solomon Senior Vice President
Mike Sloan Senior Vice President and General
Counsel
shall be the officers and directors of the Surviving Corporation following the
Effective Date until respective successors are appointed or elected and
qualified.
i. The name of the Surviving Corporation from and after the
Effective Date shall be and remain ___________________________.
[j. The shares of common stock of the into shares of common stock of
_____________________ Constituent Corporation shall be converted according to
the following conversion table:
<TABLE>
<CAPTION>
Number of
_______________
Shares Issuable on
Constituent Conversion of
Corporation Constituent Corporation
Stockholder Shares Held Shares ]
- ----------- ----------- ------------------------
<S> <C> <C>
</TABLE>
<PAGE>
k. The manner of converting the outstanding shares of the capital
stock of the Constituent Corporation into the shares or other securities of the
____________________ shall be as follows:
(1) Each share of common stock of ____________________, which
shall be issued and outstanding at the Effective Date shall
remain issued and outstanding.
(2) The shares of common stock of the Constituent Corporation
which shall be outstanding at the Effective Date and all rights
in respect thereof, shall forthwith be changed and converted into
such number of shares of common stock of ________________________
as are set forth on the conversion table contained in Section (j)
above.
(3) After the Effective Date, each holder of an outstanding
certificate representing shares of common stock of the
Constituent Corporation shall surrender the same to the Surviving
Corporation and each such holder shall be entitled upon such
surrender to receive the number of shares of common stock of
____________________ the basis provided herein. Until so
surrendered, the outstanding shares of the stock of the
Constituent Corporation to be converted into the stock of
______________________ as provided herein, may be treated by
_______________________ for all corporate purposes as evidencing
the ownership of shares of __________________ as though said
surrender and exchange had taken place. After the Effective
Date, each registered owner of any uncertified shares of common
stock of the Constituent Corporation shall have said shares
cancelled and said registered owner shall be entitled to such
number of common shares of ____________________ as are provided
for herein.
l. Anything herein or elsewhere to the contrary notwithstanding, the
merger may be abandoned by the Board of Directors of either corporation, in the
sole discretion of any such Board and without further action by stockholders, at
any time prior to the filing of Articles of Merger in the Office of the
Secretary of the State of Nevada.
m. Any officer of the Surviving Corporation is authorized to execute
and deliver such other and further instruments and documents as may be necessary
to effectuate this plan of merger in accordance with its terms.
[n. The _________________ shares to be issued in the merger will not
be registered under the Securities Act of 1933, as amended, or under any state
securities laws.]
o. The Surviving Corporation shall in no event be required to
consummate the merger unless the Surviving Corporation in its sole discretion
shall have determined that issuance of ___________ shares in the merger is
exempt from the registration requirements of the Securities Act of 1933, as
amended, and that such shares may be lawfully issued without registration under
the provisions of any state securities law.
<PAGE>
ARTICLES OF MERGER
OF
___________________, a Nevada corporation
INTO
_____________________, a Nevada corporation
THE UNDERSIGNED, as the President and the Secretary of
__________________________, a Nevada corporation (the "SURVIVING CORPORATION"),
as and for the purpose of complying with the provisions of Nevada Revised
Statutes ("NRS") Sections 78.451 et seq., and in order to effectuate the merger
of _________________, a Nevada corporation (the "CONSTITUENT CORPORATION") into
the Surviving Corporation, hereby certifies as follows:
1. The name of the Constituent Corporation is ____________ and its
place of incorporation was the State of Nevada. The name of the Surviving
Corporation is _____________________ and its place of incorporation was also the
State of Nevada.
2. A plan of merger has been adopted by the Board of Directors of
each corporation that is a party to this merger.
3. The plan of merger has been approved by the written consent of
the stockholders, if any, of each corporation that is a party to this merger.
4. The Articles of Incorporation of the Surviving Corporation have
not been amended in connection with the merger.
5. A complete executed plan of merger is on file at the registered
office of the Surviving Corporation, currently: [ ]
6. A copy of the plan of merger will be furnished by the Surviving
Corporation on request and without any cost to any stockholder of any
corporation which is a party to this merger.
. . .
. . .
. . .
. . .
. . .
Page 1 of 2
<PAGE>
7. The effective date of this merger is the date upon which these
Articles of Merger are filed in the Office of the Secretary of State of the
State of Nevada.
IN WITNESS WHEREOF, we have set forth our hands as of the ____ day of
___________, 1995.
"Surviving Corporation"
_______________________________
a Nevada corporation
____________________________________________
Name:
Title:
____________________________________________
Name:
Title:
STATE OF NEVADA )
) ss.
COUNTY OF CLARK )
This instrument was acknowledged before me on __________________, 1995 by
[ ] as President of _____________________________.
Notary Public
(My commission expires:_______________________________)
STATE OF NEVADA )
) ss.
COUNTY OF CLARK )
This instrument was acknowledged before me on __________________, 1995 by
[ ] as Secretary of ________________________________.
Notary Public
(My commission expires:_______________________________)
Page 2 of 2
<PAGE>
================================================================================
EXHIBIT D
FORM OF
REGISTRATION RIGHTS AGREEMENT
dated as of March __, 1995
by and among
CIRCUS CIRCUS ENTERPRISES, INC.,
a Nevada corporation,
MICHAEL S. ENSIGN,
WILLIAM R. RICHARDSON,
DAVID R. BELDING,
PETER A. SIMON II,
GLENN W. SCHAEFFER,
GREGG H. SOLOMON,
ANTONIO C. ALAMO,
ANTHONY KORFMAN,
and
WILLIAM ENSIGN
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 1 DEFINITIONS.............................................. 1
ARTICLE 2 DEMAND REGISTRATIONS..................................... 4
2.1 Timing and Number of Demand Registrations........... 4
2.2 Required Thresholds................................. 5
2.3 Participation....................................... 5
2.4 Managing Underwriter................................ 5
ARTICLE 3 PIGGYBACK REGISTRATIONS.................................. 5
3.1 Participation....................................... 5
3.2 Underwriter's Cutback............................... 6
3.3 Company Control..................................... 6
ARTICLE 4 HOLD-BACK AGREEMENTS..................................... 6
4.1 By Holders.......................................... 6
4.2 By the Company and Others........................... 6
ARTICLE 5 REGISTRATION PROCEDURES.................................. 7
ARTICLE 6 REGISTRATION EXPENSES.................................... 9
ARTICLE 7 INDEMNIFICATION.......................................... 9
7.1 Indemnification by Company.......................... 9
7.2 Indemnification Procedures.......................... 10
7.3 Indemnification by Holder........................... 11
7.4 Contribution........................................ 11
ARTICLE 8 REQUIREMENTS FOR PARTICIPATION IN UNDERWRITTEN
OFFERINGS........................................... 12
ARTICLE 9 SUSPENSION OF SALES...................................... 12
ARTICLE 10 MISCELLANEOUS............................................ 12
10.1 No Inconsistent Agreements......................... 12
10.2 Entire Agreement................................... 12
10.3 No Third-Party Beneficiaries....................... 13
10.4 Notices............................................ 13
10.5 No Assignment; Binding Effect...................... 13
10.6 Severability....................................... 13
10.7 Governing Law...................................... 13
10.8 Counterparts....................................... 13
</TABLE>
<PAGE>
REGISTRATION RIGHTS AGREEMENT
-----------------------------
THIS REGISTRATION RIGHTS AGREEMENT, dated as of March __, 1995 (this
"Agreement"), is made and entered into by and among CIRCUS CIRCUS ENTERPRISES,
INC., a Nevada corporation (the "Company"), and each of MICHAEL S. ENSIGN, an
individual ("M. Ensign"), WILLIAM A. RICHARDSON, an individual ("Richardson"),
DAVID R. BELDING, an individual ("Belding"), PETER A. SIMON II, an individual
("Simon"), GLENN W. SCHAEFFER, an individual ("Schaeffer"), GREGG H. SOLOMON, an
individual ("Solomon"), ANTONIO C. ALAMO, an individual ("Alamo"), ANTHONY
KORFMAN, an individual ("Korfman"), and WILLIAM ENSIGN, an individual ("W.
Ensign" and collectively with all other individuals party hereto, the
"Investors").
RECITALS
--------
WHEREAS, the Company, M. Ensign, Richardson, Belding, Simon, Verchota, and
certain other parties, are entering into an Agreement and Plan of Merger dated
as of March 19, 1995 (the "Agreement and Plan of Merger"); and
WHEREAS, the Company, Schaeffer, Solomon, Alamo, Korfman, W. Ensign and
certain other parties are entering into an Exchange Agreement dated as of March
19, 1995 (the "Exchange Agreement").
WHEREAS, in order to induce certain parties to enter into the Agreement and
Plan of Merger and the Exchange Agreement and to consummate the transactions
contemplated thereby, each of the Investors and the Company has agreed to enter
into this Agreement.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto agree
as follows:
ARTICLE 1
DEFINITIONS
The following capitalized terms shall have the following meanings:
"BOARD" shall mean the Board of Directors of the Company.
"CLAIM" shall mean any loss, claim, damages, liability or expense
(including the reasonable costs of investigation and legal fees and expenses).
"COMMON STOCK" shall mean the common stock, par value $.01 (one cent
and two-thirds mil) per share, of the Company.
"DEMAND GROUP" shall mean all Demand Persons.
<PAGE>
"DEMAND PERSON" shall mean each of M. Ensign, Richardson and Belding,
so long as such Demand Person is a Holder.
"DEMAND REGISTRATION" shall mean a registration pursuant to Article 2
hereof.
"EQUITY SECURITY" shall mean any capital stock of the Company or any
security convertible, with or without consideration, into any such stock, or any
security carrying any warrant or right to subscribe to or purchase any such
stock, or any such warrant or right.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended from time to time, and the rules and regulations promulgated pursuant
thereto.
"EXCHANGEABLE PREFERRED STOCK" shall mean the Exchangeable Preferred
Stock, $.01 par value per share, issued to Schaeffer, Solomon, Alamo, Korfman
and W. Ensign pursuant to that certain Exchange Agreement dated as of the date
first above written by and among the Company, New Day, Inc., a Nevada
corporation, and such Investors.
"FIRM COMMITMENT UNDERWRITTEN OFFERING" shall mean an offering in
which the underwriters agree to purchase securities for distribution pursuant to
a registration statement under the Securities Act and in which the obligation of
the underwriters is to purchase all the securities being offered if any are
purchased.
"FIRST DEMAND REGISTRATION STATEMENT" shall have the meaning set forth
in Section 2.1 hereof.
"HOLDER" shall mean each Investor, so long as such Investor is the
beneficial owner of Registrable Securities.
"INDEMNIFIED HOLDER" shall mean any Holder, any officer, director,
employee or agent of any such Holder and any Person who controls any of the
foregoing Persons within the meaning of either Section 15 of the Securities Act
or Section 20 of the Exchange Act; provided, however, that no Person who was an
officer, director or employee of the Company at the time of the effectiveness of
any Registration Statement shall be an Indemnified Holder.
"MISSTATEMENT" shall mean an untrue statement of a material fact or an
omission to state a material fact required to be stated in a Registration
Statement or Prospectus or necessary to make the statements in a Registration
Statement, Prospectus or preliminary prospectus not misleading.
"PERSON" shall mean a natural person, partnership, corporation,
business trust, association, joint venture or other entity or a government or
agency or political subdivision thereof.
"PIGGYBACK REGISTRATION" shall mean a registration pursuant to Article
3 hereof.
"PROSPECTUS" shall mean the prospectus included in any Registration
Statement, as supplemented by any and all prospectus supplements and as amended
by any and all post-effective amendments and including all material incorporated
by reference in such prospectus.
<PAGE>
"REGISTRATION" shall mean a Demand Registration or a Piggyback
Registration.
"REGISTRATION EXPENSES" shall mean the out-of-pocket expenses of the
Company in connection with a Registration, including:
(1) all registration and filing fees (including fees with
respect to filings required to be made with the National Association of
Securities Dealers);
(2) fees and expenses of compliance with securities or blue sky
laws (including fees and disbursements of counsel for the underwriters in
connection with blue sky qualifications of the Registrable Securities and
determinations of their eligibility for investment under the laws of such
jurisdictions as the managing underwriters may designate);
(3) printing expenses;
(4) fees and disbursements of counsel for the Company and
counsel for the underwriters;
(5) fees and disbursements of all independent certified public
accountants of the Company incurred specifically in connection with such
Registration;
(6) fees and disbursements of underwriters (excluding discounts,
commissions or fees of underwriters, selling brokers, dealer managers or
similar securities industry professionals relating to the distribution of
the Registrable Securities); and
(7) fees and expenses of any other Persons retained by the
Company.
"REGISTRABLE SECURITIES" shall mean all shares of Common Stock issued
to the Investors pursuant to the Agreement and Plan of Merger, any shares of
Common Stock issued in exchange for the Exchangeable Preferred Stock, and any
securities issued with respect to such Common Stock by way of a stock dividend
or stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or reorganization; provided that any such Common Stock or
any such securities shall be deemed to be Registrable Securities only if and so
long as it is a Transfer Restricted Security.
"REGISTRATION STATEMENT" shall mean any registration statement which
covers Registrable Securities pursuant to the provisions of this Agreement,
including the Prospectus included in such registration statement, amendments
(including post-effective amendments) and supplements to such registration
statement, and all exhibits to and all material incorporated by reference in
such registration statement.
"SECOND DEMAND REGISTRATION STATEMENT" shall have the meaning set
forth in Section 2.1 hereof.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended
from time to time, and the rules and regulations promulgated pursuant thereto.
<PAGE>
"SEC" shall mean the Securities and Exchange Commission.
"TERMINATED WITHOUT CAUSE BY THE COMPANY OR WITH GOOD REASON BY SUCH
DEMAND PERSON" shall mean the termination of the employment of a Demand Person
by the Company without cause or by such Demand Person with good reason pursuant
to Section 5(a) of the Employment Agreement dated as of the date first above
written by and between the Company and such Demand Person.
"THIRD DEMAND REGISTRATION STATEMENT" shall have the meaning set forth
in Section 2.1 hereof.
"TRANSFER RESTRICTED SECURITY" shall mean a security that has not been
sold to or through a broker, dealer or underwriter in a public distribution or
other public securities transaction or sold in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act under
Rule 144 promulgated thereunder (or any successor rule). The foregoing
notwithstanding, a security shall remain a Transfer Restricted Security until
all stop transfer instructions or notations and restrictive legends with respect
to such security have been lifted or removed.
"UNDERWRITTEN REGISTRATION" or "UNDERWRITTEN OFFERING" shall mean a
registration in which securities of the Company are sold to an underwriter for
distribution to the public.
ARTICLE 2
DEMAND REGISTRATIONS
2.1 TIMING AND NUMBER OF DEMAND REGISTRATIONS. At any time after the
first anniversary of the date of this Agreement, a Demand Person may request in
writing (a "Demand Request") that the Company file a registration statement
under the Securities Act covering shares of Registrable Securities then
outstanding which are beneficially owned by the Demand Person and which are
specified in the Demand Request.
The Company shall be obligated to prepare, file and cause to become
effective pursuant to this Article 2 no more than two Registration Statements
(the first, if any, being referred to herein as the "First Demand Registration
Statement" and the second, if any, being referred to herein as the "Second
Demand Registration Statement"); provided, however, the Company shall be
obligated to prepare, file and cause to become effective a third Registration
Statement (the "Third Demand Registration Statement"), if at the time of the
Demand Request with respect to the Third Demand Registration Statement the
Demand Person making such Demand Request was Terminated Without Cause by the
Company or With Good Reason by such Demand Person. Notwithstanding the
foregoing, (i) no Demand Request shall be provided with respect to a Second
Demand Registration Statement or a Third Demand Registration Statement (and the
Company shall not be obligated to prepare, file and cause to become effective a
Second Demand Registration Statement or a Third Demand Registration Statement,
respectively) prior to the period ending eighteen months after the effectiveness
of the First Demand Registration Statement and prior to the period ending
eighteen months after the effectiveness of the Second Demand Registration
Statement, respectively, and (ii) a Demand Request that has been revoked by any
Demand Person shall be deemed a request for the purposes of calculating the
number of Registration Statements which have been prepared, filed and become
effective pursuant to this
<PAGE>
paragraph of Section 2.1, unless such Demand Person reimburses the Company for
all Registration Expenses incurred in connection with the preparation of a
Registration Statement pursuant to such Demand Request.
If a Demand Person requests that the Company effect a Demand
Registration and the Company furnishes to such Demand Person a copy of a
resolution of the Board certified by the Secretary of the Company stating that
in the good faith judgment of the Board it would be seriously detrimental to the
Company and its stockholders for such registration statement to be filed on or
before the date such filing would otherwise be required hereunder, the Company
shall have the right to defer such filing for a period of not more than 180 days
after receipt of the Demand Request from such Demand Person; provided that
during such time the Company may not file a registration statement (other than
on Form S-8 or any successor form thereto) for securities to be issued and sold
for its own account or that of anyone other than the Demand Group.
2.2 REQUIRED THRESHOLDS. The Company shall not be obligated to prepare,
file and cause to become effective pursuant to this Article 2 a Registration
Statement unless the proposed aggregate public offering price of the securities
to be included in such Demand Registration is at least $25 million. The Company
shall not be required to effect any Demand Registration unless the offering is
to be a Firm Commitment Underwritten Offering.
2.3 PARTICIPATION. The Company shall promptly give written notice to all
Holders upon receipt of a request for a Demand Registration pursuant to Section
2.1 above. The Company shall include in such Demand Registration the shares of
Registrable Securities for which it has received written requests to register
such shares within 30 days after such written notice has been given.
2.4 MANAGING UNDERWRITER. The managing underwriter or underwriters of any
underwritten public offering covered by a Demand Registration shall be selected
by the Company; provided, however, if no member of the Demand Group is a
director or officer of the Company, the Company's selection of such managing
underwriter or underwriters shall be subject to the approval of the Demand
Group, which approval shall not be unreasonably withheld.
ARTICLE 3
PIGGYBACK REGISTRATIONS
3.1 PARTICIPATION. Each time after the first anniversary of the date of
this Agreement that the Company decides to file a registration statement under
the Securities Act (other than on Forms S-4 or S-8 or any successor form
thereto) covering the offer and sale by it or any of its security holders of any
of its Equity Securities, for money, the Company shall give written notice
thereof to all Holders. The Company shall include in such registration
statement the shares of Registrable Securities for which it has received written
requests to register such shares within 30 days after such written notice has
been given. If the registration statement is to cover an underwritten offering,
such Registrable Securities shall be included in the underwriting on the same
terms and conditions as the securities otherwise being sold through the
underwriters.
3.2 UNDERWRITER'S CUTBACK. If, in the good faith judgment of the managing
underwriter of such offering, the inclusion of all of the shares of Registrable
Securities would adversely affect
<PAGE>
the successful marketing of a smaller number of such shares, then (i) the
managing underwriter shall provide written notice of such judgment to all
Holders requesting such inclusion and (ii) the number of shares of Registrable
Securities to be included in the offering (except for shares to be issued by the
Company in an offering initiated by the Company) shall be reduced pro rata among
Holders requesting such inclusion pursuant to a Piggyback Registration and any
other Persons requesting Common Stock to be included in such Registration based
upon the number of shares of Common Stock and Registrable Securities owned by
such Persons.
All shares so excluded from the underwritten public offering shall be
withheld from the market by the Holders thereof for a period (not to exceed 15
days prior to the effective date and 120 days thereafter) that the managing
underwriter reasonably determines is necessary in order to effect the
underwritten public offering.
3.3 COMPANY CONTROL. The Company may decline to file a Registration
Statement after giving notice to any Holder pursuant to Section 3.1 above, or
withdraw a Registration Statement after filing and after such notice, but prior
to the effectiveness thereof.
ARTICLE 4
HOLD-BACK AGREEMENTS
4.1 BY HOLDERS. Upon the written request of the managing underwriter of
any underwritten offering of the Company's securities, a Holder shall not sell,
make any short sale of, loan, grant any option for the purchase of, or otherwise
dispose of any Registrable Securities (other than those included in such
registration) without the prior written consent of such managing underwriter for
a period (not to exceed 15 days before the effective date and 120 days
thereafter) that such managing underwriter reasonably determines is necessary in
order to effect the underwritten public offering; provided that each of the
officers and directors of the Company shall have entered into substantially
similar holdback agreements with such managing underwriter covering at least the
same period.
4.2 BY THE COMPANY AND OTHERS. The Company agrees:
(a) not to effect any public or private sale or distribution of its
Equity Securities during the 15-day period prior to, and during the 120-day
period after, the effective date of each underwritten offering made pursuant to
a Demand Registration or a Piggyback Registration, if so requested in writing by
the managing underwriter (except as part of such underwritten offering or
pursuant to registrations on Forms S-4 or S-8 or any successor form thereto),
and
(b) not to issue any Equity Securities other than for sale in a
registered public offering unless each of the Persons to which such securities
are issued has entered into a written agreement binding on its transferees not
to effect any public sale or distribution of such securities during such period,
including without limitation a sale pursuant to Rule 144 under the Securities
Act (except as part of such underwritten registration, if and to the extent
permitted hereunder).
<PAGE>
ARTICLE 5
REGISTRATION PROCEDURES
If and whenever the Company is required to register Registrable Securities
in a Demand Registration or a Piggyback Registration, the Company will use its
best efforts to effect such registration to permit the sale of such Registrable
Securities in accordance with the intended plan of distribution thereof, and
pursuant thereto the Company will as expeditiously as possible:
(a) prepare and file with the SEC as soon as practicable a Registration
Statement with respect to such Registrable Securities and use its best efforts
to cause such Registration Statement to become effective and remain effective
until the Registrable Securities covered by such Registration Statement have
been sold; provided that the Company shall not be required to maintain the
effectiveness of any Registration Statement for more than 90 days after such
Registration Statement becomes effective; and provided, further, that before
filing a Registration Statement or Prospectus or any amendments or supplements
thereto, the Company shall furnish to the Holders of the Registrable Securities
covered by such Registration Statement and the underwriters, if any, draft
copies of all such documents proposed to be filed, which documents will be
subject to the review of such Holders and underwriters;
(b) prepare and file with the SEC such amendments to the Registration
Statement, and such supplements to the Prospectus, as may be required by the
rules, regulations or instructions applicable to the registration form used by
the Company or by the Securities Act to keep the Registration Statement
effective until all Registrable Securities covered by such Registration
Statement are sold in accordance with the intended plan of distribution set
forth in such Registration Statement or supplement to the Prospectus or for such
shorter period of time during which such Registration Statement must be kept
effective by the terms of this Agreement;
(c) promptly notify the selling Holders and the managing underwriter, if
any, and (if requested by any such Person) confirm such advice in writing,
(1) when the Prospectus or any supplement or post-effective amendment
has been filed, and, with respect to the Registration Statement or any
post-effective amendment, when the same has become effective,
(2) of any request by the SEC for amendments or supplements to the
Registration Statement or the Prospectus or for additional information,
(3) of the issuance by the SEC of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose,
(4) of the receipt by the Company of any notification with respect to
the suspension of the qualification of the Registrable Securities for sale
in any jurisdiction or the initiation or threatening of any proceeding for
such purpose, and
(5) of the existence of any fact which results in the Registration
Statement, the Prospectus or any document incorporated therein by reference
containing a Misstatement;
<PAGE>
(d) make every reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of the Registration Statement at the earliest
possible time;
(e) promptly prior to the filing of any document which is to be
incorporated by reference into the Registration Statement or the Prospectus
(after initial filing of the Registration Statement) provide copies of such
document to counsel to the selling Holders and to the managing underwriter, if
any;
(f) furnish to each selling Holder and the managing underwriter, without
charge, at least one signed copy of the Registration Statement and any
amendments thereto, including financial statements and schedules, all documents
incorporated therein by reference and all exhibits (including those incorporated
by reference);
(g) deliver to each selling Holder and the underwriters, if any, without
charge, as many copies of each Prospectus (and each preliminary prospectus) as
such Persons may reasonably request (the Company hereby consenting to the use of
each such Prospectus (or preliminary prospectus) by each of the selling Holders
and the underwriters, if any, in connection with the offering and sale of the
Registrable Securities covered by such Prospectus (or preliminary prospectus));
(h) prior to any public offering of Registrable Securities, register or
qualify or cooperate with the selling Holders, the underwriters, if any, in
connection with the registration or qualification of such Registrable Securities
for offer and sale under the securities or blue sky laws of such jurisdictions
as such selling Holders or underwriters may designate and do anything else
necessary or advisable to enable the disposition in such jurisdictions of the
Registrable Securities covered by the Registration Statement; provided that the
Company shall not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified or to take any action which would
subject it to general service of process in any such jurisdiction where it is
not then so subject;
(i) cooperate with the selling Holders and the managing underwriter, if
any, to facilitate the timely preparation and delivery of certificates not
bearing any restrictive legends representing the Registrable Securities to be
sold and cause such Registrable Securities to be in such denominations and
registered in such names as the managing underwriter may request at least three
business days prior to any sale of Registrable Securities to the underwriters;
(j) use its best efforts to cause the Registrable Securities covered by
the Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the seller or
sellers thereof or the underwriters, if any, to consummate the disposition of
such Registrable Securities;
(k) if the Registration Statement or the Prospectus contains a
Misstatement, prepare a supplement or amendment to the Registration Statement or
the related Prospectus or any document incorporated therein by reference or file
any other required document so that, as thereafter delivered to the purchasers
of the Registrable Securities, the Prospectus will not contain a Misstatement;
<PAGE>
(l) provide a CUSIP number for all Registrable Securities not later than 3
business days prior to the effective date of the Registration Statement;
(m) enter into such agreements (including an underwriting agreement) and
do anything else necessary or advisable in order to expedite or facilitate the
disposition of such Registrable Securities; and
(n) otherwise use its best efforts to comply with all applicable rules and
regulations of the SEC, and make generally available to its security holders
earnings statements satisfying the provisions of Section 11(a) of the Securities
Act, no later than 45 days after the end of any 12-month period (or 90 days, if
such period is a fiscal year) (x) commencing at the end of any fiscal quarter in
which Registrable Securities are sold to underwriters in an underwritten
offering, or, if not sold to underwriters in such an offering, (y) beginning
with the first month of the Company's first fiscal quarter commencing after the
effective date of the Registration Statement, which statements shall cover said
12-month periods.
ARTICLE 6
REGISTRATION EXPENSES
The Company shall bear all Registration Expenses incurred in
connection with any Registration, except as set forth in Section 2.1 and the
fees and disbursements of counsel to the selling security holders shall be paid
by such holders. Notwithstanding the foregoing, if (i) any Holder requests that
shares of Registrable Securities be registered, whether in connection with a
Demand Registration pursuant to Article 2 or in connection with a Piggyback
Registration pursuant to Article 3, and (ii) such Holder later requests that a
lesser number of such shares be registered after the registration and filing
fees with respect to such greater number of shares has been paid, then such
Holder shall pay such registration and filing fees with respect to the number of
shares which such Holder requested be withdrawn from registration and which
number of shares are thereafter not included in such registration (whether
registered on behalf of the Company or any other Person requesting
registration).
ARTICLE 7
INDEMNIFICATION
7.1 INDEMNIFICATION BY COMPANY. The Company agrees to indemnify and hold
harmless each Indemnified Holder from and against all Claims arising out of or
based upon any Misstatement or alleged Misstatement, except insofar as such
Misstatement or alleged Misstatement was based upon information furnished in
writing to the Company by such Indemnified Holder expressly for use in the
document containing such Misstatement or alleged Misstatement. This indemnity
shall not be exclusive and shall be in addition to any liability which the
Company may otherwise have.
The foregoing notwithstanding, the Company shall not be liable to an
Indemnified Holder to the extent that any such Claim arises out of or is based
upon a Misstatement or alleged Misstatement in a Prospectus, if (i) such Claim
is asserted by a Person (other than an underwriter participating in the offering
to which such Prospectus relates) who purchased a Registrable Security from such
Indemnified Holder, (ii) such Misstatement or alleged Misstatement was corrected
in an amendment or supplement to such Prospectus, and (iii) having previously
been
<PAGE>
furnished by or on behalf of the Company with copies of the Prospectus as so
amended or supplemented, such Indemnified Holder thereafter failed to deliver
such Prospectus as so amended or supplemented prior to or concurrently with the
sale to such Person who purchased a Registrable Security from such Indemnified
Holder and who is asserting such Claim.
7.2 INDEMNIFICATION PROCEDURES. If any action or proceeding (including
any governmental investigation or inquiry) shall be brought or asserted against
an Indemnified Holder in respect of which indemnity may be sought from the
Company, such Indemnified Holder shall promptly notify the Company in writing,
and the Company shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to such Indemnified Holder and the payment of
all reasonable expenses in connection therewith.
Such Indemnified Holder shall have the right to employ separate
counsel in any such action and to participate in the defense thereof, but the
fees and expenses of such separate counsel shall be the expense of such
Indemnified Holder unless (i) the Company has agreed to pay such fees and
expenses, (ii) the Company shall have failed to assume the defense of such
action or proceeding or has failed to employ counsel reasonably satisfactory to
such Indemnified Holder in any such action or proceeding or (iii) the Company or
other Persons indemnified by the Company are parties to such action or
proceeding and such Indemnified Holder shall have been advised by counsel that
there may be one or more legal defenses available to such Indemnified Holder
that are different from or additional to those available to the Company or such
other Persons.
If such Indemnified Holder notifies the Company in writing that it
elects to employ separate counsel at the expense of the Company as permitted by
the provisions of the preceding paragraph, the Company shall not have the right
to assume the defense of such action or proceeding on behalf of such Indemnified
Holder. The foregoing notwithstanding, the Company shall not be liable for the
reasonable fees and expenses of more than one separate firm of attorneys (in
addition to any local counsel) at any time for such Indemnified Holder and any
other Indemnified Holders (which firm shall be designated in writing by such
Indemnified Holders) in connection with any one such action or proceeding or
separate but substantially similar or related actions or proceedings in the same
jurisdiction arising out of the same general allegations or circumstances,
unless clause (iii) of the foregoing paragraph applies.
The Company shall not be liable for any settlement of any such action
or proceeding effected without its written consent, but if settled with its
written consent, or if there be a final judgment for the plaintiff in any such
action or proceeding, the Company agrees to indemnify and hold harmless such
Indemnified Holders from and against any loss or liability by reason of such
settlement or judgment.
7.3 INDEMNIFICATION BY HOLDER. Each Holder agrees to indemnify and hold
harmless the Company, its directors and officers and each Person, if any, who
controls the Company within the meaning of either Section 15 of the Securities
Act or Section 20 of the Exchange Act to the same extent as the foregoing
indemnity from the Company to such Holder, but only with respect to information
relating to such Holder furnished in writing by such Holder expressly for use in
any Registration Statement, Prospectus or preliminary prospectus. In no event,
however, shall the liability hereunder of any selling Holder be greater than the
dollar amount of the
<PAGE>
proceeds received by such Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation.
In case any action or proceeding shall be brought against the Company
or its directors or officers or any such controlling person, in respect of which
indemnity may be sought against a Holder, such Holder shall have the rights and
duties given the Company and the Company or its directors or officers or such
controlling person shall have the rights and duties given to each Holder by
Sections 7.1 and 7.2 above.
The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in the distribution, to the same extent as provided
above with respect to information so furnished in writing by such Persons
specifically for inclusion in any Prospectus or Registration Statement.
7.4 CONTRIBUTION. If the indemnification provided for in this Article 7
is unavailable to an indemnified party under Section 7.1 or Section 7.3 above
(other than by reason of exceptions provided in those Sections) in respect of
any Claims referred to in such Sections, then each applicable indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such Claims in
such proportion as is appropriate to reflect the relative fault of the Company
on the one hand and of the Indemnified Holder on the other in connection with
the statements or omissions which resulted in such Claims as well as any other
relevant equitable considerations. The amount paid or payable by a party as a
result of the Claims referred to above shall be deemed to include, subject to
the limitations set forth in Section 7.2, any legal or other fees or expenses
reasonably incurred by such party in connection with investigating or defending
any action or claim.
The relative fault of the Company on the one hand and of the
Indemnified Holder on the other shall be determined by reference to, among other
things, whether the Misstatement or alleged Misstatement relates to information
supplied by the Company or by the Indemnified Holder and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such Misstatement or alleged Misstatement.
The Company and each Holder agree that it would not be just and
equitable if contribution pursuant to this Section 7.4 were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to above.
Notwithstanding the provisions of this Section 7.4, an Indemnified
Holder shall not be required to contribute any amount in excess of the amount by
which (i) the total price at which the securities that were sold by such
Indemnified Holder and distributed to the public were offered to the public
exceeds (ii) the amount of any damages which such Indemnified Holder has
otherwise been required to pay by reason of such Misstatement.
No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
<PAGE>
ARTICLE 8
REQUIREMENTS FOR PARTICIPATION IN UNDERWRITTEN OFFERINGS
No Person may participate in any underwritten offering pursuant to a
Registration hereunder unless such Person (a) agrees to sell such Person's
securities on the basis provided in any underwriting arrangements and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements.
ARTICLE 9
SUSPENSION OF SALES
Upon receipt of written notice from the Company that a Registration
Statement or Prospectus contains a Misstatement, each Holder shall forthwith
discontinue disposition of Registrable Securities until such Holder has received
copies of the supplemented or amended Prospectus required by Article 5 hereof,
or until such Holder is advised in writing by the Company that the use of the
Prospectus may be resumed, and, if so directed by the Company, such Holder shall
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies then in such Holder's possession, of the Prospectus
covering such Registrable Securities current at the time of receipt of such
notice. In the event the Company shall give any such notice, the 90-day period
referred to in Article 5 hereof shall be extended by the number of days during
the period from and including the date of the giving of such notice to and
including the date when each seller of Registrable Securities covered by such
Registration Statement either has received the copies of the supplemented or
amended prospectus contemplated by Article 5 hereof or has been advised in
writing by the Company that the use of the Prospectus may be resumed.
ARTICLE 10
MISCELLANEOUS
10.1 NO INCONSISTENT AGREEMENTS. The Company shall not on or after the
date of this Agreement enter into any agreement with respect to its securities
that is inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof.
10.2 ENTIRE AGREEMENT. This Agreement, including all exhibits and
schedules hereto, contains the sole and entire agreement among the parties with
respect to the subject matter hereof and supersedes any and all prior
agreements, understandings, negotiations and discussions, whether oral or
written, among the parties hereto with respect to such subject matter.
10.3 NO THIRD-PARTY BENEFICIARIES. The terms and provisions of this
Agreement are intended for the benefit of each party hereto and their respective
successors and permitted assigns, and it is not the intention of the parties to
confer third-party beneficiary rights upon any other Person (except as provided
in Article 7).
10.4 NOTICES. Unless otherwise specifically provided herein, all notices,
demands, consents, waivers and other communications required or permitted by the
terms of this Agreement shall be in writing, and any notice shall become
effective three (3) days after deposit in the United States mails, first class
postage prepaid, or one (1) day after delivery to an
<PAGE>
overnight courier or express company or immediately upon delivery by hand or in
the form of telecopy, telegram or other electronic means of communication that
produces a written copy, and, if mailed or delivered by courier, express company
or hand, shall be addressed as indicated in Section 9.3 of the Agreement and
Plan of Merger.
10.5 NO ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor any right,
interest, duty or obligation hereunder may be assigned by the Company or any
Holder without, in the case of the Company, the prior written consent of the
Holders of a majority of the Registrable Securities and, in the case of any
Holder, the prior written consent of the Company and the Holders of a majority
of the Registrable Securities, and any attempt to assign this Agreement or any
right, interest, duty or obligation hereunder without such prior written consent
shall be null and void. Subject to the preceding sentence, this Agreement is
binding upon, inures to the benefit of and is enforceable by the parties hereto
and their respective successors and assigns.
10.6 SEVERABILITY. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any present or future law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (i) such provision will be fully
severable, (ii) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
and (iii) the remaining provisions of this Agreement will remain in full force
and effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance from this Agreement.
10.7 GOVERNING LAW. This Agreement has been negotiated and executed and
shall be performed in the State of Nevada and shall be governed and construed by
the laws of such State, without giving effect to the conflicts of laws
principles thereof.
10.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
[Signature pages to follow]
<PAGE>
IN WITNESS WHEREOF, each party has executed this Agreement as of the date
first above written.
CIRCUS CIRCUS ENTERPRISES, INC.,
a Nevada corporation
By_______________________________________
Name:
Title:
__________________________________________
Michael S. Ensign
__________________________________________
William A. Richardson
__________________________________________
David R. Belding
__________________________________________
Peter A. Simon II
__________________________________________
Glenn W. Schaeffer
__________________________________________
Gregg H. Solomon
<PAGE>
__________________________________________
Antonio C. Alamo
__________________________________________
Anthony Korfman
__________________________________________
William Ensign
<PAGE>
EXHIBIT "E"
SENIOR EXECUTIVE COMPENSATION SCHEDULE
--------------------------------------
Proposed Employment Agreement
for
Clyde Turner
Summary of Key Terms
--------------------
Overall Rationale: The Company recognizes the crucial role of the
Officer in the future growth and success of the Company and desires to provide
for the employment of such Officer and to encourage such Officer's attention and
dedication to the Company. Moreover, the Company believes it is imperative to
diminish the inevitable distraction to the Officer by virtue of the personal
uncertainties and risks created by a pending or threatened Change in Control of
the Company, to reinforce the Officer's attention and dedication to his assigned
duties, and to provide the Officer with appropriate severance arrangements in
connection with any termination of employment following the occurrence of a
Change in Control. Accordingly, the following compensation, benefit and
severance arrangement is proposed for such Officer.
(a) Position/Duties: Chairman of the Board and Chief Executive Officer
(b) Contract Term: Three (3) years, provided that as of the
expiration date of each of (i) the initial three
(3) year term of the Agreement and (ii) if
applicable, any Renewal Period (as defined below),
the term of this Agreement shall automatically be
extended for a three (3) year period (each a
"Renewal Period") unless either the Company or the
Officer provides six (6) months' notice to the
contrary.
(c) Base Salary/
Annual Target Bonus: $800,000/$800,000
Base Salary would be subject to mandatory
increases equal to 5% per year for each year
during the term with further discretionary
increases as determined by the Board of Directors.
Base salary not to decrease unless Officer agrees
in writing.
(d) Long Term Incentive/
Stock Options: The Board will recommend to the Stock
Option Committee that the Officer be granted the
right to purchase an option on 2 million shares of
Company Stock under the following terms or on
terms which provide the Officer with substantially
equivalent economic value:
1. Purchase Price of the Option = $1.00 per
share;
<PAGE>
2. Option Exercise Price per Share = 110% of
the closing market price of the Company's
Stock on March 17, 1995 (the "Closing
Price");
3. Term: 7 years;
4. Subject to approval by the Company's
shareholders and the Closing of the Merger,
the Option will vest and become exercisable
at the rate of 33% per year with full
acceleration in the event of a Change in
Control or if the Officer is terminated (a)
by the Company without Cause, or (b) by the
Officer for Good Reason.
(e) Payments Upon
Termination: (a) By the Company for Cause, Death or
----------------------------------
Disability or By the Officer Other Than For Good
------------------------------------------------
Reason: The Company shall pay Officer his full
------
base salary and bonus and all other amounts due
to, or for the benefit of, Officer through the
date of termination, together with any other
amounts to which Officer is entitled pursuant to
the Company benefit plans, programs and policies.
(b) By the Company Without Cause, or by Officer
-------------------------------------------
for Good Reason: The Company shall pay salary and
---------------
target bonus, plus any other amounts due to, or
for the benefit of, Officer as provided under the
employment agreement for 36 months and all of the
Officer's Stock Options shall become immediately
exercisable.
(c) Good Reason shall include the following:
-----------
(i) a material breach by the Company of any
material provision of the agreement,
including, but not limited to, the
assignment to the officer of any duties
inconsistent with the officer's position in
Company or an adverse alteration in the
nature or status of Officer's
responsibilities;
(ii) the Company's requiring the Officer to
be based anywhere other than the
metropolitan area where he currently works
and resides;
<PAGE>
(iii) the occurrence of a Change in Control
of the Company; and
(iv) the Company's notifying the Officer
that it does not consent to any automatic
three-year extension of the term of the
Agreement.
(f) Non-Competition; Officer is subject to confidentiality and
Confidentiality/ non-competition/non-solicitation
Non-Solicitation: requirements.
(g) Indemnification: Officer is entitled to indemnification to
the fullest extent permitted by law.
(h) Mitigation: Officer is not subject to mitigation.
<PAGE>
Proposed Employment Agreement
for
Michael Ensign
Summary of Key Terms
--------------------
Overall Rationale: The Company recognizes the crucial role of the
Officer in the future growth and success of the Company and desires to provide
for the employment of such Officer and to encourage such Officer's attention and
dedication to the Company. Moreover, the Company believes it is imperative to
diminish the inevitable distraction to the Officer by virtue of the personal
uncertainties and risks created by a pending or threatened Change in Control of
the Company, to reinforce the Officer's attention and dedication to his assigned
duties, and to provide the Officer with appropriate severance arrangements in
connection with any termination of employment following the occurrence of a
Change in Control. Accordingly, the following compensation, benefit and
severance arrangement is proposed for such Officer.
(i) Position/Duties: Vice Chairman of the Board and Chief
Operating Officer
(j) Contract Term: Three (3) years, provided that as of
the expiration date of each of (i) the initial
three (3) year term of the Agreement and (ii) if
applicable, any Renewal Period (as defined below),
the term of this Agreement shall automatically be
extended for a one (1) year period (each a
"Renewal Period") unless either the Company or the
Officer provides six (6) months' notice to the
contrary.
(k) Base Salary/
Annual Target Bonus: $625,000/$625,000
Base Salary would be subject to mandatory
increases equal to 5% per year for each year
during the term with further discretionary
increases as determined by the Board of Directors.
Base salary not to decrease unless Officer agrees
in writing.
(l) Payments Upon
Termination: (a) By the Company for Cause, Death or
----------------------------------
Disability or By the Officer Other Than For Good
------------------------------------------------
Reason: The Company shall pay Officer his full
------
base salary and bonus and all other amounts due
to, or for the benefit of, Officer through the
date of termination, together with any other
amounts to which Officer is entitled pursuant to
the Company benefit plans, programs and policies.
<PAGE>
(b) By the Company Without Cause, or by Officer
-------------------------------------------
for Good Reason: The Company shall pay salary and
---------------
target bonus, plus any other amounts due to, or
for the benefit of, Officer as provided under the
employment agreement through the term of the
agreement or for twelve (12) months, whichever is
greater, and all of the Officer's Stock Options
shall become immediately exercisable.
(c) Good Reason shall include the following:
-----------
(i) a material breach by the Company of any
material provision of the Agreement,
including, but not limited to, the
assignment to the officer of any duties
inconsistent with the officer's position in
Company or an adverse alteration in the
nature or status of Officer's
responsibilities;
(ii) the Company's requiring the Officer to
be based anywhere other than the
metropolitan area where he currently works
and resides;
(iii) the occurrence of a Change in Control
of the Company; and
(iv) the Company's notifying the Officer
that it does not consent to any automatic
one-year extension of the term of the
Agreement.
(m) Non-Competition; Officer is subject to confidentiality and
Confidentiality/ non-competition/non-solicitation requirements.
Non-Solicitation:
(n) Indemnification: Officer is entitled to indemnification to the
fullest extent permitted by law.
(o) Mitigation: Officer is not subject to mitigation.
8. Joint Venture Agreement: Execution of Agreement
Pursuant to Joint Venture Agreement is condition
to Employment Agreement.
9. Cause: Cause shall also mean a final determination by a
court of competent jurisdiction that Officer
breached the Standstill Agreement.
<PAGE>
Proposed Employment Agreement
-----------------------------
for
William R. Richardson
Summary of Key Terms
--------------------
Overall Rationale: The Company recognizes the crucial role of the
Officer in the future growth and success of the Company and desires to provide
for the employment of such Officers and to encourage such Officer's attention
and dedication to the Company. Moreover, the Company believes it is imperative
to diminish the inevitable distraction to the Officer by virtue of the personal
uncertainties and risks created by a pending or threatened Change in Control of
the Company, to reinforce the Officer's attention and dedication to his assigned
duties, and to provide the Officer with appropriate severance arrangements in
connection with any termination of employment following the occurrence of a
Change in Control. Accordingly, the following compensation, benefit and
severance arrangement is proposed for such Officer.
(p) Position/Duties: Executive Vice President - Construction
(q) Contract Term: Three (3) years, provided that as of
the expiration date of each of (i) the initial
three (3) year term of the Agreement and (ii) if
applicable, any Renewal Period (as defined below),
the term of this Agreement shall automatically be
extended for a one (1) year period (each a
"Renewal Period") unless either the Company or the
Officer provides six (6) months' notice to the
contrary.
(r) Base Salary/ $625,000/$625,000
Annual Target Bonus: Base Salary would be subject to mandatory
increases equal to 5% per year for each year
during the term with further discretionary
increases as determined by the Board of Directors.
Base salary not to decrease unless Officer agrees
in writing.
(s) Payments Upon
Termination: (a) By the Company for Cause, Death or
----------------------------------
Disability or By the Officer Other Than For Good
------------------------------------------------
Reason: The Company shall pay Officer his full
------
base salary and bonus and all other amounts due
to, or for the benefit of, Officer through the
date of termination, together with any other
amounts to which Officer is entitled pursuant to
the Company benefit plans, programs and policies.
(b) By the Company Without Cause, or by Officer
-------------------------------------------
for Good Reason: The Company shall pay salary
---------------
<PAGE>
and target bonus, plus any other amounts due to,
or for the benefit of, Officer as provided under
the employment agreement through the term of the
agreement or for twelve (12) months, whichever is
greater, and all of the Officer's Stock Options
shall become immediately exercisable.
(c) Good Reason shall include the following:
-----------
(i) a material breach by the Company of any
material provision of the agreement,
including, but not limited to, the
assignment to the officer of any duties
inconsistent with the officer's position in
Company or an adverse alteration in the
nature or status of Officer's
responsibilities;
(ii) the Company's requiring the Officer to
be based anywhere other than the
metropolitan area where he currently works
and resides;
(iii) the occurrence of a Change in Control
of the Company; and
(iv) the Company's notifying the Officer
that it does not consent to any automatic
one-year extension of the term of the
Agreement.
5. Joint Venture Agreement: Execution of Agreement
Pursuant to Joint Venture Agreement is condition
to Employment Agreement.
6. Non-Competition; Officer is subject to confidentiality and
Confidentiality/ non-competition/non-solicitation requirements.
Non-Solicitation:
7. Indemnification: Officer is entitled to
indemnification to the fullest extent permitted by
law.
8. Mitigation: Officer is not subject to mitigation.
9. Cause: Cause shall also mean a final
determination by a court of competent jurisdiction
that Officer breached the Standstill Agreement.
<PAGE>
Proposed Employment Agreement
-----------------------------
for
Glenn Schaeffer
Summary of Key Terms
--------------------
Overall Rationale: The Company recognizes the crucial role of the
Officer in the future growth and success of the Company and desires to provide
for the employment of such Officer and to encourage such Officer's attention and
dedication to the Company. Moreover, the Company believes it is imperative to
diminish the inevitable distraction to the Officer by virtue of the personal
uncertainties and risks created by a pending or threatened Change in Control of
the Company, to reinforce the Officer's attention and dedication to his assigned
duties, and to provide the Officer with appropriate severance arrangements in
connection with any termination of employment following the occurrence of a
Change in Control. Accordingly, the following compensation, benefit and
severance arrangement is proposed for such Officer.
(t) Position/Duties: President, Treasurer and Chief
Financial Officer
(u) Contract Term: Three (3) years, provided that as of
the expiration date of each of (i) the initial
three (3) year term of the Agreement and (ii) if
applicable, any Renewal Period (as defined below),
the term of this Agreement shall automatically be
extended for a one (1) year period (each a
"Renewal Period") unless either the Company or the
Officer provides six (6) months' notice to the
contrary.
(v) Base Salary/
Annual Target Bonus: $600,000/$600,000
Base Salary would be subject to mandatory
increases equal to 5% per year for each year
during the term with further discretionary
increases as determined by the Board of Directors.
Base salary not to decrease unless Officer agrees
in writing.
(w) Long Term Incentive/
Stock Options: The Board will recommend to the Stock
Option Committee that the Officer be granted
Options to purchase 900,000 shares of Company
Stock with the following basic vesting schedules
and prices or on terms which provide the Officer
with substantially equivalent economic value: (i)
Options to purchase 500,000 shares would be
granted with a strike price equal to the closing
market price of the Company's Stock on March 17,
1995 (the "Closing Price"), vesting at 20% per
year; (ii) Options to purchase
<PAGE>
200,000 shares would be granted with a strike
price equal to 120% of the Closing Price, vesting
at 20% per year; and (iii) Options to purchase
200,000 shares would be granted with a strike
price equal to 130% of the Closing Price, vesting
at 20% per year. The exercisability of all of the
options shall be subject to approval by the
Company's shareholders and the Closing of the
Merger.
All options would become fully exercisable in the
event of a Change in Control or if the Officer is
terminated (a) by the Company without cause, or
(b) by the Officer for Good Reason.
(x) Payments Upon
Termination: (a) By the Company for Cause, Death or
----------------------------------
Disability or By the Officer Other Than For Good
------------------------------------------------
Reason: The Company shall pay Officer his full
------
base salary and bonus and all other amounts due
to, or for the benefit of, Officer through the
date of termination, together with any other
amounts to which Officer is entitled pursuant to
the Company benefit plans, programs and policies.
(b) By the Company Without Cause, or by Officer
-------------------------------------------
for Good Reason: The Company shall pay salary and
---------------
target bonus, plus any other amounts due to, or
for the benefit of, Officer as provided under the
employment agreement through the term of the
agreement or for twelve (12) months, whichever is
greater, and all of the Officer's Stock Options
shall become immediately exercisable.
(c) Good Reason shall include the following:
-----------
(i) a material breach by the Company of any
material provision of the agreement,
including, but not limited to, the
assignment to the Officer of any duties
inconsistent with the officer's position in
Company or an adverse alteration in the
nature or status of Officer's
responsibilities;
(ii) the Company's requiring the Officer to
be based anywhere other than the
metropolitan area where he currently works
and resides;
(iii) the occurrence of a Change in Control
of the Company; and
<PAGE>
(iv) the Company's notifying the Officer
that it does not consent to any automatic
one-year extension of the term of the
Agreement.
(y) Joint Venture Agreement: Execution of Agreement Pursuant to Joint
Venture Agreement is condition to
Employment Agreement.
(z) Non-Competition; Officer is subject to confidentiality and
Confidentiality/ non-competition/non-solicitation
Non-Solicitation: requirements.
(aa) Indemnification: Officer is entitled to indemnification to
the fullest extent permitted by law.
(ab) Mitigation: Officer is not subject to mitigation.
10. Cause: Cause shall also mean a final determination
by a court of competent jurisdiction that
such officer breached the Standstill
Agreement.
<PAGE>
Proposed Employment Agreement
-----------------------------
for
Antonio C. Alamo
Summary of Key Terms
--------------------
Overall Rationale: The Company recognizes the crucial role of the
Executive in the future growth and success of the Company and desires to provide
for the employment of such Executive and to encourage such Executive's attention
and dedication to the Company. Moreover, the Company believes it is imperative
to diminish the inevitable distraction to the Executive by virtue of the
personal uncertainties and risks created by a pending or threatened Change in
Control of the Company, to reinforce the Executive's attention and dedication to
his assigned duties, and to provide the Executive with appropriate severance
arrangements in connection with any termination of employment following the
occurrence of a Change in Control. Accordingly, the following compensation,
benefit and severance arrangement is proposed for such Executive.
(ac) Position/Duties: Senior Vice President - Operations
(ad) Contract Term: Three (3) years, provided that as of
the expiration date of each of (i) the initial
three (3) year term of the Agreement and (ii) if
applicable, any Renewal Period (as defined below),
the term of this Agreement shall automatically be
extended for a one (1) year period (each a
"Renewal Period") unless either the Company or the
Executive provides six (6) months' notice to the
contrary.
(ae) Base Salary/ $400,000/$400,000
Annual Target Bonus: Base salary not to decrease unless
Executive agrees in writing.
(af) Long Term Incentive/
Stock Options: The Board will recommend to the Stock
Option Committee that the Executive be granted
options to purchase 200,000 shares of Company
Stock with a strike price equal to the closing
market price of the Company's Stock on March 17,
1995 (the "Closing Price") and, subject to
approval by the Company's shareholders and the
Closing of the Merger, vesting at 20% per year or
on terms which provide the Executive with
substantially equivalent economic value. All
options would become fully exercisable in the
event of a Change in Control or if the Executive
is terminated (a) by the Company without cause, or
(b) by the Executive for Good Reason.
(ag) Payments Upon
<PAGE>
Termination: (a) By the Company for Cause, Death or
----------------------------------
Disability or By the Executive Other Than For Good
--------------------------------------------------
Reason: The Company shall pay Executive his full
------
base salary and bonus and all other amounts due
to, or for the benefit of, Executive through the
date of termination, together with any other
amounts to which Executive is entitled pursuant to
the Company benefit plans, programs and policies.
(b) By the Company Without Cause, or by Executive
---------------------------------------------
for Good Reason: The Company shall pay salary and
---------------
target bonus, plus any other amounts due to, or
for the benefit of, Executive as provided under
the employment agreement through the term of the
agreement or for twelve (12) months, whichever is
greater, and all of the Executive's Stock Options
shall become immediately exercisable.
(c) Good Reason shall include the following:
-----------
(i) the Company's requiring the Executive
to be based anywhere other than the
metropolitan area where he currently works
and resides for a period of more than 18
months;
(ii) a material breach by the Company of
any material provision of the agreement;
(iii) the occurrence of a Change in Control
of the Company; and
(iv) the Company's notifying the Executive
that it does not consent to any automatic
one-year extension of the term of the
Agreement.
(ah) Non-Competition; Executive is subject to confidentiality and
Confidentiality/ non-competition/non-solicitation
Non-Solicitation: requirements.
(ai) Indemnification: Executive is entitled to indemnification
to the fullest extent permitted by law.
(aj) Mitigation: Executive is not subject to mitigation.
<PAGE>
Proposed Employment Agreement
-----------------------------
for
Michael Sloan
Summary of Key Terms
--------------------
Overall Rationale: The Company recognizes the crucial role of the
Officer in the future growth and success of the Company and desires to provide
for the employment of such Officer and to encourage such Officer's attention and
dedication to the Company. Moreover, the Company believes it is imperative to
diminish the inevitable distraction to the Officer by virtue of the personal
uncertainties and risks created by a pending or threatened Change in Control of
the Company, to reinforce the Officer's attention and dedication to his assigned
duties, and to provide the Officer with appropriate severance arrangements in
connection with any termination of employment following the occurrence of a
Change in Control. Accordingly, the following compensation, benefit and
severance arrangement is proposed for such Officer.
(ak) Position/Duties: Senior Vice President and General Counsel
(al) Contract Term: Three (3) years, provided that as of
the expiration date of each of (i) the initial
three (3) year term of the Agreement and (ii) if
applicable, any Renewal Period (as defined below),
the term of this Agreement shall automatically be
extended for a one (1) year period (each a
"Renewal Period") unless either the Company or the
Officer provides six (6) months' notice to the
contrary.
(am) Base Salary/ $300,000/$300,000
Annual Target Bonus: Base salary not to decrease unless
Officer agrees in writing.
(an) Payments Upon
Termination: (a) By the Company for Cause, Death or
----------------------------------
Disability or By the Officer Other Than For Good
------------------------------------------------
Reason: The Company shall pay Officer his full
------
base salary and bonus and all other amounts due
to, or for the benefit of, Officer through the
date of termination, together with any other
amounts to which Officer is entitled pursuant to
the Company benefit plans, programs and policies.
(b) By the Company Without Cause, or by Officer
-------------------------------------------
for Good Reason: The Company shall pay salary and
---------------
target bonus, plus any other amounts due to, or
for the benefit of, Officer as provided under the
employment agreement through the term of the
agreement or for twelve (12) months, whichever is
<PAGE>
greater, and all of the Officer's Stock Options
shall become immediately exercisable.
(c) Good Reason shall include the following:
-----------
(i) the Company's requiring the Officer to
be based anywhere other than the
metropolitan area where he currently works
and resides for a period of more than 18
months;
(ii) a material breach by the Company of
any material provision of the agreement;
(iii) the occurrence of a Change in Control
of the Company; and
(iv) the Company's notifying the Officer
that it does not consent to any automatic
one-year extension of the term of the
Agreement.
(ao) Non-Competition; Officer is subject to confidentiality and
Confidentiality/ non-competition/non-solicitation
Non-Solicitation: requirements.
(ap) Indemnification: Officer is entitled to indemnification to
the fullest extent permitted by law.
(aq) Mitigation: Officer is not subject to mitigation.
<PAGE>
Proposed Employment Agreement
for
Gregg H. Solomon
Summary of Key Terms
--------------------
Overall Rationale: The Company recognizes the crucial role of the
Executive in the future growth and success of the Company and desires to provide
for the employment of such Executive and to encourage such Executive's attention
and dedication to the Company. Moreover, the Company believes it is imperative
to diminish the inevitable distraction to the Executive by virtue of the
personal uncertainties and risks created by a pending or threatened Change in
Control of the Company, to reinforce the Executive's attention and dedication to
his assigned duties, and to provide the Executive with appropriate severance
arrangements in connection with any termination of employment following the
occurrence of a Change in Control. Accordingly, the following compensation,
benefit and severance arrangement is proposed for such Executive.
(ar) Position/Duties: Senior Vice President - Operations
(as) Contract Term: Three (3) years, provided that as of the
expiration date of each of (i) the initial three
(3) year term of the Agreement and (ii) if
applicable, any Renewal Period (as defined below),
the term of this Agreement shall automatically be
extended for a one (1) year period (each a
"Renewal Period") unless either the Company or the
Executive provides six (6) months' notice to the
contrary.
(at) Base Salary/ $400,000/$400,000
Annual Target Bonus: Base salary not to decrease unless Executive
agrees in writing.
(au) Long Term Incentive/ The Board will recommend to the stock option
Stock Options: Committee that the Executive be granted, options
to purchase 200,000 shares of Company Stock with a
strike price equal to the closing market price of
the Company's Stock on March 17, 1995 (the
"Closing Price") and, subject to approval by the
Company's shareholders and the Closing of the
Merger, vesting at 20% per year or on terms which
provide the Executive with substantially
equivalent economic value.
All options would become fully exercisable in the
event of a Change in Control, or if the Executive
is terminated (a) by the Company without Cause, or
(b) by the Executive for Good Reason.
(av) Payments Upon
<PAGE>
Termination: (a) By the Company for Cause, Death or
----------------------------------
Disability or By the Executive Other Than For Good
--------------------------------------------------
Reason: The Company shall pay Executive his full
------
base salary and bonus and all other amounts due
to, or for the benefit of, Executive through the
date of termination, together with any other
amounts to which Executive is entitled pursuant to
the Company benefit plans, programs and policies.
(b) By the Company Without Cause, or by Executive
---------------------------------------------
for Good Reason: The Company shall pay salary and
---------------
target bonus, plus any other amounts due to, or
for the benefit of, Executive as provided under
the employment agreement through the term of the
agreement or for twelve (12) months, whichever is
greater, and all of the Executive's Stock Options
shall become immediately exercisable.
(c) Good Reason shall include the following:
-----------
(i) the Company's requiring the Executive
to be based anywhere other than the
metropolitan area where he currently works
and resides for a period of more than 18
months;
(ii) a material breach by the Company of
any material provision of the agreement;
(iii) the occurrence of a Change in Control
of the Company; and
(iv) the Company's notifying the Executive
that it does not consent to any automatic
one-year extension of the term of the
Agreement.
(aw) Non-Competition; Executive is subject to confidentiality and
Confidentiality/ non-competition/non-solicitation requirements.
Non-Solicitation:
(ax) Indemnification: Executive is entitled to indemnification to the
fullest extent permitted by law.
(ay) Mitigation: Executive is not subject to mitigation.
<PAGE>
Proposed Employment Agreement
for
Kurt D. Sullivan
Summary of Key Terms
--------------------
Overall Rationale: The Company recognizes the crucial role of the
Officer in the future growth and success of the Company and desires to provide
for the employment of such Officer and to encourage such Officer's attention and
dedication to the Company. Moreover, the Company believes it is imperative to
diminish the inevitable distraction to the Officer by virtue of the personal
uncertainties and risks created by a pending or threatened Change in Control of
the Company, to reinforce the Officer's attention and dedication to his assigned
duties, and to provide the Officer with appropriate severance arrangements in
connection with any termination of employment following the occurrence of a
Change in Control. Accordingly, the following compensation, benefit and
severance arrangement is proposed for such Officer.
(az) Position/Duties: Senior Vice President - Operations
(ba) Contract Term: Three (3) years, provided that as of
the expiration date of each of (i) the initial
three (3) year term of the Agreement and (ii) if
applicable, any Renewal Period (as defined below),
the term of this Agreement shall automatically be
extended for a one (1) year period (each a
"Renewal Period") unless either the Company or the
Officer provides six (6) months' notice to the
contrary.
(bb) Base Salary/ $400,000/$400,000
Annual Target Bonus: 50% of Target Bonus would be guaranteed for the
first year of the term of the agreement.
Base salary not to decrease unless Officer agrees
in writing.
(bc) Payments Upon
Termination: (a) By the Company for Cause, Death or
----------------------------------
Disability or By the Officer Other Than For Good
------------------------------------------------
Reason: The Company shall pay Officer his full
------
base salary and bonus and all other amounts due
to, or for the benefit of, Officer through the
date of termination, together with any other
amounts to which Officer is entitled pursuant to
the Company benefit plans, programs and policies.
(b) By the Company Without Cause, or by Officer
-------------------------------------------
for Good Reason: The Company shall pay salary and
---------------
target bonus, plus any other amounts due to, or
for the benefit of, Officer as provided under the
employment agreement through the term of the
agreement or for twelve (12) months, whichever is
<PAGE>
greater, and all of the Officer's Stock Options
shall become immediately exercisable.
(c) Good Reason shall include the following:
-----------
(i) the Company's requiring the Officer to
be based anywhere other than the
metropolitan area where he currently works
and resides for a period of more than 18
months;
(ii) a material breach by the Company of
any material provision of the agreement;
(iii) the occurrence of a Change in Control
of the Company; and
(iv) the Company's notifying the Officer
that it does not consent to any automatic
one-year extension of the term of the
Agreement.
(bd) Non-Competition; Officer is subject to confidentiality and
Confidentiality/ non-competition/non-solicitation requirements.
Non-Solicitation:
(be) Indemnification: Officer is entitled to indemnification to the
fullest extent permitted by law.
(bf) Mitigation: Officer is not subject to mitigation.
<PAGE>
Proposed Employment Agreement
for
Robert Prince
Summary of Key Terms
--------------------
Overall Rationale: The Company recognizes the crucial role of the
Executive in the future growth and success of the Company and desires to provide
for the employment of such Executive and to encourage such Executive's attention
and dedication to the Company. Moreover, the Company believes it is imperative
to diminish the inevitable distraction to the Executive by virtue of the
personal uncertainties and risks created by a pending or threatened Change in
Control of the Company, to reinforce the Executive's attention and dedication to
his assigned duties, and to provide the Executive with appropriate severance
arrangements in connection with any termination of employment following the
occurrence of a Change in Control. Accordingly, the following compensation,
benefit and severance arrangement is proposed for such Executive.
(bg) Position/Duties: Vice President - Operations
(bh) Contract Term: Three (3) years, provided that as of the
expiration date of each of (i) the initial
three (3) year term of the Agreement and (ii) if
applicable, any Renewal Period (as defined below),
the term of this Agreement shall automatically be
extended for a one (1) year period (each a
"Renewal Period") unless either the Company or the
Executive provides six (6) months' notice to the
contrary.
(bi) Base Salary/ $250,000/$250,000
Annual Target Bonus: Base salary not to decrease unless Executive
agrees in writing.
(bj) Payments Upon
Termination: (a) By the Company for Cause, Death or
----------------------------------
Disability or By the Executive Other Than For Good
--------------------------------------------------
Reason: The Company shall pay Executive his full
------
base salary and bonus and all other amounts due
to, or for the benefit of, Executive through the
date of termination, together with any other
amounts to which Executive is entitled pursuant to
the Company benefit plans, programs and policies.
(b) By the Company Without Cause, or by Executive
---------------------------------------------
for Good Reason: The Company shall pay salary and
---------------
target bonus, plus any other amounts due to, or
for the benefit of, Executive as provided under
the employment agreement through the term of the
agreement or for twelve (12) months, whichever is
greater, and all of the Executive's Stock Options
shall become immediately exercisable.
<PAGE>
(c) Good Reason shall include the following:
-----------
(i) the Company's requiring the Executive
to be based anywhere other than the
metropolitan area where he currently works
and resides for a period of more than 18
months;
(ii) a material breach by the Company of
any material provision of the agreement; and
(iii) the occurrence of a Change in Control
of the Company; and
(iv) the Company's notifying the Executive
that it does not consent to any automatic
one-year extension of the term of the
Agreement.
(bk) Non-Competition; Executive is subject to confidentiality and
Confidentiality/ non-competition/non-solicitation requirements.
Non-Solicitation:
(bl) Indemnification: Executive is entitled to indemnification to the
fullest extent permitted by law.
(bm) Mitigation: Executive is not subject to mitigation.
<PAGE>
Proposed Employment Agreement
for
Daniel N. Copp
Summary of Key Terms
--------------------
Overall Rationale: The Company recognizes the crucial role of the
Officer in the future growth and success of the Company and desires to provide
for the employment of such Officer and to encourage such Officer's attention and
dedication to the Company. Moreover, the Company believes it is imperative to
diminish the inevitable distraction to the Officer by virtue of the personal
uncertainties and risks created by a pending or threatened Change in Control of
the Company, to reinforce the Officer's attention and dedication to his assigned
duties, and to provide the Officer with appropriate severance arrangements in
connection with any termination of employment following the occurrence of a
Change in Control. Accordingly, the following compensation, benefit and
severance arrangement is proposed for such Officer.
(bn) Position/Duties: Senior Vice President - Corporate Communications
(bo) Contract Term: Three (3) years, provided that as of
the expiration date of each of (i) the initial
three (3) year term of the Agreement and (ii) if
applicable, any Renewal Period (as defined below),
the term of this Agreement shall automatically be
extended for a one (1) year period (each a
"Renewal Period") unless either the Company or the
Officer provides six (6) months' notice to the
contrary.
(bp) Base Salary/ $200,000/$200,000
Annual Target Bonus: 50% of Target Bonus would be guaranteed for the
first year of the term of the agreement.
Base salary not to decrease unless Officer agrees
in writing.
(bq) Payments Upon
Termination: (a) By the Company for Cause, Death or
----------------------------------
Disability or By the Officer Other Than For Good
------------------------------------------------
Reason: The Company shall pay Officer his full
------
base salary and bonus and all other amounts due
to, or for the benefit of, Officer through the
date of termination, together with any other
amounts to which Officer is entitled pursuant to
the Company benefit plans, programs and policies.
(b) By the Company Without Cause, or by Officer
-------------------------------------------
for Good Reason: The Company shall pay salary and
---------------
target bonus, plus any other amounts due to, or
for the benefit of, Officer as provided under the
<PAGE>
employment agreement through the term of the
agreement or for twelve (12) months, whichever is
greater, and all of the Officer's Stock Options
shall become immediately exercisable.
(c) Good Reason shall include the following:
-----------
(i) the Company's requiring the Officer to
be based anywhere other than the
metropolitan area where he currently works
and resides for a period of more than 18
months;
(ii) a material breach by the Company of
any material provision of the agreement;
(iii) the occurrence of a Change in Control
of the Company; and
(iv) the Company's notifying the Officer
that it does not consent to any automatic
one-year extension of the term of the
Agreement.
(br) Non-Competition; Officer is subject to confidentiality and
Confidentiality/ non-competition/non-solicitation requirements.
Non-Solicitation:
(bs) Indemnification: Officer is entitled to indemnification to the
fullest extent permitted by law.
(bt) Mitigation: Officer is not subject to mitigation.
<PAGE>
EXHIBIT "F"
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT is made and entered into this [________] day of
[________], 1995, by and between
[______________________________________________], a Nevada corporation (the
"Company") and [______________________________________] ("Executive").
W I T N E S S E T H:
WHEREAS, Executive and the Company deem it to be in their respective
best interests to enter into an agreement providing for the Company's employment
of Executive pursuant to the terms herein stated;
NOW, THEREFORE, in consideration of the premises and the mutual
promises and agreements contained herein, it is hereby agreed as follows:
(bu) Effective Date. This Agreement shall be effective as of the
--------------
[_____] day of [_______], 1995, which date shall be referred to herein as the
"Effective Date".
(bv) Position and Duties.
-------------------
(a) The Company hereby employs Executive as its [Titles] commencing
as of the Effective Date for the "Term of Employment" (as herein defined below).
In this capacity, Executive shall devote his best efforts and his full business
time and attention to the performance of the services customarily incident to
such offices and position and to such other services of a senior executive
nature as may be reasonably requested by the Board of Directors (the "Board") of
the Company which may include services for one or more subsidiaries or
affiliates of the Company. Executive shall in his capacity as an employee [and
officer] of the Company be responsible to and obey the reasonable and lawful
directives of the Board and of any officers ("Supervising Officers") to whom he
shall report.
(b) Executive shall devote his full time and attention to such
duties, except for sick leave, reasonable vacations, and excused leaves of
absence as more particularly provided herein. Executive shall use his best
efforts during the Term of Employment to protect, encourage, and promote the
interests of the Company.
(bw) Compensation.
------------
(a) Base Salary. The Company shall pay to Executive during the Term
-----------
of Employment a minimum salary at the rate of [______] hundred thousand dollars
($[___],000) per calendar year and agrees that such salary shall be reviewed at
least annually. Such salary shall be payable in accordance with the Company's
normal payroll
<PAGE>
procedures. (Executive's annual salary, as set forth above or as it may be
increased from time to time as set forth herein, shall be referred to
hereinafter as "Base Salary.") At no time during the Term of Employment shall
Executive's Base Salary be decreased from the amount of Base Salary then in
effect.
(b) Performance Bonus. In addition to the compensation otherwise
-----------------
payable to Executive pursuant to this Agreement, Executive shall be eligible to
receive an annual bonus ("Bonus") pursuant to a performance bonus plan (the
"Bonus Plan") which shall be established by the Company for its senior executive
officers and which shall provide for bonus compensation to be payable based upon
the financial and other performance of the Company and its senior executives.
It is intended that the Bonus Plan shall conform to the requirements applicable
to "qualified performance based compensation" under Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"). During the Term of
Employment, Executive's targeted annual bonus under the Bonus Plan shall not be
less than 100% of Executive's then current Base Salary.
(bx) Benefits. During the Term of Employment:
--------
(a) Executive shall be eligible to participate in any life, health
and long-term disability insurance programs, pension and retirement programs,
stock option and other incentive compensation programs, and other fringe benefit
programs made available to senior executive employees of the Company from time
to time, and Executive shall be entitled to receive such other fringe benefits
as may be granted to him from time to time by the Company's Board of Directors.
(b) Executive shall be allowed vacations and leaves of absence with
pay on the same basis as other senior executive employees of the Company.
(c) The Company shall reimburse Executive for reasonable business
expenses incurred in performing Executive's duties and promoting the business of
the Company, including, but not limited to, reasonable entertainment expenses,
travel and lodging expenses, following presentation of documentation in
accordance with the Company's business expense reimbursement policies.
(d) Executive shall be added as an additional named insured under all
liability insurance policies now in force or hereafter obtained covering any
officer or director of the Company in his or her capacity as an officer or
director. Company shall indemnify Executive in his capacity as an officer or
director and hold him harmless from any cost, expense or liability arising out
of or relating to any acts or decisions made by him on behalf of or in the
course of performing services for the Company (to the maximum extent provided by
the Company's Bylaws and applicable law).
(by) Term; Termination of Employment. As used herein, the phrase
-------------------------------
"Term of Employment" shall mean the period commencing on the Effective Date and
ending three (3) years from the Effective Date. Notwithstanding the foregoing,
the Term of Employment shall expire on the first to occur of the following:
(a) Termination by the Company Without Cause or By Executive With
-------------------------------------------------------------
Good Reason. Notwithstanding anything to the contrary in this
- -----------
<PAGE>
Agreement, whether express or implied, the Company may, at any time, terminate
Executive's employment for any reason other than Cause (as defined below) by
giving Executive at least 60 days' prior written notice of the effective date of
termination. In the event Executive's employment hereunder is terminated by the
Company other than for Cause or by Executive for Good Reason (as defined below),
Executive shall be entitled to receive (x) his Base Salary as he would have
received such amounts during the period commencing on the effective date of such
termination and ending on the later of (i) the third anniversary of the
Effective Date or (ii) the date that is six (6) months following the date of
such termination (the "Salary Continuation Period"), as if Executive were still
employed hereunder during the Salary Continuation Period; (y) if it has not
previously been paid to Executive, any Bonus to which Executive had become
entitled under the Bonus Plan prior to the effective date of such termination;
and (z) annual Bonuses during the Salary Continuation Period in an amount equal
to the product of Executive's Base Salary on the effective date of such
termination and the minimum targeted bonus percentage specified in Section 3(b),
payable in the ordinary course and prorated, as applicable, for any partial
fiscal year of the Bonus Plan ending on the final day of the Salary Continuation
Period. In addition, all of Executive's stock options with respect to the
Company's stock shall become immediately and fully exercisable. During the
Salary Continuation Period, Executive and his spouse and dependents shall be
entitled to continue to be covered by all group medical, health and accident
insurance or other such health care arrangements in which Executive was a
participant as of the date of such termination, at the same coverage level and
on the same terms and conditions which applied immediately prior to the date of
Executive's termination of employment, until Executive obtains alternative
comparable coverage under another group plan, which coverage does not contain
any pre-existing condition exclusions or limitations; provided, however, that
--------
if, as the result of the termination of Executive's employment, Executive and/or
his otherwise eligible dependents or beneficiaries shall become ineligible for
benefits under any one or more of the Company's benefit plans, the Company shall
continue to provide Executive and his eligible dependents or beneficiaries,
through other means, with benefits at a level at least equivalent to the level
of benefits for which Executive and his dependents and beneficiaries were
eligible under such plans immediately prior to the date of Executive's
termination of employment. At the termination of the benefits coverage under
the preceding sentence, Executive and his spouse and dependents shall be
entitled to continuation coverage pursuant to Section 4980B of the Internal
Revenue Code of 1986, as amended, Sections 601-608 of the Employee Retirement
Income Security Act of 1974, as amended, and under any other applicable law, to
the extent required by such laws, as if Executive had terminated employment with
the Company on the date such benefits coverage terminates.
For purposes of this Agreement, "Good Reason" shall mean, without the
express written consent of Executive, the occurrence of any of the following
events unless such events are fully corrected within 30 days following written
notification by Executive to the Company that he intends to terminate his
employment hereunder for one of the reasons set forth below:
i) the Company's requiring Executive to be based outside of the
metropolitan area where he currently works and resides for a
period in excess of eighteen (18) months;
ii) a material breach by the Company of any material provision of
this Agreement, including, without
<PAGE>
limitation, any reduction by the Company in Executive's Base
Salary in effect as of the Effective Date, or as the same may be
increased as provided herein, or a change in the material
conditions of Executive's employment; or
iii) the occurrence of a "Change in Control" as defined below.
For purposes of this Agreement a "Change in Control" shall mean an
event as a result of which: (i) any "person" (as such term is used in Sections
13(d) and 14(d) of the Securities and Exchange Act of 1934 (the "Exchange
Act")), is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act, except that a person shall be deemed to have "beneficial
ownership" of all securities that such person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time),
directly or indirectly, of more than 50% of the total voting power of the voting
stock of the Company; (ii) the Company consolidates with, or merges with or into
another corporation or sells, assigns, conveys, transfers, leases or otherwise
disposes of all or substantially all of its assets to any person, or any
corporation consolidates with, or merges with or into, the Company, in any such
event pursuant to a transaction in which the outstanding voting stock of the
Company is changed into or exchanged for cash, securities or other property,
other than any such transaction where (A) the outstanding voting stock of the
Company is changed into or exchanged for (x) voting stock of the surviving or
transferee corporation or (y) cash, securities (whether or not including voting
stock) or other property, and (B) the holders of the voting stock of the Company
immediately prior to such transaction own, directly or indirectly, not less than
50% of the voting power of the voting stock of the surviving corporation
immediately after such transaction; or (iii) during any period of two
consecutive years, individuals who at the beginning of such period constituted
the Board of the Company (together with any new directors whose election by such
Board or whose nomination for election by the stockholders of the Company was
approved by a vote of 66-2/3% of the directors then still in office who were
either directors at the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason to constitute a
majority of the Board of the Company then in office; or (iv) the Company is
liquidated or dissolved or adopts a plan of liquidation, provided however that a
Change in Control shall not include any going private or leveraged buy-out
transaction which is sponsored by Executive or in which Executive acquires an
equity interest materially in excess of his equity interest in the Company
immediately prior to such transaction (each of the events described in (i),
(ii), (iii) or (iv) above, as provided otherwise by the preceding clause being
referred to herein as a "Change in Control").
(b) Termination for Cause. The Company shall have the right to
---------------------
terminate Executive's employment at any time for Cause by giving Executive
written notice of the effective date of termination (which effective date may,
except as otherwise provided below, be the date of such notice). If the Company
terminates Executive's employment for Cause, Executive shall be paid his unpaid
Base Salary through the date of termination and the amount of any unpaid Bonus
to which Executive had become entitled under the Bonus Plan prior to the
effective date of such termination and the Company shall have no further
obligation hereunder from and after the effective date of termination and the
Company shall
<PAGE>
have all other rights and remedies available under this or any other agreement
and at law or in equity.
For purposes of this Agreement only, Cause shall mean:
i) fraud, misappropriation, embezzlement, or other act of material
misconduct against the Company or any of its affiliates;
ii) substantial and willful failure to perform specific and lawful
directives of the Board or any Supervising Officer, as
reasonably determined by the Board;
iii) willful and knowing violation of any rules or regulations of any
governmental or regulatory body, which is materially injurious
to the financial condition of the Company; or
iv) conviction of or plea of guilty or nolo contendere to a felony;
or
v) Executive's loss of any required personal gaming or related
regulatory approval or license;
provided, however, that with regard to subparagraph ii) above, Executive may not
- --------
be terminated for Cause unless and until the Board has given him reasonable
written notice of its intended actions and specifically describing the alleged
events, activities or omissions giving rise thereto and with respect to those
events, activities or omissions for which a cure is possible, a reasonable
opportunity to cure such breach; and provided, further, that for purposes of
--------
determining whether any such Cause is present, no act or failure to act by
Executive shall be considered "willful" if done or omitted to be done by
Executive in good faith and in the reasonable belief that such act or omission
was in the best interest of the Company and/or required by applicable law.
(c) Termination on Account of Death. In the event of Executive's
-------------------------------
death while in the employ of the Company, his employment hereunder shall
terminate on the date of his death and Executive shall be paid his unpaid Base
Salary through the date of termination and the amount of any unpaid Bonus to
which Executive had become entitled under the Bonus Plan prior to the effective
date of such termination. In addition, any other benefits payable on behalf of
Executive shall be determined under the Company's insurance and other
compensation and benefit plans and programs then in effect in accordance with
the terms of such programs.
(d) Voluntary Termination by Executive. In the event that
----------------------------------
Executive's employment with the Company is voluntarily terminated by Executive
other than for Good Reason, Executive shall be paid his unpaid Base Salary
through the date of
<PAGE>
termination and the amount of any unpaid Bonus to which Executive had become
entitled under the Bonus Plan prior to the effective date of such termination,
and the Company shall have no further obligation hereunder from and after the
effective date of termination and the Company shall have all other rights and
remedies available under this Agreement or any other agreement and at law or in
equity. Executive shall give the Company at least 30 days' advance written
notice of his intention to terminate his employment hereunder.
(e) Termination on Account of Disability. If, as a result of
------------------------------------
Executive's incapacity due to physical or mental illness (as determined in good
faith by a physician acceptable to the Company), Executive shall have been
absent from the full-time performance of his duties with the Company for 120
consecutive days during any twelve (12) month period or if a physician
acceptable to the Company advises the Company that it is likely that Executive
will be unable to return to the full-time performance of his duties for 120
consecutive days during the succeeding twelve (12) month period, his employment
may be terminated for "Disability." During any period that Executive fails to
perform his full-time duties with the Company as a result of incapacity due to
physical or mental illness, he shall continue to receive his Base Salary, Bonus
and other benefits provided hereunder, together with all compensation payable to
him under the Company's disability plan or program or other similar plan during
such period, until Executive's employment hereunder is terminated pursuant to
this Section 5(e). Thereafter, Executive's benefits shall be determined under
the Company's retirement, insurance, and other compensation and benefit plans
and programs then in effect, in accordance with the terms of such programs.
(bz) Confidential Information, Non-Solicitation and Non-Competition.
--------------------------------------------------------------
(a) During the Term of Employment and for three (3) years thereafter,
Executive shall not, except as may be required to perform his duties hereunder
or as required by applicable law, disclose to others or use, whether directly or
indirectly, any Confidential Information regarding the Company. "Confidential
Information" shall mean information about the Company, its subsidiaries and
affiliates, and their respective clients and customers that is not available to
the general public and that was learned by Executive in the course of his
employment by the Company, including (without limitation) any proprietary
knowledge, trade secrets, data, formulae, information, and client and customer
lists and all papers, resumes, records (including computer records) and the
documents containing such Confidential Information. Executive acknowledges that
such Confidential Information is specialized, unique in nature and of great
value to the Company, and that such information gives the Company a competitive
advantage. Upon the termination of his employment for any reason whatsoever,
Executive shall promptly deliver to the Company all documents, computer tapes
and disks (and all copies thereof) containing any Confidential Information.
(b) During the period that Executive is receiving payments under this
Agreement (which Executive may elect to terminate at any time), Executive shall
not, directly or indirectly in any manner or capacity (e.g., as an advisor,
principal, agent, partner, officer, director, shareholder, employee, member of
any association or otherwise) engage in, work for, consult, provide advice or
assistance or otherwise participate in any activity which is competitive with
the business of the Company in any geographic area in which the Company is now
or shall then be doing business. Executive further agrees that during such
period he will not assist or encourage any other person in carrying out any
activity that would be prohibited by the foregoing provisions of this Section 6
if such activity were carried out
<PAGE>
by Executive and, in particular, Executive agrees that he will not induce any
employee of the Company to carry out any such activity; provided, however, that
the "beneficial ownership" by Executive, either individually or as a member of a
"group," as such terms are used in Rule 13d of the General Rules and Regulations
under the Exchange Act, of not more than five percent (5%) of the voting stock
of any publicly held corporation shall not be a violation of this Agreement. It
is further expressly agreed that the Company will or would suffer irreparable
injury if Executive were to compete with the Company or any subsidiary or
affiliate of the Company in violation of this Agreement and that the Company
would by reason of such competition be entitled to injunctive relief in a court
of appropriate jurisdiction, and Executive further consents and stipulates to
the entry of such injunctive relief in such a court prohibiting Executive from
competing with the Company or any subsidiary or affiliate of the Company in
violation of this Agreement.
(c) During the Term of Employment and for three (3) years thereafter,
Executive shall not, directly or indirectly, influence or attempt to influence
customers or suppliers of the Company or any of its subsidiaries or affiliates,
to divert their business to any competitor of the Company.
(d) Executive recognizes that he will possess confidential information
about other employees of the Company relating to their education, experience,
skills, abilities, compensation and benefits, and interpersonal relationships
with customers of the Company. Executive recognizes that the information he
will possess about these other employees is not generally known, is of
substantial value to the Company in developing its business and in securing and
retaining customers, and will be acquired by him because of his business
position with the Company. Executive agrees that, during the Term of
Employment, and for a period of three (3) years thereafter, he will not,
directly or indirectly, solicit or recruit any employee of the Company for the
purpose of being employed by him or by any competitor of the Company on whose
behalf he is acting as an agent, representative or employee and that he will not
convey any such confidential information or trade secrets about other employees
of the Company to any other person.
(e) If it is determined by a court of competent jurisdiction in any
state that any restriction in this Section 6 is excessive in duration or scope
or is unreasonable or unenforceable under the laws of that state, it is the
intention of the parties that such restriction may be modified or amended by the
court to render it enforceable to the maximum extent permitted by the law of
that state.
(ca) No Offset - No Mitigation. Executive shall not be required to
-------------------------
mitigate damages under this Agreement by seeking other comparable employment.
The amount of any payment or benefit provided for in this Agreement, including
welfare benefits, shall not be reduced by any compensation or benefits earned by
or provided to him as the result of employment by another employer, except as
provided otherwise in Section 5(a) with respect to health and insurance benefits
provided during the Salary Continuation Period.
(cb) Designated Beneficiary. In the event of the death of Executive
----------------------
while in the employ of the Company, or at any time thereafter during which
amounts remain payable to Executive under Section 5, such payments (other than
the right to continuation of welfare benefits) shall thereafter be made to such
person or persons as Executive may specifically designate (successively or
contingently) to receive payments under this Agreement following Executive's
death by filing a written beneficiary designation with the
<PAGE>
Company during Executive's lifetime. Such beneficiary designation shall be in
such form as may be prescribed by the Company and may be amended from time to
time or may be revoked by Executive pursuant to written instruments filed with
the Company during his lifetime. Beneficiaries designated by Executive may be
any natural or legal person or persons, including a fiduciary, such as a trustee
or a trust or the legal representative of an estate. Unless otherwise provided
by the beneficiary designation filed by Executive, if all of the persons so
designated die before Executive on the occurrence of a contingency not
contemplated in such beneficiary designation, then the amounts payable under
this Agreement shall be paid to Executive's estate.
9. Taxes. All payments to be made to Executive under this Agreement
-----
will be subject to any applicable withholding of federal, state and local income
and employment taxes.
10. Miscellaneous. This Agreement shall also be subject to the
-------------
following miscellaneous considerations:
(a) Executive and the Company each represent and warrant to the other
that he or it has the authorization, power and right to deliver, execute, and
fully perform his or its obligations under this Agreement in accordance with its
terms.
(b) This Agreement contains a complete statement of all the
arrangements between the parties with respect to Executive's employment by the
Company, this Agreement supersedes all prior and existing negotiations and
agreements between the parties concerning Executive's employment, and this
Agreement can only be changed or modified pursuant to a written instrument duly
executed by each of the parties hereto.
(c) If any provision of this Agreement or any portion thereof is
declared invalid, illegal, or incapable of being enforced by any court of
competent jurisdiction, the remainder of such provisions and all of the
remaining provisions of this Agreement shall continue in full force and effect.
(d) This Agreement shall be governed by and construed in accordance
with the internal laws of the State of Nevada, except to the extent governed by
federal law.
(e) The Company may assign this Agreement to any direct or indirect
subsidiary or parent of the Company or joint venture in which the Company has an
interest, or any successor (whether by merger, consolidation, purchase or
otherwise) to all or substantially all of the stock, assets or business of the
Company and this Agreement shall be binding upon and inure to the benefit of
such successors and assigns. Except as expressly provided herein, Executive may
not sell, transfer, assign, or pledge any of his rights or interests pursuant to
this Agreement.
(f) Any rights of Executive hereunder shall be in addition to any
rights Executive may otherwise have under benefit plans, agreements, or
arrangements of the Company to which he is a party or in which he is a
participant, including, but not limited to, any Company-sponsored employee
benefit plans. Provisions of this Agreement shall not in any way abrogate
Executive's rights under such other plans, agreements, or arrangements.
<PAGE>
(g) For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall
be deemed to have been duly given when delivered or mailed by United States
certified or registered mail, return receipt requested, postage prepaid,
addressed to the named Executive at the address set forth below under his
signature; provided that all notices to the Company shall be directed to the
attention of the Board with a copy to the Secretary of the Company, or to such
other address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon receipt.
(h) Section headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose.
(i) Failure to insist upon strict compliance with any of the terms,
covenants, or conditions hereof shall not be deemed a waiver of such term,
covenant, or condition, nor shall any waiver or relinquishment of, or failure to
insist upon strict compliance with, any right or power hereunder at any one or
more times be deemed a waiver or relinquishment of such right or power at any
other time or times.
(j) This Agreement may be executed in several counterparts, each of
which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
11. Resolution of Disputes. Any dispute or controversy arising under
----------------------
or in connection with this Agreement shall be settled exclusively by
arbitration, conducted before a panel of three arbitrators in Las Vegas, Nevada
in accordance with the rules of the American Arbitration Association then in
effect. The Company and Executive hereby agree that the arbitrator will not
have the authority to award punitive damages, damages for emotional distress or
any other damages that are not contractual in nature. Judgment may be entered
on the arbitrator's award in any court having jurisdiction; provided, however,
that the Company shall be entitled to seek a restraining order or injunction in
any court of competent jurisdiction to prevent any continuation of any violation
of the provisions of Section 6, and Executive consents that such restraining
order or injunction may be granted without the necessity of the Company's
posting any bond except to the extent otherwise required by applicable law. The
expense of such arbitration shall be borne by the Company.
12. Attorneys' Fees. Should either party hereto or their successors
---------------
retain counsel for the purpose of enforcing, or preventing the breach of, any
provision hereof, including, but not limited to, by instituting any action or
proceeding in arbitration or a court to enforce any provision hereof or to
enjoin a breach of any provision of this Agreement, or for a declaration of such
party's rights or obligations under the Agreement, or for any other remedy,
whether in arbitration or in a court of law, then the successful party shall be
entitled to be reimbursed by the other party for all costs and expenses incurred
thereby, including, but not limited to, reasonable fees and expenses of
attorneys and expert witnesses, including costs of appeal. If such successful
party shall recover judgment in any such action or proceeding, such costs,
expenses and fees may be included in and as part of such judgment. The
successful party shall be the party who is entitled to recover his costs of
suit, whether or not the suit proceeds to final judgment. If no costs are
awarded, the successful party shall be determined by the arbitrator or court, as
the case may be.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the day and year first above written.
EXECUTIVE COMPANY
__________________________________ _________________________________________
By: ______________________________
Title: ___________________________ Title: _________________________________
Address:
__________________________________
__________________________________
__________________________________
<PAGE>
EXHIBIT "G"
SPOUSAL CONSENT
---------------
The undersigned are the spouses of Michael S. Ensign, William A.
Richardson, David R. Belding, Peter A. Simon II and Robert J. Verchota,
respectively. Each of them acknowledges that he or she has read the foregoing
Agreement and Plan of Merger (the "Agreement") and clearly understands the
---------
provisions thereof. Each of the undersigned hereby consents to the transactions
contemplated by the Agreement. Each of the undersigned hereby expressly
approves of and agrees to be bound by the provisions of the Agreement in its
entirety.
IN WITNESS WHEREOF, the undersigned have executed this Spousal Consent
as of the day and year first above written.
_________________________________
[Spouse of Michael S. Ensign]
_________________________________
[Spouse of William A. Richardson]
_________________________________
[Spouse of David R. Belding]
_________________________________
[Spouse of Peter A. Simon II]
_________________________________
[Spouse of Robert J. Verchota]
J-cxxvi
<PAGE>
================================================================================
EXHIBIT H
FORM OF
STANDSTILL AGREEMENT
dated as of March __, 1995
by and among
CIRCUS CIRCUS ENTERPRISES, INC.,
a Nevada corporation,
MICHAEL S. ENSIGN,
WILLIAM R. RICHARDSON,
DAVID R. BELDING,
PETER A. SIMON II,
and
GLENN W. SCHAEFFER
================================================================================
J-cxxvii
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1 - DEFINITIONS.................................................... 1
ARTICLE 2 -
REPRESENTATIONS AND WARRANTIES............................................. 2
2.1 Legal Capacity................................................... 2
2.2 Enforceability................................................... 2
2.3 Consents, etc.................................................... 2
2.4 Conflicting Agreements and Other Matters......................... 2
ARTICLE 3 - STANDSTILL..................................................... 3
ARTICLE 4 - GENERAL PROVISIONS............................................. 4
4.1 Entire Agreement................................................. 4
4.2 No Third-Party Beneficiaries..................................... 4
4.3 Notices.......................................................... 4
4.4 No Assignment; Binding Effect.................................... 5
4.5 Severability..................................................... 5
4.6 Survival of Agreement............................................ 5
4.7 Governing Law.................................................... 5
4.8 Counterparts..................................................... 5
</TABLE>
J-cxxviii
<PAGE>
STANDSTILL AGREEMENT
--------------------
THIS STANDSTILL AGREEMENT, dated as of March __, 1995 (this
"Agreement"), is made and entered into by and among CIRCUS CIRCUS ENTERPRISES,
INC. a Nevada corporation (the "Company"), and each of MICHAEL S. ENSIGN, an
individual ("Ensign"), WILLIAM A. RICHARDSON, an individual ("Richardson"),
DAVID R. BELDING, an individual ("Belding"), PETER A. SIMON II, an individual
("Simon" and collectively with Ensign, Richardson and Belding, the "Target
Company Shareholders"), and GLENN W. SCHAEFFER, an individual (collectively with
all other individuals party hereto, the "Investors").
RECITALS
--------
WHEREAS, the Company, the Target Company Shareholders, M.S.E.
INVESTMENTS, INCORPORATED, a Nevada corporation, LAST CHANCE INVESTMENTS,
INCORPORATED, a Nevada corporation, GOLDSTRIKE INVESTMENTS, INCORPORATED, a
Nevada corporation, DIAMOND GOLD, INC., a Nevada corporation, GOLD STRIKE
AVIATION, INCORPORATED, a Nevada corporation, GOLDSTRIKE FINANCE COMPANY, INC.,
a Nevada corporation, and OASIS DEVELOPMENT CO., a Nevada corporation, are
entering into an Agreement and Plan of Merger dated as of March __, 1995 (the
"Agreement and Plan of Merger"); and
WHEREAS, as an inducement for certain parties to enter into the
Agreement and Plan of Merger and to consummate the transactions contemplated
thereby, each of the Investors and the Company has agreed to enter into this
Agreement.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
The following defined terms shall, unless the context requires
otherwise, have the meanings ascribed in this Article 1:
"BOARD" shall mean the Board of Directors of the Company.
"CLOSING DATE" shall mean the date first written above.
J-cxxix
<PAGE>
"EQUITY SECURITIES" shall mean all capital stock of the Company, all
securities convertible into any such stock, and all securities carrying any
warrant or right to subscribe to or purchase any such stock, or any such warrant
or right.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated pursuant thereto.
"INVESTOR AFFILIATES" shall mean the "affiliates" (as such term is
defined in Rule 12b-2 promulgated pursuant to the Exchange Act) of any Investor.
"INVESTOR REPRESENTATIVES" shall mean the directors, officers,
employees, agents or representatives of the Investors and the Investor
Affiliates.
"PERSON" shall mean any individual, firm, corporation, partnership,
joint venture, limited liability company, trust, unincorporated organization or
other entity.
"PROHIBITED ACTIONS" shall mean the actions set forth in clauses (a)
through (i) of the first paragraph of Article 3.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF
EACH OF THE INVESTORS
Each of the Investors represents and warrants to the Company as of the
date hereof as follows:
2.1 LEGAL CAPACITY. Each Investor has full legal right, power,
capacity and authority to execute and deliver this Agreement, to carry out the
transactions contemplated hereby and to comply with the terms, conditions and
provisions hereof.
2.2 ENFORCEABILITY. This Agreement has been duly and validly
executed and delivered by each of the Investors and constitutes a legal, valid
and binding obligation of each of the Investors enforceable against such
Investors in accordance with its terms, except to the extent that such
enforceability may be limited by bankruptcy, insolvency, moratorium or other
laws affecting the enforcement of creditor's rights generally or by general
equitable principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
2.3 CONSENTS, ETC. None of the Investors is required to obtain any
consent, order, permit, approval or authorization of, or to make any declaration
or filing with, any governmental authority or entity or other agency as a
condition to or in connection with the valid execution, delivery and performance
of this Agreement or the consummation of the transactions contemplated hereby,
except, in each case, for such consents, orders, permits, approvals,
authorizations, declarations or filings (a) as have been made or have been
obtained prior to the date hereof or (b) the absence of which, or the failure to
make or obtain which, would not
J-cxxx
<PAGE>
prevent the performance and completion of the transactions contemplated hereby
or materially and adversely affect any of the Investors' ability to perform its
obligations hereunder.
2.4 CONFLICTING AGREEMENTS AND OTHER MATTERS. Neither the execution
and delivery of this Agreement nor the performance by each of the Investors of
its obligations hereunder will conflict with, result in a default of the terms,
conditions or provisions of, or constitute a default under, any mortgage,
agreement, instrument, order, judgment, decree, statute, law, rule or regulation
to which any of the Investors or any of their respective properties are subject,
except, in each case, for such defaults, individually or in the aggregate, as
would not prevent the consummation of the transactions contemplated hereby or
materially and adversely affect any of the Investors' ability to perform its
obligations hereunder.
ARTICLE 3
STANDSTILL
For a period beginning on the Closing Date and terminating on the
fifth anniversary of the Closing Date, none of the Investors, the Investor
Affiliates nor the Investor Representatives, acting alone or as part of any
"group" (within the meaning of Section 13(d)(3) of the Exchange Act) shall,
directly or indirectly, unless specifically requested to do so in writing in
advance by the Board:
(a) acquire or agree, offer, seek or propose to acquire, or cause to
be acquired, ownership (including, but not limited to, beneficial ownership
within the meaning of Rule 13d-3 promulgated pursuant to the Exchange Act) of
more than 9.9 percent of the outstanding Equity Securities or any rights or
options to acquire any such ownership (including from a third party); provided,
--------
that this clause (a) shall not be deemed to be violated by any Investor as a
result of an increase in the percentage Equity Securities owned by such Investor
in connection with the purchase of Equity Securities by the Company, a
recapitalization of the Company or any other similar action taken by the
Company;
(b) make, or in any way knowingly participate in, any "solicitation"
of "proxies" (as such terms are used in the proxy rules of the Securities and
Exchange Commission) to vote or seek to advise or influence in any manner
whatsoever a Person with respect to the voting of any securities of the Company;
(c) form, join, or in any way participate in a "group" (within the
meaning of Section 13(d)(3) of the Exchange Act) with respect to any voting
securities of the Company;
(d) otherwise act, whether alone or in concert with others, to seek
to propose to the Company or any of its stockholders any merger, business
combination, restructuring, recapitalization or similar transaction to or with
the Company;
(e) otherwise act, whether alone or in concert with others, to seek
to control, change or influence the management, Board or policies of the
Company, or nominate any Person as a Director of the Company who is not
nominated by the then incumbent Directors, or propose any matter to be voted
upon by the stockholders of the Company;
J-cxxxi
<PAGE>
(f) solicit, negotiate with, or provide any information to, any
Person with respect to a merger, exchange offer or liquidation of the Company or
any other acquisition of the Company, any acquisition or voting securities of or
all or any portion of the assets of the Company, or any other similar
transaction;
(g) announce an intention to, or enter into any discussion,
negotiations, arrangements or understandings with any third party with respect
to, any of the foregoing;
(h) disclose any intention, plan or arrangement inconsistent with the
foregoing; or
(i) advise, assist or encourage any other Person in connection with
any of the foregoing;
Notwithstanding the foregoing, if a matter (i) requires approval by
the shareholders of the Company, (ii) was presented to and approved by the
Board, and (iii) was opposed by both members of the Board who were nominated by
the Target Company Shareholders pursuant to Section 5.3 of the Agreement and
Plan of Merger, then, in seeking to cause the shareholders of the Company to
disapprove of such matter, an Investor may undertake a Prohibited Action set
forth in clauses (b), (c), (e), (g), (h) and (i) with respect to such matter;
provided, that if the Prohibited Action to be taken pursuant to clause (b) above
is a solicitation in opposition to a proposal involving a merger, exchange offer
or liquidation of the Company or any other acquisition of the Company or similar
transaction, then such solicitation shall not be deemed to be a violation of
clause (f) above.
In addition, each of the Investors shall also agree during such five-
year period not to (i) request the Company (or any director, officer, employee,
agent or representative thereof), directly or indirectly, to amend or waive any
provision of this Article 3 (including this sentence), unless such request is
made privately to the Board and remains confidential and undisclosed to the
public; or (ii) except as set forth in the immediately preceding paragraph, take
any action that might require the Company to make a public announcement
regarding a possible transaction.
Notwithstanding the foregoing Prohibited Actions, it is understood and
acknowledged that any one or more of the Investors may be members of the Board
or may be officers of the Company and that the foregoing provisions of this
Article 3 shall not be construed as limiting in any way any such Person from
participating fully in such capacity as a member of the Board or as "senior
management" of the Company, respectively.
It is further understood that the provisions of this Agreement shall
supercede the provisions of the confidentiality and standstill agreement dated
March 17, 1995, among the Company and Ensign, Richardson, Belding and Schaeffer.
ARTICLE 4
GENERAL PROVISIONS
4.1 ENTIRE AGREEMENT. This Agreement, including all exhibits and
schedules hereto, and the Agreement and Plan of Merger, including all exhibits
and schedules hereto, contain the sole and entire agreement among the parties
with respect to the subject matter hereof and
J-cxxxii
<PAGE>
supersedes any and all prior agreements, understandings, negotiations and
discussions, whether oral or written, among the parties hereto with respect to
such subject matter.
4.2 NO THIRD-PARTY BENEFICIARIES. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors and permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights upon any other Person.
4.3 NOTICES. Unless otherwise specifically provided herein, all
notices, demands, consents, waivers and other communications required or
permitted by the terms of this Agreement shall be in writing, and any notice
shall become effective three (3) days after deposit in the United States mails,
first class postage prepaid, or one (1) day after delivery to an overnight
courier or express company or immediately upon delivery by hand or in the form
of telecopy, telegram or other electronic means of communication that produces a
written copy, and, if mailed or delivered by courier, express company or hand,
shall be addressed as indicated in Section 9.3 of the Agreement and Plan of
Merger.
4.4 NO ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor any
right, interest, duty or obligation hereunder may be assigned by any party
hereto without the prior written consent of the other parties hereto, and any
attempt to assign this Agreement or any right, interest, duty or obligation
hereunder without such prior written consent shall be null and void. Subject to
the preceding sentence, this Agreement is binding upon, inures to the benefit of
and is enforceable by the parties hereto and their respective successors and
assigns.
4.5 SEVERABILITY. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any present or future law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (i) such provision will be fully
severable, (ii) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
and (iii) the remaining provisions of this Agreement will remain in full force
and effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance from this Agreement.
4.6 SURVIVAL OF AGREEMENT. The representations, warranties and
agreements of the parties provided for in this Agreement, and the parties'
obligations under any and all thereof, shall survive the Closing and shall be
and continue in effect, notwithstanding any investigation made by any party,
from and after the Closing Date.
4.7 GOVERNING LAW. This Agreement has been negotiated and executed
and shall be performed in the State of Nevada and shall be governed and
construed by the laws of such State, without giving effect to the conflicts of
laws principles thereof.
4.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
[Signature pages to follow]
J-cxxxiii
<PAGE>
IN WITNESS WHEREOF, each party has executed this Agreement as of the date
first above written.
CIRCUS CIRCUS ENTERPRISES, INC.,
a Nevada corporation
By_______________________________________
Name:
Title:
__________________________________________
Michael S. Ensign, individually
and on behalf of his Investor Affiliates
and Investor Representatives
__________________________________________
William A. Richardson, individually
and on behalf of his Investor Affiliates
and Investor Representatives
__________________________________________
David R. Belding, individually
and on behalf of his Investor Affiliates
and Investor Representatives
__________________________________________
Peter A. Simon II, individually
and on behalf of his Investor Affiliates
and Investor Representatives
__________________________________________
Robert J. Verchota, individually
and on behalf of his Investor Affiliates
and Investor Representatives
J-cxxxiv
<PAGE>
__________________________________________
Glenn W. Schaeffer, individually
and on behalf of his Investor Affiliates
and Investor Representatives
__________________________________________
Gregg H. Solomon, individually
and on behalf of his Investor Affiliates
and Investor Representatives
__________________________________________
Antonio C. Alamo, individually
and on behalf of his Investor Affiliates
and Investor Representatives
__________________________________________
Anthony Korfman, individually
and on behalf of his Investor Affiliates
and Investor Representatives
__________________________________________
William Ensign, individually
and on behalf of his Investor Affiliates
and Investor Representatives
J-cxxxv
<PAGE>
EXHIBIT "I"
AGREEMENT PURSUANT TO JOINT VENTURE AGREEMENT
---------------------------------------------
THIS AGREEMENT PURSUANT TO JOINT VENTURE AGREEMENT dated as of _______ ___,
1995 is by and among CIRCUS CIRCUS ENTERPRISES, INC., a Nevada corporation (the
"Company"), MICHAEL S. ENSIGN, an individual ("Ensign"), GLENN W. SCHAEFFER, an
individual ("Schaeffer"), and WILLIAM A. RICHARDSON, an individual ("Richardson"
and, collectively with Ensign and Schaeffer, the "Investors"). All capitalized
terms not otherwise defined herein shall have the meanings ascribed to such
terms in the Joint Venture Agreement referred to below.
RECITALS
WHEREAS, GOLD STRIKE L.V., a Nevada general partnership ("Gold Strike"),
and MRGS CORP., a Nevada corporation ("MR Sub"), are parties to that certain
Joint Venture Agreement, dated as of December 9, 1994 (the "Joint Venture
Agreement");
WHEREAS, M.S.E. INVESTMENTS, INCORPORATED, a Nevada corporation ("MSE"), is
the general partner of Gold Strike;
WHEREAS, the Joint Venture Agreement provides for the construction of a
hotel/casino facility in Las Vegas, Nevada;
WHEREAS, the Company, Ensign, Richardson, DAVID R. BELDING, an individual,
PETER A. SIMON II, an individual, ROBERT J. VERCHOTA, an individual, MSE, LAST
CHANCE INVESTMENTS, INCORPORATED, a Nevada corporation, GOLDSTRIKE INVESTMENTS,
INCORPORATED, a Nevada corporation, DIAMOND GOLD, INC., a Nevada corporation,
GOLD STRIKE AVIATION, INCORPORATED, a Nevada corporation, GOLDSTRIKE FINANCE
COMPANY, INC., a Nevada corporation, and OASIS DEVELOPMENT CO., a Nevada
corporation, have entered into an Agreement and Plan of Merger dated as of March
19, 1995 (the "Agreement and Plan of Merger");
WHEREAS, the Company and Schaeffer, GREGG H. SOLOMON, an individual,
ANTONIO C. ALAMO, an individual, ANTHONY KORFMAN, an individual, and WILLLIAM
ENSIGN, an individual, have entered into an Exchange Agreement dated as of March
19, 1995 (the "Exchange Agreement");
WHEREAS, MR Sub executed a Consent and Waiver dated as of March 19, 1995
with respect to, among other things, MSE's execution of the Agreement and Plan
of Merger; and
WHEREAS, in order to induce certain parties to enter into the Agreement and
Plan of Merger and the Exchange Agreement and to consummate the transactions
contemplated thereby, each of the Investors and the Company has agreed to enter
into this Agreement.
<PAGE>
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto agree
as follows:
4.9 LIQUIDATED DAMAGES. For a period commencing on the date first above
written until the first anniversary of the Facility's receipt of a Certificate
of Occupancy for such Facility, as contemplated by the Joint Venture Agreement,
each Investor agrees, jointly and severally, that if (i) (A) any Investor's
employment by the Company is terminated other than (x) by the Company other than
for Cause (as defined in those certain Employment Agreements dated as of the
date first above written by and between the Company and each Investor), (y) by
reason of the death or disability of such Investor or (z) by the Investor for a
material breach by the Company of a material provision of the Employment
Agreement between the Company and such Investor; or (B) Ensign, Richardson and
Schaeffer cease to beneficially own (in the case of Schaeffer, either directly
or indirectly through the ownership of New Way, Inc. preferred stock convertible
into such capital stock) at least 95% of the capital stock of the Company
received by such Investors pursuant to the Agreement and Plan of Merger and the
Exchange Agreement ("Merger Consideration"); and (ii) at any time thereafter the
MR Sub delivers notice to Gold Strike pursuant to Section 9.3 of the Joint
Venture Agreement electing that the MR Sub will become the Managing Venturer,
then, upon such election, the Investors shall pay to the Company as liquidated
damages $20 million ($20,000,000) (the "Payment") within 30 days of the date
(the "Receipt Date") which is the earlier of the Company's or Gold Strike's
receipt of such notice. The Investors shall provide a copy of such written
notice to the Company within three business days of their receipt of such
notice.
4.10 FORM OF PAYMENT. If the Payment is required to be made by the
Investors pursuant to the provisions of Section A hereof, the Payment shall be
made in the form of cash, stock of the Company or any combination thereof. If
any portion of the Payment is made in the form of capital stock, the value of
the capital stock shall (i) if listed or quoted on the New York Stock Exchange,
be based on the average of the per share closing sale prices of such capital
stock on the New York Stock Exchange Composite Tape for the 20 days (excluding
the 5 lowest and 5 highest closing prices during such period) ending on the day
immediately prior to the Receipt Date, or (ii) if not listed or quoted on any
national securities exchange, be based on the appraisal of such capital stock
determined by a mutually agreed upon investment bank. It is understood that the
Payment, if paid, shall only be paid to the Company once.
4.11 LIQUIDATED DAMAGES. The provisions of Section A hereof constitute an
agreement by the parties upon a liquidated amount as to the damages sustained by
the Company upon the occurrence of the events listed in Section A. Each party
acknowledges that the amount of damages sustained by the Company in the event of
such a failure is not readily ascertainable and that the provisions of Section A
hereof establishing such liquidated amount are reasonable under the
circumstances existing at the time of the execution of this Agreement and, to
the extent permitted by law, each Investor waives any and all rights of any
nature whatsoever to challenge the reasonableness of such provisions as of the
date of this Agreement. The Payment shall be the sole measure of damages
resulting from the occurrence of the event described in Section A hereof.
4.12 NO CONFLICTING AGREEMENTS. The Investors shall not on or after the date
of this Agreement enter into any agreement that conflicts with the rights
granted to the Company hereunder.
<PAGE>
4.13 AUTHORITY OF INVESTORS. Each of the Investors has the legal capacity
to enter into this Agreement and to perform his obligations hereunder and to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by each of the Investors and constitutes a
legal, valid and binding obligation of each of the Investors enforceable against
each of the Investors in accordance with its terms, except to the extent that
such enforceability may be limited by bankruptcy, insolvency, moratorium or
other laws affecting the enforcement of creditor's rights generally or by
general equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
4.14 ENTIRE AGREEMENT. This Agreement, including all exhibits and schedules
hereto, contains the sole and entire agreement among the parties with respect to
the subject matter hereof and supersedes any and all prior agreements,
understandings, negotiations and discussions, whether oral or written, among the
parties hereto with respect to such subject matter.
4.15 NO THIRD-PARTY BENEFICIARIES. The terms and provisions of this
Agreement are intended for the benefit of each party hereto and their respective
successors and permitted assigns, and it is not the intention of the parties to
confer third-party beneficiary rights upon any other person or entity.
4.16 NOTICES. Unless otherwise specifically provided herein, all notices,
demands, consents, waivers and other communications required or permitted by the
terms of this Agreement shall be in writing, and any notice shall become
effective three (3) days after deposit in the United States mails, first class
postage prepaid, or one (1) day after delivery to an overnight courier or
express company or immediately upon delivery by hand or in the form of telecopy,
telegram or other electronic means of communication that produces a written
copy, and, if mailed or delivered by courier, express company or hand, shall be
addressed as indicated in Section 9.3 of the Agreement and Plan of Merger and
Section 5.8 of the Exchange Agreement.
4.17 NO ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor any right,
interest, duty or obligation hereunder may be assigned by any party hereto
without the prior written consent of the other parties hereto, and any attempt
to assign this Agreement or any right, interest, duty or obligation hereunder
without such prior written consent shall be null and void. Subject to the
preceding sentence, this Agreement is binding upon, inures to the benefit of and
is enforceable by the parties hereto and their respective successors and
assigns.
4.18 SEVERABILITY. If any provision of this Agreement is held to be illegal,
invalid or unenforceable under any present or future law, and if the rights or
obligations of any party hereto under this Agreement will not be materially and
adversely affected thereby, (i) such provision will be fully severable, (ii)
this Agreement will be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part hereof, and (iii) the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid or unenforceable provision or by
its severance from this Agreement.
4.19 GOVERNING LAW. This Agreement has been negotiated and executed and
shall be performed in the State of Nevada and shall be governed and construed by
the laws of such State, without giving effect to the conflicts of laws
principles thereof.
4.20 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
[Signature page to follow]
<PAGE>
IN WITNESS WHEREOF, each party has executed this Agreement as of the date
first above written.
CIRCUS CIRCUS ENTERPRISES, INC.,
a Nevada corporation
By_______________________________________
Name:
Title:
__________________________________________
Michael S. Ensign
__________________________________________
Glenn W. Schaeffer
__________________________________________
William A. Richardson
<PAGE>
Exhibit 10(ff)
EXCHANGE AGREEMENT
------------------
THIS EXCHANGE AGREEMENT, dated as of March 19, 1995, (the
"Agreement"), is entered into by and among Circus Circus Enterprises, Inc., a
Nevada corporation (the "Company"), New Way, Inc., a Nevada corporation and a
wholly owned subsidiary of the Company ("Newco"), Glenn W. Schaeffer
("Schaeffer"), Gregg H. Solomon ("Solomon"), Antonio C. Alamo ("Alamo"), Anthony
Korfman ("Korfman") and William Ensign ("Ensign").
RECITALS
--------
WHEREAS, M.S.E. Investments, Incorporated, a Nevada corporation
("MSE"), has the interests set forth in Schedule I hereto in Gold Strike L.V., a
Nevada general partnership ("GSLV"), Jean Development North, a Nevada general
partnership ("Jean North"), Gold Strike Resorts, LLC, an Indiana limited
liability company ("Indiana LLC") and Pine Hills Development II, a Mississippi
general partnership ("Pine Hills II" and, together with GSLV, Jean North and
Indiana LLC, the "Relevant Entities");
WHEREAS, pursuant to an agreement (the "MSE Agreement"), the
Company will acquire MSE;
WHEREAS, after the Company acquires MSE, the Company desires to
contribute all of its capital stock of Newco to MSE, and to cause MSE to
contribute the MSE Note (as defined below) and MSE's interests in the Relevant
Entities to Newco in exchange for additional shares of Newco's common stock
("Newco Common Stock") and shares of Exchangeable Cumulative Preferred Stock of
Newco, having the terms specified in Annex A hereto (the "Preferred Stock");
WHEREAS, Schaeffer, Solomon, Alamo, Korfman, and Ensign have the
respective interests in the Relevant Entities set forth opposite their names in
Schedule II hereto; and
WHEREAS, Schaeffer, Solomon, Alamo, Korfman and Ensign (together, the
"Minority Investors") desire to contribute their respective interests in the
Relevant Entities to Newco in exchange for shares of Preferred Stock and cash;
<PAGE>
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
The following capitalized terms shall have the following meanings:
"Applicable Gaming Authorities" shall mean the gaming authorities of
the States of Nevada, Illinois, Mississippi and Louisiana and the Province of
Ontario, Canada and all other Governmental Authorities having or asserting
jurisdiction over the establishment or conduct of gaming activities, operations,
management, control, or ownership.
"Charter Documents" shall mean, with respect to any corporation, the
Articles or Certificate of Incorporation and Bylaws, each as amended and
modified through and including the date of this Agreement, of such corporation.
"Claim" shall have the meaning specified in Section 5.1(c).
"Claim Notice" shall have the meaning specified in Section 5.1(c).
"Damages" shall mean any and all costs, losses, including without
limitation diminution in value, taxes, liabilities, obligations, damages,
lawsuits, deficiencies, claims, demands, and expenses (whether or not arising
out of third-party claims), including without limitation, interest, penalties,
costs of mitigation and losses, reasonable attorneys' fees and all amounts paid
in investigation, defense or settlement of any of the foregoing. The foregoing
reference to "diminution in value" shall not constitute directly or indirectly a
representation with respect to projections of the subject entity. The term
"Damages" is not limited to matters
2
<PAGE>
asserted by third parties against any of the Minority Investors but includes
Damages incurred or sustained by any of the Minority Investors in the absence of
third-party claims.
"Encumbrances" shall mean any claim, lien, pledge, option, charge,
easement, security interest, right-of-way, encumbrance or other similar right.
"Environmental Laws" shall mean any Federal, state or local law,
statute, ordinance, order, decree, rule or regulation relating to releases,
discharges, emissions or disposals to air, water, land or groundwater, to the
withdrawal or use of groundwater, to the use, handling or disposal of
polychlorinated biphenyls, asbestos or urea formaldehyde, to the treatment,
storage, disposal or management of Hazardous Materials, to exposure to toxic,
hazardous or other controlled, prohibited or regulated substances, and to the
transportation, release or any other use of Hazardous Materials, including the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
(S) 9601, et seq. ("CERLA"), the Resource Conservation and Recovery Act, 42
-- ---
U.S.C. (S) 6901, et seq. ("RCRA"), the Toxic Substances Control Act, 15 U.S.C.
-- ---
(S) 2601, et seq. ("TSCA"), the Occupational, Safety and Health Act, 29 U.S.C.
-- ---
(S) 651, et seq., the Clean Air Act, 42 U.S.C. (S) 7401, et seq., the Federal
-- --- -- ---
Water Pollution Control Act, 33 U.S.C. (S) 1251, et seq., the Safe Drinking
-- ---
Water Act, 42 U.S.C. (S) 300f et seq., the Hazardous Materials Transportation
-- ---
Act, 49 U.S.C. (S) 1802 et seq. ("HMTA") and the Emergency Planning and
-- ---
Community Right to Know Act, 42 U.S.C. 11001 et seq. ("EPCRA"), and other
-- ---
comparable state laws and all rules, regulations and guidance documents
promulgated pursuant thereto or published thereunder.
"Gaming Laws" shall mean, with respect to any Person, any Federal,
state, local or foreign statute, ordinance, rule, regulation, permit, consent,
approval, license, judgment, order, decree, injunction or other authorization
governing or relating to the current or contemplated casino and gaming
activities and operations of such Person.
"Governmental Authority" shall mean any agency, authority, board,
bureau, commission, court, department, office or instrumentality of any nature
whatsoever of the
3
<PAGE>
United States, any state, any province or any county, city or other political
subdivision, or any officer or official thereof acting in an official capacity.
"Hazardous Materials" shall mean each and every element, compound,
chemical mixture, contaminant, pollutant, material, waste or other substance
which is regulated as hazardous or toxic under Environmental Laws or the release
of which is regulated under Environmental Laws. Without limiting the generality
of the foregoing, the term includes: "hazardous substances" as defined in and
regulated under CERCLA; "extremely hazardous substances" as defined in and
regulated under EPCRA; "hazardous waste" as defined in and regulated under
RCRA; "hazardous materials" as defined in and regulated under HMTA; "chemical
substances or mixture" as defined in and regulated under TSCA; crude oil,
petroleum products or any fraction thereof; radioactive materials including
source, by-product or special nuclear materials; asbestos or asbestos-
containing materials; and radon.
"Indemnified Party" shall have the meaning specified in Section
5.1(c).
"Indemnifying Party" shall have the meaning specified in Section
5.1(c).
"Material Adverse Effect" shall mean a material adverse effect on the
financial condition, results of operations, business or properties of the
Relevant Entities taken as a whole, excluding any change which adversely
affects the gaming industry in Nevada as a whole.
"Material Adverse Effect on the Company" or "Material Adverse Effect
on Newco" shall mean, with respect to the Company or Newco (as the case may be),
a material adverse effect on the financial condition, results of operations,
business or properties of the Company or Newco (as the case may be), excluding
any change which adversely affects the gaming industry in Nevada, Mississippi,
Louisiana or Ontario, Canada as a whole.
"MSE Note" shall mean the Note to be made by MSE to the order of Newco
prior to the Closing (as defined below), in the aggregate principal amount of
$40 million.
4
<PAGE>
"Options" shall mean options, warrants, subscriptions, rights
(including "phantom" rights), preemptive rights or other contracts, commitments,
calls, understandings or arrangements, including any right of conversion or
exchange under any outstanding security, instrument or agreement.
"Person" shall mean any individual, firm, corporation, partnership,
limited liability company, trust, unincorporated organization or other entity or
a Government Authority, and shall include any successor (by merger or otherwise)
of such Person.
"Representatives" shall mean, with respect to any Person, the
directors, officers, employees, agents or representatives of such Person.
ARTICLE II
EXCHANGE
2.1 Contribution of Newco Capital Stock to MSE. Prior to the
------------------------------------------
Closing, the Company shall contribute all of its capital stock of Newco to MSE.
2.2 Contribution by MSE in Exchange for Preferred Stock and Newco
-------------------------------------------------------------
Common Stock. Upon the terms and subject to the conditions contained herein, at
- ------------
the Closing, (i) MSE shall and the Company shall cause MSE to issue and deliver
the MSE Note to Newco and (ii) pursuant to an assignment and assumption
agreement substantially in the form of Annex B hereto, the Company shall cause
MSE to contribute, convey, transfer, assign and deliver to Newco the interests
in the Relevant Entities specified on Schedule I hereto; and in exchange
therefor, Newco shall (a) accept from MSE the MSE Note and, pursuant to the
assignment and assumption agreement described above, accept from MSE such
interests in the Relevant Entities and assume all liabilities and obligations of
MSE arising therefrom, and (b) issue and deliver to MSE the number of fully paid
and non-assessable shares of Preferred Stock and Newco Common Stock specified on
Schedule I.
2.3 Contribution by the Minority Investors in Exchange for Preferred
----------------------------------------------------------------
Stock and Cash. Upon the terms and subject to the conditions contained herein,
- --------------
at the
5
<PAGE>
Closing, pursuant to an assignment and assumption agreement substantially in the
form of Annex B hereto, each of the Minority Investors shall contribute, convey,
transfer, assign and deliver to Newco the interests in the Relevant Entities set
forth opposite his name on Schedule II hereto; and in exchange therefor, Newco
shall (a) pursuant to such assignment and assumption agreement, accept from such
Minority Investor such interests in the Relevant Entities and assume all
liabilities and obligations of such Minority Investor arising therefrom and (b)
issue and deliver to each of the Minority Investors the number of fully paid and
non-assessable shares of Preferred Stock, and pay the amount of cash, set forth
opposite such Minority Investor's name on Schedule II. Nothing herein shall be
deemed to compromise or limit in any manner whatsoever any rights of the Company
or Newco to indemnification under any other agreement.
2.4 Closing. The closing of the transactions specified in Sections
-------
2.2 and 2.3 hereof (the "Closing") shall take place at the offices of the
Company at 2880 Las Vegas Boulevard South, Las Vegas, Nevada 89109 or at such
other place as the parties hereto mutually agree, on a date and at a time to be
specified by the parties, which shall in no event be later than 10:00 a.m., on
the fifth business day following the satisfaction of the conditions set forth in
Article IV of this Agreement, or on such other date as the parties hereto
mutually agree (the "Closing Date"). The closing of the transactions specified
in Sections 2.2 and 2.3 hereof shall be concurrent and mutually conditional.
2.5 Instruments and Documents Satisfactory. All instruments and
--------------------------------------
documents executed and delivered to Newco or the Minority Investors pursuant
hereto shall be in form and substance, and shall be executed in a manner,
reasonably satisfactory to Newco or the Minority Investors, as the case may be.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. The Company
---------------------------------------------
hereby represents and warrants:
6
<PAGE>
(a) Organization and Qualification. The Company is a corporation
------------------------------
duly organized, validly existing and in good standing under the laws of the
State of Nevada and has full corporate power and authority to conduct its
business as and to the extent now conducted and to own, use and lease its assets
and properties. The Company is duly qualified, licensed or admitted to do
business and is in good standing in each jurisdiction in which the ownership,
use or leasing of its assets and properties, or the conduct or nature of its
business, makes such qualification, licensing or admission necessary, except
where the failure to be so qualified, licensed or admitted and in good standing
would not have a Material Adverse Effect on the Company.
(b) Capitalization. The authorized capital stock of the Company
--------------
consists of 450,000,000 shares of common stock, par value $.01-2/3 per share
(the "Company Common Stock"), and 75,000,000 shares of preferred stock. As of
the date of this Agreement (i) 85,852,798 shares of Company Common Stock are
validly issued and outstanding, fully paid and nonassessable, (ii) no shares of
preferred stock are issued and outstanding and (iii) 5,677,204 shares of Company
Common Stock are issuable upon exercise of outstanding Options heretofore
granted. Except as contemplated by this Agreement, by the MSE Agreement and by
clauses (i) through (iii) above, and except for the rights to purchase one one-
hundredth (1/100th) of a share of Series A Junior Participating Preferred Stock
of the Company issued pursuant to the Rights Agreement, dated as of July 14,
1994, by and between the Company and First Chicago Trust Company of New York,
there are no other shares of capital stock, or other equity securities of the
Company outstanding, and, except for the Preferred Stock, no other outstanding
options, warrants, rights to subscribe to (including any preemptive rights),
calls or commitments of any character whatsoever to which the Company or any of
its subsidiaries is a party or may be bound, requiring the issuance or sale of
shares of any capital stock or other equity securities of the Company or
securities or rights convertible into or exchangeable for such shares or other
equity securities, and there are no contracts, commitments, understandings or
arrangements by which the Company is or may become bound to issue additional
shares of its capital stock or other equity securities or options, warrants or
rights to purchase or acquire any additional
7
<PAGE>
shares of its capital stock or other equity securities or securities convertible
into or exchangeable for such shares or other equity securities.
(c) Authority. The Company has full corporate power and authority to
---------
enter into this Agreement and to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement, the performance by the Company of its obligations hereunder and
the consummation by the Company of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of the
Company. This Agreement has been duly and validly executed and delivered by the
Company and constitutes a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except to the
extent that such enforceability may be limited by bankruptcy, insolvency,
moratorium or other laws affecting the enforcement of creditor's rights
generally or by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(d) No Violation. The Company is not in default under or in
------------
violation of any provision of its Charter Documents, and the Company is not in
default beyond any applicable grace period under or in violation (other than
technical or similar violations that could not cause a default under such
Instrument (as defined below)) of any material agreement, indenture, contract,
lease, sublease, loan agreement, note, restriction, obligation or liability
(each, an "Instrument") to which it is a party or by which it is bound or to
which any of its properties or assets is subject. Except as set forth in
Schedule 3.1(d), neither the Company's execution and delivery of this Agreement,
nor the consummation by the Company of the transactions contemplated hereby,
will conflict with or breach any Charter Document or Instrument of the Company,
or cause any such default or violation, or accelerate or allow any Person to
accelerate, terminate, modify or cancel any material rights under any
Instrument, or will result in the creation of any material Encumbrances on the
assets or properties of the Company. Such execution, delivery and consummation
will not violate or breach or constitute a default under any material law,
rule, judgment, order, decree or regulation of any Governmental Authorities to
which the Company is a
8
<PAGE>
party or is subject or to which the Company's properties or assets are subject.
(e) Consents and Approvals. Except as set forth in Schedule 3.1(e)
----------------------
and except as noted in the following sentence, no consent, authorization, order,
license, permit, or approval of (or filing or registration with) any
Governmental Authority or any other Person is required in connection with the
Company's execution, delivery and performance of this Agreement. The exceptions
referred to above are: (i) filings and approvals required under Nevada Law in
respect of corporate mergers, (ii) filings and approvals of pre-merger
notification and report forms and related documents under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (iii) filings
with, and the receipt of all required prior approvals, consents, authorizations,
orders, permits, findings of suitability and licenses from Applicable Gaming
Authorities under the Gaming Laws, (iv) transfer notifications, filings or
approvals that may be required under any state Environmental Law, including
without limitation, the States of Nevada, Mississippi, Louisiana and Ontario,
Canada and (v) where the failure to obtain such non-gaming consents,
authorizations, orders, licenses or permits, or to make such filings or
registrations, individually or in the aggregate, would not have a Material
Adverse Effect on the Company.
(f) Commission Filings. The Company has filed with the Securities
------------------
and Exchange Commission (the "Commission") all reports, registration statements
and definitive proxy statements required to be filed with the Commission since
February 1, 1992 (collectively, with any documents filed as exhibits thereto,
the "SEC Reports"). As of their respective dates, the SEC Reports (including all
exhibits and schedules thereto and documents incorporated by reference therein)
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements made, in light of the circumstances under which they were made, not
misleading. The audited consolidated financial statements and unaudited
consolidated interim financial statements of the Company and its subsidiaries
included or incorporated by reference in the SEC Reports, and in the Company's
Annual Reports for the years ended January 31, 1993 and January 31, 1994,
9
<PAGE>
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the periods involved (except as may be
indicated in the notes or schedules thereto and except in the case of the
unaudited interim statements, as may be permitted under Form 10-Q promulgated by
the Commission pursuant to the Exchange Act), and fairly present the
consolidated financial position of the Company and its consolidated subsidiaries
as of the dates thereof and the consolidated results of their operations and
changes in financial position for the periods then ended (subject, in the case
of any unaudited interim financial statements, to normal year-end adjustments).
(g) No Material Adverse Changes. Except as set forth in Schedule
---------------------------
3.1(g), since December 31, 1994, there has been no change or effect (or any
development that, insofar as can reasonably be foreseen, is likely to result in
any change or effect) or threatened change which has had, or would reasonably be
expected to have, a Material Adverse Effect on the Company.
3.2 Representations and Warranties of Newco. Newco hereby represents
---------------------------------------
and warrants:
(a) Organization and Qualification. Newco is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of the State of
Nevada and has full corporate power and authority to conduct its business as and
to the extent now conducted and to own, use and lease its assets and properties.
Newco is duly qualified, licensed or admitted to do business and is in good
standing in each jurisdiction in which the ownership, use or leasing of its
assets and properties, or the conduct or nature of its business, makes such
qualification, licensing or admission necessary, except where the failure to be
so qualified, licensed or admitted and in good standing would not have a
Material Adverse Effect on Newco.
(b) Capitalization. The authorized capital stock of Newco consists of
--------------
2,500 shares of Newco Common Stock and no shares of preferred stock. As of the
date of this Agreement, (i) 1,000 shares of Newco Common Stock are validly
issued and outstanding, fully paid and nonassessable, (ii) no shares of
preferred stock are issued and outstanding and (iii) no shares of Newco
10
<PAGE>
Common Stock or preferred stock are issuable upon exercise of outstanding
Options heretofore granted. Except as contemplated by this Agreement and by
clauses (i) through (iii) above, there are no other shares of capital stock, or
other equity securities of Newco outstanding, and no outstanding Options to
which Newco or any of its subsidiaries is a party or may be bound, requiring the
issuance or sale of, shares of any capital stock or other equity securities of
Newco or requiring Newco to grant, extend or enter into any Options with respect
thereto. Newco has no contracts, commitments, obligations or rights to
purchase or redeem any shares of its capital stock.
(c) Authority. Newco has full corporate power and authority to enter
---------
into this Agreement and to perform its obligations hereunder and to consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement, the performance by Newco of its obligations hereunder and the
consummation by Newco of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Newco. This
Agreement has been duly and validly executed and delivered by Newco and
constitutes a legal, valid and binding obligation of Newco enforceable against
Newco in accordance with its terms, except to the extent that such
enforceability may be limited by bankruptcy, insolvency, moratorium or other
laws affecting the enforcement of creditor's rights generally or by general
equitable principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
(d) No Violation. Newco is not in default under or in violation of
------------
any provision of its Charter Documents, and Newco is not in default beyond any
applicable grace period under or in violation (other than technical or similar
violations that could not cause a default under such Instrument) of any
Instrument to which it is a party or by which it is bound or to which any of its
properties or assets is subject. Except as set forth in Schedule 3.2(d),
neither Newco's execution and delivery of this Agreement, nor the consummation
by Newco of the transactions contemplated hereby, will conflict with or breach
any Charter Document or Instrument of Newco, or cause any such default or
violation, or accelerate or allow any Person to accelerate, terminate, modify or
11
<PAGE>
cancel any material rights under any Instrument, or will result in the creation
of any material Encumbrances on the assets or properties of Newco. Such
execution, delivery and consummation will not violate or breach or constitute a
default under any material law, rule, judgment, order, decree or regulation of
any Governmental Authorities to which Newco is a party or is subject or to which
Newco's properties or assets are subject.
(e) Consents and Approvals. Except as set forth in Schedule 3.2(e)
----------------------
and except as noted in the following sentence, no consent, authorization, order,
license, permit, or approval of (or filing or registration with) any
Governmental Authority or any other Person is required in connection with the
execution, delivery and performance of this Agreement by Newco. The exceptions
referred to above are: (i) filings and approvals required under Nevada Law in
respect of corporate mergers, (ii) filings and approvals of pre-merger
notification and report forms and related documents under the HSR Act, (iii)
filings with, and the receipt of all required prior approvals, consents,
authorizations, orders, permits, findings of suitability and licenses from
Applicable Gaming Authorities under the Gaming Laws, (iv) transfer
notifications, filings or approvals that may be required under any state
Environmental Law, including without limitation, the States of Nevada,
Mississippi, Louisiana and Ontario, Canada, and (v) where the failure to obtain
such non-gaming consents, authorizations, orders, licenses or permits, or to
make such filings or registrations, individually or in the aggregate, would not
have a Material Adverse Effect on Newco.
(f) Status of Securities. The shares of Preferred Stock and Newco
--------------------
Common Stock to be issued pursuant to this Agreement have been (or will have
been prior to Closing) duly authorized by all necessary corporate action on the
part of Newco, and upon issuance hereunder will be validly issued and
outstanding, fully paid and nonassessable, and the issuance thereof is not
subject to preemptive rights of any other stockholder of Newco.
3.3 Representations and Warranties of the Minority Investors. Each
--------------------------------------------------------
of the Minority Investors hereby represents and warrants:
12
<PAGE>
(a) Ownership Interest. Such Minority Investor has the proportionate
------------------
partnership or membership interest (as the case may be) in each of the Relevant
Entities set forth opposite his name on Schedule II hereto, free and clear of
any Encumbrances, except those existing under the terms of the partnership or
operating agreement (as the case may be) of each such Relevant Entity.
(b) Authority of each Minority Investor. Except as set forth in
-----------------------------------
Schedule 3.3(b), such Minority Investor has the legal capacity to enter into
this Agreement and to perform his obligations hereunder and to consummate the
transactions contemplated hereby. Except as set forth in Schedule 3.3(b), this
Agreement has been duly and validly executed and delivered by such Minority
Investor and constitutes a legal, valid and binding obligation of such Minority
Investor enforceable against him in accordance with its terms, except to the
extent that such enforceability may be limited by bankruptcy, insolvency,
moratorium or other laws affecting the enforcement of creditor's rights
generally or by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(c) Consents and Approvals. Except as set forth in Schedule 3.3(c),
----------------------
and except as noted in the following sentence, no consent, authorization, order,
license, permit, or approval of (or filing or registration with) any
Governmental Authority or any other Person is required in connection with the
execution, delivery and performance of this Agreement by such Minority Investor.
The exceptions referred to above are: (i) filings and approvals required under
Nevada Law in respect of corporate mergers, (ii) filings and approvals of pre-
merger notification and report forms and related documents under the HSR Act,
(iii) filings with, and the receipt of all required prior approvals, consents,
authorizations, orders, permits, findings of suitability and licenses from,
Applicable Gaming Authorities under the Gaming Laws and (iv) where the failure
to obtain such non-gaming consents authorizations orders, licenses or permits,
or to make such filings or registrations, individually or in the aggregate,
would not have a Material Adverse Effect.
(d) Investment Representations.
--------------------------
13
<PAGE>
(i) Such Minority Investor understands that the shares of
Preferred Stock to be issued and delivered to him pursuant to the terms of
this Agreement have not been registered pursuant to the registration
requirements of the Securities Act of 1933, as amended (the "Securities
Act") by reason of the reliance on an exemption from the registration
requirements of the Securities Act pursuant to Section 4(2) thereof.
(ii) Such Minority Investor (A) has the capacity to protect his
interests in connection with the transactions contemplated hereby and (B)
is able to bear the economic risk thereof. The Company has delivered or
made available to such Minority Investor such documents, materials and
information pertaining to the Company as he may have requested and has
afforded him an opportunity to ask questions of and receive answers from
the Company and its executive officers and representatives.
(iii) Such Minority Investor understands that the Preferred
Stock to be issued pursuant to the terms of this Agreement may not be sold,
transferred or otherwise disposed of without registration under the
Securities Act or an exemption therefrom, and that in the absence of an
effective registration statement covering the same or an available
exemption from registration under the Securities Act, such shares of
Preferred Stock must be held indefinitely. In the absence of an effective
registration statement under the Securities Act or an exemption therefrom,
such Minority Investor will not sell, transfer or otherwise dispose of any
shares of Preferred Stock received pursuant to the terms of this Agreement,
except in a manner consistent with such Minority Investor's representations
set forth in this Section.
(iv) Such Minority Investor has carefully read this Section and
discussed its requirements and other applicable limitations upon his
ability to sell, transfer or otherwise
14
<PAGE>
dispose of the Preferred Stock received pursuant to the terms of this
Agreement to the extent that he felt necessary with his counsel and will
not make any sale, transfer or other disposition of such shares of
Preferred Stock in violation of the Securities Act or the rules and
regulations thereunder.
(v) The shares of Preferred Stock to be acquired by such
Minority Investor shall be acquired in good faith for investment for his
account and not with a view to a distribution or resale of any such
Preferred Stock.
ARTICLE IV
CONDITIONS
4.1 Conditions to the Parties' Obligations. The respective
--------------------------------------
obligations of each party hereto to effect the Closing are subject to the
fulfillment or waiver of the conditions set forth in this Section at or prior to
the Closing Date:
(a) Acquisition of Interests. (i) The merger between MSE and a
------------------------
subsidiary of the Company shall have become effective and the Company shall have
acquired MSE prior to the Closing Date; and (ii) the Company shall have
contributed all of the capital stock of Newco to MSE such that MSE shall have
valid and legal title thereto.
(b) Order or Injunction. None of the parties hereto shall be subject
-------------------
to any order or injunction of a Governmental Authority of competent jurisdiction
which prohibits the consummation of the transactions contemplated by this
Agreement. In the event any such order or injunction shall have been issued,
each party agrees to use its or his reasonable efforts to have any such
injunction lifted.
(c) Consents. All material consents, authorizations, orders,
--------
permits, findings of suitability, licenses and approvals of (or filings or
registrations with) any Governmental Authority or any other Person required
solely in connection with the execution, delivery and performance of this
Agreement (except for the
15
<PAGE>
consents contemplated in connection with the acquisition of MSE), shall have
been obtained or made, except for any other documents required to be filed after
the Closing.
4.2 Additional Conditions to the Minority Investors' Obligations. In
------------------------------------------------------------
addition to the conditions set forth in Section 4.1, the respective obligations
of the Minority Investors to effect the transactions specified in Section 2.3
are also subject to the fulfillment or waiver of the following conditions at or
prior to the Closing:
(a) Charter. Newco shall have amended its charter, to the reasonable
-------
satisfaction of the Minority Investors, to provide for the authorization of the
issuance of shares of Preferred Stock and common stock of Newco in such amounts
as are sufficient to satisfy Newco's obligations to issue such shares pursuant
to this Agreement; and the form, terms and provisions of the Preferred Stock
shall be in accordance with Annex A hereto and reasonably satisfactory to the
Minority Investors.
(b) Performance of Agreement. Each of the Company and Newco shall
------------------------
have, and the Company shall have caused its affiliates to have, materially
performed all obligations and shall have materially complied with all covenants
and conditions required of it under the terms of this Agreement.
4.3 Additional Conditions to the Obligations of the Company and
-----------------------------------------------------------
Newco. In addition to the conditions set forth in Section 4.1, the obligations
of the Company and Newco to effect the Closing are also subject to the
fulfillment or waiver of the condition at or prior to Closing that each of the
Minority Investors shall have materially performed all obligations and
agreements, and shall have materially complied with all covenants and conditions
required of it under the terms of this Agreement.
16
<PAGE>
ARTICLE V
INDEMNIFICATION
5.1 Indemnification by the Company and Newco.
----------------------------------------
(a) Indemnification. Each of the Company and Newco, jointly and
---------------
severally, shall indemnify and save and hold harmless each of the Minority
Investors, their respective affiliates and subsidiaries, and their respective
Representatives from and against any and all Damages incurred in connection
with, arising out of, or resulting from (i) any breach or inaccuracy of any
representation or warranty made by the Company or Newco to the Minority
Investors in or pursuant to this Agreement; or (ii) any breach of any covenant
or agreement made by the Company or Newco in or pursuant to this Agreement.
Payments by any of the Minority Investors of amounts for which any of the
Minority Investors is indemnified shall not be a condition precedent to
recovery. The obligations of the Company and Newco to indemnify each of the
Minority Investors shall not limit any other rights, including without
limitation rights of contribution which any of the parties may have under
statute or common law.
(b) Cooperation. The indemnified party shall cooperate in all
-----------
reasonable respects with the indemnifying party or parties (as the case may be)
and such attorneys in the investigation, trial and defense of such lawsuit or
action and any appeal arising therefrom; provided, however, that the indemnified
-------- -------
party may, at its own cost, participate in the investigation, trial and defense
of such lawsuit or action and any appeal arising therefrom. The parties shall
cooperate with each other in any notifications to insurers.
(c) Defense of Claims. If a claim for Damages (a "Claim") is to be
-----------------
made by a party entitled to indemnification hereunder (the "Indemnified Party")
against the indemnifying party or parties (as the case may be) (the
"Indemnifying Party"), the Indemnified Party claiming such indemnification shall
give written notice (a "Claim Notice") to the Indemnifying Party as soon as
practicable after the Indemnified Party becomes aware of any fact, condition or
event which may give rise to Damages for which indemnification may be sought
under this Section. If any lawsuit or enforcement action is filed against any
Indemnified Party hereunder, written
17
<PAGE>
notice thereof shall be given to the Indemnifying Party as promptly as
practicable (and in any event within 15 calendar days after the service of a
citation or summons). The failure of any Indemnified Party to give timely
notice hereunder shall not affect rights to indemnification hereunder, except to
the extent that the Indemnifying Party demonstrates actual damage caused by
such failure. After such notice, if the Indemnifying Party shall acknowledge in
writing to the Indemnified Party that the Indemnifying Party shall be obligated
under the terms of its indemnity hereunder in connection with such lawsuit or
action, then the Indemnifying Party shall be entitled, if it so elects, (i) to
take control of the defense and investigation of such lawsuit or action, (ii)
to employ and engage attorneys of its own choice to handle and defend the same,
at the Indemnifying Party's cost, risk and expense unless the named parties to
such action or proceeding include both the Indemnifying Party and the
Indemnified Party and the Indemnified Party has been advised in writing by
counsel that there may be one or more legal defenses available to such
Indemnified Party that are different from or additional to those available to
the Indemnifying Party, and (iii) to compromise or settle such Claim, which
compromise or settlement shall be made only with the written consent of the
Indemnified Party, such consent not to be unreasonably withheld. If the
Indemnifying Party fails to assume the defense of such Claim within 15 calendar
days after receipt of the Claim Notice, the Indemnified Party against which such
Claim has been asserted shall (upon delivering notice to such effect to the
Indemnifying Party) have the right to undertake, at the Indemnifying Party's
cost and expense, the defense, compromise or settlement of such Claim on behalf
of and for the account and risk of the Indemnifying Party; provided, however,
-------- -------
that such Claim shall not be compromised or settled without the written consent
of the Indemnifying Party, which consent shall not be unreasonably withheld. In
the event the Indemnified Party assumes the defense of the Claim, the
Indemnified Party will keep the Indemnifying Party reasonably informed of the
progress of any such defense, compromise or settlement. The Indemnifying Party
shall be liable for any settlement of any action effected pursuant to and in
accordance with this Section and for any final judgment (subject to any right
of appeal), and the Indemnifying Party agrees to indemnify
18
<PAGE>
and hold harmless an Indemnified Party from and against any Damages by reason of
such settlement or judgment.
(d) Limitations. The Company and Newco shall not be liable under
-----------
this Section for any Damages incurred pursuant to Section 5.1(a)(i) until the
aggregate amount otherwise due the Indemnified Party exceeds an accumulated
total of $2,500,000 (the "Threshold"), at which time the Indemnifying Party
shall be liable for only those Damages exceeding such amount. The Company and
Newco shall be liable to the Minority Investors under this Section for any and
all Damages arising under Section 5.1(a)(ii) without regard to the Threshold.
(e) Representatives. No individual Representative of any party
---------------
shall be personally liable for any Damages under the provisions contained in
this Section.
ARTICLE VI
GENERAL PROVISIONS
6.1 Availability of Company Common Stock.
------------------------------------
(a) Provision of Company Common Stock to Newco. The Company hereby
------------------------------------------
covenants to provide Newco with shares of Company Common Stock (or other
consideration) at such times and in sufficient number to enable Newco to comply
with its obligation to exchange shares of Company Common Stock (or other
consideration) for shares of Preferred Stock in accordance with the terms of the
Preferred Stock.
(b) Reservation of Shares, Etc. The Company shall at all times
---------------------------
reserve and keep available, out of its authorized and unissued capital stock,
solely for the purpose of providing Newco with shares of Company Common Stock
sufficient to effect the exchange of the Preferred Stock, such number of shares
of Company Common Stock (and other capital stock if the Preferred Stock is
exchangeable therefor), free of preemptive rights, as shall from time to time be
sufficient to enable Newco to effect the exchange of all shares of Preferred
Stock from time to time outstanding. The Company shall from time to time, in
accordance with the laws of the State of Nevada, use its best efforts to
increase the authorized number of
19
<PAGE>
shares of Company Common Stock (or other capital stock if the Preferred Stock is
exchangeable therefor) if at any time the number of shares of authorized and
unissued Company Common Stock (or such other capital stock) shall not be
sufficient to permit Newco to exchange all of the then outstanding shares of
Preferred Stock.
6.2 Legend. Each certificate of Preferred Stock issued pursuant to
------
the provisions hereof, if deemed advisable by Newco, shall bear substantially
the following legends:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH
SECURITIES MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED
OR HYPOTHECATED EXCEPT PURSUANT TO (I) A REGISTRATION STATEMENT WITH
RESPECT TO SUCH SECURITIES, WHICH IS EFFECTIVE UNDER SUCH ACT, OR (II)
ANY EXEMPTION FROM REGISTRATION UNDER SUCH ACT RELATING TO THE
DISPOSITION OF SECURITIES, INCLUDING RULE 144, PROVIDED AN OPINION OF
COUNSEL IS FURNISHED, REASONABLY SATISFACTORY IN FORM AND SUBSTANCE TO
THE COMPANY, THAT AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
SUCH ACT IS AVAILABLE."
6.3 Taxes. The parties hereto intend that the contribution of the
-----
MSE Note and the respective interests in the Relevant Entities to Newco in
exchange for Preferred Stock and Newco Common Stock, and the contribution
contemplated by Section 2.1, pursuant to this Agreement will each be treated for
income tax purposes as an exchange pursuant to section 351 of the Internal
Revenue Code of 1986, as amended, and any corresponding provisions of applicable
state income tax statutes. The parties hereto agree to prepare, or cause to be
prepared, all Federal and state income tax returns, other governmental filings
and reports, and applicable books and records in accordance with such treatment
and to take such other actions as may be reasonably necessary so that such
exchanges will be so treated.
6.4 Survival of Representations, Etc. All statements contained in
---------------------------------
the Schedules hereto or in any certificate or instrument of conveyance delivered
by or on behalf of the parties pursuant to this Agreement or in
20
<PAGE>
connection with the consummation of the transactions contemplated hereby, shall
be deemed to be representations and warranties by the parties hereunder. The
representations and warranties of the Company and the Minority Investors
contained herein shall survive the Closing Date until the date that is the third
anniversary of the Closing Date, without regard to any investigation made by any
of the parties hereto; provided, however, that the representations and
-----------------
warranties set forth in Section 3.3(a) shall survive indefinitely.
6.5 Consent to Substitution. It is the intention of the parties
-----------------------
hereto that Newco become a partner or member of each of the partnerships or
limited liability company (as the case may be) comprising the Relevant Entities
and obtain all of the Minority Investors' and MSE's rights therein in
substitution of the Minority Investors or MSE, as applicable. In furtherance
thereof and subject to the Closing, (i) the Company shall cause its affiliates,
including without limitation MSE, to consent to such substitution of Newco,
including as a new partner or member of the applicable Relevant Entity as
contemplated by this Agreement and (ii) each of the Minority Investors shall
consent to such substitution of Newco, including as a new partner or member of
the applicable Relevant Entity as contemplated by this Agreement.
6.6 Termination. This Agreement may be terminated, and the
-----------
transactions contemplated hereby may be abandoned, at any time prior to the
Closing (a) by mutual written agreement of the parties hereto, or (b) by any
party hereto if the MSE Agreement is terminated for any reason.
6.7 Entire Agreement. This Agreement (including all schedules and
----------------
annexes hereto) contains the sole and entire agreement among the parties with
respect to the transactions contemplated by Article II herein and supersedes any
and all prior agreements, understandings, negotiations and discussions, whether
oral or written, among the parties hereto with respect to such subject matter.
6.8 Notices. Unless otherwise specifically provided herein, all
-------
notices, demands, consents, waivers and other communications required or
permitted by the terms of this Agreement shall be in writing, and any
21
<PAGE>
notice shall become effective three (3) days after deposit in the United States
mails, first class postage prepaid, or one (1) day after delivery to an
overnight courier or express company or immediately upon delivery by hand or in
the form of telecopy, telegram or other electronic means of communication that
produces a written copy, and, if mailed or delivered by courier, express company
or hand, shall be addressed as follows:
If to the Company: Circus Circus Enterprises, Inc.
2880 Las Vegas Blvd. South
Las Vegas, NV 89109
Attention: President
If to Newco: New Way, Inc.
2880 Las Vegas Blvd. South
Las Vegas, NV 89109
Attention: Chief Executive Officer
If to Schaeffer: Glenn W. Schaeffer
1 Main Street
P.O. Box 19278
Jean, Nevada 89019
If to Solomon: Gregg H. Solomon
1 Main Street
P. O. Box 19278
Jean, Nevada 89019
If to Alamo: Antonio C. Alamo
1 Main Street
P. O. Box 19278
Jean, Nevada 89019
If to Korfman: Anthony Korfman
Lakeview Company
U.S. Highway 93
Boulder City, NV 89005
If to Ensign: William Ensign
Lakeview Company
U.S. Highway 93
Boulder City, NV 89005
6.9 No Assignment; Binding Effect. Neither this Agreement nor any
-----------------------------
right, interest, duty or obligation hereunder may be assigned by any party
hereto with-
22
<PAGE>
out the prior written consent of the other parties hereto, and any attempt to
assign this Agreement or any right, interest, duty or obligation hereunder
without such prior written consent shall be null and void. Subject to the
preceding sentence, this Agreement is binding upon, inures to the benefit of and
is enforceable by the parties hereto and their respective successors and
assigns.
6.10 Severability. If any provision of this Agreement is held to be
------------
illegal, invalid or unenforceable under any present or future law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (i) such provision will be fully
severable, (ii) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
and (iii) the remaining provisions of this Agreement will remain in full force
and effect and will not be affected by illegal, invalid or unenforceable
provision or by its severance from this Agreement.
6.11 Further Assurances. Each of the parties hereto agrees to
------------------
execute and deliver any and all further agreements, documents, certificates or
instruments necessary to effectuate this Agreement. Each party shall promptly
notify the other parties of any information delivered to or obtained by such
party that would prevent the consummation of the transactions contemplated by
this Agreement or would indicate a breach of the representations or warranties
of any of the parties to this Agreement, provided that failure so to notify will
not constitute a waiver of such party's rights under this Agreement.
6.12 Non-Waiver of Breach. A party hereto may specifically waive any
--------------------
breach of this Agreement by another party as to any provision in favor of the
party waiving such breach, provided that no such waiver shall be binding or
effective unless in writing and no such waiver shall constitute a continuing
waiver of similar or other breaches. A waiving party may at any time, by notice
given to the breaching party, direct future compliance with the waived term or
terms of this Agreement, in which event the breaching party shall comply as
directed from such time forward.
23
<PAGE>
6.13 Confidentiality; Publicity. The parties acknowledge that the
--------------------------
transactions described herein are of a confidential nature and shall not be
disclosed except to consultants, advisors and affiliates, as defined in Rule
12b-2 of the General Rules and Regulations under the Securities Exchange Act of
1934, or as required by law. None of the parties hereto shall make any public
disclosure of the specific terms of this Agreement, except as required by law.
The parties shall endeavor to make only those press releases as required by law,
provided, however, that no press release shall be made without prior
consultation with the other parties.
6.14 Governing Law. This Agreement has been negotiated and executed
-------------
and shall be performed in the State of Nevada and shall be governed and
construed by the laws of such State, without giving effect to the conflicts of
laws principles thereof.
6.15 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
24
<PAGE>
IN WITNESS WHEREOF, each party has executed this Agreement as of the
date first above written.
CIRCUS CIRCUS ENTERPRISES, INC.,
a Nevada corporation
By: CLYDE T. TURNER
----------------------------
Name: Clyde T. Turner
Title: President
NEW WAY, INC.,
a Nevada corporation
By: CLYDE T. TURNER
----------------------------
Name: Clyde T. Turner
Title: President
M.S.E. Investments, Incorporated
a Nevada Corporation
By: MICHAEL S. ENSIGN
----------------------------
Name: Michael S. Ensign
Title: President
GLENN W. SCHAEFFER
----------------------------------
Glenn W. Schaeffer
GREGG H. SOLOMON
----------------------------------
Gregg H. Solomon
ANTONIO C. ALAMO
----------------------------------
Antonio C. Alamo
ANTHONY KORFMAN
----------------------------------
WILLIAM ENSIGN
----------------------------------
William Ensign
25
<PAGE>
Annex A
TERMS OF PREFERRED STOCK
Issuer: New Way, Inc.
Dividends: $10.00 per share per annum. Dividends will cumulate but
not accrue interest. Dividends will be payable when, as and
if declared by the Board of Directors, but dividends may not
be paid on any other junior or pari passu stock of the issuer
---- -----
unless all dividends have been paid on the Preferred Stock.
Liquidation
Preference: $100.00 per share
Exchange Rights: Each share of Preferred Stock will be exchangeable for common
stock of Circus Circus Enterprises, Inc. at an exchange rate
of 3.901677721 shares of Company Common Stock for each share
of Preferred Stock. The exchange rate will be subject to
adjustment in the event of certain dilutive events.
Redemption: The Preferred Stock will be subject to mandatory redemption
on the fifteenth anniversary of the date of original issuance
at a price equal to the liquidation preference plus all unpaid
dividends.
Voting Rights: The holders of the Preferred Stock will not be entitled to
vote except to the extent required by law; provided, however,
that the holders of the Preferred Stock (other than Circus
Circus Enterprises, Inc. and its affiliates) will be entitled
to vote separately as a class on any amendment to the issuer's
charter or bylaws that would adversely affect the rights of
holders of the Preferred Stock (including without limitation
the authorization or issuance of any senior stock of the
issuer). The holders of the Preferred Stock shall not be
entitled to vote separately as a class on any merger of New
A-1
<PAGE>
Way with the Company or any affiliate controlled by the
Company except as required by law (in which case any such
separate class vote shall include all holders of the Preferred
Stock, including the Company and its affiliates).
A-2
<PAGE>
Annex B
ASSIGNMENT AND ASSUMPTION AGREEMENT
-----------------------------------
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT, dated as of ________ __,
1995 (the "Agreement"), is entered into by and between ___________ ("Assignor")
and New Way, Inc., a Nevada corporation ("Assignee"). Capitalized terms used
but not otherwise defined herein shall have the respective meanings ascribed to
them in the Exchange Agreement (as defined below).
RECITALS
--------
WHEREAS, Assignor is a [general partner/member] of _________________,
a _____________ [general partnership/limited liability company] (the "Relevant
Entity");
WHEREAS, pursuant to the Exchange Agreement, dated ______, 1995 (the
"Exchange Agreement"), by and among Circus Circus Enterprises, Inc., a Nevada
corporation (the "Company"), Assignee, Glenn W. Schaeffer, Gregg H. Solomon,
Antonio C. Alamo, Anthony Korfman and William Ensign, Assignor has agreed to
assign [his/its] interest in the Relevant Entity to Assignee; and
WHEREAS, pursuant to the Exchange Agreement, Assignee has agreed to
assume all liabilities and obligations of Assignor relating to Assignor's
interest or previous participation in the Relevant Entity.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
ASSIGNMENT AND ASSUMPTION
1.1 Assignment of Rights and Interest. Assignor hereby transfers,
---------------------------------
assigns and conveys to Assignee, effective as of the Closing Date, all right,
title and interest of Assignor, as [general partner/member], in and to the
Relevant Entity and under that certain [Partnership/Operating] Agreement, dated
__________, by and among Assignor and ____________.
B-1
<PAGE>
1.2 Acceptance of Assignment and Assumption of Liabilities.
-------------------------------------------------------
Assignee hereby accepts the foregoing assignment, effective as of the Closing
Date, and assumes and agrees to pay, perform and discharge, as and when due, all
of the agreements, obligations and liabilities of Assignor, as [general
partner/member] of the Relevant Entity, now existing or hereafter accruing.
Nothing herein shall be deemed to compromise or limit in any manner whatsoever
any rights of the Company or Assignee to indemnification under any other
agreement.
1.3 Further Assurances. From time to time, each party, as and when
------------------
requested by the other party hereto, shall execute and deliver, or cause to be
executed and delivered, all such agreements, documents and instruments and shall
take, or cause to be taken, all such further or other actions, as such
requesting party may reasonably deem necessary or desirable to evidence, vest,
confirm, perfect or consummate the assignment of rights and assumption of
liabilities contemplated by this Agreement.
ARTICLE II
GENERAL PROVISIONS
2.1 Entire Agreement. This Agreement contains the sole and entire
----------------
agreement among the parties with respect to the assignment and assumption of the
respective interests and obligations contemplated herein and supersedes any and
all prior agreements, understandings, negotiations and discussions, whether oral
or written, among the parties hereto with respect to such subject matter (other
than the Exchange Agreement).
2.2 Notices. Unless otherwise specifically provided herein, all
-------
notices, demands, consents, waivers and other communications required or
permitted by the terms of this Agreement shall be in writing, and any notice
shall become effective three (3) days after deposit in the United States mails,
first class postage prepaid, or one (1) day after delivery to an overnight
courier or express company or immediately upon delivery by hand or in the form
of telecopy, telegram or other electronic means of communication that produces a
written copy, and, if mailed or delivered by courier, express company or hand,
shall be addressed as follows:
If to Assignor:
If to Assignee:
B-2
<PAGE>
2.3 No Assignment; Binding Effect. Neither this Agreement nor any
-----------------------------
right, interest, duty or obligation hereunder may be assigned by any party
hereto without the prior written consent of the other parties hereto, and any
attempt to assign this Agreement or any right, interest, duty or obligation
hereunder without such prior written consent shall be null and void. Subject to
the preceding sentence, this Agreement is binding upon, inures to the benefit of
and is enforceable by the parties hereto and their respective successors and
assigns.
2.4 Severability. If any provision of this Agreement is held to be
------------
illegal, invalid or unenforceable under any present or future law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (i) such provision will be fully
severable, (ii) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
and (iii) the remaining provisions of this Agreement will remain in full force
and effect and will not be affected by illegal, invalid or unenforceable
provision or by its severance from this Agreement.
2.5 Non-Waiver of Breach. A party hereto may specifically waive any
--------------------
breach of this Agreement by another party as to any provision in favor of the
party waiving such breach, provided that no such waiver shall be binding or
effective unless in writing and no such waiver shall constitute a continuing
waiver of similar or other breaches. A waiving party may at any time, by notice
given to the breaching party, direct future compliance with the waived term or
terms of this Agreement, in which event the breaching party shall comply as
directed from such time forward.
2.6 Governing Law. This Agreement has been negotiated and executed
-------------
and shall be performed in the State of Nevada and shall be governed and
construed by the laws of such State, without giving effect to the conflicts of
laws principles thereof.
2.7 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
B-3
<PAGE>
IN WITNESS WHEREOF, each party has executed this Agreement as of the
date first above written.
"ASSIGNEE"
NEW WAY, INC.
a Delaware corporation
By: ______________________
Name:
Title:
"ASSIGNOR"
[Name of Assignor]
By: ______________________
Name:
Title:
[Schedules to this agreement, which have been omitted pursuant to paragraph
(b)(2) of Item 601 of Regulation S-K, will be furnished to the Securities and
Exchange Commission supplementally upon request]
B-4
<PAGE>
EXHIBIT 10(gg)
CIRCUS CIRCUS ENTERPRISES, INC.
1995 SPECIAL STOCK OPTION PLAN
1 PURPOSE OF THE PLAN
The purposes of the 1995 Special Stock Option Plan (the "Plan") are to enable
Circus Circus Enterprises, Inc. (the "Company") to retain the services of its
Chief Executive Officer, to substantially increase his ownership interest in
the Company's Common Stock and to attract and retain the services of three
additional senior executive officers, all pursuant to the terms of that certain
Merger Agreement dated as of March 19, 1995, as it may be amended from time to
time (the "Merger Agreement"), by and among the Company; M.S.E. Investments,
Incorporated; Last Chance Investments, Incorporated; Goldstrike Investments,
Incorporated; Diamond Gold, Inc.; Gold Strike Aviation, Incorporated;
Goldstrike Finance Company, Inc.; Oasis Development Company, Inc.; Michael S.
Ensign; William A. Richardson; David R. Belding; Peter A. Simon II; and Robert
J. Verchota.
2 GENERAL PROVISIONS
2.1 Definitions
As used in the Plan:
(a) "Board of Directors" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, including any and all
amendments thereto.
(c) "Committee" means the committee appointed by the Board of Directors
from time to time to administer the Plan pursuant to Section 2.2.
(d) "Common Stock" means the Company's Common Stock, $.01 2/3 par value.
(e) "Fair Market Value" means, with respect to a specific date, the last
reported sale price of the Common Stock on the NYSE Composite Tape on the
date such Fair Market Value is being determined, and, in the absence of any
sale on such day, the Fair Market Value as determined in good faith by the
Committee on the basis of such quotations and other consideration as the
Committee deems appropriate.
(f) "NYSE" means the New York Stock Exchange.
(g) "Participant" means a person to whom a Stock Option has been granted
under the Plan.
(h) "Rule 16b-3" means Rule 16b-3 promulgated under the Securities
Exchange Act of 1934, as amended from time to time, or any successor rule.
(i) "Stock Option" means a stock option granted under the Plan which is
intended not to qualify as an "incentive stock option" under Section 422 of
the Code.
(j) "Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if, at the time
of the granting of the Stock Option, each of the corporations other than
the last corporation in the unbroken chain owns 50% or more of the total
voting power of all classes of stock in one of the other corporations in
such chain.
2.2 Administration of the Plan
(a) The Plan shall be administered by the Committee which shall at all
times consist of two (2) or more persons, each of whom shall be a member of
the Board of Directors. Each member of the Committee shall be a
disinterested person (as such term is defined in Rule 16b-3) and an
"outside
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director" for purposes of Section 162(m) of the Code. The Board of
Directors may from time to time remove members from, or add members to, the
Committee. Vacancies on the Committee, howsoever caused, shall be filled by
the Board of Directors. The Committee shall select one of its members as
Chairman, and shall hold meetings at such times and places as it may
determine.
(b) The Committee shall have the full power, subject to and within the
limits of the Plan, to: (i) interpret and administer the Plan, and Stock
Options granted under it; (ii) make and interpret rules and regulations for
the administration of the Plan and to make changes in and revoke such rules
and regulations (and in the exercise of this power, shall generally
determine all questions of policy and expediency that may arise and may
correct any defect, omission, or inconsistency in the Plan or any agreement
evidencing the grant of any Stock Option in a manner and to the extent it
shall deem necessary to make the Plan fully effective); (iii) determine
those persons to whom Stock Options shall be granted and the number of
Stock Options to be granted to any person; (iv) determine the terms of
Stock Options granted under the Plan, consistent with the provisions of the
Plan; and (v) generally, exercise such powers and perform such acts in
connection with the Plan as are deemed necessary or expedient to promote
the best interests of the Company. The interpretation and construction by
the Committee of any provisions of the Plan or of any Stock Option shall be
final, binding and conclusive.
(c) The Committee may act only by a majority of its members then in
office; however, the Committee may authorize any one (1) or more of its
members or any officer of the Company to execute and deliver documents on
behalf of the Committee.
(d) No member of the Committee shall be liable for any action taken or
omitted to be taken or for any determination made by him or her in good
faith with respect to the Plan, and the Company shall indemnify and hold
harmless each member of the Committee against any cost or expense
(including counsel fees) or liability (including any sum paid in settlement
of a claim with the approval of the Committee) arising out of any act or
omission in connection with the administration or interpretation of the
Plan, unless arising out of such person's own fraud or bad faith.
2.3 Effective Date
The Plan shall become effective upon its adoption by the Board of Directors,
and Stock Options may be granted upon such adoption and from time to time
thereafter, provided, however, that the exercisability of stock options granted
hereunder shall be subject to approval of the Plan by the affirmative vote of
the holders of a majority of the shares of the Common Stock present in person
or by proxy and entitled to vote at an annual meeting of the shareholders of
the Company or at a special meeting of the shareholders of the Company
expressly called for such purposes, or any adjournments thereof, within 12
months after the adoption of the Plan by the Board of Directors. If the Plan is
not approved at such annual or special meeting or at any adjournments thereof,
this Plan and all Stock Options previously granted thereunder shall become null
and void.
2.4 Duration
If approved by the shareholders of the Company, as provided in Section 2.3,
unless sooner terminated by the Board of Directors, the Plan shall remain in
effect for a period of ten (10) years following its adoption by the Board of
Directors.
2.5 Shares Subject to the Plan
The maximum number of shares of Common Stock which may be subject to Stock
Options granted under the Plan shall be 3,300,000. The Stock Options shall be
subject to adjustment in accordance with Section 4.1,
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as appropriate, and shares to be issued upon exercise of Stock Options may be
either authorized and unissued shares of Common Stock or authorized and issued
shares of Common Stock purchased or acquired by the Company for any purpose. If
a Stock Option or portion thereof shall expire or is terminated, cancelled or
surrendered for any reason without being exercised in full, the unpurchased
shares of Common Stock which were subject to such Stock Option or portion
thereof shall not be available for future grants of Stock Options under the
Plan.
2.6 Amendments
The Plan may be suspended, terminated or reinstated, in whole or in part, at
any time by the Board of Directors. The Board of Directors may from time to
time make such amendments to the Plan as it may deem advisable; provided,
however, that without the approval of the Company's shareholders no amendment
shall be made which:
(a) Increases the maximum number of shares of Common Stock which may be
subject to Stock Options granted under the Plan (other than as provided in
Section 4.1, as appropriate); or
(b) Extends the term of the Plan; or
(c) Increases the period during which a Stock Option may be exercised
beyond ten years from the date of grant; or
(d) Otherwise materially increases the benefits accruing to Participants
under the Plan; or
(e) Materially modifies the requirements as to eligibility for
participants in the Plan; or
(f) Will cause Stock Options granted under the Plan to fail to meet the
requirements of Rule 16b-3.
Except as otherwise provided herein, termination or amendment of the Plan
shall not, without the consent of a Participant, affect such Participant's
rights under any Stock Option previously granted to such Participant.
2.7 Participants and Grants
Stock Options under this Plan may be granted by the Committee to Messrs.
Clyde T. Turner, Glenn W. Schaeffer, Gregg H. Solomon, and Antonio C. Alamo
consistent with the terms of the Merger Agreement. Subject to the award limit
provided in Section 3.1 and the limitations of Section 2.5, the Committee may
grant Stock Options to purchase such number of shares of Common Stock as the
Committee may, in its sole discretion, determine. In granting Stock Options
under the Plan, the Committee, on an individual basis, may vary the number of
Stock Options as between Participants and may grant Stock Options to a
Participant in such amounts as the Committee may determine in its sole
discretion. The Committee may amend or waive any term or condition of any Stock
Option, including any condition to the exercisability of any such Stock Option,
and no such amendment or waiver shall in any way diminish the effectiveness of
such Stock Option as granted on its date of grant, as so amended or as so
modified by any waiver, or constitute the grant of a new Stock Option.
3 STOCK OPTIONS
3.1 General
All Stock Options granted under the Plan shall be evidenced by written
agreements executed by the Company and the Participant to whom granted, which
agreement shall state the number of shares of Common Stock which may be
purchased upon the exercise thereof and shall contain such investment
representations and other terms and conditions as the Committee may from time
to time determine. The maximum number of shares of Common Stock which may be
subject to Stock Options granted under the
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Plan to any individual in any calendar year shall not exceed 2,000,000 and the
method of counting such shares shall conform to any requirements applicable to
performance-based compensation under Section 162(m) of the Code. To the extent
required by Section 162(m) of the Code, shares subject to Stock Options which
are canceled shall continue to be counted against the foregoing award limit and
if, after grant of a Stock Option, the price of shares subject to such Stock
Options are reduced, the transaction shall be treated as a cancellation of the
Stock Option and a grant of a new Stock Option and both the Stock Option deemed
to be canceled and the Stock Option deemed to be granted shall be counted
against the foregoing award limit.
3.2 Exercise and Purchase Prices
(a) Subject to the provisions of Section 4.1, the purchase price per
share of Common Stock subject to a Stock Option shall be set by the
Committee; provided, however, that such price shall be no less than the par
value of a share of Common Stock and if the Stock Option is intended to
qualify as performance-based compensation as described in Section
162(m)(4)(C) of the Code, such price shall be not less than one hundred
percent (100%) of the Fair Market Value of a share of Common Stock on the
date the Stock Option is granted.
(b) In its discretion, the Committee may establish a purchase price at
which a Stock Option may be issued pursuant to the Plan. Any purchase price
for any Stock Option shall be paid in United States dollars in cash, or by
check, bank draft or money order payable in United States dollars to the
order of the Company and shall be payable at such time as the Committee, in
its discretion, shall determine. The payment of any such purchase price
shall be a condition to the exercisability of any such Stock Option.
3.3 Period
The duration or term of each Stock Option granted under the Plan shall be for
such period as the Committee shall determine but in no event more than ten (10)
years from the date of grant thereof.
3.4 Exercise
Subject to Sections 2.3 and 4.4, Stock Options may be exercisable immediately
upon granting of the Stock Option or at such other time or times as the
Committee shall specify when granting the Stock Option, provided that no Stock
Option shall be exercisable before the "Closing" of the "Merger" under the
Merger Agreement, as such terms are defined in the Merger Agreement. Once
exercisable, a Stock Option shall be exercisable, in whole or in part, by
delivery of a written notice of exercise to the Secretary of the Company at the
principal office of the Company specifying the number of shares of Common Stock
as to which the Stock Option is then being exercised together with payment of
the full purchase price for the shares being purchased upon such exercise.
Until the shares of Common Stock as to which a Stock Option is exercised are
issued, the Participant shall have none of the rights of a shareholder of the
Company with respect to such shares.
3.5 Payment
The purchase price for shares of Common Stock as to which a Stock Option has
been exercised and any amount required to be withheld, as contemplated by
Section 4.3, may be paid:
(a) In United States dollars in cash, or by check, bank draft or money
order payable in United States dollars to the order of the Company; or
(b) By the delivery by the Participant to the Company of whole shares of
Common Stock having an aggregate Fair Market Value on the date of payment
equal to the aggregate of the purchase price of Common Stock as to which
the Stock Option is then being exercised or by the withholding of whole
shares of Common Stock having such Fair Market Value upon the exercise of
such Stock Option; or
(c) By a combination of both (a) and (b) above.
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The Committee may, in its discretion, impose limitations, conditions and
prohibitions on the use by a Participant of shares of Common Stock to pay the
purchase price payable by such Participant upon the exercise of a Stock Option.
3.6 Termination of Employment
(a) In the event a Participant's employment by, or relationship with, the
Company shall terminate for any reason other than those reasons specified
in Sections 3.6(b), (c), (d) or (e) hereof while such Participant holds
Stock Options granted under the Plan, then all rights of any kind under any
outstanding Stock Option held by such Participant which shall not have
previously lapsed or terminated and which are exercisable on the date of
the termination of employment shall remain so exercisable by the Optionee
for a period of three months after termination unless the option expires
earlier by its terms.
(b) If a Participant's employment by, or relationship with, the Company
or its Subsidiaries shall terminate as a result of such Participant's total
disability, each Stock Option held by such Participant (which has not
previously lapsed or terminated) shall immediately become fully exercisable
as to the total number of shares of Common Stock subject thereto (whether
or not exercisable to that extent at the time of such termination) and
shall remain so exercisable by such Participant for a period of six months
after termination unless such Stock Option expires earlier by its terms.
For purposes of the foregoing sentence, "total disability" shall mean
permanent mental or physical disability as determined by the Committee.
(c) In the event of the death of a Participant, each Stock Option held by
such Participant (which has not previously lapsed or terminated) shall
immediately become fully exercisable as to the total number of shares of
Common Stock subject thereto (whether or not exercisable to that extent at
the time of death) by the executor or administrator of the Participant's
estate or by the person or persons to whom the deceased Participant's
rights thereunder shall have passed by will or by the laws of descent or
distribution, and shall remain so exercisable for a period of six months
after such Participant's death unless such Stock Option expires earlier by
its terms.
(d) If a Participant's employment by the Company shall terminate by
reason of such Participant's retirement in accordance with Company
policies, each Stock Option held by such Participant at the date of
termination (which has not previously lapsed or terminated) shall
immediately become fully exercisable as to the total number of shares of
Common Stock subject hereto (whether or not exercisable to that extent at
the time of such termination) and shall remain so exercisable by such
Participant for a period of six months after termination, unless the Stock
Option expires earlier by its terms.
(e) In the event the Company terminates the employment of a Participant
without "Cause" or the Participant terminates his employment with the
Company for "Good Reason", as such terms shall be defined in any employment
agreement between the Company and the Participant, each Stock Option held
by such Participant (which has not previously lapsed or terminated) shall
immediately become fully exercisable as to the total number of shares of
Common Stock subject thereto (whether or not exercisable to that extent at
the time of such termination) and shall remain so exercisable for a period
of six months after such termination unless such Stock Option expires
earlier by its terms.
3.7 Effect of Leaves of Absence
It shall not be considered a termination of employment when a Participant is
on military or sick leave or such other type of leave of absence which is
considered a continuing intact of the employment relationship of
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the Participant with the Company or any of its Subsidiaries. In case of such
leave of absence, the employment relationship shall be deemed to have continued
until the later of (i) the date when such leave shall have lasted ninety days
in duration, or (ii) the date as of which the Participant's right to
reemployment shall have no longer been guaranteed either by statute or
contract.
4 MISCELLANEOUS PROVISIONS
4.1 Adjustments Upon Changes in Capitalization
In the event of changes to the outstanding shares of Common Stock of the
Company through reorganization, merger, consolidation, recapitalization,
reclassification, stock split-up, stock dividend, stock consolidation or
otherwise, or in the event of a sale of all or substantially all of the assets
of the Company, an appropriate and proportionate adjustment shall be made in
the number and kind of shares as to which Stock Options may be granted,
including with respect to the share limit provided in Section 2.5 and the award
limit provided in Section 3.1. A corresponding adjustment changing the number
or kind of shares and/or the purchase price per share of unexercised Stock
Options or portions thereof which shall have been granted prior to any such
change shall likewise be made. Notwithstanding the foregoing, in the case of a
reorganization, merger or consolidation, or sale of all or substantially all of
the assets of the Company, in lieu of adjustments as aforesaid, the Committee
may in its discretion accelerate the date after which a Stock Option may or may
not be exercised or the stated expiration date thereof. Adjustments or changes
under this Section shall be made by the Committee, whose determination as to
what adjustments or changes shall be made, and the extent thereof, shall be
final, binding and conclusive.
4.2 Non-Transferability
No Stock Option shall be transferable except by will or the laws of descent
and distribution, nor shall any Stock Option be exercisable during the
Participant's lifetime by any person other than the Participant or his guardian
or legal representative.
4.3 Withholding
The Company's obligations under this Plan shall be subject to applicable
federal, state and local tax withholding requirements. Federal, state and local
withholding tax due at the time of a grant or upon the exercise of any Stock
Option may, in the discretion of the Committee, be paid in shares of Common
Stock already owned by the Participant or through the withholding of shares
otherwise issuable to such Participant, upon such terms and conditions as the
Committee shall determine. If the Participant shall fail to pay, or make
arrangements satisfactory to the Committee for the payment, to the Company of
all such federal, state and local taxes required to be withheld by the Company,
then the Company shall, to the extent permitted by law, have the right to
deduct from any payment of any kind otherwise due to such Participant an amount
equal to any federal, state or local taxes of any kind required to be withheld
by the Company.
4.4 Compliance with Law and Approval of Regulatory Bodies
No Stock Option shall be exercisable and no shares will be delivered under
the Plan except in compliance with all applicable federal and state laws and
regulations including, without limitation, compliance with all federal and
state securities laws and withholding tax requirements and with the rules of
NYSE and of all other domestic stock exchanges on which the Common Stock may be
listed. Any share certificate issued to evidence shares for which a Stock
Option is exercised may bear legends and statements the Committee shall
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deem advisable to assure compliance with federal and state laws and
regulations. No Stock Option shall be exercisable and no shares will be
delivered under the Plan, until the Company has obtained consent or approval
from regulatory bodies, federal or state, having jurisdiction over such matters
as the Committee may deem advisable. In the case of the exercise of a Stock
Option by a person or estate acquiring the right to exercise the Stock Option
as a result of the death of the Participant, the Committee may require
reasonable evidence as to the ownership of the Stock Option and may require
consents and releases of taxing authorities that it may deem advisable.
4.5 No Right to Employment
Neither the adoption of the Plan nor its operation, nor any document
describing or referring to the Plan, or any part thereof, nor the granting of
any Stock Options hereunder, shall confer upon any Participant under the Plan
any right to continue in the employ of the Company or any Subsidiary, or shall
in any way affect the right and power of the Company or any Subsidiary to
terminate the employment of any Participant at any time with or without
assigning a reason therefor, to the same extent as might have been done if the
Plan had not been adopted.
4.6 Exclusion from Pension Computations
By acceptance of a grant of a Stock Option under the Plan, the recipient
shall be deemed to agree that any income realized upon the receipt or exercise
thereof or upon the disposition of the shares received upon exercise will not
be taken into account as "base remuneration", "wages", "salary" or
"compensation" in determining the amount of any contribution to or payment or
any other benefit under any pension, retirement, incentive, profit-sharing or
deferred compensation plan of the Company or any Subsidiary.
4.7 Abandonment of Options
A Participant may at any time abandon a Stock Option prior to its expiration
date. The abandonment shall be evidenced in writing, in such form as the
Committee may from time to time prescribe. A Participant shall have no further
rights with respect to any Stock Option so abandoned.
4.8 Severability
If any of the terms or provisions of the Plan conflict with the requirements
of Rule 16b-3, then such terms or provisions shall be deemed inoperative to the
extent they so conflict with the requirements of Rule 16b-3.
4.9 Interpretation of the Plan
Headings are given to the Sections of the Plan solely as a convenience to
facilitate reference, such headings, numbering and paragraphing shall not in
any case be deemed in any way material or relevant to the construction of the
Plan or any provision hereof. The use of the masculine gender shall also
include within its meaning the feminine. The use of the singular shall also
include within its meaning the plural and vice versa.
4.10 Use of Proceeds
Funds received by the Company upon the exercise of Stock Options shall be
used for the general corporate purposes of the Company.
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4.11 Construction of Plan
The place of administration of the Plan shall be in the State of Nevada, and
the validity, construction, interpretation, administration and effect of the
Plan and of its rules and regulations, and rights relating to the Plan, shall
be determined solely in accordance with the laws of the State of Nevada.
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THIS CERTIFICATE AND AGREEMENT IS INTENDED TO PRESENT ONLY A SUMMARY OF THE
CORPORATION'S 1995 SPECIAL STOCK OPTION PLAN (THE "PLAN") AND THE TERMS
APPLICABLE TO THE STOCK OPTION EVIDENCED HEREBY. TO THE EXTENT THAT THERE IS
ANY CONFLICT BETWEEN THE TERMS HEREOF AND THOSE OF THE PLAN, THE TERMS OF THE
PLAN SHALL CONTROL.
No._________________________ Option to Purchase
Date of Grant March 19, 1995 2,000,000 Shares
--------------
CIRCUS CIRCUS ENTERPRISES, INC.
Non-Qualified Stock Option Certificate and Agreement
----------------------------------------------------
THIS IS TO CERTIFY THAT, pursuant to Section 2.7 of the 1995 Special Stock
Option Plan (the "Plan") of CIRCUS CIRCUS ENTERPRISES, INC. (the "Corporation")
and consistent with the terms of that certain Merger Agreement (the "Merger
Agreement") dated as of March 19, 1995 by and among the Corporation; M.S.E.
Incorporated; Last Chance Investments, Incorporated; Goldstrike Investments,
Incorporated; Diamond Gold, Inc.; Gold Strike Aviation, Incorporated; Goldstrike
Finance Company, Inc.; Oasis Development Company, Inc.; Michael S. Ensign;
William A. Richardson; David R. Belding; Peter A. Simon II; and Robert J.
Verchota, MR. CLYDE TURNER (the "Optionee") is granted, subject to the terms and
conditions of the Plan and subject to the terms and conditions of this
Certificate and Agreement (the "Certificate"), and as of the date of grant set
forth above (the "Date of Grant"), the right and option (the "Option") to
purchase from the Corporation at the per share price or prices set forth below,
payable in the manner specified in paragraph 1(b) hereof, a total of Two Million
(2,000,000) shares of the Common Stock of the Corporation (the "Stock").
Pursuant to Section 3.2(b) of the Plan, the Option shall have a purchase
price of $2,000,000.00, (the "Purchase Price") which Purchase Price shall be
payable by the Optionee in cash, or by check, bank draft or money order payable
in United States dollars to the order of the Corporation within two (2) business
days following the later of (i) the approval of the Plan by the Corporation's
shareholders and (ii) the date of the Closing (the "Closing Date") of the Merger
under the Merger Agreement (as such terms are defined in the Merger Agreement).
Pursuant to Section 3.2(a) of the Plan, the purchase price of each share of
Stock under the Option shall be $27.875. Pursuant to Sections 2.3 and 3.4 of
the Plan, subject to (i) the approval of the Plan by the Corporation's
shareholders at a meeting of the shareholders on or before March 19, 1996, (ii)
the Closing of the Merger under the Merger Agreement, and (iii) the payment of
the Purchase Price, the Option shall become exercisable in three annual
installments as follows with respect to the following numbers of shares of
Stock: (i) on the first anniversary of the Closing Date, 666,667 shares of
Stock, (ii) on the second anniversary of the Closing Date, 666,667 shares of
Stock and (iii) on the third anniversary of the Closing Date, 666,666 shares of
Stock; provided, however, that, subject to the satisfaction of the foregoing
conditions, the Option shall be fully and immediately exercisable upon the
occurrence of a "Change in Control" of the Company, as such term is defined in
the employment agreement to be
<PAGE>
entered into between the Company and the Optionee effective as of the Closing
Date. In the event that the Plan is not approved by the Corporation's
shareholders on or before March 19, 1996, the Option shall thereupon be
cancelled and become null and void. In the event that the Closing of the Merger
under the Merger Agreement does not occur on or before March 19, 2002, the
Option shall thereupon be cancelled and become null and void.
The Option evidenced by this Certificate is intended to be a non-statutory
option not constituting an incentive stock option within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended (the "Code").
1. Additional Terms and Conditions. The Option is subject to the
-------------------------------
following additional terms and conditions:
(a) Time and Manner of Exercise. Except as otherwise provided in this
---------------------------
paragraph 1(a), the Option, to the extent the same is exercisable in accordance
with the foregoing schedule, is exercisable in whole or in part at any time or
from time to time until the expiration or termination of its term in accordance
with paragraph 1(c) hereof by giving written notice, signed by the Optionee, to
the Corporation (to the attention of the Corporation's Corporate Secretary)
stating the number of shares of Stock with respect to which the Option is being
exercised, accompanied by payment in full of the Option's exercise price for the
number of shares of Stock to be purchased. The date both such notice and
payment are received by the office of the Secretary of the Corporation shall be
the date of exercise of the Option as to such number of shares. Notwithstanding
any provision to the contrary, (i) at no time may the Option be exercised for
less than one hundred (100) shares of Stock unless the number of shares to be
acquired by exercise of the Option is the total number then purchasable under
the Option, and (ii) the Option may not at any time be exercised with respect to
a fractional share.
(b) Payment of Exercise Price. At the election of the Optionee, the
-------------------------
exercise price for the Option, and any amount required to be withheld as
provided in paragraph 1(f) hereof, may be paid:
(i) In the United States dollars in cash, or by check, bank draft, or
money order payable in United States dollars to the order of the Corporation: or
(ii) By delivery by the Optionee to the Corporation of whole shares of
Stock having an aggregate Fair Market Value (as defined in Section 2.1 of the
Plan) on the date of payment equal to the aggregate of the exercise price of the
Stock as to which the Option is then being exercised or by the withholding of
whole shares of Stock having such Fair Market Value upon the exercise of the
Option; or
(iii) By a combination of both (i) and (ii) above.
(c) Term of the Option. The Option shall expire on March 19, 2002,
------------------
but shall be subject to earlier termination as follows:
(i) In the event the Optionee's employment by, or relationship with,
the Corporation shall terminate for any reason other than those reasons
specified in subparagraphs (ii), (iii), (iv) or (v) hereof while the Optionee
holds the Option, then all rights of any kind under the Option which shall not
have previously lapsed or terminated and which are exercisable on the date of
the termination of employment shall remain so exercisable by the Optionee for a
period of three months after termination unless the Option expires earlier by
its terms.
(ii) If the Optionee's employment by, or relationship with, the
Corporation or its Subsidiaries (as defined in Section 2.1 of the Plan) shall
terminate as a result of the Optionee's total disability (as defined in Section
3.6(b) of the Plan), the Option (which has not previously lapsed or terminated)
shall immediately become fully exercisable as to the total number of shares of
Stock subject thereto (whether or not exercisable to that
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<PAGE>
extent at the time of such termination) and shall remain so exercisable by the
Optionee for a period of six months after termination unless the Option expires
earlier by its terms.
(iii) In the event of the death of the Optionee, the Option (which
has not previously lapsed or terminated) shall immediately become fully
exercisable as to the total number of shares of Stock subject thereto (whether
or not exercisable to that extent at the time of death) by the executor or
administrator of the Optionee's estate or by the person or persons to whom the
deceased Optionee's rights thereunder shall have passed by will or by the laws
of descent or distribution, and shall remain so exercisable for a period of six
months after the Optionee's death unless the Option expires earlier by its
terms.
(iv) If the Optionee's employment by the Corporation shall terminate
by reason of the Optionee's retirement in accordance with the Corporation's
policies, the Option (which has not previously lapsed or terminated) shall
immediately become fully exercisable as to the total number of shares of Stock
subject thereto (whether or not exercisable to that extent at the time of such
termination) and shall remain so exercisable by the Optionee for a period of six
months after termination, unless the Option expires earlier by its terms.
(v) In the event the Corporation terminates the employment of the
Optionee without "Cause" or the Optionee terminates his employment with the
Corporation for "Good Reason", as such terms shall be defined in any employment
agreement between the Corporation and the Optionee, each Option held by the
Optionee (which has not previously lapsed or terminated) shall immediately
become fully exercisable as to the total number of shares of Stock subject
thereto (whether or not exercisable to that extent at the time of such
termination) and shall remain so exercisable for a period of six months after
such termination unless such Option expires earlier by its terms.
(d) Restrictions on Transferability. The Option shall not be
-------------------------------
transferable except by will or the laws of descent and distribution, and shall
not be exercisable during the Optionee's lifetime by any person other than the
Optionee or his guardian or legal representative.
(e) Limitation of Rights. Neither the Optionee nor the Optionee's
--------------------
successor or successors in interest shall have any rights as a stockholder of
the Corporation with respect to any shares of Stock subject to the Option until
the date of issuance of a stock certificate for such shares of Stock.
(f) Tax Withholding. The Committee shall be entitled, in accordance
---------------
with the provisions of Section 4.3 of the Plan, to withhold, or request the
Optionee to remit to the Corporation, an amount sufficient to satisfy any
withholding or other tax due with respect to any shares of Stock issuable
pursuant to the Option.
(g) Limitation as to Employment. Neither the Plan, nor the granting
---------------------------
of the Option, nor any other action taken pursuant to the Plan shall constitute
or be evidence of any agreement or understanding, express or implied, that the
Optionee has a right to continue as an employee of the Corporation or any
"Subsidiary" as defined in the Plan for any period of time or at any particular
rate of compensation.
(h) Capital Adjustments. In the event of changes to the outstanding
-------------------
shares of Stock of the Corporation through reorganization, merger,
consolidation, recapitalization, reclassification, stock split-up, stock
dividend, stock consolidation or otherwise, or in the event of a sale of all or
substantially all of the assets of the Corporation, an appropriate and
proportionate adjustment shall be made in the number and kind of shares and/or
the exercise price per share of the Option (or any unexercised portion thereof).
Notwithstanding the foregoing, in the case of a reorganization, merger or
consolidation, or sale of all or substantially all of the assets of the
Corporation, in lieu of adjustments as aforesaid, the Committee may in its
discretion accelerate the date after which the Option may or may not be
exercised or the stated expiration date thereof. Adjustments or changes under
Section 4.1 of the Plan shall be made by the Committee, whose determination as
to what adjustments or changes shall be made, and the extent thereof, shall be
final, binding and conclusive.
(i) No Obligation to Exercise Option. The Optionee shall be under no
--------------------------------
obligation to exercise the Option in whole or in part.
3
<PAGE>
2. Authority of the Committee. The Committee shall have full authority to
--------------------------
interpret the terms of the Plan and this Certificate. The decision of the
Committee on any such matter of interpretation or construction shall be final,
binding and conclusive.
3. Investment Representation. Upon the exercise of all or any part of
-------------------------
the Option, the Committee may require the Optionee to furnish to the Corporation
an agreement (in such form as the Committee may specify) in which the Optionee
shall represent that the shares of Stock to be acquired by exercise of the
Option are to be acquired for the Optionee's own account for investment and not
with a view to the sale or distribution thereof.
4. Optionee Bound by the Plan, etc. The Optionee hereby acknowledges
-------------------------------
receipt of a copy of the Plan, agrees to be bound by all the terms and
provisions thereof, and understands that in the event of any conflict between
the terms of the Plan and of this Certificate, the terms of the Plan shall
control.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
executed by the Chairman of the Board as of the 19th day of March, 1995.
CIRCUS CIRCUS ENTERPRISES, INC.
By___________________________________________
Chairman of the Board
The Optionee agrees to hold the Option subject to the terms and conditions set
forth in this Certificate.
______________________________________________
Signature of Optionee
4
<PAGE>
THIS CERTIFICATE AND AGREEMENT IS INTENDED TO PRESENT ONLY A SUMMARY OF THE
CORPORATION'S 1995 SPECIAL STOCK OPTION PLAN (THE "PLAN") AND THE TERMS
APPLICABLE TO THE STOCK OPTION EVIDENCED HEREBY. TO THE EXTENT THAT THERE IS
ANY CONFLICT BETWEEN THE TERMS HEREOF AND THOSE OF THE PLAN, THE TERMS OF THE
PLAN SHALL CONTROL.
No._________________________ Option to Purchase
Date of Grant March 19, 1995 ____________ Shares
--------------
CIRCUS CIRCUS ENTERPRISES, INC.
Non-Qualified Stock Option Certificate and Agreement
----------------------------------------------------
THIS IS TO CERTIFY THAT, pursuant to Section 2.7 of the 1995 Special Stock
Option Plan (the "Plan") of CIRCUS CIRCUS ENTERPRISES, INC. (the "Corporation"),
and consistent with the terms of that certain Merger Agreement (the "Merger
Agreement") dated as of March 19, 1995 by and among the Corporation; M.S.E.
Incorporated; Last Chance Investments, Incorporated; Goldstrike Investments,
Incorporated; Diamond Gold, Inc.; Gold Strike Aviation, Incorporated; Goldstrike
Finance Company, Inc.; Oasis Development Company, Inc.; Michael S. Ensign;
William A. Richardson; David R. Belding; Peter A. Simon II; and Robert J.
Verchota, ________________________ (the "Optionee") is granted, subject to the
terms and conditions of the Plan and subject to the terms and conditions of this
Certificate and Agreement (the "Certificate"), and as of the date of grant set
forth above (the "Date of Grant"), the right and option to purchase from the
Corporation at the per share price or prices set forth below, payable in the
manner specified in paragraph 1(b) hereof, a total of _______________________
(_______) shares of the Common Stock of the Corporation (the "Stock").
Pursuant to Section 3.2(a) of the Plan, the purchase price of each share of
Stock under the Option shall be $_____. Pursuant to Sections 2.3 and 3.4 of the
Plan, subject to both the approval of the Plan by the Corporation's shareholders
at a meeting of the shareholders on or before March 19, 1996, and the Closing of
the Merger under the Merger Agreement, the Option shall become exercisable in
five annual installments as follows with respect to the following numbers of
shares of Stock: (i) on the first anniversary of the Closing Date (the "Closing
Date") of the Merger under the Merger Agreement (as such terms are defined in
the Merger Agreement), _______ shares of Stock, (ii) on the second anniversary
of the Closing Date, ______ shares of Stock, (iii) on the third anniversary of
the Closing Date, _______ shares of Stock, (iv) on the fourth anniversary of the
Closing Date, ______ shares of Stock and (v) on the fifth anniversary of the
Closing Date, ______ shares of Stock; provided, however, that, subject to the
satisfaction of the foregoing conditions, the Option shall be fully and
immediately exercisable upon the occurrence of a "Change in Control" of the
Company, as such term is defined in the employment agreement to be entered into
between the Company and the Optionee effective as of the Closing Date. In the
event that the Plan is not approved by the Corporation's shareholders at a
meeting of the shareholders on or before March 19, 1996, the Option shall
thereupon be cancelled and become null and void. In the event that the Closing
of the
<PAGE>
Merger under the Merger Agreement does not occur on or before March 19, 2005,
the Option shall thereupon be cancelled and become null and void.
The Option evidenced by this Certificate is intended to be a non-statutory
option not constituting an incentive stock option within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended (the "Code").
1. Additional Terms and Conditions. The Option is subject to the
-------------------------------
following additional terms and conditions:
(a) Time and Manner of Exercise. Except as otherwise provided in this
---------------------------
paragraph 1(a), the Option, to the extent the same is exercisable in accordance
with the foregoing schedule, is exercisable in whole or in part at any time or
from time to time until the expiration or termination of its term in accordance
with paragraph 1(c) hereof by giving written notice, signed by the Optionee, to
the Corporation (to the attention of the Corporation's Corporate Secretary)
stating the number of shares of Stock with respect to which the Option is being
exercised, accompanied by payment in full of the Option's exercise price for the
number of shares of Stock to be purchased. The date both such notice and
payment are received by the office of the Secretary of the Corporation shall be
the date of exercise of the Option as to such number of shares. Notwithstanding
any provision to the contrary, (i) at no time may the Option be exercised for
less than one hundred (100) shares of Stock unless the number of shares to be
acquired by exercise of the Option is the total number then purchasable under
the Option, and (ii) the Option may not at any time be exercised with respect to
a fractional share.
(b) Payment of Exercise Price. At the election of the Optionee, the
-------------------------
exercise price for the Option, and any amount required to be withheld as
provided in paragraph 1(f) hereof, may be paid:
(i) In the United States dollars in cash, or by check, bank draft, or
money order payable in United States dollars to the order of the Corporation: or
(ii) By delivery by the Optionee to the Corporation of whole shares of
Stock having an aggregate Fair Market Value (as defined in Section 2.1 of the
Plan) on the date of payment equal to the aggregate of the exercise price of the
Stock as to which the Option is then being exercised or by the withholding of
whole shares of Stock having such Fair Market Value upon the exercise of the
Option; or
(iii) By a combination of both (i) and (ii) above.
(c) Term of the Option. The Option shall expire on March 19, 2005,
------------------
but shall be subject to earlier termination as follows:
(i) In the event the Optionee's employment by, or relationship with,
the Corporation shall terminate for any reason other than those reasons
specified in subparagraphs (ii), (iii), (iv) or (v) hereof while the Optionee
holds the Option, then all rights of any kind under the Option which shall not
have previously lapsed or terminated and which are exercisable on the date of
the termination of employment shall remain so exercisable by the Optionee for a
period of three months after termination unless the Option expires earlier by
its terms.
(ii) If the Optionee's employment by, or relationship with, the
Corporation or its Subsidiaries (as defined in Section 2.1 of the Plan) shall
terminate as a result of the Optionee's total disability (as defined in Section
3.6(b) of the Plan), the Option (which has not previously lapsed or terminated)
shall immediately become fully exercisable as to the total number of shares of
Stock subject thereto (whether or not exercisable to that extent at the time of
such termination) and shall remain so exercisable by the Optionee for a period
of six months after termination unless the Option expires earlier by its terms.
2
<PAGE>
(iii) In the event of the death of the Optionee, the Option (which
has not previously lapsed or terminated) shall immediately become fully
exercisable as to the total number of shares of Stock subject thereto (whether
or not exercisable to that extent at the time of death) by the executor or
administrator of the Optionee's estate or by the person or persons to whom the
deceased Optionee's rights thereunder shall have passed by will or by the laws
of descent or distribution, and shall remain so exercisable for a period of six
months after the Optionee's death unless the Option expires earlier by its
terms.
(iv) If the Optionee's employment by the Corporation shall terminate
by reason of the Optionee's retirement in accordance with the Corporation's
policies, the Option (which has not previously lapsed or terminated) shall
immediately become fully exercisable as to the total number of shares of Stock
subject thereto (whether or not exercisable to that extent at the time of such
termination) and shall remain so exercisable by the Optionee for a period of six
months after termination, unless the Option expires earlier by its terms.
(v) In the event the Corporation terminates the employment of the
Optionee without "Cause" or the Optionee terminates his employment with the
Corporation for "Good Reason", as such terms shall be defined in any employment
agreement between the Corporation and the Optionee, each Option held by the
Optionee (which has not previously lapsed or terminated) shall immediately
become fully exercisable as to the total number of shares of Stock subject
thereto (whether or not exercisable to that extent at the time of such
termination) and shall remain so exercisable for a period of six months after
such termination unless such Option expires earlier by its terms.
(d) Restrictions on Transferability. The Option shall not be
-------------------------------
transferable except by will or the laws of descent and distribution, and shall
not be exercisable during the Optionee's lifetime by any person other than the
Optionee or his guardian or legal representative.
(e) Limitation of Rights. Neither the Optionee nor the Optionee's
--------------------
successor or successors in interest shall have any rights as a stockholder of
the Corporation with respect to any shares of Stock subject to the Option until
the date of issuance of a stock certificate for such shares of Stock.
(f) Tax Withholding. The Committee shall be entitled, in accordance
---------------
with the provisions of Section 4.3 of the Plan, to withhold, or request the
Optionee to remit to the Corporation, an amount sufficient to satisfy any
withholding or other tax due with respect to any shares of Stock issuable
pursuant to the Option.
(g) Limitation as to Employment. Neither the Plan, nor the granting
---------------------------
of the Option, nor any other action taken pursuant to the Plan shall constitute
or be evidence of any agreement or understanding, express or implied, that the
Optionee has a right to continue as an employee of the Corporation or any
"Subsidiary" as defined in the Plan for any period of time or at any particular
rate of compensation.
(h) Capital Adjustments. In the event of changes to the outstanding
-------------------
shares of Stock of the Corporation through reorganization, merger,
consolidation, recapitalization, reclassification, stock split-up, stock
dividend, stock consolidation or otherwise, or in the event of a sale of all or
substantially all of the assets of the Corporation, an appropriate and
proportionate adjustment shall be made in the number and kind of shares and/or
the exercise price per share of the Option (or any unexercised portion thereof).
Notwithstanding the foregoing, in the case of a reorganization, merger or
consolidation, or sale of all or substantially all of the assets of the
Corporation, in lieu of adjustments as aforesaid, the Committee may in its
discretion accelerate the date after which the Option may or may not be
exercised or the stated expiration date thereof. Adjustments or changes under
Section 4.1 of the Plan shall be made by the Committee, whose determination as
to what adjustments or changes shall be made, and the extent thereof, shall be
final, binding and conclusive.
(i) No Obligation to Exercise Option. The Optionee shall be under no
--------------------------------
obligation to exercise the Option in whole or in part.
3
<PAGE>
2. Authority of the Committee. The Committee shall have full authority
--------------------------
to interpret the terms of the Plan and this Certificate. The decision of the
Committee on any such matter of interpretation or construction shall be final,
binding and conclusive.
3. Investment Representation. Upon the exercise of all or any part of
-------------------------
the Option, the Committee may require the Optionee to furnish to the Corporation
an agreement (in such form as the Committee may specify) in which the Optionee
shall represent that the shares of Stock to be acquired by exercise of the
Option are to be acquired for the Optionee's own account for investment and not
with a view to the sale or distribution thereof.
4. Optionee Bound by the Plan, etc. The Optionee hereby acknowledges
-------------------------------
receipt of a copy of the Plan, agrees to be bound by all the terms and
provisions thereof, and understands that in the event of any conflict between
the terms of the Plan and of this Certificate, the terms of the Plan shall
control.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
executed by the Chairman of the Board as of the 19th day of March, 1995.
CIRCUS CIRCUS ENTERPRISES, INC.
By___________________________________________
Chairman of the Board
The Optionee agrees to hold the Option subject to the terms and conditions set
forth in this Certificate.
______________________________________________
Signature of Optionee
4
<PAGE>
EXHIBIT 10(hh)
CIRCUS CIRCUS ENTERPRISES, INC.
EXECUTIVE OFFICER
BONUS PLAN
PURPOSE
This Executive Officer Bonus Plan (the "Plan") is designed to reward
executive officers of Circus Circus Enterprises, Inc. (the "Company") for
achieving corporate performance objectives. The Plan is intended to provide an
incentive for superior work and to motivate participating officers toward even
higher achievement and business results, to tie their goals and interests to
those of the Company and its shareholders, and to enable the Company to attract
and retain highly qualified executive officers. The Plan is also intended to
secure the full deductibility of bonus compensation payable to the Company's
Chief Executive Officer and the four highest compensated executive officers
(collectively the "Covered Employees") whose compensation is required to be
reported in the Company's proxy statement and all compensation payable
hereunder to such persons is intended to qualify as "performance-based
compensation" as described in Section 162(m)(4)(C) of the Internal Revenue Code
of 1986, as amended (the "Code").
ARTICLE I
ELIGIBILITY AND PARTICIPATION
1.1 Only those executive officers of the Company who are officers at the
level of vice president or above shall be eligible to participate in the Plan.
Prior to or at the time performance objectives are established for a
"Performance Period", as defined below, the Committee designated under Section
6.1 (the "Committee") of the Company's Board of Directors (the "Board") will
designate in writing which executive officers among those who may be eligible
to participate in the Plan shall in fact be participants for such Performance
Period.
ARTICLE II
PLAN YEAR, PERFORMANCE PERIODS AND PERFORMANCE OBJECTIVES
2.1 The fiscal year of the Plan (the "Plan Year") shall be the fiscal year
beginning on February 1 and ending on January 31, provided, however that the
first Plan Year shall be the short year which commences on the date that the
Company's shareholders approve the adoption of the Plan and which ends on the
following January 31. The performance period (the "Performance Period") with
respect to which bonuses may be payable under the Plan shall generally be the
Plan Year; provided however, that the Committee shall have the authority to
designate different Performance Periods under the Plan.
2.2 Within the first ninety (90) days of each Performance Period the
Committee shall establish in writing, with respect to such Performance Period,
one or more performance goals, a specific target objective or objectives with
respect to such performance goals and an objective formula or method for
computing the amount of bonus compensation payable to each participant under
the Plan if the performance goals are attained. Notwithstanding the foregoing
sentence, for any Performance Period, such goals, objectives and
B-1
<PAGE>
computation formulae or methods must be established within that number of days,
beginning on the first day of such Performance Period, which is no more than
twenty-five percent (25%) of the total number of days in such Performance
Period.
2.3 Performance goals shall be based upon one or more of the following
business criteria for the Company as a whole or any of its subsidiaries,
operating divisions or other operating units: Stock price, market share, gross
revenue, pretax income, operating income, cash flow, earnings per share, return
on equity, return on invested capital or assets, cost reductions and savings,
return on revenues or productivity. In addition, to the extent consistent with
the goal of providing for deductibility under Section 162(m) of the Code,
performance goals may be based upon a participant's attainment of personal
objectives with respect to any of the foregoing performance goals or
implementing policies and plans, negotiating transactions and sales, developing
long-term business goals or exercising managerial responsibility. Measurements
of the Company's or a participant's performance against the performance goals
established by the Committee shall be objectively determinable and shall be
determined according to generally accepted accounting principles ("GAAP") as in
existence on the date on which the performance goals are established and
without regard to any changes in such principles after such date.
ARTICLE III
DETERMINATION OF BONUS AWARDS
3.1 As soon as practicable after the end of each Performance Period, the
Committee shall certify in writing to what extent the Company and the
participants have achieved the performance goal or goals for such Performance
Period, including the specific target objective or objectives and the
satisfaction of any other material terms of the bonus award and the Committee
shall calculate the amount of each participant's bonus for such Performance
Period based upon the performance goals, objectives and computation formulae or
methods for such Performance Period. The Committee shall have no discretion to
increase the amount any participant's bonus as so determined, but may reduce
the amount of or totally eliminate such bonus, if it determines, in its
absolute and sole discretion, that such a reduction or elimination is
appropriate in order to reflect the participant's performance or unanticipated
factors.
3.2 No participant's bonus for any Plan Year shall exceed the lesser of 150%
of the participant's base annual salary as in effect as of the first day of
such Plan Year or $1,500,000.
3.3 In no event shall the aggregate amount of all bonuses payable in any Plan
Year under the Plan exceed ten percent (10%) of the Company's average annual
income before taxes for the preceding five fiscal years of the Company.
ARTICLE IV
PAYMENT OF AWARDS
4.1 Approved bonus awards shall be payable by the Company in cash to each
participant, or to his estate in the event of his death, as soon as practicable
after the end of each Performance Period and after the Committee has certified
in writing pursuant to Section 3.1 that the relevant performance goals were
achieved.
B-2
<PAGE>
4.2 A bonus award that would otherwise be payable to a participant who is not
employed by the Company or one of its subsidiaries on the last day of a
Performance Period shall be prorated, or not paid, as follows:
<TABLE>
<C> <S> <C>
(1) Terminated due to disability Prorated based on active service
during Performance Period
(2) Retirement in accordance with the Prorated based on active service
Company's retirement policies during Performance Period
(3) Voluntary or involuntary resignation No award
or termination prior to retirement
without mutual written agreement
(4) Resignation pursuant to mutual Prorated based on active service
written agreement during Performance Period
(5) Leave of absence Prorated based on active service
during Performance Period
(6) Death of participant Prorated based on active service
during Performance Period
</TABLE>
ARTICLE V
OTHER TERMS AND CONDITIONS
5.1 No bonus awards shall be paid under the Plan unless and until the
material terms (within the meaning of Section 162(m)(4)(C) of the Code) of the
Plan, including the business criteria described in Section 2.3 of the Plan, are
disclosed to the Company's shareholders and are approved by the shareholders by
a majority of votes cast in person or by proxy (including abstentions to the
extent abstentions are counted as voting under applicable state law).
5.2 No person shall have any legal claim to be granted an award under the
Plan and the Committee shall have no obligation to treat participants
uniformly. Except as may be otherwise required by law, bonus awards under the
Plan shall not be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, charge, garnishment, execution, or
levy of any kind, either voluntary or involuntary. Bonuses awarded under the
Plan shall be payable from the general assets of the Company and no participant
shall have any claim with respect to any specific assets of the Company.
5.3 Neither the Plan nor any action taken under the Plan shall be construed
as giving any employee the right to be retained in the employ of the Company or
any subsidiary or to maintain any participant's compensation at any level.
5.4 The Company or any of its subsidiaries may deduct from any award any
applicable withholding taxes or any amounts owed by the employee to the Company
or any of its subsidiaries.
B-3
<PAGE>
ARTICLE VI
ADMINISTRATION
6.1 All members of the Committee shall be persons who qualify as "outside
directors" as defined under Section 162(m) of the Code. Until changed by the
Board, the Compensation Committee of the Board shall constitute the Committee
hereunder.
6.2 The Committee shall have full power and authority to administer and
interpret the provisions of the Plan and to adopt such rules, regulations,
agreements, guidelines and instruments for the administration of the Plan and
for the conduct of its business as the Committee deems necessary or advisable.
6.3 Except with respect to matters which under Section 162(m)(4)(C) of the
Code are required to be determined in the sole and absolute discretion of the
Committee, the Committee shall have full power to delegate to any officer or
employee of the Company the authority to administer and interpret the
procedural aspects of the Plan, subject to the Plan's terms, including adopting
and enforcing rules to decide procedural and administrative issues.
6.4 The Committee may rely on opinions, reports or statements of officers or
employees of the Company or any subsidiary thereof and of Company counsel
(inside or retained counsel), public accountants and other professional or
expert persons.
6.5 The Board reserves the right to amend or terminate the Plan in whole or
in part at any time. Unless otherwise prohibited by applicable law, any
amendment required to conform the Plan to the requirements of Section 162(m) of
the Code may be made by the Committee. No amendment may be made to the class of
individuals who are eligible to participate in the Plan, the performance
criteria specified in Section 2.3 or the maximum bonus payable to any
participant as specified in Section 3.2 without shareholder approval unless
shareholder approval is not required in order for bonuses paid to Covered
Employees to constitute qualified performance-based compensation under Section
162(m) of the Code.
6.6 No member of the Committee shall be liable for any action taken or
omitted to be taken or for any determination made by him or her in good faith
with respect to the Plan, and the Company shall indemnify and hold harmless
each member of the Committee against any cost or expense (including counsel
fees) or liability (including any sum paid in settlement of a claim with the
approval of the Committee) arising out of any act or omission in connection
with the administration or interpretation of the Plan, unless arising out of
such person's own fraud or bad faith.
6.7 The place of administration of the Plan shall be in the State of Nevada,
and the validity, construction, interpretation, administration and effect of
the Plan and of its rules and regulations, and rights relating to the Plan,
shall be determined solely in accordance with the laws of the State of Nevada.
B-4
<PAGE>
EXHIBIT 10(ii)
CIRCUS CIRCUS ENTERPRISES, INC
RETIREMENT PLAN FOR OUTSIDE DIRECTORS 1
- --------------------------------------------------------------------------------
Effective January 1, 1995
ARTICLE I
Purpose
1.1 The purpose of this Retirement Plan is to provide Directors of Circus
Circus Enterprises, Inc. who are not employees, with benefit payments
after retirement in recognition of their service to the Company and to
ensure that the overall compensation arrangements for Directors are
adequate to attract and retain highly qualified individuals.
ARTICLE II
Definitions
2.1 "Board" or "Board of Directors" means the board of directors of the
Company.
2.2 "Company" means Circus Circus Enterprises, Inc.
2.3 "Director" means an individual serving on the Board of Directors who is
not an employee of the Company on the date elected to the Board.
2.4 "Committee" means all members of the Board who are not employees of the
Company.
2.5 "Participant" means a Director who is eligible for or entitled to receive
benefits under this Plan.
2.6 "Plan" means this Retirement Plan for Outside Directors effective January
1, 1995.
2.7 "Annual Retainer" means the amount of compensation paid or payable to the
Participant for services rendered as a Director, excluding meeting fees,
committee chairman fees, travel expenses, and any consulting fees.
2.8 "Service" means any period during which an individual is serving on the
Board of Directors of the Company.
ARTICLE III
Eligibility
3.1 Except as provided below, all Directors of the Company who are or become
duly elected Directors shall be eligible to participate in this Plan as of
the later of January 1, 1995, or the effective date of their first
election as a Director. Directors who have retired from the Board or who
otherwise were not serving on the Board as of the Effective Date are not
eligible for benefits. Directors who are receiving retirement benefits
from the Company are not eligible for benefits under the Plan.
<PAGE>
CIRCUS CIRCUS ENTERPRISES, INC
RETIREMENT PLAN FOR OUTSIDE DIRECTORS 2
- --------------------------------------------------------------------------------
3.2 A Director shall be eligible for retirement benefits hereunder upon
completion of at least five (5) years of Service if retirement occurs at
or after the age of 72, or with at least ten (10) years of Service if
retirement occurs prior to the age of 72.
ARTICLE IV
Retirement Benefits
4.1 Participants shall be paid an annual retirement benefit in accordance with
the terms and conditions of this Plan.
4.2 A Participant's annual retirement benefit shall be 100% of the Annual
Retainer in effect at the time of the Director's retirement from the
Board.
4.3 A Participant shall be credited with Service for any period during which
he served on the Board of Directors of the Company, including Service
prior to January 1, 1995.
4.4 Benefits will be paid for the greater of five years or the number of years
service on the Board for those directors who have less than ten years of
service at their date of retirement. For those directors with more than
ten years of service at their date of retirement, benefits will be paid
for life. Partial years of Service will be prorated on a quarterly basis
in order to determine the duration of payments.
4.5 Payment of retirement benefits hereunder shall be in the form of quarterly
payments commencing on the first day of the calendar quarter following the
later of the Director's attainment of age 65 or actual retirement from the
Board.
4.6 In the event a Participant dies prior to retirement from the Board, no
benefits shall be paid under the Plan.
4.7 In the event a Participant dies after retirement from the Board but before
becoming entitled to receive benefits under Section 4.5, benefits will be
paid to the surviving spouse commencing on the first day when the
Participant would have been eligible for such benefits and will continue
for a period of years equal to years of Service, but in no event will the
total years of such benefits paid exceed ten (10) years. If there is no
surviving spouse, no benefits will be paid to any other party,
beneficiary, or estate.
4.8 In the event of the Participant's death prior to receiving full benefits,
as described in Section 4.4, benefits shall continue to be paid to the
surviving spouse for a period of years equal to years of Service, but in
no event will the total years of such benefits paid exceed ten (10) years.
If there is no surviving spouse, no benefits will be paid to any other
party, beneficiary, or estate.
<PAGE>
CIRCUS CIRCUS ENTERPRISES, INC
RETIREMENT PLAN FOR OUTSIDE DIRECTORS 3
- --------------------------------------------------------------------------------
ARTICLE V
Status of Plan
5.1 This Plan is a nonqualified supplemental retirement plan. As such, all
payments from this Plan shall be made from the general assets of the
Company. This Plan shall not require the Company to set aside, segregate,
earmark, pay into trust or special account, or otherwise restrict the use
of its assets in the operation of its business. A Participant shall have
no greater right or status than as an unsecured creditor of the Company
with respect to any amounts owed to any Participant hereunder.
ARTICLE VI
Rights Nonassignable
6.1 All payments to persons entitled to benefits hereunder shall be made to
such persons and shall not be grantable, transferable, or otherwise
assignable in anticipation of payment thereof, in whole or in part, by the
voluntary or involuntary acts of any such persons or by operation of law.
In addition, such payments shall not be subject to garnishment,
attachment, or any other legal process of creditors of such persons.
ARTICLE VII
Administration
7.1 Full power and authority to construe, interpret, and administer this Plan
shall be vested in the Committee. The Committee shall have full power and
authority to make each determination provided for in this Plan. All
determinations made by the Committee shall be conclusive and binding upon
the Company and each Participant or former Participant.
ARTICLE VIII
Plan Termination
8.1 The Board of Directors may terminate this Plan at any time. Upon
termination of the Plan, benefits shall be paid in accordance with Article
IV to any Participant who is receiving benefits prior to the date of
termination of the Plan or to any Participant who has prior to the date of
termination:
a) Satisfied the eligibility requirements of Article III,
b) Retired from the Board of Directors of the Company, and,
c) Has not commenced receiving benefits.
<PAGE>
CIRCUS CIRCUS ENTERPRISES, INC
RETIREMENT PLAN FOR OUTSIDE DIRECTORS 4
- --------------------------------------------------------------------------------
No other payments shall be made to any person under the Plan after the
date of termination, including, but not limited to, Directors who meet the
eligibility requirements of Article III but who have not retired from the
Board as of the date of Plan termination.
ARTICLE IX
Amendment
9.1 The Board of Directors may, in its discretion, amend this Plan from time
to time. In addition, the Committee may from time to time amend this Plan
to make such administrative changes as it deems necessary or desirable.
No such amendment shall divest any Participant without his consent of
rights to which he would have been entitled under Article IV if the Plan
has been terminated on the effective date of such amendment.
ARTICLE X
Liquidation
10.1 Notwithstanding Articles VIII and IX, if the Company is liquidated, the
Committee shall have the right to determine the present value of the total
amount payable under Article VIII to all Participants and to cause the
amount so determined to be paid in one or more installments or upon such
other terms and conditions and at such other time as the Committee
determines to be just and equitable.
ARTICLE XI
Miscellaneous
11.1 If the person to receive payment is deemed by the Committee or is adjudged
to be legally incompetent, the payments shall be made to the duly
appointed guardian of such incompetent, or they may be made to such person
or persons who the Committee believes are caring for or supporting such
incompetent; and the receipt by such person or persons shall be a complete
acquittance for the payment of the benefit.
11.2 The expenses of administration hereunder shall be borne by the Company.
11.3 This Plan shall be construed, administered, and enforced according to the
laws of the State of Nevada.
11.4 The masculine pronoun shall be deemed to include the feminine, and the
singular to include the plural, unless a different meaning is plainly
required by context.
<PAGE>
CIRCUS CIRCUS ENTERPRISES, INC
RETIREMENT PLAN FOR OUTSIDE DIRECTORS 5
- --------------------------------------------------------------------------------
ARTICLE XII
Effective Date
12.1 The effective date of this Plan is January 1, 1995.
Executed this 27th day of April 1995.
Circus Circus Enterprises, Inc.
By: /s/ CLYDE T. TURNER
-------------------------------
Clyde T. Turner
Chairman, President and CEO
Attest: /s/ MIKE SLOAN
--------------------------
Mike Sloan
Corporate Secretary
Date: April 27, 1995
----------------------------
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS Exhibit 13
FINANCIAL POLICY
Circus' primary financial goals are to generate significant free cash flow and
to provide attractive returns on our invested capital.
Over the past five years, our production of free cash flow has essentially
doubled. This steady, strong cash flow has allowed Circus to grow at a rapid
pace without incurring large amounts of long-term debt. Our production of cash
flow combined with our significant borrowing capacity (over $500 million
available credit as of January 31, 1995) and our easy access to other capital
markets, provide Circus the ability to entertain virtually any growth
opportunity. These available resources give the Company the financial
flexibility to react swiftly to new gaming opportunities as they arise, as well
as permit us to focus on the merits of a specific project without concerns about
potential financing.
<TABLE>
<CAPTION>
FREE CASH FLOW ANALYSIS
Year ended January 31,
(in thousands) 1995 1994 1993 1992 1991
-------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income from operations* $259,019 $217,567 $205,482 $200,391 $169,653
Add non-cash expenses
Depreciation and
amortization 82,753 58,965 48,182 48,870 42,395
Other (65) (65) (65) (65) (65)
-----------------------------------------------
Cash generated from
operations before income tax 341,707 276,467 253,599 249,196 211,983
Cash income taxes (55,754) (56,023) (43,602) (31,452) (36,566)
Interest, dividends and
other income (loss) 1,217 (683) 820 245 (570)
Proceeds from disposal of assets 415 685 4,510 527 663
----------------------------------------------
Cash available for repayment
of debt and reinvestment 287,585 220,446 215,327 218,516 175,510
Scheduled principal and
interest payments (45,988) (35,388) (30,939) (44,168) (51,056)
Ordinary capital expenditures (29,856) (33,182) (24,085) (24,110) (19,450)
------------------------------------------------
Free cash flow $211,741 $151,876 $160,303 $150,238 $105,004
------------------------------------------------
</TABLE>
*Before one-time charges in fiscal 1995 for Circus Circus-Tunica preopening
expenses of $3,012, in fiscal 1994 for Luxor and Grand Slam Canyon preopening
expenses of $16,506 and in fiscal 1991 for Excalibur preopening expenses of
$11,177.
-19-
<PAGE>
Generating strong cash flow is only part of the story. Investing that cash flow
in projects which produce attractive returns has been an integral part of
Circus' past success, while presenting the challenge for the future. The Company
has met that challenge by achieving a return on invested capital of
approximately 20% over the past five years. Looking to the future, our capital
investments may include acquisition of existing companies as well as internally
developed projects. Our recent acquisition of Gold Strike Resorts, the purchase
of the Hacienda and the purchase of 73 acres of undeveloped land south of the
Hacienda, demonstrates that the Company is positioned to continue its rapid
growth. With these acquisitions and their future development, we expect to
continue to achieve a return on invested capital that will rival our historical
levels .
<TABLE>
<CAPTION>
RETURN ON INVESTED CAPITAL
Year ended January 31,
(in thousands) 1995 1994 1993 1992 1991
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net income before
non-recurring items* $ 138,244 $ 126,918 $120,983 $103,348 $ 83,669
Income tax expense 78,204 66,419 62,330 53,656 39,566
Interest expense 42,734 17,770 22,989 43,632 42,048
--------------------------------------------------------
259,182 211,107 206,302 200,636 165,283
Cash income taxes (55,754) (56,023) (43,602) (31,452) (36,566)
--------------------------------------------------------
Total return as defined $ 203,428 $ 155,084 $162,700 $169,184 $ 128,717
--------------------------------------------------------
Total assets $ 1,507,085 $ 1,297,924 $950,458 $783,071 $ 792,479
Construction in progress and
investments in non-operating
joint ventures (77,794) (19,855) (179,757) (5,179) (43,488)
Current liabilities (82,008) (92,061) (87,494) (59,498) (61,456)
--------------------------------------------------------
Total invested capital
as defined $ 1,307,283 $ 1,186,008 $683,207 $718,394 $687,535
--------------------------------------------------------
Average invested capital $ 1,266,646 $ 934,608 $700,801 $702,965 $558,663
--------------------------------------------------------
Return on average
invested capital 16.1% 16.6% 23.2% 24.1% 23.0%
--------------------------------------------------------
</TABLE>
*Before one-time charges in fiscal 1995 for Circus Circus-Tunica preopening
expenses of $3,012, in fiscal 1994 for Luxor and Grand Slam Canyon preopening
expenses of $16,506 and in fiscal 1991 for Excalibur preopening expenses of
$11,177. Net income for fiscal 1993 excludes an extraordinary loss of $3,661
related to the early retirement of debt.
-20-
<PAGE>
Results of Operations
Excluding preopening expenses, earnings per share for the year ended January 31,
1995 were $1.61 against $1.46 on the same basis last year. During the current
year, the Company wrote off $3.0 million of preopening expenses related to the
August 29, 1994 opening of Circus Circus-Tunica. These preopening expenses
amounted to $.02 per share on an after-tax basis. In the prior year, the Company
wrote off preopening expenses associated with Grand Slam Canyon (which opened
August 23, 1993) and Luxor Hotel and Casino (which opened October 15, 1993).
These preopening expenses totalled $16.5 million, amounting to $.12 per share on
an after-tax basis. Including the effect of preopening expenses, earnings per
share for the year ended January 31, 1995 were $1.59 versus $1.34 for the prior
year.
The increase in earnings per share was attributable primarily to the first full
year of operations for Luxor, which was open only 3 1/2 months in the prior
fiscal year. The opening of Circus Circus-Tunica also contributed to this
increase. The Company's first riverboat casino posted operating income in
excess of $13 million in the five months it was open during the year. Earnings
per share also benefitted from 1.2 million fewer average shares outstanding,
stemming from the repurchase of 0.5 million shares during fiscal 1995 and 1.6
million shares in fiscal 1994. However, these benefits were partially offset by
additional interest expense due to lower capitalized interest and higher
borrowings.
On the same basis of operations, earnings per share for the year ended January
31, 1994 were $1.50 (excluding preopening expenses and the effect of an increase
in the corporate tax rate) versus $1.41 (excluding an extraordinary loss) in
fiscal 1993 - an increase of 6% despite an increase of 1.1 million average
shares outstanding. This increase in earnings per share was due primarily to
the opening of Luxor in October 1993 and to lower interest expense, which
resulted from higher capitalized interest related to Luxor and Grand Slam
Canyon.
Revenues
Revenues for the year ended January 31, 1995 increased $206.7 million, or 21%,
to $1.2 billion, marking the first time the Company's revenues have topped $1
billion. The first full year of operations for Luxor and the opening of
Circus Circus-Tunica accounted for the majority of this increase in revenues.
The Company's combined hotel occupancy rate declined to 95.7% from 97.8% last
year, due primarily to the impact of additional competition in the Laughlin
market. Despite the decrease in occupancy rates, room revenues (excluding the
impact of Luxor) rose 4% on the strength of selective price increases at the
Las Vegas properties. Including Luxor, hotel revenues increased 32% over the
prior year. In general, the Company's policy of offering moderately priced
rooms, multiple entertainment attractions and low-priced food on an everyday
basis
<PAGE>
attracts a high level of occupancy along with substantial walk-in traffic.
For the year ended January 31, 1994, revenues increased $112.5 million, or
13%, versus the prior year. The three and one-half months of operations of
Luxor drove this growth in revenues.
Income from Operations
Income from operations, excluding the write-off of preopening expenses,
increased $41.5 million, or 19%, for the year ended January 31, 1995. The
increase in income from operations was attributable primarily to Luxor and the
opening of Circus Circus-Tunica. In its first full fiscal year of operations,
Luxor posted $64.1 million in operating income and a 23% operating margin.
Meanwhile, Circus Circus-Tunica experienced a strong opening, generating
operating income of $13.2 million and an operating margin over 40% (excluding
preopening expenses) in the five months it was open.
Income from operations was essentially flat at the Company's other Las Vegas
properties, Circus Circus-Las Vegas and Excalibur, and margins remained steady.
At Circus Circus-Reno, disruption from the construction of neighboring Silver
Legacy (see Capitalization, Capital Spending and Liquidity) and poor winter
weather hampered results throughout much of the year, causing a 12% decline in
operating income at that property.
Results at the Company's Laughlin properties, the Colorado Belle and
Edgewater, declined significantly, with combined operating income down 22%
from the prior year. The decrease is attributable to a variety of competitive
factors. The three major new theme resorts which opened in Las Vegas in late
1993 (including
-21-
<PAGE>
Luxor), have drawn upon Laughlin's customer base, as have the recently expanded
facilities at Stateline, Nevada, which are closer to Las Vegas and more
accessible to visitors from Southern California. Also in late 1993, a
competitor in Laughlin underwent a major hotel and casino expansion, which
further diffused the customer base. Finally, the emergence of unregulated Indian
gaming, particularly in Laughlin's Arizona feeder markets, has brought
additional competitive challenges. While it is the Company's belief that the
Laughlin market is beginning to stabilize, a new hotel/casino opened in late
February 1995 which may further impact results in the near term. Despite the
significant declines in operating income, the Colorado Belle and Edgewater still
posted a combined 23% operating margin for the year.
The Company's composite operating margin was 22.1% (prior to the write-off of
preopening expenses), compared to last year's 22.6%. The decline was
attributable to the reasons discussed above.
Income from operations in fiscal 1994 increased $12.1 million, or 6%, excluding
the one-time write-off of $16.5 million of preopening expenses from Luxor and
Grand Slam Canyon. The growth in income from operations before preopening
expenses was primarily the result of the opening of Luxor in October 1993.
Depreciation and Amortization Expense
For the year ended January 31, 1995, depreciation and amortization expense rose
$23.8 million, to $82.8 million, due primarily to a full year of depreciation on
Luxor and Grand Slam Canyon, as well as the addition of Circus Circus-Tunica.
In fiscal 1994, depreciation and amortization expense increased $10.8 million
over the prior year due primarily to the openings of Luxor and Grand Slam
Canyon.
Interest Expense
For the year ended January 31, 1995, interest expense was $42.7 million compared
to $17.8 million in the prior year. The increase was due mostly to lower
capitalized interest ($4.2 million in fiscal 1995 versus $18.5 million in fiscal
1994) stemming from the completion of Luxor and Grand Slam Canyon in the prior
fiscal year. Interest expense was also impacted by higher average debt
outstanding (approximately $590 million in fiscal 1995 versus approximately $555
million in fiscal 1994). Though short-term interest rates rose during the year,
the Company's interest expense was not significantly impacted due to the effect
of certain interest rate swap agreements which expired during late fiscal 1994
and 1995.
Interest expense for the year ended January 31, 1994 was $17.8 million, down
from $23.0 million in the prior year. The decrease was due primarily to the
net effect of increased capitalized interest pertaining to Luxor and Grand
Slam Canyon ($18.5 million in fiscal 1994 versus $8.0 million in fiscal 1993),
offset by higher average
<PAGE>
debt outstanding and a higher average interest rate due to issuing $300 million
of Senior Subordinated Notes in July 1993 (see Capitalization, Capital Spending
and Liquidity).
Taxes
The Company's effective tax rate for the year ended January 31, 1995 was 36.5%.
This reflects the federal statutory rate of 35.0% plus the effect of various
nondeductible expenses.
For the year ended January 31, 1994, the difference between the Company's
effective tax rate of 36.4% and the Federal statutory rate of 34.9% was due
primarily to the adjustment of the deferred tax balance to reflect the new
statutory rate mandated by the Revenue Reconciliation Act of 1993.
Capitalization, Capital Spending and Liquidity
For the year ended January 31, 1995, the Company's pretax cash flow from
operations (before preopening expenses) was $341.7 million, compared to $276.5
million in fiscal 1994 and $253.6 million in fiscal 1993. In fiscal 1995, the
Company's cash flow was used primarily to fund construction of Circus Circus-
Tunica and to fund its investment in two joint venture projects: Silver Legacy
in Reno, Nevada and Circus Circus-Chalmette, a riverboat near New Orleans,
Louisiana. In fiscal 1994, the Company's cash flow was used primarily to fund
construction of Luxor and Grand Slam Canyon.
-22-
<PAGE>
Capital expenditures for the year ended January 31, 1995 were $142.7 million,
compared with $378.8 million in fiscal 1994 and $208.6 million in fiscal 1993.
The majority of expenditures in the past year related to the completion of
Circus Circus-Tunica ($58.1 million), the addition of new attractions at Grand
Slam Canyon ($15.4 million), the construction of parking garages at Luxor and
Excalibur ($11.7 million) and the purchase of land in Reno for future expansion
($11.9 million). In fiscal 1994, Luxor ($254.3 million) and Grand Slam Canyon
($61.7 million) accounted for the bulk of the capital expenditures.
The Company has also funded equity investments in new projects totalling $71.6
million during fiscal 1995. These equity investments include the temporary
casino in Windsor, Canada ($5.4 million net investment since inception);
Silver Legacy in Reno, Nevada ($55.3 million net investment since inception);
and the riverboat casino in Chalmette, Louisiana ($14.2 million net investment
since inception).
During the year ended January 31, 1995, the Company repurchased 0.5 million
shares of its common stock at a total cost of approximately $15.0 million. In
fiscal 1994, the Company repurchased 1.6 million shares at a total cost of
approximately $57.3 million.
In July 1993, the Company issued $150 million principal amount of 6-3/4% Senior
Subordinated Notes due 2003. The notes were priced at 99.89%. Also in July
1993, the Company issued, at par, $150 million principal amount of 7 5/8% Senior
Subordinated Debentures due 2013. The net proceeds of these offerings were used
to retire amounts outstanding under the Company's corporate debt program.
On September 30, 1993, the Company signed a $750 million unsecured bank credit
agreement with its bank group (see Note 3 of Notes to Consolidated Financial
Statements). This facility replaced the Company's previous $350 million and
$200 million reducing revolvers. As of January 31, 1995, Circus had $517 million
undrawn and immediately available under the credit agreement.
On August 29, 1994, the Company's newest property, Circus Circus-Tunica, opened
in Tunica County, Mississippi, approximately 20 miles from the Memphis,
Tennessee airport. This circus-themed project was completed on schedule at a
total cost of approximately $70 million, including land, capitalized interest
and preopening expenses. The property features over 1,400 slot machines, 66
table games, three restaurants and a gift shop.
The Company is an investor in several joint venture projects in various stages
of development.
In December 1993, Windsor Casino Limited, a corporation owned equally by Circus
Circus Enterprises, Inc., Caesars World, Inc. and Hilton Hotels Corporation, was
selected to exclusively design, build and operate a casino complex in Windsor,
Ontario, Canada. As planned, the complex includes casino, showroom and meeting
facilities as well as a 300-room hotel, all located in Windsor's central
business
<PAGE>
district, immediately across the Detroit River from Detroit, Michigan. An
interim casino, operated by Windsor Casino Limited, opened in May 1994 and
generated $5.5 million in operating income for the Company in fiscal 1995. The
corporation currently negotiating an agreement for a permanent facility, which
is expected to be completed in 1997, the terms and conditions of which are still
being finalized. As of January 31, 1995, Circus had a net investment of
approximately $5.4 million in this project.
The Company is also a partner in a 50/50 joint venture with the Eldorado
Hotel/Casino, which is developing and will operate a hotel/casino in downtown
Reno, Nevada. Silver Legacy is themed after a turn-of-the-century silver mining
town and is located on a site adjacent to Circus Circus-Reno and the Eldorado,
and will be connected to both properties by enclosed skyways. The project broke
ground in late 1993 and completion is expected by late July 1995. The cost of
the project is currently estimated at $335 million (excluding capitalized
interest and preopening expenses), of which the venturers will contribute $105
million in equity. As of January 31, 1995, the Company had a net investment of
approximately $55.3 million in this project, and had loaned the joint venture
$58.1 million, which bears interest at 10%. This loan will be reduced to $25
million upon the closing of the joint venture's $220 million credit agreement in
May 1995 and will be subordinated to the indebtedness under that agreement. As a
condition to the credit agreement, the Company will enter into an agreement
pursuant to which it will guarantee completion of Silver Legacy. In addition,
the Company will enter into a make-well agreement with the joint venture whereby
it will be obligated to make additional contributions to the joint venture as
may be necessary to maintain a minimum coverage ratio (as
-23-
<PAGE>
defined in the credit agreement). The Company is also obligated under the joint
venture agreement to obtain or provide a $10 million credit line for working
capital purposes.
The Company is also a partner in a 50/50 joint venture with American
Entertainment Corporation to develop and operate a riverboat gaming facility in
Louisiana. The riverboat will feature a 30,000-square-foot casino and will be
docked in Chalmette, Louisiana, approximately 20 minutes from downtown New
Orleans. The cost and specifics of the design and funding have yet to be
finalized. The Company is required to contribute $20 million in equity and to
lend the project any amount which cannot be financed by a third party. The
project is currently expected to be completed by late 1995. As of January 31,
1995, the Company had a net investment in the joint venture of approximately
$14.2 million and a loan to its joint venture partner of $10 million. The loan
carries interest at the prime rate plus one percentage point and is payable from
the joint venture partner's share of distributions.
In March 1995, the Company reached agreement to purchase the Hacienda Hotel and
Casino in Las Vegas for approximately $80 million, subject to receipt of
requisite regulatory approvals. The Hacienda is located on 47 acres of land
adjacent to Luxor, between I-15 and the Las Vegas Strip, and contains
approximately 1,100 rooms and 50,000 square feet of casino space. Also in March
1995, the Company purchased approximately 73 acres of undeveloped land at the
northwest corner of Russell Road and the Las Vegas Strip, just south of the
Hacienda, at a cost of approximately $73 million. The acquisition of the
Russell Road land was financed under the Company's bank lines of credit and the
Company anticipates financing the Hacienda acquisition in a similar manner.
The Company is developing a master plan for this area, including the existing
Excalibur and Luxor resorts, that will encompass several stages of development
and include a series of new and interconnected hotel/casino/entertainment
complexes. It is the Company's belief that the Las Vegas market can readily
absorb significant new capacity, including that contemplated in its master
plan. Furthermore, the focus in Las Vegas has shifted toward the south end of
the Las Vegas Strip, where the Company will be developing its master plan at
what is essentially the gateway to Las Vegas.
On March 19, 1995, the Company entered into an agreement to acquire a group of
affiliated entities (collectively "Gold Strike Resorts"), subject to receipt of
all necessary consents and approvals, including those of gaming regulatory
authorities. The agreement provides for the issuance of approximately 17
million shares of the Company's common stock and the payment of $12 million in
cash in exchange for the equity interests in Gold Strike Resorts, as well as the
Company's assumption of approximately $165 million of debt. For the year ended
December 31, 1994, Gold Strike Resorts recorded net revenues of approximately
$106 million and operating income of approximately $32 million. Provided the
requisite approvals are obtained, the Company
<PAGE>
anticipates completing the acquisition during its second quarter and does not
anticipate that the transaction will have a materially dilutive impact on
earnings per share.
Gold Strike Resorts owns and operates three gaming properties in Nevada (Gold
Strike Hotel and Gambling Hall and Nevada Landing in Jean, and Railroad Pass in
Henderson). It also holds a 50% interest in and operates The Grand Victoria
riverboat in Elgin, Illinois (which opened in October 1994), and is a 50%
partner with Mirage Resorts, Inc., in the development of a major destination
resort on the Las Vegas Strip, for which it serves as managing partner. The
joint venture project with Mirage has an estimated cost of $325 million
(including land and capitalized interest), and Gold Strike Resorts is obligated
to fund any portion of such cost in excess of certain equity contributions and
the funding provided by a $175 million construction loan. It is currently
anticipated that this obligation will require an equity contribution by Gold
Strike Resorts of approximately $60 million.
The Company believes that it has sufficient capital resources, through its
existing bank arrangements and its operating cash flows, to meet all of its
existing cash obligations, strategically repurchase shares and fund its
commitments on each of the above discussed projects. The Company anticipates
that additional funds could be raised through debt or equity markets, if
necessary.
-24-
<PAGE>
CIRCUS CIRCUS ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
January 31, (in thousands, except share data) 1995 1994
------ ------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $53,764 $39,110
Receivables 8,931 8,673
Inventories 22,660 20,057
Prepaid expenses 20,103 20,062
---------- ----------
Total current assets 105,458 87,902
---------- ----------
Property, equipment and leasehold interests,
at cost, net 1,239,062 1,179,961
---------- ----------
Other assets
Excess of purchase price over fair
market value of net assets acquired, net 9,836 10,200
Notes receivable 68,083 -
Investments in joint ventures 74,840 3,203
Deferred charges and other assets 9,806 16,658
---------- ----------
Total other assets 162,565 30,061
---------- ----------
Total assets $1,507,085 $1,297,924
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt $106 $169
Accounts and contracts payable --
Trade 12,102 14,804
Construction 1,101 13,844
Accrued liabilities --
Salaries, wages and vacations 24,946 19,650
Progressive jackpots 7,447 4,881
Advance room deposits 8,701 6,981
Other 25,151 25,648
Interest payable 2,331 2,278
Income tax payable 123 3,806
---------- ----------
Total current liabilities 82,008 92,061
---------- ----------
Long-term debt 632,652 567,345
---------- ----------
Other liabilities
Deferred income tax 105,313 77,153
Other long-term liabilities 988 1,415
---------- ----------
Total other liabilities 106,301 78,568
---------- ----------
Total liabilities 820,961 737,974
---------- ----------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Commitments and contingent liabilities
Stockholders' equity
Common stock $.01 2/3 par value
Authorized -- 450,000,000 shares
Issued -- 96,441,357 and 96,168,769 shares 1,607 1,603
Preferred stock $.01 par value
Authorized -- 75,000,000 shares - -
Additional paid-in capital 124,960 120,135
Retained earnings 754,732 618,446
Treasury stock (10,589,309 and 10,062,814 shares),
at cost (195,175) (180,234)
--------- ---------
Total stockholders' equity 686,124 559,950
--------- ---------
Total liabilities and stockholders' equity $1,507,085 $1,297,924
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-25-
<PAGE>
CIRCUS CIRCUS ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year ended January 31, (in thousands, except share data)
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Revenues
Casino $612,115 $538,813 $495,012
Rooms 232,346 176,001 147,115
Food and beverage 189,664 152,469 135,786
Other 171,754 126,048 100,416
--------- ------- -------
1,205,879 993,331 878,329
Less-complimentary allowances (35,697) (29,861) (27,388)
--------- ------- -------
1,170,182 963,470 850,941
--------- ------- -------
Costs and expenses
Casino 246,416 209,402 189,499
Rooms 94,257 78,932 68,783
Food and beverage 177,136 149,267 128,689
Other operating expenses 107,297 82,958 67,051
General and administrative 183,175 150,495 129,934
Depreciation and amortization 81,109 58,105 46,550
Preopening expense 3,012 16,506 -
------- ------- -------
892,402 745,665 630,506
------- ------- -------
Operating profit before
corporate expense 277,780 217,805 220,435
Corporate expense 21,773 16,744 14,953
------- ------- -------
Income from operations 256,007 201,061 205,482
------- ------- -------
Other income (expense)
Interest, dividends and
other income (loss) 1,217 (683) 820
Interest expense (42,734) (17,770) (22,989)
------- ------- -------
(41,517) (18,453) (22,169)
------- ------- -------
Income before provision for income tax 214,490 182,608 183,313
Provision for income tax 78,204 66,419 62,330
------- ------- -------
Income before extraordinary loss 136,286 116,189 120,983
Extraordinary loss on early
extinguishment of debt, net
of income tax benefit of $1,885 - - (3,661)
------- ------- -------
Net income $136,286 $116,189 $117,322
======= ======= =======
Earnings per share
Income before extraordinary loss $1.59 $1.34 $1.41
Extraordinary loss on early
extinguishment of debt - - (0.04)
------- ------- -------
Net income per share $1.59 $1.34 $1.37
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-26-
<PAGE>
CIRCUS CIRCUS ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Year ended January 31,
Increase (decrease) in cash
and cash equivalents (in thousands)
Cash flows from operating activities
Net income before extraordinary loss $136,286 $116,189 $120,983
------- ------- -------
Adjustments to reconcile net income before
extraordinary loss to net cash provided
by operating activities
Depreciation and amortization 82,753 58,965 48,182
Increase in deferred income tax 28,160 13,030 5,293
Increase (decrease) in interest payable 53 180 (4,100)
Increase (decrease) in income tax
payable (3,683) 3,098 (477)
(Gain) loss on sale of fixed assets 768 1,001 (41)
Increase in other current assets (2,902) (13,772) (1,268)
Increase in other current liabilities 6,383 15,192 5,598
(Increase) decrease in other non-
current assets 6,880 (6,635) (2,368)
Decrease in other non-current
liabilities (65) (65) (65)
------- ------- -------
Total adjustments 118,347 70,994 50,754
------- ------- -------
Net cash provided by operating
activities 254,633 187,183 171,737
------- ------- -------
Cash flows from investing activities
Capital expenditures (142,667) (378,785) (208,586)
Increase (decrease) in construction
payables (12,743) (13,918) 27,762
Increase in investments in joint ventures (71,637) (3,203) -
Increase in notes receivable (68,083) - -
Proceeds from sale of equipment and other
assets 415 685 4,510
------- ------- -------
Net cash used in investing activities (294,715) (395,221) (176,314)
Cash flows from financing activities
Proceeds from issuance of senior subor-
dinated notes - 299,841 -
Net effect on cash of issuances and
payments of debt with initial maturities
of three months or less 65,378 (40,445) 69,957
Principal payments of debt with original
maturities in excess of three months (169) (10,154) (100,397)
Exercise of stock options and warrants 4,919 11,091 46,491
Purchases of treasury stock and fractional
shares (15,031) (57,339) -
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Effect on cash of extraordinary loss - - (2,155)
Other (361) 739 (62)
------ ------ ------
Net cash provided by financing activities 54,736 203,733 13,834
------ ------- ------
Net increase (decrease) in cash and cash
equivalents 14,654 (4,305) 9,257
Cash and cash equivalents at beginning
of year 39,110 43,415 34,158
------ ------ ------
Cash and cash equivalents at end of year $53,764 $39,110 $43,415
====== ====== ======
Supplemental cash flow disclosures
Cash paid during the period for
Interest (net of amount capitalized) $41,613 $16,597 $26,104
Income tax $52,500 $47,000 $41,500
Noncash investing and financing activities
Purchase of land with debt $ - $10,000 $ -
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-27-
<PAGE>
CIRCUS CIRCUS ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Issued Additional Total
------------------- Paid-In Retained Treasury Stockholders'
(in thousands) Shares Amount Capital Earnings Stock Equity
-------- ------ ------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 31, 1992 95,397 $1,590 $ 84,026 $384,935 $(144,355) $326,196
Net income - - - 117,322 - 117,322
Exercise of stock options and warrants 517 9 27,490 - 18,992 46,491
------ ----- ------- ------- -------- -------
Balance, January 31, 1993 95,914 1,599 111,516 502,257 (125,363) 490,009
Net income - - - 116,189 - 116,189
Exercise of stock options and warrants 255 4 8,627 - 2,460 11,091
Treasury stock acquired (1,632 shares),
at cost - - - - (57,331) (57,331)
Purchase of fractional shares - - (8) - - (8)
------ ----- ------- ------- -------- -------
Balance, January 31, 1994 96,169 1,603 120,135 618,446 (180,234) 559,950
Net income - - - 136,286 - 136,286
Exercise of stock options and warrants 272 4 4,825 - 90 4,919
Treasury stock acquired (535 shares),
at cost - - - - (15,031) (15,031)
------ ----- ------- ------- -------- -------
Balance, January 31, 1995 96,441 $1,607 $124,960 $754,732 $(195,175) $686,124
====== ===== ======= ======= ======== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-28-
<PAGE>
CIRCUS CIRCUS ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
Circus Circus Enterprises, Inc. (the "Company") was incorporated February 27,
1974. The Company operates hotel and casino facilities in Las Vegas, Reno and
Laughlin, Nevada and opened Circus Circus-Tunica, a riverboat casino in Tunica,
County Mississippi, on August 29, 1994. It is also a one-third owner of a
casino operation in Windsor, Canada.
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. Material intercompany accounts and
transactions have been eliminated. Investments in 50% or less owned affiliated
companies are accounted for under the equity method.
On November l, 1979, the Company purchased the Slots-A-Fun Casino in Las
Vegas and on February 1, 1983, the Company purchased the Edgewater Hotel and
Casino in Laughlin, Nevada. The excess of the purchase price over the fair
market value of the net assets acquired amounted to $4.2 million for the
purchase of Slots-A-Fun and $9.7 million for the purchase of the Edgewater, and
each is being amortized over a period of 40 years.
CAPITALIZED INTEREST
The Company capitalizes interest costs associated with debt incurred in
connection with major construction projects. When no debt is specifically
identified as being incurred in connection with such construction projects, the
Company capitalizes interest on amounts expended on the project at the Company's
average cost of borrowed money. The amounts capitalized during the years ended
January 31, 1995, 1994 and 1993, were $4.2 million, $18.5 million, and $8.0
million, respectively.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined using
the first-in, first-out and the average cost methods.
CASH EQUIVALENTS
At January 31, 1995 and 1994, cash equivalents (consisting principally of money
market funds and instruments with original maturities of three months or less)
had a cost approximately equal to market value.
INTEREST RATE SWAPS
The Company, from time to time, uses interest rate swaps and similar financial
instruments to assist in managing interest incurred on its long-term debt. The
difference between amounts received and amounts paid under such agreements, as
well as any costs or fees, is recorded as a reduction of, or addition to,
<PAGE>
interest expense as incurred over the life of the swap or similar financial
instrument.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization of property, equipment and leasehold interests are
provided using the straight-line method predominantly over the following
estimated useful lives:
<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
Buildings and improvements 15-45 years
Leasehold improvements 5-16 years
Equipment, furniture and fixtures 3-15 years
Leasehold interests 5-14 years
- --------------------------------------------------------------------------------
</TABLE>
Accumulated amortization of the excess of the purchase price over the fair
market value of the net assets of businesses acquired was $4.0 million, $3.7
million, and $3.3 million as of January 31, 1995, 1994 and 1993, respectively.
REVENUES AND EXPENSES
Revenues include the retail value of rooms, food and beverage furnished
gratuitously to customers. Such amounts are then deducted as complimentary
allowances. The costs of such rooms, food and beverage were included as casino
expenses as follows: $30.6 million, $25.0 million and $23.1 million for the
fiscal years ended January 31, 1995, 1994 and 1993, respectively. For the three
years, approximately 93%-95% of such costs were for food and beverage with the
balance for rooms. Casino revenues are the net difference between the sums
received as winnings and the sums paid as losses.
-29-
<PAGE>
RECLASSIFICATIONS
The financial statements for prior years reflect certain reclassifications,
which have no effect on net income, to conform with classifications adopted in
the current year.
PREOPENING EXPENSES
Preopening expenses consisted principally of direct incremental personnel costs
and advertising and marketing expenses. These costs were capitalized prior to
the opening of the specific project and were charged to expense at the
commencement of operations. For the year ended January 31, 1995, preopening
expenses amounted to $3.0 million and related to the August 29, 1994 opening of
Circus Circus-Tunica. For the year ended January 31, 1994, preopening expenses
amounted to $16.5 million and related to the August 23, 1993 opening of Grand
Slam Canyon and the October 15, 1993 opening of Luxor.
<PAGE>
Note 2. Property, Equipment and Leasehold Interests
Property, equipment and leasehold interests consist of the following:
<TABLE>
<CAPTION>
January 31, (in thousands) 1995 1994
- ---------------------------------------------------------------------
<S> <C> <C>
Land and land leases $ 125,661 $ 101,539
Buildings and improvements 1,024,179 960,999
Equipment, furniture and fixtures 483,147 426,590
Leasehold interests 6,908 6,908
Leasehold improvements 3,709 3,560
- ---------------------------------------------------------------------
1,643,604 1,499,596
Less - accumulated depreciation
and amortization (412,909) (336,287)
- ---------------------------------------------------------------------
1,230,695 1,163,309
Construction in progress 8,367 16,652
- ---------------------------------------------------------------------
$1,239,062 $1,179,961
========== ==========
</TABLE>
Note 3. Long-term Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
January 31, (in thousands) 1995 1994
- ---------------------------------------------------------------------
<S> <C> <C>
Amounts due under corporate debt
program at floating interest rates,
weighted average of 6.1% $210,828 $167,450
7-5/8% Senior Subordinated Debentures
due 2013 150,000 150,000
6-3/4% Senior Subordinated Notes
due 2003 (net of unamortized
discount of $134 and $150) 149,866 149,850
10-5/8% Senior Subordinated Notes
due 1997 (net of unamortized
discount of $42 and $60) 99,958 99,940
Amounts due under bank credit agree-
ments at floating interest rates,
weighted average of 6.5% 22,000 -
Other notes 106 274
-------- --------
632,758 567,514
Less - current portion (106) (169)
-------- --------
$632,652 $567,345
======== ========
</TABLE>
-30-
<PAGE>
The Company has established a corporate debt program whereby it can issue
commercial paper or similar forms of short-term debt. Although the debt
instruments issued under this program are short-term in tenor, they are
classified as long-term debt because (i) they are backed by long-term debt
facilities (see below) and (ii) it is management's intention to continue to
replace such borrowings on a rolling basis as various instruments come due and
to have such borrowings outstanding for longer than one year. To the extent that
the Company incurs debt under this debt program, it must maintain an equivalent
amount of credit available under its revolving credit and term loan agreements
with its bank group.
In September 1993, the Company renegotiated its $350 million reducing
revolver dated April 11, 1990 and its $200 million reducing revolver dated
September 6, 1988. These agreements were replaced by new revolving loan
agreements consisting of a $250 million unsecured 364-day facility and a $500
million unsecured reducing revolver which matures in September 1998 (the
"Revolvers"). The $250 million facility has provisions for annual renewal
subject to the consent of the banks and converts to a two-year term loan if not
renewed. The Revolvers contain financial covenants regarding minimum net worth,
interest charge coverage, maximum leverage ratio, funded debt ratio, new venture
capital expenditures and new venture investments. The maximum available credit
under the $500 million revolver reduces by $60 million on each of March 31,
1997, September 30, 1997 and March 31, 1998. The Revolvers are for general
corporate purposes. The Company currently incurs commitment fees of 22.50 basis
points on the unused portion of the $250 million facility and 27.50 basis points
on the unused portion of the $500 million revolver. As of January 31, 1995, the
Company had $22.0 million of borrowings under the Revolvers. At such date, the
Company had also $210.8 million issued under the corporate debt program thus
reducing, by that amount, the credit available under the Revolvers for purposes
other than repayment of corporate debt. The fair value of the debt issued under
the corporate debt program approximates the carrying amount of the debt due to
the short-term maturities of the individual components of the debt.
In July 1993, the Company issued $150 million principal amount of 6 3/4%
Senior Subordinated Notes (the "6 3/4% Notes") due July 2003 and $150 million
principal amount of 7 5/8% Senior Subordinated Debentures (the "7 5/8%
Debentures") due July 2013, with interest payable each July and January. The 6
3/4% Notes, which were discounted to $149.8 million, and the 7 5/8% Debentures
are not redeemable prior to maturity and are not subject to any sinking fund
requirements. The net proceeds from these offerings were used primarily to repay
borrowings under the Company's corporate debt program. As of January 31, 1995,
the estimated fair value of the 6 3/4% Notes was $133.6 million and the
estimated fair value of the 7 5/8% Debentures was $134.3 million based on the
trading price of these borrowings.
In June 1990, the Company issued $100 million principal amount of 10 5/8%
Senior Subordinated Notes (the "10 5/8% Notes") due June
<PAGE>
1997, with interest payable each June and December. The 10 5/8% Notes, which
were discounted to $99.9 million, are not redeemable prior to maturity and are
not subject to any sinking fund requirements. Holders of the 10 5/8% Notes may
require the Company to repurchase all or any portion of their notes at par upon
the occurrence of both a Designated Event (as defined in the indenture) and a
Rating Decline (as defined in the indenture). As of January 31, 1995, $9.1
million principal amount of the 10 5/8% Notes was owned by one of the Company's
two founders. As of January 31, 1995, the estimated fair value of the 10 5/8%
Notes was $105.6 million based on the trading price of the 10 5/8% Notes.
In April 1987, the Company issued $100 million principal amount of 10 1/8%
Senior Subordinated Notes (the "10 1/8% Notes") due April 1997. The 10 1/8%
Notes, which were discounted to $97.7 million, were retired in April 1992 at the
stated redemption price of 102.89%, using borrowings under the Company's
previous revolvers. The early retirement of the 10 1/8% Notes resulted in an
extraordinary after-tax loss of $3.7 million.
The Company has a policy aimed at managing interest rate risk associated
with its current and future anticipated borrowings. This policy enables the
Company to use any combination of interest rate swaps, futures, options, caps
and similar arrangements. The Company has entered into various interest rate
swaps, principally with its bank group, to manage interest expense, which is
subject to fluctuation due to the variable rate nature of the debt under the
Company's corporate debt program. The Company has interest rate swap agreements
under which it pays a fixed interest rate (weighted average of approximately
8.9%) and receives a variable interest rate (weighted average of approximately
5.8% at January 31, 1995)
-31-
<PAGE>
on $90 million notional amount of "initial" swaps, and pays a variable interest
rate (weighted average of approximately 6.0% at January 31, 1995) and receives a
fixed interest rate (weighted average of approximately 7.6%) on $95 million
notional amount of "reversing" swaps. The net effect of all such swaps resulted
in additional interest expense, due to an interest rate differential which, at
January 31, 1995, was approximately .67% on the total notional amount of the
swaps. The initial swaps have the following termination dates: $35 million in
fiscal 1996, $30 million in fiscal 1997 and $25 million in fiscal 2000. The
reversing swaps expire as follows: $35 million in fiscal 1996, $30 million in
fiscal 1997 and $30 million in fiscal 2002. In addition to the aforementioned
swaps, the Company has entered into an interest rate swap with a notional amount
of $100 million in which the Company pays a floating rate (5.8% at January 31,
1995 and capped at 6.5%) and receives a fixed interest rate of 4.75%. This swap
corresponds in both notional amount and maturity to the Company's 10 5/8% Notes
due in 1997. The variable interest rates which the Company pays or receives
under the various swaps are based primarily upon the London Interbank Offering
Rate (LIBOR). The Company is exposed to credit loss in the event of
nonperformance by the other parties to the interest rate swap agreements.
However, the Company considers the risk of nonperformance by the counterparties
to be minimal because the parties to the swaps and reverse swaps are
predominantly members of the Company's bank group. If the Company had terminated
all swaps as of January 31, 1995, it would have had to pay a net amount of
approximately $1.2 million based on quoted market values from the various
financial institutions holding the swaps.
As of January 31, 1995, under the Company's most restrictive loan covenants,
the Company was restricted as to the payment of dividends or the purchase of its
own capital stock in excess of approximately $92 million and was restricted from
issuing additional debt in excess of approximately $564 million.
Required annual principal payments as of January 31, 1995 are as follows:
<TABLE>
<CAPTION>
Year ending January 31, (in thousands)
- ----------------------------------------------------------------
<S> <C>
1996 $ 106
1997 -
1998 99,958
1999 232,828
2000 -
Thereafter 299,866
- ----------------------------------------------------------------
$632,758
========
</TABLE>
Note 4. Leasing Arrangements
Effective November 1, 1981, the Company entered into an 18-year lease for the
premises on which the Silver City Casino in Las Vegas operates. This lease is
accounted for as an operating lease. The current monthly base rent of $129,982
is subject to annual increases, calculated using a specified index with a cap
based on
<PAGE>
a specified percentage of annual revenues. The lease also provides for profit
participation, which began February 1988. The profit participation is the
amount by which 50% of defined net income exceeds the adjusted base rent. There
was no profit participation rent due for the three years ended January 31, 1995.
The Company also leases various storage facilities and equipment and has
various air space under operating leases expiring individually through 2032. A
portion of the Circus Circus facility in Reno is built on leased land with
various operating leases expiring through 2033. The following is a schedule by
year of future minimum rental payments required as of January 31, 1995 under
these operating leases that have noncancelable lease terms in excess of one
year:
<TABLE>
<CAPTION>
Year ending January 31, (in thousands)
- ----------------------------------------------------------------
<S> <C>
1996 $ 3,170
1997 2,867
1998 2,438
1999 2,287
2000 1,769
Thereafter 8,069
- ----------------------------------------------------------------
$ 20,600
========
</TABLE>
The following schedule shows total rent expense for all leases accounted for as
operating leases:
<TABLE>
<CAPTION>
Year ended January 31,
(in thousands) 1995 1994 1993
- ----------------------------------------------------------------
<S> <C> <C> <C>
Operating rent expense $3,452 $3,262 $3,108
====== ====== ======
</TABLE>
-32-
<PAGE>
Note 5. Income Tax
The components of the provision for income taxes are as follows:
Year ended January 31,
(in thousands) 1995 1994 1993
- -------------------------------------------------------------------------
Current
Federal $56,745 $57,093 $57,719
State 130 - -
------- ------- -------
56,875 57,093 57,719
------- ------- -------
Deferred
Federal 19,254 9,326 4,611
Foreign
2,075 - -
------- ------- -------
21,329 9,326 4,611
------- ------- -------
Total $78,204 $66,419 $62,330
======= ======= =======
The current component of the provision includes $1.2 million, $3.9 million
and $14.1 million for the tax benefit of the exercise of stock options and
warrants for the fiscal years ended January 31, 1995, 1994 and 1993,
respectively. Such amounts reduce the current portion that is actually payable.
The cumulative balance of the deferred tax liability is due predominantly to
temporary book/tax depreciation differences. The components of deferred income
tax expense are as follows:
Year ended January 31,
(in thousands) 1995 1994 1993
- -------------------------------------------------------------------------
Additional depreciation
resulting from the use of
accelerated methods for tax
purposes and straight-line
methods for financial state-
ment purposes $18,598 $9,679 $3,964
Effect of writing off preopening
expenses for financial state-
ment purposes and amortizing
over five years for tax purposes 861 (4,092) 760
Effect of writing off research and
experimental expenses for tax
purposes and capitalizing for
financial statement purposes - 3,385 1,284
Foreign income 2,075 - -
Other - net (205) 354 (1,397)
- -------------------------------------------------------------------------
$21,329 $9,326 $4,611
=============================
The reconciliation of the difference between the Federal statutory tax rate
and the Company's effective tax rate is as follows:
Year ended January 31, 1995 1994 1993
- -------------------------------------------------------------------------
Federal statutory tax rate 35.0% 34.9% 34.1%
<PAGE>
Adjust deferred tax balances for
increase in Federal statutory rate - 1.0 -
Non-deductible employee meals .9 .3 .3
Other .6 .2 (.4)
--------------------------
Effective tax rate 36.5% 36.4% 34.0%
==========================
-33-
<PAGE>
Note 6. Stock Split
In June 1993, the Board of Directors declared a 3-for-2 split of the Company's
common stock, which was paid July 23, 1993, to stockholders of record on July 9,
1993. All share data in the accompanying financial statements has been adjusted
retroactively for the 3-for-2 stock split.
Note 7. Employee Retirement Plans
Approximately 41% of the Company's employees are covered by union-sponsored,
collectively bargained, multi-employer, defined benefit pension plans. The
Company contributed $8.1 million, $6.5 million and $5.2 million during the years
ended January 31, 1995, 1994 and 1993, respectively, for such plans. These
contributions are determined in accordance with the provisions of negotiated
labor contracts and generally are based on the number of hours worked.
The Company also has a profit-sharing, investment and employee stock
ownership plan covering primarily non-union employees who are at least 21 years
of age and have at least one year of service. The plan is a voluntary defined
contribution plan and is subject to the provisions of the Employee Retirement
Income Security Act of 1974. The plan allows for investments in the Company's
common stock as one of the investment alternatives. The Company's contributions
to this plan are determined based on employees' years of service and matching of
employees' contributions, and were approximately $3.3 million, $3.3 million and
$3.1 million in the years ended January 31, 1995, 1994 and 1993. Contributions
may be funded with the Company's stock or cash. The fiscal 1995, 1994 and 1993
contributions were funded in cash.
Note 8. Warrants, Stock Options, Stock Rights and Share Repurchases
WARRANTS
In June 1989, the stockholders approved a stock purchase warrant plan enabling
the Company to offer warrants to its officers and other key employees to
purchase up to 4.5 million shares of the Company's common stock. In accordance
with the provisions of such plan, the 4.5 million warrants were subsequently
issued in June 1989 at a price of $.17 per warrant, with an exercise price of
$14.33 ($.67 per share over the fair market value on the date the warrants were
authorized). Each warrant has a term of seven years, with 50% of the warrants
becoming exercisable two years from the date of grant and the remaining 50%
three years from the date of grant. As of January 31, 1995, warrants
representing 3.5 million shares had been exercised. No warrants were exercised
during the year ended January 31, 1995.
STOCK OPTIONS
The Company also has various stock option plans for executive, managerial and
supervisory personnel as well as the Company's outside directors and
consultants. The plans permit grants of options, performance shares and/or
restricted shares of the Company's common stock. As of January 31, 1995,
options for a total of 17.5 million shares have been granted whereby 5.6 million
shares have been exercised, options for 7.3 million shares have been canceled
and options for 4.6
<PAGE>
million shares remain exercisable at prices ranging from $8.58 to $39.34, with a
weighted average exercise price of $21.77 per share. In November 1994,
replacement options to purchase an aggregate of approximately 3.7 million shares
of the Company's common stock were awarded at an exercise price of $21.25 per
share, subject to the surrender for cancellation of options to purchase a like
number of such shares exercisable at prices in excess of $21.25. During the
year ended January 31, 1995, options for 0.3 million shares were exercised at
prices ranging from $8.58 to $15.29 with a weighted average of $13.02 per share.
As of January 31, 1995, options covering 2.6 million shares remained available
for grant.
The stock options, both incentive and nonqualified, granted prior to 1988
are immediately exercisable. The stock options granted in 1988 and thereafter
are exercisable in one or more installments beginning not less than six months
after the grant date.
-34-
<PAGE>
STOCK RIGHTS
On July 14, 1994, the Company declared a dividend of one common stock
purchase right (the "Rights") for each share of common stock outstanding at the
close of business on August 15, 1994. Until the "Distribution Date" (as
defined), a Right will also accompany each new share of common stock issued by
the Company. Each Right entitles the registered holder thereof, after the Rights
become exercisable and until August 15, 2004 (or the earlier redemption,
exchange or termination of the Rights), to purchase from the Company one share
of common stock at an exercise price of $125, subject to certain antidilution
adjustments. The Rights, unless earlier redeemed, exchanged or voided, will
become exercisable on the earlier to occur of (i) 10 days following a public
announcement that a Person or group of affiliated or associated Persons has
acquired, or obtained the right to acquire, beneficial ownership of 10% or more
of the common stock (an "Acquiring Person"), or (ii) 10 days after a Person or
group commences, or announces an intention to commence, a tender or exchange
offer, the consummation of which would result in the beneficial ownership by a
Person or group of 10% or more of the common stock (the "Distribution Date").
Among other provisions applicable to the Rights, in the event that a person
becomes an Acquiring Person or the Company becomes the surviving corporation in
a merger with an Acquiring Person or any affiliate or associate of an Acquiring
Person and the common stock is not changed or exchanged, each Right, other than
Rights that are or were acquired or beneficially owned by the Acquiring Person
(which Rights will thereafter be void), will thereafter entitle the holder to
receive upon exercise common stock having a market value of two times the
exercise price of the Right. The Rights are redeemable by the Company at a
price of $.01 per Right at any time prior to the close of business on the first
date of public announcement that a person or group has become an Acquiring
Person, and expire on August 15, 2004 (unless earlier redeemed or exchanged),
subject to the Company's right to extend such date. The Rights should not
interfere with any merger or other business combination approved by the
Company's Board of Directors. The Rights are intended to cause substantial
dilution to a person or group that attempts to acquire control of the Company on
terms not approved by the Board of Directors.
SHARE REPURCHASES
During the year ended January 31, 1995, the Company repurchased 0.5 million
shares of its common stock at a cost of $15.0 million. In fiscal 1994, 1.6
million shares were repurchased at a cost of $57.3 million.
Note 9. Earnings Per Share
Earnings per share is computed by dividing net income by the weighted average
number of common shares outstanding during the period. Earnings per share
assuming full dilution is not presented because the exercise of stock options
and stock warrants would not have a material dilutive effect on the per share
amounts. The weighted average number of shares outstanding for the years ended
January 31, 1995, 1994 and 1993 were 85.8 million, 87.0 million and 85.9
million, respectively.
<PAGE>
Note 10. Preferred Stock
The Company is authorized to issue up to 75 million shares of $.01 par value
preferred stock in one or more series having such respective terms, rights and
preferences as are designated by the Board of Directors. No preferred stock has
yet been issued.
-35-
<PAGE>
Note 11. Investments in Joint Ventures
The Company has investments in joint ventures that are accounted for under the
equity method. Under the equity method, original investments are recorded at
cost and adjusted by the Company's share of earnings, losses and distributions
of these companies. Investments in joint ventures consist of the following:
<TABLE>
<CAPTION>
January 31, (in thousands) 1995 1994
- ------------------------------------------------------------------------
<S> <C> <C>
Circus and Eldorado Joint Venture (50%) $55,256 $2,706
(Hotel/Casino, Reno, Nevada)
Windsor Casino Limited (33 1/3%) 5,413 424
(Hotel/Casino, Windsor, Canada)
American Entertainment, L.L.C. (50%) 14,171 73
------- ------
(Riverboat Casino, Chalmette, Louisiana)
$74,840 $3,203
======= ======
</TABLE>
For the year ended January 31, 1995, Windsor Casino Limited contributed
approximately $5.5 million to the Company's operations which is included in
"Other Revenue" on the accompanying consolidated statements of income. As of
January 31, 1995, the Circus and Eldorado Joint Venture and American
Entertainment, L.L.C. were still in the development or construction stage and
had not generated any earnings or losses. For additional information on these
projects, see Note 12 - Commitments and Contingent Liabilities.
Note 12. Commitments and Contingent Liabilities
In December 1993, Windsor Casino Limited, a corporation owned equally by
Circus Circus Enterprises, Inc., Caesars World, Inc. and Hilton Hotels
Corporation or their subsidiaries, was selected to exclusively negotiate an
agreement to design, build and operate a casino complex in Windsor, Ontario,
Canada. As planned, the complex will include casino, showroom and meeting
facilities as well as a 300-room hotel, all located in Windsor's central
business district, immediately across the Detroit River from Detroit, Michigan.
An interim casino, operated by Windsor Casino Limited, opened in May 1994. The
corporation is currently negotiating the agreement for the permanent facility,
which is expected to be completed in 1997, the terms and conditions of which are
still being finalized.
The Company is also a partner in a 50/50 joint venture with the Eldorado
Hotel/Casino, which is developing and will operate a hotel/casino in downtown
Reno, Nevada. Silver Legacy is themed after a turn-of-the-century mining town
and is located on a site adjacent to Circus Circus-Reno and the Eldorado, and
will be connected to both properties by enclosed skyways. The project broke
ground in late 1993 and completion is expected by late July 1995. The cost of
the project is currently estimated at $335 million (excluding capitalized
interest and preopening expenses), of which the venturers will contribute $105
million in equity. As of January 31, 1995, the Company had loaned the joint
venture $58.1 million, which bears interest at 10%. This loan will be reduced
to $25 million upon the closing of the joint venture's $220 million credit
agreement in May 1995 and will be subordinated to
<PAGE>
the indebtedness under that agreement. As a condition to the credit agreement,
the Company will enter into an agreement pursuant to which it will guarantee
completion of Silver Legacy. In addition, the Company will enter into a make-
well agreement with the joint venture whereby it will be obligated to make
additional contributions to the joint venture as may be necessary to maintain a
minimum coverage ratio (as defined in the credit agreement). The company is
also obligated under the joint venture agreement to
-36-
<PAGE>
obtain or provide a $10 million credit line for working capital purposes.
The Company is also a partner in a 50/50 joint venture with American
Entertainment Corporation to develop and operate a riverboat gaming facility in
Louisiana. The riverboat will feature a 30,000-square-foot casino and will be
docked in Chalmette, Louisiana, approximately 20 minutes from downtown New
Orleans. The cost and specifics of the design and funding have yet to be
finalized. The Company is required to contribute $20 million in equity and to
lend the project any amount which cannot be financed by a third party. The
project is currently expected to be completed by late 1995. As of January 31,
1995, the Company had a loan to its joint venture partner of $10 million. The
loan bears interest at the prime rate plus one percentage point and is payable
from the joint venture partner's share of distributions.
The Company anticipates funding these projects from internal cash flows,
project specific financing or its revolving lines of credit, currently at $750
million, of which approximately $517 million was available at January 31, 1995.
Note 13. Subsequent Events
On March 6, 1995, the Company reached an agreement to purchase the Hacienda
Hotel and Casino in Las Vegas, Nevada for $80 million. The Hacienda is located
on 47 acres of land adjacent to Luxor, between I-15 and the Las Vegas Strip, and
contains approximately 1,100 rooms and 50,000 square feet of casino space. Also
in March, the Company purchased approximately 73 acres of undeveloped land at
the northwest corner of Russell Road and the Las Vegas Strip, just south of the
Hacienda, at a cost of $73 million. The acquisition of the Russell Road land
was financed under the Company's bank lines, and the Company anticipates
financing the Hacienda acquisition in a similar manner.
On March 19, 1995, the Company entered into an agreement to acquire a group
of affiliated entities (collectively "Gold Strike Resorts") subject to receipt
of all necessary consents and approvals, including those of gaming regulatory
authorities. The agreement provides for the issuance of approximately 17
million shares of the Company's common stock and the payment of $12 million in
cash in exchange for the equity interests in Gold Strike Resorts, as well as the
Company's assumption of approximately $165 million of debt. Gold Strike Resorts
owns and operates three gaming properties in Nevada (Gold Strike Hotel and
Gambling Hall and Nevada Landing in Jean, and Railroad Pass in Henderson). It
also holds a 50% interest in and operates The Grand Victoria riverboat in Elgin,
Illinois (which opened in October 1994), and is a 50% partner with Mirage
Resorts, Inc., in the development of a major destination resort on the Las Vegas
Strip, for which it serves as managing partner. Provided the requisite
approvals are obtained, the Company anticipates completing the acquisition
during its second quarter.
-37-
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of Circus Circus Enterprises, Inc.:
We have audited the accompanying consolidated balance sheets of Circus Circus
Enterprises, Inc. (a Nevada corporation) and subsidiaries as of January 31, 1995
and 1994 and the related consolidated statements of income, stockholders' equity
and cash flows for each of the three years in the period ended January 31, 1995.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Circus Circus Enterprises, Inc.
and subsidiaries as of January 31, 1995 and 1994 and the results of their
operations and their cash flows for each of the three years in the period ended
January 31, 1995, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Las Vegas, Nevada
February 22, 1995 (except with
respect to matters discussed
in Note 13, as to which the date
is March 19, 1995)
<PAGE>
Management's Report on Financial Statements
The Company is responsible for preparing the consolidated financial statements
and related information appearing in this report. Management believes that the
financial statements present fairly its financial position, results of
operations and cash flows in conformity with generally accepted accounting
principles. In preparing its financial statements, the Company is required to
include amounts based on estimates and judgments which management believes are
reasonable under the circumstances.
The Company maintains accounting and other control systems designed to provide
reasonable assurance that financial records are reliable for purposes of
preparing financial statements and that assets are properly accounted for and
safeguarded. Compliance with these systems and controls is reviewed through a
program of audits by an internal auditing staff.
The Board of Directors fulfills its responsibility for the Company's financial
statements through its audit committee, which is composed solely of directors
who are not Company officers or employees. The audit committee meets from time
to time with the independent public accountants, management and the internal
auditors. The independent public accountants have direct access to the audit
committee, with or without the presence of management representatives.
-38-
<PAGE>
Exhibit 21
Subsidiaries of the Company
Set forth below is information concerning the Company's subsidiaries, each
of which is owned directly by Circus Circus Enterprises, Inc. unless otherwise
noted. Except as otherwise noted, each of such subsidiaries is a corporation.
Jurisdiction of
Incorporation or Percentage of
Name Origination Ownership
---- --------------- -------------
Ramparts, Inc.(1) Nevada 100%
New Castle Corp.(2) Nevada 100%
Circus Circus Casinos, Inc.(3) Nevada 100%
Colorado Belle Corp.(4) Nevada 100%
Edgewater Hotel Corporation(5) Nevada 100%
Slots-A-Fun, Inc.(6) Nevada 100%
Circus Circus Mississippi, Inc.(7) Mississippi 100%
Galleon, Inc. Nevada 100%
Circus Circus Development Corp. Nevada 100%
Pinkless, Inc. Nevada 100%
New Way, Inc. Nevada 100%
Circus Circus Louisiana, Inc. Louisiana 100%
Circus and Eldorado Joint Venture(8) Nevada 50%(9)
American Entertainment, L.L.C.(10) Louisiana 50%(11)
Windsor Casino Limited Ontario 33-1/3%
- ------------------
(1) Doing business as Luxor Hotel & Casino.
(2) Doing business as Excalibur Hotel & Casino.
(3) Doing business as Circus Circus Hotel & Casino - Las Vegas, Circus Circus
Hotel & Casino - Reno and Silver City Casino.
(4) Doing business as Colorado Belle Hotel & Casino.
(5) Doing business as Edgewater Hotel & Casino.
(6) Doing business as Slots-A-Fun Casino.
(7) Doing business as Circus Circus-Tunica.
(8) A general partnership.
(9) Owned by Galleon, Inc.
(10) A limited liability company.
(11) Owned by Circus Circus Louisiana, Inc.
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our report dated February 22, 1995 (except with respect to the matters
discussed in Note 13, as to which the date is March 19, 1995) included (or
incorporated by reference) in Circus Circus Enterprises, Inc.'s Annual Report on
Form 10-K for the year ended January 31, 1995, into the Company's previously
filed Form S-8 Registration Statements File Nos. 2-91950, 2-93578, 33-18278, 33-
29014, 33-39215, 33-56420 and 33-53303.
ARTHUR ANDERSEN LLP
Las Vegas, Nevada
April 24, 1995
-58-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-31-1995
<PERIOD-END> JAN-31-1995
<CASH> 53,764
<SECURITIES> 0
<RECEIVABLES> 8,931
<ALLOWANCES> 0
<INVENTORY> 22,660
<CURRENT-ASSETS> 105,458
<PP&E> 1,651,971
<DEPRECIATION> 412,909
<TOTAL-ASSETS> 1,507,085
<CURRENT-LIABILITIES> 82,008
<BONDS> 632,652
<COMMON> 1,607
0
0
<OTHER-SE> 684,517
<TOTAL-LIABILITY-AND-EQUITY> 1,507,085
<SALES> 1,170,182
<TOTAL-REVENUES> 1,170,182
<CGS> 0
<TOTAL-COSTS> 892,402
<OTHER-EXPENSES> 21,773
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 42,734
<INCOME-PRETAX> 214,490
<INCOME-TAX> 78,204
<INCOME-CONTINUING> 136,286
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 136,286
<EPS-PRIMARY> 1.59
<EPS-DILUTED> 1.59
</TABLE>
