<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. )*
---------
THE SANDS REGENT
--------------------------------------------------------
(Name of Issuer)
Common Stock, par value $.05 per share
--------------------------------------------------------
(Title of Class of Securities)
800091100
--------------------------------------------------------
(CUSIP Number)
Shawn Scott with a copy to:
1055 East Tropicana Avenue Brent Christensen, Esq.
Suite 200 Van Cott, Bagley, Cornwall & McCarthy
Las Vegas, Nevada 89119 50 South Main Street, Suite 1600
(702) 891-9400 Salt Lake City, Utah 84144
--------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
June 27, 1997
--------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the following
box / /.
NOTE: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
*The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which
would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
(Continued on following page(s))
Page 1 of Pages
---
<PAGE>
CUSIP No. 800091100 13D Page 2 of Pages
--------- --- ---
- -------------------------------------------------------------------------------
(1) Names of Reporting Persons. S.S. or I.R.S. Identification Nos. of Above
Persons
Desert Golden Sun, LLC
- -------------------------------------------------------------------------------
(2) Check the Appropriate Box if a Member (a) / /
of a Group* (b) / /
Not Applicable
- -------------------------------------------------------------------------------
(3) SEC Use Only
- -------------------------------------------------------------------------------
(4) Source of Funds*
00 (Borrowed from Third Party)
- -------------------------------------------------------------------------------
(5) Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e) / /
- -------------------------------------------------------------------------------
(6) Citizenship or Place of Organization
Nevada
- -------------------------------------------------------------------------------
Number of Shares (7) Sole Voting
Beneficially Owned Power 2,057,618 shares(1)
by Each Reporting --------------------------------------------------
Person With (8) Shared Voting
Power None.
--------------------------------------------------
(9) Sole Dispositive
Power 2,057,618 shares(1)
--------------------------------------------------
(10) Shared Dispositive
Power None.
- -------------------------------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
2,057,618 shares(1)
- -------------------------------------------------------------------------------
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares*
/ /
- -------------------------------------------------------------------------------
(13) Percent of Class Represented by Amount in Row (11)
45.74%
- -------------------------------------------------------------------------------
(14) Type of Reporting Person*
00 (Limited Liability Company)
- -------------------------------------------------------------------------------
*SEE INSTRUCTION BEFORE FILLING OUT!
(1) As described in Item 4 hereof, pursuant to a Letter Agreement dated June
27, 1997, as amended, the Reporting Person has the right to acquire such
shares, subject to the satisfaction of certain conditions.
<PAGE>
CUSIP No. 800091100 13D Page 3 of Pages
--------- --- ---
- -------------------------------------------------------------------------------
(1) Names of Reporting Persons. S.S. or I.R.S. Identification Nos. of Above
Persons
Shawn Scott
- -------------------------------------------------------------------------------
(2) Check the Appropriate Box if a Member (a) / /
of a Group* (b) / /
Not Applicable
- -------------------------------------------------------------------------------
(3) SEC Use Only
- -------------------------------------------------------------------------------
(4) Source of Funds*
00 (Funds Borrowed from Third Party by Purchasing Entity)
- -------------------------------------------------------------------------------
(5) Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e) / /
- -------------------------------------------------------------------------------
(6) Citizenship or Place of Organization
United States
- -------------------------------------------------------------------------------
Number of Shares (7) Sole Voting
Beneficially Owned Power 2,057,618 shares(1)
by Each Reporting --------------------------------------------------
Person With (8) Shared Voting
Power None.
--------------------------------------------------
(9) Sole Dispositive
Power 2,057,618 shares(1)
--------------------------------------------------
(10) Shared Dispositive
Power None.
- -------------------------------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
2,057,618 shares(1)
- -------------------------------------------------------------------------------
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares*
/ /
- -------------------------------------------------------------------------------
(13) Percent of Class Represented by Amount in Row (11)
45.74%
- -------------------------------------------------------------------------------
(14) Type of Reporting Person*
IN
- -------------------------------------------------------------------------------
*SEE INSTRUCTION BEFORE FILLING OUT!
(1) As described in Item 4 hereof, pursuant to a Letter Agreement dated June
27, 1997, as amended, the Desert Golden Sun, LLC has the right to acquire such
shares, subject to the satisfaction of certain conditions. The Reporting
Person, as the sole manager of Desert Golden Sun, LLC, is deemed to have sole
voting and dispositive powers over such shares.
<PAGE>
Item 1. SECURITY AND ISSUER
This statement relates to the common stock, par value $.05 per share (the
"Common Stock") of The Sands Regent, a Nevada corporation (the "Company"). The
address of the principal executive offices of the Company is 345 North Arlington
Avenue, Reno, Nevada 89501.
Item 2. IDENTITY AND BACKGROUND
This Schedule 13D relates to the direct beneficial ownership in the Shares
(as defined below) by Desert Golden Sun, LLC, a Nevada Limited Liability Company
("DGS"), and the indirect beneficial ownership of Shawn Scott in the Shares.
The business address of DGS and Mr. Scott is 1055 East Tropicana Avenue, Suite
200, Las Vegas, Nevada 89119. Mr. Scott is a citizen of the United States and
the sole manager of DGS. Neither DGS nor Mr. Scott have been convicted in any
criminal proceeding, nor has DGS or Mr. Scott been a party to any civil
proceeding commenced before a judicial or administrative body of competent
jurisdiction as a result of which DGS or Mr. Scott was or is now subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, federal or state securities laws or finding
any violation with respect to such laws.
Item 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Pursuant to a letter agreement dated June 27, 1997, as amended (the "Letter
Agreement") between DGS and each of the shareholders of the Company named
therein (the "Selling Shareholders"), which is filed as Exhibit 2 to this
Schedule 13D and more fully described in Item 4, DGS has agreed to purchase,
subject to certain conditions, and the Selling Shareholders have agreed to sell,
subject to certain conditions, 2,057,618 shares of Common Stock owned by the
Selling Shareholders (the "Shares").
The aggregate consideration to be paid by DGS for the Shares will be
$6,172,854 (the "Purchase Price"). $500,000 (the "Escrow Amount") of the
Purchase Price is to be deposited with an escrow agent in accordance with the
terms of the Letter Agreement. The Escrow Amount is refundable to DGS only
upon certain conditions. DGS borrowed the Escrow Amount from Madeleine LLC, a
limited liability company organized under the laws of the State of New York
("Madeleine"). In addition, DGS may borrow all or a portion of the balance of
the Purchase Price from Madeleine (or its affiliates), although no agreement to
do so has been entered into between Madeleine (or any of its affiliates) and DGS
(or any other person). If DGS does not obtain financing for the Purchase Price
from Madeleine (or its affiliates), DGS intends to borrow the balance of the
Purchase Price from another source.
Item 4. PURPOSE OF TRANSACTION.
DGS has entered into the Letter Agreement to obtain a significant equity
interest in the Company. Upon consummation of the Letter Agreement, DGS will
beneficially own all of the Shares, representing approximately 45.74% of the
outstanding shares of Common Stock as reported by the Company in its Quarterly
Report on Form 10-Q for the quarterly period ended March 31, 1997 (the "March
1997 10-Q").
The obligation of DGS to purchase the Shares is conditioned upon approval
from all appropriate gaming authorities. In addition, the purchase and sale of
the Shares is conditioned upon DGS reaching an agreement within 90 days of the
Letter Agreement with Wells Fargo Bank (the "Bank"), the holder of certain debt
owed by the Company, pursuant to which the Bank
4
<PAGE>
either (i) approves the consummation of the transactions contemplated by the
Letter Agreement or (ii) agrees to allow DGS to purchase the Company's
outstanding debt from the Bank. The Letter Agreement further requires DGS to
consummate the purchase of the Shares on or before November 30, 1997.
The Selling Shareholders have jointly and severally agreed to use their
best efforts to assist DGS in gaining control of the Company's board of
directors promptly after the closing of the purchase of the Shares. It is
anticipated that Pete Cladianos, Jr., Pete Cladianos III and Katherene Latham
will resign as directors of the Company following the closing of the
transactions contemplated by the Letter Agreement and that the Board of
Directors of the Company will fill the vacancies created by such resignations
with nominees of DGS. It is also anticipated that one or more additional
directors nominated by DGS will be appointed to the Board of Directors of the
Company either to fill vacancies created by any additional resignations or an
increase in the number of directors of the Company.
Once DGS has obtained control of the Company's Board of Directors,
Mr. Scott and DGS intend to explore possibilities of enhancing the operations
of the Company, including various marketing approaches and the possibility
of acquiring additional gaming operations. To further these objectives, DGS and
Mr. Scott intend to explore means of obtaining additional capital for the
Company's operations.
Except as described above, Mr. Scott and DGS have no plans or intentions
which would result in or relate to any of the transactions described in
subparagraphs (a) through (j) of Item 4 of Schedule 13D.
The information included in response to Items 3 and 6 hereof is
specifically incorporated herein by reference.
Item 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) Pursuant to the terms of the Letter Agreement, upon consummation
thereof, DGS will directly own 2,057,618 shares of Common Stock of the Company,
which represent approximately 45.74% of the outstanding shares of Common Stock
as reported by the Company in the March 1997 10-Q.
(b) As of the closing date of the transactions contemplated by the Letter
Agreement, DGS will have sole voting and dispositive powers with respect to the
2,057,618 shares of Common Stock. As sole manager of DGS, Shawn Scott will also
be deemed to have sole voting and dispositive powers with respect to the
2,057,618 shares of Common Stock once they have been acquired by DGS.
(c) The information contained in Item 4 of this Schedule 13D concerning
the Letter Agreement entered into by DGS is incorporated herein by reference.
(d) Not Applicable
(e) Not Applicable
Item 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
The information included in response to Item 4 hereof is incorporated
herein by reference.
Except as described above, there are no contracts, arrangements,
understandings or relationships with respect to any securities of the Company
between DGS and any person or between Shawn Scott and any person.
5
<PAGE>
Item 7. MATERIALS TO BE FILED AS EXHIBITS.
1. Agreement of Joint Filing
2. Letter Agreement, as amended, dated as of June 27, 1997, between DGS
and the Selling Shareholders.
3. Demand Promissory Note, dated July 17, 1997, made by Desert Golden
Sun, LLC in favor of Madeleine LLC.
6
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, the
undersigned certify that the information set forth in this statement is true,
complete and correct.
Dated: July 28, 1997
DESERT GOLDEN SUN, LLC
By: /s/ Shawn Scott
-------------------------
Shawn Scott, Manager
/s/ Shawn Scott
----------------------------
Shawn Scott, an Individual
7
<PAGE>
EXHIBIT 1
AGREEMENT OF JOINT FILING
This will confirm the Agreement by and between the undersigned that the
Schedule 13D filed on or about this date, with respect to the beneficial
ownership of the undersigned of shares of the Common Stock of The Sands
Regent, is being filed on behalf of each of the persons named below.
Dated: July 28, 1997
DESERT GOLDEN SUN, LLC
By: /s/ Shawn Scott
--------------------------
Shawn Scott, Manager
/s/ Shawn Scott
-----------------------------
Shawn Scott, an Individual
8
<PAGE>
EXHIBIT 2
Desert Golden Sun, LLC
1055 E. Tropicana Avenue
Suite 200
Las Vegas, Nevada 89119
June 27, 1997
Pete Cladianos, Jr.
345 North Arlington Avenue
Reno, Nevada 89501
Dear Pete:
By execution of this letter agreement (this "Letter Agreement"), each of
the undersigned shareholders (the "Shareholders") of The Sands Regent (the
"Company") hereby irrevocably agrees to sell (the "Purchase") to Desert Golden
Sun, LLC (the "Purchaser") the number of shares of common stock of the Company
set forth opposite such Shareholder's name on Exhibit A annexed hereto, totaling
2,057,618 shares (collectively, the "Shares"), upon the terms and conditions set
forth herein.
1. Consideration for the Purchase. As consideration for entering
into this Letter Agreement, the Purchaser shall pay to the Shareholders an
aggregate amount of $100.00. Within Five (5) days of the date of this
Letter Agreement, the Purchaser shall place in escrow, upon terms
mutually agreeable to the parties hereto, $499,900.00 (the "Escrow Amount").
The Purchaser shall have Twenty-One (21) days from the date of this
Letter Agreement to commence proceeding for approval from all appropriate
gaming authorities. The Purchaser shall have Ninety (90) days from the date
of this Letter Agreement to negotiate with Wells Fargo Bank (the "Bank"),
the holder of certain debt owed by the Company, to receive the Bank's
approval of the consummation of the transaction outlined herein or to
purchase the Company's debt from the bank. If the Purchaser does not
reach agreement with the Bank, this Letter Agreement will terminate
and the Escrow Amount will be returned to the Purchaser. The Shareholders
will not be obligated to place the Shares in the escrow until (i) an agreement
between the Bank and the Purchaser has been reached, or (ii) the
Purchaser has placed the entire Purchase Price in escrow.
The Escrow Amount shall be immediately payable to the Shareholders, and
credited toward the Purchase Price, if, on or before the Expiration Date, the
Purchaser has received all requisite approvals from all applicable gaming and
regulatory authorities with respect to the Purchase. The Escrow Amount shall
be payable to the Shareholders if the Purchase is not consummated as a
consequence of the Purchaser's breach of any representation, warrant or
covenant set forth herein. The Escrow Amount shall not be payable to the
Shareholders and it shall be refunded to the Purchaser by the Shareholders if
previously distributed, if any approvals received from gaming authorities have
been rescinded or cease to be in effect or if the Shareholders have breached
any representation, warranty or covenant set forth herein. If the Bank
rescinds its consent to the transaction contemplated hereby or fails to
consummate the sale of the Company's debt to the Purchaser, then the Purchaser
still has the obligation to proceed to consummate the purchase of the Stock.
2. Closing. The Purchaser shall have until November 30, 1997 (the
"Expiration Date") to consummate the Purchase (the "Closing"). The Purchaser
shall notify the Shareholders of the date of Closing by written notice.
3. Purchase Price. The Purchase shall be consummated upon payment by
the Purchaser to the Shareholders of a total of $6,172,854 (i.e. $3.00 per
Share) (the "Purchase Price") in cash at the Closing, inclusive of the Escrow
Amount, pursuant to definitive agreements reasonably acceptable to the parties
hereto.
9
<PAGE>
In addition, Purchaser agrees to compensate Shareholders for all of their
costs and expenses associated with the Purchase, including attorneys fees,
provided, however, that such costs and expenses shall not exceed $35,000.
4. Representations of the Shareholders. Each of the Shareholders,
jointly and severally, represents, warrants and covenants that as of the date
hereof and through the Closing (i) each Shareholder owns and will own the
Shares set forth opposite such Shareholder's name on Schedule A hereto free
and clear of any lien or encumbrance, (ii) each Shareholder has and will have
the authority to enter into the Letter Agreement and perform its obligations
hereunder and (iii) this Letter Agreement is and will be enforceable against
each Shareholder in accordance with its terms.
5. Representations of the Purchaser. The Purchaser, and Shawn Scott
individually, jointly and severally, represent, warrant and covenant that as
of the date hereof through the Closing (i) Shawn Scott has and will have the
authority to enter into the Letter Agreement on behalf of the Purchaser, (ii)
Purchaser has the authority to perform its obligations hereunder (iii) this
Letter Agreement is and will be enforceable against Purchaser in accordance
with its terms and (iv) the Shares will not be acquired by Purchaser with a
view to the distribution thereof within the meaning of the Securities act of
1933, as amended.
6. Definitive Documentation: Best Efforts; Control of Board. Each of the
Shareholders jointly and severally agrees to cause the Company to make
available to the Purchaser and its representatives, such information as the
Purchaser may reasonably request. Except as may be required by applicable law
or applicable regulatory or governmental authorities and regulations,
non-public information thus obtained by the Purchaser will be treated as
confidential and, if the Purchase is not consummated, all documents or copies
thereof obtained by the Purchaser will be returned to the Company or the
Shareholders. Each of the Shareholders jointly and severally agrees to use
best efforts to enter into definitive documentation prior to the Expiration
Date and to cooperate with the Purchaser and the applicable gaming and
regulatory authorities in obtaining prior to the Expiration Date all requisite
approvals from such authorities for the Purchase. The shareholders jointly and
severally agree to use their best efforts to assist the Purchaser in gaining
control of the Company's board of directors promptly after the Closing.
7. Operation of Business; No Other Sale. After the date hereof and
prior to the termination of the Letter Agreement, each of the Shareholders
jointly and severally agrees to cause the Company to be operated in the
ordinary course of business. The Shareholders jointly and severally agree that
none of them will accept any other offer to obtain control of, or ownership
or, all or any portion of the Shares prior to the Expiration Date.
8. Employment Agreements. After the Closing, Pete Cladianos, Jr., and
Pete Cladianos, III, have agreed to continue their employment with the
Company. The basic terms for employment are set forth on Exhibit B which is
attached to this Letter Agreement and made a part of it by this reference.
Pete Cladianos, Jr., and Pete Cladianos, III, have agreed to be bound by the
terms of those agreements. The parties will enter into formal employment
agreements, the execution of which will be a condition of Closing.
9. No Purchase of Bank Debt. The Shareholders jointly and severally
agree that they will not, directly or indirectly, purchase the Company's debt
to the Bank.
10. No Public Announcement. None of the Shareholders, on the one hand,
or the Purchaser, on the other hand, will make any public statement or
announcement with respect to the subject matter of this Letter Agreement
without the prior approval of the other, except that in the event the parties
are unable to agree on a public statement or announcement and legal counsel
for a party is of the opinion that such statement or announcement is required
by law, then such party may issue the legally required statement or
announcement.
11. Termination. This Letter Agreement shall terminate if the Closing
has not occurred by November 30, 1997 (the "Expiration Date") or as provided
in Sections 1 above unless extended by mutual written agreement among the
parties hereto.
10
<PAGE>
12. Enforceability. The Shareholders' obligation to sell the Shares on
the terms set forth in paragraph 3 shall be binding upon the Shareholders
during the term of this Letter Agreement. This Letter Agreement is a binding
and enforceable agreement between the parties hereto, and each party agrees
not to institute or participate in any proceeding seeking to establish that
this Letter Agreement does not constitute a binding and enforceable agreement.
The representations, warranties and covenants herein shall survive the
Closing. All parties shall be considered the draftsman of the Letter Agreement
in any dispute where that issue is relevant.
13. Governing Law. This Letter Agreement may be governed by the laws of
the state of Nevada applicable to agreements made and to be performed entirely
within such State.
14. Exclusive Jurisdiction. It is agreed that the Second Judicial
District Court of the State of Nevada, in and for the County of Washoe, shall
be the sole and exclusive forum for the resolution of any disputes arising
among any of the parties to this Letter Agreement. In the event that any
litigation commenced in the Second Judicial District Court of the State of
Nevada, in and for the County of Washoe, is properly removable to a Federal
Court under the laws of the United States of America, such removal shall take
place if the legal basis for removal exists; provided, however, that the
parties to this Letter Agreement agree that the exclusive venue of the Federal
forum for the resolution of any disputes shall be the United States District
Court for the District of Nevada, Northern Nevada Division, located in Reno,
Nevada.
15. Counterparts. This Letter Agreement may be executed in counterparts,
each of which shall be an original, and all of which together shall constitute
one and the same Letter Agreement.
16. Attorney's Fees. If a legal action or other proceeding is brought
for enforcement of the Letter Agreement because of an alleged dispute, breach,
default, or misrepresentation in connection with any of the provisions of this
Letter Agreement, the successful or prevailing party shall be entitled to
recover reasonable attorney's fees and costs incurred, both before and after
judgment, in addition to any other relief to which they may be entitled.
If this Letter Agreement accurately reflects our understanding, please so
indicate by signing the original and duplicate of this letter and returning a
fully executed copy to the undersigned.
Very truly yours,
Desert Golden Sun, LLC
By: /s/ Shawn Scott
-------------------------------
Shawn Scott, Manager
/s/ Pete Cladianos Jr. /s/ Pete Cladianos Jr.
- --------------------------------- ----------------------------------
PETE CLADIANOS, JR., Trustee PETE CLADIANOS, JR., Trustee of the
of the Pete Cladianos, Jr. Trust Pete Cladianos, Jr. Trust
FBO Allison Cladianos FBO Leslie Cladianos
/s/ Pete Cladianos, Jr. /s/ Katherene Johnson Latham
- --------------------------------- ----------------------------------
11
<PAGE>
PETE CLADIANOS, JR., Trustee KATHERENE JOHNSON LATHAM, Trustee
of the Antonia Cladianos II Grantor of the Katherene J. Latham 1988
Retained Annuity Trust Trust (Living Trust)
/s/ Pete Cladianos, Jr. /s/ Deborah R. Lundgren
- --------------------------------- ----------------------------------
PETE CLADIANOS, JR., Trustee DEBORAH R. LUNDGREN, Trustee
of the Pete Cladianos, Jr. Trust of the Deborah R. Lundgren 1986
FBO Antonia Cladianos II Trust (Living Trust)
/s/ Pete Cladianos, Jr. /s/ Deborah R. Lundgren
- --------------------------------- ----------------------------------
PETE CLADIANOS, JR., Trustee DEBORAH R. LUNDGREN, Trustee
of the Katherene Johnson Latham Trust of the Gregory Kent Lundgren Trust
FBO Antonia Cladianos II
/s/ Pete Cladianos, Jr. /s/ Deborah R. Lundgren
- --------------------------------- ----------------------------------
PETE CLADIANOS, JR., Trustee DEBORAH R. LUNDGREN, Trustee
of the Second Amended of the Pete Cladianos, Jr. Trust
Antonia Cladianos II Trust FBO Gregory K. Lundgren
/s/ Pete Cladianos, Jr. /s/ Deborah R. Lundgren
- --------------------------------- ----------------------------------
PETE CLADIANOS, JR., Trustee DEBORAH R. LUNDGREN, Trustee
of the Pete Cladianos III Grantor of the Katherene Johnson Latham
Retained Annuity Trust Trust FBO Gregory K. Lundgren
/s/ Pete Cladianos, Jr. /s/ Pete Cladianos, Jr.
- --------------------------------- ----------------------------------
PETE CLADIANOS, JR., Trustee DEBORAH R. LUNDGREN, Trustee
of the Pete Cladianos Jr. Trust of the Katherene R. Lundgren Trust
FBO Pete Cladianos III
/s/ Pete Cladianos, Jr. /s/ Deborah R. Lundgren
- --------------------------------- ----------------------------------
PETE CLADIANOS, JR., Trustee DEBORAH R. LUNDGREN, Trustee
of the Katherene Johnson Latham Trust of the Pete Cladianos, Jr. Trust
FBO Pete Cladianos III FBO Katherene R. Lundgren
/s/ Pete Cladianos, Jr. /s/ Deborah R. Lundgren
- --------------------------------- ----------------------------------
PETE CLADIANOS, JR., Trustee DEBORAH R. LUNDGREN, Trustee
of the Second Amended of the Katherene Johnson Latham
Pete Cladianos III Trust Trust FBO Katherene R. Lundgren
12
<PAGE>
/s/ Pete Cladianos, Jr. /s/ Deborah R. Lundgren
- --------------------------------- ----------------------------------
PETE CLADIANOS, JR., Trustee DEBORAH R. LUNDGREN, Custodian
of the Leslie Cladianos Grantor for Katherene R. Lundgren under
Retained Annuity Trust Nevada Uniform Transfers to Minors
Act
/s/ Pete Cladianos, Jr. /s/ Pete Cladianos, Jr.
- -------------------------------- ----------------------------------
PETE CLADIANOS, JR., Trustee PETE CLADIANOS, JR., Trustee
of the Katherene Johnson Latham Trust of the Pete Cladianos, Jr. Living
FBO Leslie Cladianos Trust
PETE CLADIANOS, JR. PETE CLADIANOS, III
13
<PAGE>
EXHIBIT "A"
Number of
Shareholder Date of Trust Shares
Pete Cladianos, Jr. Trust FBO Allison 12/09/91 6,293
Cladianos, Pete Cladianos, Jr., Trustee
Antonia Cladianos II Grantor Retained Annuity 08/13/93 100,000
Trust, Pete Cladianos, Jr., Trustee
Pete Cladianos, Jr. Trust FBO Antonia 12/22/86 17,013
Cladianos II, Pete Cladianos, Jr., Trustee
Katherene Johnson Latham Trust FBO Antonia 12/22/86 10,567
Cladianos II, Pete Cladianos, Jr., Trustee
Second Amended Antonia Cladianos II Trust 02/22/87 213,376
Pete Cladianos, Jr., Trustee
Pete Cladianos III Grantor Retained Annuity 08/13/93 100,000
Trust, Pete Cladianos, Jr., Trustee
Pete Cladianos, Jr. Trust FBO Pete Cladianos 12/22/86 17,013
III, Pete Cladianos, Jr., Trustee
Katherene Johnson Latham Trust FBO Pete 12/22/86 10,567
Cladianos III, Pete Cladianos, Jr., Trustee
Second Amended Pete Cladianos III Trust, Pete 02/19/87 224,162
Cladianos, Jr., Trustee
Leslie Cladianos Grantor Retained Annuity 08/13/93 200,000
Trust, Pete Cladianos, Jr., Trustee
Pete Cladianos, Jr. Trust FBO Leslie 11/26/91 17,103
Cladianos, Pete Cladianos, Jr., Trustee
Katherene Johnson Latham Trust FBO Leslie 12/08/92 2,949
Cladianos, Pete Cladianos, Jr., Trustee
Pete Cladianos, Jr. Living Trust, Pete 05/25/89 156,041
Cladianos, Jr., Trustee
Katherene J. Latham 1988 Trust (Living 08/08/88 345,674
14
<PAGE>
Trust), Katherene J. Latham, Trustee
Deborah R. Lundgren 1986 Trust (Living 09/03/86 547,026
Trust), Deborah R. Lundgren, Trustee
Gregory Kent Lundgren Trust Deborah R. 03/29/93 28,175
Lundgren, Trustee
Pete Cladianos, Jr. Trust FBO Gregory K. 12/01/88 10,659
Lundgren, Deborah R. Lundgren, Trustee
Katherene Johnson Latham Trust FBO Gregory K. 12/01/88 6,083
Lundgren, Deborah R. Lundgren, Trustee
Katherene R. Lundgren Trust, Deborah R. 03/29/93 28,175
Lundgren, Trustee
Pete Cladianos, Jr., Trust FBO Katherene R. 12/22/86 10,659
Lundgren, Deborah R. Lundgren, Trustee
Katherene Johnson Latham Trust FBO Katherene 12/22/86 6,083
R. Lundgren, Deborah R. Lundgren, Trustee
2,057,618
---------
---------
15
<PAGE>
EXHIBIT "B"
The employment agreements would be structured as follows:
Terms of agreements to be 72 months.
For Pete Cladianos, Jr., compensation will be $20,000 per month for the
first 36 months and $15,000 per month for the next 36 months. For Pete
Cladianos, III, compensation will be $10,000 per month for the first 36 months
and $15,000 for the next 36 months. These amounts will be adjusted annually to
reflect changes in the Consumer Price Index.
Both will receive:
Company rental car provide through rental care agency for the term.
Membership in Prospectors Club for the term.
Membership in Montreux or similar comparable facility for the term.
Health Insurance at a level comparable to current coverage for the term.
Declining term life insurance in an amount equal to the remaining
unpaid balance of the agreed salary for the term.
Indemnity from the lawsuit regarding the Copa Casino from The Company.
The agreements will be structured in a way that if Pete Cladianos, Jr., and
Pete Cladianos, III, determine that it would be more advantageous to shift
workload to one or the other of them, that compensation will be adjusted to take
into account that determination.
The agreements will not become effective until approved by the Company's
board of directors. The buyer agrees to use his best efforts to secure
approval of the board. In the event the agreements are disapproved or modified
by the board of directors, Purchaser will make a payment to Pete Cladianos,
Jr., and Pete Cladianos, III, equal to the value of the agreements outlined
above, or, if the modified agreements are acceptable to Pete Cladianos Jr.,
and Pete Cladianos, III, in their sole discretion, the difference between the
value of the agreements outlined above and the value of the modified
agreements.
16
<PAGE>
Desert Golden Sun, LLC
1055 E. Tropicana Avenue
Suite 200
Las Vegas, Nevada 89119
July 15, 1997
Pete Cladianos, Jr.
345 North Arlington Avenue
Reno, Nevada 89501
Dear Pete:
By execution of this letter agreement amendment ("Amendment"), each of
the undersigned shareholders (the "Shareholders") of The Sands Regent (the
"Company") hereby agrees to amend the Letter Agreement dated June 27, 1997,
between Desert Golden Sun, LLC (the "Purchaser") and the Shareholders (the
"Letter Agreement"). Any capitalized words not defined herein will have the
meaning ascribed to them in the Letter Agreement. Sections 1 and 6 of the
Letter Agreement are amended in their entirety to read as follows:
1. Consideration for the Purchase. As consideration for entering
into this Letter Agreement, the Purchaser shall pay to the Shareholders an
aggregate amount of $100.00. Within Five (5) days of the date of this
Letter Agreement, the Purchaser shall place in escrow, upon terms
mutually agreeable to the parties hereto, $499,900.00 (the "Escrow Amount").
The Purchaser shall have Twenty-One (21) days from the date of this Letter
Agreement to commence proceeding for approval from all appropriate gaming
authorities.
The purchaser shall have until the Closing to to negotiate with Wells
Fargo Bank (the "Bank"), the holder of certain debt owed by the Company (the
"Debt"), to receive the Bank's approval of the consummation of the Purchase or
to purchase the Debt from the Bank. The Purchaser may also choose to attempt
to reach an agreement with the Company to protect the Company from any action
by the Bank to accelerate the maturity date of the Debt due to the Closing. If
the Purchaser does not receive approval from the Bank and does not reach
agreement with the Company, either the Shareholders or the Purchaser shall
have the right to terminate this Agreement;
The Escrow Amount shall be immediately payable to the Shareholders,
and credited toward the Purchase Price, if, on or before the Expiration Date,
the Purchaser has received all requisite approvals from all applicable gaming
and regulatory authorities with respect to the Purchase. The Escrow Amount
shall be payable to the Shareholders if the Purchase is not consummated as a
consequence of the Purchaser's breach of any representation, warrant or
covenant set forth herein. The Escrow Amount shall not be payable to the
Shareholders and it shall be refunded to the Purchaser by the Shareholders if
previously distributed, if any approvals received from gaming authorities have
been rescinded or cease to be in effect or if the Shareholders have breached
any representation, warranty or covenant set forth herein, or if the Purchaser
is not able to reach agreement with the Bank or the Company regarding the Debt
as outlined in the above paragraph.
6. Definitive Documentation: Best Efforts; Control of Board. Each of
the Shareholders jointly and severally agrees to cause the Company to make
available to the Purchaser and its representatives, such information as the
Purchaser may reasonably request. Except as may be required by applicable law
or applicable regulatory or governmental authorities and regulations,
non-public information thus obtained by the Purchaser will be treated as
confidential and, if the Purchase is not consummated, all documents or copies
thereof obtained by the Purchaser will be returned to the Company or the
Shareholders. Each of the Shareholders jointly and severally agrees to use
best efforts to enter into definitive documentation prior to the Expiration
Date and to cooperate with the Purchaser and the applicable gaming and
regulatory authorities in obtaining prior to the Expiration Date all requisite
approvals from such authorities for the Purchase. The shareholders jointly and
severally agree to use their best efforts to assist the Purchaser in gaining
control of the Company's board of directors promptly after the Closing. The
Shareholders agree, prior to Closing, to take all actions within their power,
to move the next annual meeting of the shareholders of the Company to as soon
as is practicable after the Closing, and to ensure that a majority of the
board of directors will be elected at that annual meeting.
If this Amendment accurately reflects our understanding, please so
indicate by signing the original and duplicate of this letter and returning a
fully executed copy to the undersigned.
Very truly yours,
Desert Golden Sun, LLC
By: /s/ Shawn Scott
-------------------------------
Shawn Scott, Manager
17
<PAGE>
/s/ Pete Cladianos, Jr. /s/ Pete Cladianos, Jr.
- --------------------------------- ----------------------------------
PETE CLADIANOS, JR., Trustee PETE CLADIANOS, JR., Trustee of the
of the Pete Cladianos, Jr. Trust Pete Cladianos, Jr. Trust
FBO Allison Cladianos FBO Leslie Cladianos
/s/ Pete Cladianos, Jr. /s/ Katherene Johnson Latham
- --------------------------------- ----------------------------------
PETE CLADIANOS, JR., Trustee KATHERENE JOHNSON LATHAM, Trustee
of the Antonia Cladianos II Grantor of the Katherene J. Latham 1988 Trust
Retained Annuity Trust (Living Trust)
/s/ Pete Cladianos, Jr. /s/ Deborah R. Lundgren
- --------------------------------- ----------------------------------
PETE CLADIANOS, JR., Trustee DEBORAH R. LUNDGREN, Trustee
of the Pete Cladianos, Jr. Trust of the Deborah R. Lundgren 1986 Trust
FBO Antonia Cladianos II (Living Trust)
/s/ Pete Cladianos, Jr. /s/ Deborah R. Lundgren
- --------------------------------- ----------------------------------
PETE CLADIANOS, JR., Trustee DEBORAH R. LUNDGREN, Trustee
of the Katherene Johnson Latham Trust of the Gregory Kent Lundgren Trust
FBO Antonia Cladianos II
/s/ Pete Cladianos, Jr. /s/ Deborah R. Lundgren
- --------------------------------- ----------------------------------
PETE CLADIANOS, JR., Trustee DEBORAH R. LUNDGREN, Trustee
of the Second Amended of the Pete Cladianos, Jr. Trust
Antonia Cladianos II Trust FBO Gregory K. Lundgren
/s/ Pete Cladianos, Jr. /s/ Deborah R. Lundgren
- --------------------------------- ----------------------------------
PETE CLADIANOS, JR., Trustee DEBORAH R. LUNDGREN, Trustee
of the Pete Cladianos III Grantor of the Katherene Johnson Latham Trust
Retained Annuity Trust FBO Gregory K. Lundgren
18
<PAGE>
/s/ Pete Cladianos, Jr. /s/ Deborah R. Lundgren
- --------------------------------- ----------------------------------
PETE CLADIANOS, JR., Trustee DEBORAH R. LUNDGREN, Trustee
of the Pete Cladianos Jr. Trust of the Katherene R. Lundgren Trust
FBO Pete Cladianos III
/s/ Pete Cladianos, Jr. /s/ Deborah R. Lundgren
- --------------------------------- ----------------------------------
PETE CLADIANOS, JR., Trustee DEBORAH R. LUNDGREN, Trustee
of the Katherene Johnson Latham Trust of the Pete Cladianos, Jr. Trust
FBO Pete Cladianos III FBO Katherene R. Lundgren
/s/ Pete Cladianos, Jr. /s/ Deborah R. Lundgren
- --------------------------------- ----------------------------------
PETE CLADIANOS, JR., Trustee DEBORAH R. LUNDGREN, Trustee
of the Second Amended of the Katherene Johnson Latham Trust
Pete Cladianos III Trust FBO Katherene R. Lundgren
/s/ Pete Cladianos, Jr. /s/ Deborah R. Lundgren
- --------------------------------- ----------------------------------
PETE CLADIANOS, JR., Trustee DEBORAH R. LUNDGREN, Custodian
of the Leslie Cladianos Grantor for Katherene R. Lundgren under Nevada
Retained Annuity Trust Uniform Transfers to Minors Act
/s/ Pete Cladianos, Jr. /s/ Pete Cladianos, Jr.
- --------------------------------- ----------------------------------
PETE CLADIANOS, JR., Trustee PETE CLADIANOS, JR., Trustee
of the Katherene Johnson Latham Trust of the Pete Cladianos, Jr. Living Trust
FBO Leslie Cladianos
PETE CLADIANOS, JR. PETE CLADIANOS, III
19
<PAGE>
EXHIBIT 3
DEMAND PROMISSORY NOTE
$500,000.00 New York, New York
July 16, 1997
ON DEMAND, the undersigned, Desert Golden Sun, LLC, a Nevada
limited liability company (the "Borrower"), HEREBY PROMISES TO PAY to
the order of Madeleine LLC (the "Lender"), (i) the principal sum of Five
Hundred Thousand Dollars ($500,000.00) or, if less, the aggregate unpaid
principal amount of the Loan (as hereinafter defined) made by the Lender
to the Borrower, and (ii) interest on any and all principal amounts
remaining unpaid hereunder from time to time outstanding, from the date
hereof until such principal amounts become due, to be added to the principal
amount of the Loan (commencing on July 1, 1997) while any principal
amount remains unpaid hereunder and on the day of demand, at rate per
annum of 15%.
I. (a) Any amount of principal of and (to the extent permitted by law)
interest on any Loan that is not paid on demand shall bear interest from the
day when due until such amount is paid in full, payable on demand, at an
interest rate per annum of 20% (the "Default Rate"). All interest shall be
computed on the basis of a year of 360 days for the actual number of days
(including the first day but excluding the last day) elapsed.
Notwithstanding any other provision of this Note, interest paid or
becoming due hereunder shall in no event exceed the maximum rate
permitted by applicable law.
(b) This Note evidences the loan (the "Loan") that the Lender made to
the Borrower on the date hereof. The Lender may conclusively rely on the
borrowing resolutions of the Borrower's managing member previously
delivered to the Lender, as such resolutions may be amended or
superseded from time to time, provided that any such amending or
superseding resolutions shall have been certified by the Secretary or an
Assistant Secretary of the Borrower, and a copy thereof, so certified,
shall have been delivered to the Lender. The Loan shall be conclusively
presumed to have been made to or for the benefit of the Borrower.
(c) The Lender shall maintain an account on its books in the name of
the Borrower (the "Loan Account") on which the Borrower will be charged
with the Loan, including all accrued interest, all fees, all expenses
incurred by Lender in connection with this Note and the transactions
contemplated thereby and any other obligations of Borrower to Lender. The
Borrower authorizes the Lender to charge the Loan Account with such
interest, fees, expenses and other obligations and acknowledge that such
charges will be made at Lender's discretion and shall constitute a further
Loan to the Borrowers.
(d) If any amount payable hereunder shall be due on a Saturday, Sunday
or other day on which natural banks are required or authorized to close (any
other day being a "Business Day"), such payment may be made on the next
succeeding Business Day, and such extension of time shall in such case be
included in the computation of interest payable hereon.
(e) Both principal and interest are payable in lawful money of the
United States and in immediately available funds at the offices of the
Lender located at 450 Park Avenue, 28th Floor, New York, N.Y. 10022, or at
such other place as the Lender shall designate in writing to the Borrower.
Payments received by the Lender after 2:00 p.m. New York City time on a
Business Day will be deemed to be received on the next Business Day.
(f) The Borrower may prepay the Loan under this Note, in whole at any
time, without penalty or premium, such prepayment to be accompanied by the
payment of accrued interest to the date of such prepayment on the amount
prepaid.
II. The Borrower represents and warrants as follows: (a) it is a
limited liability company duly organized, validly existing and in good
standing under the laws of the State of Nevada; (b) the execution, delivery
and performance by the Borrower of this Note and each other instrument,
agreement and other document delivered by the Borrower to the Lender in
connection with this Note (the Note, together with all such other
agreements, instruments and other documents, are hereinafter referred
to individually as a "Document" and collectively as the "Documents")
are within the Borrower's powers, have been duly authorized by all
necessary action, and do not contravene the Borrower's operating agreement;
(c) no authorization or approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body is required
for the due execution, delivery and performance by the Borrower of any
Document; and (d) each Document constitutes the legal, valid and
binding obligation of the Borrower, enforceable against the Borrower in
accordance with its terms.
III. The Lender may at any time (in its sole and absolute discretion)
(i) declare the outstanding principal amount of this Note and all other
amounts due under this Note to be immediately due and payable, whereupon
the outstanding principal amount of all Loans under this Note and all such
other amounts shall become and shall be forthwith due and payable, without
diligence, presentment, demand, protest or other notice of any kind, all of
which are hereby expressly waived, and (ii) exercise any and all of its
other rights under applicable law, under this Note and under the other
Documents.
IV. All payments made by the Borrower under this Note will be made
without setoff, counterclaim or other defense.
20
<PAGE>
V. (a) All notices or other communications provided for hereunder shall be
in writing (including telecommunications) and shall be mailed, telecopied,
telexed, telegraphed or delivered to the Borrower at the address of the
Borrower set forth next to its signature, or at such other address as
may hereafter be specified by the Borrower to the Lender (at its address
set forth herein) in writing. All notices and communications shall be
effective (i) if mailed, when received or three days after mailing,
whichever is earlier, (ii) if telecopied, when transmitted, and (iii) if
delivered, upon delivery.
(b) No failure on the part of the Lender to exercise, and no delay
in exercising, any right, power, privilege or remedy hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise
thereof by the Lender preclude any other or further exercise thereof or
the exercise of any other right, power, privilege or remedy of the
Lender. No amendment or waiver of any provision of this Note, nor consent to
any departure by the Borrower therefrom, shall in any event be effective
unless the same shall be in writing and signed by the Lender, and then such
waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given.
(c) Any provision hereof which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective only to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof or affecting the validity or enforceability of
such provision in any other jurisdiction.
(d) The Borrower hereby agrees to pay on demand all costs and
expenses (including, without limitation, all fees, expenses and other
client charges of counsel to the Lender) incurred by the Lender in
connection with (i) the preparation, execution, delivery, administration
and amendment of this Note and the other Documents, and (ii) the enforcement
of the Lender's rights, and the collection of all amounts due, hereunder.
(e) This Note shall be governed by, and construed in accordance with,
the laws of the State of New York.
DESERT GOLDEN SUN, LLC
By: /s/ SHAWN SCOTT
------------------------------
Name: Shawn Scott
Title: Managing Member
Address:
1055 East Tropicana Ave., Suite 200
Las Vegas, Nevada 89119
Attention: Mr. Shawn Scott
Telephone: 702-891-9400
Telecopier: 702-891-9401
21
