UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 10-KSB
_X_ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 1995
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ___________
Commission file number: 0-18864
DEBBIE REYNOLDS HOTEL & CASINO, INC.
(Exact name of Registrant as specified in its charter)
Nevada 88-0335924
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
305 Convention Center Drive
Las Vegas, Nevada 89109
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(702) 734-0711
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.0001 par value
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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, and (2) has been subject to such filing
requirements for the past 90 days.
(1) Yes ___ No _X_
(2) Yes _X_ No ___
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B, and no disclosure will be contained, to the best of
Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendments to
this Form 10-KSB. [X]
The Company's revenues for its most recent fiscal year were $9,790,000. The
aggregate market value of the voting stock held by nonaffiliates (based upon the
average of
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the bid and asked price of these shares on the over-the-counter market) as of
December 24, 1996 was approximately $4,633,500.
Class Outstanding at December 24, 1996
Common Stock, $.0001 par value 12,522,831 shares
Documents incorporated by reference: None
Transitional Small Business Disclosure Format:
Yes ___ No _X_
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DEBBIE REYNOLDS HOTEL & CASINO, INC.
FORM 10-KSB
PART I
Item 1. Description of Business.
(a) Business Development. Debbie Reynolds Hotel & Casino, Inc., formerly
Halter Venture Corporation (the "Company" or the "Registrant") originally was
incorporated on January 10, 1986 under the laws of the State of Texas. From
inception until late 1992, the Company engaged in the business of breeding,
training and racing thoroughbred race horses. The Company acquired SWTV
Production Services, Inc. ("SWTV"), a mobile television production company, on
May 3, 1993 and its operations from that date through March 22, 1994 consisted
solely of the direct operations of SWTV.
Effective March 22, 1994, the Company acquired Maxim Properties Company
("Maxim"), a privately held Colorado corporation, and Debbie Reynolds Management
Company, Inc., formerly Debbie Reynolds Hotel & Casino, Inc. ("DRHC") and
Hamlett Production, Ltd. ("HPL"), both privately held Nevada corporations.
Pursuant to several mergers, HPL Acquisition Corporation, a wholly-owned
subsidiary of the Company, merged with and into DRHC, formerly HPL, the
surviving corporation (the "DRHC Merger"). In addition, MPC Acquisition
Corporation, another wholly-owned subsidiary of the Company, merged with and
into Maxim, the surviving corporation (the "Maxim Merger".) The DRHC Merger and
the Maxim Merger are referred to herein collectively as the "DRHC/Maxim
Mergers." Pursuant to the DRHC/Maxim Mergers, the Company acquired all of the
outstanding securities of DRHC and Maxim in exchange for the issuance of
2,850,833 shares of the Company's Common Stock to the Maxim shareholders and
2,350,833 shares to the DRHC shareholder. In connection with the DRHC/Maxim
Mergers the Company also issued 565,000 shares to others. Prior to the closing
of the mergers, DRHC merged with and into HPL, and HPL changed its name to
Debbie Reynolds Hotel & Casino, Inc.
In connection with the DRHC/Maxim Mergers, the Company divested its
wholly-owned subsidiary, SWTV Production Services, Inc., to the Company's former
President, Lawrence E. Meyers, in exchange for the 2,126,540 shares of Common
Stock of the Company owned by Mr. Meyers which have been canceled by the
Company.
In November 1994, the Company reincorporated in the State of Nevada and
changed its name from Halter Venture Corporation to Debbie Reynolds Hotel &
Casino, Inc. In connection with the reincorporation, the Company's wholly-owned
subsidiary, Debbie Reynolds Hotel & Casino, Inc. changed its name to Debbie
Reynolds Management Company, Inc. ["DRMC"].
The Company's operations consist primarily of the hotel operations of DRMC
and the timeshare operations of Debbie Reynolds Resorts, Inc. ("DRRI"), a
wholly-owned subsidiary of DRMC. DRMC owns and operates the Debbie Reynolds
Hotel & Casino (the "Hotel"), a gift shop, the Hollywood Motion Picture Museum,
a restaurant and bar and a showroom located on Convention Center Drive in Las
Vegas, Nevada. DRMC leased the restaurant to Celebrity Restaurants, Inc., a
company wholly-owned by Ms. Reynolds, until August 1, 1996 at which time DRMC
was granted a liquor license from Clark County and commenced operating the bar
and the restaurant. Until the Company received approval for its own liquor
license, Celebrity accommodated the Company by undertaking and operating the
restaurant and bar under its liquor license. The Company's operations, through
DRRI, also consist of the sale of timeshare units in the Debbie Reynolds Hotel.
DRRI obtained a permanent timeshare license on June 28, 1994. In addition, DRMC
and its management have a pending application filed for a
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gaming license from the Nevada gaming authorities; however, there can be no
assurance that such license will be granted. Due to the Company's poor capital
structure and acting on the advice of counsel, the Company requested the Nevada
Gaming Authorities to place a hold on processing its pending gaming applications
until its capital structure substantially improves. Prior to March 31, 1996, the
Company leased space to a third party for the operation of a casino. The Company
served the operator with a termination notice in February 1996 because, pursuant
to the terms of the lease agreement, the Company was losing money on a monthly
basis. The Company requested Jackpot to cease operations as of June 30, 1996. On
March 31, 1996 the operator discontinued its gaming operations on the property,
removed all off its gaming equipment and subsequently filed a lawsuit against
DRHC. [See Item 3 - Legal Proceedings]
On October 30, 1996 the Company entered into an Agreement for Purchase and
Sale with ILX Incorporated ("ILX") under which ILX will purchase the Debbie
Reynolds Hotel & Casino (the "Hotel"), including all of the Hotel's real and
personal property and the Hotel's timeshare operations (the "ILX Agreement").
ILX is a publicly-held corporation based in Phoenix Arizona which principally
owns, operates and markets resort properties in Arizona, Florida, Indiana and
Mexico. The purchase price for the Hotel is $16,800,000, which will consist of
3,750,000 "free-trading" shares of ILX common stock valued for purposes of the
transaction at $2.00 per share, $4,200,000 in cash and $5,100,000 in assumption
of mortgage indebtedness. The market value of ILX's common stock has recently
been substantially less than $2.00 per share. When the market value of ILX's
common stock reduces so does the negotiated purchase price. Under the ILX
agreement, immediately after the closing, ILX has agreed to lease certain of the
hotel facilities to Debbie Reynolds and /or a designee (the "Hotel Facilities
Lease"). The Hotel Facilities Lease is expected to be for a term of 99 years,
with a monthly lease payment to be determined, although the ILX Agreement
documents specify monthly payments of approximately $150,000 it is unlikely the
Lease would be profitable at that rate and there is no guarantee that ILX will
agree to an acceptable lower figure. The Hotel Facilities Lease is expected to
include the showroom, the museum, the gift shop, the vacant casino space, the
back bar and certain joint areas. In addition, in consideration for use of her
name and likeness, and associated goodwill and other services, Debbie Reynolds
will receive a percentage of the net profit of any timeshare project at the
Hotel pursuant to a Timeshare Profit Agreement. Ms. Reynolds will also
participate in future activities of the Hotel and other ILX business activities,
pursuant to the Debbie Reynolds Participation Agreement. As a condition
precedent to the sale, ILX has requested Debbie Reynolds to enter into an
agreement with Red Rock Collection Incorporated, a wholly owned subsidiary of
ILX. Subsequently, Ms. Reynolds and Todd Fisher have entered into agreements
with Red Rock Collections Incorporated. The sale of the Hotel to ILX is subject
to the approval of the Company's shareholders, a standard due diligence
investigation by ILX, receipt of any necessary governmental approvals, and
satisfaction of various other conditions. The Company anticipates that the
closing will occur in the first quarter of 1997; however, there can be no
assurance that the closing will occur.
The Company's recurring losses from operations, its working capital
deficiency, its' shareholders equity deficiency, its significant debt service
obligations and its default with respect to various agreements raise substantial
doubt about the Company's ability to continue as a going concern. The ability of
the Company to continue as a going concern is dependent on its ability to obtain
additional financing to finance its working capital deficit until such time as
cash flows from operations are sufficient to finance the Company's operations,
including the Company's proposed casino operations. If the sale under the ILX
Agreement is not consummated, the Company may need to seek protection under the
Federal bankruptcy laws. In order for the Company to continue to operate until
the sale under the ILX Agreement is consummated, the Company must obtain a
sufficient amount of interim financing to fund its operations. While such
interim financing is currently being negotiated,
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there is no assurance it will be obtained. If the Company is unable to obtain
the interim financing the Company may need to seek protection under the Federal
bankruptcy laws.
The Company's principal executive offices are located at 305 Convention
Center Drive, Las Vegas, Nevada 89109 and its telephone number is (702)
734-0711.
(b) Business of the Issuer.
(b)(1), (2) Principal Products or Services; Markets and Distribution
Methods.
Background. The Hotel began gaming operations in 1957, under the trade
names "The Royal" and later "The Paddle Wheel Hotel & Casino." Debbie Reynolds
purchased the Paddle Wheel at auction in 1992 and renamed it the "Debbie
Reynolds Hotel & Casino". The Debbie Reynolds Hotel & Casino is located on a
6.13-acre site just off of Las Vegas Boulevard and is located close to the Las
Vegas Convention Center. Las Vegas Boulevard, more commonly known as "The
Strip," is currently the center of gaming activity in Las Vegas.
Hotel. The Debbie Reynolds Hotel includes 193 hotel rooms (of which 43 are
being converted into timeshare units), approximately 6,000 square feet of vacant
casino space which is currently filled with Hollywood memorabilia, the Hollywood
Movie Museum, a 500 seat showroom, a full-service restaurant, a cocktail lounge
and bar, one swimming pool and several hundred parking spaces. The Company
offers its hotel rooms at modest prices (as of August 31, 1996, the average room
rate was approximately $50.00). The Hotel's average occupancy rates were
approximately 80%, 82% and 74% for the 1993, 1994 and 1995 fiscal years,
respectively.
Showroom. Ms. Reynolds' performances in the Company's 500-seat showroom are
the primary draw for the Company's facilities and its timeshare sales. Through
the Company's approximately $1,000,000 renovation, the showroom has
state-of-the-art sound, staging and lighting. When Ms. Reynolds performs, she
performs Monday through Friday in the early evenings. Generally other Las Vegas
acts perform Monday through Saturday after Ms. Reynolds' show. When Ms. Reynolds
is not performing, the showroom attracts other well-known Las Vegas
entertainers. For the year ended December 31, 1995 the showroom averaged 84%
occupancy for Ms. Reynolds' show with ticket prices of $34.95.
Museum. The Debbie Reynolds Hollywood Movie Museum is unique in that it
houses two world class collections of authentic Hollywood movie memorabilia
owned separately by Ms. Reynolds and the Hollywood Motion Picture and Television
Museum, a non-profit organization, "Hollywood". The Museum is a highly technical
multimedia presentation which combines the charm of a historical museum and the
drama of a modern Hollywood screening room. The Museum has five stages,
including three revolving stages, in a surrounding similar to a Hollywood
screening room. The Museum has a walk-through portion where guests are able to
see up close many pieces from Hollywood classics, such as Marilyn Monroe's dress
from the "Seven Year Itch", among many others. Both collections are so extensive
that the Museum is only able to display approximately 10% of the collections at
any one time. The Company acquired the exclusive licenses to display both
extensive collections of movie memorabilia pursuant to license agreements;
however, Ms. Reynolds License Agreement has been terminated and Hollywood's
License Agreement is in default (See below). Under this License Agreement, which
is in default, the Company also has the rights to over 200 film clips from
classic Hollywood films, most of which have received an Academy Award in some
category. The Museum has a seating capacity of 79 people and runs 14 shows a day
at an average ticket price of $7.95. The total costs to complete the Museum were
approximately $2,700,000. See Part III, Item 10. "Executive Compensation," for a
description of the license agreements.
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Restaurant and Bar. The restaurant and bar located in the Hotel were
previously operated by Celebrity Restaurants, Inc. ("Celebrity"), a company
wholly-owned by Ms. Reynolds, pursuant to an oral lease agreement which
commenced in August 1994. Under the lease agreement, Celebrity was required to
pay the Company 8% of net income for the lease of the restaurant and bar. Under
the oral agreement, DRMC was obligated to cover the operating cash shortfalls of
Celebrity's operations. On August 1, 1996 DRMC received a liquor license from
Clark County and terminated the oral lease agreement. The restaurant and bar are
currently operated by DRMC. Until the Company received approval for its own
liquor license, Celebrity accommodated the Company by undertaking and operating
the restaurant and bar under its liquor license. The restaurant seats 150 people
and is open for breakfast, lunch and dinner. As with its hotel accommodations,
the food and beverage services provided by the restaurant and bar are moderately
priced. The restaurant operations are not intended to be a profit center for the
Company but the restaurant services are intended to be an attraction for the
timeshare sales, the showroom and the museum and as a convenience for the hotel
guests. See Part III, Item 12. "Certain Relationships and Related Transactions-
Transactions of Debbie Reynolds Hotel & Casino, Inc. and Hamlett Production,
Ltd.
Gift Shop. Hollywood-themed souvenirs, collectibles and logoed merchandise
are currently available in the gift shop. The gift shop occupies approximately
640 square feet of space on the property.
Timeshare. The Company's timeshare operations are conducted through Debbie
Reynolds Resorts, Inc. ("DRRI"), a subsidiary of DRMC. The operations of DRRI
consist of the sale of timeshare units in the Debbie Reynolds Hotel. DRRI
obtained a permanent timeshare license on June 28, 1994 and since then has been
aggressively pursuing timeshare sales and the conversion of the timeshare units.
Timeshares are sold in units of one week and entitle the purchaser thereof to
use the hotel room for the period of time purchased each year. Each timeshare
room in the hotel has 52 units, representing each week of the year. As of
October 31, 1996, approximately 1,290 timeshare units have been sold. Unit
prices have ranged from $6,000 to $10,000 depending upon the size and location
of the hotel room. A minimum of 10% of the unit purchase price must be paid in
cash, and the Company will arrange financing for qualified purchasers. The rooms
that are not converted to timeshare units will continue to be used as hotel
rooms. Upon completion of the initial phase of 43 rooms, the Company is
considering the idea of applying for timeshare licensing for the remaining 150
rooms which it would intend to designate as timeshare units. While the Company
believes it will be able to obtain such additional timeshare licensing, at this
time there can be no assurance that such additional licensing will be obtained.
The Company is in the process of restructuring its timeshare division and
currently is not actively selling timeshare units.
The Company's timeshare units are listed with Interval International, an
internationally-known timeshare network. The Company has a five-star red-room
rating that it has been given by Interval International. The timeshare
renovations include extending the balconies and enclosing them in glass. The
rooms are decorated with new furniture and new color schemes. The cost of
timeshare conversion is approximately $18,500 per room. The Company is marketing
its timeshare units through on-site tours, telemarketing and an off premises
preview center.
Casino. Until March 31, 1996 the gaming operations of the casino were owned
and operated by Jackpot Enterprises, Inc. ("Jackpot"), pursuant to a lease
agreement. Under the lease, Jackpot paid a fixed monthly rent to the Company
based on the number of slot and video poker machines and blackjack tables
located in the casino. Prior to March 31, 1996 the casino consisted of 183 such
machines located in the casino and two blackjack tables. Under the lease the
Company had the option to buy-out the remaining term of the lease based on the
value of the machines and other considerations. The Company served the operator
with a
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termination notice in February 1996 because, pursuant to the terms of the lease
agreement, the Company was losing money on a monthly basis. The Company
requested Jackpot to cease operations as of June 30, 1996. On March 31, 1996 the
operator discontinued its gaming operations on the property, removed all of its
gaming equipment and subsequently filed a lawsuit against DRHC. [See Item 3 -
Legal Proceedings] Since March 31, 1996 there have been no gaming operations on
the property.
In connection with the leased casino's gaming activities, the Company
adhered to a policy of stringent controls in compliance with the standards set
by the Nevada Gaming Authorities. See "Regulation and Licensing" under (b)(9)
below.
The Company and its management have an pending application for a gaming
license filed with the Nevada Gaming Authorities; however, there can be no
assurance that such license will be granted. Due to the Company's poor capital
structure and acting on the advice of counsel, the Company requested the Nevada
Gaming Authorities to place a hold on processing its pending gaming applications
until its capital structure substantially improves. If the Company is unable to
secure its own gaming license, the Company will consider entering into another
lease agreement with a licensed casino operator. See "Need for Governmental
Approval" under (b)(8) below.
Consulting Agreements. In January 1995, the Company entered into a business
consulting agreement with Telex, Inc. an unaffiliated company, under which Telex
agreed to provide the Company with business and strategic planning consulting
services for nine months in consideration of the issuance of 40,000 shares of
the Company's Common Stock under a Registration Statement on Form S-8 filed by
the Company.
During 1995, the Company entered into a business consulting agreement with
MBL, an unaffiliated company, which contract was extended, under which the
consultant agreed to provide the Company with business and strategic planning
consulting services for 12 months in consideration of the issuance of 200,000
shares of the Company's Common Stock under a Registration Statement on Form S-8
filed by the Company.
During 1995, the Company extended the business consulting agreement with
Miron Lesham, an unaffiliated company, under which the consultants agreed to
provide the Company with business and strategic planning consulting services for
12 months in consideration of the issuance of 35,000 shares of the Company's
Common Stock under a Registration Statement on Form S-8 filed by the Company.
During 1995, the Company entered into a business consulting agreement with
Pacific Consulting Group, ("PCG"), an unaffiliated company, under which PCG
agreed to provide the Company with business and strategic planning consulting
services for twelve months in consideration of the issuance of 50,000 shares of
the Company's Common Stock under a Registration Statement on Form S-8 filed by
the Company.
In December 1995, the Company entered into consulting agreements with Peter
Bistrian Consulting, Inc. and Robert C. Brehm Consulting, Inc., ("Consultants"),
unaffiliated companies, under which the consultants agreed to provide the
Company with business, strategic marketing and strategic planning consulting
services for eight months. In consideration for the consulting services, the
Company issued options to purchase up to an aggregate of 750,000 shares of the
Company's common stock over a period of twenty-four months at an exercise price
of $.75 per share. In late 1995 the Company filed a Registration Statement on
Form S-8 registering the 750,000 shares of Common Stock underlying the stock
options issued to the Consultants. The options were exercised by the Consultants
through the issuance of two short-term promissory notes payable to the Company
in the principal amounts of $364,000 and $198,000 (collectively the "Notes").
Subsequent to the issuance of
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the shares, the Consultants defaulted on the payments of the Notes. The Company
intends to pursue its remedies against the Consultants, their principals and
others with respect to these shares.
In January 1996, the Company entered into a business consulting agreement
with Baron Marney, ("Baron"), an unaffiliated company, under which Baron agreed
to provide the Company with business and strategic planning consulting services
for twelve months in consideration of the issuance of 50,000 shares of the
Company's Common Stock under a Registration Statement on Form S-8 filed by the
Company.
(b)(3) Status of Publicly-Announced New Product or Services. Not
applicable.
(b)(4) Competition. There is intense competition among companies in the
resort industry, many of which have significantly greater financial resources
than the Company. The Debbie Reynolds Hotel & Casino faces competition from all
other hotels in the Las Vegas area. The Company competes directly with a number
of other operations targeted to local residents. In the event the Company
obtains a gaming license and opens a gaming facility, the Debbie Reynolds Hotel
& Casino's operations will compete generally with gaming operations in other
parts of the State of Nevada, such as Reno, Laughlin and Lake Tahoe, with
facilities in Atlantic City, New Jersey and other parts of the world and with
state-sponsored lotteries, on- and off-track wagering, card parlors, riverboat
and Native American gaming ventures and other forms of legalized gaming. Certain
states have recently legalized, and several other states are currently
considering legalizing, casino gaming in designated areas. Legalized casino
gaming in other states and on Native American reservations represents additional
competition to the Company and could adversely affect the Company's proposed
gaming operations, particularly if such gaming were to occur in areas close to
the Company's operations. The Company competes directly with Grand Flamingo,
Polo Towers, Jockey Club and the Hilton Hotel, all timeshare projects located in
Las Vegas.
The Company's business strategy emphasizes attracting and retaining older,
upper-middle class customers who are familiar with Debbie Reynolds, her
collection of memorabilia and who have a reasonable level of disposable income.
A significant attraction to the Hotel itself is the Hollywood Movie Museum
featuring Ms. Reynolds' extensive collection of movie memorabilia which is one
of the largest of its kind in the world. Also, families attracted by Las Vegas's
new emphasis on theme resorts and attractions may want to spend time at a resort
and museum with an authentic Hollywood theme. The Company believes that Ms.
Reynolds is a significant draw for the showroom, and the Museum, which enables
the Company to attract customers staying at other hotels in Las Vegas to its
facilities.
(b)(5) Raw Materials and Principal Suppliers. Not applicable.
(b)(6) Significant Customers. Not applicable.
(b)(7) Patents and Licenses. The Company previously licensed the exclusive,
perpetual, non-transferable rights to display Ms. Reynolds' and Hollywood's
extensive collection of movie memorabilia and to use the name, photograph,
likeness and signature of Ms. Reynolds for the promotion of the Company and its
operations. Both of these licenses are significant to the Company's business;
however, the Debbie Reynolds license has been terminated and Hollywood's license
is in default and a 30-day termination notice was received from Hollywood. The
licenses are currently in default due to non-payment of performance fees and
non-issuance of stock. See Part III, Item 10, "Executive Compensation" for a
description of these licenses.
(b)(8) Need for Governmental Approval. The Company and its affiliates have
obtained all required permits and licenses required to conduct its hotel and
restaurant operations.
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Debbie Reynolds Resorts, Inc. ("DRRI"), obtained a permanent timeshare license
to conduct its timeshare operations from the Nevada Real Estate Board on June
28, 1994. Pursuant to Nevada state law and Clark County ordinances, prior to the
Company receiving any gaming revenues, other than revenues which it might
receive under a lease agreement, the Company must obtain state and county
approval for gaming activities. The Company is in the process of filing the
appropriate gaming applications on behalf of the Company and its officers and
directors with the Nevada Gaming Control Board; however, there can be no
assurance that a gaming license will be granted. See (b)(9) below.
(b)(9) Effect of Governmental Regulations.
As of the date of this report, the Company does not have a gaming license
and no gaming activities are conducted on its properties; however, the following
discussion is included since the Company has a pending application for a gaming
license filed with the Nevada Gaming Authorities. Due to the Company's poor
capital structure and acting on the advice of counsel, the Company requested the
Nevada Gaming Authorities to place a hold on processing its pending gaming
applications until its capital structure substantially improves.
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, "Nevada Act"); and (ii) various local regulation. Las
Vegas gaming operations are subject to the licensing and regulatory control of
the Nevada Gaming Commission ("Nevada Commission"), the Nevada State Gaming
Control Board ("Nevada Board"), and the Clark County Commission and/or the Clark
County Liquor and Gaming License Board. The Nevada Commission, the Nevada State
Gaming Control Board, the Clark County Commission and/or the Clark County Liquor
Gaming License Board ("CCLGLB") 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) to provide a source of state and local revenues
though taxation and licensing fees. Changes in such laws, regulations and
procedures could have an adverse effect on the Company's proposed gaming
operations.
The Company has a pending application filed with the Nevada Gaming
Authorities for various registrations, approvals, permits and licenses required
in order to engage in gaming activities in Nevada; however, there can be no
assurance that a gaming license will be granted. Due to the Company's poor
capital structure and acting on the advice of counsel, the Company requested the
Nevada Gaming Authorities to place a hold on processing its pending gaming
applications until its capital structure substantially improves. The gaming
license requires the periodic payment of fees and taxes and is not transferable.
The Company, if licensed, will be registered by the Nevada Commission as a
publicly traded corporation ("Registered Corporation") and as such, it will be
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 Company without first obtaining licenses and approvals from
the Nevada Gaming Authorities.
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The Nevada Gaming Authorities may investigate any individual who has a
material relationship to, or material involvement with, the Company or its
affiliates or subsidiaries in order to determine whether such individual is
suitable or should be licensed as a business associate of a gaming licensee or
its affiliates or subsidiaries. Officers, directors and certain key employees of
the Company 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 will be actively and
directly involved in the Company's proposed gaming activities 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, the companies involved would have to sever all
relationships with such person. In addition, the Nevada Commission may require
the Company 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.
As a licensee, the Company would be 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
Company would need to be reported to, or approved by, the Nevada Commission.
If it were determined that the Nevada Act was violated by the Company, its
gaming licenses could be limited, conditioned, suspended or revoked, subject to
compliance with certain statutory and regulatory procedures. In addition, 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 the reasonable rental value of
the Company's gaming properties) 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 proposed 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 5% of a company's
voting securities to report the acquisition to the Nevada Commission. The Nevada
Act requires that beneficial owners of more than 10% of a company'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
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more than 15%, of a company'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
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 a company, any change in a company's
corporate charter, bylaws, management, policies or operations of a company, or
any of its gaming affiliates, or any other action which the Nevada Commission
finds to be inconsistent with holding a company'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 thirty 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 common stock of a
Registered Corporation beyond such period of time as may be prescribed by the
Nevada Commission may be guilty of a criminal offense. A 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 a company or its
affiliates or subsidiaries, a 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 for cash at
fair market value. Additionally, the CCLGLB has taken the position that it has
the authority to approve all persons owning or controlling the stock of any
corporation controlling a gaming license.
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
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.
A gaming licensee 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. A company is also required to render maximum
assistance in determining the identity of the beneficial owner. The Nevada
Commission has the power to require a company's stock certificates to bear a
legend
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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.
A Company may not make a public offering of its securities without the
prior approval of the Nevada Commission if the securities or the 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. Such approval, if given, 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. Any
representation to the contrary is unlawful.
Changes in control of a 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 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 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 environmental for the orderly governance of
corporate affairs. Approvals are, in certain circumstances, required from the
Nevada Commission before a 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 a 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 Nevada licensee's 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,
"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 pay the expenses of investigation of
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
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requirements imposed by the Nevada Act. A Licensee is also subject to
disciplinary action by the Nevada Commission if it knowingly violates any laws
of the foreign jurisdiction pertaining to the foreign gaming operation, fails to
conduct the foreign gaming operation in accordance with the standards of honesty
and integrity required of Nevada gaming operations, engages in activities that
are harmful to the State of Nevada or its ability to collect gaming taxes and
fees, or employs a person in the foreign operation who has been denied a license
or finding of suitability in Nevada on the ground of personal unsuitability.
(b)(10)Research and Development. None.
(b)(11)Compliance with Environmental Laws. Compliance with federal, state
and local provisions regulating the discharge of materials into the environment
or otherwise relating to the protection of the environment will have no material
effect on the capital expenditures, earnings and competitive position of the
Company.
(b)(12)Employees. As of December 31, 1996, the Company employed a total of
103 employees; 85 of whom are full-time employees, including its 2 executive
officers, 10 managers and 9 security personnel. The Company occasionally employs
part-time workers as needed. None of the Company's employees are currently
covered by any collective bargaining agreement, although the International
Alliance Theatrical Stage Employees ("IATSE") are attempting to organize the
Star Theater and Movie Museum stage crew.
Item 2. Description of Properties.
The Debbie Reynolds Hotel & Casino is situated on a 6.13 - acre site just
off of the Las Vegas Strip between the Stardust Hotel and the Las Vegas
Convention Center. It includes 193 hotel rooms (43 of which are licensed for
timeshare sales), approximately 6,000 square feet of vacant casino space, a
500-seat showroom, an 79-seat museum, a full-service restaurant, a cocktail
lounge and bar, one swimming pool and several hundred parking spaces. These
facilities total approximately 210,380 square feet.
As of October 31, 1996 the Company had a total of approximately $6,100,000
in mortgages encumbering its real and personal property, including the Hotel and
real property located at 305 Convention Center Drive, Las Vegas, Nevada. See
Part II, Item 6 "Management's Discussion and Analysis or Plan of Operations" for
a description of these mortgages.
The Company believes that these facilities are suitable and adequate for
its current needs.
Item 3. Legal Proceedings.
In January 1994, Edward Stambro, an unaffiliated individual, filed a
lawsuit against one of the Company's subsidiaries and others in the District
Court of Clark County, Nevada, alleging breach of brokers agreement. The
Company's subsidiary filed an answer to the allegations on February 28, 1994.
Management and legal counsel for the Company are of the opinion that the
plaintiff's claim is without merit and the Company will prevail in defending the
suit.
On April 28, 1995, Ronald D. Nitzberg and Ron Nitzberg Associates, Inc., an
unaffiliated corporation, filed a lawsuit against the Company and others in the
District Court of Clark County, Nevada, alleging breach of contract, slander and
other claims, relating to his employment with the Company. The plaintiffs seek
damages in the amount of approximately $245,000 and an unspecified amount of
money damages. The Company has filed a
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counterclaim against the plaintiff alleging breach of fiduciary duty and breach
of contract asking for declaratory relief from consulting and stock agreements.
On April 14, 1995, Edward S. Coleman filed a lawsuit against the Company
and others in the District Court of Clark County, Nevada, alleging breach of
covenant of good faith and fair dealing based on certain services. The plaintiff
seeks unspecified money damages in excess of $10,000.
On January 26, 1995, American Interval Marketing, Inc., filed a lawsuit in
the District Court of Clark County, Nevada, against the Company and others,
alleging breach of contract and reasonable value of services. The plaintiff
seeks damages of approximately $45,000.
On July 14, 1995, Grand Nevada Hotel Corp., filed a lawsuit in the District
Court of Clark County, Nevada, against the Company, alleging breach of contract
and breach of implied duty of good faith. The plaintiff seeks damages in excess
of $10,000.
On July 27, 1995, Norman Eugene Watson, filed a lawsuit against the Company
and others in the District Court of Clark County, Nevada, alleging breach of
contract, fraud and misrepresentation and other claims. The plaintiff seeks
damages in excess of $10,000.
On August 10, 1995, Fiduciary Trust Company International, as Trustee of
the Taylor-Made Ltd. Defined Benefit Pension Plan, filed a lawsuit in the
District Court of Clark County, Nevada, against the Company and others, alleging
breach of contract and unjust enrichment. The plaintiff seeks damages in excess
of $10,000. The Company is negotiating a settlement with respect to this
lawsuit.
On September 1, 1995, Young Electric Sign Company, filed a lawsuit in the
District Court of Clark County, Nevada, against the Company and others, alleging
breach of contract. The plaintiff is seeking damages in excess of $10,000.
On April 11, 1996 Jackpot Enterprises, Inc., filed a lawsuit in the
District Court of Clark County, Nevada, against the Company and others, alleging
breach of contract, specific judgment, unjust enrichment and breach of the
implied covenant of good faith and fair dealing. The plaintiff is seeking
damages in excess of $10,000.
In addition to the above mentioned lawsuits, their are numerous other
lawsuits filed against the Company by certain of its vendors and other
creditors. The Company believes that these lawsuits may be satisfied through
payment of the indebtedness to the extent the Company's cash flow permits.
Except as otherwise set forth above, the Company is unable to predict, at
this time, the likelihood of the Company prevailing in the above lawsuits.
Item 4. Submission of Matters to a Vote of Security Holders. Not Applicable.
PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder
Matters.
(a)(1) The principal market on which the Registrant's Common Stock is
traded is the over-the-counter market and the Registrant's Common Stock is
quoted on the National Quotation Bureau Inc.'s Electronic Bulletin Board.
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(a)(1)(i) Not applicable.
(a)(1)(ii) The range of high and low bid quotations for the Registrant's
Common Stock for the last two fiscal years are provided below and were obtained
from tradeline. These over-the-counter market quotations reflect inter-dealer
prices without retail markup, markdown or commissions and may not necessarily
represent actual transactions.
High bid Low bid
-------- -------
1/1/94 - 3/31/94 6.00 5.00
4/1/94 - 6/30/94 6.25 5.50
7/1/94 - 9/30/94 6.50 5.13
10/1/94 - 12/31/94 5.50 3.88
1/1/95 - 3/31/95 $4.50 1.13
4/1/95 - 6/30/95 3.00 1.75
7/1/95 - 9/30/95 3.00 2.63
10/1/95 - 12/31/95 2.75 .63
On December 24, 1996, the reported bid and asked prices for the
Registrant's Common Stock were $.34 and .41, respectively.
(a)(2) Not applicable.
(b) On December 24, 1996 the Registrant had approximately 536 holders of
record of its Common Stock which does not include approximately 630 holders
whose shares were held in street name.
(c)(1) The Registrant has paid no dividends with respect to its Common
Stock.
(c)(2) The Registrant's outstanding 8 3/4% Convertible Subordinated
Debentures prohibit the Registrant from paying dividends, other than Common
Stock dividends on its preferred stock, while the Debentures are outstanding.
Item 6. Management's Discussion and Analysis or Plan of Operations.
The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto included elsewhere in this
report.
Liquidity and Capital Resources:
As of December 31, 1995, the Company had a working capital deficit of
$10,059,000 compared to a working capital deficit of $1,074,000 at December 31,
1994. In addition, the Company is in default in the payment of the following
indebtedness; interest payments on mortgages, interest payment on debentures,
payroll taxes, property taxes, operating taxes, equipment leases and various
other accounts payable. During the year ended December 31, 1995, cash and cash
equivalents increased by $160,000.
Financings
During 1995, the Company's long-term debt increased from $7,162,000 at
December 31, 1994 to $8,328,000 at December 31, 1995. During 1994, $1,150,000 of
long-term debt was exchanged for 383,333 common shares, $400,000 was exchanged
for 2,850,833 common
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shares (in connection with the DRMC\Maxim Mergers) and $250,000 was exchanged
for 213,816 common shares.
In 1994, the Company issued $1,273,000 of additional debt which was
subsequently exchanged for 424,333 common shares.
During 1994 the Company obtained additional financing for its operations
totalling net proceeds of approximately $3,868,000 through the sale of 128,515
units in a private offering, each unit consisting of four shares of Series AA
Convertible Preferred Stock, $.0001 par value, four two-year Convertible
Debentures each in the principal amount of $4.50 and four Class A Common Stock
Purchase Warrants, each to purchase one share of Common Stock at $5.50 per
share. In connection with the private placement, 116,000 Warrants were issued to
the sales agent.
In November 1994 the Company closed an additional private placement of
38,961 units totalling net proceeds of $896,000. Each unit consisted of four
shares of Series AA Convertible Preferred Stock, $.0001 par value, four
four-year Convertible Debentures each in the principal amount of $4.50 and four
Class B Common Stock Purchase Warrants, each to purchase one share of Common
Stock at $5.50 per share.
In March 1994 the Company obtained a $2,500,000 loan from Bennett
Management & Development Corp. ("Bennett"), the proceeds of which were used to
replace an existing mortgage on the Debbie Reynolds Hotel & Casino of $2,090,000
and the balance of $410,000 was used for working capital. The loan bears
interest at 13% per annum and is due on March 15, 1997. The loan requires
monthly payments of interest and payments of $1,200 per timeshare unit sold to
be applied to accrued interest and principal. In consideration of the loan the
Company issued to Bennett 25,000 shares of its Common Stock. Ms. Reynolds
executed a personal guarantee with respect to the loan. As of December 31, 1995
the principal amount outstanding was reduced to approximately $2,115,000.
In June 1994 the Company and its subsidiaries obtained a $1,000,000 loan
from TPM Holdings, Inc. ("TPM"), and Source Capital Corporation ("Source"), both
unaffiliated with the Company. The loan bears interest at 13% per annum and was
due on June 7, 1996. The loan requires monthly payments of interest and payments
of $1,000 per timeshare unit sold to be applied to accrued interest and
principal. The loan is secured by the Company's real and personal property,
including the Debbie Reynolds Hotel & Casino. As of December 31, 1995 the
principal amount outstanding was reduced to approximately $151,000 and the loan
was paid off in July 1996.
In December 1994 TPM and Source loaned the Company an additional
$1,100,000. The loan bears interest at a rate equal to the greater of four
percent over the prime rate or 12%, and was due on November 15, 1996. The loan
requires monthly payments of interest and payments of between $100 and $1,500
per timeshare unit sold, depending on the actual number of units sold, to be
applied to accrued interest and principal. The loan is secured by the Company's
real and personal property, including the Debbie Reynolds Hotel & Casino. The
principal amount outstanding on the loan as of December 31, 1995 was
approximately $885,000. This loan is currently in default.
From the proceeds of the loans and sale of securities during 1994,
$3,909,000 was invested in building improvements, timeshare, the Museum and
furniture and equipment. From the proceeds of the loans and sale of securities
during 1995, approximately $650,000 was invested in building improvements,
timeshare, the Museum and furniture and equipment.
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The Company allows purchasers to finance a significant portion of its
timeshare sales. To facilitate the sale of timeshares the Company obtained a
$25,000,000 (increased to $35,000,000 at March 31, 1995) commitment from Bennett
Funding International, Ltd. ("Bennett") whereby Bennett purchases timeshare
paper from the Company with recourse, subject to its credit criteria, and
advances the Company 85% of the amount financed. Generally, the Company receives
at least a 10% down payment from the purchaser and finances the remaining 90%
with Bennett. At December 31, 1995 the Company had utilized and was contingently
liable for approximately $4,967,000 of this commitment.
In January 1995, World Venture Trust, an unaffiliated company, loaned the
Company $250,000. The loan bore interest at 10% and was due April 26, 1995 with
a principal balance of $275,000. The loan was secured by the Company's real and
personal property. The loan was convertible, at the option of the holder, after
maturity, into 200,000 shares of the Company's common stock. The Company paid
off this loan in September of 1995 with $275,000 in cash and issued the holder
15,745 restricted shares of the Company's common stock.
In January 1995, Realecon, a California Corporation, loaned the Company
$125,000 and advanced an additional $75,000 in March 1995. The Loan bore
interest at 12% and was due July 16, 1995. The amount due at maturity was
$235,000. The loan was secured against certain receivables of the Company and
required principal and interest payments equal to $1,000 per timeshare interval
sold. In consideration of the loan the Company issued Realecon 10,000 restricted
shares of the Company's common stock. The Company paid off this loan in June of
1995.
In February 1995, the Company obtained a $525,000 loan from Bennett, the
proceeds of which were principally used in the construction of the museum and
for general corporate purposes. The loan bears interest at 13% and is due and
payable March 22, 1997. The loan is secured by the Company's real and personal
property.
In March 1995, the Company obtained a $245,000 loan from an independent
third party, the proceeds of which were principally used in the construction of
the museum. The loan bore interest at 6% and was due March 31, 1996. The loan
was convertible, at the holder's option, into the Company's restricted common
stock at a rate of $1.00 per share. In August 1995 the holder converted the
indebtedness into 245,000 shares.
In April 1995, the Company obtained a $500,000 loan from TPM
Financial/Source Capital, the proceeds of which were principally used in the
construction of the museum and for general corporate purposes. The loan bore
interest at 13% and was due June 25, 1996. This loan was issued as an addition
to the lender's second mortgage. The Company paid off this loan in November of
1995.
In May 1995, the Company obtained a $340,000 loan from Bennett, the
proceeds of which were principally used for general corporate purposes. The loan
bears interest at 13% and is due and payable March 22, 1997. The loan is secured
by the Company's real and personal property.
In August 1995, the Company obtained a $2,865,000 loan from Bennett Funding
International, LTD., the proceeds of which were principally used to pay off
existing debt and for general corporate purposes, which includes the $340,000
advanced to the Company in May of 1995 and $525,000 advanced in February of
1995. The loan bears interest at 14% and is due August 23, 1999. The loan is
secured by the Company's real and personal property.
In October 1995, the Company raised additional financing through a
Regulation S offering under the Securities Act of 1933 (the "Act"). The Company
sold 300,000 shares of the
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Company's common stock totalling net proceeds of approximately $205,000. The
offering of shares was directed solely to persons who were not residents of the
United States. The Company offered a maximum of 2,666,666 shares at $.75 per
share. The shares were not registered under the Act and may not be offered or
sold in the United States absent registration or an applicable exemption from
registration. In addition the shares were subject to a minimum six month
restriction on transfer.
In December 1995, the Company commenced a Regulation D offering under the
Securities Act of 1933 (the "Act"). The Company sold 200,000 units, at $1.00 per
unit, consisting of 200,000 shares of the Company's common stock and 200,000
warrants to purchase one share of common stock at $1.00, totalling net proceeds
of approximately $182,000. The offering of shares was directed solely to persons
who met the definition of "Accredited Investor" set forth in rule 501(A) of
Regulation D promulgated under the Act. The Company offered a maximum of
3,000,000 Units, (the "Unit"), each unit consisting of one share of Common Stock
and one warrant to purchase one share of common stock at $1.00 per share.
In August 1995 the Company offered all holders of the Company's units
issued pursuant to the Company's private placement memoranda dated March 25,
1994 and November 17, 1994 the opportunity to convert the Series AA Preferred
Stock and Debentures constituting part of the units into restricted shares of
the Company's common stock. Each Series AA Preferred Stock and Debenture
converted into one share of the Company's common stock at the reduced conversion
prices of $2.00 and $2.25, per share, respectively. The total dollar amount
converted from Series AA Preferred Stock and Debentures was $2,954,500 which
converted into 1,392,240 shares of the Company's common stock. As additional
consideration, the Company also offered the unit holders the right to exercise
each Class A Warrant to purchase two shares of Common Stock (instead of one) at
an exercise price of $1.00 per share (instead of $5.50) for 60 days from the
date of the offer. Pursuant to the Warrant offer, the Company received $93,120
from the exercise of warrants to purchase 93,120 shares of Common Stock. As
additional consideration to the Company, the unit holders waived the delinquent
interest and dividend payments owed.
In April 1996, the Company announced the signing of a term sheet with CS
First Boston Mortgage Capital Corporation, "CS First", for certain financing.
The financing, subject to certain terms and conditions, was to be evidenced by a
senior note in the amount of $8,500,000 secured by a senior mortgage of a like
amount on the property of the Company. In addition, subject to certain terms and
conditions CS First was to fund an additional $1,500,000. The terms of the
proposed financing were: a 2-year term, paying interest only at an interest rate
of Libor plus 500 basis points (600 basis points when the additional $1,500,000
was funded) payable monthly in arrears. Principal payments to be paid to CS
First were initially in the amount of $1,250 for every timeshare interval sold
and when certain conditions were met the Company was to commence paying an
amount of $2,000 for every timeshare interval sold. Subsequently, the Company
and CS First terminated negotiations with respect to the proposed financing.
In May 1996, the Company offered all holders of the Company's units issued
pursuant to the Company's private placement memorandum dated March 25, 1994 the
opportunity to convert the Series AA Preferred Stock and Debentures constituting
part of the units into restricted shares of the Company's common stock. Each
Series AA Preferred Stock and Debenture converted into one share of the
Company's common stock at the reduced conversion prices of $1.10 per share. The
total dollar amount converted from Series AA Preferred Stock and Debentures was
$884,000 which converted into 803,636 shares of the Company's common stock. As
additional consideration, the Company reduced the conversion price for each
Series AA Preferred Stock and Debenture issued pursuant to the Private
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Placement Memorandum dated November 17, 1994 to $2.25. As additional
consideration to the Company, the unit holders waived the delinquent interest
and dividend payments owed.
In August 1996, the Company obtained a $500,000 loan from Gregory Orman, a
third party, the proceeds of which were principally used to reduce past due tax
obligations, reduce trade payable debt and also allowed the Company to engage
its auditors. The loan bears interest at 12% and has $550,000 principal balance
due November 1, 1996. This loan is secured with a fourth mortgage on the
Company's property and with certain of the Company's receivables. In connection
with the financing the Company granted Orman warrants to acquire 260,000 shares
of the Company's common stock at an exercise price of $.70 per share. On October
18, 1996, Orman agreed to extend the maturity date to February 1, 1997. In
consideration for the extension the Company reduced Orman's exercise price on
the warrants to acquire 260,000 shares of the Company's common stock from $.70
per share to $.22 per share.
The Company is currently in default under the following obligations: the
Bennett Management & Development ("BMD") mortgage is in default due to
non-payment of interest and the holder has the right to accelerate the mortgage
immediately and make demand on the entire outstanding principal balance; the BMD
mortgage had a principal balance of approximately $2,115,000 outstanding at
December 31, 1995; the Bennett Funding International, Ltd. ("BFI") mortgage is
in default due to non-payment of interest and the holder has the right to
accelerate the mortgage immediately and make demand on the entire outstanding
principal balance; the BFI mortgage had a principal balance of approximately
$2,865,000 outstanding at December 31, 1995; the TPM Holding, Inc. ("TPM")
mortgage is in default due to non-payment of interest and the holder has the
right to accelerate the mortgage immediately and make demand on the entire
outstanding principal balance; the TPM mortgage had a principal balance of
approximately $885,000 outstanding at December 31, 1995; and the Company is in
default on its unsecured subordinated debentures due to non-payment of monthly
interest, the holders have the right to accelerate immediately and make demand
on the entire outstanding principal balance.
On October 30, 1996 the Company entered into an Agreement for Purchase and
Sale with ILX Incorporated ("ILX") under which ILX will purchase the Debbie
Reynolds Hotel & Casino (the "Hotel"), including all of the Hotel's real and
personal property and the Hotel's timeshare operations (the "ILX Agreement").
ILX is a publicly-held corporation based in Phoenix Arizona which principally
owns, operates and markets resort properties in Arizona, Florida, Indiana and
Mexico. The purchase price for the Hotel is $16,800,000, which will consist of
3,750,000 "free-trading" shares of ILX common stock valued for purposes of the
transaction at $2.00 per share, $4,200,000 in cash and $5,100,000 in assumption
of mortgage indebtedness. The market value of ILX's common stock has recently
been substantially less than $2.00 per share. When the market value of ILX's
common stock reduces so does the negotiated purchase price. Under the ILX
agreement, immediately after the closing, ILX has agreed to lease certain of the
hotel facilities to Debbie Reynolds and /or a designee (the "Hotel Facilities
Lease"). The Hotel Facilities Lease is expected to be for a term of 99 years,
with a monthly lease payment to be determined, although the ILX Agreement
documents specify monthly payments of approximately $150,000 it is unlikely the
Lease would be profitable at that rate and there is no guarantee that ILX will
agree to an acceptable lower figure. The Hotel Facilities Lease is expected to
include the showroom, the museum, the gift shop, the vacant casino space, the
back bar and certain joint areas. In addition, in consideration for use of her
name and likeness, and associated goodwill and other services, Debbie Reynolds
will receive a percentage of the net profit of any timeshare project at the
Hotel pursuant to a Timeshare Profit Agreement. Ms. Reynolds will also
participate in future activities of the Hotel and other ILX business activities,
pursuant to the Debbie Reynolds Participation Agreement. As a condition
precedent to the sale, ILX has requested Debbie Reynolds to enter into an
agreement with Red Rock Collection Incorporated, a wholly owned subsidiary of
ILX.
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Subsequently, Ms. Reynolds and Todd Fisher have entered into agreements with Red
Rock Collections Incorporated. The sale of the Hotel to ILX is subject to the
approval of the Company's shareholders, a standard due diligence investigation
by ILX, receipt of any necessary governmental approvals, and satisfaction of
various other conditions. The Company anticipates that the closing will occur in
the first quarter of 1997; however, there can be no assurance that the closing
will occur.
The Company's recurring losses from operations, its working capital
deficiency, its' shareholders equity deficiency, its significant debt service
obligations and its default with respect to various agreements raise substantial
doubt about the Company's ability to continue as a going concern. The ability of
the Company to continue as a going concern is dependent on its ability to obtain
additional financing to finance its working capital deficit until such time as
cash flows from operations are sufficient to finance the Company's operations,
including the Company's proposed casino operations. If the sale under the ILX
Agreement is not consummated, the Company may need to seek protection under the
Federal bankruptcy laws. In order for the Company to continue to operate until
the sale under the ILX Agreement is consummated, the Company must obtain a
sufficient amount of interim financing to fund its operations. While such
interim financing is currently being negotiated, there is no assurance it will
be obtained. If the Company is unable to obtain the interim financing the
Company may need to seek protection under the Federal bankruptcy laws.
In addition to pursuing the ILX Agreement, management is seeking additional
sources of financing to reduce its debt service obligations, complete certain
capital projects and fund its working capital needs. In addition, management is
implementing cost control measures to increase the cash flow of the Company.
There can be no assurance the additional financing can be obtained.
Revenues:
Revenues for fiscal 1995 totalled $9,790,000 as compared to $8,957,000 for
fiscal 1994. This increase is attributed to the timeshare department having a
full year of operations during the fiscal year 1995 and the opening of the
Hollywood Movie Museum in April of 1995. Revenues from timeshare sales were
$3,839,000 and from hotel rooms were $2,444,000 for fiscal year 1995 as compared
to respective revenues of $3,514,000 and $2,838,000 for fiscal year 1994. The
increase in timeshare sales is attributed to a full year of operations in fiscal
year 1995. Showroom revenues totalled $1,938,000 for 1995 as compared to
$1,607,000 in 1994. This increase is attributed to additional marketing and the
increase in the ticket price of Ms. Reynolds' show. Restaurant revenues totalled
$297,000 for the approximate four month period the Company operated the
restaurant during 1995 as compared to restaurant revenues totalling $310,000 for
the approximate four month period the Company operated the restaurant during
1994. Rental income for 1995 totalled $502,000 all of which was from casino
rental. Casino rental income for 1994 totalled $472,000. The Company's gift shop
produced revenues of $123,000 for 1995 compared to $133,000 for 1994. Museum
revenues for fiscal year 1995 totalled $416,000 as compared to no revenues in
1994.
The loss from operations for 1995 totalled $6,002,000 as compared to
$3,637,000 for 1994. The increase in the loss from operations for 1995 can be
attributed to the expense of approximately $460,000 relating to the conversion
of certain of the company's debts into equity, the issuance of common stock and
write-off of prepaid consulting services totalling approximately $960,000, the
Company reserving an allowance of $450,000 relating to certain of its contingent
liabilities, and $126,500 expense relating to the forgiveness of a certain
accounts receivable. Because of the investment in building improvements and
furniture and equipment, depreciation and amortization increased from $633,000
in 1994 to $1,107,000 in 1995. The net loss for 1994 totalled $4,195,000 as
compared to $8,603,000 for 1995.
20
<PAGE>
Interest Expense:
Interest expense increased from $565,000 in 1994 to $2,601,000 in 1995 as a
result of the increase in the Company's borrowings, increase in the cost of
borrowings and additional interest costs associated with the conversion of debt
into shares of common stock.
Item 7. Financial Statements.
The following financial statements are filed as a part of this Form 10-KSB
and are included immediately following the signature page.
Independent Auditor's Report
Consolidated Balance Sheet - December 31, 1995
Consolidated Statements of Operations - Years ended December 31, 1995 and
1994
Consolidated Statements of Shareholders' Equity (Deficiency) - Years ended
December 31, 1995 and 1994
Consolidated Statements of Cash Flows - Years ended December 31, 1995 and
1994
Notes to Consolidated Financial Statements
Item 8. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure. (Not Applicable)
21
<PAGE>
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act.
(a)(1),(2),(3) Identification of Directors and Executive Officers.
Date first
appointed
to such
Name Age Position with the Company position
- --------------------------------------------------------------------------------
Debbie Reynolds 64 Chairman, Director March 1994
Secretary May 1995
Todd Fisher 38 Chief Executive Officer, President, May 1995
Chief Financial Officer, Treasurer
Director March 1994
(a)(4) The business experience of the Registrant's officers and directors
is as follows:
Debbie Reynolds. Ms. Reynolds' 48-year business career has made her an
internationally known star of more than 30 motion pictures, two Broadway shows
and hundreds of television appearances. In December 1996, Paramount Pictures
released a feature film called "Mother", starring Ms. Reynolds and Albert
Brooks. Hamlett Productions, Ltd., a company owned 50% by Ms. Reynolds,
purchased the old Paddle Wheel Hotel and Casino in Las Vegas at auction as a
site for a movie museum to house her collection of Hollywood memorabilia, the
largest privately held in the world. The extensively renovated property reopened
in July 1993 as the Debbie Reynolds Hotel/Casino/Hollywood Movie Museum. The
unique, high-tech, multi-media Hollywood Movie Museum opened in early 1995. Ms.
Reynolds also is secretary and a director of Debbie Reynolds Management Company,
Inc. ("DRMC"), a wholly-owned subsidiary of the Company, is secretary and a
director of Debbie Reynolds Resorts, Inc., a wholly-owned subsidiary of DRMC,
and is president and sole shareholder of Raymax Production, Ltd., an
entertainment company, and Celebrity Restaurants, Inc, a service company.
Todd Fisher. Mr. Fisher has more than twenty years of technical and
creative experience in television and film. He has designed and built sound
stages, recording studios and TV facilities. Mr. Fisher designed the Company's
state-of-the-art, 500-seat showroom which doubles as a complete television
production studio. He also conceived and designed the Company's unique,
high-tech, multi-media Hollywood Movie Museum, which is one of the first sites
in the country to exhibit high-definition television. In May 1995 the Board of
Directors of the Company appointed Mr. Fisher as the Company's Chief Executive
Officer, President, Chief Financial Officer and Treasurer. Mr. Fisher also is
president, treasurer and a director of DRMC and is president, treasurer and a
director of Debbie Reynolds Resorts, Inc.
The Board of Directors has no committees at this time.
(a)(5) Directorships Held in Other Reporting Companies. None.
(b) Identification of Certain Significant Employees. None.
(c) Family Relationships. Ms. Reynolds is the mother of Todd Fisher. Other
than this relationship, there are no family relationships between any director
or executive officer of the Company.
22
<PAGE>
(d) Involvement in Certain Legal Proceedings.
During the past five years, no director, executive officer, promoter or
control person of the Company has:
(1) Had any bankruptcy petition filed by or against any business of which
such person was a general partner or executive officer either at the time of the
bankruptcy or within two years prior to that date;
(2) Been convicted in a criminal proceeding or been subject to a pending
criminal proceeding (excluding traffic violations and other minor offenses);
(3) Been subject to any order, judgment, or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise limiting
his involvement in any type of business, securities or banking activities; or
(4) Been found by a court of competent jurisdiction (in a civil action),
the Commission or the Commodity Futures Trading Commission to have violated a
federal or state securities or commodities law, where the judgment has not been
reversed, suspended, or vacated.
(e) Compliance with Section 16(a) of the Exchange Act.
Section 16 of the Securities Exchange Act of 1934, as amended, requires the
Company's officers, directors and persons who own greater than 10% of a
registered class of the Company's equity securities to file reports of ownership
and changes in ownership with the Securities and Exchange Commission. Based
solely on a review of the forms it has received and on written representations
from certain reporting persons, the Company believes, to the best of its
knowledge, that during 1995 all Section 16 filing requirements applicable to its
officers, directors and 10% beneficial owners were complied with by such
persons.
Item 10. Executive Compensation.
(a) General.
During the fiscal years ended December 31, 1992 and 1993 Lawrence E.
Meyers, the President and Chief Executive Officer of Halter Venture Corporation
during such years, received aggregate cash compensation from the Company of
$20,547 and $35,400, respectively. No executive officer of the Company received
compensation in excess of $100,000 during the 1992 and 1993 fiscal years.
During the 1994 fiscal year and in connection with the DRMC/Maxim mergers,
the Company entered into various compensation agreements with certain of its
executive officers. During 1995, some of these compensation agreements were
amended. See (g) "Employment Contracts and Arrangements" below.
(b) Summary Compensation Table.
The following table sets forth certain information regarding the
compensation paid or accrued by the Company to or for the account of the
executive officers of the Company whose total annual compensation exceeded
$100,000 during the fiscal years ended December 31, 1993, 1994 and 1995.
23
<PAGE>
<TABLE>
<CAPTION>
Compensation Table
------------------
Annual Compensation Long - Term Compensation
------------------- ------------------------
Securit.
Name and Restrctd. Underly.
Principal Other Annual Stock Options/ LTIP
position Year Salary Bonuses Compensation Awards SARs (#) Payout Other
- -------- ---- ------ ------- ------------ ------ -------- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Debbie 1995 $965,000(1) -0- N/A -0- -0- -0- -0-
Reynolds 1994 $600,000 -0- N/A -0- 50,000(2) -0- -0-
Chairman of the 1993 -0- -0- N/A -0- -0- -0- -0-
Board, Secretary
Todd Fisher 1995 $127,615 -0- N/A -0- -0- -0- -0-
CEO, President, 1994 $128,000 -0- N/A -0- 50,000(2) -0- -0-
Treasurer, CFO 1993 -0- -0- N/A -0- -0- -0- -0-
Henry Ricci 1995 $129,038 -0- N/A -0- -0- -0- -0-
Former 1994 $131,250 -0- N/A -0- 275,000(3) -0- -0-
President 1993 -0- -0- N/A -0- -0- -0- -0-
Donald 1995 $ 39,000 -0- $164,060(4) -0- -0- -0- -0-
Granatstein 1994 $120,000 -0- $103,500(5) -0- 300,000(6) -0- -0-
Former CFO, 1993 -0- -0- N/A -0- -0- -0- -0-
Executive Vice
President, and
Treasurer
</TABLE>
1 Represents amounts paid or accrued to Raymax Productions, Inc., a Company
wholly-owned by Ms. Reynolds ("Raymax"), pursuant to an agreement among Raymax,
Ms. Reynolds and the Company. For the year ended December 31, 1995 Raymax was
paid $170,000.00 and is owed $795,000 in accrued wages and showroom performance
fees. See (g) "Employment Contracts and Arrangements" below.
2 Represents shares underlying stock options exercisable at $4.00 per share
until October 10, 1999. The fair market value of the Common Stock on the date of
grant was $5.00 per share.
3 Represents shares underlying stock options exercisable per diem at $3.00 per
share until March 22, 1999. The fair market value of the Common Stock on the
date of grant was $5.70 per share.
4 Represents timeshare commissions and advances paid to Roebling totalling
$37,560 and $126,500. See (g) "Employment Contracts and Arrangements."
5 Represents timeshare commissions paid to Roebling. See (g) "Employment
Contracts and Arrangements."
6 Represents shares underlying stock options exercisable at $3.00 per share
until March 22, 1999. The fair market value of the Common Stock on the date of
grant was $5.70 per share.
N/A: Disclosure is not applicable under the Securities and Exchange Commission's
rules.
24
<PAGE>
(c) Option/SAR Grants Table.
Option/SAR Grants in Last Fiscal Year
Individual Grants
No options were granted to any of the Named Executive Officers during the 1995
fiscal year.
1994 Stock Option Plan. During 1994 the Company adopted a Stock Option Plan
for officers, directors and key employees (the "Plan"). The Company has reserved
a maximum of 2,000,000 shares of Common Stock to be issued upon the exercise of
options granted under the Plan. The Plan includes: (i) options intended to
qualify as "incentive stock options" under Section 422 of the Internal Revenue
Code of 1986, as amended; (ii) non-qualified options which are not intended to
qualify as "incentive stock options"; and (iii) formula plan options which are
non-discretionary and will be granted annually to the disinterested directors of
the Company. As of October 1996, options to purchase up to 335,000 shares have
been granted under the Plan. The 1994 Stock Option Plan and the 190,000 options
previously granted thereunder were approved by the Company's shareholders at the
1994 Stockholders Meeting.
1994 Employee Stock Compensation Plan. The Company adopted in June 1994 an
Employee Stock Compensation Plan for employees, officers and directors of the
Company and consultants and advisors to the Company (the "1994 ESC Plan").
Employees will recognize taxable income upon the grant of Common Stock equal to
the fair market value of the Common Stock on the date of the grant. The shares
of Common Stock issuable under the 1994 ESC Plan have been registered under a
registration statement on Form S-8. The ESC Plan is administered by the Board of
Directors. Of the 1,000,000 shares reserved under the Plan 560,000 had been
granted as of December 31, 1995. During 1996 an additional 88,000 shares were
granted under the Plan.
25
<PAGE>
(d) Aggregated Option/SAR Exercises and Fiscal Year-End Option/SAR Value Table.
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
at at
FY-End (#) FY-End ($)
Shares Acquired ------------- -------------
on Value Exercisable/ Exercisable/
Name Exercise (#) Realized ($) Unexercisable Unexercisable
---- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
Debbie Reynolds -0- -0- 50,000 $-0-
exercisable
Todd Fisher -0- -0- 50,000 $-0-
exercisable
Donald Granatstein -0- -0- 300,000 $-0-
exercisable
Henry Ricci -0- -0- 160,417 $-0-
exercisable
114,583 $-0-
unexercisable
</TABLE>
(e) Long-Term Incentive Plan Awards Table. None.
(f) Compensation of Directors. Directors of the Company are not compensated for
their services as such but are reimbursed for expenses incurred in attending
Board meetings.
(g) Employment Contracts and Arrangements.
Agreement with Raymax Production, Ltd. DRMC entered into an agreement with
Debbie Reynolds and Raymax Production, Ltd., a California corporation
wholly-owned by Debbie Reynolds ("Raymax") as of January 25, 1994, and as
amended on March 9, 1995. Under the agreement Raymax provided the entertainment,
management and promotional services of Ms. Reynolds on an exclusive basis in Las
Vegas, Nevada during her lifetime. The agreement was terminable upon Ms.
Reynolds' death or a default. Under the agreement Ms. Reynolds was to provide
performance in the showroom at the Debbie Reynolds Hotel for a minimum of 30
weeks per year and other managerial and promotional activities. As compensation
for her performance services, Raymax was to receive $25,000 per weekly
performance (the "Weekly Performance Fee"). Under the agreement Raymax also was
to receive annually 10% of the Company's net profits (as defined in the
agreement) for her non-entertainment services. Raymax has the right to take a
non-refundable monthly draw against the net profits equal to the difference
between $60,000 and the Weekly Performance Fees for such month, up to a maximum
draw of $1,000,000. If the draw taken for any year exceeded the 10% net profits
for such year, such excess will be carried forward as a non-refundable advance
against future net profits earned under the agreement. Raymax also was to
receive reimbursement of reasonable business and travel expenses. Under the
agreement, DRMC is required to carry life insurance on Ms. Reynolds in the
amount of $10,000,000 for the benefit of DRMC. During 1994 and under the
original terms of the agreement prior to its amendment in March 1995, Ms.
Reynolds received compensation of $50,000 per month for her services.
26
<PAGE>
During 1994 the Company had advanced $455,000 to Raymax against future amounts
owing under this agreement, all of which was outstanding at December 31, 1995.
As of December 31, 1995 the Company was in arrears approximately $795,000
pursuant to the weekly performance fee and monthly draw of this agreement. The
Company and Raymax have agreed to net the $455,000 advance against the
$1,914,000 in arrears as of December 31, 1996. In September, 1996 Raymax and Ms.
Reynolds served the Company notice that this agreement was in default due to
non-payment. In November 1996, Raymax delivered a notice to the Company
terminating this agreement. As of December 31, 1996, the amount the Company was
in arrears to Raymax was $1,740,000 plus $174,000 in accrued interest. Ms.
Reynolds has agreed to render showroom and other services on an "at will" basis,
terminable any time. The terms relating to Ms. Reynolds' services are the same
as specified in the terminated agreement except that as to all unpaid past and
future sums due Ms. Reynolds, the Company shall pay interest at a rate of prime
plus 2%.
Exclusive License Agreement Effective March 9, 1995 the Company entered
into an agreement with Ms. Reynolds and Raymax under which Ms. Reynolds was to
grant the Company the exclusive, perpetual, non-transferable license: (i) to
display Ms. Reynolds' extensive Hollywood memorabilia collection at the
Company's Hollywood Movie Museum; and (ii) to use the name, photograph, likeness
and signature of Ms. Reynolds for the promotion of the Company and its
operations. In consideration for the license, the Company was to agree to issue
400,000 shares of restricted Common Stock to Raymax and to insure, maintain and
house the memorabilia. As additional consideration for the license, upon Ms.
Reynolds' death, the Company would pay to her heirs and/or assigns annually, 10%
of the net profits of the Company (as defined in the agreement) in perpetuity.
The Company was in default of the agreement with Ms. Reynolds. In November 1996,
Ms. Reynolds delivered a notice to the Company terminating this agreement.
Exclusive License Agreement Effective March 9, 1995 the Company entered
into a license agreement with Hollywood Motion Picture and Television Museum, a
non-profit organization ("Hollywood"), which also owns an extensive Hollywood
memorabilia collection. Under the agreement with Hollywood, the Company has been
granted the license to display Hollywood's memorabilia in its Museum in
consideration for the Company's annual payment to Hollywood of $50,000 until the
construction costs of the Museum has been recouped from the Museum profits, at
which time the annual payment will increase to $100,000. On December 27, 1996
Hollywood sent a default and 30-day termination notice to the Company due to
non-performance on the contract.
Employment Contract with Henry Ricci. Henry Ricci, formerly the President
of the Company, had entered into an Employment Contract with DRMC as of February
14, 1994. Under the contract, Mr. Ricci served as general manager of the Debbie
Reynolds Hotel for a term of five years and received annual base compensation of
$150,000. In addition, Mr. Ricci would receive an annual bonus equal to two
percent of the Hotel's net profits, as defined in the contract. Mr. Ricci also
was granted stock options to purchase 275,000 shares of the Company's Common
Stock, vesting ratably per diem and exercisable at $3.00 per share for five
years from the vesting dates. Mr. Ricci was also furnished with a vehicle. In
May 1995, the Company terminated this contract with Mr. Ricci and entered into a
modified contract. The modified contract with DRMC was dated June, 1995. Under
this contract Mr. Ricci served as Chief of Operations for the Debbie Reynolds
Hotel for a term of one year and received annual base compensation of $80,000.
Mr. Ricci also received a $30,000 payment as additional consideration from the
new contract. As of this date, Mr. Ricci has fully vested into his stock options
to purchase 275,000 shares of the Company's Common Stock exercisable at $3.00
per share. During 1996, the Company granted to Mr. Ricci options to purchase an
additional 25,000 shares of the Company's Common Stock exercisable at $1.00 per
share. In September 1996, Mr. Ricci and the Company mutually terminated his
employment.
27
<PAGE>
Consulting Arrangement with Roebling. The Company had an oral consulting
arrangement with Roebling Investments (Canada), Inc. ("Roebling"), a Canadian
company wholly-owned by M. Donald Granatstein, formerly the Executive Vice
President, Chief Financial Officer, Treasurer and a director of the Company. In
May 1995, the Company and Roebling mutually terminated this consulting agreement
through a severance agreement. Under the severance arrangement the Company
agreed to continue to defend Mr. Granatstein, to the extent required by
paragraph 3 of Section 78.751 of the Nevada Revised Statutes in certain
litigation. The Company also waived its rights to collect certain debts due from
Mr. Granatstein totalling $126,500 and issued a limited release of claims from
Debbie Reynolds Hotel & Casino, Inc., Debbie Reynolds Management Company and
Debbie Reynolds Resorts, Inc. The Company also indemnified Mr. Granatstein as to
his personal loan guarantee on the Renaldi loan and the $250,000 bond issued in
favor of the Nevada Department of Real Estate Timeshare Division. Mr.
Granatstein warranted and agreed to pay and/or defend, indemnify, secure and
hold the Company harmless from costs, assessments, penalties, damage, fees,
attorney fees, interest, employee withholding or other losses arising from any
federal or state tax obligations to which the Company is or may be subject by
reason of any debts forgiven or payments made by the Company to Mr. Granatstein.
Mr. Granatstein also agreed to assist the Company in any matters relating to the
business while the Consultant was under contract with the Company.
Consulting Agreement with Peter D. Bistrian Consulting, Inc. On December 7,
1995, the Company entered into a Management Consulting Agreement with Peter D.
Bistrian Consulting, Inc. ("consultant") pursuant to which the Company agreed to
issue to the consultant Options to purchase up to an aggregate of 486,000 shares
of Common Stock of the Company in consideration for consulting services to be
provided to the Company over an anticipated eight-month period commencing as of
the date of the agreement. The option price to exercise the consultants option
to purchase 486,000 shares of Common Stock was $.75 per share and the each
option was exercisable from December 10, 1995 until its expiration date of
December 10, 1997. The Company filed a Registration Statement on Form S-8
registering the 486,000 shares of Common Stock underlying the stock options. The
Options were exercised by the consultant through the issuance of a short-term
promissory note payable in the principal amount of $364,500 (the "Note").
Subsequent to the issuance of the shares, the consultant defaulted on the
payment of the note. The Company plans to pursue its remedies against the
consultant, its principal and others with respect to these shares.
Consulting Agreement with Robert. C. Brehm Consulting, Inc. On December 7,
1995, the Company entered into a Management Consulting Agreement with Robert C.
Brehm Consulting, Inc. ("consultant") pursuant to which the Company agreed to
issue to the consultant Options to purchase up to an aggregate of 264,000 shares
of Common Stock of the Company in consideration for consulting services to be
provided to the Company over an anticipated eight-month period commencing as of
the date of the agreement. The option price to exercise the consultants option
to purchase 264,000 shares of Common Stock was $.75 per share and the each
option was exercisable from December 10, 1995 until its expiration date of
December 10, 1997. The Company filed a Registration Statement on Form S-8
registering the 264,000 shares of Common Stock underlying the stock options. The
Options were exercised by the consultant through the issuance of a short-term
promissory note payable in the principal amount of $198,000 (the "Note").
Subsequent to the issuance of the shares, the consultant defaulted on the
payment of the note. The Company plans to pursue its remedies against the
consultant, its principal and others with respect to these shares.
(h) Report on Repricing of Options/SARs. Not applicable.
28
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management.
(a), (b) Security Ownership of Beneficial Owners and Management. The
following table sets forth information as of December 24, 1996 with respect to
the ownership of the Company's Common Stock for all directors and officers
individually, all officers and directors as a group, and all beneficial owners
of more than five percent of the Common Stock.
Name and Address Amount & Nature Percent
of Beneficial of Beneficial of
Owner Ownership Class
- --------------------------------------------------------------------------------
Debbie Reynolds 2,945,833(1) 22.5%
305 Convention Center Drive
Las Vegas, NV 89109
Kennedy Capital 1,852,679(2) 13.9%
425 N. New Ballas Rd.
St. Louis, MO. 63141
Michael Weiner 835,056(3) 6.6%
1035 Pearl Street, #402
Boulder, Colorado 80302
Todd Fisher 252,930(4) 2.0%
305 Convention Center Drive
Las Vegas, NV 89109
Stephen Cherner 625,000(5) 5.0%
1035 Pearl Street, Suite 402
Boulder, Colorado 80302
All officers and directors 3,198,763(6) 24.2%
as a group (2 persons)
- ----------
1 Includes: (i) 2,395,833 shares held of record by the Debbie Reynolds
Trust dated February 11, 1986, a revocable trust of which Ms. Reynolds is
the sole trustee; (ii) 50,000 and 100,000 shares issuable upon the exercise
of presently outstanding options exercisable at $4.00 per share and
expiring on October 10, 1999 and $0.80 per share and expiring on February
16, 2000, respectively; (iii) 400,000 shares subscribed to by Ms. Reynolds,
pursuant to a license agreement but not issued. See Part III, Item 10
"Executive Compensation" for a description of the license agreement.
2 Includes: (i) 245,000 shares owned by a principal of Kennedy Capital;
(ii) 772,727 shares owned by clients of Kennedy Capital for whom Kennedy
Capital serves as an investment advisor; (iii) 581,188 shares issuable upon
conversion of Series AA Preferred Stock and Debentures owned by clients of
Kennedy Capital; and (iv) 253,764 shares of the Company's common stock
issuable upon exercise of Class A Warrants, owed by clients of Kennedy
Capital, at an exercise price of $1.00.
3 Includes 100,000 shares issuable upon the exercise of presently
outstanding options exercisable at $3.50 per share and expiring on August
6, 2000.
4 Includes: (i) 50,000 and 100,000 shares issuable upon the exercise of
presently outstanding options exercisable at $4.00 per share and expiring
on October 10, 1999 and $0.80 per share and expiring on June 30, 2000,
respectively.
29
<PAGE>
5 Includes: (i) 300,000 shares owned by the Maxim Profit Sharing Plan of
which Mr. Cherner is the primary beneficiary; and (ii) 325,000 shares owned
by the Cherner Family Trust of which Mr. Cherner is the trustee, and his
children are the beneficiaries. Mr. Cherner disclaims ownership of the
325,000 shares owned by the Cherner Family Trust.
6 Includes 300,000 shares issuable upon the exercise of presently
outstanding options.
(c) Changes in Control.
The Registrant knows of no arrangement, the operation of which may, at a
subsequent date, result in change in control of the Registrant.
Item 12. Certain Relationships and Related Transactions.
Transactions of Debbie Reynolds Hotel & Casino, Inc. and Hamlett Production,
Ltd.
In December 1992, Debbie Reynolds Hotel & Casino, Inc. was incorporated as
a Nevada corporation ("DRMC"). At the time of its formation DRMC issued 500,000
shares of its common stock to Debbie Reynolds in consideration of $500. Ms.
Reynolds made subsequent capital contributions to DRMC totalling $50,000. Ms.
Reynolds is an officer and director of DRMC.
In March 1989, Hamlett Production Ltd. was incorporated as a Nevada
corporation ("HPL"). At the time of its formation HPL issued 250,000 shares of
its common stock to Debbie Reynolds and 250,000 shares to Richard Hamlett, each
in consideration of $250. Subsequently, Ms. Reynolds acquired all of Mr.
Hamlett's shares in HPL.
In March 1994, DRMC merged with and into HPL, the surviving company, and
HPL changed its name to DRMC. At the time of the merger of DRMC with and into
HPL, Ms. Reynolds was the sole shareholder of DRMC and HPL and she was an
officer and director of both companies.
As of December 31, 1993 DRMC and HPL had loans payable to Ms. Reynolds
totalling $2,160,000. The loans were unsecured, noninterest-bearing obligations
and were due on demand. The proceeds of the loans were used to pay operating
expenses for DRMC, HPL and Raymax Production, Ltd. ("Raymax"), a company
wholly-owned by Ms. Reynolds. During the quarter ended March 31, 1994 Ms.
Reynolds converted $1,761,000 of these obligations into additional capital
contributions to the Company and $149,000 was repaid. As of April 8, 1994 the
remaining obligations of $250,000 were repaid.
During the 1993 fiscal year Ms. Reynolds and Mr. Hamlett negotiated on
behalf of DRMC and HPL to obtain financing for such companies from unaffiliated
third parties. Although the loans were negotiated on behalf of DRMC and HPL, Ms.
Reynolds and Mr. Hamlett signed various notes personally and deposited the money
to the respective companies. All payments on the respective obligations have
been made by DRMC and HPL directly to the lenders. However, because these
individuals signed certain notes personally, these obligations are included in
the combined financial statements of DRMC and HPL as amounts due to related
parties. The amount outstanding under these obligations totalled $100,000 as of
December 31, 1994. During the 1995 fiscal year the $100,000 was converted into
equity in exchange for 80,000 shares of the Company's restricted common stock.
30
<PAGE>
A company affiliated with a former officer, director and shareholder of HPL
loaned HPL $201,000 during 1993, all of which was outstanding as of December 31,
1994. The obligation was unsecured, non-interest bearing and payable upon
demand. During 1995, the Company wrote-off this obligation.
As of December 31, 1993, DRMC had an operating lease with HPL for the
Debbie Reynolds Hotel & Casino, payable $75,000 monthly, with $525,000
outstanding on the obligation as of December 31, 1993. In addition, as of
December 31, 1993 DRMC and HPL were obligated under certain capital lease
obligations for certain hotel furniture and equipment totalling $984,000, some
of which obligations have been paid by one company on behalf of the other. As a
result of the merger of DRMC with and into HPL in March 1994, the operating
lease between DRMC and HPL and the obligations thereunder have terminated. See
"Part I, Item 1. Description of Business."
Up until August 1, 1996, the restaurant and bar operations of the Debbie
Reynolds Hotel & Casino were leased to Celebrity Restaurants, Inc. ("Celebrity")
under an oral lease. Celebrity is wholly-owned by Ms. Reynolds. Rental income
was based upon 8% of net income. No money was received under this lease for the
years ended December 31, 1995 and 1994, respectively, because the operation of
the restaurant produced a net loss. Under the oral agreement, DRMC was obligated
to cover the operating cash shortfalls of Celebrity's operations. Until the
Company received approval for its own liquor license, Celebrity accommodated the
Company by undertaking and operating the restaurant and bar under its liquor
license. During the year ended December 31, 1995 the amount DRMC funded to
Celebrity was approximately $461,000. On August 1, 1996 DRMC received a liquor
license from Clark County and terminated the oral lease agreement. The
restaurant and bar are currently operated by DRMC.
The showroom operations were leased to Raymax under a five-year operating
lease which commenced in June 1993. All revenues from the showroom operations
were received directly by DRMC, therefore, no lease payments were made by Raymax
to DRMC. As a result of the DRMC/Maxim Mergers, the lease was canceled and DRMC
operates the showroom directly. During the year ended December 31, 1993 Raymax
made $388,000 in leasehold improvements and furniture, fixture and equipment
purchases for the showroom, all of which were transferred to DRMC as additional
capital contributions by Ms. Reynolds as of December 31, 1993.
During the year ended December 31, 1994 the Company loaned M. Donald
Granatstein, the then Chief Financial Officer, Executive Vice President,
Treasurer and a director of the Company, an aggregate of $115,900, and as of
December 31, 1994 $126,500 in accrued interest and principal was outstanding.
The loan bore interest at nine percent and was due on December 31, 1996. The
loan was secured by all consulting fees, commissions and all other amounts due
Mr. Granatstein from the Company pursuant to his consulting arrangement with the
Company. Pursuant to a severance agreement entered into in May 1995 the Company
forgave this indebtedness. See Part III, Item 10. "Executive Compensation" for a
description of Mr. Granatstein's consulting arrangement and severance agreement
with the Company.
During 1996, Ms. Reynolds loaned the Company approximately $105,000, of
which, all is still outstanding as of December 31, 1996.
During the year ended December 31, 1994 and since such time Ms. Reynolds
and Mr. Granatstein have personally guaranteed various borrowings of the Company
and its subsidiaries. The amounts guaranteed by such persons totalled
approximately $8,725,000 as of December 31, 1995. The Company has indemnified
Ms. Reynolds and Mr. Granatstein from these personal guarantees. See Part III,
Item 10, "Executive Compensation".
31
<PAGE>
Transactions of Maxim Properties Company
Maxim Properties Company ("Maxim") was incorporated as a Colorado
corporation in November 1993. At the time of its formation Maxim issued
1,500,000 shares of its common stock each to Maxim Financial Corp. ("Maxim
Financial") and Stephen Cherner in consideration of a total of $100,000. Maxim
Financial and Mr. Cherner subsequently transferred all of their shares to other
persons, including several of their affiliates. Maxim Financial is controlled by
Stephen Cherner.
Joe Kowal, a principal shareholder of Maxim at the time of the DRMC/Maxim
Mergers, transferred 705,000 of the 830,277 shares of the Company's common stock
which he was to receive in exchange for his Maxim shares in the DRMC/Maxim
Merger to four entities who he has represented are not affiliated with him.
Commencing in September 1993 the Maxim Profit Sharing Plan (the "Maxim
Plan") loaned a total of $800,000 to DRMC to pay for the build-out of the
showroom and working capital. The loan bore interest at 10% and was due on
demand. During 1994 a portion of the loan was repaid. In October 1994 the
Company agreed to issue 150,000 shares of the Company's common stock to the
Maxim Plan as full and complete consideration for the remaining balance owed to
it, including principal and interest. The Company has agreed to register the
150,000 shares issued to the Maxim Plan under the next available registration
statement filed by the Company. These shares were issued in November 1994.
Stephen Cherner, the beneficial owner of approximately 5.0% of the Company's
outstanding common stock (including the 150,000 shares), and a principal of
Maxim, is the primary beneficiary of the Maxim Plan.
Transactions of Halter Venture Corporation
SWTV owed Southwest TNT, Inc. ("SWTNT"), a corporation owned by Lawrence E.
Meyers, a former officer, director and principal shareholder of the Company,
approximately $2,602 and $254,996 at December 31, 1993 and 1992 for the
construction of a mobile television production unit. SWTV had made advances to
SWTNT of approximately $29,232 at December 31, 1991. These amounts were offset
against the amounts owed for the construction of the new mobile television
production unit during 1992. During 1993, SWTV renegotiated the construction
price with SWTNT resulting in a reduction in the amount due to SWTNT of $209,264
and a corresponding reduction in the basis of the mobile television production
unit to $142,080. Additionally, during 1993, part of the remaining balance due,
including additional advances made by SWTNT during 1993 in connection with
construction of the mobile television unit, totalling $59,743, were offset
against amounts due to a majority shareholder. The Company had advances
receivable from Lawrence E. Meyers in the amount of $119,495 at December 31,
1992. The advances bore interest at the applicable Federal rates for long-term
obligations, accrued quarterly on the outstanding balance. The amount was
partially offset against the amount due to SWTNT, with the balance being settled
during 1993.
Pursuant to a Divestiture Agreement dated March 23, 1994, after the closing
of the DRMC/Maxim Mergers, the Company divested its wholly-owned subsidiary,
SWTV Production Services, Inc., to the Company's former President, Lawrence E.
Meyers, in exchange for the 2,126,540 shares of common stock of the Company
owned by Mr. Meyers, effective March 31, 1994. Mr. Meyers' 2,126,540 shares were
canceled by the Company on March 31, 1994. Subsequent to the divestiture, Mr.
Meyers was a minority shareholder of the Company.
32
<PAGE>
Item 13. Exhibits and Reports on Form 8-K.
(a) Exhibits. The following is a complete list of exhibits filed as a part
of this Report on Form 10-KSB and are incorporated herein by reference.
Exhibit
Number Title of Exhibit
- ------ ----------------
2.1 Agreement of Merger and Plan of Reorganization dated February 11,
1994 (1)
2.2 Amended and Restated Agreement of Merger and Plan of Reorganization
dated March 10, 1994 (2)
3.1 Articles of Incorporation of Debbie Reynolds Hotel & Casino, Inc. ,
as filed with the Nevada Secretary of State on November 17, 1994 (4)
3.4 Bylaws (4)
4.1 Specimen common stock certificate (4)
10.1 1994 Employee Stock Compensation Plan (4)
10.2 1994 Stock Option Plan (4)
10.4 Divestiture Agreement dated March 30, 1994 between the Company,
Lawrence Meyers and SWTV (3)
10.5 Management Agreement dated January 8, 1994 between DRHC and Grand
Nevada Hotel Corporation, as amended and terminated on February 17,
1994 (3)
10.6 Lease Agreement dated April 5, 1993 between DRHC and Grand Nevada
Hotel Corporation (3)
10.7 Lease Termination Agreement dated January 10, 1994 between DRHC and
Grand Nevada Hotel Corporation (3)
10.8 Agreement of Sublease between John Neumeyer, Edward Haddad and DRHC
dated April 27, 1993 (3)
10.9 Termination of Sublease Agreement dated February 11, 1994 between
Hollywood Restaurants, Inc. Hamlett Productions, Ltd., and DRHC. (3)
10.10 Amended and Restated Space Lease Agreement dated May 7, 1993 between
DRHC, Debbie's Casino Inc., Jackpot Enterprises, Inc., Richard R.
Hamlett and Debbie Reynolds (3)
10.11 Agreement dated January 25, 1994 between Hamlett Productions, Ltd.,
Raymax Productions, Inc. and Debbie Reynolds (3)
10.12 Employment contract dated February 14, 1994 between DRHC and Henry
Ricci (3)
10.13 Employment contract dated February 16, 1994 between the Company and
Steve Schiffman, as amended (3)
33
<PAGE>
10.14 Agreement of Sublease between DRHC and Celebrity Restaurants, Inc.
dated April, 1993 (3)
10.15 Loan Agreement between DRHC and Hamlett Production Ltd. and Bennett
Management & Development Corp. and Promissory Note and Guarantee and
Subordination Agreement, all dated March 7, 1994. (3)
10.16 Contract of Sale Membership Agreements and Installment Purchase
Agreements with Recourse between Debbie Reynolds Resorts, Inc. and
Resort Funding, Inc. dated March 7, 1994 (3)
10.17 Amendment dated March 9, 1995 to Agreement dated January 25, 1994
between Hamlett Productions, Ltd., Raymax Productions, Inc. and
Debbie Reynolds (4)
10.18 Termination Agreement among Registrant, TPM Holdings and Source
Capital Corporation dated February 10, 1995.(4)
10.19 Consulting Agreement between the Registrant and MBL Investments
dated August 3, 1994. (4)
10.20 Loan Agreement between the Registrant and TPM Holdings, Inc., and
Promissory Note, dated June 10, 1994. (4)
10.21 Loan Agreement between the Registrant and Source Capital
Corporation, and Promissory Note, dated December 1, 1994. (4)
10.22 Loan Agreement between DRMC and World Ventures Trust, and Promissory
Note, all dated April 26, 1995.
10.23 Loan Agreement between the Registrant and RealEcon, and Promissory
Note, dated January 16, 1995.
10.24 Loan Agreement between the Registrant and Bennett Funding
International Ltd., and Promissory Note, dated July 27, 1995.
10.25 Loan Agreement between the Registrant and Source Capital/TPM
Holding, Inc., and Promissory Note, dated March 1995.
10.26 Consulting Agreement between the Registrant and Miron Leshem dated
November 6, 1995.
10.27 Amendment to Consulting Agreement between the Registrant and Miron
Leshem dated December 12, 1995.
10.28 Consulting Agreement between the Registrant and Pacific Consulting
Group dated September 1, 1995.
10.29 Consulting Agreement between the Registrant and Telex, Inc. dated
March 27, 1995.
10.30 Consulting Agreement between the Registrant and Peter Bistrian
Consulting, Inc., ("Consultant").
10.31 Consulting Agreement between the Registrant and Robert C. Brehm
Consulting, Inc., ("Consultant").
34
<PAGE>
10.32 ILX Incorporated definitive agreement dated October 30, 1996.
23.1 Consent of KPMG Peat Marwick LLP
------------------------------------------------
1. Incorporated by reference from the like numbered exhibit filed with the
Registrant's Form 8-K dated February 11, 1994.
2. Incorporated by reference from the like numbered exhibit filed with the
Registrant's Form 8-K dated March 22, 1994.
3. Incorporated by reference from the like numbered exhibit filed with the
Registrant's Form 10-K for the year ended December 31, 1993.
4. Incorporated by reference from the like numbered exhibit filed with the
Registrant's Form 10-K for the year ended December 31, 1994.
(b) Reports on Form 8-K. During the last quarter period covered by this
report the Registrant filed no Reports on Form 8-K.
35
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DEBBIE REYNOLDS HOTEL & CASINO, INC.
By:/s/ Todd Fisher
-------------------------
Todd Fisher, President
Date: January 23, 1997
In accordance with 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.
/s/ Debbie Reynolds Chairman of the January 23, 1997
- ------------------- Board, Secretary
DEBBIE REYNOLDS and Director
/s/Todd Fisher Chief Executive Officer,
- ------------------- Chief Financial Officer,
TODD FISHER Treasurer, and Director January 23, 1997
36
<PAGE>
DEBBIE REYNOLDS HOTEL & CASINO, INC.
AND SUBSIDIARIES
Consolidated Financial Statements
December 31, 1995
(With Independent Auditors' Report Thereon)
F-1
<PAGE>
DEBBIE REYNOLDS HOTEL & CASINO, INC. AND SUBSIDIARIES
Table of Contents
-----------------
Page
----
Independent Auditors' Report F-3
Consolidated Balance Sheet F-4
Consolidated Statements of Operations F-5
Consolidated Statements of Shareholders' Equity (Deficiency) F-6
Consolidated Statements of Cash Flows F-8
Notes to Consolidated Financial Statements F-10
F-2
<PAGE>
Independent Auditors' Report
The Board of Directors and Shareholders
Debbie Reynolds Hotel & Casino, Inc.:
We have audited the accompanying consolidated balance sheet of Debbie Reynolds
Hotel & Casino, Inc. and subsidiaries as of December 31, 1995, and the related
consolidated statements of operations, shareholders' equity (deficiency), and
cash flows for each of the years in the two year period ended December 31, 1995.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Debbie Reynolds
Hotel & Casino, Inc. and subsidiaries as of December 31, 1995, and the results
of their operations and their cash flows for each of the years in the two year
period ended December 31, 1995, in conformity with generally accepted accounting
principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 8 to the
consolidated financial statements, the Company has suffered recurring losses
from operations, has a working capital deficiency, has a shareholders' equity
deficiency, significant debt service obligations, and is in default with respect
to various agreements, that raise substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these matters are
described in Notes 8 and 11. The consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
/s/ KPMG Peat Marwick LLP
December 20, 1996
Las Vegas, Nevada
F-3
<PAGE>
DEBBIE REYNOLDS HOTEL & CASINO, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
December 31, 1995
<TABLE>
<CAPTION>
<S> <C>
Assets
Current assets:
Cash and cash equivalents $ 172,000
Restricted cash 152,000
Accounts receivable, net of allowance of $56,000 1,451,000
Inventories (note 3) 615,000
Prepaid expenses and deposits 114,000
------------
Total current assets 2,504,000
------------
Property and equipment (notes 4, 6 and 11):
Land and building 7,073,000
Furniture and equipment 3,361,000
------------
10,434,000
Less accumulated depreciation and amortization 1,996,000
------------
Net property and equipment 8,438,000
------------
Due from affiliates (note 2) 545,000
Deposits and other assets 442,000
------------
Total assets $ 11,929,000
============
Liabilities and Shareholders' Equity (Deficiency)
Current liabilities:
Current maturities of long-term debt and capital lease obligations (note 4) $ 8,078,000
Accounts payable and accrued liabilities 2,967,000
Accrued legal claims (note 9) 450,000
Due to affiliates (note 5) 916,000
Timeshare deposits 152,000
------------
Total current liabilities 12,563,000
Long-term debt and capital lease obligations, excluding current maturities (note 4) 250,000
------------
Total liabilities 12,813,000
------------
Commitments and contingencies (notes 6, 8, 9 and 11) Shareholders' equity
(deficiency) (notes 4, 10 and 11):
Preferred stock, $.0001 par value. Authorized 50,000,000 shares; 2,000,000 designated
as Series AA, 319,844 issued and outstanding ($1,279,000 liquidation preference) --
Common stock, $.0001 par value. Authorized 25,000,000 shares; issued and outstanding
11,484,070 shares 1,000
Additional paid-in capital 14,141,000
Stock subscribed 300,000
Deferred compensation (300,000)
Accumulated deficit (15,026,000)
------------
Total shareholders' equity (deficiency) (884,000)
------------
Total liabilities and shareholders' equity $ 11,929,000
============
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
DEBBIE REYNOLDS HOTEL & CASINO, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Revenue:
Timeshare sales $ 3,839,000 3,514,000
Rooms 2,444,000 2,838,000
Showroom 1,938,000 1,607,000
Museum 416,000 --
Restaurant 297,000 310,000
Casino lease 502,000 472,000
Other 354,000 216,000
------------ ------------
Total revenue 9,790,000 8,957,000
------------ ------------
Operating costs and expenses:
Timeshares 2,876,000 2,434,000
Rooms 1,591,000 1,358,000
Showroom 2,352,000 1,341,000
Museum 314,000 --
Restaurant 374,000 591,000
Other 263,000 114,000
General and administrative 4,611,000 3,877,000
Bad debt expense -- 70,000
Depreciation and amortization 1,107,000 633,000
Property operations, maintenance and energy 2,304,000 2,176,000
------------ ------------
Total operating costs and expenses 15,792,000 12,594,000
------------ ------------
Loss from operations (6,002,000) (3,637,000)
------------ ------------
Other income (expense):
Interest income -- 7,000
Interest expense (2,601,000) (565,000)
------------ ------------
Total other income (expense) (2,601,000) (558,000)
------------ ------------
Net loss $ (8,603,000) (4,195,000)
============ ============
Loss per common share $ (.99) (.69)
============ ============
Weighted-average number of common shares outstanding 8,734,362 6,049,651
============ ============
</TABLE>
See accompanying notes to consolidated financial statements
F-5
<PAGE>
DEBBIE REYNOLDS HOTEL & CASINO, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity (Deficiency)
Years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
Total
Preferred Stock Common Stock Additional Accumu- Deferred Share-
--------------- ----------------- Paid-in lated Stock Compen- holders'
Shares Amount Shares Amount Capital Deficit Subscribed sation Equity
------ ------ ------ ------ ------- ------- ---------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1994 -- $-- 3,404,314 $ 1,000 $ 50,000 $(2,163,000) $ -- $-- $(2,112,000)
Shareholder contribution -- -- 1,761,000 -- -- -- 1,761,000
Shares issued in conjunction
with Maxim merger -- -- 2,850,833 -- 400,000 -- -- -- 400,000
Shares issued through conversion
of debt -- -- 1,284,842 -- 3,264,000 -- -- -- 3,264,000
Shares issued to
officer/director for -- -- 100,000 -- 200,000 -- -- -- 200,000
services rendered
Shares issued as loan fees to
holder of first mortgage -- -- 25,000 -- 75,000 -- -- -- 75,000
Shares issued for consulting
services -- -- 235,000 -- 648,000 -- -- -- 648,000
Shares issued in conjunction
with lease termination -- -- 77,991 -- 118,000 -- -- -- 118,000
Shares issued in consideration
of obtaining loans -- -- 35,000 -- 85,000 -- -- -- 85,000
Shares issued for professional
services -- -- 45,000 -- 226,000 -- -- -- 226,000
Preferred stock dividend 25,924 -- 65,000 (65,000) -- -- --
Net proceeds from sale of
pre-ferred stock and
warrants in conjunction with
the private placement of 667,904 -- -- -- 2,655,000 -- -- -- 2,655,000
securities (note 4)
Net loss -- -- -- -- -- (4,195,000) -- -- (4,195,000)
------- ---- --------- -------- ---------- ----------- --------- ----- -----------
Balance at December 31, 1994 667,904 -- 8,083,904 1,000 9,547,000 (6,423,000) -- -- 3,125,000
</TABLE>
(Continued)
F-6
<PAGE>
DEBBIE REYNOLDS HOTEL & CASINO, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity (Deficiency), Continued
Years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
Total
Preferred Stock Common Stock Additional Accumu- Deferred Share-
--------------- --------------- Paid-in lated Stock Compen- holders'
Shares Amount Shares Amount Capital Deficit Subscribed sation Equity
------ ------ ------ ------ ------- ------- ---------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994,
brought forward 667,904 $ -- 8,083,904 $1,000 $ 9,547,000 $ (6,423,000) $ -- $ -- $ 3,125,000
Shares issued for consulting and
other services -- -- 414,061 -- 876,000 -- -- -- 876,000
Shares issued in consideration
of obtaining loans -- -- 400,745 -- 419,000 -- -- -- 419,000
Regulation S offering, shares
issued for cash -- -- 300,000 -- 225,000 -- -- -- 225,000
Regulation D offering, shares
issued for cash -- -- 50,000 -- 50,000 -- -- -- 50,000
Shares issued through conversion
of preferred shares to
common shares (348,060) -- 696,120 -- -- -- -- -- --
Shares issued through conversion
of debt -- -- 696,120 -- 2,158,000 -- -- -- 2,158,000
Shares issued through exercise
of warrants -- -- 93,120 -- 93,000 -- -- -- 93,000
Shares issued through exercise
of options -- -- 750,000 -- 563,000 -- -- -- 563,000
Uncollected receivable for
shares issued through
exercise of options (563,000) -- -- -- (563,000)
Stock subscribed (note 9) -- -- -- -- -- -- 300,000 -- 300,000
Deferred compensation (note 9) -- -- -- -- -- -- -- (300,000) (300,000)
Options issued for services -- -- -- -- 773,000 -- -- -- 773,000
Net loss -- -- -- -- -- (8,603,000) -- -- (8,603,000)
-------- ------ ---------- ------ ----------- ------------ -------- --------- -----------
Balance at December 31, 1995 319,844 $ -- 11,484,070 $1,000 $14,141,000 $(15,026,000) $300,000 $(300,000) $ (884,000)
======== ====== ========== ====== =========== ============ ======== ========= ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
DEBBIE REYNOLDS HOTEL & CASINO, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
----------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(8,603,000) (4,195,000)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 1,107,000 663,000
Amortization of debt discount 275,000 --
Amortization of consulting fees 297,000 344,000
Provisions for losses on receivables -- 70,000
Forgiveness of debt from affiliate 108,000 --
Forgiveness of debt to affiliate (201,000) --
Expense associated with conversion of debt to equity 592,000 --
Common stock issued for services rendered 876,000 364,000
Options issued for services 773,000 --
Shares issued as consideration for loans 419,000 --
Changes in assets and liabilities:
Increase in accounts receivable (494,000) (994,000)
Increase in other receivables 5,000 (126,000)
Increase in inventories -- (47,000)
(Increase) decrease in prepaid expenses and deposits (13,000) 43,000
Increase in deposits and other assets 473,000 (592,000)
Increase in accounts payable and accrued expenses 1,613,000 614,000
----------- ----------
Net cash used in operating activities (2,773,000) (3,856,000)
----------- ----------
Cash flows from investing activities:
Capital expenditures (676,000) (3,579,000)
----------- ----------
Net cash used in investing activities (676,000) (3,579,000)
----------- ----------
Cash flows from financing activities:
Proceeds from borrowings from affiliates 838,000 331,000
Payments on amounts due to affiliates (54,000) (641,000)
Loans made to affiliates -- (601,000)
Net proceeds from private placement of securities -- 4,764,000
Proceeds from issuance of stock 368,000 --
Proceeds from issuance of long-term debt 3,215,000 6,588,000
Principal payments on long-term debt and capital lease obligations (758,000) (3,400,000)
Cash acquired in connection with Maxim merger -- 100,000
----------- ----------
Net cash provided by financing activities 3,609,000 7,141,000
----------- ----------
Net increase (decrease) in cash and cash equivalents 160,000 (294,000)
Cash and cash equivalents at beginning of year 12,000 306,000
----------- ----------
Cash and cash equivalents at end of year $ 172,000 12,000
=========== ==========
</TABLE>
(Continued)
F-8
<PAGE>
DEBBIE REYNOLDS HOTEL & CASINO, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Continued)
Years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
----------- ----------
<S> <C> <C>
Supplemental disclosure of cash flow information:
Cash paid for interest $ 821,000 171,000
=========== ==========
</TABLE>
Supplemental disclosures of noncash investing and financing activities:
In March 1994, a subsidiary of the Company acquired Debbie Reynolds Hotel &
Casino, Inc. (DRHC) in exchange for issuing 2,350,833 shares of common
stock.
The Company fully divested itself of its wholly-owned subsidiary, SWTV
Production Services, Inc., (SWTV) in exchange for the 2,126,540 shares of
the Company's common stock owned by the Company's former President. The
2,126,540 shares were canceled on March 31, 1994.
In March 1994, an officer, director and principal shareholder made an
additional capital contribution through the conversion of $1,761,000 of
debt to equity.
In March 1994, a subsidiary of the Company acquired Maxim Properties Company
(Maxim) in exchange for issuing 2,850,833 shares of common stock valued at
$400,000.
During 1994, certain of the Company's lenders and related parties converted
debt of $3,264,000 in exchange for 1,284,842 shares of common stock.
In consideration for services rendered in 1994 in developing and constructing
the showroom and museum, 100,000 shares of common stock, valued at
$200,000, were issued to an officer/director.
In consideration for services rendered in 1994, the Company issued 235,000
shares of common stock valued at $648,000.
In connection with the first mortgage note financing in 1994, the Company
issued 25,000 shares, valued at $75,000, to the mortgage holder as loan
fees.
In connection with a private placement in 1994, $385,000 representing the
fair value of the common stock purchase warrants, was recorded as original
issue discount on the convertible subordinated debentures.
In connection with a subsequent private placement in 1994, $192,000
representing the fair value of the common stock purchase warrants, was
recorded as original issue discount on the convertible subordinated
debentures.
During 1994, the Company issued an aggregate of 25,924 shares of restricted
common stock with a value of approximately $65,000 as a dividend on its
preferred stock.
During 1994, the Company entered into various capital lease obligations
aggregating $54,000 for the purchase of furniture and equipment.
During 1995, the Company issued 814,806 shares of common stock with a fair
market value of approximately $1,233,000 for consulting and other services
rendered.
The Company completed the construction of its timeshare units and transferred
all unsold units with a cost of $557,000 into inventory.
The Company issued 696,120 shares of common stock through conversion of
348,060 shares of preferred stock. The Company issued 696,120 shares of
common stock valued at $1,566,000 through conversion of debt.
See accompanying notes to consolidated financial statements
F-9
<PAGE>
DEBBIE REYNOLDS HOTEL & CASINO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1995
(1) Summary of Significant Accounting Policies
(a) Corporate Organization
The accompanying consolidated financial statements include the
accounts of Debbie Reynolds Hotel & Casino, Inc., formerly Halter
Venture Corporation (Halter) and its wholly-owned subsidiaries Debbie
Reynolds Management Company, Inc. (DRMC), formerly Debbie Reynolds
Hotel & Casino, Inc. (DRHC) and Debbie Reynolds Resorts, Inc. (DRRI)
(collectively the Companies). On November 18, 1994, the shareholders
of the Company elected at their annual shareholders' meeting to change
the name of the Company from Halter Venture Corporation to Debbie
Reynolds Hotel & Casino, Inc.
(b) Merger
Effective February 11, 1994, Halter entered into an Agreement of
Merger and Plan of Reorganization, as amended and restated on March
10, 1994 (Agreement), with Maxim Properties Company (Maxim), a
privately held Colorado corporation, DRHC and Hamlett Production, Ltd.
(HPL), both privately held Nevada corporations, and others. The
mergers contemplated by the Agreement were consummated as of March 22,
1994. Under the Agreement, HPL Acquisition Corporation, a wholly-owned
subsidiary of Halter, merged with and into DRHC, formerly HPL, the
surviving corporation (the DRHC Merger). In addition, MPC Acquisition
Corporation, another wholly-owned subsidiary of Halter, merged with
and into Maxim, the surviving corporation (the Maxim Merger). The DRHC
Merger and the Maxim Merger are referred to herein collectively as the
"Mergers."
Pursuant to the Mergers, Halter acquired all of the outstanding
securities of DRHC and Maxim in exchange for the issuance of 2,850,833
shares of Halter's common stock to the Maxim shareholders and other
related parties, and 2,350,833 shares of Halter's common stock to the
DRHC shareholder. Prior to the closing, DRHC merged with and into HPL,
and HPL changed its name to Debbie Reynolds Hotel & Casino, Inc. In
connection with the Mergers, Maxim and its principals obtained
financing for DRHC consisting of convertible promissory notes in the
amount of $2,553,500 and one other note of $800,000. In conjunction
with the Mergers, the convertible notes were converted into 851,167
shares of Halter's common stock. In connection with the Maxim merger,
$300,000 of the other note was contributed to the Company.
In conjunction with the Mergers, pursuant to a Divestiture Agreement
dated March 23, 1994, Halter divested itself of its wholly-owned
subsidiary, SWTV Production Services, Inc. (SWTV), to Halter's former
President in exchange for the 2,126,540 shares of common stock of
Halter owned by the former President. The 2,126,540 shares were then
canceled on March 31, 1994. SWTV was acquired by Halter on April 22,
1993 and from that time until divestiture constituted the sole
business operations of Halter.
F-10
<PAGE>
DEBBIE REYNOLDS HOTEL & CASINO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
For accounting purposes, the Mergers are accounted for as a
recapitalization of DRHC, with DRHC the acquirer and the surviving
corporation. The accompanying consolidated financial statements
reflect only the operations of the Company and its wholly-owned
subsidiaries, DRHC and DRRI.
The Company continued to operate under the Halter name until the
shareholders meeting in November 1994, when it was changed to DRHC.
(c) Description of Business
DRHC owns and operates a hotel, gift shop and showroom, and leases
space to a third party for the operation of a gambling casino, and
leases space to an affiliate for the operation of a bar and restaurant
located on Convention Center Drive in Las Vegas, Nevada (collectively,
the Property). Additionally, at December 31, 1994, the Company was in
the process of completing construction on the Debbie Reynolds
Hollywood Movie and Memorabilia Museum (Museum), which opened on April
1, 1995. The Company's operations also include the development and
sale of timesharing units in the Debbie Reynolds Hotel (Hotel) through
DRRI. The Company obtained a timeshare license which was granted by
the Nevada Real Estate Board on June 28, 1994.
On April 20, 1994, DRHC entered into an agreement with Hollywood
Restaurant, Inc. to terminate the existing restaurant lease and begin
operating the restaurant, "Celebrity Cafe". In April 1994, the
restaurant was leased to the affiliate that operates the bar and
liquor operations (see Note 2).
(d) Principles of Consolidation
The accompanying consolidated financial statements include the
accounts of Debbie Reynolds Hotel and Casino, Inc., a Nevada
Corporation, and its wholly owned subsidiaries DRMC and DRRI. All
intercompany accounts and transactions have been eliminated in
consolidation.
(e) Cash Equivalents
The Company considers all highly liquid debt instruments with original
maturities of three months or less at date of purchase to be cash
equivalents.
(f) Restricted Cash
Restricted cash is cash deposits made by timeshare purchasers to hold
their unit.
(g) Property and Equipment
Property and equipment are stated at cost. Property and equipment held
under capital leases are stated at the present value of minimum lease
payments at the inception of the lease.
F-11
<PAGE>
DEBBIE REYNOLDS HOTEL & CASINO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Depreciation on property and equipment is calculated on the
straight-line method over the estimated useful lives of the assets as
follows:
Building 20 years
Building improvements 10 years
Furniture and equipment 5 years
Property and equipment held under capital leases and leasehold
improvements are amortized straight-line over the shorter of the
lease term or estimated useful life of the asset.
(h) Income Taxes
Under the asset and liability method of Statement 109, deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carry forwards. Deferred tax
assets and liabilities are measured using enacted tax rates expected
to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under Statement
109, the effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period that includes the
enactment date.
(i) Self Insurance
The Company is self-insured for losses and liabilities related
primarily to health care. The Company does not have a maximum self
insurance exposure. Losses are accrued based upon the Company's
estimates using historical information.
(j) Recognition of Timeshare Revenue
Revenue from sales of timeshare interests is recognized in accordance
with the Financial Accounting Standards Board's Statement of Financial
Accounting Standards No. 66, Accounting for Sales of Real Estate. No
sales are recognized until such time as a minimum of 10% of the
purchase price has been received in cash, the buyer is committed to
continued payments of the remaining purchase price, the Company has
been released of all future obligations for the timeshare interest and
the recession period has passed.
(k) Earnings Per Share
Earnings per common and common equivalent share is based upon the
weighted average of common and common equivalent shares outstanding
during the year. Primary and fully diluted earnings per share are the
same. Earnings available to common shares have been reduced for
preferred stock dividends declared of $65,000 in 1994 and preferred
stock dividends not declared and in arrears of $65,000 in 1995.
F-12
<PAGE>
DEBBIE REYNOLDS HOTEL & CASINO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(l) Use of Estimates
Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and
the disclosure of contingent assets and liabilities to prepare these
financial statements in conformity with generally accepted accounting
principles. Actual amounts could differ from these estimates.
(m) Inventories
Inventory of food and beverage is accounted for at the lower of cost
(first-in first-out basis) or net realizable value.
(n) Fair Value of Financial Instruments
In December 1991, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards (SFAS) No. 107
Disclosure about Fair Value of Financial Instruments (SFAS 107). SFAS
107 requires all entities to disclose the fair value of financial
instruments, both assets and liabilities recognized and not recognized
on the balance sheet, for which it is practicable to estimate fair
value. SFAS 107 defines fair value of a financial instrument as the
amount at which the instrument could be exchanged in a current
transaction between willing parties. As of December 31, 1995, the
carrying value of all financial instruments approximates fair value
based on what the instrument could be exchanged for in a current
transaction between willing parties.
(o) Recently Issued Accounting Standards
The FASB issued SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of in March
1995. This statement, effective for the Company's fiscal year
beginning January 1, 1996, requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity, be reviewed
for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable.
Management believes that if SFAS No. 121 had been adopted as of
December 31, 1995, it would not have had a significant effect on the
financial position or results of operations of the Company.
The FASB issued SFAS No. 123, Accounting for Stock-Based Compensation
in October 1995. This statement, effective for the Company's fiscal
year beginning January 1, 1996, requires certain disclosures about the
impact on results of operations of the fair value of stock-based
employee compensation arrangements. Management believes that if SFAS
No. 123 had been adopted as of December 31, 1995, it would not have
had a significant effect on the financial position or results of
operations of the Company.
(p) Reclassifications
Certain amounts in the 1994 consolidated financial statements have
been reclassified to conform with the 1995 presentation.
F-13
<PAGE>
DEBBIE REYNOLDS HOTEL & CASINO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(2) Due From Affiliates
In March 1993, the Company entered into an oral agreement with an affiliate
to lease the bar and any liquor operations, for a five-year period with
five five-year renewal options. Payments to the Company under the agreement
are equal to 8% of net liquor sales and are payable monthly. Included in
due from affiliates is approximately $62,000 as of December 31, 1995, for
working capital advances. On August 1, 1996, DRMC received a liquor license
and terminated this lease.
The Company advanced $455,000 during 1994 to the chairman of the board of
directors. The funds were advances against future profits earned under an
employment agreement.
(3) Inventories
During 1995, the Company finished construction of all timeshare units and
transferred the cost associated with these units into inventory. At
December 31, 1995, $558,000 of cost relating to units remained in inventory
awaiting sale.
The Company maintained an inventory of $57,000 of food and beverage for the
bar and restaurant area at December 31, 1995.
F-14
<PAGE>
DEBBIE REYNOLDS HOTEL & CASINO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(4) Long-Term Debt and Capital Lease Obligations
<TABLE>
<S> <C>
Long-term debt at December 31, 1995 consists of the following:
First mortgage note payable, due March 15, 1997, interest at 13% payable monthly; secured by a first
deed of trust; payments of $1,200 are due upon sale of each timeshare unit, currently in default
(see below) $ 2,115,000
Note payable, due August 23, 1999, interest at 14%, secured by a fourth
deed of trust, currently in default (see below) 2,865,000
Note payable, due December 1, 1996, interest at the greater of 12% or 4% above prime rate; secured by a
third deed of trust; payments due monthly based on a graduated scale of timeshare sales, currently
in default (see below) 885,000
Note payable, due June 7, 1996, interest at 13% payable monthly; secured by a second deed of trust;
payments of $1,000 are due upon sale of each timeshare unit (see below) 151,000
Convertible subordinated debentures, interest at 8-3/4%, due March 25, 1996; convertible into one
share of common stock at $4.50, net of discount of $180,000 and $360,000 as of December 31, 1995
and 1994, respectively; effective rate of 19%, currently in default 576,000
Convertible subordinated debentures, interest at 8-3/4%, due November 17, 1998; convertible into one
share of common stock at $4.50, net of discount of $92,000 and $187,000 as of December 31, 1995
and 1994, respectively; effective rate of 21%, currently in default 591,000
Capital lease obligations (note 6) 688,000
Other 457,000
-----------
Total long term debt and capital lease obligations 8,328,000
Less current maturities (a) (8,078,000)
-----------
Long term debt and capital lease obligations, excluding current maturities $ 250,000
===========
</TABLE>
The aggregate scheduled maturities of long-term debt and capital lease
obligations for each of the years subsequent to December 31, 1995 are as
follows: 1996, $8,078,000(a); 1997, $166,000; 1998, $72,000; 1999, $12,000;
and 2000, $-0-. As disclosed above, two notes require aggregate payments of
$2,200 upon the sale of each timeshare unit and a third requires graduated
payments based on aggregate timeshare sales. The sales of timeshare units
will accelerate the principal payments on such notes, however no
assumptions regarding such accelerated principal payments have been
reflected in the maturities schedule.
- --------------
(a) The Company has reclassified $5,549,000 of long term debt to current,
because of certain events of default and noncompliance with certain loan
covenants at December 31, 1995.
F-15
<PAGE>
DEBBIE REYNOLDS HOTEL & CASINO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
On March 22, 1994, the Company obtained a $2,500,000 loan from Bennett
Management & Development Corp. (Bennett), the proceeds of which were
principally used to repay an existing mortgage on the Hotel and for general
corporate purposes. In consideration of the loan the Company agreed to
issue to Bennett 25,000 shares of its common stock. The chairman of the
board of directors of the Company has personally guaranteed the repayment
of the loan.
In August 1995, the Company obtained an additional $2,865,000 loan from
Bennett, the proceeds of which were principally used to pay off existing
debt and for general corporate purposes.
On December 1, 1994, the Company obtained a $1,100,000 loan from Source
Capital Corporation (Source), the proceeds of which have been used
principally to complete construction of the museum and for general
corporate purposes. Payments on the loan, although made monthly, are to be
facilitated through the following schedule of timeshare sales:
Through January 31, 1995:
$100 per timeshare sale between 1 and 350 units
$500 per timeshare sale between 351 and 515 units
$1,500 per timeshare sale in excess of 516 units
Subsequent to February 1, 1995:
$500 per timeshare sale between 1 and 515 units
$1,500 per timeshare sale in excess of 516 units until
the loan is repaid.
On June 15, 1994, the Company obtained a $1,000,000 loan from TPM Holdings,
Inc. (TPM), the proceeds of which have been used principally to continue
construction of the museum and for general corporate purposes. The loan
agreement provided that in the event that the loan was not paid in full by
February 1995, TPM would receive warrants that provided for the conversion
of the then outstanding indebtedness into the Company's common shares. The
warrants would have entitled the holder to convert the then outstanding
indebtedness into the Company's restricted common shares at a price of $3
per share, or in the event of a public offering or private placement of the
Company's common stock at an offering price of less than $4 per share, then
75% of that offering price. Additionally, the lender would receive warrants
to purchase 75,000 restricted common shares at the lower of $4 per share or
in the event of a public offering or private placement of the Company's
common stock at less than $4 per share, then 75% of that offering price.
Additionally, if the loan was not paid in full by February 1995, TPM could,
at its option, require DRHC to exercise its right to terminate the casino
operations lease (refer to Note 5), provided that TPM advances DRHC all
costs incurred with terminating the lease. Furthermore, TPM could not
exercise its right to require the lease termination without prior approval
of the Nevada Gaming authorities. Subsequent to December 31, 1994, this
option agreement was terminated and replaced with warrants to purchase up
to 100,000 shares of restricted common stock. The warrants are exercisable
for five years at an exercise price of the lesser of $3.00 or 75% of a
public offering or private placement of the Company's common stock. This
note has been paid in full by the Company subsequent to December 31, 1995.
F-16
<PAGE>
DEBBIE REYNOLDS HOTEL & CASINO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
In April 1995, the Company obtained a $500,000 loan from TPM, the proceeds
of which were principally used in the construction of the museum and for
general corporate purposes. The loan bore interest at 13% and was due June
25, 1996. This loan was issued as an addition to the lenders second
mortgage. The Company paid off this loan in November of 1995.
In October 1994, the Company completed a private placement of securities
for the Company's expansion and capital improvements, and sold 128,515
units, with total net proceeds of approximately $3,868,000. The units each
consist of four shares of Series AA Convertible Preferred Stock, $.0001 par
value, four two year Convertible Debentures each in the principal amount of
$4.50, and four Class A Common Stock Purchase Warrants, each to purchase
one share of common stock at $5.50 per share. The preferred shares accrue a
cumulative stock dividend of 8-3/4% based on a conversion rate of $4 per
share. The preferred shares are convertible into common stock at $4 per
share and have a liquidation preference of $4 per share. In connection with
the private placement, the Company issued 514,060 shares of preferred
stock. The Company has assigned values to each of the components based on
the estimated fair market value at the date of sale, which resulted in an
original issue discount for the convertible debentures of $385,000.
In November 1994, the Company completed a second private placement of
securities for the Company's expansion and capital improvements and sold
approximately 38,000 of the 66,000 units offered, with total net proceeds
of approximately $896,000. The units each consist of four shares of Series
AA Convertible Preferred Stock, $.0001 par value, four four-year
Convertible Debentures each in the principal amount of $4.50 and four Class
B Common Stock Purchase Warrants, each to purchase one share of common
stock at $5.50 per share. The preferred shares accrue a cumulative stock
dividend of 8-3/4% based on a conversion rate of $4 per share. The
preferred shares are convertible into common stock at $4 per share and have
a liquidation preference of $4 per share. In connection with the second
private placement, the Company issued 153,844 shares of preferred stock.
The Company has assigned values to each of the components based on the
estimated fair market value at the date of sale, which resulted in an
original issue discount for the convertible debentures of $192,000.
In August 1995, the Company offered all holders of the Company's units
issued pursuant to the Company's private placement memorandum dated March
25, 1994 and November 17, 1994 the opportunity to convert the Series AA
Preferred Stock and Debentures constituting part of the units into
restricted shares of the Company's common stock. Each Series AA Preferred
Stock and Debenture converted into one share of the Company's common stock
at the reduced conversion prices of $2.00 and $2.25, respectively. The
total dollar amount converted from Series AA Preferred Stock and Debentures
was $2,954,500, which converted into 1,392,240 shares of the Company's
common stock. As additional consideration, the Company also offered the
unit holders the right to exercise each Class A Warrant to purchase two
shares of Common Stock (instead of one) at an exercise price of $1.00
(instead of $5.50) for 60 days from the date of the offer. Pursuant to the
Warrant offer, the Company received $93,120 from the exercise of warrants
to purchase 93,120 shares of common stock. As additional consideration to
the Company, the unit holders waived the past due interest and dividend
payments owed. Total expenses associated with this conversion are $592,000.
F-17
<PAGE>
DEBBIE REYNOLDS HOTEL & CASINO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The convertible debentures prohibit the Company from paying any dividends,
other than the common stock dividend requirement of the preferred stock,
while the debentures are outstanding. In December 1994, the Company issued
25,924 shares of restricted common stock as Convertible Preferred Stock
dividends with a value of approximately $65,000. These dividends are at a
rate of 8-3/4% and are in accordance with the private placements stated
above.
In January 1995, World Venture Trust, an unaffiliated company, loaned the
Company $250,000. The loan bore interest at 10% and was due April 26, 1995
with a principal balance of $275,000. The loan was secured by the Company's
real and personal property. The loan was convertible, at the option of the
holder, after maturity, into 200,000 shares of the Company's common stock.
The Company paid off this loan in September of 1995 with $275,000 in cash
and issued the holder 15,745 restricted shares of the Company's common
stock.
In January 1995, Realecon, a California Corporation, loaned the Company
$125,000 and advanced an additional $75,000 in March 1995. The loan bore
interest at 12% and was due July 16, 1995. The amount due at maturity was
$235,000. The loan was secured against certain receivables of the Company
and required principal and interest payments equal to $1,000 per timeshare
interval sold. In consideration of the loan, the Company issued Realecon
10,000 restricted shares of the Company's common stock. The Company paid
off this loan in June of 1995.
In March 1995, the Company obtained a $245,000 loan from an independent
third party, the proceeds of which were principally used in the
construction of the museum. The loan bore interest at 6% and was due March
31, 1996. The loan was convertible, at the holders option, into the
Company's restricted common stock at a rate of $1.00 per share. In August
1995 the holder converted the indebtedness into 245,000 shares.
In October 1995, the Company raised additional financing through a
Regulations S offering under the Securities Act of 1933 (the Act). The
Company sold 300,000 shares of the Company's common stock for net proceeds
of approximately $225,000. The offering of shares was directed solely to
persons who are not residents of the United States. The offer was for a
maximum of 2,666,666 shares at $.75 per share. The shares were not
registered under the Act and may not be offered or sold in the United
States absent registration or an applicable exemption from registration. In
addition the shares were subject to a minimum six month restriction on
transfer.
In December 1995, the Company commenced a Regulation D offering under the
Act. At December 31, 1995 the Company sold 50,000 units at a $1.00 per unit
price, consisting of one share of the Company's common stock and one
warrant to purchase one share of common stock. Subsequent to year end, an
additional 150,000 units of this offering have been sold. The offering of
shares was directed solely to persons who met the definition of "Accredited
Investor" set forth in Rule 501(A) of Regulation D promulgated under the
Act. The Company offered a maximum of 3,000,000 units (the Unit), each Unit
consisting of one share of common stock and one warrant to purchase one
share of common stock at $1.00 per share.
F-18
<PAGE>
DEBBIE REYNOLDS HOTEL & CASINO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(5) Due to Affiliates
Due to affiliates at December 31, 1995 consists of the following:
Accounts payable to the Chairman of the Board of Directors
of the Company $ 838,000
Unsecured loans payable, without interest, due on demand 78,000
----------
Total due to affiliates $ 916,000
==========
During 1995, a $201,000 loan from a related party was forgiven and included
in other income.
(6) Leases
(a) Lessee
DRHC is obligated under various capital leases for certain hotel
furniture and equipment that expire at various dates during the next
five years. At December 31, 1995, the gross amount of property and
equipment and related accumulated amortization recorded under capital
leases is as follows:
Furniture and equipment $ 1,154,000
Less accumulated amortization (644,000)
---------------
$ 510,000
===============
Amortization of assets held under capital leases is included in
depreciation and amortization expense. The Company entered into a
lease agreement during 1993 for the Hotel's sign under terms
classified as an operating lease. The lease is for a five year period
and provides for monthly payments of approximately $8,000,
representing principal only. Rent expense for the years ended December
31, 1995 and 1994 aggregated $99,000 and $130,000, respectively, and
is included in general and administrative expense in the accompanying
consolidated statements of operations.
F-19
<PAGE>
DEBBIE REYNOLDS HOTEL & CASINO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Future minimum lease payments under noncancelable operating leases
(with initial or remaining lease terms in excess of one year) and
future minimum capital lease payments, as of December 31, 1995 are:
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
---------- ---------
<S> <C> <C>
Year ending December 31:
1996 $ 578,000 99,000
1997 176,000 99,000
1998 81,000 74,000
1999 14,000 --
========== ==========
Total minimum lease payments 849,000 272,000
==========
Less amount representing interest (at rates
ranging from 10% to 17.5%) (161,000)
----------
Present value of net minimum capital lease
payments $ 688,000
==========
</TABLE>
(b) Lessor
The Company leases the casino and bar operations under agreements
classified as operating leases, as follows:
The Company leases approximately 6,000 square feet of its facility to
an unaffiliated third party operator for purposes of operating a
casino. The lease is for a four-year period beginning July 1993, with
extensions available for an unspecified number of successive one-year
periods. Rental income is $175 per slot machine per month but not less
than $30,625 in any one month, reduced by 10% until the Company is
fully operating two restaurants. Rental income was $502,000 and
$472,000 for the years ended December 31, 1995 and 1994, respectively.
Included in the lease is a provision whereby between July 1994 and
June 1996 the Company has the right to terminate the lease. In
exchange, the Company would have to pay the lessee an amount equal to
the remaining book value of the slot machines, one-half of the
lessee's capitalized expenditures related to the casino operations,
and reimburse the lessee for renovations made to the casino area. The
Company served the operator with a termination notice in February 1996
and requested that the operator cease operations effective June 30,
1996. On March 31, 1996, the operator discontinued its gaming
operations on the property and subsequently filed a lawsuit against
the Company.
The restaurant and bar and liquor sales operations were leased to an
affiliate under a lease that commenced in April 1994 and was
terminated in August of 1996.
F-20
<PAGE>
DEBBIE REYNOLDS HOTEL & CASINO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(7) Income Taxes
Income tax benefit attributable to losses from continuing operations
differed from the amount computed by applying the federal income tax rate
of 34% to pretax loss from operations as a result of the following:
Computed "expected" tax benefit $ 2,925,000
Reduction in income tax benefit resulting from:
Change in the valuation allowance for deferred
tax assets (2,925,000)
-----------
$ --
===========
Prior to March 8, 1994, DRHC was taxed as an S Corporation and HPL as a C
Corporation. The S Corporation losses incurred prior to that date are not
eligible to be carried over by the Company. The tax effects of temporary
differences that give rise to significant portions of the deferred tax
assets are presented below:
Deferred tax assets:
Net operating loss carry forward $ 4,104,000
Allowance for doubtful accounts (5,000)
Less valuation allowance (4,099,000)
-----------
Total net deferred tax assets $ --
===========
At December 31, 1995 the Company has net operating loss carry-forwards for
federal income tax purposes of approximately $18,000,000 which are
available to offset future federal taxable income, if any, through 2010.
(8) Liquidity and Going Concern
The accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern. The Company's
recurring losses from operations, working capital deficiency, debt service
obligations, and defaults on various agreements raise substantial doubt
about the consolidated entity's ability to continue as a going concern.
Management of the Company is seeking additional sources of financing to
reduce its debt service obligations and is implementing cost control
measures to increase the cash flow of the Company. The accompanying
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
The Company has entered into an agreement to sell substantially all of the
assets of the Company (see Note 11). The sale of the Hotel to ILX
Incorporated (ILX) is subject to the approval of the Company's
shareholders, a standard due diligence investigation by ILX, receipt of any
necessary governmental approvals, and satisfaction of various other
conditions. The Company anticipates that the closing will occur in the
first quarter of 1997; however, there can be no assurance that the closing
will occur.
F-21
<PAGE>
DEBBIE REYNOLDS HOTEL & CASINO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
On June 28, 1994, the Nevada Real Estate Board granted DRRI its permanent
timeshare license. The Company continues to allocate substantial resources
to developing the timeshare operations. Through December 31, 1995, 1,082
timeshare units have been sold, proceeds from which total $7,353,000.
(9) Commitments and Contingencies
The Company finances a significant portion of its timeshare sales. To
facilitate the sale of timeshares the Company has obtained a $25,000,000
(increased to $35,000,000 at March 31, 1995) commitment from Bennett
Funding International, Ltd. (Bennett) whereby Bennett purchases timeshare
notes receivable from the Company with recourse, and subject to its credit
criteria, and advances the Company 85% of the amount financed. Generally,
the Company receives at least a 10% down payment from the purchaser and
finances the remaining 90% with Bennett. At December 31, 1995 the Company
had utilized and was contingently liable for approximately $4,967,000 of
this commitment.
On January 25, 1994, DRHC entered into an agreement with Raymax Production,
Ltd. (Raymax), a company wholly owned by the chairman of the board of
directors, to provide entertainment services for the remainder of the
chairman's life for $50,000 per month. On March 9, 1995, this agreement was
amended. Under the agreement, the chairman was to perform in the showroom
at the Property for a minimum of 30 weeks per year and perform other
managerial and promotional services. As compensation for her performance
services Raymax was to receive $25,000 per weekly performance (the Weekly
Performance Fee). Under the agreement Raymax also was to receive annually
10% of the Company's net profits (as defined in the agreement) for her
non-entertainment services. Raymax had the right to take a non-refundable
monthly draw against the net profits equal to the difference between
$60,000 and the Weekly Performance Fees for such month, up to a maximum
outstanding draw of $1,000,000. If the draw taken for any year exceeds the
10% net profits for such year, such excess would be carried forward as a
non-refundable advance against future net profits earned under the
agreement. Raymax also was to receive reimbursement of reasonable business
and travel expenses. Under the agreement, the Company is required to carry
life insurance on the chairman in the amount of $10,000,000 for the benefit
of the Company. During 1994, the Company had advanced $455,000 to Raymax
against future amounts owed under this agreement, all of which were
outstanding at December 31, 1995. The Company is currently in default of
this agreement due to non-payment. As of December 31, 1995, the Company was
in arrears approximately $795,000 pursuant to the agreement. In November
1996, Raymax delivered a notice to the Company terminating this agreement.
Ms. Reynolds has agreed to render showroom and other services on an "at
will" basis, terminable anytime. The terms relating to Ms. Reynolds
services are the same as specified in the terminated agreement except that
as to all unpaid past and future sums due Ms. Reynolds, the Company shall
pay interest at a rate of prime plus 2%.
Effective March 9, 1995, the Company entered into an agreement with Ms.
Reynolds and Raymax under which Ms. Reynolds was to grant the Company the
exclusive, perpetual, non-transferable license: (i) to display Ms.
Reynolds' extensive Hollywood memorabilia collection at the Company's
Hollywood Movie Museum; and (ii) to use the name, photograph, likeness and
signature of Ms. Reynolds for the promotion of the Company and its
operations. In consideration for the license, the Company was to agree to
issue 400,000 shares of restricted common stock to Raymax and to insure,
maintain and house the
F-22
<PAGE>
DEBBIE REYNOLDS HOTEL & CASINO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
memorabilia. As additional consideration for the license, upon Ms.
Reynolds' death, the Company will pay to her heirs and/or assigns annually,
10% of the net profits of the Company (as defined in the agreement) in
perpetuity. The Company was in default of the agreement with Ms. Reynolds.
In November 1996, Raymax delivered a notice to the Company terminating this
agreement.
Also on March 9, 1995, the Company entered into an agreement with Hollywood
Motion Picture and Television Museum, a non-profit organization
(Hollywood), which is the owner of an extensive memorabilia collection
which is displayed in the Museum. The Company has agreed to insure,
maintain and house the memorabilia. The Company will pay $50,000 per year
to Hollywood until the construction costs of the Museum have been recouped
from the Museum profits, at which time the annual payments will increase to
$100,000. The payments may be made in cash or in movie memorabilia.
On February 14, 1994, DRHC entered into an employment agreement with an
individual to serve as general manager of the Hotel for a period of five
years. As compensation for services performed, the employee will receive an
annual salary of $150,000. The employee will also receive a bonus
calculated as 2% of DRHC's hotel operation net profits, as defined, which
excludes timeshare operations. Additionally, this employee has been granted
stock options to purchase 275,000 shares of the Company's restricted common
stock, which vest ratably per diem and are exercisable at $3.00 per share
for five years from the vesting date. In May 1995, the Company terminated
this contract with the employee and entered into a modified contract. The
modified contract with DRMC was for the period June 1995 through May 1996.
Under this contract the employee served as Chief of Operations for the
Debbie Reynolds Hotel for a term of one year and received annual base
compensation of $80,000. The employee also received a $30,000 payment as
additional consideration from the new contract. As of December 31, 1995,
the employee is fully vested into his stock options to purchase 275,000
shares of the Company's common stock exercisable at $3.00 per share. During
1996, the Company granted options to purchase an additional 25,000 shares
of the Company's common stock exercisable at $1.00 per share. In September
1996, the employee and the Company mutually terminated his employment.
On December 7, 1995, the Company entered into Management Consulting
Agreements with two unrelated third party consultants. Pursuant to these
agreements, the Company issued 750,000 options to purchase shares of the
Company's common stock at $.75 per share in exchange for an anticipated
eight months of consulting services. These options were exercised by the
consultants through the issuance of two short term promissory notes payable
with an aggregate principal value of $563,000. Subsequent to the issuance
of the shares, the consultants defaulted on these notes.
The Company is involved in various claims and legal actions. In the opinion
of management, the ultimate disposition of these matters has been evaluated
and those claims considered probable and estimable have been accrued for.
As of December 31, 1995, the Company has accrued $450,000 for these claims.
F-23
<PAGE>
DEBBIE REYNOLDS HOTEL & CASINO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(10) Stock Plans
In June 1994, the Board of Directors of the Company adopted the 1994
Employee Stock Compensation Plan (Plan) for all full-time and part-time
employees and consultants and advisors to the Company. The Company reserved
an aggregate of 1,000,000 shares of the Company's common stock for issuance
under the 1994 Plan. The number of shares granted to an individual is at
the discretion of the Board of Directors of the Company. As of December 31,
1995, 560,000 shares have been granted under the Plan.
In June 1994, the Board of Directors adopted the 1994 Stock Option Plan
(Option Plan) for officers, directors and key employees, approved by
shareholders at the November 1994 Annual Shareholders meeting. The Company
has reserved an aggregate of 2,000,000 shares of the Company's common stock
for issuance under the 1994 Plan. The Option Plan includes options intended
to qualify as incentive stock options, non-qualified options, and formula
plan options which are non-discretionary and will be granted annually to
the disinterested directors of the Company. As of December 31, 1995, the
Company has issued options to purchase 190,000 shares of common stock with
an exercise price of $4 per share. The options, which vest immediately,
expire on October 10, 1999. As of December 31, 1995, none of these options
have been exercised.
(11) Subsequent Event
On October 30, 1996, the Company entered into an agreement with ILX
Incorporated (ILX), an Arizona Corporation, for the purchase of
substantially all of the assets of the Company for the purchase price of
$16,800,000. The purchase price will be payable to the Company in cash,
assumption of existing mortgage debt, and issuance of unrestricted ILX
common stock. Under the ILX Agreement, immediately after the closing, ILX
has agreed to lease certain of the hotel facilities to Debbie Reynolds
and/or a designee (the Hotel Facilities Lease). The Hotel Facilities Lease
is expected to be for a term of 99 years, with a monthly lease payment of
approximately $150,000, and will include the showroom, the museum, the gift
shop, the vacant casino space, the back bar and certain joint areas. The
sale of the Hotel to ILX is subject to the approval of the Company's
shareholders, a standard due diligence investigation by ILX, receipt of any
necessary governmental approvals, and satisfaction of various other
conditions. The Company anticipates that the closing will occur in the
first quarter of 1997; however, there can be no assurance that the closing
will occur.
In August 1996, the Company obtained a $500,000 loan from an unrelated
third party, the proceeds of which were principally used to reduce past due
tax obligations and reduce trade payable debt. The loan bears interest at
12% and has a $550,000 principal balance due November 1, 1996. This loan is
secured with a fourth mortgage on the Company's property and with certain
of the Company's receivables. In connection with the financing the Company
granted the unrelated third party warrants to acquire 260,000 shares of the
Company's common stock at an exercise price of $.70 per share. On October
18, 1996, the unrelated third party agreed to extend the maturity date to
February 1, 1997. In consideration for the extension, the Company reduced
the unrelated third party exercise price on the warrants to acquire 260,000
share of the Company's common stock from $.70 per share to $.22 per share.
F-24
Exhibit 10.22
Loan Agreement between DRMC and World Ventures Trust, and Promissory Note, all
dated April 26, 1995.
<PAGE>
THIS CONVERTIBLE NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF
THE NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR THE SECURITIES LAWS OF ANY STATE, AND NEITHER THE NOTE NOR THE SHARES NOR ANY
INTEREST IN THE NOTE OR THE SHARES MAY BE SOLD, OFFERED FOR SALE, PLEDGED OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION
THEREUNDER AND UNDER APPLICABLE STATE LAW, THE AVAILABILITY OF WHICH MUST BE
ESTABLISHED TO THE SATISFACTION OF THE MAKER.
CONVERTIBLE PROMISSORY NOTE AND NOTE SECURED BY DEED OF TRUST
FOR THE VALUE RECEIVED, DEBBIE REYNOLDS HOTEL AND CASINO, INC., a Nevada
corporation with its principal executive office in Las Vegas, Nevada ("Maker")
promises to pay to the order of WORLD VENTURES, a trust, ("Payee"), the sum of
TWO HUNDRED SEVENTY-FIVE THOUSAND DOLLARS ($275,000.00) in legal and lawful
money of the United States of America on April 26, 1995 at Las Vegas, Nevada.
This Note shall bear interest from the date hereof until paid at the rate of 10
% per annum, payable on maturity. The Maker shall have the right to prepay prior
to maturity all or any part of the principal of this Note, together with all
accrued interest thereon, without premium or penalty.
1. Conversion. At the option of the Payee, but only after maturity, after a
five (5) day notice, the principal and all accrued interest represented by this
Note may be converted, in full or in part, into shares of the Common Stock
$.0001 par value of Maker ("Shares") at the conversion price of $1.375 per share
("Conversion Price") subject to adjustment as hereinafter provided.
In order to exercise the conversion privilege, the holder of this Note
shall surrender this Note, duly endorsed or assigned to Maker or in blank, at
the principal executive office of Maker, accompanied by written notice to Maker
at such office that the holder elects to convert this Note. If the full
conversion privilege is exercised, this Note shall be deemed to have been fully
converted immediately prior to the close of business on the day of surrender of
this Note for full conversion in accordance with this paragraph and at such time
the rights of the holder of this Note as such shall cease, and the person or
persons entitled to receive the Shares issuable upon full conversion shall be
treated for all purposes as the record holder or holders of such Shares at such
time. In order to exercise the partial conversion privilege, the holder and the
Maker of this Note shall, on the back of this Note, indicate the fraction of the
indebtedness converted for Shares and the indebtedness remaining after such
partial conversion. In the event of such partial conversion, each party
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<PAGE>
shall affix its signature and the date of such partial conversion to the back of
this Note. If the partial conversion privilege is exercised, this Note shall be
deemed to have been partially converted immediately prior to the close of
business on the date the holder and the Maker indicate such partial conversion
on the back of this Note in accordance with this paragraph and at such time the
rights of the holder of this Note as to that portion of the Note converted for
Shares shall cease, and the person or persons entitled to receive the Shares
issuable upon partial conversion shall be treated for all purposes as the record
holder or holders of such Shares at such time. As promptly as practicable on or
after the conversion date, whether full or partial, the maker shall issue and
shall deliver to the holder at the address specified in the notice a certificate
or certificates evidencing the ownership of the shares by the holder hereof,
which shall bear only a standard restrictive legend that the Shares have not
been registered.
The Conversion Price and number of Shares purchasable pursuant to this Note
shall be subject to adjustment from time to time as hereinafter stated. In the
event Maker shall at any time after the date of execution hereof exchange as a
whole, by subdivision or consolidation in any manner or by effecting a stock
dividend, the number of Shares then outstanding into a different number of
Shares, with or without par value, then thereafter the number of Shares which
the holder shall have the right to purchase (calculated immediately prior to
such change), shall be increased or decreased, as the case may be, in direct
proportion to the increase or decrease in the number of Shares of Maker issued
and outstanding by reason of such change, and the Conversion Price of the Shares
after such change shall in the event of an increase in the number of Shares be
proportionately reduced, and in the event of a decrease in the number of Shares
be proportionately increased.
In case of any consolidation of Maker with, or merger of Maker into, any
other corporation (other than a consolidation or merger in which Maker is the
continuing corporation), the sale of all the shares of the Company's outstanding
Common Stock or any transaction pursuant to which Maker shall become a
subsidiary of a holding company, the corporation formed by such consolidation or
the corporation resulting from such merger, or such holding company, as the case
may be, shall execute an amendment to this Note providing that the holder of
this Note then outstanding shall have the right thereafter to convert this Note
in full or in part into the Shares upon such consolation, merger, transfer or
holding company transaction by the holder into which this Note might have been
converted immediately prior to such consolidation, merger, transfer or holding
company transaction. The provisions of this paragraph shall similarly apply to
successive consolidations, mergers, transfers or holding company transactions.
The holder of this Note, by his acceptance hereof, consents and agrees to any
and all such amendment or amendments.
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<PAGE>
In the event of the sale of all or substantially all of the assets of
Maker, or in the event of any distribution of all or substantially all of its
assets in dissolution or liquidation, Maker shall mail notice thereof by
registered mail to the holder and shall make no distribution to the shareholders
of Maker until the expiration of thirty (30) days from the date of mailing of
the aforesaid notice. If the holder shall not exercise this conversion privilege
within thirty (30) days from the date of mailing notice to the holder by Maker,
that Maker either (i) proposes to sell all or substantially all of its assets or
(ii) proposes to distribute assets in dissolution or liquidation, all rights
herein granted not exercised within such thirty (30) day period, shall there
after become null and void. Maker shall not, however, be prevented from
consummating any such sale without waiting the expiration of such thirty (30)
period, it being the intent and purpose hereof to enable the holder, upon
exercise of this conversion privilege, to participate in the distribution of the
consideration to be received to Maker upon any such sale or sublease, or in the
distribution of assets upon any dissolution or liquidation.
This Note and the Shares issuable upon conversion of the Note have not been
registered under the Securities Act of 1933, as amended, (the "Securities Act")
or the securities laws of any states and will be offered and sold in reliance on
exemptions from the registration requirement of such laws. The Note and the
underlying Shares are deemed to be "restricted securities" as that term is
defined under Rule 144 promulgated under the Securities Act. Prior to the
issuance of the underlying Shares upon the conversion of the Note the Payee
will be required to execute an investment letter in substantially the form
attached hereto acknowledging that the Shares are "restricted securities" and
representing that the Shares are being taken by Payee for investment purposes
only and not for distribution. Maker at any time after the Note is converted
into the Shares and while the Shares remain "restricted securities" proposes to
register under the Securities Act any of its securities, either for its own
account or for the account of security holders, other than a registration on
Form S-8 or S-14, or any registration on a form which does not permit secondary
sales, the Maker shall, at such time, give written notice of such intention to
the Payee and upon written request of the Payee received by the Maker within
thirty (30) days after the Maker has given such notice, include in such
registration (and all related qualifications under state securities laws) all of
such Shares held by Payee or a portion thereof specified in such written
request. If Payee exercises such right to have the Shares so registered, Payee's
registration rights with respect to such registration statement shall be those
that are customary in the industry.
2. Interest Savings Clause. Notwithstanding anything to the contrary
contained herein, no provision of this Note shall require
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<PAGE>
the payment or permit the collection of interest in excess of the maximum rate
(the "Maximum Rate") permitted by applicable law. If any excess of interest in
such respect is herein provided for, or shall be adjudicated to be so provided,
in this Note or otherwise in connection with the transaction that gave rise to
the indebtedness evidenced by this Note, the provisions of this Section shall
govern and prevail, and neither Maker nor the successors or assigns of Maker
shall be obligated to pay the excess amount of such interest, or any other
excess sun paid for the use, forbearance or detention of sums loaned pursuant
hereto. If for any reason interest in excess of the maximum rate of interest
permitted by applicable law shall be deemed charged, required or permitted by
any court of competent jurisdiction, any such excess shall be applied as a
payment and reduction of the principal indebtedness evidenced by this Note, and,
if the principal amount hereto has been paid in full, any remaining excess shall
forthwith be paid to Maker. In determining whether the amount of interest paid
or payable under any contingency exceeds the amount of interest paid or payable,
if the indebtedness evidenced by this Note had at all times accrued interest at
the Maximum Rate, Maker agrees that, to the maximum extent permitted under
applicable law, (a) any non principal payment shall be characterized as an
expense fee, or premium rather than as interest, (b) prepayments and the effects
thereof shall be excluded, (c) the total amount of interest shall be "spread"
throughout the entire contemplated term of the Note to and including the
maturity date of this Note, and (d) if the indebtedness evidenced by this Note
is paid and performed in full prior to the end of the full stated term of this
Note and if the aggregate amount of interest received by Payee for the actual
period of existence hereof exceeds the amount of interest that would have
accrued on the indebtedness evidenced by this Note had such indebtedness at all
times from the inception thereof borne interest at the Maximum Rate, Payee shall
refund to Maker the amount of such excess, and, in such event Payee shall not be
subject to any penalties provided by any laws for contracting for, charging,
reserving, taking or receiving interest in any amount in excess of the amount
which would have accrued on the indebtedness evidenced by this Note if such
indebtedness had, at all times from the inception thereof, borne interest at the
Maximum Rate.
3. Waiver. Maker, and any other person liable for the payment of
indebtedness evidenced hereby, jointly and severally waive diligence in
collecting, presentment for payment, demand, dishonor and bringing suit against
any party liable hereon, and all notices, including notice of intention to
accelerate the maturity hereof, notice that such acceleration of maturity has
occurred, notice of protest, demand, dishonor and nonpayment of the indebtedness
evidenced by this Note, (except as otherwise provided in this Note); and
expressly agree to any and all extensions, renewals, partial payments,
substitutions of evidence of indebtedness and the taking, release or
substitution of any security or collateral without notice before or after
maturity
4
<PAGE>
without in any way affecting the liability of Maker or any other person liable
for the indebtedness evidenced hereby. No extension of time for payment of any
of the indebtedness or any installment thereof evidenced by this Note made by
agreement by Payee with any person now or hereafter liable under this Note shall
affect the original liability on this Note of Maker or any other person liable
for the payment of the indebtedness or any installment thereof evidenced hereby,
even if Maker or other person liable for the payment of the indebtedness
evidenced hereby are not parties to such agreement.
4. Deed of Trust and Guaranty. The payment of the indebtedness evidenced by
this Note is secured by a Deed of Trust executed on this same date, encumbering
the property located at 305 Convention Center Drive, Las Vegas, Nevada 89109,
and Payee or any subsequent holder is entitled to the benefits thereof. This
Note is also guaranteed by M. Donald Granatstein, pursuant to the Guaranty
executed by him as of the date hereof.
5. Events of Default. The occurrence of any one or more of the following
events shall constitute an Event of Default, and Maker shall have five (5) days,
after written notice is received from Payee, to cure such default or Payee may
exercise the Remedies upon Default detailed hereinafter. The events of default
are:
(a) Maker shall fail to pay this Note when due;
(b) Maker shall admit in writing its inability to pay its debts, or
shall make a general assignment of its assets or property rights for
the benefit of its creditors; or any proceeding shall be instituted by
or against Maker seeking to adjudicate Maker a bankrupt or insolvent,
or seeking reorganization, arrangement, adjustment or composition of
Maker or Maker's debts under any law relating to bankruptcy,
insolvency or reorganization or release of debtors, or seeking
appointment of a receiver, custodian, trustee, or other similar
official for Maker or for any substantial part of Maker's property.
(c) Maker dissolves or any action shall be taken by Maker, or the
holders of a majority of the issued and outstanding capital stock of
Maker, to wind-up or liquidate the business, property or assets of
Maker; or
(d) The lease for the operation of a gambling casino between Jackpot
Enterprises shall be in default or the lessee is not in compliance
with all requisite regulatory requirements for the operation of its
casino business, or the Maker shall not have received all requisite
regulatory approvals required for this loan; or
5
<PAGE>
(e) Maker shall sell or attempt to sell substantially all of its
assets.
6. Remedies upon Default. Upon the occurrence of any Event of Default, and
five (5) days after receipt of notice has elapsed, the holder hereof may at its
option:
(a) Declare the principal balance of this Note and any accrued
interest thereon immediately due and payable without presentment,
demand, protest or further notice of any kind, including notice of
intention to accelerate and notice of acceleration, all of which are
hereby waived by Maker:
(b) Exercise any and all right and remedies provided for in, or
pursuant to this Note, the Dead of Trust or the Guaranty or by
creditors generally; and
(c) to the extent permitted by law, bring suit at law, in equity or
through other appropriate proceedings, whether for the specific
performance of any covenant or agreement contained in the Deed of
Trust, for an injection against the violation of the terms hereof or
thereof, in aid of the exercise of any power granted hereby or thereby
or by law, to recover judgment for any and all amounts due on this
Note, under the Deed of Trust or otherwise against Maker and Maker's
assets.
7. Cumulative Rights. No delay on the part of the holder of this note in
the exercise of any power or right under this Note, under the Deed of Trust, or
the Guaranty, shall operate as a waiver hereof. Failure of the holder hereof to
exercise any right granted herein shall not constitute a waiver of the right to
exercise the same upon the occurrence of a subsequent Event of Default.
Enforcement by the holder of this Note of any security for the payment hereof
shall not constitute an election by such holder of remedies so as to preclude
the exercise of any other remedy available to such holder.
8. Attorneys' Fees and Costs. In the event this Note is placed in the hands
of an attorney for collection after the occurrence of an Event of Default, or in
the event this Note is collected in whole or in part through legal or judicial
proceedings of any nature, including bankruptcy, after the occurrence of an
Event of Default, then Make agrees and promises to pay in addition to the
remaining unpaid principal and accrued interest on the Note all of the holder's
costs of collection, when incurred, including, without limitation, reasonable
attorneys' fees, irrespective of whether legal action is filed with a court of
competent jurisdiction.
9. Assignment. This Note shall not be assignable by Payee,
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<PAGE>
without prior written consent of the Maker.
10. Governing Law. THIS NOTE IS MADE, ENTERED INTO AND PERFORMABLE IN LAS
VEGAS, NEVADA. THE MAKER HAS ITS PRINCIPAL PLACE OF BUSINESS IN LAS VEGAS,
NEVADA AND ALL PAYMENTS UNDER THIS NOTE SHALL BE PAID IN CLARK COUNTY, NEVADA
CONSEQUENTLY, THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF NEVADA AND ANY LITIGATION OR OTHER PROCEEDING BETWEEN
MAKER AND PAYEE THAT MAY BE BROUGHT, OR ARISE OUT OF, IN CONNECTION WITH OR BY
REASON OF THIS NOTE SHALL BE BROUGHT IN THE APPLICABLE FEDERAL OR STATE COURT IN
AND FOR CLARK COUNTY, NEVADA WHICH COURTS SHALL BE THE EXCLUSIVE COURTS OF
JURISDICTION AND VENUE.
IN WITNESS WHEREOF, Maker has caused this Note to be executed by a duly
authorized officer of Maker, as of the day and year first above written.
MAKER:
DEBBIE REYNOLDS HOTEL AND CASINO,
INC.
By: /S/ DONALD GRANATSTEIN
Exhibit 10.23
Loan Agreement between the Registrant and RealEcon, and Promissory Note, dated
January 16, 1995.
<PAGE>
SECURED PROMISSORY NOTE
$146,000.00 January 16, 1995
FOR VALUE RECEIVED, DEBBIE REYNOLDS HOTEL AND CASINO, INC., a Nevada
corporation, and DEBBIE REYNOLDS RESORTS, INC., a Nevada corporation, whose
address is 305 Convention Center Drive, Las Vegas, Nevada 89109 (collectively,
"Maker"), jointly and severally do hereby promise to pay to the order of
REALECON, a California corporation, at 4 Hutton Centre Drive, Suite 410, Santa
Ana, California 92707 ("Lender"), or such other place as Lender may designate in
writing, in lawful money of the United States of America, the principal sum of
One Hundred Forty-Six Thousand Dollars ($146,000.00), together with interest on
the outstanding principal balance from time to time outstanding at a rate equal
to twelve percent (12%) per annum, compounded annually.
Maker is the owner and operator of the Debbie Reynolds Hotel and Casino
located in Las Vegas, Nevada (the "Project"), and is currently engaged in the
business of, among other things, selling timeshare interests in the Project (the
"Timeshare Unit(s)"). This Note is made in connection with a Loan Agreement of
even date herewith between Maker and Payee (the "Loan Agreement").
This Note shall mature on May 16, 1995 (the "Maturity Date"). Required
payments on this Note of principal and accrued interest shall be due and payable
as follows (collectively, the "Required Payments"):
(a) Commencing on February 25, 1995 and continuing to and including March
26, 1995 (the "First Payment Period"), Maker, upon the closing of any sale of
any Timeshare Unit by Maker during such period, shall cause to be paid to Lender
by the escrow holder of such sale, directly out of escrow ("Escrow") from the
proceeds of sale of each such Timeshare Unit ("Proceeds"), the amount of One
Thousand Dollars ($1,000.00), until a total of Fifty Thousand Dollars
($50,000.00) has been paid to Lender during such First Payment Period.
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<PAGE>
(b) Commencing on March 27, 1995 and continuing to and including April 25,
1995 (the "Second Payment Period"), Maker, upon the closing of any sale of any
Timeshare Unit by Maker during such period, shall cause to be paid to Lender by
the escrow holder of such sale, directly out of Escrow from the Proceeds, the
amount of One Thousand Two Hundred Dollars ($1,200.00), until a total of (i)
Sixty-Nine Thousand Six Hundred Dollars ($69,600.00), plus (ii) any deficiency
in the amounts which should have been paid to Lender during the First Payment
Period, is paid to Lender during such Second Payment Period.
(c) Commencing on April 26, 1995 and continuing to and including the
Maturity Date (the 'Third Payment Period"), Maker, upon the closing of any sale
of any Timeshare Unit by Maker during such period, shall cause to be paid to
Lender by the escrow holder of such sale, directly out of Escrow from the
Proceeds, the amount of One Thousand Dollars ($1,000.00), until such time as all
principal and accrued, but unpaid, interest under this Note is paid in full.
(d) In the event of any refinancing of the debt encumbering the Project (a
"Refinancing"), Borrower shall pay to Lender, within three (3) days following
such Refinancing, all outstanding amounts under this Note, including, without
limitation, principal and accrued, but unpaid, interest.
All principal and accrued, but unpaid, interest on this Note shall be due
and payable on the Maturity Date. All payments on this Note shall, at the option
of Lender or the holder of this Note, be applied first to the payment of accrued
interest, and after all such interest has been paid, any remainder shall be
applied to reduction of the principal balance. Principal and interest shall be
payable in lawful money of the United States.
Maker shall pay interest on all amounts (including both principal and
interest) outstanding under this Note after the Maturity Date (whether by
acceleration after a default or otherwise) at a rate equal to twelve percent
(12%) per annum, compounded annually, and such interest shall continue to
accrue
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until the date such default is cured pursuant to the provisions of this Note.
Anything herein to the contrary notwithstanding, if a late charge is assessed
hereunder, such amount shall not exceed the maximum amount permitted by law.
DG
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Initials
Maker has the right to prepay at any time, without penalty, all or any part
of the unpaid balance of the principal hereof.
Maker shall be in default under this Note if (i) any payment of principal
or interest is not paid to Lender or the holder of this Note when due; (ii)
maker shall be in default under the terms of the Loan Agreement; or (iii) Maker
shall make an assignment for the benefit of creditors, admit in writing its
inability to pay its debts generally as they become due, files a petition in
bankruptcy, be adjudicated insolvent or bankrupt, or petitions or applies to any
tribunal for a receiver or for any relief under bankruptcy or other debtor
protection statutes. Upon the occurrence of an event of default hereunder, the
whole of the unpaid principal and interest owing on this Note shall, at the
election of Lender or the holder hereof and without notice, become immediately
due and payable.
If this Note is not paid when due, whether at maturity or by acceleration,
the undersigned promises to pay all costs of collection, including, but not
limited to, reasonable attorneys' fees, and all expenses incurred in connection
with the protection or realization of any collateral incurred by Lender hereof
on account of any such collection, whether or not suit is filed hereon. The
undersigned expressly waives presentment, diligence, protest, and demand, notice
of protest, demand and dishonor and nonpayment of this Note, and all other
notices of any kind, and expressly agrees that this Note or any payment
hereunder, may be extended from time to time; and consents to the acceptance of
any security for this Note. To the fullest extent permitted by law, the defense
of the statute of limitations and any action on this Note is waived by the
undersigned.
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<PAGE>
This Note may from time to time be extended or renewed by Lender, with or
without notice to the undersigned and any related right may be waived,
exchanged, surrendered, or otherwise dealt with, all without affecting the
liability of the undersigned.
All agreements between the undersigned and Lender hereof are expressly
limited so that in no contingency or event whatsoever, whether by reason of
advancement of the proceeds hereof, acceleration of maturity of the unpaid
principal balance hereof, or otherwise, shall the amount paid or agreed to be
paid to Lender hereof for the use, forbearance or detention of the money to be
advanced hereunder exceed the highest lawful rate permissible under applicable
usury laws. If, from any circumstances whatsoever, fulfillment of any provision
hereof or any security agreement securing this Note or any other agreement
referred to herein, at the time performance of such provision shall be due,
shall involve transcending the limit of validity prescribed by law which a court
of competent jurisdiction may deem applicable hereto, then ipso facto, the
obligation to be fulfilled shall be reduced to the limit of such validity, and
if from any circumstances the holder hereof shall ever receive as interest an
amount which would exceed the highest lawful rate, such amount which would be
excessive interest shall be applied to the reduction of the unpaid principal
balance due hereunder and not to the payment of interest. This provision shall
control every other provision of all agreements between the undersigned and the
holder hereof.
This Note is secured by the collateral assignment to Lender of certain
promissory notes payable to Maker pursuant to that certain Assignment of
Promissory Notes and that certain Assignment of Deeds of Trust, both of even
date herewith executed by Maker in favor of Lender.
Should Maker sell, convey, transfer, lease, dispose of, or further encumber
or refinance any debt which encumbers the Project, or any portion thereof
(whether voluntarily or involuntarily), without providing written notice to
Lender and paying to Lender the amounts set forth in subparagraph (d) above,
then Lender shall have the right, at its option, to declare all sums under this
Note to be immediately due and payable.
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<PAGE>
The provisions hereof shall be binding upon the legal representatives,
successors and assigns of the undersigned, and shall inure to the benefit of
Lender, its legal representatives, successors and assigns.
This Note shall be governed by and construed in accordance with the laws of
the State of Nevada and the exclusive forum in the determination of any action
relating to the collection, validity, or enforceability of this Note shall be
the United States District Court located in the County of Orange, State of
California.
DEBBIE REYNOLDS RESORTS, INC., DEBBIE REYNOLDS HOTEL AND
a Nevada Corporation CASINO, INC., a Nevada Corporation
By: /s/ Donald Granatstein
By: /s/ Donald Granatstein ------------------------------
----------------------------- Its: Executive V.P. & Asst. Secretary
Its: President & Asst. Secretary
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<PAGE>
AMENDMENT NO. 1 TO LOAN AGREEMENT
This Amendment No. 1 to Loan Agreement is made and entered into as March
13, 1995 (the "Effective Date"), by and between (i) REALECON, a California
corporation ('Lender"), and (ii) DEBBIE REYNOLDS HOTEL AND CASINO, INC., a
Nevada corporation ("DRHCI"), and DEBBIE REYNOLDS RESORTS, INC., a Nevada
corporation ("DRRI") (collectively, "Borrower"), with reference to the following
facts:
R E C I T A L S
A. Borrower and Lender have entered into that certain Loan Agreement dated
as of January 16, 1995 (the "Loan Agreement") under the terms and conditions of
which Borrower borrowed from Lender, and Lender loaned to Borrower, the sum of
One Hundred Twenty-Five Thousand Dollars ($125,000.00) in consideration for the
repayment by Borrower to Lender of the sum of One Hundred Forty-Six Thousand
Dollars ($146,000.00), together with interest on such One Hundred Forty-Six
Thousand Dollar ($146,000.00) amount, pursuant to the terms and conditions of
that certain Secured Promissory Note dated as of January 16, 1995 executed by
Borrower in favor of Lender (the "Note").
B. Borrower desires to Borrower from Lender an additional Seventy-Five
Thousand Dollars ($75,000.00) in consideration for increasing the principal
amount owed under the terms of the Note by Eighty-Seven Thousand Five Hundred
Dollars ($87,500.00), under the terms and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing facts, and upon the
mutual covenants and conditions hereinafter contained, the parties hereto hereby
agree as follows:
1. Defined Terms. All terms used herein with their initial letter
capitalized shall have the same meaning as set forth in the Loan Agreement
unless otherwise defined herein.
2. Increase in Loan. In consideration for making an additional advance to
Borrower of Seventy-Five Thousand Dollars ($75,000.00), Borrower hereby agrees
to repay to Lender an additional principal sum under the Note of Eighty-Seven
Thousand Five Hundred Dollars ($87,500.00), together with additional interest on
such Eighty-Seven Thousand Five Hundred Dollar ($87,500.00) amount, pursuant to
the terms and conditions of the Note, as modified by that certain Note
Modification Agreement of even date herewith between Lender and Borrower, in the
form of that attached hereto as Exhibit "A" and incorporated herein by this
reference (the "Note Modification"). Concurrently with the execution hereof,
Borrower shall execute and deliver to Lender the Note Modification.
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<PAGE>
3. Additional Collateral. Borrower's performance under the Note, as
modified by the Note Modification, shall be further secured pursuant to
Borrower's collateral assignment to Lender, and Borrower hereby grants a
security interest to Lender in and to, all of Borrower's right, title, and
interest in and to all of Borrower's right to receive any amounts under those
certain Vacation Partners Purchase Agreements (Nevada) listed on Exhibit "B"
attached hereto and incorporated herein by reference, which evidence amounts
owed to Borrower from the buyers' named therein in the aggregate principal
amount as of the date hereof of approximately Seventy-Nine Thousand Dollars
($79,000.00) (collectively, the "Additional Collateral Agreements"). Said
buyers' performance under the Additional Collateral Agreements are secured by
those certain Deeds of Trust which name Borrower as beneficiary, and which are
recorded in the county of Clark, state of Nevada, encumbering certain Timeshare
Interests purchased by the trustors under such Deeds of Trust (collectively, the
"Additional Collateral Deeds of Trust"). The assignment of the Additional
Collateral Agreements shall be evidenced by Borrower's execution and delivery to
Lender concurrently herewith of an Assignment of Purchase Agreements in the form
of that attached hereto as Exhibit "C" and incorporated herein by this reference
(the "Additional Collateral Agreements Assignment"). Concurrently herewith,
Borrower shall also execute and acknowledge and deliver to Lender an Assignment
of Deeds of Trust in the form of that attached hereto as Exhibit "D" assigning
to Lender all of Borrower's beneficial interest under the Additional Collateral
Deeds of Trust (the "Additional Collateral Deeds of Trust Assignment").
Concurrently herewith, Borrower shall also execute and deliver to Lender a UCC-2
Amendment to Financing Statement in the form of that attached hereto as Exhibit
"E."
Concurrently herewith, Borrower shall deliver to Lender the originals of
all Additional Collateral Agreements and Additional Collateral Deeds of Trust.
To the extent that Borrower does not have in its possession any of the
Additional Collateral Deeds of Trust, Borrower shall forward such original
Additional Collateral Deeds of Trust to Lender immediately following receipt
thereof. The Additional Collateral Agreements shall be deemed for all purposes
Collateral Agreements under the terms of the Loan Agreement, and the Additional
Collateral Deeds of Trust shall be deemed for all purposes Collateral Deeds of
Trust under the Loan Agreement, and shall be subject to all of the terms and
conditions of the Loan Agreement.
4. Agreement to Provide Additional Ten (10) Collateral Agreements. Borrower
acknowledges and agrees that Borrower shall deliver to Lender, and Lender shall
be entitled to list on Exhibit "B" attached hereto, the next ten (10)
consecutive Vacation Partners Purchase Agreements (Nevada) executed by Borrower
and the buyer's named therein with respect to the sale of Timeshare Interests in
the Project which actually result in a closing and sale of a Timeshare Interest
(the "Future Additional Collateral Agreements"), and such Future Additional
Collateral Agreements shall be deemed for all purposes Collateral Agreements
under the terms of the Loan Agreement, and shall be subject to all of the terms
and conditions of the Loan Agreement; provided, however, Borrower shall not be
obligated to pay to Lender, and such sums shall not be added to the amounts due
under the Note, any payments made to Borrower attributable to the Future
Additional Collateral Agreements through April 30, 1995. Commencing on May 1,
1995, in the event all amounts due under the Note, as amended by the Note
Modification, have not been paid to Lender, the Future Additional Collateral
Agreements shall be subject to all of the terms and conditions of the Loan
Agreement, including, without limitation, paragraph 2 thereof. Borrower shall
also deliver to Lender, immediately upon recordation the Deeds of Trust securing
the buyers' performance under the Future Additional Collateral Agreements (the
"Future Additional Collateral Deeds of Trust), and execute such additional
Assignments of Deeds of Trust
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<PAGE>
assigning such deeds of trust to Lender, as Lender may request, and such Future
Additional Collateral Deeds of Trust shall be deemed for all purposes Collateral
Deeds of Trust under the Loan Agreement, and shall be subject to all of the
terms and conditions of the Loan Agreement.
5. Issuance of Stock. In partial consideration for advancing the additional
funds described in this Amendment, concurrently herewith, or within ten (10)
days following the Effective Date, DRHCI shall deliver to John L. Rainaldi
("Rainaldi") a Stock Certificate executed by the President and Secretary of
DRHCI evidencing the issuance to John L. Rainaldi of ten thousand (10,000)
shares of common stock of DRHCI, as adjusted by any stock splits or dividends
subsequent to the date hereof (the "DRHCI Stock"). DRHCI hereby represents and
warrants to Lender and Rainaldi that, upon issuance of the stock certificates
representing the DRHCI Stock, the DRHCI Stock shall be duly and validly issued,
fully paid, and nonassessable. DRHCI also acknowledges and agrees that the
DRHCI Stock shall be owned by Rainaldi and shall not constitute collateral for
any amounts loaned to Borrower under the terms hereof or the Loan Agreement. The
failure of DRHCI to deliver the stock certificates representing the DRHCI Stock
in the manner provided for in this paragraph 5 shall constitute a material
default under the terms of the Loan Agreement.
6. Escrow Instruction. Concurrently herewith, Borrower shall execute and
deliver to the Escrow Holder Irrevocable Escrow Instructions in the form of
those attached hereto as Exhibit "F," instructing Escrow Holder, as a condition
of closing of each Timeshare Escrow, to pay the Required Payments to Lender
directly out of the proceeds of the sale from each such Timeshare Escrow,
pursuant to the terms and conditions of the Note, as amended by the Note
Modification, and to deliver the documents referenced in paragraph 4 hereof, as
an when escrow closings occur.
7. No Other Changes. Except as modified herein, the remaining terms and
conditions of the Loan Agreement shall remain unmodified and in full force and
effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date first written above.
DEBBIE REYNOLDS HOTEL AND CASINO,
INC., a Nevada corporation
By: /s/ Donald Granatstein
---------------------------
Its: Executive Vice President
------------------------
By: /s/ Henry Ricci
---------------------------
Its: President
------------------------
[SIGNATURES CONTINUED ON NEXT PAGE]
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<PAGE>
DEBBIE REYNOLDS RESORTS, INC., a
Nevada Corporation
By: /s/ Donald Granatstein
---------------------------
Its: Executive Vice President & Secretary
------------------------------------
REALECON, a California Corporation
By: /s/ John L. Rainaldi
---------------------------
Its: President
EXHIBITS
A Note Modification
B List of Additional Collateral Agreements
C Assignment of Purchase Agreements
D Assignment of Deeds of Trust
E UCC-2
F Escrow Instructions
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<PAGE>
NOTE MODIFICATION AGREEMENT
This Note Modification Agreement ("Agreement") is made and entered into as
of March 13, 1995 ("Effective Date"), by and between (i) REALECON, a California
corporation ("Lender"), and (ii) DEBBIE REYNOLDS HOTEL AND CASINO, INC., a
Nevada corporation, and DEBBIE REYNOLDS RESORTS, INC., a Nevada corporation
(collectively, "Maker").
RECITALS
A. Maker executed and delivered to Lender that certain Secured Promissory
Note dated as of January 16, 1995 in the principal amount of One Hundred
Forty-Six Thousand Dollars ($146,000.00) (the "Note"), the definitions of which
are incorporated herein by reference.
B. Maker and Payee desire to amend the terms of the Note under the terms
and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing facts, the parties hereto
hereby agree as follows:
1. Amendment to Principal Amount. As of the Effective Date, the principal
balance of the Note as of the date hereof shall be increased by Eighty-Seven
Thousand Five Hundred Dollars ($87,500.00) over and above the principal amount
otherwise owing on this Note as of such date.
2. New Maturity Date. The Note shall mature on July 16, 1995 (the "Maturity
Date"), and the Third Payment Period and the terms applicable thereto in the
Note shall be extended to such new Maturity Date.
3. Payments from Buyers' Under Collateral Agreements. In addition to all
other amounts which become due and payable under this Note, an amount equal to
any amounts which Borrower receives as payments under those certain Vacation
Partners Purchase Agreements (Nevada) from the buyers' thereunder, which have
been collaterally assigned to Lender as security for the payment of this Note
under the terms and conditions of the Loan Agreement or the Amendment No. 1 to
Loan Agreement between Borrower and Lender of even date herewith, shall be due
and payable to Lender within five (5) days of receipt of such amounts by
Borrower.
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<PAGE>
4. No Other Changes. Except as expressly modified herein, the remaining
terms and conditions of the Note shall remain unmodified, and in full force and
effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
<PAGE>
DEBBIE REYNOLDS HOTEL AND CASINO,
INC., a Nevada Corporation
By: /s/ Donald Granatsteien
---------------------------
Its: Executive Vice President
---------------------------
By: Henry Ricci
---------------------------
Its: President
---------------------------
DEBBIE REYNOLDS RESORTS, INC., a
Nevada Corporation
By: /s/ Donald Granatstein
---------------------------
Its: President & Secretary
---------------------------
REALECON, a California corporation
By: /s/ John L. Rainaldi
---------------------------
Its: President
---------------------------
Exhibit 10.24
Loan Agreement between the Registrant and Bennett Funding
International, Ltd., and Promissory Note, dated July 27, 1995.
<PAGE>
PROMISSORY NOTE
AMOUNT: $ 2,865,000.00 DATE: July 27, 1995
FOR VALUE RECEIVED, Debbie Reynolds Hotel & Casino, Inc., a Nevada
Corporation ("Maker"), promises to pay to Bennett Funding International, Ltd.
d/b/a Resort Funding, a Delaware Corporation ("lender"), or order, at Two
Clinton Square, Syracuse, New York 13202, or at such other place as the holder
of this Promissory Note ("Holder") may from time to time designate in writing,
in lawful money of the United States of America, the principal sum of up to Two
Million Eight Hundred Sixty Five Thousand Dollars ($2,865,000.00) or so much
thereof as has been disbursed and not repaid, together with interest on the
unpaid principal balance from time to time outstanding until paid, as more fully
provided for below ("Note").
The amounts loaned pursuant to this Note shall be made available by Lender
for disbursement to Maker on a revolving basis, the maximum amount available
hereunder, at any one time, shall be Two Million Eight Hundred Sixty Five
Thousand Dollars ($2,865,000.00).
Debbie Reynolds Resort, Inc. and Resort Funding, Inc., executed and entered
into a Contract of Sale of Membership Agreements and Installment Purchase
Agreements with Recourse dated March 7, 1994 ("Agreement"). Maker agreed to
execute and deliver this Note with respect to the method and manner in which the
Note is to be repaid from and after the date hereof based on the terms of the
Agreement.
All capitalized terms not otherwise defined herein shall have the meanings
ascribed to them in the Agreement, the applicable provisions of which are
incorporated herein by reference.
1. Interest
Interest only shall be due and payable monthly in arrears, shall accrue
daily on the basis of a 360-day year and actual days elapsed shall accrue and be
payable for a period of twelve (12) months from the date hereof at a rate per
annum equal to fourteen percent (14.0%). Thereafter repayment of this Note shall
be made, at Holder's option, in thirty-six (36) equal monthly installments of
principal and interest or through the timeshare release payment mechanism. In no
event shall any interest rate to be charged exceed the maximum contract rate
permitted under the applicable Usury Law.
Page 1 of 5
<PAGE>
If all or any portion of any Interest Installment (as hereinafter defined)
is not actually received by Holder from Maker within ten (10) days following the
Installment Date that such Interest Installment is due, Maker shall pay on
demand to Holder a late charge of two percent (2%) of the amount of such overdue
payment.
2. Maturity
The initial term of the Loan shall be twelve (12) months from the date of
execution of this Note or upon demand of the Holder, but no sooner than ninety
(90) days from the date of the execution of this Note, whichever occurs first
("Term"). Such term may be extended at the sole option of the Holder.
3. Security
This Note is to be secured by a Mortgage and Security Agreement on the
property described in Exhibit "A" attached hereto.
4. Prepayment
Prepayment of this Note shall be permitted to be made without premium or
penalty pursuant to the payment of release fees as described in Section 10
below.
5. Miscellaneous
Every person or entity at any time liable for the payment of the
indebtedness evidenced hereby waives: diligence, presentment for payment,
protest and demand, notice of protest, demand, dishonor and nonpayment of this
Note. Every such person or entity further consents that Holder may renew or
extend the time of payment of any part or the whole of indebtedness at any time
and from time to time at the request of any other person or entity liable
therefor. Any such renewals or extensions may be made without notice to any
person or entity liable for the payment of the indebtedness evidenced hereby.
This Note is given and accepted as evidence of indebtedness only and not in
payment or satisfaction of any indebtedness or obligation.
Time is of the essence with respect to all of Maker's obligations and
agreements under this Note.
This Note and all its provisions, conditions, promises and covenants shall
be binding in accordance with the terms hereof upon Maker, its successors and
assigns, provided nothing herein shall be deemed consent to any assignment
restricted or prohibited by the terms hereof. If more that one person or other
entity
Page 2 of 5
<PAGE>
has executed this Note as Maker, the obligations of such persons and entities
shall be joint and several.
6. Default and Remedies
The entire unpaid principal amount of this Note, together with all accrued
interest thereon, shall, at the option of Holder exercised by written notice to
the Maker at its principal executive offices, be due and payable if any one or
more of the following events (herein called "Event of Default") shall have
occurred (for any reason whatsoever and whether such happening shall be
voluntary or involuntary or come about or be effected by operation of law or
pursuant to or in compliance with any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body) and be
continuing at the time of such notice;
(a) if default shall be made in the due and punctual payment of interest or
principal of this Note when and as the same shall become due and payable,
whether at maturity, by acceleration or otherwise, and such default shall
have continued for a period of thirty (30) days after written notice
thereof to Maker;
(b) if default shall be made in the performance or observance of any of the
other covenants, agreements or conditions of Maker contained in this Note,
and such default shall have continued for a period of thirty (30) days
after written notice thereof to maker;
(c) if Maker shall:
(i) admit in writing its inability to pay its debts generally as they
become due;
(ii) file a petition in bankruptcy or a petition to take advantage of
any insolvency act;
(iii) make any assignment for the benefit of creditors;
(iv) consent to the appointment of a receiver of itself or of the
whole or any substantial part of its property;
(v) on a petition in bankruptcy filed against it, be adjudicated a
bankrupt; or
Page 3 of 5
<PAGE>
(vi) file a petition or answer seeking reorganization or arrangement
under the Federal bankruptcy laws or any other applicable law or
statute of the United States of America or any State, district or
territory thereof; or
(d) if default shall be made in the performance or observance of any of the
conditions of other agreements as set forth above, and such default shall
have continued for a period of thirty (30) days after written notice
thereof to Maker;
In case any one or more of the Event of Default shall have occurred and be
continuing, Holder may proceed to protect and enforce its rights either by suit
in equity and/or by action of law, whether for the specific performance of any
covenant or agreement contained in this Note or in aid of the exercise of any
power granted in this Note, or Holder may proceed to enforce the payment of all
sums due upon this Note or to enforce any other legal or equitable right of
Holder.
No remedy herein conferred upon Holder is intended to limit or restrict any
other remedy and each and every such remedy shall be cumulative and shall be in
addition to every other remedy given hereunder or now or hereafter existing at
law or in equity or by statute or otherwise.
No course of dealing between Maker and Holder or any delay on the part of
Holder in exercising any rights hereunder shall operate as a waiver of any
rights or any Holder hereof.
Should any proceedings be instituted by Holder to recover any monies due
hereunder, Maker agrees to pay all reasonable attorney's fees and costs.
7. Severability
In the event that one or more of the provisions of this Note shall for any
reason be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provisions
of this Note, but this Note shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein.
8. Governing Law
This Note shall be deemed to have been made and executed at Syracuse, New
York regardless of the order in which the signatures of the parties shall be
affixed hereto, and this Note shall be interpreted, construed, and enforced in
accordance
Page 4 of 5
<PAGE>
with the laws and public policies of the State of New York without regard to the
principles of conflicts of law.
In any action to enforce this Note, personal jurisdiction and venue shall
be at Holder's option in the Supreme Court of the State of New York, County of
Onondaga, or in the United States District Court for the Northern District of
New York.
9. Modification
This Note shall not be modified, amended, changed, terminated,
supplemented, or waived except in writing signed by Maker and Holder.
10. Release Fees
Maker shall pay release fees to Holder which are generated from the sales
of timeshare Periods at the Debbie Reynolds Hotel and Casino in the amount as
provided in the Agreement. The release fees shall be applied by Holder to the
principal balance due hereunder. On a monthly basis, payment due on Interest
Installments shall be re-calculated based on the principal reduction.
IN WITNESS WHEREOF, the undersigned sets its hand the date above first
written.
Debbie Reynolds Hotel & Casino, Inc.
By: /s/ Todd Fisher
--------------------
Its: CEO
Page 5 of 5
Exhibit 10.25
Loan Agreement between the Registrant and Source
Capital/TPM Holding, Inc., and Promissory Note, dated March
1995.
<PAGE>
ADDITIONAL ADVANCE PROMISSORY NOTE
$500,000.00 Las Vegas, Nevada
March _____, 1995
The undersigned, jointly and severally ("the Borrower"), for value
received, hereby promise to pay to the order of SOURCE CAPITAL CORPORATION
("Lender") the principal sum of Five Hundred Thousand and No/100 Dollars
($500,000.00) and to pay interest on the unpaid principal hereof, from the date
hereof until the principal hereof is paid or renewed, at the rate of fifteen
percent (15%) per annum, together with all costs and fees, including reasonable
attorneys' fees incurred by Lender in enforcing the obligations of this Note.
The principal hereof and interest hereon are payable to Lender at 9016 E.
Indiana, Suite 200, Spokane, Washington 99212 or at such other place as the
Lender may direct, in such coin or currency of the United States of America as
at the time of payment shall be legal tender for the payment of public and
private debts. Principal and interest shall be advanced and payable as follows:
a. Concurrently with the execution hereof, Lender shall advance
Borrower up to the sum of $200,000.00, less Lender's loan costs as agreed
to by and between Borrower and Lender.
b. Upon Borrower's request, but in Lender's sole and exclusive
discretion, on or about April , 1995, Lender may advance Borrower an
additional sum up to $300,000.00, less Lender's loan costs as agreed to by
and between Lender and Borrower.
c. Each advance hereunder, as of the date hereof, shall bear interest
at the rate of fifteen percent (15%) per annum.
d. All payments received hereunder shall be applied first against
costs, then against interest, and then against principal.
e. In all events, the entire balance, both principal and accrued
interest, shall be due and payable no later than June 25, 1995.
The undersigned shall have the right at any time to prepay the whole or any
part hereof, but any such additional payments shall be credited first upon
accrued interest and then upon principal.
This Note is secured by a Deed of Trust ("Deed of Trust") executed on or
about June 10, 1994, encumbering property located in Clark County, Nevada, to
which reference is hereby made for a description of the nature and extent of the
security provided thereby and the rights and limitations of rights of the Lender
and of the Borrower in respect of such security.
If default be made with respect to any payment herein provided for, or in
case of an event of default (as defined in the Deed of Trust or any other
document executed in connection therewith or
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<PAGE>
referred to therein, to secure this Note, collectively referred to as "Loan
Instruments") shall occur, the principal of this Note and any accrued interest
and all other indebtedness secured or to be secured thereby may be declared due
and payable in the manner and with the effect provided in the Loan Instruments.
If default be made in the payment of principal or interest when due
hereunder, or if default be made under any of the Loan Instruments and after
notice as provided in said security documents, if any, at the option of holder
of this note, the whole amount then unpaid shall be due and collectible, whether
due by lapse of time or not, and the same shall thereafter bear interest at the
rate of nineteen percent (19%) per annum. Failure to exercise this option shall
not constitute a waiver of the right to exercise the same at any other time.
In the event that Borrower defaults with respect to any payment herein
provided for or in case of an event of default under any of the Loan
Instruments, the Lender shall have the right, at the Borrower's expense, to
retain an attorney or collection agency to make any demand, enforce any remedy,
or otherwise protect its rights under this Note and the Loan Instruments. The
Borrower hereby promises to pay all costs, fees and expenses so incurred by the
Lender, including, without limitation, reasonable attorneys' fees (with or
without arbitration or litigation), arbitration and court costs, collection
agency charges, notice expenses and title search expenses, and the failure of
the defaulting Borrower to pay the same shall, in itself, constitute a further
and additional default. In the event that suit or action or arbitration is
instituted by the Lender to enforce this Note or any rights under the Loan
Instruments, the Borrower hereby promises to pay, in addition to costs and
expenses provided by statute or otherwise, such sums as the court may adjudge
reasonable as attorneys' fees in such proceeding and on any appeals from any
judgment or decree entered therein and the costs and attorneys' fees for
collection of the amount due therein. Time is of the essence. All reimbursements
and payments required by this paragraph shall be immediately due and payable on
demand. The Makers, Borrowers, drawers and endorsers severally waive presentment
for payment, protest, notice of protest and notice of nonpayment of this Note.
DEBBIE REYNOLDS MANAGEMENT
COMPANY, INC., formerly known as DEBBIE
REYNOLDS HOTEL & CASINO, INC.
By: _____________________________
Its: __________________________
DEBBIE REYNOLDS RESORTS, INC.
By: _____________________________
Its: __________________________
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<PAGE>
AFTER RECORDING, RETURN TO:
MICHAEL D. CURRIN
Witherspoon, Kelley, Davenport & Toole
422 West Riverside, Ste 1100
Spokane WA 99201-0390
ADDITIONAL ADVANCE MODIFICATION
OF DEED OF TRUST
THIS MODIFICATION AGREEMENT is entered into this _ day of March, 1995, by
and between DEBBIE REYNOLDS MANAGEMENT COMPANY, INC., formerly known as DEBBIE
REYNOLDS HOTEL & CASINO, INC. and DEBBIE REYNOLDS RESORTS, INC., (hereinafter
referred to as "Borrower"), and SOURCE CAPITAL CORPORATION (hereinafter referred
to as "Lender").
RECITALS
1. On or about June 13, 1994, Borrower made, executed and delivered to
Lender its Promissory Note, in writing, in the original principal amount of One
Million Dollars ($ 1,000,000.00) together with interest thereon at a variable
rate (hereinafter referred to as the "Note").
2. At the same time as the execution and delivery of the Note, and in order
to secure repayment of the same, Borrower executed, in favor of Lender, a Deed
of Trust (hereinafter referred to as ("Deed of Trust"), encumbering certain real
property located in Clark County, Nevada, (the "property"), and legally
described as follows, to-wit:
See Exhibit "A" attached hereto and by this reference made a part
hereof.
The Deed of Trust was thereafter recorded under Clark County Instrument No.
00816 ill Book 940615, records of Clark County, Nevada.
3. On or about December 1, 1994, Borrower made, executed and delivered to
Lender its Promissory Note in the original principal amount of One Million One
Hundred Thousand and No/100 Dollars ($ 1,100,000.00), together with interest
thereon at a variable rate, the repayment of which was secured by an additional
Deed of Trust encumbering the property (hereinafter referred to as the "Second
Note" and "Second Deed of Trust", respectively). The Second Deed of Trust was
recorded on or about December 2, 1994, as Instrument No. 01626, in Book 941202,
records of Clark County, Nevada.
-1-
<PAGE>
4. Borrower has requested that Lender advance it additional funds, up to a
maximum additional amount of $500,000.00, the repayment of which will be secured
by the Deed of Trust. Lender is willing to make the advance to Borrower, upon
the terms and conditions set forth herein and in the Additional Advance
Promissory Note, to be executed concurrently herewith by Borrower in favor of
Lender.
5. The Note, Deed of Trust, Second Note, Second Deed of Trust, and this
Modification Agreement, and any other document executed in connection therewith
or referred to therein, may hereinafter be referred to as the "Loan Documents."
NOW, THEREFORE, in consideration of their mutual benefits contained herein,
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Borrower and Lender hereby agree as follows:
A. Concurrently with the execution of this Modification Agreement, Borrower
shall execute and deliver its Additional Advance Promissory Note in the
principal amount of Five Hundred Thousand and No/100 Dollars ($500,000.00),
together with interest thereon at the rate of fifteen percent (15%) per annum. A
true and correct copy of the Additional Advance Promissory Note is attached
hereto as Exhibit "B".
B. the payment and performance of Borrower's obligations under the
Additional Advance Note shall be secured by the Deed of Trust and Loan Documents
and in event of default by Borrower in the payment and performance of the
Additional Advance Note shall entitle Lender to all the rights and remedies for
default under the Deed of Trust and Loan Documents.
C. The Deed of Trust and Second Deed of Trust shall continue to secure the
payment and performance of Borrower's obligations to Lender under the First
Note, Second Note, and the Loan Documents.
D. In the event Borrower shall, it any time, be or have been in default
hereunder or under the Loan Documents, Lender shall have the right, at
Borrower's sole expense, to enter upon the property, either by itself or
through its agent, for the purpose of conducting an MAI appraisal of the
property. The cost of the appraisal shall be payable by Borrower to lender on
demand, and shall bear interest at the Note rate. It is expressly agreed and
understood by Borrower that the occurrence of such a default shall be deemed to
increase Lender's risk hereunder, thereby creating a need for Lender to have the
information contained in an MAI appraisal of the property.
E. It is agreed and understood that all of the agreements, covenants and
conditions of the Loan Documents shall remain in full force and effect, except
for the amendments and modifications expressly mentioned herein.
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<PAGE>
F. Nothing herein contained shall in any manner effect the validity or
priority of the lien established by the Deed of Trust or the Second Deed of
Trust encumbering the Property referred to in Paragraph 2 above.
G. The recitals set forth in Paragraphs 1 through 5 above are incorporated
into the substantive provisions of this Agreement.
H. Borrower acknowledges that oral agreements or oral commitments to loan
money, extend credit or to forebear from enforcing repayment of a debt are not
enforceable under Washington law.
BORROWER:
DEBBIE REYNOLDS MANAGEMENT
COMPANY, INC., formerly known as DEBBIE
REYNOLDS HOTEL & CASINO, INC.
By: _____________________________
Its: __________________________
DEBBIE REYNOLDS RESORTS, INC.
By: _____________________________
Its: __________________________
LENDER:
SOURCE CAPITAL CORPORATION
By: /s/ James Kirschbaum
--------------------------------
Its: Executive Vice President
------------------------------
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<PAGE>
STATE OF NEVADA )
) ss.
County of )
I certify that I know or have satisfactory evidence that _________________
signed this instrument, on oath stated that he/she was authorized to execute the
instrument and acknowledged it as ________________________ of DEBBIE REYNOLDS
MANAGEMENT COMPANY, INC., to be the free and voluntary act of such corporation,
for the uses and purposes mentioned in the instrument.
DATED: March _______, 1995.
--------------------------------------------
Notary Public in and for the State of Nevada
Residing at:________________________________
My commission expires:______________________
STATE OF NEVADA )
) ss.
County of )
I certify that I know or have satisfactory evidence that
___________________ signed this instrument, on oath stated that he/she was
authorized to execute the instrument and acknowledged it as
______________________ of DEBBIE REYNOLDS RESORTS, INC., to be the free and
voluntary act of such corporation, for the uses and purposes mentioned in the
instrument.
DATED: March _______, 1995.
--------------------------------------------
Notary Public in and for the State of Nevada
Residing at:________________________________
My commission expires:______________________
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<PAGE>
STATE OF WASHINGTON )
) ss.
County of Spokane )
I certify that I know or have satisfactory evidence that JAMES KIRSCHBAUM
signed this instrument, on oath stated that he/she was authorized to execute the
instrument and acknowledged it as E.V.P. of SOURCE CAPITAL CORPORATION., to be
the free and voluntary act of such corporation, for the uses and purposes
mentioned in the instrument.
DATED: March 27, 1995.
/s/: Sharon Frank
------------------------------------------------
Notary Public in and for the State of Washington
Residing at: Spokane, Washington
My commission expires: 3-22-98
-5-
<PAGE>
EXHIBIT "A"
PARCEL 1:
That portion of the Southeast Quarter (SE 1/4) of Section 9, Township 21 South,
Range 61 East, M.D.M., Clark County, Nevada described as follows:
COMMENCING at the Southeast Corner of said Section 9;
THENCE North 04(dg)39'10" West along the East line of said Section 9, a distance
of 702.66 feet to the Northeast corner of that certain parcel of land described
by "Corporation Grant Deed" to Walter S. Hunsaker, et ux, recorded March 24,
1949 in Book 59 of Deeds, page 504 as Instrument No. 30674S in the Clark County
Recorder's Office, Clark County, Nevada; THENCE North 89(dg)05'00" West along
the North line of said Parcel of land, 258.90 feet to a Southeast corner of that
certain parcel of land described by "Corporation Grant, Bargain, Sale Deed" to
Clifford A. Jones, et al, recorded December 4, 1951 in Book 65, Page 461 of
Deeds as Instrument No. 378222 in the Clark County Recorder's Office, Clark
County, Nevada; THENCE North 00(dg)11'23" East, 234.86 feet to a point on the
Southerly right of way line of Convention Center Drive (80.00 feet wide); THENCE
North 89(dg)24'14" West along said right of way line 1237.25 feet to the Point
of Beginning, which bears South 89(dg)24'14" East, 100.00 feet from the
Northwest corner of said Jones Parcel; THENCE South 02(dg)53'34" East parallel
with the West line of said Jones Parcel, 277.78 feet to a point on the South
line of said Jones Parcel; THENCE South 88(dg)58'00" East along the South line
of said Jones Parcel, 237.25 feet to the Northwest corner of that certain parcel
of land described by "Corporation Grant, Bargain, Sale Deed" to T.M. Griss, et
ux, recorded February 13, 1952 in Book 66 of Deeds, page 26, as Instrument No.
380912 in the Clark County Recorder's Office, Clark County, Nevada; THENCE
continuing South 88(dg)58'00" East along the North line of said Griss Parcel,
219.18 feet to the Northeast Corner of "Desert Inn Condominiums" as shown by map
thereof on file in Book 26, page 86 in the Clark County Recorder's Office, Clark
County, Nevada; THENCE South 03(dg)51'03" East along the East line of said
tract, 601.57 feet to a point being 50.00 feet North of the South line of said
Section 9 and being on the Northerly right of way line of Desert Inn Road (90.00
feet wide); THENCE South 89(dg)06'04" East along said right of way line, 127.16
feet; THENCE curving to the left along a 25.00 foot radius curve , concave
Northwesterly, through a central angle of 95(dg)11'28", an arc length of 41.53
feet to a point on the Westerly right of way line of Mel Drive (Varying width);
THENCE along said right of way line, the following Three (3) courses, North
04(dg)17'32" West, 212.70 feet to an angle point in said right of way line;
THENCE North 03(dg)16'28" West, 361.01 feet to a point on the South line of the
aforementioned Jones Parcel; THENCE North 02(dg)14'14" West, 268.01 feet; THENCE
curving to the left along a 1S.00 foot radius curve, concave Southwesterly,
through a central angle of 87(dg)10'00", an arc length of 22-82 feet to a point
on the aforementioned Southerly right of way line of Convention Center Drive;
Page 1 of 3
<PAGE>
THENCE North 89(dg)24'14" West along said right of way line, 601.44 feet to the
Point of Beginning.
EXCEPTING THEREFROM that portion as conveyed to Clark County in a Deed recorded
September 2, 1993 in Book 930922 of Official Records, Clark County, Nevada
Records, as Document No. 00213, and described as follows:
COMMENCING at the South Quarter Corner (S 1/4 cor.) of said Section 9; THENCE
along the South line of the Southeast Quarter (SE 1/4) of said Section, South
89(dg)21'56" East, 1691.65 feet; THENCE North 04(dg)06'59" West, 50.17 feet to
the Southwest Corner of said Parcel, being the True Point of Beginning; THENCE
along the West line of said Parcel, North 04(dg)06'59" West, 15.02 feet; THENCE
South 89(dg)21'56" East, 127.03 feet to a point of curvature; THENCE along a
curve to the left having a radius of 25.00 feet through a central angle of
95(dg)12'00", an arc length of 41.54 feet (chord North 43(dg)02'04" East 36.92
feet), to a point of tangency on the West right of way line of Mel Avenue;
THENCE along said line South 04(dg)33'56" East, 15.06 feet to a point of
curvature; THENCE along a curve to the left having a radius of 25.00 feet
through a central angle of 95(dg)21'00", an arc length of 41.54 feet (chord
South 43(dg)02'04" West 36.92 feet) to a point of tangency on the North right of
way line of Desert Inn Road; THENCE along said line North 89(dg)21'56" West,
127.14 feet to the True Point of Beginning.
ALSO EXCEPTING THEREFROM that portion of the Southeast Quarter (SE 1/4) of
Section 9, Township 21 South, Range 61 East, M.D.M., Clark County, Nevada
described as follows:
COMMENCING at the Southeast corner of said Section 9; THENCE North 89(dg)06'04"
West, along the South line thereof, 863.25 feet; THENCE North 04(dg)17'32" West,
departing said South line, 651.78 feet;
THENCE North 88(dg)58'00" West, 3.63 feet;
THENCE North 02(dg)14'14" West, 250.69 feet;
THENCE South 87(dg)45'46" West, 152.35 feet to the Point of Beginning;
THENCE South 00(dg)29'26" West, 9.90 feet;
THENCE North 89(dg)30'34" West, 3.25 feet;
THENCE South 00(dg)29'26" West, 84.00 feet;
THENCE South 89(dg)30'34" West, 10.60 feet;
THENCE South 00(dg)29'26" West, 19.85 feet;
THENCE North 89(dg)30'34" West, 11.97 feet;
THENCE North 00(dg)29'26" East, 81.80 feet;
THENCE South 89(dg)30'34" East, 29.40 feet;
THENCE South 00(dg)29'26" West, 8.50 feet;
THENCE South 89(dg)30'34" East, 4.75 feet;
THENCE North 00(dg)29'26" East, 7.60 feet;
THENCE South 89(dg)30'34" East, 10.60 feet;
THENCE North 00(dg)29'26" East, 6.00 feet;
THENCE South 89(dg)30'34" East, 91.22 feet;
THENCE North 00(dg)29'26" East, 5.30 feet;
THENCE South 89(dg)30'34" East, 13.65 feet;
THENCE North 00(dg)29'26" East, 9.90 feet;
THENCE South 89(dg)30'34" East, 18.80 feet to the True Point of
Beginning.
Page 2 of 3
<PAGE>
PARCEL 2:
That portion of the Southeast Quarter (SE 1/4) of Section 9, Township 21 South,
Range 61 East, M.D.M., Clark County, Nevada described as follows:
COMMENCING at the Southeast corner of said Section 9;
THENCE North 89(dg)06'04" West, along the South line thereof, 863.25 feet;
THENCE North 0401713211 West, departing said South line, 651.78 feet;
THENCE North 88(dg)58'00" West, 3.63 feeT;
THENCE North 02(dg)14'14" West, 250.69 feet;
THENCE South 87(dg)45'46" West, 152.35 feet to the Point of Beginning;
THENCE South 00(dg)29'26" West, 9.90 feet;
THENCE North 89(dg)30'34" West, 3.25 feet;
THENCE South 00(dg)29'26" West, 84.00 feet;
THENCE South 89(dg)30'34" West, 10.60 feet;
THENCE South 00(dg)29'26" West, 19.85 feet;
THENCE North 89(dg)30'34" West, 11.97 feet;
THENCE North 00(dg)29'26" East, 81.80 feet;
THENCE South 89(dg)30'34" East, 29.40 feet;
THENCE South 00(dg)29'26" West, 8.50 feet;
THENCE South 89(dg)30'34" East, 4.75 feet;
THENCE North 00(dg)29'26" East, 7.60 feet;
THENCE South 89(dg)30'34" East, 10.60 feet;
THENCE North 00(dg)29'26" East, 6.00 feet;
THENCE South 89(dg)30'34" East, 91.22 feet;
THENCE North 00(dg)29'26" East, 5.30 feet;
THENCE South 89(dg)30'34" East, 13.65 feet;
THENCE North 00(dg)29'26" East, 9.90 feet;
THENCE South 89(dg)30'34" East, 18.80 feet to the True Point of
Beginning.
Page 3 of 3
Exhibit 10.26
Consulting Agreement between the Registrant and Miron
Leshem dated November 6, 1995.
<PAGE>
INDEPENDENT CONTRACTOR AGREEMENT
THE AGREEMENT is made and entered into as of this 6th day of November, 1995
by and between Debbie Reynolds Hotel & Casino, Inc. (Client), with its principal
place of business in Las Vegas, Nevada, and Miron Leshem an individual ("ML"),
an independent contractor, with his place of business at 108 Sagamore Rd. Apt#
5j, Tuckahoe, NY 10707.
RECITALS
WHEREAS, Client is engaged in the Timeshare, Hotel and Stock Promotion
Industry.
WHEREAS, ML is in the business of providing general business consulting
services, including strategic business planning services, to companies.
WHEREAS, in the operation of Client's business, Client is in need of the
services which ML provides and wishes to enter into a business arrangement with
ML to provide such services.
IN CONSIDERATION of the promises and mutual covenants hereby contained, it
is hereby agreed as follows:
AGREEMENTS
1. Terms of Contract
This Agreement will become effective on November 6, 1995 and will continue
in effect for a period of six (6) months unless earlier terminated pursuant to
Section 5 of this Agreement.
2. Services to be Performed by Contractor
2.1 Specific Services ML agrees to provide general business consulting
services, including strategic business planning services, to Client.
2.2 Independent Contractor Status. It is the express intention of the
parties that ML be an independent contractor and not an employee, agent, joint
venture or partner of Client. Client shall have no right to and shall not
control the manner or prescribe the method by which ML performs the
above-described services. ML shall be entirely and solely responsible for its
own actions and the actions of its agents, employees or partners while
<PAGE>
engaged in the performance of services required by this Agreement. Nothing in
this Agreement shall be interpreted or construed as creating or establishing the
relationship of employer and employee between Client and ML or any employee or
agent of ML. Both parties acknowledge that ML is not an employee for state or
federal income tax purposes and ML specifically agrees that it shall be
exclusively liable for the payment of all income taxes, or other state or
federal charges, that are due as a result of receipt of any consideration for
the performance of services required by this Agreement. ML agrees that any such
consideration is not subject to withholding by the Client for payment of any
taxes and ML directs Client not to withhold any sums for the consideration paid
to ML for the services provided hereunder. ML shall retain the right to perform
services for others during the term of this Agreement.
2.3 Use of Employees of Contractor, ML may, at ML's own expense, use any
employees or subcontractors as ML deems necessary to perform the services
required of ML by this Agreement. Client may not control, direct or supervise
ML's employees or subcontractors in the performance of those services.
2.4 Expense, ML shall be responsible for all costs and expenses incident to
the performance of services required by this Agreement, including but not
limited to, the cost of materials used by ML, travel, fees, fines, licenses,
bonds and taxes required of, or imposed against ML, and all other of ML's costs
of doing business.
3. Compensation
3.1 Stock, Client and ML agree that ML shall receive fifteen thousand
shares of Client's tradable common stock to be delivered to ML after this
agreement has been executed.
4. Obligations of Client
4.1 Cooperation, Client shall comply with all reasonable requirements of ML
and provide access to all documents reasonably necessary to the performance of
ML's duties under this Agreement.
5. Termination of Agreement
5.1 Termination on Notice. Notwithstanding any other provision of this
Agreement, the client may terminate this Agreement at any time by giving thirty
(30) days written notice to the other party. Unless otherwise terminated as
provided in this Agreement, this Agreement will continue in force for a period
of six (6) months.
<PAGE>
5.2 Termination on Occurrence of Stated Event, This Agreement will
terminate automatically on the occurrence of the following event:
(a) bankruptcy or insolvency of either party.
6. General Provisions
6.1 Further Acts, Each party agrees to perform any further acts and execute
and deliver any further documents that may be reasonably necessary to carry out
the provisions and intent of this Agreement.
6.2 Entire Agreement, This Agreement contains the entire understanding of
the parties hereto with respect to the subject matter contained herein and may
be amended only by a written instrument signed by the parties affected thereby,
or their respective successors or assigns. This Agreement cancels and supersedes
all prior agreements, if any, oral or written, among Client and ML.
6.3 Severability, If any provision of this Agreement shall be held invalid
such invalidity shall not affect the other provisions hereof, and to this extent
the provisions of this Agreement are intended to be and shall be deemed
severable.
6.4 Counterparts, This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
6.5 Notices, Any notice or other communication required or permitted under
this Agreement shall be sufficiently given if delivered personally or sent by
registered or certified mail, postage prepaid and return receipt requested, to
the address of the parties set forth in the first paragraph of this Agreement or
at such address as may have been provided in like manner in writing to both of
the parties to this Agreement. Any notice that is sent by mail under this
Agreement shall be considered received on the date on which it is actually
delivered to the premises of the party of whom it is properly addressed, such
date to be conclusively evidenced by the date of the return receipt.
6.6 Governing Law, This Agreement shall be construed in accordance with,
and governed by the laws of the State of Nevada.
<PAGE>
6.7 Assignment, No party to this Agreement may assign this Agreement or its
right or obligations hereunder without the written consent of the others.
6.8 Headings, The headings of this Agreement are inserted solely for the
convenience of reference and are not part of, and are not intended to govern,
limit or aid in the construction of any term or provision hereof.
6.9 Pronouns. All pronouns and any variations thereof shall be deemed to
refer to the masculine, feminine or neuter, singular or plural, as the identity
of the person, persons, entity or entities may require.
6.10 Waiver, No waiver of any of the provisions of this Agreement shall be
deemed, or shall constitute a waiver of any other provisions, nor shall any
waiver constitute a continuing waiver. No waiver shall be binding unless
executed in writing by the party making the waiver.
6.11 Acknowledgment Concerning Counsel, Each party acknowledges that it had
the opportunity to employ separate and independent counsel of its own choosing
in connection with this Agreement.
6.12 Arbitration, Any controversy, claim, misunderstanding, course of
action, matter in question, breach, disagreement, dispute, or other related
matter arising out of, or relating to this Agreement, or the relationship
between the parties, shall be decided by mandatory binding arbitration before
the American Arbitration Association in Las Vegas, Nevada. In such arbitration,
the parties shall be entitled to the full discovery rights accorded to litigants
under the Laws of Nevada. The prevailing party shall be entitled to recover all
costs and expenses incurred, including its reasonable attorney's fees, related
costs, and any advanced arbitration expenses.
6.13 Indemnification, Messr. Miron Leshem will indemnify and hold harmless
Client and its officers, directors, agents and employees against any and all
losses, or liabilities, including reasonable attorneys fees and costs and
expenses, which may be incurred by Client as a result of statements made by ML
which are inaccurate or misleading or the failure by ML to state facts, which
are necessary to be stated in order to make statements made not misleading.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
CLIENT: DEBBIE REYNOLDS HOTEL & CASINO, INC.
By: /s/ Todd Fisher
---------------------
Its:: CEO
---------------------
MIRON LESHEM
By: /s/ Miron Leshem
---------------------
Exhibit 10.27
Amendment to Consulting Agreement between the Registrant
and Miron Leshem dated December 12, 1995.
<PAGE>
AMENDMENT TO INDEPENDENT CONTRACTOR AGREEMENT
THE AMENDMENT is made and entered into this 12th day of December 1995 by and
between Debbie Reynolds Hotel & Casino, Inc. (client), with its principal place
of business in Las Vegas, Nevada and Miron Leshem, an independent contractor,
("ML"), with his place of business at 108 Sagamore Rd. Apt # 53, Tuckahoe, NY
10707.
RECITALS
WHEREAS, Client and ML entered into an Independent Contractor Agreement dated
November 6, 1995 (the "Agreement") under which ML is providing consulting
services to Client with respect to shareholder relations, the maintenance of
market makers and strategic planning;
WHEREAS, Client and ML have mutually agreed to extend the terms of the
Agreement.
NOW, THEREFORE, IN CONSIDERATION of the promises and mutual covenants hereby
contained, it is hereby agreed as follows:
AGREEMENTS
Sections 1 and 3 of the Agreement are hereby amended to read as follows:
1. Terms of Contract
This agreement will become effective on November 6, 1995, and will continue in
effect for a period of twelve (12) months unless earlier terminated pursuant to
Section 5 of this Agreement.
3. Compensation
<PAGE>
3.1 Stock. Client and ML acknowledge that ML has received fifteen thousand
(15,000) shares of Client's free-trading common stock as compensation for its
services hereunder. Client and ML agree that ML shall receive an additional
twenty thousand (20,000) shares of Client's free-trading common stock as
additional compensation for its services hereunder.
Except as set forth above, the provisions of the Agreement shall be unchanged
and shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the
date first written above.
CLIENT: DEBBIE REYNOLDS HOTEL & CASINO, INC.
By: /s/ Todd Fisher
---------------------
Its: CEO
---------------------
ML: MIRON LESHEM
By: /s/ Miron Leshem
---------------------
Exhibit 10.28
Consulting Agreement between the Registrant and Pacific
Consulting Group dated September 1, 1995.
<PAGE>
INDEPENDENT CONTRACTOR AGREEMENT
THE AGREEMENT is made and entered into as of this lst day of September,
1995 by and between Debbie Reynolds Hotel & Casino, Inc. (Client), with its
principal place of business in Las Vegas, Nevada, and Pacific Consulting Group,
Inc., a Nevada corporation ("PC"), an independent contractor, with its place of
business at 1821 WCR27 Brighton, Colorado 80601.
RECITALS
WHEREAS, Client is engaged in the Timeshare, Hotel Industry.
WHEREAS, PC is in the business of providing general business consulting
services, including strategic business planning services, to companies.
WHEREAS, in the operation of Client's business, Client is in need of the
services which PC provides and wishes to enter into a business arrangement with
PC to provide such services.
IN CONSIDERATION of the promises and mutual covenants hereby contained, it
is hereby agreed as follows:
AGREEMENTS
1. Terms of Contract
This Agreement will become effective on September 1, 1995 and will continue
in effect for a period of six (6) months unless earlier terminated pursuant to
Section 5 of this Agreement.
2. Services to be Performed by Contractor
2.1 Specific Services PC agrees to provide general business consulting
services, including strategic business planning services, to Client.
2.2 Independent Contractor Status. It is the express intention of the
parties that PC be an independent contractor and not an employee, agent, joint
venturer or partner of Client. Client shall have no right to and shall not
control the manner or prescribe the method by which PC performs the
above-described services. PC shall be entirely and solely responsible for its
own actions and the actions of its agents, employees or partners while
<PAGE>
engaged in the performance of services required by this Agreement. Nothing in
this Agreement shall be interpreted or construed as creating or establishing the
relationship of employer and employee between Client and PC or any employee or
agent of PC. Both parties acknowledge that PC is not an employee for state or
federal income tax purposes and PC specifically agrees that it shall be
exclusively liable for the payment of all income taxes, or other state or
federal charges, that are due as a result of receipt of any consideration for
the performance of services required by this Agreement. PC agrees that any such
consideration is not subject to withholding by the Client for payment of any
taxes and PC directs Client not to withhold any sums for the consideration paid
to PC for the services provided hereunder. PC shall retain the right to perform
services for others during the term of this Agreement.
2.3 Use of Employees of Contractor, PC may, at PC's own expense, use any
employees or subcontractors as PC deems necessary to perform the services
required of PC by this Agreement. Client may not control, direct or supervise
PC's employees or subcontractors in the performance of those services.
2.4 Expense, PC shall be responsible for all costs and expenses incident to
the performance of services required by this Agreement, including but not
limited to, the cost of materials used by PC, travel, fees, fines, licenses,
bonds and taxes required of, or imposed against PC, and all other of PC's costs
of doing business.
3. Compensation
3.1 Stock, Client and PC agree that PC shall receive fifty thousand shares
of Client's tradable common stock to be delivered to PC after this agreement has
been executed.
4. Obligations of Client
4.1 Cooperation, Client shall comply with all reasonable requirements of PC
and provide access to all documents reasonably necessary to the performance of
PC's duties under this Agreement.
5. Termination of Agreement
5.1 Termination on Notice, Notwithstanding any other provision of this
Agreement, the client may terminate this Agreement at any time by giving thirty
(30) days written notice to the other party. Unless otherwise terminated as
provided in this Agreement, this Agreement will continue in force for a period
of six (6) months.
-2-
<PAGE>
5.2 Termination on Occurrence of Stated Event, This Agreement will
terminate automatically on the occurrence of the following event:
(a) bankruptcy or insolvency of either party.
6. General Provisions
6.1 Further Acts, Each party agrees to perform any further acts and execute
and deliver any further documents that may be reasonably necessary to carry out
the provisions and intent of this Agreement.
6.2 Entire Agreement, This Agreement contains the entire understanding of
the parties hereto with respect to the subject matter contained herein and may
be amended only by a written instrument signed by the parties affected thereby,
or their respective successors or assigns. This Agreement cancels and supersedes
all prior agreements, if any, oral or written, among Client and PC.
6.3 Severability, If any provision of this Agreement shall be held invalid
such invalidity shall not affect the other provisions hereof, and to this extent
the provisions of this Agreement are intended to be and shall be deemed
severable.
6.4 Counterparts, This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
6.5 Notices. Any notice or other communication required or permitted under
this Agreement shall be sufficiently given if delivered personally or sent by
registered or certified mail, postage prepaid and return receipt requested, to
the address of the parties set forth in the first paragraph of this Agreement or
at such address as may have been provided in like manner in writing to both of
the parties to this Agreement. Any notice that is sent by mail under this
Agreement shall be considered received on the date on which it is actually
delivered to the premises of the party of whom it is properly addressed, such
date to be conclusively evidenced by the date of the return receipt.
6.6 Governing Law, This Agreement shall be construed in accordance with,
and governed by the laws of the State of Nevada.
6.7 Assignment, No party to this Agreement may assign this Agreement or its
right or obligations hereunder without the written consent of the others.
-3-
<PAGE>
6.8 Headings. The headings of this Agreement are inserted solely for the
convenience of reference and are not part of, and are not intended to govern,
limit or aid in the construction of any term or provision hereof.
6.9 Pronouns, All pronouns and any variations thereof shall be deemed to
refer to the masculine, feminine or neuter, singular or plural, as the identity
of the person, persons, entity or entities may require.
6.10 Waiver, No waiver of any of the provisions of this Agreement shall be
deemed, or shall constitute a waiver of any other provisions, nor shall any
waiver constitute a continuing waiver. No waiver shall be binding unless
executed in writing by the party making the waiver.
6.11 Acknowledgment Concerning Counsel, Each party acknowledges that it had
the opportunity to employ separate and independent counsel of its own choosing
in connection with this Agreement.
6.12 Arbitration, Any controversy, claim, misunderstanding, course of
action, matter in question, breach, disagreement, dispute, or other related
matter arising out of, or relating to this Agreement, or the relationship
between the parties, shall be decided by mandatory binding arbitration before
the American Arbitration Association in Las Vegas, Nevada. In such arbitration,
the parties shall be entitled to the full discovery rights accorded to litigants
under the Laws of Nevada. The prevailing party shall be entitled to recover all
costs and expenses incurred, including its reasonable attorney's fees, related
costs, and any advanced arbitration expenses.
6.13 Indemnification, PC and its principle, Messrs. Randy Sasaki, will
indemnify and hold harmless Client and its officers, directors, agents and
employees against any and all losses, or liabilities, including reasonable
attorneys fees and costs and expenses, which may be incurred by Client as a
result of statements made by PC which are inaccurate or misleading or the
failure by PC to state facts, which are necessary to be stated in order to make
statements made not misleading.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
CLIENT: DEBBIE REYNOLDS HOTEL & CASINO, INC.
By: /s/ Todd Fisher
---------------------
Its: CEO
--------------------
PACIFIC CONSULTING GROUP
By: /s/ Randy Sasaki
---------------------
-5-
Exhibit 10.29
Consulting Agreement between the Registrant and Telex, Inc.
dated March 27, 1995.
<PAGE>
INDEPENDENT CONTRACTOR AGREEMENT
THE AGREEMENT is made and entered into as of this ______ day of March, 1995
by and between Debbie Reynolds Hotel & Casino, Inc. ("Client"), with its
principal place of business in Las Vegas, Nevada, and Telex, a Nevada trust
("Telex"), an independent contractor, with its place of business at ____________
__________.
RECITALS
WHEREAS, Client is engaged in the Timeshare, Hotel Industry.
WHEREAS, Telex is in the business of providing general business consulting
services, including strategic business planning services, to companies,
WHEREAS, in the operation of Client's business, Client is in need of the
services which Telex provides and wishes to enter into a business arrangement
with Telex to provide such services.
IN CONSIDERATION of the promises and mutual covenants hereby contained, it
is hereby agreed as follows:
AGREEMENTS
1. Terms of Contract
This Agreement will become effective on March 27, 1995 and will continue
in effect for a period of six (6) months, unless earlier terminated pursuant to
Section 5 of this Agreement,
2. Services to be Performed by Contractor
2.1 Specific Services Telex agrees to provide general business consulting
services, including strategic business planning services, to Client.
2.2 Independent Contractor Status. It is the express intention of the
parties that Telex be an independent contractor and not an employee, agent,
joint venturer or partner of Client. Client shall have no right to and shall not
control the manner or prescribe the method by which Telex performs the
above-described services, Telex shall be entirely and solely responsible for its
own actions and the actions of its agents, employees or partners while engaged
in the performance of services required by this Agreement. Nothing in this
Agreement shall be interpreted or construed as creating or establishing the
relationship of employer and employee between Client and Telex or any employee
or agent of Telex. Both parties acknowledge that Telex is not an employee for
state or federal income tax purposes and
<PAGE>
Telex specifically agrees that it shall be exclusively liable for the payment of
all income taxes, or other state or federal charges, that are due as a result of
receipt of any consideration for the performance of service required by this
Agreement. Telex agrees that any such consideration is not subject to
withholding by the Client for payment of any taxes and Telex directs Client not
to withhold any sums for the consideration paid to Telex for the services
provided hereunder. Telex shall retain the right to perform services for others
during the term of this Agreement,
2.3 Use of Employees of Contractor. Telex may, at Telex's own expense, use
any employees or subcontractors as Telex deems necessary to perform the services
required of Telex by this Agreement. Client may not control, direct or supervise
Telex's employees or subcontractors in the performance of those services.
2.4 Expense. Telex shall be responsible for all costs and expenses incident
to the performance of services required by this Agreement, including but not
limited to, the cost of materials used by Telex, travel, fees, fines, licenses,
bonds and taxes required of, or imposed against Telex, and all other of Telex's
costs of doing business.
3. Compensation
3.1 Stock Client and Telex agree that Telex shall receive 37,777 shares of
Client's tradeable common stock to be delivered to Telex after this agreement
has been executed.
4. Obligations of Client.
4.1 Cooperation. Client shall comply with all reasonable requirements of
Telex and provide access to all documents reasonably necessary to the
performance of Telex's duties under this Agreement.
5. Termination of Agreement
5.1 Termination on Notice. Notwithstanding any other provision of this
Agreement, either party may terminate this Agreement at any time by giving
thirty (30) days written notice to the other party. Unless otherwise terminated
as provided in this Agreement, this Agreement will continue in force for a
period of six (6) months.
5.2 Termination on Occurrence of Stated Event. This Agreement will
terminate automatically on the occurrence of the following event:
(a) bankruptcy or insolvency of either party.
-2-
<PAGE>
6. General Provisions
6.1 Further Acts. Each party agrees to perform any further acts and execute
and deliver any further documents that may be reasonably necessary to carry out
the provisions and intent of this Agreement.
6.2 Entire Agreement. This Agreement contains the entire understanding of
the parties hereto with respect to the subject matter contained herein and may
be amended only by a written instrument signed by the parties affected thereby,
or their respective successors or assigns. This Agreement cancels and supersedes
all prior agreements, if any, oral or written, among Client and Telex.
6.3 Severability. If any provision of this Agreement shall be held invalid
such invalidity shall not affect the other provisions hereof, and to this extent
the provisions of this Agreement are intended to be and shall be deemed
severable.
6.4 Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument,
6.5 Notices. Any notice or other communication required or permitted under
this Agreement shall be sufficiently given if delivered personally or sent by
registered or certified mail, postage prepaid and return receipt requested, to
the address of the parties set forth in the first paragraph of this Agreement or
at such address as may have been provided in like manner in writing to both of
the parties to this Agreement. Any notice that is sent by mail under this
Agreement shall be considered received on the date on which it is actually
delivered to the premises of the party to whom it is properly addressed, such
date to be conclusively evidenced by the date of the return receipt.
6.6 Governing Law. This Agreement shall be construed in accordance with,
and governed by the laws of the State of Nevada.
6.7 Assignment. No party to this Agreement may assign this Agreement or its
right or obligations hereunder without the written consent of the others.
6.8 Headings. The headings of this Agreement are inserted solely for the
convenience of reference and are not part of, and are not intended to govern,
limit or aid in the construction of any term or provision hereof
6.9 Pronouns. All pronouns and any variations thereof shall be deemed to
refer to the masculine, feminine or neuter, singular or plural, as the identity
of the person, persons, entity or entities may require.
-3-
<PAGE>
6.10 Waiver. No waiver of any of the provisions of this Agreement shall be
deemed, or shall constitute a waiver of any other provisions, nor shall any
waiver constitute a continuing waiver. No waiver shall be binding unless
executed in writing by the party making, the waiver.
6.11 Acknowledgment Concerning Counsel. Each party acknowledges that it had
the opportunity to employ separate and independent counsel of its own choosing
in connection with this Agreement.
6.12 Arbitration. Any controversy, claim, misunderstanding, course of
action, matter in question, breach, disagreement, dispute, or other related
matter arising out of, or relating to this Agreement, or the relationship
between the parties, shall be decided by mandatory binding arbitration before
the American Arbitration Association in Las Vegas, Nevada. In such arbitration,
the parties shall be entitled to the full discovery rights accorded to litigants
under the Laws of Nevada. The prevailing party shall be entitled to recover all
costs and expenses incurred, including its reasonable attorney's fees, related
costs, and any advanced arbitration expenses.
6.13 Indemnification. Telex and its principles, will indemnify and hold
harmless Client and its officers, directors, agents and employees against any
and all losses, or liabilities, including reasonable attorneys fees and costs
and expenses, which may be incurred by Client as a result of statements made by
Telex which are inaccurate or misleading or the failure by Telex to state facts,
which are necessary to be stated in order to make statements made not
misleading.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above,
DEBBIE REYNOLDS HOTEL & CASINO, INC.
By: /S/ Donald Granatstein
-------------------------
Its: Executive Vice President
-------------------------
TELEX
By:
-------------------------
Its:
-------------------------
-4-
Exhibit 10.30
Consulting Agreement between the Registrant and Peter
Bistrian Consulting, Inc., ("Consultant")
Exhibit 10.31
Consulting Agreement between the Registrant and Robert C.
Brehm Consulting, Inc., ("Consultant")
<PAGE>
As filed with the Securities and Exchange Commission on December 19, 1995
Registration No.33-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM S-8
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
----------
DEBBIE REYNOLDS HOTEL & CASINO, INC.
(Exact name of registrant as specified in its charter)
NEVADA 88-0335924
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Debbie Reynolds, President
305 Convention Center Drive
Las Vegas, NV 89109
(702) 734-0711
(Address of Registrant's principal executive offices, including zip code)
----------
MANAGEMENT CONSULTING PLAN WITH PETER D. BISTRIAN CONSULTING, INC.
MANAGEMENT CONSULTING PLAN WITH ROBERT C. BREHM CONSULTING, INC.
(Full title of Plan)
305 Convention Center Drive
Las Vegas, Nevada 89109
(702) 734-0711
(Name, address and telephone number of agent (for service)
----------
COPIES TO:
M. Richard Cutler, Esq.
Horowitz, Cutler & Beam
Two Venture Plaza, Suite 380
Irvine, CA 92718
----------
Approximate Date of Proposed Sale to the Public:
As soon as practicable after this Registration Statement becomes effective.
----------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Title of Securities Amount to be Proposed Maximum Proposed Maximum Amount of
to be Registered Registered Offering Price per Aggregate Offering Registration Fee
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock $0,0001 Par Value(1) 750,000 50,7500 $562,500 $193.95
- --------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes shares of commons stock issuable upon exercise of options to
purchase a total of 750,000 shares of common stock, issuable for counseling and
advisory services to Peter D. Bistrian Consulting, Inc (an option to purchase
486,000 shares) and to Robert C. Brehm Consulting, Inc. (an option to purchase
254,000 shares), respectively, and exercisable at $0.75 per share.
(2) The registration fee is based upon the exercise price of the options at
$0.75 per share calculated pursuant to Rule 457.
<PAGE>
DEBBIE REYNOLDS HOTEL & CASINO, INC.
CROSS REFERENCE SHEET REQUIRED BY ITEM 501(b) OF REGULATION S-K
Form S-8 Item Number
and Caption Caption in Prospectus
-------------------- ---------------------
1. Forepart of Registration Statement Facing Page of Registration
and Outside Front Cover Statement and Cover Page of
Page of Prospectus Prospectus
2. Inside Front and Outside Back Inside Cover Page of Pro-
Cover Pages of Prospectus spectus and Outside Cover
Page of Prospectus
3. Summary information, Risk Factors Not Applicable
and Ratio of Earnings to Fixed Charges
4. Use of Proceeds Not Applicable
5. Determination of Offering Price Not Applicable
6. Dilution Not Applicable
7. Selling Security Holders Sales by Selling Security
Holder
8. Plan of Distribution Cover Page of Prospectus and
by Selling Security Holder Sales
9. Description of Securities to be Description of Securities:
Registered Management Consulting
Agreement with CKN Capital Corporation
10. Interests of Named Experts and Legal Matters
Counsel
11. Material Changes Not Applicable
12. Incorporation of Certain information Incorporation of Certain
by Reference Documents by Reference
13, Disclosure of commission Position Indemnification of Directors
on Indemnification for Securities and Officers; Undertakings
Act Liabilities
<PAGE>
DATED: December 19, 1995
PROSPECTUS
DEBBIE REYNOLDS HOTEL & CASINO, INC.
750,000 Shares Common Stock
ISSUED PURSUANT TO THE, EXERCISE OF OPTIONS UNDER
THE COMPANY'S MANAGEMENT CONSULTING AGREEMENT
WITH PETER D. BISTRIAN CONSULTING, INC. AND
ROBERT C. BREHM CONSULTING, INC.,
This prospectus is part of a Registration Statement which registers an
aggregate of 750,000 shares of Common Stock, $0.0001 par value (such shares
being referred to as the "Shares"), of DEBBIE REYNOLDS HOTEL & CASINO, INC. (the
"Company") which may be issued upon exercise of certain options, as set forth
herein, to Peter D, Bistrian Consulting, Inc. and Robert C. Brehm Consulting,
Inc., consultants to the Company (the "Consultants" or if referred to
individually the "Consultant") pursuant to their respective written Management
Consulting Agreements dated December 7, 1995 (the "Consulting Agreements" or the
"Consulting Agreements") providing for the issuance of such options (such
options being hereinafter collectively referred to as the ("Options"). Such
selling stockholders may sometimes hereafter be referred to as the "Selling
Security Holders." All of the Stocks are being issued to the Consultants
Pursuant to their respective Consulting Agreements, The Company has been advised
by the Selling Security Holders that it may sell all or a portion of the Shares
from time to time in the Bulletin Board market, in negotiated transactions,
directly or through brokers or otherwise, and that such shares will be sold at
market prices prevailing at the time of such sales or at negotiated prices, and
the Company will not receive any proceeds from such sales. The company's
principal executive office is located at 305 Convention Center Drive, Las Vegas,
Nevada 89109, (702) 734-0711.
No person has been authorized by the Company to give any information or to
make any representation other than as contained in this Prospectus, and if given
or made, such information or representation must not be relied upon as having
been authorized by the Company. Neither the delivery of this Prospectus nor any
distribution of the Shares issuable under the terms of the Agreement shall,
under any circumstances, create any implication that there has been no change in
the affairs of the Company since the date hereof.
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED ON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SECURITIES IN ANY STATE TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH STATE.
The date of this Prospectus is December 19, 1995
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy statements
and other information filed with the Commission can be inspected and copies at
the public reference facilities of the Commission at 450 Fifth Street, N.W.,
Washington D.C. 20549. Copies of this material can also be obtained at
prescribed rates from the Public Reference Section of the Commission at its
principal office at 450 Fifth Street, N.W., Washington D.C. 20540. The Company's
Common Stock is traded on the Bulletin Board under the symbol "DEBI.'
The Company has filed with the Commission a Registration Statement on Form
S-8 (the "Registration Statement") under the Securities Act of 1933, as amended
(the "Act"), with respect to the resale of up to an aggregate of up to 750,000
shares of the Company's Common Stock offered by this Prospectus, reference is
made to the Registration Statement, including the exhibits thereto. Statements
in this Prospectus as to any document are not necessarily complete, and where
any such document is an exhibit to the Registration Statement or is incorporated
by reference herein, each such statement is qualified in all respects by the
provisions of such exhibit or other document, to which reference is hereby made
for a full statement of the provisions thereof. A copy of the Registration
Statement with exhibits, may be obtained from the Commission's office in
Washington, D.C. (at the above address) upon payment of the fees prescribed by
the rules and regulations of the Commission, or examined there without charge.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Securities and
Exchange Commission are incorporated herein by reference and made a part
thereof.
1 . The company's Annual Report on Form 10-KSB filed for the year ended
December 31, 1994 and the Company's Quarterly Reports on Forms 1O-QSB for the
quarters of Match 31, 1995, June 30, 1995 and September 30, 1995; Current
Reports on Form 8-K dated June 30, 1995, July 21, 1995 and August 30, 1995;
description of the Company's Common Stock contained in the Company's Form 8-A
dated October 18, 1990.
2. All reports and documents filed by the Company pursuant to Section 13,
14 or 15(d) of the Exchange Act, prior to the filing of a post-effective
amendment which indicates that all securities offered hereby have been sold or
which deregisters all securities then remaining unsold, shall be deemed to be
incorporated by reference herein and to be a part hereof from the respective
date of filing of such documents. Any statement incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein,
modifies or supersedes such statement. Any statement modified or superseded
shall not be deemed, except as so modified or superseded, to constitute part of
this Prospectus.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner to whom a copy of the Prospectus has been
delivered, on the written or oral request of any such person, a copy of any or
all of the documents referred to above which have been or may be incorporated by
reference in this Prospectus other than exhibits to such documents. Written
requests for such copies should be directed to Corporate Secretary, 305
Convention Center Drive, Las Vegas,, Nevada 89109, (702) 734-0711.
INFORMATION WITH RESPECT TO THE COMPANY
This Prospectus is accompanied by the Company's Annual Report on Form 10-KSB
for the year ended December 31, 1994 and the company's Quarterly Reports on Form
10-QSB for the quarters ended March 31, 1995, June 30, 1995 and September 30,
1995; Current Reports on Form 8-K dated June 30, 1995. July 21, 1995 and August
30,1995; description of the Company's Common Stock contained in the company's
Form 8-A dated October 18, 1990. These Annual and Quarterly Reports as well is
all other reports filed by the Company pursuant to Sections 13(a), 13(c),
2
<PAGE>
14 or 15(d) of the Securities Exchange Act of 1934 are, hereby incorporated by
reference in this Prospectus and may be obtained, without charge, upon the oral
or written request of any person to the Company at 305 Convention Center Drive,
Las, Vegas, Nevada 89109. (702) 734-0711.
<PAGE>
MANAGEMENT CONSULTING AGREEMENT
WITH PETER D. BISTRIAN CONSULTING. INC.
General
On December 7, 1995, the Company entered into a Management Consulting
Agreement with Peter D, Bistrian Consulting, Inc. pursuant to which the Company
agreed to issue to the Consultant Options to purchase up to an aggregate of
486,000 shares of common Stock of the Company in consideration for consulting
services to be provided to the Company over an anticipated eight-month period
commencing as of the date of the agreement. The Consultant is wholly-owned by
Mr. Peter D. Bistrian, who is the sole officer and director of the Consultant.
The term of the Management Consulting Agreement shall be eight months. Under the
terms of the Consulting Agreement the Consultant is to undertake for and consult
with the Company concerning management, marketing and operational planning and
consulting, strategic planning, corporate organization, and structure, expansion
of services and stockholder relations, and shall review and advise the Company
regarding its overall progress, needs and condition.
In particular, the Consultant shall assist the Company with the
implementation of short range and long term strategic planning to fully develop
and enhance the Company's assets, resources, products and services; and advise
and recommend to the Company additional services related to the present products
and services provided by the Company as well as new products and services that
may be provided by the Company.
Compensation
In connection with the Consulting Agreement, the Company has agreed to
issue Options to purchase up to 486,000 shares of Common Stock of the Company
over the period of twenty-four months and which are not being administered by
either the Board of Directors of the Company or any committee of the Board of
Directors organized for that purpose. The specific terms of the Options are as
follows:
(a) Option Price. Options to purchase 486,000 shares of Common Stock shall
be exercisable at a price per share of Common Stock of $0.75.
(b) Terms of Options. Each Option is exercisable from December 10, 1995
until its expiration date of December 10, 1997.
(c) Payment for Shares. The purchase price for the exercise of the Options
is payable in cash, and the price for the shares of Common Stock is to
be paid in full upon exercise of the Options.
(d) Transferability. The Options are not transferable by the holder
thereof except pursuant to the laws of descent and distribution to the
sole shareholder.
(e) Redemption. There are no redemption rights afforded to the Company in
connection with the Options.
(1) Adjustments. The number of shares of Common Stock of the Company
purchasable upon exercise of the Options and the exercise price of the
Options are subject to the adjustment involving stock dividends, stock
splits, reorganizations, reclassification, consolidations and mergers.
There will be no adjustment for the payment of cash dividends by the
Company on its Common Stock. The Company is not required to issue
fractional shares. Options for fractional shares amounting to less
than one share will be disregarded,
(g) Miscellaneous. It is intended that the shares of Common Stock issued
on exercise of the Options will be fully registered securities under
the Securities Act of 1933.
4
<PAGE>
MANAGEMENT CONSULTING AGREEMENT
WITH ROBERT C. BREHM CONSULTING, INC.
General
On December 7, 1995, the Company entered into a Management Consulting
Agreement with Robert C. Brehm Consulting, Inc. pursuant to which the Company
agreed to issue to the Consultant Options to purchase up to an aggregate of
264,000 shares of Common Stock of the Company in consideration for consulting
services to be provided to the Company over an anticipated eight-month period
commencing as of the date of the agreement. The Consultant is wholly-owned by
Mr. Robert C- Brehm, who is the sole officer and director of the Consultant. The
term of the Management Consulting Agreement shall be eight months. Under the
terms of the Consulting Agreement the Consultant is to undertake for and consult
with the Company concerning management, marketing and operational planning and
consulting, strategic planning, corporate organization and structure, expansion
of services and stockholder relations, and shall review and advise the Company
regarding its overall progress, needs and condition.
In particular, the Consultant shall assist the Company with the
implementation of short range and long term strategic planning to fully develop
and enhance the company's assets, resources, products and services, and advise
and recommend to the Company additional services relating to the present
products and services provided by the Company as well as new products and
services that may be provided by the Company.
Compensation
In connection with the Consulting Agreement, the Company has agreed to
issue Options to purchase up to 264,000 shares of Common Stock of the Company
over the period of twenty-four months and which are not being administered by
either the Board of Directors of the Company or any committee of the Board
Directors organized for that purpose. The specific terms of the Options are as
follows:
(a) Option Price. Options to purchase 264,000 shares of Common Stock shall
be exercisable at a price per share of Common Stock of $0.75.
(b) Terms of Options, Each Option is exercisable from December 10, 1995
until its expiration date of December 10, 1997.
(c) Payment for Shares. The purchase price for the exercise of the Options
is payable in cash, and the price for the shares of Common Stock is to
be paid in full upon exercise of the Options.
(d) Transferability. The Options are not transferable by the holder
thereof except pursuant to the laws of descent and distribution to the
sole shareholder.
(e) Redemption. There are no redemption rights afforded to the Company in
connection with the Options.
(f) Adjustments. The number of shares of common stock of the Company
purchasable upon exercise of the Options and the exercise price of the
Options are subject to the adjustment involving stock dividends, stock
splits, reorganizations, reclassifications, consolidations and
mergers. There will be no adjustment for the payment of cash dividends
by the Company on its Common Stock. The Company is not required to
issue fractional shares. Options for fractional shares amounting to
less than one share will be disregarded.
(g) Miscellaneous. it is intended that the shares of Common Stock issued
on exercise of the Options will be fully registered securities under
the Securities Act of 1933.
5
<PAGE>
Restrictions Under Securities Laws
The sale of any shares of Common Stock acquired upon the exercise of the
Options must be made in compliance with federal and state securities laws.
Officers, directors and 10% or greater stockholder of the Company, as well as
certain other persons or parties who may be deemed to be "affiliates" of the
Company under the Federal Securities Laws, should be aware that resales by
affiliates can only be made pursuant to an effective Registration Statement,
Rule 144 or any other applicable exemption. Officers, directors and 10% and
greater stockholders are also subject to, the "short swing" profit rate of
Section 16(b) of the Securities Exchange Act of 1934. Section 16(b) of the
Exchange Act generally provides that if an officer, director or 10% and greater
stockholder sold any Common Stock of the Company acquired pursuant to the
exercise of a stock option or warrant, he would generally be required to pay to
the Company and "profits" resulting from the sale of the stock and receipt of
the stock option. Section 16(b) exempts all option exercises from being treated
as purchases and, instead, treats an option grant as a purchase of the
underlying security, which grant/purchase may be matched with any sale or the
underlying security within six months of the date of grant.
SALES BY SELLING: SECURITY HOLDERS
The following table sets forth the name of the Selling Security Holder, the
amount of shares of Common Stock held directly or indirectly or underlying the
maximum number of Options to be issued to the Selling Security Holder, the
amount of shares of Common Stock underlying the Options to be offered by the
Selling Security Holder, the exercise price for the Options, the amount of
Common Stock to be owned by the Selling Security Holder following sale of such
shares of Common Stock and the percentage of shares of Common Stock to be owned
by the Selling Security Holder following completion of such offering (based on
9,925,751 shares of Common Stock of the Company outstanding as of December 19,
1995). Unless otherwise indicated, each of the stockholders has sole voting and
investment Power with respect to shares beneficially owned.
<TABLE>
<CAPTION>
Exercise Shares to be Percent to be
Name of Selling Number of Shares to Price per owned After owned after
Security Holder Shares Owned be Offered Share Offering Offering
- --------------- ------------ ---------- ----- -------- --------
<S> <C> <C> <C> <C> <C>
Peter D, Bistrian 486,000 (1) 486,000 $0.75 0 none
Consulting, Inc.
Robert C. Brehm 264,000 (2) 264,000 $O.75 0 none
Consulting, Inc.
</TABLE>
(1) Represents shares underlying a currently execrable option to purchase
468,000 shares of the Company's common stock exercisable at $O.75 per
share, which has been issued to Consultant for advisory and consulting
services.
(2) Represents shares underlying a currently exercisable option to purchase
264,000 shares of the company's common stock exercisable at $O.75 per
share, which has been issued to Consultant for advisory and consulting
services.
6
<PAGE>
DESCRIPTION OF SECURITIES
The authorized capital stock of the Company consists of 25,000,000 shares
of Common Stock, $.0001 par value, and 50,000,000 shares of preferred stock,
$.OOO1 par value.
The following summary of certain terms of the Common Stock and Preferred
Stock does not purport to be complete and is subject to, and qualified in its
entirely by, the provisions of the Company's Certificate of Incorporation and
By-laws, which are included as exhibits to the Registration Statement of which
this Prospectus is a part, and the provisions of applicable law.
Common Stock
As of the date of this Prospectus, there are 9,925,751 shares of Common
Stock outstanding. Holders of Common Stock are entitled to one vote for each
share held of record on all matters submitted to a vote of the stockholders.
Holders of Common Stock are entitled to receive ratably such dividends as may be
declared by the Board of Directors out of funds legally available therefor. In
the event of a liquidation, dissolution or winding up of the Company, holders of
Common Stock are entitled to share ratably in all assets remaining after payment
of liabilities and the liquidation preference of any then outstanding preferred
stock, if any. Holders of Common Stock have no right to convert their Common
Stock into any other securities. The Common Stock has no preemptive or other
subscription rights. There are no redemption or sinking fund provisions
applicable to the Common Stock. All outstanding shares of Common Stock are, and
the Common Stock to be outstanding upon completion of this Offering will be,
duly authorized, validly issued, fully paid and nonassessable.
Preferred Stock
The Board of Directors has the authority, without further action by the
stockholders, to issue up to 50,000,000 shares of Preferred Stock, $.OOO1 par
value, of which 2,000,0OO shares have been designated as Series AA and of which
667,904 shares of its AA Preferred Stock are currently issued and remain
outstanding. The Company currently has no plans to issue any additional
preferred stock. The Board of Directors of the Company has authority, however,
to issue all or any portion of the authorized but unissued preferred stock in
one or more series and to fix the rights, preferences, privileges and
restrictions thereof, including dividend rights, conversion rights, voting
rights, terms of redemption, liquidation preference and the number shares
constituting any series at the designation of such series. The issuance of
Preferred Stock could adversely affect the voting power of holders of Common
Stock and could have the effect of delaying, deferring or preventing a change in
control of the Company.
Trading Status
The Company's Common Stock is traded in the Bulletin Board under the symbol
"DEBI".
Transfer Agent
The Transfer Agent for the shares of Common Stock is American Stock
Transfer and Trust, 40 Wall Street. New York, New York 10005, telephone number:
(718) 921-8327.
LEGAL MATTERS
Certain legal matters in connection with the securities being offered
hereby will be passed upon for the Company by Horwitz, Cutler & Beam, Irvine
California. Shareholders of Horwitz, Cutler & Beam are not the beneficial owners
of any of the Company's common stock.
7
<PAGE>
PART II
Item 3. Incorporation of Documents by Reference.
The Registrant incorporates the following documents by reference in the
registration statement:
(a) The Company's Annual Report on Form 1O-KSB filed for the year ended
December 31, 1994 and the Company's Quarterly Reports on Forms 1O-QSB for
the quarters ended March 31, 1995, June 30, 1995 and September 30, 1995;
Current Reports on Form 8-K dated June 30,1995, July 21, 1995 and August
30, 1995; description of the Company's Common Stock contained in the
Company's Form 8-A dated October 19, 1990;
All other documents filed in the future by Registrant after the date of this
registration Statement under section 13(a), 13(c), 14 and 15(d) of the
Securities Exchange Act of 1934, prior to the filing of a post-effective
amendment Registration Statement which deregisters the securities covered
hereunder which remain unsold, shall be deemed to be incorporated by reference
in this Registration Statement and to be a part hereof from the date of filing
of such documents.
Item 4. Description of Securities.
The class of securities to be offered is registered under Section 12(g) of
the Securities Exchange Act of 1934, as amended. A description of the
registrant's Securities is set forth in the Prospectus incorporated as a part of
this Registration Statement.
Item 5. Interests of Named Experts and Counsel
None.
Item 6. Indemnification of Officers & Directors
The Company's Bylaws and the Nevada General Corporation Law provide for
indemnification of directors and officers against certain liabilities. Officers
and directors of the Company are indemnified generally against expenses actually
and reasonably incurred in connection with proceedings, whether civil or
criminal, provided that it is determined that they acted in good faith, were not
found guilty, and, in any criminal matter, had reasonable cause to believe that
their conduct was not unlawful.
The Company's Certificate of Incorporation further provides that a director
of the Company shall not be personally liable for monetary damages to the
Company or its shareholders for breach of any fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to the
Company or its stockholders; (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) for
the unlawful payments or dividends or stock redemption by the Company or (iv)
for any transaction from which the director derives an improper Personal
benefit.
Item 7. Exemption form Registration Claimed
Inasmuch as the Consultant who received the options of the Registrant was
knowledgeable, sophisticated and had access to comprehensive information
relevant to the Registrant such transaction was undertaken in reliance on the
exemption from registration provided by Section 4(2) of the Act.
8
<PAGE>
Item 8. Exhibits
4(l) Management Consulting Agreement with Peter D. Bistrian Consulting, Inc.
4(2) Management Consulting Agreement with Robert C. Brehm Consulting, Inc.
4(3) Option Agreement with Peter D. Bistrian Consulting, Inc.
4(4) Option Agreement with Robert C. Brehm Consulting, Inc.
5 Opinion of Horowitz, Cutler & Beam, consent included,, relating to the
Issuance of the shares of securities pursuant to the Management Consulting
Agreement
23(1) Consent of Horowitz, Cutler & Beam.
23(2) Consent of KPMG Peat Marwick LLP.
Item 9. Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 1O(a)(3)) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement including (but not limited to) any
addition or election of a managing underwriter.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities offered at that
time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof,
9
<PAGE>
(c) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is therefore, unenforeceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will,
unless in the opinion of its counsel that matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement in be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Las Vegas, NV, on December
, 1995.
DEBBIE REYNOLDS HOTEL & CASINO, INC.
By: /s/ Todd Fisher
--------------------------------
Todd Fisher President
Pursuant to the requirements of the Securities Act of 1933, the
registration statement has been signed below by the following persons in the
capacities indicated on December , 1995.
/s/ Debbie Reynolds
- ------------------------
Debbie Reynolds Chairman of the Board
/s/ Todd Fisher President, Chief Executive Officer,
- ------------------------ Chief Financial Officer & Director
Todd Fisher (Principal Executive Officer and
Principal Financial Officer)
11
<PAGE>
EXHIBIT (4)(1)
Managing Consulting Agreement
with
Peter D. Bistrian Consulting, Inc.
<PAGE>
PETER D. BISTRIAN CONSULTING, INC.
One East Uwchlan Avenue
Suite 109
Exton, PA 19341
December 7, 1995
Ms. Debbie Reynolds
Chairman
DEBBIE REYNOLDS HOTEL & CASINO, INC.
305 Convention Center Drive
Las Vegas, Nevada 89109
RE: Management Consulting Agreement
-----------------------------------
Dear Ms. Reynolds:
Formalizing our earlier discussions this is to acknowledge and confirm the
terms of our Management Consulting Agreement ("Consulting Agreement") as
follows:
1. Appointment of Peter D. Bistrian Consulting, Inc.. DEBBIE, REYNOLDS
HOTEL & CASINO, INC. ("DEBI") hereby engages Peter D. Bistrian Consulting, Inc.
("BISTRIAN") and BISTRIAN hereby agrees to render services to DEBI as a
management consultant, strategic planner and advisor.
2. Duties. During the term of this Agreement, BISTRIAN shall provide advice
to, undertake for and consult with the Company concerning management, marketing
consulting, strategic planning corporate organization and structure, financial
matters in connection with the operation of the business of the Company,
expansion of services, stockholder relations, and shall review and advise DEBI
regarding its overall progress, needs and condition. BISTRIAN agrees to provide
on a basis the following enumerated services plus any additional services
contemplated thereby.
(a) The implementation of short range and long term strategic planning
to fully develop and enhance DEBI's assets, resources, products and
services;
(b) Advise and recommend to DEBI additional services relating to the
present business and services provided by DEBI as well as new products
and services that may be provided by DEBI.
3. The term of this Consulting Agreement shall be for an eight-month period
commencing on the date hereof.
<PAGE>
4. Compensation. As compensation for its services hereunder, BISTRIAN shall
be issued options (the "Options") to purchase up to 486,000 shares of Common
Stock, $.OOO1 par value (the "Shares"), of the Company exercisable at a price of
$0.75 per share.
5. Purchase of Shares. The exercise price for the Options shall be paid in
cash, and appropriate investment restrictions shall be noted against the Shares.
6. Expenses. BISTRIAN shall be entitled to reimbursement by DEBI of such
reasonable out-of-pocket expenses as BISTRIAN may incur in performing services
under this Consulting Agreement. Any significant expenses shall be approved in
advance in writing by DEBI.
7. Registration. DEBI agrees to provide BISTRIAN with registration rights
at DEBI's cost and expenses and include, the underlying shares of Common Stock
in a registration statement on Form S-8 to be filed by DEBI with the Securities
and Exchange Commission within the proximate future, provided that the Options
may not be exercised prior to the registration statement being filed with the
SEC.
8. Confidentiality . BISTRIAN will not disclose to any other person, firm
or corporation, nor use for its own benefit, during or after the term of this
Consulting Agreement, any trade secrets or other information designated as
confidential by DEBI which is acquired by BISTRIAN in the course of its
performing services hereunder. (A trade secret is information not generally
known to the trade which gives DEBI an advantage over its competitors. Trade
secrets can include, by way of example, products or services under development,
production methods and processes, sources of supply, customer lists, marketing
plans and information concerning the filing of pendency of patent applications).
Any financial advice tendered by BISTRIAN pursuant to this Consulting Agreement
may not be disclosed publicly in any manner without the prior written approval
of BISTRIAN.
9. Indemnification. DEBI agrees to indemnify and hold BISTRIAN harmless
from and against losses, claims, damages, liabilities, costs or expenses
(including reasonable attorneys' fees (collectively the "liabilities") joint and
several, arising out of the performance of this Consulting Agreement, whether or
not BISTRIAN is a party to such dispute. This indemnity shall not apply,
however, and BISTRIAN shall indemnify and hold DEBI, its affiliates, control
persons, officers, employees and agents harmless from and against all
liabilities, where a court of competent jurisdiction has made final
determination that BISTRIAN engaged in gross recklessness and willful misconduct
in the performance of its services hereunder which gave rise to the losses,
claim, damage, liability, cost or expense sought to be recovered hereunder (but
pending any such final determination, the indemnification and reimbursement
provisions of this Consulting Agreement shall apply and DEBI shall perform its
obligations hereunder to reimburse BISTRIAN for its expenses.) The provisions of
this paragraph 8 shall survive the termination and expiration of this Consulting
Agreement.
<PAGE>
10. Independent Contractor. BISTRIAN and DEBI hereby acknowledge that
BISTRIAN is an independent contractor. BISTRIAN shall not hold itself out as,
nor shall it take any action from which others might infer, that it is a partner
of, agent of or a joint venturer of DEBI.
11. Miscellaneous. This Consulting Agreement sets forth the entire under
standing of the parties relating to the subject matter hereof, and supersedes
and cancels any prior communications, understandings and agreements between the
parties. This Consulting Agreement cannot be modified or changed, nor can any of
its provisions be waived except by written agreement signed by a11 parties. This
Consulting Agreement shall be governed by the laws of the State of Nevada. In
any event or any dispute as to the terms of this Consulting Agreement, the
prevailing party in any litigation shall be entitled to reasonable attorney's
fees.
Please confirm that the foregoing correctly sets forth our understanding by
signing the enclosed copy of this letter where provided and returning it to us
at your earliest convenience.
Very truly yours,
PETER D. BISTRIAN CONSULTING, INC.
By:
-----------------------------
Its:
-----------------------------
ACCEPTED AND AGREED TO as
of the day of December 1995
DEBBIE REYNOLDS HOTEL & CASINO, INC.
By:
-------------------------------
Todd Fisher, President
<PAGE>
EXHIBIT (4)(2)
Managing Consulting Agreement
with
Robert C. Brehm Consulting, Inc.
<PAGE>
ROBERT C. BREHM CONSULTING, INC.
6965 El Camino Real, Suite 105
Carlsbad, California 92009
December 7, 1995
Ms. Debbie Reynolds
Chairman
DEBBIE, REYNOLDS HOTEL & CASINO, INC.
305 Convention Center Drive
Las Vegas, Nevada 89109
RE: Management Consulting Agreement
-------------------------------
Dear Ms. Reynolds:
Formalizing our earlier discussions this is to acknowledge and confirm the
terms of our Management Consulting Agreement ("Consulting Agreement") as
follows:
1. Appointment of Robert C. Brehm Consulting Inc.. DEBBIE REYNOLDS HOTEL &
CASINO, INC. ("DEBI") hereby engages Robert C. Brehm Consulting, Inc. ("BREHM')
and BREHM hereby agrees to render services to DEBI as management consultant,
strategic planner and adviser.
2. Duties. During the term of this Agreement, BREHM shall provide advice
to, undertake for and consult with the Company concerning management, marketing
consulting, strategic planning corporate organization and structure, financial
matters in connection with the operation of the business of the Company,
expansion of services, stockholder relations, and shall review and advise DEBI
regarding its over-all progress, needs and condition. BREHM agrees to provide on
a timely basis the following enumerated services plus any additional services
contemplated thereby.
(a) The implementation of short range and long term strategic
planning to fully develop and enhance DEBI's assets, resources,
products and services;
(b) Advise and recommend to DEBI additional services relating to the
present business and services provided by DEBI as well as new
products and services that may be provided by DEBI.
3. Term. The term of this Consulting Agreement shall be for an eight-month
period commencing on the date hereof
<PAGE>
4. Compensation. As compensation for its services hereunder, BREHM shall be
issued Options (the "Options") to purchase up to 264,000 shares of Common
Stock, $.OOO1 par value (the "Shares"), of the Company exercisable at a price of
$0.75 per share.
5. Purchase of Shares
The exercise price for the Options shall be paid in cash, and
appropriate investment restrictions shall be noted against the Shares.
6. Expenses. BREHM shall be entitled to reimbursement by DEBI of such
reasonable out of pocket expenses as BREHM may incur in performing services
under this Consulting Agreement. Any significant expenses shall be approved in
advance in writing by DEBI.
7 Registration. DEBI agrees to provide BREHM with registration rights at
DEBI's cost and expense; and include the underlying shares of Common Stock in a
registration statement on Form S-8 to be filed by DEBI with the Securities and
Exchange Commission within the proximate future, provided that the Options may
not be exercised prior to the registration statement being filed with the SEC
8. Confidentiality. BREHM will not disclose to any other person, firm or
corporation, nor use for its own benefit, during or after the term of this
Consulting Agreement, any trade secrets or other information designated as
confidential by DEBI which is acquired by BREHM in the course of its performing
services hereunder. (A trade secret is information not generally known to the
trade which gives DEBI an advantage over its competitors. Trade secrets can
include, by way of example, products or services under development, production
methods and processes, sources of supply, customer lists, marketing plans and
information concerning the filing of pendency of patent applications). Any
financial advice tendered by BREHM pursuant to this Consulting Agreement may not
be disclosed publicly in any manner without the prior written approval of BREHM.
9. Indemnification. DEBI agrees, to indemnify and hold BREHM harmless from
and against all losses, claims, damages, liabilities, costs or expenses
(including reasonable attorneys' fees (collectively the "Liabilities") joint and
several, arising out of the performance of this Consulting Agreement, whether or
not BREHM is a party to such dispute. This indemnity shall not apply, however,
and BREHM shall indemnify and hold DEBI, its affiliates, control persons,
officers, employees and agents harmless from and against all liabilities, where
a court of competent jurisdiction has made a final determination that BREHM
engaged in gross recklessness and willful misconduct in the performance of its
services hereunder which gave rise to the losses, claim, damage, liability, cost
or expense sought to be recovered hereunder (but pending any such final
determination, the indemnification and reimbursement provisions of this
Consulting Agreement shall apply and DEBI shall perform its obligations
hereunder to reimburse BREHM for its expenses.) The provisions of this paragraph
8 shall survive the termination and expiration of this Consulting Agreement.
<PAGE>
10. Independent Contractor. BREHM and DEBI hereby acknowledge that BREHM is
an independent contractor. BREHM shall not hold itself out as, nor shall it take
any action from which others might infer, that it is a partner of, agent of or a
joint venturer of DEBI.
11. Miscellaneous. This consulting Agreement sets forth the entire
understanding of the parties relating to the subject matter hereof, and
supersedes and cancels any prior communications, understandings and agreements
between the parties. This Consulting Agreement cannot be modified or changed,
not can any of its provisions be waived except by written agreement signed by
all parties. This Consulting Agreement shall be governed by the laws of the
State of Nevada. In any event of any dispute as to the terms of this Consulting
Agreement, the prevailing party in any litigation shall be entitled to
reasonable attorneys' fees.
Please confirm that the foregoing correctly sets forth our understanding by
signing the encloses copy of this letter where provided and returning it to us
at your earliest convenience.
Very truly yours,
PETER D. BISTRIAN CONSULTING, INC.
By:
-----------------------------
Its:
-----------------------------
ACCEPTED AND AGREED TO as
of the day of December 1995
DEBBIE REYNOLDS HOTEL & CASINO, INC.
By:
-------------------------------
Todd Fisher, President
<PAGE>
EXHIBIT(4)(3)
OPTION AGREEMENT
<PAGE>
OPTION TO PURCHASE
COMMON STOCK
OF
DEBBIE REYNOLDS HOTEL & CASINO, INC.
This is to certify that PETER D. BISTRIAN CONSULTING, INC. ("Optionee") is
entitled, subject to the terms and conditions hereinafter set forth, to purchase
486,000 shares of Common Stock, $.OOO1 par value per share (the "Common
Shares") of DEBBIE REYNOLDS HOTEL & CASINO, INC., a Nevada corporation (the
"Company"), from the Company at the price per share and on the terms set forth
herein and to receive a certificate of the Common Shares so purchased on
presentation and surrender to the Company with the subscription form attached,
duly executed and accompanied by payment of the purchase price of each share
purchased either in cash or by certified or bank cashier's check or other check
payable to the order of the Company.
The purchase rights represented by this Option are exercisable commencing
December 10, 1995 through and including December 10, 1997 at a price per Common
Share of $0.75.
Subject to the above conditions, the purchase rights represented by this
Option are exercisable at the option of the registered owner hereof in whole at
any time, or in part from time to time, within the period specified; provided,
however, that such purchase rights shall not be exercisable with respect to a
fraction of a Common Share. In case of the purchase of less than all the Common
Shares purchasable under this Option, the Company shall cancel this Option on
surrender hereof and shall execute and deliver a new Option of like tenor and
date for the balance of the shares purchasable hereunder.
The Company agrees at all times to reserve or hold available a sufficient
number of Common Stock to cover the number of shares issuable on exercise of
this and all other Options of like tenor then outstanding.
This Option shall not entitle the holder hereof to any voting rights or
other rights as a stockholder of the Company, or to any other rights whatever
except the rights herein expressed and such as are set forth, and no dividends
shall be payable or accrue in respect to this Option or the interest represented
hereby or the Common Shares purchasable hereunder until or unless, and except to
the extent that, this Option shall be exercised.
In the event that the outstanding Common Shares hereunder are changed into
or exchanged for a different number or kind of shares or other securities of the
Company or of another corporation by reason of merger, consolidation, other
reorganization, recapitalization, reclassification, combination of shares, stock
split-up or stock dividend:
1
<PAGE>
(a) The aggregate number and kind of Common Shares subject to this Option,
shall be adjusted appropriately;
(b) Rights under this Option, both as to the number of subject Common
Shares and the Option price, shall be adjusted appropriately; and
(c) Where dissolution or liquidation of the company or any merger or
combination in which the Company is not a surviving corporation is involved,
this Option shall terminate, but the registered owner of this Option shall have
the right, immediately prior to such dissolution, liquidation, merger or
combination, to exercise his Option in whole or in part to the extent that it
shall not have been exercised.
The foregoing adjustments and the application of the foregoing provisions
may provide for the elimination of fractional share interests.
The Option and all rights hereunder shall not be transferrable otherwise
than by will or the laws of descent and distribution and except to the sole
shareholder of Optionee.
The Company shall not be required to issue or deliver any certificate of
Common Shares purchased on exercise of this Option or any portion thereof prior
to fulfillment of all the following conditions:
(a) The completion of any registration or other qualification of such
shares under any federal or state law or under the rulings or regulations of the
Securities and Exchange Commission or any other government regulatory body which
is necessary;
(b) The obtaining of any approval or other clearance from any federal or
state government agency which is necessary.
The Company agrees to file an appropriate registration statement under the
Securities Act of 1933 as soon as practicable in order to register the
underlying Common Shares under such Act.
IN WITNESS WHEREOF, the Company has caused this Option to be executed by
the signature of its duly authorized officer.
DEBBIE REYNOLDS HOTEL & CASINO, INC.
By: ______________________
Todd Fisher, President
Dated: December 5, 1995
<PAGE>
SUBSCRIPTION FORM
(To be executed by the registered holder to exercise the rights
to purchase Common Shares evidenced by the within Option).
Debbie Reynolds Hotel & Casino, Inc.
305 Convention Center Drive
Las Vegas, Nevada 89109
The undersigned hereby irrevocably subscribes for Common Shares pursuant to and
in accordance with the terms and conditions of this Option, and hereunder makes
payment of $_______________ therefor, and requests that a certificate of such
Common Shares be issued in the name of the undersigned and be delivered to the
undersigned at the address stated below, and if such number of shares shall not
be all of the shares purchasable hereunder, that a new Option of like tenor for
the balance of the remaining Common Shares purchasable hereunder shall be
delivered to the undersigned at the address stated below.
Dated: ____________________ Signed: _____________________
Address: ____________________
____________________
____________________
3
<PAGE>
EXHIBIT (4)(4)
OPTION AGREEMENT
<PAGE>
OPTION TO PURCHASE
COMMON STOCK
OF
DEBBIE REYNOLDS HOTEL & CASINO, INC.
This is to certify that ROBERT C. BREHM CONSULTING, INC. ("Optionee") is
entitled, subject to the terms and conditions hereinafter set forth, to purchase
264,000 shares of Common Stock, $.0001 par value per share (the "Common Shares")
of DEBBIE REYNOLDS HOTEL & CASINO, INC., a Nevada corporation (the "Company"),
from the Company at the price per share and on the terms set forth herein and to
receive a certificate of the Common Shares so purchased on presentation and
surrender to the Company with the subscription form attached, duly executed and
accompanied by payment of the purchase price of each share purchased either in
cash or by certified or bank cashier's check or other check payable to the order
of the Company.
The purchase rights represented by this Option are exercisable commencing
December 10, 1995 through and including December 10, 1997 at a price per Common
Share of $0.75.
Subject to the above conditions, the purchase rights represented by this
Option are exercisable at the option of the registered owner hereof in whole at
any time, or in part from time to time, within the period specified; provided,
however, that such purchase rights shall not be exercisable with respect to a
fraction of a Common Share. In case of the purchase of less than all the Common
Shares purchasable under this Option, the Company shall cancel this option on
surrender hereof and shall execute and deliver a new option of like tenor and
date for the balance of the shares purchasable hereunder.
The Company agrees at all times to reserve or hold available a sufficient
number of Common Shares to cover the number of shares issuable on exercise of
this and all other Options of like tenor then outstanding.
This Option shall not entitle the holder hereof to any voting rights or
other rights as a stockholder of the Company, or to any other rights whatever
except the rights herein expressed and such as are set forth, and no dividends
shall be payable or accrue in respect to this Option or the interest represented
hereby or the Common Shares purchasable hereunder until or unless, and except to
the extent that, this Option shall be exercised.
In the event that the outstanding Common Shares hereunder are changed into
or exchanged for a different number or kind of shares or other securities of the
Company or of another corporation by reason of merger, consolidation, other
reorganization, recapitalization, reclassification, combination of shares, stock
split-up or stock dividend:
1
<PAGE>
(a) The aggregate number and kind of Common, Shares subject to this option
shall be adjusted appropriately;
(b) Rights under this Option, both as to the number of subject Common
Shares and the Option price, shall be adjusted appropriately; and
(c) Where dissolution or liquidation of the company of any merger or
combination in which the Company is not a surviving corporation is involved,
this Option shall terminate, but the registered owner of this Option shall have
the right immediately prior to such dissolution, liquidation, merger or
combination, to exercise his Option in whole or in part to the extent that it
shall not have been exercised.
The foregoing adjustments and the application of the foregoing provisions
may provide for the elimination of fractional share interests.
The Option and all rights hereunder shall not be transferrable otherwise
than by will or the laws of descent and distribution and except to the sole
shareholder of Optionee.
The Company shall not be required to issue or deliver any certificate
Common Shares purchased on exercise of this Option or any portion thereof prior
to fulfillment of all the following conditions:
(a) The completion of any registration or other qualification of such
shares under any federal or state law or under the rulings or regulations of the
Securities and Exchange Commission or any other government regulatory body which
is necessary;
(b) The obtaining of any approval or other clearance from any federal or
state government agency which is necessary.
The Company agrees to file an appropriate registration statement under the
Securities Act of 1933 as soon as practicable in order to register the
underlying Common Shares under such Act.
IN WITNESS WHEREOF, the Company has caused this Option to be executed by
the signature of its duly authorized officer.
DEBBIE REYNOLDS HOTEL & CASINO, INC.
By: ______________________
Todd Fisher, President
Dated: December 5, 1995
2
<PAGE>
SUBSCRIPTION FORM
(To be executed by the registered holder to exercise the rights
to Purchase Common Shares evidenced by the within Option).
Debbie Reynolds Hotel & Casino, Inc.
305 Convention Center Drive
Las Vegas, Nevada 99109
The undersigned hereby irrevocably subscribes for Common Shares pursuant to and
in accordance with the terms and conditions of this Option, and hereunder makes
Payment of $_________________ therefor, and request that a certificate of such
Common Shares be issued in the name of the undersigned and be delivered to the
undersigned at the address stated below, and if such number of shares shall not
be all of the shares purchasable hereunder, that a new Option of like tenor for
the balance of the remaining Common Shares Purchasable hereunder shall be
delivered to the undersigned at the address stated below.
Dated: ____________________ Signed: _____________________
Address: ____________________
____________________
____________________
3
<PAGE>
EXHIBIT (5)
Opinion Of Horwitz, Cutler & Ream relating to
issuance of shares of securities Pursuant to the above
Management Consulting Agreement
<PAGE>
Law Office Of
HOROWITZ CUTLER & BEAM
Two Venture Plaza
Suite 380
Irvine, California 92718
(714) 453-0300
(310) 842-8574
FAX: (714) 453-9416
Lawrence W. Horwitz, Esq. *Also Admitted in Texas
M. Richard Cutler, Esq.*
Gregory B, Beam, Esq.
Lawrence R. Bujold, Esq.
Lawrence M. Cron, Esq.
Iwona Alami, Esq.
Dana M. Strabic, Esq.
Thomas A Zeigler, Esq.
James M. Gilbert, Esq.
December 19, 1995
Securities and Exchange Commission
450 Fifth Street, N.W.
Judiciary Plaza
Washington, DC 2O549
Re: DEBBIE REYNOLDS HOTEL & CASINO, INC.
Ladies and Gentlemen:
This office represents DEBBIE REYNOLDS HOTEL & CASINO, INC., a Nevada
corporation (the "Registrant") in connection with the registrant's Registration
Statement on Form S- 8 under the Securities Act of 1933 (the "Registration
Statement"), which relates to the registration of a total of 75O,O0O shares of
the registrant's Common Stock issuable upon exercise of options issued to Peter
D. Bistrian Consulting, Inc. (an option to purchase 486,000 shares) and to
Robert C. Brehm Consulting, Inc. (an option to purchase 264,000 shares) for
performance of certain consulting and management services of the "Registered
Securities"). In connection with our representation, we have examined such
documents and undertaken such further inquiry as we consider necessary for
rendering the opinion hereinafter set forth.
Based upon the foregoing, it is our opinion that the Registered Securities,
when sold as set forth in the Registration Statement, will be legally issued,
fully paid and nonassessable.
We acknowledge that we are referred to under the heading "Legal Matters" in
the Prospectus which is a part of the Registrant's Form S-8 Registration
Statement relating to the Registered Securities, and we hereby consent to such
use of our name in such Registration Statement and to the filing of this opinion
as Exhibit 5 to the Registration Statement and with such state regulatory
agencies in such states as may require such filing in connection with the
registration of the Registered Securities for offer and sale in such states.
HOROWITZ, CUTLER & BEAM
<PAGE>
EXHIBIT (23.1)
Consent Of Horowitz, Cutler & Beam relating to
issuance of shares Of Securities pursuant to the above
Management Consulting Agreements
<PAGE>
CONSENT OF HORWITZ, CUTLER & BEAM
We hereby consent to the use in the Prospectus constituting part of the
Registration Statement on Form S-8 of our opinion dated December 19, 1995
relating to the registration of the Securities, as therein defined, of DEBBIE
REYNOLDS HOTEL & CASINO, a Nevada corporation, which is attached as Exhibit 5
therein.
December ____, 1995
HOROWITZ, CUTLER & BEAM
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITOR
We hereby consent to the use in the Prospectus, constituting part of the
Registration Statement on Form S-8 of our report dated __________, 1995 relating
to the financial statements of DEBBIE REYNOLDS HOTEL & CASINO, which are
incorporated by reference therein.
December __, 1995
KMPG Peat Marwick LLP
Exhibit 10.32
ILX Incorporated definitive agreement dated October 30, 1996.
<PAGE>
Debbie Reynolds Hotel Acquisition
Memorandum of Understanding
ILX Incorporated, an Arizona Corporation (NASDAQ: ILEX), will acquire by
purchase the Debbie Reynolds Hotel & Casino situated in Las Vegas, NV from
Debbie Reynolds Hotel & Casino, Inc. for the purchase price of $16,800,000,
payable as follows:
$5,100,000 by assumption of certain existing mortgage indebtedness
$4,200,000 payable in cash
$7,500,000 payable by issuance of 3,750,000 shares of ILX
Incorporated common stock with a registration statement
to be filed on an appropriate form with the SEC within
90 days of closing.
The obligation of ILEX to consummate this transaction is expressly conditioned
upon the execution of a definitive agreement which, among other salient
provisions, requires the continued presence, cooperation, and participation of
Ms. Debbie Reynolds in future activities of the hotel & casino and other ILEX
related businesses to be set forth in detail in another definitive agreement.
Both parties will commence immediately to complete all remaining due diligence,
take any and all appropriate corporate action and seek governmental approvals,
if any, pertaining to the transactions contemplated with a view to closing in
the fourth quarter of 1996.
Dated this 27th day of September, 1996.
Debbie Reynolds Hotel & Casino, Inc. ILX Incorporated
/s/ Todd Fisher /s/ Joseph P. Martori
- --------------------------- ----------------------------
Todd Fisher, CEO Joseph P. Martori,
Chairman
<PAGE>
AGREEMENT FOR
PURCHASE AND SALE OF
DEBBIE REYNOLDS HOTEL AND CASINO
LAS VEGAS, NEVADA
SELLER: DEBBIE REYNOLDS HOTEL & CASINO, INC.
a Nevada corporation
DEBBIE REYNOLDS RESORTS, INC.
a Nevada corporation
BUYER: ILX INCORPORATED
an Arizona corporation
or its nominee
DATE October 30, 1996
<PAGE>
AGREEMENT FOR PURCHASE AND SALE
THIS AGREEMENT FOR PURCHASE AND SALE ("Agreement") is made as of the 30th day of
October 1996, by and between DEBBIE REYNOLDS HOTEL & CASINO, INC., a Nevada
corporation and its wholly owned subsidiary DEBBIE REYNOLDS RESORTS, INC., a
Nevada corporation (collectively "Seller"), and ILX INCORPORATED, an Arizona
corporation, or its nominee ("Buyer").
R E C I T A L S
A. Seller is the owner of certain real property located in the city of Las
Vegas, Clark County, Nevada, comprised of a resort hotel and casino known as
Debbie Reynolds Hotel and Casino (a portion of which has been timeshared) and
certain related personal property and rights, tangible and intangible, as more
particularly described below (the real and personal property and rights may be
referred to herein as the "Resort", as such term is more fully defined below).
B. Seller has agreed to sell, and Buyer has agreed to purchase, the Resort
pursuant to the terms and conditions set forth below.
NOW, THEREFORE, In consideration of the mutual covenant and conditions set
herein, the sufficiency of such consideration being acknowledged, the parties
hereby agree as follows:
AGREEMENT
Section 1. Sale of Resort
1.01. Seller shall sell to Buyer, and Buyer shall purchase from Seller, at
the price and upon the terms and conditions set forth in this Agreement:
(a) All that real property located in the County of Clark, State of
Nevada, described in Exhibit "B" attached hereto and incorporated herein,
together with all rights, privileges, easements and appurtenances thereto,
including, without limitation, all of Sellers right, title and interest in
and to any appurtenant land lying within the right of way of any street,
road or alley, whether completed or proposed (the "Property").
(b) All existing and proposed buildings, parking facilities,
structures, signs, improvements, tenements, fixtures and appurtenences
presently located on, under or about the Property and any additional items
located thereon at the time of Closing ("Improvements").
(c) All of the Resort, restaurant, lounge, museum, showroom, casino,
gift shop, back bar, common area, and other furniture, furnishings,
equipment , fixtures, improvements, inventory, supplies and other items of
personal property and any vehicles customarily located on the Property or
used primarily in connection with the Resort, including those items set
forth an Exhibit "C" attached hereto and Incorporated herein (the "Personal
Property"), but specifically excluding those items set forth on Exhibit "T"
attached hereto and incorporated herein;
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<PAGE>
(d) All customer lists, timeshare leads, and rental and booking
information owned by Seller (the "Ledgers") and used in conjunction with
the operation of the Resort:
(e) All of seller's right title and interest in and to: (i) any losses
affecting the Resort (the "Leases") that have not been paid as of Closing
and that Buyer specifically agrees to assume, if any, and (ii) any
management service, concession maintenance, utility and other contracts and
agreements with respect to the maintenance and operation of the Resort (the
"Service Contracts");
(f) All of seller's right title and interest in and to all
architectural drawings, plans and specifications, shop drawings and other
design or construction documents relating to the present or future
development of the Resort and construction of the Improvements (the "Plans
and Specifications");
(g) All of seller's right title and interest in and to any and all of
the following to the extent that they arise out of, are related to the
construction or development, or are, or have at any time been, used in
connection with the Resort (i) warranties, guarantees and Indemnities in
favor of Seller and claims of Seller against third parties with respect
thereto, with the exception of those claims described on Exhibit 10-KSB
attached hereto and incorporated herein. (ii) licenses, permits,
certificates of occupancy or similar documents, contract rights and other
agreements, whether oral or In writing, incident to the operation of the
Resort to the extent transferrable, (iii) the goodwill associated with the
Resort (iv) all designs, surveys, site plans, plats, operating materials,
engineering reports and other technical descriptions, (v) transferrable
licenses and permits necessary to operate the Resort as it is presently
being operated, and (vi) all other contracts, assets, and rights owned by
Seller, relating to the business, maintenance, construction and/or
operation of the Resort (collectively the "Contract Rights and Intangible
Assets");
(h) All of seller's right title and interest in and to any
transferable licenses and permits, including without limitation alcoholic
beverage licenses, used In the operation of the Resort and all other
personal property or rights, tangible or intangible, located at and used in
the operation of the Resort (collectively "Miscellaneous Items") ;
(i) All of seller's right title and interest in Resort telephone
numbers and marketing materials used in marketing the Resort, whether
located at the Resort or elsewhere, including existing videotapes,
photographs, brochures, film copy and anything relating thereto
("Advertising Materials"); and
(j) All of Seller's right title and interest in the timeshare
operation on the Property and any OPC license or lease (the "Timeshare
Operation") and all "in-house" timeshare contracts, purchase agreements and
notes receivable resulting from sales of timeshare Intervals at the Resort
prior to Closing and not sold to lenders (the "Timeshare Paper"), as more
particularly described on Exhibit A.
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<PAGE>
All of the items described in subparagraphs (a) through (j) above are
referred to in this Agreement collectively as the "Resort". Any items
excluded from the foregoing are set forth on Exhibit "T" attached hereto.
1.02 Seller shall convey and Buyer shall accept title to the Property and
improvements in accordance with the terms of this Agreement by general warranty
deed (Exhibit "D"), subject to all matters of public record shown on the Owners
Title Policy, current taxes and current assessments, and any matter shown on the
A.L.T.A. survey of the Property described in paragraph 3.04 below and approved
by Buyer (collectively the "Permitted Exceptions"). The Personal Property and
Advertising Materials shall be conveyed to Buyer by Bill of Sale (Exhibit "E")
to be executed and delivered by Seller at Closing, free and clear of liens and
encumbrances except the First Lien (as described hereinafter). The Leases,
Service Contracts, Ledgers, Plans and Specifications, Miscellaneous Items,
Timeshare Operation, Timeshare Paper, and Contract Rights and Intangible Assets,
shall be conveyed by Seller pursuant to an Assignment of Leases, Contract Rights
and Intangible Assets (Exhibit "F") or other appropriate assignment or
conveyance document free and clear of all liens except the First Lien, to be
executed and delivered by Seller and Buyer at Closing.
Section 2. Purchase Price, Appointments, Escrow Agent
2.01 The purchase price ("Purchase Price") to be paid by Buyer to Seller
for the Resort shall be SIXTEEN MILLION EIGHT HUNDRED THOUSAND DOLLARS
($16,800,000.00), plus any additional sum for inventories existing as of
Closing, payable as follows:
(a) Four Million Two Hundred Thousand Dollars ($4,200,000.00) In cash
at Closing (the "Down Payment"), plus any additional sum representing the
cost of any Resort Inventory of liquor, food, beverages and the gift shop
(the "Inventory"), to be valued as agreed by the parties at a joint
inventory conducted prior to Closing and as close thereto as practicable,
all of which shall be used by Seller to satisfy the obligations of Seller
described on Exhibit "P".;
(b) Five Million One Hundred Thousand Dollars ($5,l00,000.00)
(adjusted to the actual balance of principal and interest at Closing) by,
at Buyers option, either (i) assumption at Closing of seller's existing
obligation on the existing promissory note, deed of trust or mortgage, and
other loan and security documents by Seller in favor of Resort Funding,
Inc., attached hereto as Exhibit "G" (the " First Lien" or "Loan
Documents"), or (ii) paying the loan evidenced by the Loan Documents in
full at Closing; and
(c) Seven Million Five Hundred Thousand Dollars ($7,500,000.00) by
issuance at Closing of three Million seven hundred fifty thousand
(3,750,00) shares of ILX incorporated Common Stock (the "Shares"), valued
for purposes of this agreement at Two Dollars ($2.00) per share. Such stock
will be included in a registration statement to be filed on an appropriate
form with the United States Securities & Exchange Commission within thirty
(30) days after the date of substantial completion of those Exhibits to be
attached hereto hereinafter that provide material Information or additional
term to the overall transaction required to be disclosed in such
registration statement.
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<PAGE>
2.02 Except as set forth In paragraph 1.01 and 2.03, Seller shall retain
all the rights and all the obligations with respect to all obligations and
liabilities of the Resort and its operation arising from or relating to the
period on and prior to the date of Closing, including without limitation, all
accounts payable, employees and employee claims, salaries and wages payable,
vacation pay for vacation earned, and payroll taxes associated therewith ,
unbooked accounts payable, accounts receivable, cash, cash equivalents, security
deposits, utility and telephone payments, utility deposits, bank deposits, bank
and operating accounts, and all other obligations for the Resort existing as of
and on the Closing Data and for the period prior thereto, as well as for its pro
rata share of current real property taxes and current assessments as of the
Closing Date. Seller's prorata share of real property taxes and assessments
shall be paid to Buyer in cash on the Adjustment Date as defined in paragraph
hereof if not known and prorated at Closing. Buyer, its wholly owned
subsidiary, or through a management company as Buyer may employ, shall receive
payments paid to the Resort on all seller's accounts receivable existing as of
the Closing Date as seller's agent and shall remit all amounts received to
Seller within thirty (30) days of receipt such receipt of accounts receivable
shall be undertaken In the usual and ordinary course of the Resort business and
Buyer shall not be required to undertake any solicitations or other effort or
legal action to collect Receipt of free accounts receivable as set forth above
shall be without cost to Seller. Any payment other than cash delivered for
Seller shall be transmitted in kind by Buyer without recourse to Buyer.
Adjustment for cash security deposits, prepaid or accrued expenses shall be made
as provided In paragraph 2.03 below.
2.03 Buyer and Seller agree that a prorated net adjustment (the "Net
Adjustment") shall be computed as of the Closing Date for any amounts actually
paid to (or to be paid to) and for any amounts actually paid by (or to be paid
by) one party, but otherwise under this Agreement belonging to the other party
or chargeable to the other party, as the case may be. The computation of the Net
Adjustment will be made as of the Closing Date and exclude the cash payment
described in paragraph 2.01 (a) above. Buyer and Seller agree to use their best
efforts to ensure that a full accounting of the Net Adjustments be Provided no
later than the Closing Date to the extent practicable (the "Adjustment Date").
If Seller owes the Net Adjustment to Buyer, then Buyer shall deduct such amount
from the Down Payment as of the Closing Date. If Buyer owes the Net Adjustment
to Seller, such amount shall be added to the Down Payment as of the Closing
Date. The parties acknowledge that some items subject to adjustment may not be
received prior to the Adjustment Date, and wherever the context requires,
Adjustment Date shall also mean Supplemental Adjustment Date as defined below.
Accordingly, there will be a supplemental adjustment determined thirty (30) days
after the Closing Date or such other date or dates as the parties may agree or
which may be necessary if all information has not been received (the
"Supplemental Adjustment Date(s)") for such items, with such supplemental
adjustments to be made as of the Closing Date and paid to the other party within
ten(10)days after the Supplemental Adjustment Date. Buyer and Seller agree that
adjustments will include, but not necessarily be limited to, the following:
(a) Sales and Other Taxes. Any sales, transaction privilege gaming or
other periodic taxes (except Seller's corporate income tax) based on
Pre-Closing Resort revenue, which taxes having been collected and not paid,
or which are due or to become due and the amount known or determinable at
Closing, shall be paid by Seller at Closing. All other such amounts not so
determinable on or before the Adjustment Date, shall be an adjustment in
favor of Buyer unless
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<PAGE>
otherwise paid by Seller. Upon presentation by Buyer of a copy of the sales
or other tax return, with an allocation of seller's responsibility
therefore, Seller shall reimburse Buyer for such amount within ten (10)
business days after the date of such presentation.
(b) Insurance. If Buyer continues any insurance that Seller has
previously obtained with respect to the Resort, Buyer agrees to reimburse
Seller for the proportionate share of insurance costs prepaid by Seller for
any coverage continued by Buyer after Closing, shall be prorated as of the
Closing Date.
(c) Certain Payments. All Lease, Service Contract, utility and
telephone payments shall be prorated as of the Closing Date.
(d) Customer Deposits and Prepayments. All unearned customer deposits
and prepayments for services to be performed or goods to be delivered after
Closing shall be prorated in favor of Buyer as of the Closing Date.
(e) Utility and Equipment Lease Deposits. All utility and equipment
lease deposits shall be assigned to Buyer at Closing and shall be an
adjustment in favor of Seller on the Adjustment Date.
(f) License Fees. Any prepaid license fees shall be prorated as of the
Closing Date and shall be an adjustment in favor of Seller on the
Adjustment Date.
(g) Employee and Payroll Related Expenses. At buyer's option, Buyer
may require that all or any part of the resort's employees resign as of the
Closing Date. To the extent not so required by Buyer, any workman's
Compensation premium deposits to be utilized by Buyer shall be prorated to
the Closing Date, and shall be an adjustment in favor of Seller on the
Adjustment Date. Current wages, salaries, vacation and sick leave accrued
as of the Closing Date shall be an adjustment in favor of Buyer on the
Adjustment Date computed as if the vacation will be taken and the sick
leave used. For purposes of the foregoing, paid vacation and sick leave
shall be deemed paid on a first accrued-first paid basis,
(h) Ledgers. All amounts receivable for lodging provided prior to the
Closing Date, as shown on the Ledgers, shall be receivables to be received
by Buyer on behalf of Seller or, set forth above.
(i) To the extent the foregoing prorations and adjustments are
specifically dealt with in the Hotel Facilities Lease, they shall be
resolved herein in a manner consistent with that document
(j)For all Purposes of proration and allocation of responsibility and
liability as described in this Agreement, Closing Date and the period prior
thereto are allocated to the Seller and the period after the Closing Date
is allocated to the Buyer. The words 'as of' or "on" the Closing or Closing
Date or similar wording, as well as the words "Closing"' or "Closing Date"
where appropriate in the context shall be interpreted accordingly,
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<PAGE>
2.04 The items below shall be paid as follows:
(a) Seller shall pay all of the obligations described on Exhibit "P" from
the Closing funds through the Escrow Agent.
(b) Seller and Buyer shall each pay one-half (1/2) of the standard escrow
charges in connection with this Agreement.
(c) The cost of the owners title policy provided for in Paragraph 8.01
shall be paid on the Closing Date as follows:
(i) Seller shall be charged an amount equal to the premium for
standard coverage; and
(ii) Buyer shall pay the additional premium for extended coverage, and
the cost of any special endorsements as may be desired by Buyer.
(d) The cost of any extended lender's title insurance policy shall be paid
in full by Buyer.
2.05 Seller and Buyer hereby acknowledge and agree that the Purchase Price,
for all purposes relating to this Agreement shall be allocated among the various
assets comprising the Resort as the parties shall mutually agree In writing
prior to the end of the Feasibility Period and attached hereto as Exhibit "H".
2.06 First American Title Insurance Company, Las Vegas, Nevada shall act as
the escrow agent ("Escrow Agent") hereunder and shall, among other things, on
the Closing Date, assume responsibility for recording and/or filing all
necessary documents resulting herefrom, and shall cause the issuance of the
policies of title insurance required under Section 8, together with proper
issuance of any reinsurance agreements pertaining to such title insurance
policies, and otherwise accomplish the provisions by signing in the indicated
place on the signature page of this Agreement. The parties agree, if required by
Escrow Agent, to execute and enter into Escrow agent's standard form of escrow
instructions, all with such modifications as the parties shall reasonably
request.
Section 3. Feasibility and Investigation
3.01 In consideration of Buyer entering into the mutual covenants in this
Agreement at any time on or prior to the sixtieth (60th) day after the date of
this Agreement (or as other Terms of this Agreement may specifically extend such
period) (the "Feasibility Period"), Buyer may cancel this Agreement and all
agreements relating thereto (except for Its Indemnity relating to disturbance of
the Resort as described below in this Section) for any reason whatsoever in
Buyer's sole and absolute discretion, by providing to Seller and Escrow Agent
written notice of such cancellation. ln the event Buyer timely gives notice of
cancellation in accordance with the provisions hereof, this Agreement shall
become null and void and of no further force or effect whatsoever and neither
party shall have any further rights or obligations to the other
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<PAGE>
hereunder or by reason hereof except for those provisions hereof which are
expressly stated to survive the termination of this Agreement. If, however,
Buyer shall fail to give notice of buyer's election to cancel at the time and in
the manner as above provided, then Buyer shall be deemed to have waived its
right to do so and Buyer shall continue to be bound by the remaining provisions
of this Agreement.
3.02 Buyer shall have the right to enter and examine the Resort and all
other items being sold pursuant to this Agreement at any time under the
execution of this Agreement and also have the Resort and such items examined and
copied by any persons whom it shall designate, including without limitation,
accountants, attorneys, contractors, engineers, and environmental testing
personnel. Seller shall permit access to the Resort by Buyer and any persons it
designates, and shall fully cooperate and afford them the opportunity to inspect
such items and perform any tests upon the Resort that Buyer deems necessary or
appropriate. Buyer may utilize the office equipment and office facilities at the
Resort without charge (except for any long distance telephone service). Buyer
will not unreasonably interfere with the business of the Resort.
3.03 As to any physical disturbance of the Property or Improvements or
physical injury to person caused by Buyer or seller's agents, upon completion of
such studies and investigations, if Buyer cancels the Agreement or thereafter
does not close, Buyer agrees to restore any physical damage to the Property or
Improvements caused by Buyer or its agents to the condition it was In prior to
such damage, and further, without regard to whether or not Buyer shall cancel or
close, to defend, indemnify and hold Seller harmless from and against all
physical Injury to persons arising from such activities by Buyer. These
covenants shall survive cancellation of this Agreement
3.04 Buyer shall pay the cost of any studies and examinations of the Resort
conducted by agents of Buyer, including any "Phase 1", environmental report and
any testing in connection therewith. Notwithstanding the foregoing, as soon as
reasonably practicable execution of this Agreement Seller, at its expense shall
provide Buyer with an ALTA Urban Class Survey of the Resort including such Table
A items as specified by Buyer, by a Nevada licensed surveyor in good standing,
certified to Buyer, the title insurer and any lender connected herewith, with
such certification containing such other matters as Buyer shall reasonably
request. As soon as practicable after execution, Seller shall provide Buyer with
copies of all existing surveys, environmental reports and other studies and
reports relating to the Resort in seller's possession or under its reasonable
control.
3.05 Prior to the Closing, and under such reasonable terms and conditions
as Seller may impose, employees and agents of Buyer may stay at the Resort
without charge for lodging, except for incidentals consumed such as long
distance telephone, food and beverages, provided such stay is primarily for the
purpose of conducting feasibility examinations and investigations or otherwise
working on matters related to this transaction.
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<PAGE>
3.06 Title Report
(a) As soon as practicable after execution hereof, Seller will, at Seller's
sole cost and expense, deliver to Buyer a commitment for title insurance
relating to the Property prepared by Escrow Agent and leading to the Issuance of
an extended owners policy, together with complete and legible copies of all
recorded documents referred to therein (the "Title Report") and, in the event
that the following are subsequently prepared, agrees to cause Escrow Agent to
deliver to Buyer any updates and supplements thereto or amendments thereof, in
each case together with complete and legible copies of all matters referred to
therein ("Amendments"). Buyer shall have until the later of the end of the
Period or five (5) business days after the date of delivery of any Amendment
(which, at Buyer's option, shall extend the Closing Date accordingly), to notify
Seller and Escrow Agent in writing of Buyer's objection to any matter(s)
indicated therein (but only, in the case of Amendments, with respect to matters
not appearing on the Title Report or any previously delivered Amendment).
Notwithstanding the foregoing. Buyer shall not be entitled to object to any
exception contained in the Title Report (or any Amendment thereof which is
caused by Buyer's activities under Section 3 hereof (excluding those resulting
from Buyer's discovery of any existing defect or condition).
(b) If Buyer fails to timely object to any title exception matter disclosed
in accordance with the above procedure, Buyer shall be deemed to have approved
the condition of title to the Property. If Buyer objects to any exception as
above provided, Seller shall have until five (5) business days after the date of
delivery of Buyer's objections to advise Escrow Agent and Buyer in writing with
respect to each specified objection of Seller's election either to (i) take no
action in connection therewith (ii) or attempt to cause any such matter(s) to be
cured or eliminated at or prior to Close of Escrow. Insuring over any such item
may be done only with Buyer's written consent in its sole direction. Seller's
failure to give notice within such five (5) business day period with respect to
any of Buyer's objections shall be deemed to constitute Seller's election to
take no action in connection therewith.
(c) In the event Seller elects or is deemed to have elected to take no
action with respect to any specified objection, Buyer shall have until the later
end of the Feasibility Period or five (5) business days thereafter to advise
Escrow Agent and Seller in writing of its election to (a) waive such previously
specified objection(s) and close the transaction contemplated hereby in
accordance with the remaining provisions of this Agreement and without any
abatement or reduction of the Purchase Price, or (b) cancel and terminate the
Agreement. Buyer's failure to give written notice within such period shall be
deemed to constitute Buyer's election to waive its previously specified
objections with respect to those matters as to which Seller has notified or is
deemed to have notified Buyer that Seller will take no action.
(d) With respect to those matters which Seller has notified Buyer that
Seller will attempt to cause to be cured or eliminated (or Insured over with
Buyer's consent), Seller shall have until five (5) business days prior to the
Closing (which shall be extended in accordance with the time periods herein)
within which to accomplish the same; provided, however, that if Seller fails to
do so within said period, or if Seller Shall be unable (other than due to its
voluntary act after execution
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hereof causing such disability) to convey title to the Property subject to and
in accordance with the provisions of this Agreement at the Closing, then Buyer,
as its sole and exclusive remedies, may elect either to (i) waive such
previously specified objection(s) and close the transaction contemplated hereby
in accordance with the remaining provisions of this Agreement and without any
abatement or reduction of the Purchase Price on account thereof, or (ii) cancel
this Agreement and the Escrow, said election of remedies to be evidenced by
buyer's giving written notice to each of Seller and Escrow Agent at or prior to
the Closing. Buyer's failure to give written notice as required by the preceding
sentence shall be deemed to constitute Buyer's to waive its previously specified
objection(s). If Buyer elects to cancel, this Agreement shall become null and
void and of no further force or effect and neither party shall have any further
rights or obligations to the other hereunder or by reason hereof, except for the
provisions hereof which are expressly stated to survive the termination of the
Agreement.
(e) Buyer specifically agrees that nothing herein contained shall be deemed
to impose on Seller any obligation to bring any action or proceedings, expend
any sums or take any other steps of whatever kind or nature in order to insure
over, remove or cure matters affecting title or to fulfill any condition or
expend any monies therefore unless Seller voluntarily Impairs title to the
Property or otherwise voluntarily causes such matter after execution hereof. The
acceptance of Deed by Buyer shall not diminish Seller's warranties or any
continuing obligation herein.
4. Operations Prior to Closing
Seller covenants and agrees that between the date hereof and the Closing,
Seller will:
4.01 Continue to operate the Resort as heretofore operated in the normal
course of business and in accordance with its customary business practices.
4.02 Perform required maintenance and replacements in accordance with its
customary practices.
4.03 Afford Buyer and its representatives full access to the Resort and to
Seller's books, and files relating to the Resort and make same available to
Buyer whether they are located on or off the Property, at reasonable times, and
without undue delay, up to and including the date of the Closing.
4.04 Pay, in the normal course of business, and, in any event prior to
Closing, sums due for work, materials or services furnished or a incurred in the
ownership and operation of the Resort up to and including the date of Closing,
except as otherwise specifically treated in the provisions of this Agreement.
Not prepay any material item after the date of this Agreement without the prior
written consent of Buyer.
4.05 Except for daily room rental agreements in the ordinary course of
business which are not discounted more than twenty-five percent (25%) from the
full "rack" rate, not enter into any new material agreement nor renew, amend,
modify or terminate any existing material agreement relating to the Resort
without having obtained the prior written consent of Buyer in each such
instance, which will not be
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unreasonably withheld or delayed. Material agreements will include, without
limitation, airline and travel agent commitments, automobile leases, or room or
other facility commitments which are discounted more than twenty-five (25%) from
their full rates.
4.06 Not grant or transfer or permit the grant or transfer of any interest
in the Resort or any item being sold pursuant to this Agreement or grant any
execution rights in connection therewith, except for any items being replaced
with comparable items of equal or greater value in the ordinary course of
business.
4.07 Not discontinue compliance with governmental requirements applicable
to the Resort.
4.08 Promptly advise Buyer of any threatened or actual litigation or
governmental investigation or proceeding affecting the Resort, its licenses, its
operation, or those persons materially involved in its operation. It shall be a
condition precedent to Buyer's obligation to close that there shall be no such
matters threatened or pending at Closing having a potential significant and
material adverse effect on the Resort or upon Seller's ability to convey the
Resort to Buyer.
4.09 Not permit any material alteration, structural modification or
additions to the Resort except in the nature of ordinary maintenance.
4.10 Except for daily room rental agreements in the ordinary course of
business, not create (or agree to create) any contract grant option, lease,
covenant restriction, easement encumbrance or lien on or affecting the Resort
nor do anything negatively affecting title thereto, without the prior written
consent of buyer.
4.11 As a condition precedent to Buyer's obligation to close, Seller shall
have duly performed all covenants and other obligations to be performed by it
under this Section 4.
Section 5. The Closing
5.01 The consummation of this transaction by recording the General Warranty
Deed in accordance with the provisions of the Agreement shall take place ten
(10) days (or as such time may be extended in accordance with the specific terms
of this Agreement) after the date of expiration of the Feasibility Period or
sooner at any time if desired by Buyer upon two (2) days written notice by
Buyer. The date of such recording is referred to in this Agreement as the
"Closing"' or the "Closing Date" At the Closing, the parties hereto agree to
take the following acts and make the following deliveries, all of which will be
deemed taken and delivered simultaneously and no one of which will be deemed
completed or delivered until all have been completed or delivered:
(a) Seller shall execute, acknowledge (as appropriate) and deliver to
Buyer and/or Escrow Agent the following documents:
(1) A General Warranty Deed in the form attached as Exhibit "D";
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(2) Any documents or affidavits required to be filed or recorded
therewith In connection with Nevada Law,
(3) A Bill of Sale in the form attached as Exhibit "E"; assigning
and transferring to Buyer all of Seller's right, title and interest in
and to the Personal Property, Advertising Materials, Ledgers, and the
Plans and Specifications, including without limitation those items
shown on Exhibit "C", free and clear of all claims, liens, security
interests, encumbrances and other charges, except for the First Lien;
(4) An Assignment of Leases, Contract Rights and Intangible
Assets in the form attached as Exhibit "F", free and clear of all
claims, liens, security interests, and other charges, except for the
First Lien. The schedules to this assignment shall include the Leases,
Service Contracts, Ledgers, Plans and Specifications, Contract Rights,
Intangible Assets, Timeshare Operation items, Timeshare Paper and
related security agreements, and Miscellaneous items;
(5) Assignments of Seller's interest in all automobiles and
equipment lease-purchase contracts, and appropriate title transfer
documentation property executed by Seller for all such items owned by
Seller and used for the Resort free and clear of all claims, liens,
security interests, encumbrances and other charges, except for the
First Lien;
(6) Certificate of Non-Foreign Status in the form attached hereto
as Exhibit "I";
(7) If requested by Buyer, the resignations of all officers and
directors of the Timeshare Operation owners association who are
controlled by Seller, and corresponding replacement with persons
controlled by Buyer,
(8) If requested by Buyer, an assignment of all the developer's
and "declarant's" rights in the governing documents of the Timeshare
Operation, in the form of Exhibit "J" attached hereto;
(9) Such other documents required by this Agreement or as may
reasonably be required by Buyer, its counsel, or Escrow Agent in order
to consummate the transactions which are the Subject matter of this
Agreement, and;
(10) An opinion of Seller's counsel.
(b) At Closing, Buyer shall pay, execute, acknowledge (as appropriate)
and deliver to Seller and/or Escrow Agent the following:
(1) The Down Payment In cash or other immediately available funds;
(2) An assumption of the Loan Documents, if required;
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(3) Such other documents required by this Agreement or as may be
reasonably required by Seller, its counsel, or Escrow Agent to consummate
the transactions which are the subject matter of this Agreement; and
(4) An opinion of Buyer's counsel.
(c) At Closing, the Escrow Agent shall record and deliver the
foregoing documents as appropriate In connection with this Agreement.
Section 6. Covenants, Representations and Warranties of Seller
Seller represents covenants and warrants to Buyer as following, as of the
date hereof and as of the Closing:
6.01 Seller are corporations, duly organized and validly existing under the
laws of the State of Nevada.
6.02 Seller has the full right and authority to enter into and fully
perform its obligations under this Agreement subject to obtaining shareholder
approval of the transaction contemplated hereby.
6.03 The persons signing this Agreement on behalf of Seller are authorized
to do so and to bind Seller to the terms hereof.
6.04 All the Closing, Seller is the sole owner of the Resort subject only
to the First Lien.
6.05 The Schedule of Leases set forth in Exhibit "M" attached hereto
("Schedule of Leases") is accurate as of the date hereof, and there are no
leases or other tenancies in or related to the Resort other than those set forth
therein and room rentals in the ordinary course of business. Copies of all
Leases will be provided to Buyer during the Feasibility Period and all original
Leases shall be delivered to Buyer at Closing. Except as otherwise set forth in
the Schedule of Leases or elsewhere in this Agreement all of the Leases are in
full force and effect and none of them has been modified, amended or extended.
Moreover, Seller has no knowledge of any material breach or default, claim of
material breach or default thereunder, or any event which with the passage of
time will become a breach or default and has received no written notice of any
of the foregoing thereunder.
6.06 A schedule of the Service Contracts, oral or written (indicating
which), is attached hereto as Exhibit "N" ("Schedule of Service Contracts").
Except as otherwise set forth in the Schedule of Service Contracts or elsewhere
in this Agreement, the Service Contracts are in full force and effect and have
not been modified, amended or extended. Moreover, Seller has no knowledge of any
breach or default, claim of material breach or default thereunder, or any event
which with the passage of time will become a breach or default. Copies of all
Service Contracts will be provided to Buyer during the Feasibility Period and
the originals shall be delivered to Buyer at Closing. Except as stated on the
Exhibit, all Service Contracts may be canceled immediately upon notice of same,
without penalty or charge.
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6.07 A Permanent Certificate(s) of Occupancy for the Improvements has been
issued by the appropriate government authorities and has not been amended or
revoked and a copy will be delivered to Buyer during the Feasibility Period. The
Resort is located within the boundaries of the City of Las Vegas, Nevada
6.08 Except as set forth in Exhibit "O" attached hereto, the Property and
Improvements are, to the best of seller's knowledge, in substantial compliance
with the zoning and use requirements of applicable governmental entities. Seller
has received no correspondence or formal notice from any governmental authority
of any existing violation, which has not been cured, or of any circumstances
that with the passage of time or failure to act or both, would constitute a
violation of any applicable zoning or use requirement.
6.09 To the best of Seller's knowledge, there is no pending or contemplated
condemnation of the Property or Improvements, or any portion thereof, by any
governmental authority, nor is there any existing or proposed plan to widen,
modify or realign any street, alley or roadway adjoining the Property which
would affect access to or use of the Property.
6.10 To the best of Sellers knowledge, and except as qualified by Exhibit
"T" attached hereto, and in related documents set forth on the Exhibit and
provided to Buyer at least ten (10) days prior to the end of the Feasibility
Period, sewage and waste disposal systems and utility and telephone services now
serving the Property and the Improvements are adequate for the present operation
of the Resort.
6.11 Except as set forth in Exhibit "P" attached hereto, and in related
documents set forth on the Exhibit and provided to Buyer at least ten (10) days
prior to the end of the Feasibility Period, Seller has not received notice of
any uncured violations or infringements of any laws including without limitation
gaming laws and laws related to the Timeshare Operation, rules, regulations,
ordinances, fire or safety codes, life safety requirements, insurance
requirements, covenants, conditions, restrictions including without limitation
those relating to the Timeshare Operation on the Property, trademark service
mark or tradename registrations, agreements, or rights applicable to the Resort
and, to the best of the Seller's knowledge, the Resort as customarily, and
presently, operated is in substantial compliance with all applicable laws, rules
and regulations.
6.12 Except as set forth in Exhibit "P" attached hereto, and in related
documents set forth on this Exhibit and provided to Buyer at least ten (10) days
prior to the end of the Feasibility Period, to the best of Seller's knowledge:
(a) There are not presently, and have been no, above or underground
storage tanks, dry wells, injection wells, or similar facilities, PCB
transformers, asbestos or Hazardous Material located on the Resort
(b) No notice pursuant to any Environmental Law has been received
from, given to, or is presently due to, any governmental authority pursuant
to such Environmental Law.
(c) There are not presently, and have been no, violations on or by the
Resort of any Environmental Law.
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(d) The Resort is not presently, and has not been, used for the
manufacture, collection, storage, handling, treatment or processing of any
Hazardous Material, nor as a Sanitary Landfill or open dump, except for
normal quantities of customary products used in the operation of the
Resort.
(e) There is not presently, and has not been, any spill, leakage or
release of any Hazardous Material on or into the soil, water or air, on or
at the Resort or at any real property within one mile of the boundaries of
the Resort.
(f) The Resort is not a state or federal "superfund" site or study
site pursuant to Environmental Law.
(g) Seller agrees to defend, indemnify and hold Buyer harmless from
all loss, cost damage and expense arising out of any alleged or actual
violation of, or liability under, any Environmental Law, for events and
conditions occurring on or to the Resort by act or omission to act of
Seller or any person on the Resort property during the period an and prior
to the Closing Date. This indemnity does not limit any statutory or other
legal rights available to Buyer. Buyer agrees to defend, indemnify and hold
Seller harmless from all loss, cost damage and expense arising out or any
alleged or actual violation of, or liability under, any Environmental Law,
for events and conditions occurring on or to the Resort by act or omission
to act of Buyer or any person on the Resort property during the period
after the Closing Date.
(h) "Environmental Law" means, in relation to the Resort and its
operations, any applicable federal, state, county, municipal or other
political subdivision or district statute, law, rule, regulation, code,
ordinance, or decree relating to health, environment, air, water, soil,
improvements and facilities, the protection of same, and the contamination
and cleanup thereof.
(i) Hazardous Materials means any hazardous waste, materials, gases,
liquids, substances, improvements or other items defined in any
Environmental Law and regulated thereunder or by any applicable
governmental authority pursuant thereto, including any notification
requirements thereunder to governmental authorities.
6.13 To the best of Seller's knowledge, and except as set forth on Exhibit
"K" attached hereto, no claims, actions, suits, proceedings or investigations by
governmental authorities, employees or other employees or other third parties
are pending or threatened against or relating to the Resort or its operation in
writing or in any court or before any federal, state, municipal or other
governmental department agency, commission, board or bureau.
6.14 Except as may be set forth on the Title Report and further except for
current property taxes and current assessments, not delinquent, Seller has no
knowledge of any delinquent tax, assessment or other obligation affecting the
Resort which is, or may become, a lien on the Resort.
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6.15 Seller has delivered to Buyer financial statements, Including
statements of Income and expenses dated ___________________ (the "Financial
Statements") for Seller prepared by KPMG Peat Marwick. To the best of Sellers
knowledge the Financial Statements are true, correct and complete as of the date
thereof and fairly present the financial operations of the Resort for the period
stated. Seller makes no representation as to the future financial performance of
the Resort.
6.16 A full and complete schedule of liabilities related to the Resort
which are to be assumed by Buyer pursuant to this Agreement is attached hereto
as Exhibit "L": ("Existing Liabilities"). The Existing Liabilities to the best
of Seller's knowledge are true and correct as to nature and amount. Seller
hereby agrees to defend, indemnify and hold Buyer harmless from any sums owing
on liabilities of the Seller existing on the Closing Date not set forth as an
Existing Liability on Exhibit "L".
6.17 Seller is not prohibited from consummating the transaction
contemplated by this Agreement or from conveying the Resort by any law,
regulation, agreement, instrument, restriction, order or judgment. No
permission, approval or consent by any third party or governmental authority, or
any individual or entity connected with Seller (other than that of Seller's
shareholders) is required in order for Seller to convey the Resort or to
consummate the transaction contemplated by this Agreement
6.18 Seller has paid in full for all labor performed at professional
services performed in respect to, and materials, machinery, fixtures and tools
delivered to, furnished to or incorporated into the Resort or which would
otherwise give rise to a lien or a right to lien the Resort except for the First
Lien.
6.19 The Loan Documents are not in default nor is there any existing
condition which would cause a default with the mere passage of time, the
principal balance and interest due on the Loan Documents does not exceed Five
Million One Hundred Thousand Dollars( $5,100,000.00). No additional principal
has been advanced or accepted pursuant to the Loan Documents.
6.20 All employees of and at the Resort including without limitation its
managers are employees at-will and may legally be discharged without cause at
any time, including immediately before Closing, without liability to the Buyer
or liability to the Resort if requested by Buyer, Seller will, in writing, give
notice to and discharge all employees of the Resort effective immediately prior
to Closing, and not do anything to interfere with any immediate rehire after
Closing of same or all of such employee's. Prior to any such events, Seller will
not encourage, support or entice in any way, any satisfactory employee to leave
the employ of the Resort.
6.21 Except as set forth on Exhibit "P" attached hereto and for normal wear
and tear, the Resort, including the buildings, systems, furniture, fixtures and
equipment are in good condition and repair.
6.22 All licenses and permits necessary to the operation of the Resort are
current and in good standing.
6.23 Seller holds, in good standing, current alcoholic beverage license(s)
from the appropriate governmental liquor authorities in connection with the
operation of the Resort.
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6.24 Up to the Closing Date, the Resorts equipment and facilities have been
adequate to serve its customers during peak demand periods.
6.25 Except as set forth on Exhibit "P" attached hereto, there are no
delinquent taxes, assessments, salaries, wages, contract payments, supplier
payments, or any other delinquent payments of any kind or nature owing from
Seller or the Resort and relating to the Resort its employees, contractors,
governmental authorities, or any other person or entity dealing with the Resort
and its operation. Any such delinquent payments listed on Exhibit "P" will be
paid by Seller at Closing from the Closing funds through the Escrow Agent.
6.26 Attached hereto as Exhibit "U" is a schedule of all commitments and
reservations for "free" rooms and rooms or other facilities discounted more than
twenty-five percent (25%) from the full rate therefore for any period after the
sixtieth (60th) day following the date of this Agreement.
6.27 The Timeshare Operation has been operated continuously from Its
inception to the present in compliance with all laws, rules and regulations
applicable thereto, including without limitation the sales connected therewith,
and there has been no misrepresentation to purchasers or failure of performance
In connection with any representation or written obligation to any purchaser,
except for tenth (10th) floor (of the Resort) furnishings represented to the
timeshare purchasers. An accurate list of (i) those furnishings, (ii) their
brand and purchase source, and (iii) their cost is set forth in Exhibit "V"
attached hereto, and such furnishings will properly fulfill the obligations to,
and representation made to, the timeshare purchasers. Also shown on Exhibit V is
an accurate schedule of all Resort timeshare purchasers (I) whose owners
association dues have been waived and the period of such waiver or (II) who are
delinquent in the payment of such dues, for how long and the amount of each such
delinquency.
6.28 Seller agrees to inform Buyer in writing immediately upon obtaining
actual knowledge that any of Seller's representations or warranties are
inaccurate,
6.29 It shall be a condition precedent to Buyer's obligation to close this
transaction that Seller's covenants, representations and warranties in this
Agreement be fully performed and true and accurate as of the Closing, and that
the lender will allow Buyer to assume the First Lien without material
modification thereof and without any substantial charge or fee to Buyer.
6.30 To the best of Seller's knowledge or references to "Seller's
Knowledge" in this Section 6 means any written notice received by Seller
relating to a representation and warranty matter herein, and the personal
knowledge of Todd Fisher, the general managers of each of the Resorts, hotel
operation, casino operation, maintenance operation, food and beverage operation,
maintenance operation, entertainment/museum operation and housekeeping
operation; David Crabtree and Debbie Reynolds.
6.31 Seller agrees to defend, indemnify and hold Buyer harmless from all
loss, cost, damage and expense arising from any breach of, or inaccuracy in, the
covenants representations and warranties of Seller in this Agreement. Further,
except for liability expressly assumed by Buyer pursuant to the terms hereof,
Seller shall defend, indemnify and hold Buyer harmless from any and of loss,
cost damage,
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expense and liability to third parties arising out of the Resort, its condition
and operation (including without limitation the Timeshare Operation), and acts
or omissions by Seller on or prior to the Closing Date.
6.32 No investigation by, or knowledge of Buyer, shall diminish Sellers
indemnities herein or Seller's covenants, representations and warranties.
Section 7. Covenants, Representations and Warranties of Buyer
Buyer covenants, represents and warrants to Seller as follows:
7.01 Buyer is a corporation duly organized and in good standing under the
laws of the State of Arizona.
7.02 Buyer has the full right and authority to enter into and fully perform
its obligations under this Agreement.
7.03 The persons signing this Agreement on behalf of Buyer are authorized
to do so, and to bind Buyer to the terms hereof.
7.04 Buyer shall assume all of the existing liabilities, as shown on
Exhibit "L" attached hereto, and shall pay when due all items appearing thereon.
7.05 Buyer shall defend, indemnify and hold Seller harmless from any and
all liability to third parties arising out of, connected to or resulting from
any act transaction, or omission of Buyer occurring after the Closing Date with
respect to the Resort its condition or the operation thereof, provided however,
that such indemnification shall not (except as may be otherwise herein
specifically provided) extend to any cost expense or liability arising out of
seller's indemnification's and warranties or any omissions or act of Seller on
or prior to the Closing Date.
7.06 As of the Closing Date, Buyer has inspected the Resort and the books
and records of the Resort and has made all other inquiries which it deem
necessary" to satisfy itself as to the condition and the operation of the Resort
and agrees to accept possession of the Resort in its "as is" condition, except
for the express covenants, representations and warranties of Seller contained in
this Agreement
7.07 Buyer accepts Seller's assignment to it of all Leases, Service
Contracts and Contract Rights contained in Exhibit "F" related to the Resort and
assumes all obligations of Seller thereunder arising after the Closing Date.
7.08 If Buyer assigns its interest in this Agreement to a nominee, Buyer
shall guarantee the prompt payment and full performance of the nominee in form
approved by Seller.
7.09 Buyer agrees to inform Seller in writing immediately upon obtaining
actual knowledge that arty of Buys(s) representations or warranties herein are
inaccurate.
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7.10 The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby will not violate any provision of, or
result in the breach of, any of the terms, provisions, or conditions of, or
constitute a default under or conflict with respect to, any other agreement by
which Buyer is bound.
7.11 The Shares of common stock described in paragraph 2.01(c) above are
authorized but unissued stock of Buyer, and Buyer will deliver or issue to
Seller the Shares free and clear of all liens, encumbrances, security
agreements, options, claims, charges and restriction (except as may be imposed
by Rule 144 or other state or federal securities laws) and fully paid and
non-assessable.
7.12 The Financial Statements delivered to Seller have been prepared In
accordance with generally accepted accounting principles, and fairly present the
financial position of Buyer as of the respective date thereof, and the results
of its operations for the period(s) indicated.
7.13 To the best of Buyer's knowledge, there is no suit, action,
arbitration or legal, administrative, or other proceeding, or governmental
investigation pending or threatened against or affecting Buyer which if resolved
adversely to Buyer would have a material adverse affect on Buyer or its
business, assets, or financial condition.
7.14 It shall be a condition precedent to Seller's obligation to close this
transaction that Buyer's covenants, representations and warranties in this
Agreement be fully performed and true and accurate as of the Closing.
Section 8 Title Insurance
8.01 Seller agrees to cause Escrow Agent to deliver to Buyer, at the
Closing, an ALTA extended coverage owners 1% insurance policy or a binding
commitment to issue the same as soon after the Closing as is customary (the
"Owners Title Policy") Insuring Buyers title to the Property in The full amount
of the Purchase Price subject only to those matters which Buyer approves or is
deemed to have approved pursuant to Section 3.06 hereof and the printed
exclusions and conditions and customary exceptions set forth in Escrow Agents
usual form of ALTA extended coverage owners title insurance policy. If Buyer
shall desire any additional endorsements, the cost and responsibility for the
acquisition thereof shall be the responsibility of the Buyer.
8,02 Any Lender's title policy required by the First Lien lender at Closing
shall be Buyer's responsibility.
Section 9 Hotel Facilities Lease
9.01 Immediately after Closing, Buyer will lease certain of the Resort
facilities to Debbie Reynolds and/or her nominee ("Lessee") pursuant to the
lease to be attached hereto as Exhibit "Q" (the "Hotel Facilities Lease"), which
will be executed and delivered by said at Closing.
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9.02 In general, the lease will be for a period of ninety-nine (99) years
with an approximate monthly lease payment of $150,000 and will include the
following facilities: showroom, museum, gift shop, casino, back bar and certain
joint use areas. Lessee will maintain such facilities, plus the marquis sign and
the portable display signs around the Resort and Lessee will share prorata the
Resort's utilities, security, and engineering. ln addition, the lease will
provide for a license of the tradename "Debbie Reynolds Hotel & Casino" and all
derivatives thereof, and all other logos, trademarks, tradedress and tradenames
used in connection with the Resort (collectively "Names and Marks"). Said
license will be transferrable with the Resort if approved by Debbie Reynolds,
which approval will not be unreasonably withheld so long as the transferree
meets certain conditions to be defined in the lease. In the event said approval
is not given, then the lease of facilities may be terminated by Seller;
9.03 The above Is Illustrative only, and the final terms of the Hotel
Facilities Lease shall be controlling.
Section 10 Certain Other Agreements
10.01 In consideration for the Use of her name and likeness and associated
goodwill and other services, Debbie Reynolds Will personally receive a
percentage of the net profit of any timeshare project at the Resort as set forth
in the Timeshare Profit Agreement attached hereto as Exhibit "R", to be executed
and delivered at Closing.
10.02 A life insurance policy acceptable to Buyer on Debbie Reynolds' life
in the amount of $10,000,000 Will be assigned by Seller to Buyer and made
payable to Buyer and delivered to Buyer at Closing.
10.03 On a per project basis, timely, good faith negotiations will take
place at either party's request to place Debbie Reynolds memorabilia and/or
Debbie Reynolds museum displays at other ILX Incorporated locations.
10.04 Seller Will cause the "Debbie Reynolds Participation Agreement",
attached hereto as Exhibit "S", wherein Ms. Reynolds agrees to personally be
present, cooperate in and participate in the future activities of the Resort
(including without limitation the hotel and casino) and other ILX Incorporated
business activities (including without limitation Red Rock Collection
Incorporated) and allow for the use of her name and likeness, to be personally
executed by Ms. Reynolds and delivered to Buyer at Closing.
10.05 As additional consideration to Buyer and as a condition to Buyer's
obligations to consummate the transactions hereunder, Debbie Reynolds shall have
entered into a merger agreement and related promotional agreements with Buyer's
wholly-owned subsidiary, Red Rock Collection Incorporated.
10.06 With reference to this agreement and the specific terms of paragraph
17.13 concerning the timing of exhibit preparation, both parties will commence
immediately, diligently and continuously to complete all remaining due
diligence, complete any and all necessary corporate action, procure any
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necessary government approvals, and negotiate the definitive exhibits to be
attached hereto, with the goal of Closing prior to the end of 1996.
10.07 Without modifying any other term of this Agreement, Closing shall be
conditional on the procurement of all required governmental approvals for the
transactions and activities contemplated by this Agreement and its exhibits and
the consummation to Buyers sole and exclusive satisfaction of the matters
described in Section 9 above and this Section 10.
10.08 If Seller is unable to procure the required governmental approvals
for its activities contemplated pursuant to the Hotel Facilities Lease
(including without limitation the appropriate gaming licenses for the casino
operation) within six (6) months after the date of Closing, then Buyer shall
have no other obligations under the Hotel Facilities Lease with respect to the
casino operation and Buyer shall have the right to operate the casino in its
name.
Section 11 Broker
Seller and Buyer hereby covenant and agree that each shall indemnify and
defend the other against any costs, claims or expenses, including Attorney's
fees, arising out of any real estate or other brokerage contract executed by, or
similar activities engaged in by, the indemnifying party. The obligations under
this paragraph shall survive the Closing or, if the Closing does not occur, the
termination of this Agreement
Section 12 Notices
12.01 All notices under this Agreement shall be in writing and shall be
effective when addressed to the person(s) and address(s) as set forth below, and
either:
(a) Delivered to the address(es) by United States Mail or an
established, reputable overnight courier such as Federal Express or UPS;
(b) Delivered by other messenger to an appropriate employee at such
address(es); or
(c) Received at the telefacsimile number(s) shown below.
12.02 Proof of delivery or receipt is the obligation of the sender. Refusal
of delivery shall constitute delivery.
12.03 Addresses and telephone numbers:
If to Buyer
Joseph P. Martori, Chairman
ILX Incorporated
2777 East Camelback Road
-20-
<PAGE>
Phoenix, AZ 85016
Telefacsimile: 602-957-2780
Telephone: 602-957-2777
with a required copy to:
Samuel L. Ciatu, General Counsel
ILX Incorporated
2777 East Camelback Road
Phoenix, Arizona 85016
and with a required copy to:
Elliot R. Eisner, Esq.
Kummer Kaempfer Bonner & Renshaw
3800 Howard Hughes Pkwy,
Suite 700
Las Vegas, NV 89109
Telefacsimile: 702-796-7181
Telephone: 702-792-7000
If to Seller:
Todd Fisher, Chief Executive Officer
Debbie Reynolds Hotel & Casino, Inc.
305 Convention Center Drive
Las Vegas, Nevada 89109
Telefacsimile: 702-734-2954
Telephone: 702-734-0711
with a required copy to:
David Crabtree
Debbie Reynolds Hotel & Casino, Inc.
305 Convention Center Drive
Las Vegas, Nevada 89109
Telefacsimile: 702-734-2954
Telephone: 702-734-0711
-21-
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with a required copy to:
Matthew Q. Callister
Callister & Reynolds
823 Las Vegas Blvd. South
Las Vegas, Nevada 891 01
Telefacsimile: 702-385-7743
Telephone: 702-385-3343
If to Escrow Agent:
- ---------------------------------
- ---------------------------------
- ---------------------------------
- ---------------------------------
Telefacsimile:
- ---------------------------------
Telephone:
- ---------------------------------
with a required copy to:
- ---------------------------------
- ---------------------------------
- ---------------------------------
- ---------------------------------
Telefacsimile:
- ---------------------------------
Telephone:
- ---------------------------------
Section 13 Survival of Representations, Warranties, Covenants, and Obligations
Except as may be otherwise specifically provided in this Agreement, all
representations, warranties, covenants, indemnities, or other obligations of
both parties set forth in this Agreement shall not be merged into the deed to
Buyer or into any other document relating to the transaction contemplated by
this Agreement but shall survive the Closing for a period of three (3) years.
-22-
<PAGE>
Section 14 Uniform Commercial Code - Bulk Transfer
14.01 The parties believe that this sale is exempt from the application of
the Uniform Commercial Code bulk sale law as it does not involve a seller whose
principal business is the sale of inventory from stock, but involves a resort
hotel the business of which is principally the sale of services.
14.02 To the extent such provisions may apply, unless otherwise requested
by a party prior to the end of the Feasibility Period, Buyer and Seller agree to
waive compliance, as between themselves, with the Bulk Sale provisions of the
Uniform Commercial Code as it may be in force in the State of Nevada.
Section 15 Risk of Loss
15.01 In the event of any damage or loss to all or any substantial portion
of the Property due to casualty or the occurrence of a suit for a taking of any
portion thereof by governmental or quasi-governmental authority after the date
hereof and prior to the Closing Date, Buyer may, as its sole and exclusive
remedy, by written notice given to each of Seller and Escrow Agent on or prior
to the Closing Date, elect either to (i) cancel and terminate this Agreement and
the Escrow or (ii) receive, by assignment from Seller, all insurance proceeds
and/or condemnation awards, if any, received and/or to be received by Seller as
a result of such casulty or taking (in which case the parties shall proceed to
consummate the transaction without any resulting adjustment of the Purchase
Price).
Section 16 Cancellation and Termination: Remedies for Failure to Close
16.01 Wherever this Agreement provides that upon the occurrence of a
condition other than breach or default, one of the parties hereto may elect or
has the right to "cancel and terminate" the Agreement that phrase shall mean
that, unless otherwise herein provided, written notice thereof shall be given to
both Escrow Agent and the other party, and then this Agreement shall immediately
become null and void and of no further force or effect and neither party shall
have any further rights or obligations to the other hereunder or by reason
hereof except for those which by the provisions hereof are expressly stated to
survive any termination of this Agreement. If the notice is one of default or
breach and the matter stated in said notice is not cured, corrected or removed
within three (3) days after the date of receipt of the aforesaid written notice
(Seller and Buyer hereby waiving the "13 day" provision contained in any printed
form escrow instructions), then, unless a different time period and result is
specificaly stated in this Agreement, the notice may state cancellation shall
then occur and this Agreement shall automatically become null and void and of no
further force or effect and neither party shall have any further rights or
obligations to the other hereunder or by reason hereof except for those which by
the provisions hereof are expressly stated to survive any termination of this
Agreement
16.02 If Buyer shall breach or fail to perform or fulfill any of
Pre-closing or Closing obligations hereunder, then, provided that Seller is not
then in (default hereunder, Seller may elect to cancel this Agreement by notice
as provided above, or Seller may exercise any and all other remedies then
available to it at law or in equity (including without limitation bringing suit
for damages, specific performance or any other relief to which it may be
entitled).
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<PAGE>
16.03 If Seller shall breach or fail to perform or fulfill any of its
pre-Closing or Closing obligations hereunder, then, provided that Buyer is not
then in default hereunder, Buyer may elect to cancel this Agreement by notice as
provided above, or Buyer may exercise any and all other remedies then available
to it at law or in equity (Including without limitation bringing suit for
damages, specific performance or any other relief to which it may be entitled).
Section 17 Miscellaneous Provisions
17.01 This Agreement and the various other documents required hereby embody
and constitute the entire understanding between the parties with respect to the
transaction contemplated herein, and all prior agreements, understandings,
representations and statements, oral or written, are merged into this Agreement.
Neither this Agreement nor any provision hereof may be waived, modified,
amended, discharged or terminated except by an instrument signed by the party
against whom the enforcement of such waiver, modification, amendment, discharge
or termination is sought and then only to the extent set forth in such
instrument.
17.02 This Agreement shall be governed by, and construed in accordance
with, the law of the State of Nevada.
17.03 The section and paragraph headings in this Agreement are inserted for
convenience of reference only and in no way define, describe, limit, expand or
modify the text, scope or intent of this Agreement or any of the provisions
hereof.
17.04 This Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective heirs or successors and permitted
assigns,
17.05 This Agreement shall not be binding or effective until properly
executed by both Seller and Buyer.
17.06 As used in this Agreement the masculine shall include the feminine
and neuter, the singular shall include the plural and the plural shall include
the singular, or vice-versa, all as the context may require.
17.07 Nothing in this Agreement, express or implied, is intended to confer
any rights or remedies whatsoever upon any person, other than the parties hereto
and their respective successors, assigns and transferees.
17.08 Unless provided to the contrary in any particular provision, all time
periods shall refer to calendar days and shall expire at 5:00 p.m., Las Vegas,
Nevada time, on the last of such days; provided, however, that if the time for
the performance of any obligation expires on a day other than a business day
(any day other than a Saturday, Sunday or State of Arizona, State of Nevada or
federal paid legal holiday), the time for performance shall be extended to the
next succeeding day which is a business day. Subject to the foregoing,
Timeliness is the essence of this Agreement and of every term and provision
hereof.
-24-
<PAGE>
17.09 Seller and Buyer hereby acknowledge that this Agreement is the result
of continual and ongoing negotiation between the parties. All parties have
arrived at this Agreement through the exercise of equal bargaining power and any
ambiguities herein should be construed against neither party, but should be
given a fair and reasonable interpretation.
17.10 If either Seller or Buyer shall bring any legal action or suit for
any relief against the other, declaratory or otherwise, arising out of this
Agreement, the losing party shall pay the successful party a reasonable sum for
its attorneys fees, expenses, discovery costs and court costs as the court
sitting without a jury shall determine. Any party seeking to be indemnified or
held harmless by the other under the terms of this Agreement shall provide
notice to the Indemnifying party of receipt of any indemnified claim or cause of
action, and the indemnifying party shall have the option of joining in the
defense of such claim or cause of action.
17.11 Buyer and Seller shall each provide the other prior to the end of the
Feasibilty Period with appropriate resolutions in form and substance authorizing
the respective entities by and through their agents or officers to enter into
and execute this Agreement and the collateral documents associated herewith.
17.12 Neither Buyer nor Seller will make any public announcement concerning
the transactions contemplated hereby without the review, comment and approval of
the other, which review and comment will be promptly provided and which approval
will not ultimately be withheld so long as no securities law violation would
occur as a result of such announcement.
17.13 Set forth In Exhibt "A" is a list of any and all amendments,
schedules, riders, and other items which are attached hereto but which are not
listed elsewhere herein. All exhibits, schedules, riders or other items attached
to this Agreement are a part of and incorporated by reference into this
Agreement with the same effect as they were recited at length In the body of
this Agreement. Exhibits C, G, K, L, M, N, 0, P, T, U, V and the schedules to
Exhibit F are to be prepared initially by Seller. Seller will use its best
reasonable efforts to prepare, complete and deliver same to Buyer prior to the
end of the thirtieth (30th) day after the date of this Agreement failing which,
the Feasibility Period shall be extended to the date thirty (30) days after the
date the last of the foregoing completed exhibits is delivered to Buyer. The
parties will use their best good faith, reasonable efforts to agree upon the
form of the remaining exhibits to this Agreement as soon as reasonably
practicable, and in no event later than ten (10) days prior to the end of the
Feasibility Period. failing which, after the and of the Feasibility Period,
either party may cancel this Agreement prior to the occurrence of such
Agreement.
17.14 This Agreement may be executed in counterparts and all signature (and
any notary) pages may be attached to a single document . A telefacsimile
signature shall be valid as, an original signature and it shall be the
responsibility of the party (or its agent) telefaxing same to preserve the page
containing the original signature for inspection until the receiving party is
subsequently supplied with an Identical page containing an original signature,
which shall occur within seven (7) days after the date of such telefacsimilie.
-25-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
BUYER: ILX Incorporated, an Arizona
corporation
By: /s/ Joseph P. Martori, Chairman
-----------------------------------
Joseph P. Martori, Chairman
SELLER: DEBBIE REYNOLDS HOTEL & CASINO, INC.,
a Nevada corporation
By: /s/ Todd Fisher, CEO
-----------------------------------
Todd Fisher, CEO
DEBBIE REYNOLDS RESORTS, INC.,
a Nevada corporation
By: /s/ Todd Fisher, CEO
-----------------------------------
Todd Fisher, CEO
Escrow Agent hereby acknowledges its receipt of a fully executed copy of
this Agreement and agrees to perform the functions assigned to Escrow Agent
hereunder. Escrow Agent as the party responsible for closing the transaction
contemplated hereby within the meaning of Section 6045 (e) (2) (A) of the
Internal Revenue Code of 1986, as amended (the "Code"), further agrees to file
all necessary Information reports returns and statement regarding the
transaction required by the Code of such closing agent including, but not
limited to, the reports required pursuant to Section 6045 of the Code.
ESCROW AGENT:
-----------------------------------
BY:________________________________
Its:____________________________
-26-
<PAGE>
TABLE OF EXHIBITS
Exhibit Title
A Riders, Amendments and Miscellaneous Items
B Description of Real Property
C Schedules of Personal Property
D Deed
E Bill of Sale
F Assignment of Leases, Contract Rights and Intangible Assets
G Loan Documents - First Lien
H Allocations
I Certificate of Non-Foreign Status
J Assignment of Declarant's Rights
K Suits, Proceedings, Investigations and Claims
K-1 Claims Not-Assigned
L Existing Liabilities to be Assumed by Buyer
M Schedule of Leases
N Schedule of Service Contracts
O Summary of Existing Zoning and Use Violations
P Summary of Certain Problems
Q Hotel Facilities Lease
R Timeshare Profit Agreement
S Debbie Reynolds Participation Agreement
T Items Excluded From the Sale
U Discounted Room and Facility Committments
V Timeshare Operation Items
-27-
<PAGE>
ADDENDUM
TO
DEBBIE REYNOLDS HOTEL ACQUISITION
MEMORANDUM OF UNDERSTANDING
In connection with the Memorandum of Understanding (the "MOU") between the
undersigned dated September 27, 1996, the undersigned further agree that press
releases or other statements by either party or its respective affiliates
concerning the MOU, or any resulting definitive agreements, or the transactions
contemplated thereby, shall be jointly, expressly approved in writing in advance
by both parties, which approval shall not be unreasonably or untimely withheld
by either party.
Dated this 30th day of October, 1996.
Debbie Reynolds Hotel & Casino, Inc. ILX Incorporated
/s/ Todd Fisher /s/ Joseph P. Martori
- ---------------------------- -------------------------
Chief Executive Officer Chairman
INDEPENDENT AUDITORS' CONSENT
The Board of Directors and Shareholders
Debbie Reynolds Hotel & Casino, Inc.:
We consent to incorporation by reference in the registration statement (No.
33-82126) on Form S-8 of Debbie Reynolds Hotel & Casino, Inc. of our report
dated December 20, 1996, relating to the consolidated balance sheets of Debbie
Reynolds Hotel & Casino, Inc. and subsidiaries as of December 31, 1995 and 1994,
and the related consolidated statements of operations, shareholders' equity and
cash flows for the years then ended, which report appears in the December 31,
1995 annual report on Form 10-KSB of Debbie Reynolds Hotel & Casino, Inc.
Our report dated December 20, 1996, contains an explanatory paragraph that
states that the Company has suffered recurring losses from operations, has a
working capital deficiency, has a shareholders' equity deficiency, significant
debt service obligations, and is in default with respect to various agreements,
all of which raise substantial doubt about its ability to continue as a going
concern. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/ KPMG Peat Marwick LLP
Las Vegas, Nevada
January 24, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 172,000
<SECURITIES> 0
<RECEIVABLES> 1,459,000
<ALLOWANCES> 0
<INVENTORY> 615,000
<CURRENT-ASSETS> 2,504,000
<PP&E> 10,434,000
<DEPRECIATION> 1,996,000
<TOTAL-ASSETS> 11,929,000
<CURRENT-LIABILITIES> 12,563,000
<BONDS> 0
0
0
<COMMON> 1,000
<OTHER-SE> 14,141,000
<TOTAL-LIABILITY-AND-EQUITY> 11,929,000
<SALES> 9,790,000
<TOTAL-REVENUES> 9,790,000
<CGS> 0
<TOTAL-COSTS> 15,792,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,601,000
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,603,000)
<EPS-PRIMARY> (.99)
<EPS-DILUTED> (.99)
</TABLE>
