<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal quarter ended January 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 0-14939
CROWN CASINO CORPORATION
(Exact name of registrant as specified in its charter)
TEXAS
(State or other jurisdiction of 63-0851141
incorporation or organization) (I.R.S. employer identification number)
2415 WEST NORTHWEST HIGHWAY
SUITE 103
DALLAS, TEXAS 75220-4446
(Address of principal executive offices,
including zip code)
(214) 352-7561
(Registrant's telephone number,
including area code)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
Outstanding at
Title of Each Class March 16, 1995
------------------- --------------
<S> <C>
Common Stock, Par Value $.01 Per Share 11,128,459
</TABLE>
<PAGE> 2
PART I - FINANCIAL INFORMATION ITEM 1. Financial Statements
CONSOLIDATED BALANCE SHEETS CROWN CASINO CORPORATION
<TABLE>
<CAPTION>
January 31,
1995 April 30,
(Unaudited) 1994
----------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 902,856 $ 1,778,939
Receivables, net 155,544 1,041,243
Prepaid expenses 1,083,503 155,082
----------- ----------
Total current assets 2,141,903 2,975,264
Property and equipment:
Land held for development 16,559,895
Land deposit and site costs 56,709 1,286,223
Riverboat 14,906,140 8,844,024
Barges and improvements 350,000 485,000
Furniture, fixtures and equipment 8,803,512 1,842,118
----------- ----------
40,676,256 12,457,365
Less accumulated depreciation (186,267) (75,007)
----------- ----------
40,489,989 12,382,358
Other assets:
Debt issuance costs, net 1,050,645
Non-compete agreement, net 341,673 416,670
Land purchase option 6,075,000
License costs 9,125,000 9,125,000
----------- ---------
10,517,318 15,616,670
----------- ----------
$ 53,149,210 $ 30,974,292
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 590,515 $ 215,334
Accrued liabilities 1,034,363 152,809
Capital lease obligations 2,704,104
Note payable, net of discount 21,513,392
----------- ----------
Total current liabilities 25,842,374 368,143
Capital lease obligations,
less current portion 2,466,103
Deferred income taxes 4,440,000
Common stock pending
issuance 1,500,000
Common stock subject to
redemption 829,500
Stockholders' equity:
Preferred stock, 1,000,000 shares
authorized; none issued
Common stock, par value $.01 per share,
50,000,000 shares authorized; 11,449,853
issued and 10,752,459 outstanding
(9,686,319 issued and 8,998,925
outstanding at April 30, 1994) 114,499 96,863
Additional paid-in capital 39,151,612 28,049,381
Accumulated deficit (13,782,491) (3,721,708)
Treasury stock, at cost (642,887) (587,887)
----------- ----------
Total stockholders' equity 24,840,733 23,836,649
----------- ----------
$ 53,149,210 $ 30,974,292
=========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 3
CONSOLIDATED STATEMENTS OF OPERATIONS CROWN CASINO CORPORATION
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
January 31,
1995 1994
---------------- --------------
<S> <C> <C>
Revenues $ - $ -
Costs and expenses:
General and administrative 457,929 293,765
Gaming pre-opening and development 1,724,115 286,628
Depreciation and amortization 62,793 258,555
St. Charles Parish site abandonment 3,131,359
---------- -----------
5,376,196 838,948
---------- -----------
Net interest (income) expense:
Interest expense 1,756,523 9,521
Interest income (14,855) (54,951)
---------- -----------
1,741,668 (45,430)
---------- -----------
Loss from continuing operations before
income taxes (7,117,864) (793,518)
Benefit for income taxes (1,603,478) (263,565)
---------- -----------
Loss from continuing operations (5,514,386) (529,953)
Discontinued operations, net of taxes:
Loss on disposition of discontinued
operations (115,985)
---------- -----------
Net loss $ (5,514,386) $ (645,938)
========== ===========
Loss per share:
From continuing operations $ (.54) $ (.08)
From discontinued operations (.02)
---------- -----------
$ (.54) $ (.10)
========== ===========
Weighted average common and common
equivalent shares outstanding 10,284,658 6,227,706
========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
CONSOLIDATED STATEMENTS OF OPERATIONS CROWN CASINO CORPORATION
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
January 31,
1995 1994
---------------- --------------
<S> <C> <C>
Revenues $ - $ -
Costs and expenses:
General and administrative 1,398,296 745,053
Gaming pre-opening and development 5,120,524 515,910
Depreciation and amortization 186,257 335,329
St. Charles Parish site abandonment 3,131,359
----------- -----------
9,836,436 1,596,292
----------- -----------
Net interest (income) expense:
Interest expense 4,799,569 11,303
Interest income (172,895) (174,685)
----------- -----------
4,626,674 (163,382)
----------- -----------
Loss from continuing operations before
income taxes (14,463,110) (1,432,910)
Benefit for income taxes (4,402,328) (528,929)
----------- -----------
Loss from continuing operations (10,060,782) (903,981)
Discontinued operations, net of taxes:
Loss on disposition of discontinued
operations (192,535)
----------- -----------
Net loss $ (10,060,782) $ (1,096,516)
=========== ===========
Loss per share:
From continuing operations $ (1.03) $ (.17)
From discontinued operations (.04)
----------- ------------
$ (1.03) $ (.21)
=========== ============
Weighted average common and common
equivalent shares outstanding 9,799,176 5,319,318
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
CONSOLIDATED STATEMENTS OF CASH FLOWS CROWN CASINO CORPORATION
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
January 31,
1995 1994
---------------- --------------
<S> <C> <C>
Operating activities:
Net loss $ (10,060,782) $ (903,981)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 186,257 335,329
Amortization of debt issuance costs/discount 2,298,499
Write-down of assets 3,131,359 100,000
Warrant issued for services 62,500
Deferred income taxes (4,440,000) (438,534)
Changes in assets and liabilities:
Receivables, net 436,902 399,260
Prepaid expenses (1,053,827) (66,218)
Accounts payable and accrued liabilities 1,198,095 (22,840)
Net effect of discontinued operations 301,404
------------ ----------
Net cash used by operating activities (8,240,997) (295,580)
------------ ----------
Investing activities:
Purchases of property and equipment (17,270,420) (1,446,112)
Loan to GEMS (500,000)
Purchases of other assets (300,000)
Acquisition of GEMS, net 80,481
Acquisition of SCGC, net (450,000)
Net effect of discontinued operations 498,872
------------ ----------
Net cash used by investing activities (17,270,420) (2,116,759)
------------ ----------
Financing activities:
Issuance of common stock 5,350,522 2,414,984
Purchase of common stock (55,000)
Issuance of debt and warrants 28,000,000 500,000
Debt issuance costs (1,558,407)
Payments of debt (7,101,781) (500,000)
------------ ----------
Net cash provided by financing activities 24,635,334 2,414,984
------------ ----------
Increase (decrease) in cash and cash equivalents (876,083) 2,645
Cash and cash equivalents at: Beginning of period 1,778,939 120,719
------------ ----------
End of period $ 902,856 $ 123,364
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CROWN CASINO CORPORATION
(Unaudited)
FOR THE NINE MONTHS ENDED JANUARY 31, 1995
NOTE A - BASIS OF PRESENTATION
Crown Casino Corporation ("Crown") and its wholly-owned subsidiaries, St.
Charles Gaming Company, Inc. ("SCGC") and Gaming Entertainment Management
Services, Inc. ("GEMS"), (collectively, the "Company") is currently developing
a riverboat gaming casino in Calcasieu Parish, Louisiana, near Lake Charles.
In addition, the Company has purchased an 18.6 acre tract of land in the gaming
district of Las Vegas, Nevada for development of a hotel and casino. The
Company is also actively pursuing gaming opportunities in other jurisdictions.
The Louisiana riverboat casino project is the only project currently under
development. Prior to March 1994, the Company had been engaged in various
facets of the cable and related programming businesses.
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the nine month period
ended January 31, 1995 are not necessarily indicative of the results that may
be expected for the year ended April 30, 1995. For further information, refer
to the consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended April 30, 1994.
NOTE B - DISCONTINUED OPERATIONS
In July 1993 the Company made the decision to focus all its efforts in the
gaming industry and discontinue operating in the cable programming industry.
As a result, all cable related assets and operations were sold during fiscal
1994. The identifiable revenues and expenses from discontinued operations have
been reclassified on the accompanying statement of operations from their
historical classification to separately identify them as net results from
discontinued operations. Discontinued operations include allocations of
general and administrative expenses that were determined to be directly related
to such operations. The condensed statement for discontinued operations for
the nine months ended January 31, 1994 was as follows:
<TABLE>
<S> <C>
Revenues $ 592,154
Costs and expenses 881,809
--------
Loss before income taxes (289,655)
Benefit for income taxes (97,120)
--------
Net loss $(192,535)
========
</TABLE>
NOTE C - LAND HELD FOR DEVELOPMENT
In June 1994 the Company exercised its option for $10 million and closed the
purchase of an 18.6 acre tract of land in the gaming district of Las Vegas,
Nevada located on the southeast corner of the intersection of Flamingo and
Arville. Upon closing, land purchase option costs were reclassified to land
held for development. The Company intends to construct a hotel and casino on
the site. Also included in land held for development is a 6.5 acre tract of
land adjacent to the Company's former riverboat gaming site in St. Rose,
Louisiana. In consideration for the purchase of this land the Company
exchanged a note receivable with a face value of approximately $471,000.
NOTE D - RIVERBOAT
In July 1994 upon completion of construction and receipt of a temporary
certificate of inspection, the Company closed the purchase and took delivery of
its riverboat vessel. In December 1994, after satisfying certain conditions,
the vessel received a certificate of inspection. Also in December 1994, the
Company delivered the final portion of the purchase price (623,334 shares of
Crown common stock) to the seller, Kehl River Boats, Inc. ("KRB"), upon being
notified by the Louisiana gaming regulatory authorities that KRB had been
approved as a 5% or greater shareholder of the Company.
6
<PAGE> 7
NOTE E - DEBT
In June 1994 the Company's SCGC subsidiary issued a $28 million Senior Secured
Increasing Rate Note (the "Senior Note") to an institutional investor
("Lender"). The Senior Note is due in June 1995 and carries a 12% coupon
increasing 67 basis points each quarter up to a maximum interest rate of 14%.
The Senior Note was issued with a warrant to purchase 508,414 shares of the
Company's common stock for a period of five years with an original exercise
price of $6.00 per share, which was adjusted to $3.00 per share in December
1994 pursuant to an amendment to the warrant. The proceeds from the private
placement have been allocated between the Senior Note ($26.7 million) and the
warrant ($1.3 million) based upon the relative fair value of each of the
securities at the time of issuance. The resulting original issue discount is
being amortized over the life of the Senior Note using the effective interest
method. In connection with the initial issuance of the Senior Note, the
Company incurred debt issuance costs of approximately $1.6 million.
The Senior Note is collateralized by a first priority perfected security
interest in substantially all the assets of the Company and the agreement
governing the Senior Note ("Note Purchase Agreement") contains covenants
relating to certain business, operational and financing matters, including
requirements that the Company (i) commence gaming operations in Louisiana by
April 30, 1995, (ii) maintain its consolidated net worth and fixed charge
coverage above specified levels, and (iii) observe restrictions on additional
indebtedness and the payment of dividends. The Company and its GEMS subsidiary
also provided full and unconditional guarantees of the Senior Note.
The proceeds from the issuance of the Senior Note and the warrant were
initially placed in escrow. As a result of delays experienced in attempting to
obtain zoning approval for the St. Rose site (see Note H) and related inability
to close on the purchase of such site, on October 7, 1994, the $6.5 million
then remaining in escrow was returned to the Lender and the escrow agreement
was terminated. The Company's inability to withdraw the $6.5 million held in
escrow by September 16, 1994 and the failure to receive a letter of no
objection from the Board of Commissioners of the Ponchartrain Levee District
("Levee District") by September 30, 1994 resulted in events of default under
the Note Purchase Agreement. The receipt of the letter of no objection from
the Levee District was contingent upon the Company closing on the purchase of
the St. Rose site and providing satisfactory indemnification to the Levee
District. The Company obtained waivers of such events of default from the
Lender through October 31, 1994, and effective December 3, 1994 the Company and
its Lender executed an amendment ("Amendment") to the Note Purchase Agreement
eliminating the loan covenants that gave rise to the events of default. In
connection with the execution of the Amendment, the Company agreed to reduce
the exercise price of the warrant held by the Lender from $6.00 per share to
$3.00 per share, and to pay an additional fee of $430,000 payable by the
issuance of a note due in June 1995.
In March 1995, pursuant to the joint venture agreement (See Note I), the
Company borrowed $700,000 from its proposed joint venture partner, Louisiana
Riverboat Gaming Partnership ("LRGP"). The $700,000 note bears interest at
11.5% per annum and is due on the later of i) August 1, 1995, or ii) three
business days after the Senior Note and any related obligations are retired.
NOTE F - CAPITAL LEASES
During the first nine months of fiscal 1995 the Company accepted delivery of
various gaming, surveillance and computer equipment pursuant to capital lease
agreements. As of January 31, 1995 future minimum lease payments under capital
leases were as follows:
<TABLE>
<CAPTION>
Fiscal year ending April 30,
----------------------------
<S> <C>
1995 $ 280,797
1996 3,289,216
1997 1,996,033
1998 79,476
1999 79,476
Thereafter 6,624
-----------
Total minimum lease payments 5,731,622
Less amount representing interest (561,415)
-----------
5,170,207
Less current portion (2,704,104)
-----------
Capital lease obligations, less current portion $ 2,466,103
===========
</TABLE>
7
<PAGE> 8
NOTE G - SALES AND ISSUANCES OF COMMON STOCK
In May 1994 the Company sold 636,700 shares of its common stock resulting in
net proceeds of approximately $3.4 million pursuant to a private placement
under Regulation D of the Securities Act of 1933 ("Securities Act"). On May
31, 1994 the Company filed a registration statement with the Securities and
Exchange Commission to register these and other shares of stock issued by the
Company. On November 8, 1994 this registration statement, covering an
aggregate of 10.1 million shares of its $.01 par value common stock, was
declared effective. Of the total shares being registered, approximately 6.9
million are for the benefit of certain selling shareholders, 1.2 million
represent the underlying shares of outstanding common stock purchase warrants,
and 2.0 million are being offered on a best efforts basis by the Company for
its own account. As of March 15, 1995, the Company had sold a total of 490,000
shares of the 2,000,000 shares being offered by the Company, resulting in gross
proceeds of approximately $ 2.2 million. In February and March 1995, the
Company sold 100,000 shares of its common stock to a foreign investor under the
provisions of Regulation S under the Securities Act resulting in net proceeds
of approximately $320,000.
In March 1995, the Company issued 200,000 shares of its common stock to
Calcasieu Development Corporation ("CDC") in consideration for i) the mutual
release and termination of a prior letter agreement regarding the potential use
of certain land controlled by CDC in the City of Lake Charles that the Company
was considering to use for its riverboat casino site, and ii) obtaining CDC's
cooperation in effecting the Company's development of an alternative site in
Calcasieu Parish. Also in March 1995, the Company issued 50,000 shares of its
common stock, pursuant to a total commitment of 100,000 shares, to a consultant
in partial consideration for services rendered by such consultant. The balance
of such shares (50,000) are due seven business days after opening of the
Calcasieu Parish casino.
NOTE H - CHANGE OF LOUISIANA SITE
The prior site for the casino was located along the bank of the Mississippi
River in St. Rose, Louisiana in St. Charles Parish near New Orleans. In
connection with the proposed St. Charles Parish site, the Company made
application for a change in zoning which was approved by the St. Charles Parish
Planning and Zoning Commission and by the St. Charles Parish Council. However,
the zoning change approval was vetoed by the Parish President on September 9,
1994. On September 16, 1994, the Company filed a petition in the 19th Judicial
District Court in Baton Rouge, Louisiana seeking to enjoin the Parish from
taking any further action on the zoning approval. The suit challenged the
authority of St. Charles Parish to impose local zoning ordinances on riverboat
gaming, which the Company believed to be in direct contradiction to state law.
On October 20, 1994, the Company was granted a preliminary injunction enjoining
the Parish and its officers and employees from interfering with, prohibiting or
restricting the location, operation or development of the riverboat project at
the Company's proposed site in St. Charles Parish. The preliminary injunction
also prohibited the enjoined parties from failing to take any affirmative
action to which the Company was entitled in conducting its activities within
St. Charles Parish. The court held that an ordinance adopted by the Parish
purported to restrict gaming operations in contradiction of state law and held
such ordinance to be unconstitutional on its face.
Following the issuance of the preliminary injunction, the President of St.
Charles Parish requested a suspensive appeal from the 19th Judicial District
Court, the First Circuit Court of Appeals and the Supreme Court of Louisiana.
Both the 19th Judicial District Court and the First Circuit Court of Appeals
denied the request for suspensive appeal. On November 3, 1994, the Supreme
Court of Louisiana ordered that the preliminary injunction be stayed pending
further notice from that court. On November 15, 1994, the Company filed a
motion with the Supreme Court seeking to lift the stay, or in the alternative,
to expedite the decision on the matter. The Supreme Court heard oral arguments
on the matter on December 14, 1994, and on January 17, 1995 reversed the
decision of the trial court, holding that the St. Charles Parish ordinance in
question was not unconstitutional. The Supreme Court remanded the case back to
the trial court for further proceedings.
In light of the potential for protracted legal proceedings in St. Charles
Parish, coupled with the delays already encountered and growing legal expenses,
the Company decided to pursue an alternative site that was investigated by the
Company during the delays in St. Charles Parish. On January 23, 1995, the
Company entered into a letter of intent with LRGP to jointly develop a site on
the Calcasieu River in Calcasieu Parish, Louisiana, near Lake Charles. The
change in site from St. Charles Parish to Calcasieu Parish required the
approval of the Gaming Commission, which was granted on February 8, 1995. On
March 2, 1995, the Company and LRGP entered into a definitive joint venture
agreement (see Note I).
8
<PAGE> 9
NOTE I - JOINT VENTURE AGREEMENT
On March 2, 1995 the Company entered into an agreement with LRGP to form a
joint venture to develop the Company's Louisiana casino project (the "Joint
Venture Agreement"). Pursuant to the Joint Venture Agreement, the Company will
sell a 50% interest in SCGC to LRGP in return for i) a five-year $20 million
note (the "LRGP Note"), and ii) $1 million. The sale of a 50% interest in SCGC
requires the approval of the Enforcement Division, which was granted on March
14, 1995. The transaction is expected to be consummated by May 15, 1995.
The LRGP Note will bear interest at 11.5% per annum, and will be secured by
LRGP's 50% interest in SCGC. Interest will be payable monthly for the entire
term of the LRGP Note. Principal is payable in seventeen equal quarterly
installments beginning twelve months after closing, provided that if the
distributions from SCGC to LRGP during any quarter are less than the principal
installment due for such quarter, LRGP will only be obligated to pay the amount
of such distributions and any deficiency will be deferred to the next
installment due under the LRGP Note. All principal and interest not previously
paid will be due and payable five years after closing. The Company will have
the option at any time to convert up to 50% of the principal outstanding on the
LRGP Note (but not more than a total conversion of $5 million in principal
amount) into common stock of Casino America at a conversion rate of $12 per
share.
With the approval of the Company's senior Lender, LRGP loaned certain funds to
SCGC for working capital and casino design planning purposes. In addition,
pursuant to the Joint Venture Agreement, LRGP will lend funds to SCGC, or will
provide a financing source for SCGC, to provide for i) all development costs
relating to the Calcasieu Parish project, ii) monies necessary to buy out the
Century Casinos, Inc. management agreement, and iii) interest due on its senior
debt, in amounts to be agreed upon by LRGP and the Company. The maximum amount
of all loans funded or guaranteed by LRGP will not exceed $45 million. The
loans will be secured by substantially all the assets of SCGC (after the
retirement of SCGC's senior debt) and will bear interest and be repayable on
the same terms as the financing to be obtained by SCGC, with the credit
assistance of LRGP.
Simultaneously with the execution of the Joint Venture Agreement, SCGC entered
into a casino management agreement with a subsidiary of Casino America. The
casino management agreement has a term of 99 years and provides for a
management fee of 2% of "Revenues," as defined in the agreement, (generally net
gaming and other operating revenues less gaming and admission taxes) plus 10%
of "Net Operating Income," as defined in the agreement, but not to exceed a
total of 4% of aggregate "Revenues." In the event the joint venture is not
consummated, the casino management agreement will be terminated. In the event
the Company reacquires LRGP's 50% interest in SCGC, SCGC will have the right to
terminate the casino management agreement.
In addition to the foregoing, the Company has agreed to grant LRGP a right of
first refusal to develop its 18.6 acre parcel of land in the gaming district of
Las Vegas with the Company in the event the Company chooses to develop such
project on a joint venture basis.
The Joint Venture Agreement is subject to certain closing conditions including
the receipt of certain environmental engineering reports and the execution of
leases with respect to the Calcasieu Parish site, as well as a determination of
the Federal Trade Commission not to raise an objection to the consummation of
the transaction. The parties have agreed to use their best efforts to close
the transaction by April 30, 1995, but in no event later than May 15, 1995.
NOTE J - LOUISIANA LICENSE CONDITIONS
In connection with obtaining the Enforcement Division's approval of the
proposed transfer of a 50% interest in SCGC from the Company to LRGP, the
Enforcement Division imposed certain additional conditions to SCGC's Louisiana
gaming license. These conditions require SCGC to i) commence gaming operations
in Calcasieu Parish by October 10, 1995, ii) submit a plan of internal controls
and rules of play to the Enforcement Division at least 120 days prior to the
commencement of gaming operations, iii) exercise due diligence in the
development of its planned hotel in Calcasieu Parish, iv) obtain the
Enforcement Division's finding of suitability of the lessor of the Calcasieu
Parish site, v) obtain the U.S. Army Corps of Engineers approval for the
Calcasieu Parish project, and vi) submit a good faith plan to upgrade
minorities in employment and business opportunities by May 13, 1995.
9
<PAGE> 10
NOTE K - COMMITMENTS AND CONTINGENCIES
LITIGATION
On September 21, 1994, an action was filed against the Company in the 24th
Judicial District Court for the Parish of Jefferson, Louisiana by Avondale
Industries, Inc. ("Avondale"). In this action, Avondale alleges that the
Company was contractually obligated to Avondale for the construction of the
Company's riverboat vessel based upon a letter of intent (allegedly reaffirming
a previous agreement entered into between Avondale and the Company). Avondale
alleges that the Company breached a duty to negotiate in good faith toward the
execution of a definitive Vessel Construction Contract. Alternatively,
Avondale alleges that a separate, oral contract for the construction of the
vessel existed and that the Company committed unspecified unfair trade
practices and misrepresentations. Avondale seeks unspecified damages including
"all lost profits and lost overhead" and attorneys fees. The Company intends
to vigorously contest liability in this matter.
COMMITMENTS TO PARISH
In January 1995, the Company made a commitment to Calcasieu Parish to provide
certain payments to the Parish above and beyond the mandatory $2.50 per head
admissions tax. The Company committed to a $1 million initial payment, which
is due and payable upon the opening of the casino, and a $1 million annual
payment for as long as the casino is operating in the Parish, but in no event
less than six years. The commitment contemplates that the parties will enter
into a definitive development agreement wherein the Company anticipates
receiving certain commitments from the Parish to cooperate with and provide
assistance to the Company in obtaining and maintaining necessary permits and
approvals.
OPTION TO LEASE
In January 1995, the Company entered into an option agreement to lease the
Calcasieu Parish site, for which option the Company paid aggregate
consideration of $100,000. The underlying leases have an initial term of five
years with three five year renewal options. During the initial term, the
leases require annual rental payments totaling $850,000, payable monthly.
During the first renewal term, the rent will be increased annually by the
greater of i) 5%, or ii) the percentage increase in the average consumer price
index for Calcasieu Parish, Louisiana for the previous twelve month period.
During the second and third renewal terms, the lessor and the lessee will
attempt to set the rent equal to 100% of the rent paid by other riverboat
gaming operators in Louisiana and Mississippi for comparable property usages,
or if no agreement can be made, then the parties will appoint real estate
appraisers to set the rent for such renewal term. In addition, the Company
will pay all real estate taxes, except for taxes due on the unimproved value of
the property.
NOTE L - SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental cash flow disclosures are as follows for the nine months ended
January 31, 1995 and 1994:
<TABLE>
<CAPTION>
Nine Months Ended January 31,
------------------------------
Continuing operations: 1995 1994
------ ------
<S> <C> <C>
Common stock issued in acquisitions $9,582,500
Common stock issued for equipment $1,450,000 550,000
Equipment acquired under capital leases 5,764,838
Equipment acquired with debt 5,000,000
Property acquired in exchange for note receivable 471,465
Retirement of debt with property 200,000
Warrants issued for equipment and services 337,500 321,760
Interest paid, net of amount capitalized 1,953,951 11,303
Discontinued operations:
Cable assets sold for note receivable 250,000
</TABLE>
10
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Company's
consolidated financial statements and the related notes thereto appearing
elsewhere in this report.
OVERVIEW
The Company is currently developing a riverboat gaming casino in Calcasieu
Parish, Louisiana (near Lake Charles). In addition the Company has purchased
an 18.6 acre tract of land in the gaming district of Las Vegas, Nevada for
development of a hotel and casino. The Company is also actively pursuing
gaming opportunities in other jurisdictions. The Company currently has no
gaming operations. Prior to March 1994 the Company had been engaged in various
facets of the cable and related programming businesses.
In June 1993, the Company completed the acquisition of 100% of the outstanding
common stock of St. Charles Gaming Company, Inc. ("SCGC"), a Louisiana
corporation, which had received preliminary approval from the Louisiana
Riverboat Gaming Commission to construct and operate a riverboat casino. In
March 1994, SCGC received a license with certain conditions from the Louisiana
Riverboat Gaming Enforcement Division of the Office of State Police. In
connection with the acquisition the Company paid $500,000 and issued 1.6
million shares of its common stock. The Company has entered into an agreement
with Louisiana Riverboat Gaming Partnership ("LRGP") to form a joint venture to
operate the Company's riverboat casino in Calcasieu Parish, Louisiana. If such
joint venture is consummated, the Company will sell 50% of the common stock of
SCGC to LRGP for $1,000,000 cash and a $20,000,000 five-year note. See Note I
to the accompanying consolidated financial statements.
In December 1993, the Company acquired 100% of the outstanding common stock of
Gaming Entertainment Management Services, Inc. ("GEMS") which was organized for
the purpose of developing a hotel and casino in Las Vegas, Nevada known as the
Desert Winds Hotel and Casino. GEMS' primary asset was its option to purchase
an 18.6 acre tract of land in the gaming district of Las Vegas. In June 1994
the option was exercised for $10 million and the land was purchased. In
connection with the acquisition, the Company issued 885,000 shares of its
common stock and assumed approximately $585,000 of liabilities.
As a result of the Company's entry into the gaming industry in June 1993 with
the acquisition of SCGC, the Company made the decision to discontinue
operations in the cable programming industry and focus all its efforts on
gaming. During fiscal 1994 the Company sold all its remaining cable related
assets and operations.
RESULTS OF OPERATIONS
As a result of the Company's decision to exit the cable industry, all revenues,
costs and expenses directly related to cable operations have been reclassified
to discontinued operations. Continuing operations principally consist of
corporate general and administrative expenses, gaming pre-opening and
development costs and interest expense.
THREE MONTHS ENDED JANUARY 31, 1995 COMPARED TO THE THREE MONTHS ENDED JANUARY
31, 1994
General and administrative expenses for the three months ended January 31, 1995
increased $164,164 compared to the same period in the prior fiscal year. The
increase was attributable primarily to increased professional fees, personnel
and travel costs associated with the development of the Company's Louisiana
riverboat casino project. Interest expense amounted to $1,756,523 in the
current fiscal quarter, principally attributable to the issuance of the Senior
Note in June 1994 with no comparable amount in the prior fiscal quarter.
Included in interest expense is $885,759 of amortization of deferred financing
costs and the discount from the issuance of the Senior Note. Gaming
pre-opening and development costs for the three months ended January 31, 1995
increased $1,437,487 compared to the same period in the prior fiscal year. The
increase was the result of greater personnel, advertising, legal and training
costs in connection with the anticipated opening of its Louisiana riverboat
casino and development costs outside of Louisiana, whereas in the prior fiscal
year the Company was only in the early stages of development of its Louisiana
riverboat casino project and other projects outside of Louisiana were not being
pursued. In January 1995, the Company made the decision to abandon its site in
St. Charles Parish, Louisiana in favor of a new site in Calcasieu Parish,
Louisiana. As a result of this decision the Company recorded a charge of
approximately $ 3.1 million which represents the write-off of previously
capitalized costs specific to the St. Charles Parish site. During the
development of the Calcasieu Parish site, the Company has taken steps to reduce
its personnel, advertising and certain other costs.
11
<PAGE> 12
NINE MONTHS ENDED JANUARY 31, 1995 COMPARED TO THE NINE MONTHS ENDED JANUARY
31, 1994
General and administrative expenses for the nine months ended January 31, 1995
increased $653,243 compared to the same period in the prior fiscal year. The
increase was attributable primarily to increased professional fees, personnel
and travel costs associated with the development of the Company's Louisiana
riverboat casino project. Interest expense amounted to $4,799,569 in the
current period, principally attributable to the issuance of the Senior Note in
June 1994 with no comparable amount in the prior fiscal period. Included in
interest expense is $2,298,499 of amortization deferred financing costs and the
discount from the issuance of the Senior Note. Gaming pre-opening and
development costs for the nine months ended January 31, 1995 increased
$4,604,614 compared to the same period in the prior fiscal year. The increase
was the result of greater personnel, advertising, legal and training costs in
connection with the anticipated opening of its Louisiana riverboat casino,
development costs outside of Louisiana and development activities for a full
nine months in the current fiscal period, whereas in the prior fiscal period
the Company was only in the early stages of development of its Louisiana
riverboat casino project and other projects outside of Louisiana were not being
pursued. In January 1995, the Company made the decision to abandon its site in
St. Charles Parish, Louisiana in favor of a new site in Calcasieu Parish,
Louisiana. As a result of this decision the Company recorded a charge of
approximately $3.1 million which represents the write-off of previously
capitalized costs specific to the St. Charles Parish site. During the
development of the Calcasieu Parish site, the Company has taken steps to reduce
its personnel, advertising and certain other costs.
LIQUIDITY AND CAPITAL RESOURCES
In connection with the development of its Calcasieu Parish riverboat casino,
the Company, with its joint venture partner, expects to incur total project
costs of approximately $79 million including pre-opening expenses. As of
January 31, 1995, the estimated remaining project costs through the opening of
the casino via a temporary terminal facility were approximately $20 million,
including a $4 million buy-out of the Century Casino management agreement.
After the opening of the Casino, the Company expects to expend an additional i)
$7 million to complete the land-based pavilion, ii) $15 million to construct an
approximately 300 room hotel, and iii) $4 million to retire certain project
related payables.
Pursuant to the Company's joint venture agreement, LRGP will be required to
provide, either itself or through a third party financing arranged by it, all
remaining development costs related to the Calcasieu Parish project up to $45
million, which may include the retirement of approximately $22 million of
senior debt of SCGC. See Note I to the accompanying consolidated financial
statements. Capital costs paid after the opening of the Casino are expected to
be financed principally out of cash flows from operations. In the event the
joint venture with LRGP is not consummated, the Company expects to raise the
additional capital necessary to complete the Calcasieu Parish project through
one or more of i) public and/or private sales of its common stock, ii)
obtaining financing from its Lender, or with the consent of its Lender, a third
party, and iii) potentially entering into a joint venture agreement with a
third party.
The estimated cost to complete the Calcasieu Parish project is based upon
preliminary construction plans, which are subject to change. The scope and
resulting costs of the project may vary significantly from that which is
currently anticipated. However, management believes that the Company will be
able to obtain the financing necessary to open the casino as currently
designed, and should a significant change in the cost occur, management
believes the Company and/or LRGP will be able to raise any additional capital
that may be necessary through the issuance of debt, the sale of the Company's
common stock or otherwise. There can be no assurance that LRGP (or in the
event the joint venture with LRGP is not consummated, the Company) will be able
to obtain the financing necessary to complete the Calcasieu Parish project.
In May 1994 the Company sold 636,700 shares of its common stock resulting in
net proceeds of approximately $3.4 million pursuant to a private placement
under Regulation D of the Securities Act of 1933 ("Securities Act"). On May
31, 1994 the Company filed a registration statement with the Securities and
Exchange Commission to register these and other shares of stock issued by the
Company. On November 8, 1994 this registration statement, covering an
aggregate of 10.1 million shares of its $.01 par value common stock, was
declared effective. Of the total shares being registered, approximately 6.9
million are for the benefit of certain selling shareholders, 1.2 million
represent the underlying shares of outstanding common stock purchase warrants,
and 2.0 million are being offered on a best efforts basis by the Company for
its own account. As of March 15, 1995, the Company had sold a total of 490,000
shares of the 2,000,000 shares being offered by the Company, resulting in gross
proceeds of approximately $2.2 million. In February and March 1995, the
Company sold 100,000 shares of its common stock to a foreign investor pursuant
to the provisions of Regulation S under the Securities Act resulting in net
proceeds of approximately $320,000. In May and June of 1994, the Company
accepted delivery of approximately $6 million of gaming, surveillance and
computer equipment with respect to which the vendors have provided capital
lease financing for nearly the full value thereof.
12
<PAGE> 13
In June 1994, the Company's SCGC subsidiary completed a private placement of a
$28,000,000 Senior Secured Increasing Rate Note (the "Senior Note") to an
institutional investor (the "Lender"). The Senior Note bears an initial
interest rate of 12% per annum and increases by .67% on a quarterly basis
during its one-year term, up to a maximum of 14%. The Senior Note was issued
to finance a portion of the Company's riverboat casino project, to acquire
certain land in Las Vegas, Nevada (which land was acquired in June 1994) upon
which an additional casino facility may be built, and for general working
capital purposes.
The Senior Note is collateralized by a first priority perfected security
interest in substantially all the assets of the Company, as well as a first
priority perfected security interest in all the outstanding stock of SCGC and
GEMS. The agreement governing the Senior Note (the "Note Purchase Agreement")
contains covenants relating to certain business, operational and financing
matters, including requirements that the Company i) commence gaming operations
in Louisiana by April 30, 1995, ii) maintain its consolidated net worth and
fixed charge coverage above specified levels, and iii) observe restrictions on
additional indebtedness and the payment of dividends. The Company and its GEMS
subsidiary also provided full and unconditional guarantees of the Note.
The proceeds from the issuance of the Senior Note were initially placed in
escrow. At September 30, 1994, $6.5 million remained in escrow subject to
meeting certain escrow conditions and was designated for the purchase of land
at its former riverboat casino site in St. Charles Parish. As a result of
delays experienced in attempting to obtain zoning approval for its former site
and related inability to close on the purchase of such site, on October 7,
1994, the $6.5 million then remaining in escrow was returned to the Lender and
the escrow agreement terminated.
In January 1995, SCGC made a commitment to Calcasieu Parish to provide certain
payments to the Parish above and beyond the mandatory $2.50 per head admissions
tax. SCGC committed a $1 million initial payment, which is due and payable
upon the opening of the casino, and a $1 million annual payment for as long as
the casino is operating in the Parish, but in no event less than six years.
The commitment contemplates that the parties will enter into a definitive
development agreement wherein the Company anticipates receiving certain
commitments from the Parish to cooperate with and provide assistance to the
Company in obtaining and maintaining necessary permits and approvals.
The Company anticipates that shortly after its Calcasieu Parish riverboat
casino becomes operational, it may seek long term financing from public or
private sources to i) provide development capital for the Company's Las Vegas
project, ii) provide capital for potential future developments in other gaming
jurisdictions, and iii) for general corporate purposes. While management
anticipates such third party financing will be available to the Company, there
can be no assurance that any such financing will be available, or, if
available, on terms acceptable to the Company.
Management of the Company is currently evaluating the design and scope of the
Las Vegas hotel and casino project and the anticipated capital requirements
related thereto. Management is considering a variety of scenarios with respect
to the operation and ownership of the proposed hotel and casino, including a
potential joint venture relationship. In connection with the joint venture
with LRGP, the Company will grant LRGP a right of first refusal to develop the
Company's Las Vegas project with the Company in the event the Company chooses
to develop such project on a joint venture basis. Management does not expect
to finalize its plans for the Las Vegas project until the Calcasieu Parish
riverboat casino is fully operational.
13
<PAGE> 14
CROWN CASINO CORPORATION
PRO-FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
The following pro-forma condensed consolidated statement of operations for the
nine months ended January 31, 1994 gives effect to the acquisitions of St.
Charles Gaming Company, Inc. ("SCGC") and Gaming Entertainment Management
Services, Inc. ("GEMS"), as if the acquisitions had occurred on May 1, 1993.
The pro-forma information is based on the historical financial statements of
the Company, SCGC and GEMS, giving effect to the acquisitions under the
purchase method of accounting and the pro-forma adjustments described below.
The pro-forma condensed consolidated statement of operations may not be
indicative of the results that actually would have occurred had the
acquisitions occurred on May 1, 1993 or which may be obtained in the future.
PRO-FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Nine Months Ended January 31, 1994
(In thousands, except per share data)
<TABLE>
<CAPTION>
Crown as Pro-forma Pro-forma
Reported Adjustments Consolidated
-------- ----------- ------------
<S> <C> <C> <C>
Revenues $ - $ - $ -
Costs, expenses and interest 1,433 634 (a) 2,067
-------- ---------- --------
Loss from continuing operations
before income taxes (1,433) (634) (2,067)
Benefit for income taxes 529 529
-------- ---------- --------
Loss from continuing operations (904) (634) (1,538)
Discontinued operations (193) (193)
--------- ---------- --------
Net loss $ (1,097) $ (634) $ (1,731)
========= ========== ========
Loss per share:
From continuing operations $ (.17) $ (.24)
From discontinued operations (.04) (.03)
-------- --------
$ (.21) $ (.27)
======== ========
Average shares outstanding 5,319 6,370
======== ========
</TABLE>
(a) To reflect additional costs and expenses of SCGC and GEMS during
the period which have not been included in the historical results
of Crown, and to record additional amortization expense with
respect to the non- compete agreement entered into in connection
with the acquisition of SCGC.
14
<PAGE> 15
CROWN CASINO CORPORATION
FORM 10-Q
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
On September 21, 1994, an action was filed against the Company in the 24th
Judicial District Court for the Parish of Jefferson, Louisiana by Avondale
Industries, Inc. ("Avondale"). In this action, Avondale alleges that the
Company was contractually obligated to Avondale for the construction of the
Company's riverboat vessel based upon a letter of intent (allegedly reaffirming
a previous agreement entered into between Avondale and the Company). Avondale
alleges that the Company breached a duty to negotiate in good faith toward the
execution of a definitive Vessel Construction Contract. Alternatively,
Avondale alleges that a separate, oral contract for the construction of the
vessel existed and that the Company committed unspecified unfair trade
practices and misrepresentation. Avondale seeks unspecified damages including
"all lost profits and lost overhead" and attorneys fees. The Company intends
to vigorously contest liability in this matter.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The proceeds from the issuance of the Senior Note and the warrant were
initially placed in escrow. As a result of delays experienced in attempting to
obtain zoning approval for the St. Rose site (see Note H to the accompanying
consolidated financial statements), the Company was unable to withdraw funds
from escrow to close on the purchase of such site. The Company's inability to
withdraw funds held in escrow designated for the purchase of the St. Rose site
by September 16, 1994 and the failure to receive a letter of no objection from
the Board of Commissioners of the Ponchartrain Levee District ("Levee
District") by September 30, 1994 resulted in events of default under the Note
Purchase Agreement. The receipt of the letter of no objection from the Levee
District was contingent upon the Company closing on the purchase of the St.
Rose site and providing satisfactory indemnification to the Levee District.
The Company obtained waivers of such events of default from the Lender through
October 31, 1994, and effective December 3, 1994 the Company and its Lender
executed an amendment to the Note Purchase Agreement eliminating the loan
covenants that gave rise to the events of default.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
2.3.1 Stock Purchase Agreement dated March 2, 1995 by and
between Crown Casino Corporation ("Crown"), St.
Charles Gaming Company, Inc. ("SCGC") and Louisiana
Riverboat Gaming Partnership ("LRGP").
2.3.2 Management Agreement by and between River Services,
Inc. and SCGC.
4.4.13 Waiver to the Note Purchase Agreement dated March 3,
1995.
27 Financial Data Schedule
(b) Reports on Form 8-K.
There were no reports on Form 8-K filed in the third fiscal
quarter of the current year.
15
<PAGE> 16
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
CROWN CASINO CORPORATION
By: /s/ Mark D. Slusser
-------------------------------------------
Mark D. Slusser
Vice President Finance, Chief Financial
Officer and Secretary
(Principal Financial and Accounting Officer)
Dated: March 16, 1995
16
<PAGE> 1
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of this 2nd day of March, 1995 by and among CROWN CASINO CORPORATION, a
Texas corporation ("Crown"), ST. CHARLES GAMING COMPANY, INC., a Louisiana
corporation (the "Company") and LOUISIANA RIVERBOAT GAMING PARTNERSHIP, a
Louisiana partnership ("LRGP").
RECITALS
A. Crown currently owns all of the outstanding capital stock of the
Company (the "Company Stock") and desires to sell 50% of the Company Stock to
LRGP.
B. LRGP is willing to purchase 50% of the Company Stock.
C. The Company's principal business will be the operation of a
riverboat casino and related facilities (the "Calcasieu Casino") in Calcasieu
Parish, Louisiana.
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements, and upon the terms and subject to the
conditions hereinafter set forth, the parties do hereby agree as follows:
Section 1. Purchase and Sale of Stock. Crown shall sell, transfer,
assign and deliver and LRGP shall purchase 50% of the Company Stock ("LRGP
Stock") on the Closing Date (as hereinafter defined) for the purchase price of
$21,000,000. The purchase price shall be payable as follows: on the Closing
Date LRGP shall pay Crown the sum of $1,000,000 cash (less the $100,000 deposit
previously delivered and any amounts then owing by Crown to the Company) and
shall deliver to Crown a $20,000,000 Promissory Note (the "Purchase Money
Note") described below.
1.1 Purchase Money Note. The Purchase Money Note shall be executed by
LRGP in favor of Crown in the principal sum of $20,000,000, and shall be
substantially in the form of Exhibit A-1 hereto; the Purchase Money Note shall
be secured by the LRGP Stock pursuant to a Security Agreement-Pledge
substantially in the form of Exhibit A-2 hereto.
1.2 Warrant to Convert Purchase Money Note Into Equity. At the
Closing, Casino America, Inc., a Delaware corporation ("CSNO"), shall issue a
warrant (the "Warrant") to Crown, pursuant to which at any time prior to the
repayment in full of the Purchase Money Note, Crown shall have the right to
convert up to 50% of the
<PAGE> 2
principal amount outstanding on the Purchase Money Note (but not more than a
total conversion of $5,000,000) for common stock of CSNO at a conversion rate
of $12 per share. The Warrant shall be substantially in the form of Exhibit B
hereto.
1.3 Delivery of Common Stock. At the Closing, Crown shall deliver
certificates for the LRGP Stock in negotiable form, duly endorsed in blank or
with separate stock transfer powers attached, free and clear of all liens,
encumbrances, claims and other charges thereon of every kind.
1.4 Shareholders Agreement. At the Closing. Crown and LRGP shall
execute a shareholders agreement substantially in the form of Exhibit C hereto.
1.5 Closing. The consummation (the "Closing") of the transactions
contemplated by this Agreement shall take place at the offices of Phelps
Dunbar, 400 Poydras Street, New Orleans, Louisiana on that date which is not
more than ten days after all conditions of Closing set forth in Sections 8 and
9 have been satisfied or waived, or at such other time and place as shall be
mutually agreed upon by LRGP and Crown, but in no event later than May 15,
1995, (the date of Closing being herein referred to as the "Closing Date"). The
parties will use their best efforts to cause the Closing to occur by April 30,
1995. If the Closing has not occurred on or prior to May 15, 1995 any party
hereto shall have the right to abandon and not consummate the transactions
contemplated herein pursuant to Section 21 hereof.
Section 2. Management Agreement. Simultaneously with the execution of
this Agreement, the Company and Riverboat Services, Inc., a wholly-owned
subsidiary of Casino America, Inc., shall enter into a management agreement for
the operation of the Calcasieu Casino, substantially in the form of Exhibit D
hereto.
Section 3. Representations and Warranties of Crown. Crown represents
and warrants to LRGP as follows:
3.1 Organization, Good Standing and Authority. Crown is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Texas, and has the corporate power and authority to perform its
business as presently conducted and to own and lease the properties used in
connection therewith. Crown is duly qualified to do business and is in good
standing in Louisiana, and is duly qualified to do business in all other
jurisdictions where the failure to so qualify would have a material adverse
impact on the financial condition or operations of Crown. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby are within the power of Crown and have been duly authorized
by all necessary corporate and other action. This Agreement constitutes the
valid obligation of
-2-
<PAGE> 3
Crown legally binding upon it and enforceable in accordance with its terms.
3.2 Stock Ownership. Crown is the lawful owner of record and
beneficially owns all of the Company Stock, free and clear of any liens,
encumbrances, rights, equities, security interests and any other adverse claims
whatsoever (except for the security interest created by the Pledge Agreement
dated as of May 31, 1994 (the "Nomura Pledge Agreement") executed by Crown in
favor of Hibernia National Bank ("Hibernia") as agent for the purchaser of
Notes issued by the Company pursuant to the Note Purchase Agreement among the
Company, Crown, Hibernia and the Noteholders (as therein defined) (the "Nomura
Loan Agreement") (the Nomura Pledge Agreement, the Nomura Loan Agreement and
the ancillary instruments executed and defined in connection therewith are
herein sometimes called "Nomura Loan Documents"). Crown has full legal power
and authority to transfer and deliver the LRGP Stock in accordance with this
Agreement, and by delivery of a certificate therefor, and upon receipt of the
consents stated in Section 3.4 hereof, Crown will transfer to LRGP good and
marketable title to 50% of the Company Stock, free and clear of all liens,
encumbrances, equities and claims.
Neither Crown nor the Company is a party to, or bound by any written
or oral contract or agreement which grants to any person an option or right of
first refusal or other right to acquire at any time, or upon the happening of
any stated events, any of the Company Stock.
3.3 No Conflict. Except for the Nomura Loan Documents, neither the
execution, delivery or performance of this Agreement by Crown, nor the
consummation of the transactions contemplated hereby will (a) violate, conflict
with or result in a breach of any provisions of, constitute a default (or an
event which, with notice or lapse of time or both, would constitute a default)
under, result in the termination of or accelerate the performance required by,
or result in the creation of any lien, security interest, charge or encumbrance
upon any of the properties or assets of Crown under, any of the terms,
conditions or provisions of its Certificate of Incorporation or By-laws or any
note, bond, mortgage, indenture, deed of trust, lease, license, agreement or
other instrument or obligation which binds it or any of its assets or (b)
violate any order, writ, injunction, decree, statute, rule or regulation of any
governmental body applicable to Crown or any of its assets, except for the
consents stated in Section 3.4 hereof.
3.4 Consents. All consents, approvals or authorizations required to be
obtained by Crown or the Company in connection with the transactions
contemplated by this Agreement have been obtained, except for approval by the
Louisiana State Police Riverboat Gaming Enforcement Division and consent by
Nomura Holding America, Inc.
-3-
<PAGE> 4
3.5 No Claims. Except as stated in Schedule 3.5 hereto, there is no
action, suit, proceeding or claim by any person, and no investigation by any
governmental agency, pending or threatened against Crown.
3.6 Disclosure. No representation or warranty by Crown in by this
Agreement or in the Schedules attached hereto contains any untrue statement of
material facts or omits to state any material facts necessary to make any
statement herein not misleading.
Section 4. Representations and Warranties of Crown and the Company.
Crown and the Company represent and warrant to LRGP as follows:
4.1. Organization, Standing, Qualification and Capitalization. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Louisiana, and has the corporate power and
authority to perform its business as presently conducted and to own and lease
the properties used in connection therewith. The Company is duly qualified to
do business and is in good standing in each jurisdiction where the conduct of
its business or the ownership of its property requires such qualification. The
Company has no subsidiary or direct or indirect ownership interest in any other
firm, partnership, corporation, association or business.
The authorized capital stock of the Company consists of 100,000 shares
of common stock, no par value. The Company has no authority to issue any other
series or class of capital stock or security. Of the authorized shares of
Common Stock there are only 100,000 fully paid and nonassessable shares validly
issued and outstanding, all of which are held of record and owned by Crown and
evidenced by certificate No. 103. All of such issued and outstanding shares of
Common Stock (a) have been duly authorized, validly issued and fully paid, and
are non-assessable, (b) have not been issued in violation of any agreement or
document restricting their issuance and (c) are registered as owned by Crown in
the Company's stock records. Except for the Nomura Loan Documents, neither
Crown nor the Company is a party to or bound by any written or oral contract or
agreement which grants to any person an option or right of first refusal or
other right of any character to acquire at any time, or upon the happening of
any stated events, shares of Common Stock of the Company whether or not
presently issued or outstanding.
4.2 Compliance. The business and operations of the Company have been
and are being conducted in compliance with all applicable laws, rules and
regulations of all authorities, noncompliance with which would have a material
adverse effect on its business, results of operations or prospects. The Company
is not in violation of any term or provision of its Certificate of
Incorporation or By-laws, or any indenture, contract, lease, agreement or
instrument by which
-4-
<PAGE> 5
it is bound or any applicable law, rule or regulation, the violation of which
would have a material adverse effect on its business, financial or other
condition or its prospects.
4.3 Financial Statements. The Company has delivered to LRGP copies of
the following financial statements, all of which have been prepared in
accordance with generally accepted accounting principles (except for the
absence of footnotes or as otherwise disclosed therein) applied on a basis
consistent with that of the preceding fiscal year.
(i) Balance sheet of the Company as of June 24, 1993, certified by
Fred Bastie & Associates, PC, certified public accountants,
and as of April 30, 1994 and January 31, 1995, prepared by the
Company, which balance sheets present fairly the financial
condition and assets and liabilities of the Company as of
their respective dates. The balance sheet of the Company as of
January 31, 1995 is attached as Schedule 4.3 hereto and will
be hereinafter called the "1995 Balance Sheet".
(ii) Statements of operations for the Company for the period from
inception to June 24, 1993, certified by Fred Bastie &
Associates, PC, certified public accountants, and for the
period from June 25, 1993 to April 30, 1994 and for the nine
months ended January 31, 1995, prepared by the Company, which
statements together with any notes to the respective
statements of net income present fairly the results of
operations of the Company for the said periods.
(iii) Balance sheet of Crown as of April 30, 1994 and statements of
income of Crown for the year then ended, certified by Coopers
& Lybrand, L.L.P., certified public accountants, which balance
sheet and statement of income present fairly the results of
operations of Crown for said period.
4.4 Changes in Financial Condition. (a) Since January 31, 1995 there
has not been (i) any adverse change in the financial condition or in the
operations, businesses or properties of the Company (except for expenses
incurred in the ordinary course of business); (ii) any damage, destruction or
loss, whether covered by insurance or not, materially and adversely affecting
the operations, businesses or properties of the Company; (iii) any declaration,
setting aside or payment of any dividend, or any distribution in respect of
capital stock of the Company, or any redemption, purchase or other acquisition
of any of such shares of the Company; (iv) any increase in the compensation
payable or to become payable by the Company to any of its officers, directors
or employees; (v) any change in the terms of any bonus, insurance, pension or
other benefit plan for or with any officers, directors
-5-
<PAGE> 6
or employees which increases amounts paid, payable or to become payable
thereunder; or (vi) any complaints or other concerns which have been brought to
the attention of the Company and which relate to the Company's labor relations.
(b) Current liabilities of the Company, exclusive of debt and lease
obligations stated on Schedule 4.4 do not exceed current assets of the Company,
as of the date of this Agreement. At Closing the Company shall pay to Crown any
excess of current assets over current liabilities (as defined herein) as of the
date of this Agreement and Crown shall pay to the Company any excess of current
liabilities (as defined herein) over current assets as of the date of this
Agreement.
(c) Undisclosed Liabilities. There are no liabilities or obligations
of the Company either accrued, absolute, contingent or otherwise, including,
but not limited to, any tax liabilities due or to become due other than (i)
those reflected in the 1995 Balance Sheet, (ii) unpaid expenses incurred since
the 1995 Balance Sheet in the ordinary course of business and (iii) as stated
in the Schedules to this Agreement and not heretofore paid or discharged.
(d) All liabilities owing by the Company to Crown as of February 8,
1995 will be converted into equity. In addition, Crown will pay on behalf of
the Company or reimburse the Company for all interest on the debt of the
Company to Nomura Holding America, Inc. accrued through February 8, 1995, but
paid after the date of this Agreement.
4.5 No Conflict. Neither the execution, delivery or performance of
this Agreement by the Company, nor the consummation of the transactions
contemplated hereby will (a) violate, conflict with or result in a breach of
any provisions of, constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, result in the
termination of or accelerate the performance required by, or result in the
creation of any lien, security interest, charge or encumbrance upon any of the
properties or assets of the Company under, any of the terms, conditions or
provisions of its Certificate of Incorporation or By-laws or any note, bond,
mortgage, indenture, deed of trust, lease, license, agreement or other
instrument or obligation which binds it or any of its assets or (b) violate any
order, writ, injunction, decree, statute, rule or regulation of any
governmental body applicable to the Company or any of its assets, except for
the approvals and consents stated in Section 3.4 hereto.
4.6 Title to And Condition of Properties. (a) The Company has good and
marketable title to all its properties and assets reflected in the 1995 Balance
Sheet, free and clear of all mortgages, claims, liens, pledges, equitable
interests, charges or other encumbrances of any nature whatsoever, except any
mortgages, liens, pledges, charges or other encumbrances disclosed in the 1995
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Balance Sheet or in Schedule 4.6 hereto, and liens for current taxes not yet
due and payable.
(b) All of the personal property reflected on the 1995 Balance Sheet,
together with any personal property acquired thereafter, including without
limitation, the Calcasieu Casino riverboat and all of the gaming and other
equipment located thereon, are in good condition and working order, ordinary
wear and tear excepted. The Calcasieu Casino riverboat is completed and has
been paid for in full.
4.7 Tax Matters. The amounts set up as provisions for taxes on the
1995 Balance Sheet are sufficient for the payment of all foreign, federal,
state, county and local taxes, and all employment and payroll related taxes,
including any penalties or interest thereon, whether disputed or not, of the
Company accrued for or applicable to all periods ended on or prior to January
31, 1995. The Company did not and will not realize any gain or income of any
kind with respect to activities subsequent to January 31, 1995 and through the
Closing Date except gain and income incurred in the ordinary course of business
subsequent to January 31, 1995. The Company has timely made all deposits
required by law to be made with respect to employees' withholding taxes. The
Company has timely filed all income, foreign, franchise, excise, employment and
payroll related, real and personal property, sales and gross receipts tax
returns and all other tax returns which were required to be filed by it, and
has paid, or has set up adequate reserves for the payment of, all taxes shown
on such returns. No agreement for the extension of time for the assessment of
any deficiency or adjustment with respect to any tax return filed by the
Company has been assessed, and the Company has no knowledge of any assessed tax
deficiency proposed or threatened against the Company.
4.8 Litigation and Labor Matters. Except as stated in Schedule 4.8
hereto, (a) there is no litigation, proceeding, governmental investigation or
claim pending or, to the Company's knowledge, threatened, against or related to
the Company, or its properties or business; (b) the Company is not in default
with respect to any order, writ, injunction or decree of any court or federal,
state, municipal or governmental department, commission, board, bureau, agency
or instrumentality; and (c) the Company has not committed, and the Company has
not received any notice of union election or claim that the Company has
committed any unfair labor practice under applicable federal or state law.
4.9 Insurance. The Company is insured under various policies of fire,
liability and other forms of insurance, as stated in Schedule 4.9 hereto, which
policies are valid and enforceable in accordance with their terms and provide
adequate insurance for the business of the Company and its assets and
properties; all outstanding claims under such policies are described in said
Schedule 4.9. To the Company's knowledge, there is no liability
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for retrospective insurance premium adjustments for any period prior to the
date hereof, except as stated in Schedule 4.9 hereto.
4.10 Patents, Trademarks and Copyrights. There are no patents, patent
applications, registered trademarks, registered service marks, trademark and
service mark applications, unregistered trademarks and service marks,
copyrights and copyright applications, owned or filed by the Company or in
which the Company has an interest and the nature of such interest. Except for
the right to use "Isle of Capri", no other patent, trademark or service mark,
copyright or license is necessary to permit the business of the Company to be
conducted as now conducted or as heretofore or proposed to be conducted. No
person, firm or corporation has any proprietary, financial or other interest in
any of such patents, patent applications, registered trademarks, registered
service marks, trademark and service mark applications, unregistered trademarks
and service marks, copyrights and copyright applications, and there are no
violations by others of any of the rights of the Company thereunder. To the
knowledge of Crown and the Company, the Company is not infringing upon any
patent trademark or service mark, or copyright or otherwise violating the
rights, of any third party, and no proceedings have been instituted or are
pending or, to the knowledge of the Company, are threatened, and no claim has
been received by the Company, alleging any such violation. The Company is not a
party to or bound by any license agreement requiring the payment by the Company
of any royalty payment.
4.11 Contracts and Commitments. Except as stated in Schedule 4.11
hereto, the Company is not a party to any written or oral contract or
commitment or any letter of intent, letter of understanding or other similar
instrument. Copies of all such instruments have been provided to counsel for
LRGP. Except as stated in Schedule 4.11, the Company, and to the Company's
knowledge, the other parties to the above contracts have complied with the
provisions thereof, such contracts are valid and enforceable, no party is in
default thereunder, and no event has occurred which but for the passage of time
or the giving of notice would constitute a default thereunder. The Company has
entered into an agreement with Century Casinos, Inc. ("Century") to terminate
the management agreement in consideration of the payment by the Company of $4
million in cash on or before March 18, 1995.
4.12 Defaults. The Company is not in default in the performance,
observance or fulfillment of any obligation, covenant or condition contained in
any debenture or note, or contained in any conditional sale or equipment trust
agreement, or loan or other borrowing agreement to which the Company is a
party.
4.13 Restrictions. The Company is not subject to any charter or other
corporate restriction or any judgment, order, writ, injunction or decree, which
materially and adversely affects the
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<PAGE> 9
businesses, operations, prospects, properties, assets or condition, financial
or otherwise, of the Company.
4.14 Pension Plans. There are no plans of the Company to which the
Employee Retirement Income Security Act ("ERISA") applies, in whole or in part.
4.15 Employees. Schedule 4.15 hereto sets forth the names, addresses
and social security numbers of all employees of the Company, their rates of
compensation and all other material terms and conditions of their employment.
Except as set forth in Schedule 4.15, all such employees may be terminated
immediately without any further or ongoing contractual obligations whatsoever.
The Company is not a party to any collective bargaining agreement, and the
Company is not aware of any attempts to organize its employees.
4.16 Compliance with Laws. The Company has complied with and is not in
default under, or in violation of, any laws, ordinances, rules, regulations or
orders (including, without limitation, any antitrust, environmental,
securities, employment, safety, health or trade laws, ordinances, rules,
regulations or orders) applicable to the operations, businesses or properties
of the Company which materially and adversely affect or, so far as Crown can
now foresee, may in the future materially and adversely affect, the business,
operations, prospects, properties, assets or condition, financial or otherwise,
of the Company.
4.17 Consents. Except as stated in Section 3.4 hereof, all consents,
approvals or authorizations required to be obtained by the Company in
connection with the transactions contemplated by this Agreement have been
obtained.
4.18 No Claims. Except as stated in Schedule 4.18 hereto, there is no
action, suit, proceeding or claim by any person, and no investigation by any
governmental agency, pending or threatened against the Company.
4.19 Disclosure. No representation or warranty by the Company in this
Agreement or in the Schedules hereto contains any untrue statement of material
facts or omits to state any material facts necessary to make any statement
herein not misleading.
Section 5. Representations and Warranties of LRGP. LRGP represents and
warrants to Crown that:
5.1 Organization and Authority. LRGP is a general partnership duly
organized and validly existing under the laws of the State of Louisiana, and
has full power and authority to own its properties and assets and to carry on
its business as presently conducted. The partners of LRGP are, and will be at
Closing, Louisiana River Site Development, Inc. and CSNO, Inc. The
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execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby are within the power of LRGP and have been
duly authorized by all necessary corporate and other action. This Agreement
constitutes the valid obligation of LRGP legally binding upon it, enforceable
in accordance with its terms.
5.2 Validity of Contemplated Transactions. Except for the provisions
of the note in the face amount of $35 million of LRGP to CSNO, Inc., neither
the execution, delivery or performance of this Agreement by LRGP, nor the
consummation of the transactions contemplated hereby will (a) violate, conflict
with or result in a breach of any provisions of, constitute a default (or an
event which, with notice or lapse of time or both, would constitute a default)
under, result in the termination of or accelerate the performance required by,
or result in the creation of any lien, security interest, charge or encumbrance
upon any of the properties or assets of LRGP under, any of the terms,
conditions or provisions of its Articles of Partnership or any note, bond,
mortgage, indenture, deed of trust, lease, license, agreement or other
instrument or obligation which binds it or any of its assets or (b) violate any
order, writ, injunction, decree, statute, rule or regulation of any
governmental body applicable to LRGP or any of its assets.
5.3 Investment Representations. The Company Stock being delivered
pursuant to the provisions of this Agreement is being purchased by LRGP for
investment for its own account and not with a view to the distribution thereof.
5.4 Compliance. The business and operations of LRGP have been and are
being conducted in compliance with all applicable laws, rules and regulations
of all authorities, noncompliance with which would have a material adverse
effect on its business, results of operations or prospects. LRGP is not in
violation of any term or provision of its Articles of Partnership, or any
indenture, contract, lease, agreement or instrument by which it is bound or any
applicable law, rule or regulation, the violation of which would have a
material adverse effect on its business, financial or other condition or its
prospects.
5.5 Financial Statements. LRGP has delivered to Crown copies of the
following financial statements, all of which have been prepared in accordance
with generally accepted accounting principles (except for the absence of
footnotes and as otherwise disclosed therein) applied on a basis consistent
with that of the preceding fiscal year.
(i) Balance sheets as of December 31, 1994, prepared by LRGP,
which balance sheets together with any notes to the respective
balance sheets present fairly the financial condition and
assets and liabilities of LRGP as of their respective dates.
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(ii) Income statement of LRGP for the fiscal year ended December
31, 1994, prepared by LRGP, which statement together with any
notes to the respective statements of net income present
fairly the results of operations of LRGP for the said periods.
5.6 Changes in Financial Condition. (a) Since December 31, 1994 there
has not been (i) any adverse change in the financial condition or in the
operations, businesses or properties of LRGP; or (ii) any damage, destruction
or loss, whether covered by insurance or not, materially and adversely
affecting the operations, businesses or properties of LRGP.
5.7 Litigation. There is no litigation, proceeding, governmental
investigation or claim pending or threatened, against or related to LRGP, or
its properties or business and not covered by insurance; and (b) LRGP is not in
default with respect to any order, writ, injunction or decree of any court or
federal, state, municipal or governmental department, commission, board,
bureau, agency or instrumentality.
5.8 Defaults. LRGP is not in default in the performance, observance or
fulfillment of any obligation, covenant or condition contained in any debenture
or note, or contained in any conditional sale or equipment trust agreement, or
loan or other borrowing agreement to which LRGP is a party.
5.9 Compliance with Laws. LRGP has complied with and is not in default
under, or in violation of, any laws, ordinances, rules, regulations or orders
(including, without limitation, any safety, health or trade laws, ordinances,
rules, regulations or orders) applicable to the operations, businesses or
properties of LRGP which materially and adversely affect or, so far as LRGP can
now foresee, may in the future materially and adversely affect, the business,
operations, prospects, properties, assets or condition, financial or otherwise,
of LRGP.
5.10 Disclosure. No representation or warranty by LRGP in this
Agreement contains any untrue statement of material facts or omits to state any
material facts necessary to make any statement herein not misleading.
Section 6. Conduct of Business Pending Closing. A. Pending the
Closing, Crown and the Company covenant in favor of LRGP as follows (which
covenants may not be modified without the consent of LRGP):
6.1 Business in the Ordinary Course. Except for transactions incurred
in the ordinary course of business, the Company shall refrain from engaging in
any transactions except with the concurrence of LRGP, which will not be
unreasonably withheld.
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6.2 Accounting Changes. The Company will not make any change in its
accounting procedures and practices from those in existence at January 31,
1995.
6.3 Capitalization, Options and Dividends. The Company will not
(i) make any change in its Articles of Incorporation or By-Laws (except to
the extent necessary to implement the provisions of this Agreement and the
Shareholders Agreement attached as Exhibit C hereto), (ii) issue or reclassify
or alter any shares of its outstanding or unissued capital stock, (iii) grant
options, warrants or other rights of any kind to purchase, or agree to issue
any shares of its capital stock, (iv) purchase, redeem or otherwise acquire
for a consideration any shares of its capital stock, or (v) declare, pay, set
aside or make any dividends or other distribution or payment in respect of its
capital stock.
6.4 Encumbrance of Assets. The Company will not mortgage, pledge or
encumber any of its properties or assets, except to LRGP to secure Debt of the
Company to LRGP.
6.5 Employment Agreements. The Company will not enter into any
employment agreements, will keep in effect its present salary administration
program (including pension plans and other fringe benefits), and will not
increase the compensation of any of its directors, officers or employees; nor
shall the Company make any contribution to any profit-sharing or pension plan,
deferred compensation or other employee benefit plan.
6.6 Real Property Acquisition, Dispositions and Leases. The Company
will not acquire or dispose of real estate or enter into leases of real estate
or equipment, except for (a) the leases of the real property consisting of
approximately 16 acres in Calcasieu Parish, Louisiana, for the site of the
Calcasieu Casino (the "Site") as stated in Schedule 8.6 hereto, and (b) the
purchase of real property in the area surrounding the Site for an aggregate
purchase price not to exceed $2,500,000 on terms and conditions approved by
LRGP.
6.7 Litigation During Interim Period. The Company will promptly advise
LRGP in writing of the commencement or threat against the Company of any suit,
proceeding, or claim by any person.
6.8 Inspection. LRGP and its officers, attorneys, accountants and
representatives shall be permitted to examine the property, books and records
of Crown (as they relate to the Company) and the Company, and such officers,
attorneys, accountants and representatives shall be afforded access to such
property, books and records and Crown and the Company will upon reasonable
request furnish LRGP with any information reasonably required in respect to
Crown and the Company's property, assets and business and will provide LRGP
with copies of any contract, document or
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instrument listed in any Schedule hereto. No such examination, however, shall
constitute a waiver or relinquishment on the part of LRGP of its right to rely
upon the covenants, representations and warranties made by Crown and the
Company herein.
6.9 Good Will. The Company will use its best efforts to preserve the
good will of suppliers and others having business relations with it.
6.10 Insurance. The Company will not cause or permit any of its
current insurance contracts to be cancelled or terminated or any coverage
thereunder to lapse unless, simultaneously therewith, replacement policies
providing equal or greater coverage for substantially the same premiums are in
effect.
6.11 Closing. Crown and the Company will each use all reasonable
efforts to bring about the satisfaction of the conditions of Closing specified
in Section 8 hereof as they relate to such party.
6.12 No Breach. The Company and Crown will not commit or omit to do
any act which act or omission would cause a breach of any agreement, contract
or commitment or which would have a material adverse effect on the Company's
financial condition, results of operations, business or prospects.
6.13 No Violation. The Company and Crown will not violate any law,
statute, rule, governmental regulation or order, which violation would have a
material adverse effect on the Company's financial condition, results of
operations, business or prospects.
B. Pending the Closing, LRGP covenants and agrees that it will use all
reasonable efforts to bring about the conditions of Closing specified in
Section 9 hereof as they relate to LRGP.
C. From and after the date hereof, LRGP shall provide, or shall cause
a third party lender to provide, loans (the "Loans") to the Company for all
expenses and development costs (in amounts to be agreed upon by LRGP and Crown)
related to the Calcasieu Casino accrued or incurred by the Company since
February 8, 1995, including, but not limited to, the sum of $4,000,000 to buy
out the Management Agreement between the Company and Century Casinos, Inc., and
the payment of interest on the loan evidenced by the Nomura Loan Documents (the
"Nomura Loan") from and after February 8, 1995. The maximum amount of all such
Loans shall not exceed $45,000,000 in the aggregate. The Loans, or a portion
thereof, may further be used to pay off in full at maturity (June 2, 1995) the
Nomura Loan in the outstanding principal amount of $21,920,000, plus accrued
interest since February 8, 1995, unless refinanced on terms acceptable to Crown
and LRGP.
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The Loans shall be represented by a note or notes of the Company
secured by all assets of the Company, bearing interest at the same rate of
interest and payable on the same terms as the financing obtained by LRGP from a
third party lender. In the absence of third party lender, or the transaction
contemplated hereby does not close for any reason, the Loans shall bear
interest at 11.5% per annum, shall be secured as set forth above and shall be
repaid by the Company and Crown in four (4) equal quarterly installments of
principal and interest beginning three (3) months after the termination date of
this Agreement. The Loans shall be guaranteed by Crown.
LRGP shall use its best efforts to obtain third party financing for
the Company on terms satisfactory to Crown, the Company and LRGP, but without
the requirement for (i) Crown to grant a security interest in the 18.6 acre
land owned by a subsidiary of Crown located in Las Vegas, Nevada and other
Crown assets, (ii) Crown to guarantee such financing and, (iii) Crown and LRGP
to grant a security interest in the Company Stock; provided, however, that if
such third party lender requires the pledge of the Company Stock as a first
priority security interest for such financing, Crown and LRGP agree to do so
and Crown further agrees to subordinate its security interest in the LRGP Stock
to the first priority security interest in favor of such third party lender.
Section 7. Liability and Indemnification. (a) Crown shall defend,
indemnify and hold harmless LRGP against and in respect of any and all
liability, damage, loss, deficiency, cost and expenses arising out of or
otherwise in respect of (i) any misrepresentation, breach of warranty (or
claims which would constitute a breach of warranty if true) or non-fulfillment
of any agreement or covenant contained in this Agreement, certificate or other
instrument furnished by Crown or the Company, (ii) the costs and expenses
incurred after the Closing Date, including attorneys fees, judgments, fines and
amounts paid in settlements of all actions, suits or proceedings, whether
civil, criminal, administrative or investigative, involving the Company which
relate to acts or omissions occurring prior to the date hereof, and (iii) any
and all actions, suits, proceedings, audits, demands, assessments, judgments,
costs and legal and other expenses incident to any of the foregoing or the
enforcement of this Section, but only to the extent that any such liability,
damage, loss, deficiency, cost or expense exceeds $5,000 individually and
$25,000 in the aggregate, provided, however, such limitation shall not apply to
a breach of Section 4.4(b).
(b) LRGP shall defend, indemnify and hold harmless Crown against and
in respect of any and all liability, damage, loss, deficiency, cost and
expenses arising out of or otherwise in respect of (i) any misrepresentation,
breach of warranty or nonfulfillment of any agreement or covenant contained in
this Agreement, certificate or other instrument furnished by LRGP, and
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(ii) any and all actions, suits, proceedings, audits, demands, assessments,
judgments, costs and legal and other expenses incident to any of the foregoing
or the enforcement of this Section.
Section 8. Conditions Precedent to LRGP's Obligations. All obligations
of LRGP under this Agreement are subject to the fulfillment, prior to or at the
Closing, of each of the following conditions;
8.1 Representations and Warranties. Crown's and the Company's
representations and warranties contained in this Agreement, certificates or
other instrument delivered pursuant to the provisions hereof shall be true and
correct as of the date of this Agreement and as of the Closing Date (except
those made as of a specific date) as though such representations and warranties
were made at and as of such time, and Crown and the Company shall have
delivered to LRGP a certificate dated the Closing Date and signed by them to
such effect.
8.2 Compliance with Agreements. Crown and the Company shall have
performed or complied with all agreements and conditions required by this
Agreement to be performed or complied with by them prior to or at the Closing,
and Crown and the Company shall have delivered to LRGP a certificate dated the
Closing Date and signed by them to such effect.
8.3 Opinion of Counsel. Crown and the Company shall have delivered to
LRGP an opinion of their counsel, dated the Closing Date, substantially in the
form of Exhibit E hereto.
8.4 Debt to Parent. Any Debt of the Company to Crown existing on the
date of this Agreement or at Closing which shall not have been repaid shall
have been converted to shareholders equity by increasing paid-in capital.
8.5 Environmental Reports. Prior to executing the leases described in
Section 8.6 hereof, LRGP shall have received, reviewed and approved Phase I (or
Phase II or Phase III if deemed necessary by LRGP) environmental engineering
reports on the property subject to said proposed leases.
8.6 Leases. The Company and landlord(s) shall have executed leases and
recorded memorandums of leases of the Site pursuant to the options to lease
described in Schedule 8.6 hereto.
8.7 Regulatory Approvals. The Company, Crown and LRGP shall have
received all necessary approvals of governmental authorities to consummate the
transactions contemplated by this Agreement including without limitation,
approvals from the Louisiana Riverboat Gaming Commission and the Louisiana
State Police Gaming Enforcement Division.
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8.8 Hart-Scott-Rodino Filing. Crown and LRGP (and any other required
parties) shall have made any filings with the Federal Trade Commission required
by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, and shall not have
received any timely objection to the consummation of the transactions
contemplated by this Agreement.
8.9 Litigation. There shall not have been filed, or to the knowledge
of Crown or the Company, threatened, any action, suit, proceeding or claim by
any person, which if successful would have a material adverse effect on the
business of the Company or the transactions contemplated by this Agreement. No
action or proceeding shall have been threatened or instituted before a court or
other governmental body by any person, governmental agency or public authority
to restrain or prohibit the transactions contemplated by this Agreement or to
obtain damages or other material relief in connection with the execution of
this Agreement or the consummation of the transactions contemplated hereby. In
addition, no governmental agency shall have given notice to the effect that
consummation of the transactions contemplated by this Agreement would
constitute a violation of any law or that it intends to commence proceedings to
restrain consummation of the transactions contemplated hereby.
8.10 Satisfactory Proceedings. All corporate and other proceedings and
actions taken in connection with the transactions contemplated hereby and all
certificates, opinions, agreements, instruments and documents referred to in
this Section 8 or incident to any such transactions shall be reasonably
satisfactory in form and substance to LRGP and its counsel. Crown and the
Company shall furnish to LRGP and its counsel such supporting documentation and
evidence of the satisfaction of any or all of the conditions precedent
specified in this Section 8 as LRGP or its counsel may reasonably request.
8.11 Financing Consent. Crown and the Company shall have obtained the
consent of Nomura Holding America, Inc. to all of the transactions contemplated
by this Agreement.
8.12 Delivery of Company Stock. Crown shall have delivered the LRGP
Stock to LRGP, free and clear of any liens, encumbrances, rights, equities,
security interests and other adverse claims whatsoever, except for the security
interest in favor of Crown to secure the Purchase Money Note.
Section 9. Conditions Precedent to Crown's Obligations. All
obligations of Crown under this Agreement are subject to the fulfillment, prior
to or at the Closing, of each of the following conditions:
9.1 Representations and Warranties. The representations and warranties
of LRGP contained in this Agreement or in any
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certificate or other instrument delivered pursuant to the provisions hereof
shall be true and correct as of the date of this Agreement and as of the
Closing Date as though such representations and warranties were made at and as
of such time, and LRGP shall have delivered to Crown a certificate dated the
Closing Date and signed by it to such effect.
9.2 Compliance with Agreements. LRGP shall have performed or complied
with all agreements and conditions required by this Agreement to be performed
or complied with by it prior to or at the Closing, and LRGP shall have
delivered to Crown a certificate dated the Closing Date and signed by it to
such effect.
9.3 Opinion of Counsel. LRGP shall have delivered to Crown an opinion
of LRGP's counsel, dated the Closing Date, substantially in the form of Exhibit
F hereto.
9.4 Regulatory Approvals. The Company, LRGP and Crown shall have
received all applicable approvals of governmental authorities to consummate the
transactions contemplated by this Agreement, including without limitation,
approvals from the Louisiana Riverboat Gaming Commission and the Louisiana
State Police Gaming Enforcement Division.
9.5 Hart-Scott-Rodino Filing. Crown and LRGP (and any other required
parties) shall have made any filings with the Federal Trade Commission required
by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, and not have
received any timely objection to the consummation of the transactions
contemplated by this Agreement.
9.6 No Action. No action or proceeding shall have been threatened or
instituted before a court or other governmental body by any person,
governmental agency or public authority to restrain or prohibit the
transactions contemplated by this Agreement or to obtain damages or other
material relief in connection with the execution of this Agreement or the
consummation of the transactions contemplated hereby. In addition, no
governmental agency shall have given notice to the effect that consummation of
the transactions contemplated by this Agreement would constitute a violation of
any law or that it intends to commence proceedings to restrain consummation of
the transactions contemplated hereby.
9.7 Satisfactory Proceedings. All corporate and other proceedings and
actions taken in connection with the transactions contemplated hereby and all
certificates, opinions, agreements, instruments and documents referred to in
this Section 9 or incident to any such transactions shall be reasonably
satisfactory in form and substance to Crown and its counsel. LRGP shall furnish
to Crown and its counsel such supporting documentation and evidence of the
satisfaction of any or all of the conditions precedent
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specified in this Section 9 as Crown or its counsel may reasonably request.
9.8 Loans. LRGP shall have provided, or caused to be provided by a
third party lender, the Loans to the Company as contemplated by Section 6.C.
hereof, and the Company shall have entered into a loan agreement acceptable to
LRGP and Crown with a third party lender providing for loans in an amount not
to exceed $45,000,000, to be used in the manner set forth in Section 6.C.
hereof, or, alternatively, the Company and LRGP shall have entered into a loan
agreement acceptable to Crown and LRGP whereby LRGP shall loan such funds up to
the maximum amount referred to above in accordance with the terms of Section
6.C. hereof.
Section 10. Broker and Finder's Fees. Crown and the Company represent
and warrant to LRGP that they have not engaged or dealt with any person who may
be entitled to any broker fee or commission in respect of the execution of this
Agreement or the consummation of the transactions contemplated hereby. LRGP
represents and warrants to Crown that it has not engaged or dealt with any
broker or other person who may be entitled to any brokerage fee or commission
in respect of the execution of this Agreement or the consummation of the
transactions contemplated hereby. Each of the parties hereto shall indemnify
and hold the others harmless against any and all claims, losses, liabilities or
expenses which may be asserted against such other parties as a result of such
first mentioned party's dealings, arrangements or agreements with any such
broker or person. Notwithstanding the foregoing, with the written approval of
Crown and LRGP which may be given or with held in each such party's sole and
absolute discretion, the Company may pay a finders fee to Sid Goldstein and/or
Mike Profit in connection with the transactions contemplated by this Agreement.
Section 11. Expenses. Crown and LRGP shall each bear their own
expenses in connection with the Agreement and the transactions contemplated
thereby. Unless otherwise agreed by LRGP, Crown shall also bear the expenses of
the Company in connection with this Agreement and the transactions contemplated
hereby.
Section 12. Announcements. LRGP and Crown will consult and cooperate
with each other as to the timing and content of any announcements of the
transactions contemplated hereby to the general public or to employees,
customers or suppliers. Except as otherwise required by applicable law, neither
party without the consent of the other, will issue any press release concerning
the transactions contemplated by this Agreement, it being the intent of the
parties that any press releases will be issued simultaneously and the contents
thereof will be approved by all parties.
Section 13. Further Actions and Assurances. LRGP and Crown will
execute and deliver any and all documents, and will cause any and all other
action to be taken, either before or after Closing,
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which may be necessary or proper to effect or evidence the provisions of this
Agreement and the transactions contemplated hereby.
Section 14. Corporate and/or Purchase Money Note Restructure. (a) If the
parties hereto determine that it would be in their mutual best interest to own
and operate the Calcasieu Casino in a limited liability company,
notwithstanding any of the foregoing, the parties hereto agree to use their
best efforts to obtain approval from all applicable governmental authorities
(i) to permit the Company to sell 50% of all of its assets to LRGP for a total
purchase price of $21,000,000 payable as set forth in Section 1 hereof (except
that the cash shall be paid to the Company and the Purchase Money Note shall be
in favor of the Company and the repayment of the Purchase Money Note shall be
in the amount of distributions less an amount equal to 40% of net income of the
Company for such period as an allowance for income taxes); (ii) to permit the
Company and LRGP each to contribute their 50% interest in the assets formerly
belonging entirely to the Company to a limited liability company of which Crown
and LRGP are the sole members having equal ownership (and for which the
operating agreement shall be substantially the same in substance as the
Shareholders Agreement attached as Exhibit C hereto); (iii) to permit the
limited liability company to operate the Calcasieu Casino pursuant to a
management agreement with Riverboat Services, Inc. substantially in the form of
Exhibit D hereto; and (iv) to name the limited liability company Calcasieu
Gaming Company. In the event all of such approvals are obtained prior to the
Closing Date, the parties hereto shall take all steps necessary to complete the
transactions contemplated by this Agreement through the new limited liability
company.
(b) Notwithstanding any of the foregoing, in the event that the
Company (with the consent of both Crown and LRGP) enters into one or more
financing arrangements with persons unaffiliated with Crown or LRGP, the terms
of the Purchase Money Note (including interest rate and repayment terms) and/or
the collateral arrangements shall be adjusted so as to comply with any
affirmative or negative covenants (including limitations on distributions)
imposed by such third party lender on the Company; in such event, the Purchase
Money Note shall be amended to reflect such required adjustments.
Section 15. Counterparts. This Agreement may be executed in several
counterparts each of which is an original. This Agreement and any counterpart
so executed shall be deemed to be one and the same instrument. It shall not be
necessary in making proof of this Agreement or any counterpart hereof to
produce or account for any of the other counterparts.
Section 16. Contents of Agreement; Parties in Interest. Etc. This
Agreement sets forth the entire understanding of the parties.
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Any previous agreements or understandings between the parties regarding the
subject matter hereof are merged into and superseded by this Agreement. This
Agreement may not be assigned by any party hereto without the prior written
consent of the other parties. Subject to the foregoing, all representations,
warranties, covenants, terms, conditions and provisions of this Agreement shall
be binding upon and inure to the benefit of and be enforceable by the
respective heirs, legal representatives, successors and assigns of Crown, the
Company and LRGP.
Section 17. Governing Law. This Agreement is being delivered and is
intended to be performed in the State of Louisiana and shall be construed and
enforced in accordance with the laws thereof.
Section 18. Section Headings and Gender. The section headings herein
have been inserted for convenience of reference only and shall in no way modify
or restrict any of the terms or provisions hereof. The use of the masculine
pronoun herein when referring to any party has been for convenience only and
shall be deemed to refer to the particular party intended regardless of the
actual gender of such party.
Section 19. Schedules and Exhibits. All Schedules and Exhibits
referred to in this Agreement are intended to be and are hereby specifically
made a part of this Agreement.
Section 20. Notices. Any notice or demand which, by provision of this
Agreement, is required or permitted to be given or served by LRGP to or on
Crown and the Company shall be deemed to have been sufficiently given and
served for all purposes (if mailed) three calendar days after being deposited,
postage prepaid, in the United States Mail, registered or certified mail, or
(if delivered by express courier) one Business Day after being delivered to
such courier, or (if delivered in person) the same day as delivery, in each
case addressed (until another address or addresses is given in writing by Crown
to LRGP) as follows:
Crown Casino Corporation
2415 West Northwest Highway, Suite 103
Dallas, Texas 75220
Attention: Mr. Mark D. Slusser
Vice President - Finance
St. Charles Gaming Company, Inc.
c/o Crown Casino Corporation
2415 West Northwest Highway, Suite 103
Dallas, Texas 75220
Attention: Mr. Mark D. Slusser
Vice President - Finance
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<PAGE> 21
with a copy to:
T.J. Falgout, III, Esq.
Stumpf & Falgout
1400 Post Oak Boulevard, Suite 400
Houston, Texas 77056
Any notice or demand which, by any provision of this Agreement, is
required or permitted to be given or served by Crown to or on LRGP shall be
deemed to have been sufficiently given and served for all purposes (if mailed)
three calendar days after being deposited, postage prepaid, in the United
States Mail, registered or certified mail, or (if delivered by express courier)
one Business Day after being delivered to such courier, or (if delivered in
person) the same day as delivery, in each case addressed (until another address
or addresses are given in writing by LRGP to Crown) as follows:
Louisiana Riverboat Gaming Partnership
c/o Louisiana River Site Development, Inc.
The Edward J. DeBartolo Corporation
7620 Market Street
Youngstown, Ohio 44513-3287
Attention: Mr. Gerald Wiemann
Vice President
Louisiana Riverboat Gaming Partnership
c/o CSNO, Inc.
Casino America, Inc.
711 Washington Loop
Biloxi, Mississippi 39530
Attention: Mr. James E. Ernst
Chief Executive Officer
with copies to:
Mr. Arthur Wolfcale
Vice President and Secretary
Edward J. DeBartolo Corporation
7620 Market Street
Youngstown, Ohio 44512-6085
and
Allan B. Solomon, Esq.
Chairman of the Executive Committee
Casino America, Inc.
2200 Corporate Blvd., N.W., Suite 310
Boca Raton, Florida 33431
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<PAGE> 22
Section 21. Termination. (a) This Agreement may be terminated at any
time prior to the Closing (i) by consent of Crown, the Company and LRGP; (ii)
by LRGP if any of the conditions described in Section 8 hereof have not been
met as of the proposed Closing Date and have not been waived by LRGP; (iii) by
Crown if any of the conditions described in Section 9 hereof have not been met
as of the proposed Closing Date and have not been waived by Crown; or (iv) by
any party if the Closing has not occurred by May 15, 1995. Any termination
pursuant to this Section 21 shall be effective immediately upon the giving of
notice by the terminating party to the other party. In the event of
termination, this Agreement shall become null and void and no party shall have
any obligations to any other party.
(b) If this Agreement is terminated as a result of the breach by Crown
or the Company of its obligations hereunder, LRGP shall be entitled to the
return of the $100,000 deposit made prior to the execution of this Agreement.
Such right shall be in addition to any and all other rights and remedies which
would be available to LRGP at law or in equity.
Section 22. Exclusivity. From and after the date of this Agreement
until the earlier of the Closing Date or the termination of this Agreement
pursuant to Section 21 hereof, Crown and the Company will not solicit or
encourage inquiries or proposals with respect to, or furnish any information
relating to, or participate in any negotiations or discussions concerning, any
acquisition of the Calcasieu Casino, or any of the Company Stock or any other
matters contemplated by this Agreement, and Crown and the Company shall
instruct their officers, directors, agents and affiliates to refrain from doing
so. Crown and the Company will notify LRGP immediately if any such serious
inquiries or proposals are received by Crown or the Company, or if any such
information is requested from Crown of the Company, or any such negotiations
are sought to be initiated with Crown or the Company, and any response thereto
shall be approved in advance by LRGP.
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<PAGE> 23
Section 23. No Waiver. The failure by any party to enforce any of its
rights hereunder shall not be deemed to be a waiver of such rights, unless such
waiver is an express written waiver which has been signed by the waiving party.
Waiver of any one breach shall not be deemed to be a waiver of any other breach
of the same or any other provisions hereof.
Section 24. Survival. The representations, warranties, covenants and
agreements contained in this Agreement shall survive the Closing for a period
of five (5) years thereafter except that the representations and warranties
contained in Sections 3.1, 3.2, 3.3, 3.4 and 4.1 shall survive for the maximum
period permitted by applicable law.
IN WITNESS WHEREOF, this Agreement has been executed as of the day and
year first above written.
CROWN CASINO CORPORATION
By: Mark D. Slusser
------------------------------
Name: Mark D. Slusser
Title: CFO
ST. CHARLES GAMING COMPANY, INC.
By: Mark D. Slusser
------------------------------
Name: Mark D. Slusser
Title: CFO
LOUISIANA RIVERBOAT GAMING PARTNERSHIP,
a Louisiana general partnership
By: LOUISIANA RIVER SITE DEVELOPMENT,
INC., General Partner, a wholly-owned
subsidiary of Louisiana Downs, Inc.
By: Gerald Weimann
---------------------------------
Name: Gerald Weimann
Title: V.P. - Secretary/Treasurer
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<PAGE> 24
By: CSNO, INC., General Partner, a
wholly-owned subsidiary of Casino
America, Inc.
By: Allan B. Solomon
-------------------------------
Name: Allan B. Solomon
Title: Secretary-Treasurer
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<PAGE> 25
LIST OF EXHIBITS
Exhibit A-1 Purchase Money Note
Exhibit A-2 Security Agreement - Pledge
Exhibit B Warrant
Exhibit C Shareholders Agreement
Exhibit D Management Agreement
Exhibit E Crown and the Company Counsel Opinions
Exhibit F LRGP Counsel Opinion
Exhibit G Casino America Counsel Opinion
LIST OF SCHEDULES
Schedule 3.5 Claims Against Crown
Schedule 4.3 1995 Balance Sheet
Schedule 4.4 Exclusions from Current Liabilities
Schedule 4.6 Title to And Condition of Properties
Schedule 4.8 Litigation and Labor Matters
Schedule 4.9 Insurance
Schedule 4.11 Contracts and Commitments
Schedule 4.15 Employees
Schedule 4.18 Claims Against the Company
Schedule 8.6 Site Leases
<PAGE> 1
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (this "Management Agreement") is made
effective as of February ___, 1995 (the "Effective Date"), by and between
RIVERBOAT SERVICES, INC., an Iowa corporation, ("Manager") and ST. CHARLES
GAMING COMPANY, INC., a Louisiana Corporation ("Owner").
RECITALS
A. Owner proposes to lease and/or acquire, construct, develop, equip,
and operate certain gaming facilities, including land, an interim and/or
permanent gaming boat or boats and/or a floating gaming pavilion, a dock or
mooring facility, land-based facilities to provide for activities which are
ancillary or complimentary to the gaming business, including but not limited to
food and beverage, gift shop, entertainment, parking, and all other permitted
and related activities ("Gaming Facilities"), all such facilities being located
on (or adjacent to) land in Calcasieu Parish, Louisiana to be leased by the
Owner (hereinafter defined as the "Business").
B. Owner desires to have Manager manage its business and Manager
desires to manage Owner's business, all upon the terms and conditions of this
Management Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, Owner and Manager, agree as follows:
1. DEFINITIONS AND REFERENCES.
1.1 Definitions. As used herein, the following terms shall
have the respective meanings indicated below:
(a) Annual Plan - The Annual Plan (which shall include a
budget) to be prepared by Manager and approved by Owner in accordance with the
provisions of Section 6.2 hereof.
(b) Commencement Date - The date upon which Owner first opens
the Gaming Facilities to the public for business, which date shall be confirmed
in writing by Owner and Manager.
(c) Compensation - The direct salaries and wages paid to, or
accrued for the benefit of, any executive or other employee, including, without
limitation, employer's contributions under F.I.C.A., unemployment compensation
or other employment taxes, pension fund contributions, worker's compensation,
group life, accident, health and other insurance premiums, profit sharing, and
retirement plans, disability and other similar benefits.
<PAGE> 2
(d) Fiscal Year - The period beginning on May 1 and ending on
the following April 30 of each calendar year.
2. SCOPE OF AGREEMENT; RESPONSIBILITIES.
2.1 Authority of Owner. The Owner, acting by and through the board of
directors or other duly appointed committee or representative, shall determine
the general policy with respect to the Business and shall have all other
decision making powers afforded to an executive management committee. Among
other things, Owner, after consultation with Manager, shall establish the
length and frequency of cruises.
2.2 Authority of Manager. Subject to the foregoing general authority
of Owner, and subject to the terms of this Management Agreement, Manager shall
exclusively supervise and direct the management and operation of the day-to-day
activities of the Business for the account of Owner. Manager shall have the
authority and responsibility, subject to budget limitations and Owner's general
policy, (i) to determine operating policy, standards of operation, quality of
service, the maintenance and physical appearance of the Gaming Facilities and
any other matters affecting operations and maintenance; (ii) to supervise and
direct all phases of advertising, sales and business promotion for the
Business; and (iii) to carry out all programs contemplated by the Annual Plan.
Owner agrees that it will cooperate with Manager in every reasonable and proper
way to permit and assist Manager to carry out its duties hereunder and comply
with any conditions or restrictions, if any, placed upon Manager by any gaming
authority.
2.3 Duties and Obligations of Manager. Manager shall take all actions
which may be reasonably necessary or appropriate in connection with the
authority granted to it in accordance with the provisions of this Management
Agreement. Manager shall devote to its responsibilities hereunder such time as
may be reasonably necessary for the proper performance of all duties hereunder.
The standard of performance by Manager in managing the Business shall be
measured by what a reasonably prudent person would do consistent with good
business practices and policies.
2.4 Consultation with Owner. Notwithstanding the foregoing, Manager
shall at all times keep Owner apprised and aware of all operating policies.
Manager agrees to consult with Owner as frequently as Owner shall request to
review operating policies and other matters referred to herein. Owner shall, at
all times, have the right to enter the Boat for the purpose of inspecting same
and reviewing the operations. Owner agrees that it and its representatives
will, at no time, act in a manner which derogates from the authority granted to
Manager.
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<PAGE> 3
3. CONDITIONS PRECEDENT TO IMPLEMENTATION OF AGREEMENT. Owner and Manager
shall use their best efforts to apply for and maintain any and all licenses and
approvals required in order to implement the provisions of this Management
Agreement.
4. TERM. The term of this Agreement shall continue until December 31,
2094, unless sooner terminated as hereinafter set forth.
5. PRE-COMMENCEMENT DATE RESPONSIBILITIES.
5.1 Owner's Responsibilities. Owner, without cost or expense to
Manager, has designed, acquired, constructed and equipped a boat and will
develop the remaining Gaming Facilities. All expenses and fees incident thereto
shall be paid by Owner. The extent of the Gaming Facilities shall be within the
sole discretion of Owner.
5.2 Manager's Responsibilities. From the Effective Date to the
Commencement Date, Manager shall assist Owner in designing, acquiring,
constructing and equipping all assets to be used by Owner in the operation of
the Business. Manager shall, at Owner's expense, also be responsible for the
development and implementation of all pre-opening activities in accordance with
a pre-opening budget.
6. OPERATION OF THE BUSINESS.
6.1 Permits. Manager and Owner shall use their best efforts to timely
apply for, obtain and maintain all licenses and permits required to operate the
Business.
6.2 Annual Plan.
6.2.1 Preparation. With such cooperation and assistance of
Owner as Manager may request, Manager shall prepare in reasonable detail for
Owner's review and approval not less than sixty (60) days in advance of each
Fiscal Year, an Annual Plan for the Business:
(a) a forecast comprised of estimated income and expenses by
month for the coming Fiscal Year;
(b) an estimated cash flow projection by month, and an
estimate as to the amount of funds needed for working capital requirements;
(c) a budget covering estimated expenditures for capital
improvements;
(d) an annual marketing plan in reasonable detail; and
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<PAGE> 4
(e) an organizational chart listing all employees' names,
positions and compensation (including key employees whether employees of Owner
or charged to Owner).
Manager shall not be deemed to have made any guarantee or warranty in
connection with the results of performance set forth in the Annual Plan since
the parties acknowledge that the Annual Plan is intended to set forth
objectives and goals based upon Manager's best judgment of the facts and
circumstances known by Manager at the time of preparation.
6.2.2 Owner's Review and Approval. The Annual Plan will be
subject to the approval of the Owner, which approval will not be unreasonably
withheld or delayed. Owner shall approve or disapprove the Annual Plan, or
portions thereof, within sixty (60) days after submission to Owner. If Owner
fails to provide written notice to Manager of any specific objections to a
proposed Annual Plan within such sixty (60) day period, such Annual Plan shall
be deemed to have been approved by Owner as submitted. In the event Owner
disapproves or raises any objections to the proposed Annual Plan or any
revisions thereto, Owner and Manager agree to cooperate with each other in good
faith to resolve the dispute. Owner agrees consistent with the Annual Plan to
provide the funds necessary to operate the Business. Owner reserves the right
to modify the Annual Plan throughout the applicable year after consultation
with the Manager.
6.2.3 Compliance. Manager shall use all reasonable efforts to
comply with the Annual Plan and shall not deviate in any substantial respect
therefrom. In the event Manager encounters circumstances which require
unexpected expenditures not foreseen at the time of preparation of the Annual
Plan and which Manager deems reasonably necessary, Manager may without Owner's
approval, make or cause to be made on account of Owner, such expenditures.
Manager, without Owner's approval, on a monthly basis with full reporting to
Owner, shall be entitled to increase the total expenses budgeted within the
Annual Plan by a percentage approved annually by the Owner to cover any
expenditures that were underestimated at the time the Annual Plan was prepared
and that are reasonably necessary in Manager's sole discretion, to carry out
the provisions of this Agreement. Manager shall not be entitled to make any
expenditures in excess of the Annual Plan without first obtaining the prior
written approval of Owner, which approval shall not be unreasonably delayed or
withheld. Owner and Manager agree to cooperate with each other in good faith in
resolving disputes. Policy changes not anticipated in the Annual Plan shall be
submitted to Owner for approval, which approval shall not be unreasonably
delayed or withheld.
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<PAGE> 5
6.2.4 Specific Matters. The description of specific matters
hereinafter stated are in every respect subject to the prior approval of Owner
as part of its approval of the Annual Plan.
6.3 Personnel.
6.3.1 General. Manager, for the account of Owner, shall hire,
supervise, direct, discharge and determine terms of employment of all personnel
working for the Business. The determination of compensation for all employees
shall be part of the Annual Plan approved by Owner.
6.3.2 Key Employees. The key employees include but are not
limited to the general manager, boat captain, director of gaming, director of
food, beverage and entertainment and comptroller and all other managerial
employees at the director level and shift managers, may, at the option of
Manager and with prior approval of Owner, be employees of Manager. Owner shall
reimburse Manager for the reasonable Compensation of these employees.
6.3.3 Other Employees. Subject to the above, it is expressly
understood and agreed that all other personnel are in the sole employ of Owner.
6.3.4 Professional and Other Specialists. Manager shall have
the right to retain legal counsel and such other professionals, consultants and
specialists as Manager deems necessary or appropriate in connection with the
operation of the Business. The selection of all professional firms shall be
subject to Owner's prior approval.
6.4 Sales, Marketing and Advertising. Manager shall advertise and
promote the Business for Owner's account and shall institute and supervise a
sales and marketing program and coordinate and cooperate with tour programs
marketed by airlines, travel agents and government tourist departments when
Manager deems the same to be advisable. Manager, in its sole discretion, may
cause participation in sales and promotional campaigns ad activities involving
complimentary passage, food and beverages to travel agents, tourist officials
and airline representatives.
6.5 Other Services Provided by Manager. Other services, such as data
processing, reservation system, internal audit, etc., may be provided by
Manager to Owner at an additional cost or contracted for separately; however,
these services (whether provided by an affiliate of Manager or unaffiliated
third party) must be placed out for competitive bid and approved by Owner.
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<PAGE> 6
6.6 Maintenance and Repairs. Owner shall be responsible for
maintaining the property utilized in the Business in good repair and condition.
To implement Owner's responsibility, Manager shall, on behalf of Owner, and at
Owner's expense, make or cause to be made all repairs, replacements,
corrections and maintenance items as shall be required in the normal and
ordinary course of operation of the Business.
6.7 Capital Expenditures. Owner recognizes the necessity of capital
improvements and shall expend such amount for capital improvements as shall be
required in the normal and ordinary course of operation of the Business in
conformity with the amounts approved as part of the Annual Plan.
6.8 Reimbursement. In addition to the Compensation provided for in
Section 9, Manager shall be entitled to be reimbursed for the reasonable travel
and entertainment expenses of all officers and employees of Manager incurred in
performing its duties hereunder in connection with any phase of the operation
of the Business. In addition, if employees of Manager on a specific assignment
for the benefit of the Business are in a position that would otherwise be
filled by an employee of Owner, then Manager shall be entitled to be reimbursed
by Owner for the reasonable Compensation payable to such employees while
working at the Business. Manager shall be entitled to make all reimbursements
authorized under this Section 6.8, or under any other provision of this
Agreement, provided that all such reimbursements shall be made in a manner
which is consistent with the provisions of the Annual Plan or as otherwise
agreed with Owner.
7. FISCAL MATTERS.
7.1 Accounting Matters and Fiscal Periods.
7.1.1 Books and Records. Manager shall maintain, or cause to
be maintained, at Owner's expense, full and complete books of account and such
other records as are necessary to reflect the operation of the Business.
Manager shall also prepare and file for Owner, at Owner's expense, all
informational and/or tax returns which may be required by any governmental
authorities.
7.1.2 Reports to Owner. Within thirty (30) days after the end
of each month, Manager, at Owner's expense, will deliver or cause to be
delivered to Owner monthly financial statements with sufficient content to meet
the public disclosure requirements of the shareholders of the Owner or their
affiliates.
7.1.3 Owner's Right to Audit. Owner and its shareholders
reserve the right upon reasonable prior notice, to perform any and all
additional audit tests relating to the Business
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<PAGE> 7
where accounting books and records are kept, at Owner's or shareholders' costs.
7.2 Bank Accounts. All bank accounts for the Business shall be in the
name of Manager, as agent for Owner. Owner and Manager shall agree on the
procedures for withdrawals and deposits of funds. Manager shall have the right
to designate individuals to disburse funds from the Business bank accounts to
pay all costs and expenses of managing, operating and maintaining the Business
and its properties, including authorized capital expenditures and management
fees due to Manager. Owner agrees that at all times during the term of this
Agreement, a bank balance as approved in the Annual Plan shall be maintained in
an amount necessary to provide sufficient working capital to assure the
uninterrupted and efficient operation of the Business. Excess funds shall be
disbursed to Owner on a regular basis and at least quarterly.
8. TITLE; OTHER MATTERS.
8.1 Covenant of Title. Owner shall enable Manager to peaceably and
quietly operate the Business in accordance with the terms of this Management
Agreement.
8.2 Proprietary Information. All specifically identifiable information
developed by Manager for Owner shall be the property of both Manager and Owner.
All existing information of Manager previously developed by Manager at
Manager's expense, including, without limitation, all customer lists, gaming
and marketing strategies and other similar information, shall be the property
of Manager and not Owner and neither Owner nor any of its affiliates or
successors may use such proprietary information without the consent of Manager.
The parties agree that proprietary information does not include information
which is available in the public domain.
8.3 Names. The Business shall be operated under the name "Isle of
Capri"; provided, however, that Manager shall retain all rights, title and
interest in and to and control over the use of this name and of any and all
related names, marks, trade names, trademarks and service marks which may be
used by Manager, and neither any such use nor this Management Agreement shall
constitute an agreement thereof or create any interest in or right thereto in
favor of Owner or any other person or entity. Upon termination of this
Management Agreement for any reason, the use of the name heretofore determined
prior to the Commencement Date and related names or marks will also terminate
unless Manager shall otherwise consent or agree in writing, in the absolute and
sole discretion of Manager.
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<PAGE> 8
8.4 Outside Activities of Parties. This Management Agreement shall be
limited to the purposes set forth herein and nothing in this Agreement, whether
by implication or otherwise, shall be construed to extend the relationship of
the parties beyond such purposes. Each party acknowledges that the other party
and their respective affiliates are or may hereafter become interested,
directly or indirectly, by ownership, contract, agency or otherwise, in
business opportunities which are not within the purpose of this Management
Agreement and which may compete with or otherwise affect all or some aspects of
the Business. However, both parties agree that they will not compete in any
riverboat activities, within a one hundred (100) mile radius of the casino of
the Business on the Site during the Term.
9. COMPENSATION OF MANAGER.
9.1 In consideration for the services to be performed by Manager after
the Commencement Date, Manager shall be entitled to an annual management fee
for each Fiscal Year (or part thereof) equal to two percent (2%) of Revenues
(as defined below) plus ten percent (10%) of Operating Income (as defined
below), but the total annual management fee shall not exceed four percent (4%)
of Revenues in the aggregate.
(a) "Revenues" means all revenues, less sales tax on such
revenues, determined on an annual basis for each Fiscal Year (or part thereof)
received from the following sources: (i) gross gaming revenues (gross gaming
receipts less amounts paid out as winnings) from the Business, less applicable
gaming taxes from the operation of gaming; (ii) admission fees, less any
applicable admission tax (whether or not there are any admission fees); (iii)
food and beverage operations (net of complimentary items); (iv) all revenues
generated at or in connection with the pavilion; (v) all parking fees; (vi) all
revenues generated from gift shops and arcades; (vii) other revenues, fees and
income, which are attributable to the operation of the Business. Revenues
derived from non-operating activities, such as the sale of capital assets, are
excluded from the definition of revenues.
(b) "Operating Income" means the income of the Business before
any management fee paid to Manager, salaries paid to officers, directors and/or
members of Owner, interest, depreciation, amortization and write-off of
start-up and pre-opening type expenses and income taxes.
(c) The fee shall become due and payable ten (10) days after
the end of each month based upon the increase in cumulative Revenues for the
previous month, and shall be, subject to an annual adjustment, if necessary,
within ninety (90) days after the end of each Fiscal Year. Payment of such
compensation may be paid to
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<PAGE> 9
Manager by withholding Revenues it has received for Owner's account; provided,
however, that the fee shall be accrued as a liability and not paid to the
extent that Owner has not generated sufficient cash flow to pay such fee. For
these purposes, cash flow shall be determined before capital expenditures and
shareholder salaries and distributions.
(d) In the event that the beneficial owner of Manager sells
more than 80% of its interest in Owner, if requested by the purchaser of the
interest, Manager shall, concurrently with the sale of the interest, sell to
Purchaser or otherwise terminate the Management Agreement upon the same terms
paid for the interest, at a price determined as follows:
(1) Sales price for / Owner's Earnings * = Multiple
the interest sold before interest, taxes,
depreciation and
amortization
(2) Management Fee * X Multiple = Sales price
for Management
Agreement
* In each case for the period used in determining the sales price for
the interest sold.
In the event that less than 100% of the Owner is being sold, the EBITDA shall
be adjusted proportionately. Provided, however, that in no event shall the
sales (or termination) price for the Management Agreement exceed 12.5% of the
sales price for the interest sold.
10. INSURANCE.
10.1 Coverage. Owner, for the benefit of both Owner and Manager, will
maintain adequate insurance during the term of this Agreement. The type and
amount of coverage shall be approved by Owner.
10.2 Policies and Endorsements.
10.2.1 Policies. All insurance coverage provided for hereunder
shall be effected by policies issued by insurance companies with sound and
adequate financial responsibility. Either party shall be entitled to object to
an insurance company. Owner shall deliver to the Manager duplicate copies of
the insurance policies or certificates of insurance with respect to all of the
policies of insurance so procured, including existing, additional and renewal
policies, and in the case of insurance about to expire, shall deliver duplicate
copies of the insurance policies or
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<PAGE> 10
insurance certificates with respect to the renewal policies to the other party
not less than thirty (30) days prior to the respective dates of expiration.
10.2.2 Endorsement. All insurance shall, to the extent
obtainable, have attached thereto:
(a) an endorsement that such policy shall not be canceled or
materially changed without at least thirty (30) days' prior written notice to
Owner and Manager; and
(b) an endorsement to the effect that no act or omission of
Owner or Manager shall affect the obligation of the insurer to pay the full
amount of any loss sustained.
10.2.3 Named Insureds. All policies of insurance shall be
carried in the name of Owner and Manager. All liability policies shall name
Owner and Manager, and in each case any affiliates which either may specify,
and their respective directors, officers, agents and employees, as additional
insureds.
11. INDEMNIFICATION.
11.1 Indemnification. Manager agrees to indemnify and hold Owner free
and harmless from any loss, liability, claim, demand, legal proceeding or cost
(including attorneys' fees, costs, expenses and other charges) which is not
covered by insurance proceeds and which Owner may sustain, incur or assume as a
result of, or relative to, any allegation, claim, civil or criminal action,
proceeding, charge or prosecution, including but not limited to, injuries to
persons or damage to property or the Business or any matters arising out of the
employment or compensation of employees or former employees of Manager
(collectively "Claims") which may be alleged, made, instituted or maintained
against Manager or Owner, jointly or severally, arising out of or based upon
the management, operation, condition or use of the Business; the performance or
non-performance of this Management Agreement by Manager, its agents or
employees; or acts or failures to act of Manager, its employees, agents or
general contractors; provided, notwithstanding the foregoing, Manager shall not
be liable to indemnify and hold Owner harmless from any such loss, liability or
cost which results from the negligence or misconduct of Owner, its agents or
employees.
11.2 Related Matters.
11.2.1 Legal Fees, Etc., Procedures. Manager shall reimburse
Owner for any legal fees and costs, including attorneys' fees and other
litigation expenses, incurred by Owner in respect to which indemnity is granted
hereunder. If Claims are asserted or
-10-
<PAGE> 11
threatened, of if any action or suit is commenced or threatened with respect
thereto, for which indemnity may be sought against Manager hereunder, Owner
shall notify Manager in writing within thirty (30) days after Owner shall have
had actual knowledge of the threat, assertion or commencement of the Claims,
which notice shall specify in reasonable detail the matter for which indemnity
may be sought. Manager shall have the right, upon notice to Owner given within
thirty (30) days of its receipt of Owner's notice, to take primary
responsibility for the prosecution, defense or settlement of such matter and
payment or expenses in connection therewith. Owner shall provide, without cost
to Manager, all relevant records and information reasonably required by Manager
for such prosecution, defense or settlement and shall cooperate with Manager to
the fullest extent possible. Owner, at Owner's sole cost and expense, shall
have the right to employ its own counsel in any such matter with respect to
which Manager has elected to take primary responsibility for prosecution,
defense or settlement.
11.2.2 Indemnified Parties. The indemnities contained in this
Section 11 shall run to the benefit of both Owner and its affiliates, and its
directors, officers, shareholders and employees.
11.2.3 Survival. The provisions of this Section 11 shall
survive any cancellation, termination or expiration of this Management
Agreement and shall remain in full force and effect until such time as the
applicable statute of limitation shall cut off all claims which are subject to
the provisions of this Section 11.
12. DAMAGE TO AND DESTRUCTION OF THE BUSINESS.
12.1 Restoration. Provided that there is sufficient insurance
proceeds, in the event fire or other casualty shall damage or destroy the
property used in the Business, Owner may, at its option, repair, restore or
replace the same to the extent as may be limited by insurance proceeds. If
there are not sufficient insurance proceeds or if Owner no longer desires to
operate the Business, Owner may retain all insurance proceeds; however, Manager
shall have the option, exercisable within ninety (90) days of the decision by
the Owner not to operate the Business, to obtain the license to operate the
Business for the Manager's benefit, subject to appropriate regulatory approval.
In such event, this Management Agreement shall terminate. Owner shall use its
best efforts to assist Manager in obtaining the license.
13. DEFAULT AND TERMINATION.
13.1 Events of Default. It shall be an event of default hereunder (an
"Event of Default") if Manager or Owner (the
-11-
<PAGE> 12
"Defaulting Party") fails to keep, perform or observe any material covenant,
obligation or agreement required to be kept, performed or observed by such
party under the terms of this Management Agreement, followed by written notice
of such breach, default or non-compliance from the other party (the
"Non-Defaulting Party") to the Defaulting Party and the Defaulting Party fails
to remedy or correct such breach, default or non-compliance within thirty (30)
days after receipt of such notice. If the breach, default or non-compliance is
other than payment of money and is of a nature such that it cannot reasonably
be cured within such thirty (30) day period, the period for curing the default
shall be extended so long as the Defaulting Party in good faith commences
immediately and proceeds expediently to cure the breach, default or
non-compliance within such thirty (30) day period.
13.2 Termination.
13.2.1 General. If an Event of Default occurs and has not been
cured, this Management Agreement shall terminate at the election of the
Non-Defaulting Party. Notice of termination pursuant to this Section 13 may be
given by the Non-Defaulting Party to the Defaulting Party at any time prior to
the curing of such Event of Default, and such termination shall be effective as
of the date specified in such notice of termination, which date shall be not
less than thirty (30) nor more than one hundred twenty (120) days after the
date of such notice. Notwithstanding the foregoing, if the Event of Default
pertains to the payments of money, Manager may cease the discharge of its
responsibilities hereunder effective upon the expiration of the thirty (30) day
notice referenced in Section 13.1 hereof. Manager shall receive all funds due
to it at the time of Termination.
13.2.2 Termination. In addition to the foregoing, this
Management Agreement shall terminate upon any of the following events:
(a) The mutual agreement of the parties; or
(b) The inability of either party to receive or maintain the
licenses or permits to perform their obligations hereunder; or
(c) Manager shall (i) apply for or consent to the appointment
of, or taking possession by, a receiver, custodian, trustee, liquidator or
other similar official of all of its assets; (ii) make a general assignment for
the benefit of creditors; (iii) be adjudicated a bankrupt or insolvent or have
an order for relief entered with respect thereto; or (iv) file a voluntary
petition, commence a voluntary case under the federal bankruptcy laws as now or
hereafter constituted or file a petition or an answer seeking reorganization or
any arrangement with creditors or take advantage
-12-
<PAGE> 13
of any bankruptcy, reorganization, insolvency, readjustment of debts,
dissolution or liquidation law or statute.
(d) After two (2) full years of operation following the
Commencement Date, upon sixty (60) days notice, at the option of either party,
if the Business in the next year or any subsequent year does not produce a net
income of One Million Dollars ($1,000,000) before income taxes, amortization of
pre-opening type expenses and distributions to Owner, determined in accordance
with generally accepted accounting principles consistently applied.
(e) If Louisiana Riverboat Gaming Partnership ("LRGP") does
not acquire fifty percent (50%) interest in the issued and outstanding capital
stock of the Company from Crown Casino Corporation ("Crown") pursuant to the
Stock Purchase Agreement, dated the date hereof, by and among Crown, the
Company and LRGP (the "Stock Purchase Agreement").
(f) Crown (or its assigns) shall reacquire all of the
outstanding capital stock of the Company owned by LRGP as a result of a default
by LRGP under the Purchase Money Note (as defined in the Stock Purchase
Agreement) issued by LRGP to Crown pursuant to the Stock Purchase Agreement.
(g) If the Manager exercises its option to obtain the license
to operate the business for Manager's benefit pursuant to Section 12.1 hereof.
13.2.3 Waiver. The waiver of anyone Event of Default shall not
be construed as the waiver of any other Event of Default.
13.3 Remedies Cumulative. Except as herein provided to the contrary,
the termination of this Management Agreement by the Non-Defaulting Party upon
an Event of Default shall be without prejudice to any right the Non-Defaulting
Party may have to damages, injunctions, specific performance or other legal or
equitable remedies by reason of any breach, default or non-compliance by the
Defaulting Party with such Defaulting Party's covenants, obligations and
agreements hereunder.
14. NOTICES.
14.1 Notices. Every notice, demand, consent, approval or other
document or instrument required or permitted to be served upon any of the
parties hereto shall be in writing and shall be deemed to have been duly served
on the day of mailing, and shall be sent by registered or certified United
States Mail, postage prepaid, return receipt requested, addressed to the
respective parties at the addresses stated below:
-13-
<PAGE> 14
If to Manager: Riverboat Services, Inc.
c/o Casino America, Inc.
711 Washington Loop
Biloxi, Mississippi 39530
Attention: Ms. Julie K. Watt
Vice President, Chief Financial
Officer and Treasurer
with a copy to:
Allan B. Solomon, Esq.
Chairman of the Executive Committee
Casino America, Inc.
2200 Corporate Blvd., N.W., Suite 310
Boca Raton, Florida 33431
If to Owner: St. Charles Gaming Company, Inc.
c/o Crown Casino Corporation
2415 West Northwest Highway, Suite 103
Dallas, Texas 75220
Attention: Mr. Mark D. Slusser
Vice President - Finance
Crown Casino Corporation
2415 West Northwest Highway, Suite 103
Dallas, Texas 75220
Attention: Mr. Mark D. Slusser
Vice President - Finance
with a copy to:
T.J. Falgout, III, Esq.
Stumpf & Falgout
1400 Post Oak Boulevard, Suite 400
Houston, Texas 77056
or to such other address as either Manager or Owner may have specified in a
notice duly given as required herein to the other.
15. RELATIONSHIP, AUTHORITY AND FURTHER ACTIONS.
15.1 Relationship. Manager and Owner shall not be construed as joint
venturers or partners of each other by reason of this Management Agreement and
neither shall have the power to bind or obligate the other except as
specifically authorized and set forth in this Management Agreement.
Nevertheless, Manager is granted
-14-
<PAGE> 15
such authority and powers as may be reasonably necessary for it to carry out
the provisions of this Management Agreement. This Management Agreement, either
alone or in conjunction with any other documents, shall not be deemed to
constitute or create a lease of all or any portion of the Business.
15.2 Contractual Authority. Subject to the limitations thereon set
forth in this Management Agreement, and in conformity with the Annual Plan,
Manager is authorized to make, enter into and perform in the name of, for the
account of, on behalf of and at the expense of the Owner any contracts and
agreements (including, but not limited to bank accounts) which are reasonably
necessary and appropriate to carry out and place in effect the terms and
conditions of this Management Agreement. Copies of all executed contracts
promptly shall be furnished to Owner.
15.3 Further Actions. Owner and Manager agree to execute all
contracts, agreements and documents and to take all actions necessary to comply
with the provisions of this Management Agreement and the intent hereof. Manager
shall not enter into contracts (i) having a duration of more than one year and
requiring Owner's or Manager's expenditure of more than $250,000 per year or
(ii) having a duration of one year or less and requiring Owner's or Manager's
expenditure of more than $500,000, without the consent of Owner, unless such
contracts or expenditures are provided for in the Annual Plan.
16. APPLICABLE LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Louisiana. If any of the terms and
provisions hereof shall be held invalid or unenforceable for any reason, such
validity or unenforceability shall in no event affect any of the other terms or
provisions hereof, all such other terms and provisions to be held valid and
enforceable to the fullest extent permitted by law; provided, however, that in
the event any material part of Owner's obligations under this Management
Agreement shall be declared invalid or unenforceable, Manager shall have the
option to terminate this Management Agreement.
17. MISCELLANEOUS.
17.1 Successors and Assigns. Manager shall not assign the whole or any
portion of this Agreement or any payments due Manager hereunder, without
Owner's consent which consent will not be unreasonably withheld. No prohibited
assignment, whether voluntary or involuntary, by operation of law, under legal
process or proceedings, by receivership, in bankruptcy or otherwise, shall be
valid or effective. Owner shall not assign the whole or any portion of this
Agreement, except to an affiliate without Manager's consent, which consent will
not be unreasonably withheld, except as
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<PAGE> 16
collateral for any financing obtained in connection with the development and/or
operation of the Business. If the Agreement is assigned to an affiliate,
Manager shall continue to be responsible under this Agreement.
17.2 Force Majeure. If at any time it becomes necessary in Manager's
or Owner's reasonable opinion to cease operation of all or part of the Business
to protect the Business or the health, safety or welfare of guests or employees
of the Business for reasons of force majeure, such as, but not limited to,
weather, river conditions, acts of war, insurrection, civil strife and
commotion, labor unrest, contagious illness, catastrophic events, or acts of
God, then in such event Manager or Owner may close and cease operations of all
or part of the Business, reopening and commencing operation when Manager and
Owner determine in good faith that such may be done without jeopardy to the
Business, its guests and employees. Neither party shall be liable for failure
to perform any obligation hereunder (other than to pay money) when prevented by
any force majeure cause not reasonably within the control of such party, such
as strike, lockout, breakdown, accident, order or regulation of or by any
governmental authority, failure of supply or inability, by the exercise of
reasonable diligence, to obtain supplies, parts or employees necessary to
perform such obligation to which such force majeure applies, and this Agreement
shall be extended for a period of time equivalent to the delay from such cause.
17.3 Authorization. Owner and Manager represent to the other that it
has full power and authority to execute this Management Agreement and to be
bound by and perform the terms hereof. On request, each party shall furnish the
other evidence of such authority.
17.4 Interest. Any amount payable to a party hereunder which shall not
be paid when due, shall accrue interest until paid at the prime rate of the
First National Bank of Chicago then in effect.
17.5 Entire Agreement; Amendments. This Agreement sets forth the
entire and only agreement or understanding between Owner and Manager relating
to the subject matter hereof and supersedes and cancels all previous
agreements, negotiations, commitments and representations in respect hereof
among them. Owner has not relied on any projection of earnings, statements as
to the possibility of future success or other similar matters which may have
been prepared by Manager or Owner, or any of their respective affiliates, and
understands that no guaranty is made or implied by Manager or its affiliates as
to the cost or the future financial success of the operations being managed
hereunder. This Agreement may not be amended in any respect except by an
instrument in writing signed by the Owner and Manager.
-16-
<PAGE> 17
17.6 No Waiver. No waiver by either party of a breach by the other
party of any of the terms, covenants or conditions of this Agreement, shall be
construed or held to be a waiver of any other breach of the same or any other
term, covenant or condition herein contained. No waiver of any default of
either party hereunder shall be implied from any omission by the other party to
take any action on account of such default if such default persists or is
repeated, and no express waiver shall affect default other than as specified in
said waiver.
17.7 Compliance. In performing its obligations under this Agreement,
Manager shall comply with all present and future laws, ordinances and all rules
and regulations, requirements and orders of all governmental authorities and
shall obtain all licenses and permits required to perform such obligations and
shall file all returns and reports lawfully required of Manager in connection
with its duties hereunder, including, but not limited to, income tax
withholding returns, Federal Insurance Contributions Act returns and reports,
Federal Unemployment Tax Act and worker's compensation returns and reports,
sales and use tax returns (and shall timely pay all contributions, taxes, costs
and other amounts due thereunder). All of the foregoing returns and reports
shall be maintained as a part of the books and records of Manager.
17.8 Headings. The headings hereunder are used for convenience only
and shall not affect the construction or interpretation of any provision
hereof.
17.9 Counterparts. For the convenience of the parties hereto, this
Agreement may be executed in several original counterparts, each of which shall
be deemed an original for all purposes and all such counterparts shall
constitute but one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Management Agreement as of the date and year first above
written.
OWNER: ST. CHARLES GAMING COMPANY, INC.
By: /s/ MARK D. SLUSSER
Name: Mark D. Slusser
Title: CFO
-17-
<PAGE> 18
MANAGER: RIVERBOAT SERVICES, INC.
By: /s/ ALLEN B. SOLOMON
Name: Allen B. Solomon
Title: Secretary/Treasurer
-18-
<PAGE> 1
WAIVER, dated as of March 3, 1995 (this "March 1995 Waiver"), to the
Note Purchase Agreement, dated as of May 31, 1994 (as amended, supplemented or
otherwise modified from time to time, the "Note Purchase Agreement"), by and
among ST. CHARLES GAMING COMPANY, INC., a Louisiana corporation (the
"Company"), CROWN CASINO CORPORATION, a Texas corporation ("Crown Casino"),
HIBERNIA NATIONAL BANK, as agent for the Purchasers named therein (in such
capacity, the "Agent"), and NOMURA HOLDING AMERICA INC. ("Nomura") .
W I T N E S S E T H
WHEREAS, pursuant to the Note Purchase Agreement, the Purchasers (as
defined in the Note Purchase Agreement) of the Senior Secured Increasing Rate
Notes of the Company due June 3, 1995 (the "Notes") purchased the Notes from
the Company in the aggregate principal amount of $28,000,000 at the purchase
price of 100% of the principal amount thereof upon the terms and subject to the
conditions set forth therein (unless otherwise defined herein, terms defined in
the Note Purchase Agreement shall have their defined meanings when used
herein);
WHEREAS, the Company has requested that Louisiana Riverboat Gaming
Partnership, a Louisiana partnership ("LRGP"), provide a loan to the Company in
the amount of $700,000 (the "LRGP Debt") evidenced by a promissory note a copy
of which is attached as Exhibit A hereto (the LRGP Note") and the obligations
and liabilities of the Company thereunder guaranteed by Crown Casino (the "LRGP
Guarantee"; Crown Casino, as guarantor thereunder, the "LRGP Guarantor"), the
proceeds of which loan shall be used (i) to pay interest due and payable on the
outstanding principal amount of $21,930,000 of the Notes, (ii) to pay the fees,
expenses and disbursements of counsel to Nomura due and payable pursuant to
Section 21 of the Note Purchase Agreement and (iii) to provide working capital
for the Company;
WHEREAS, the Company has requested and Nomura has agreed to waive the
provisions of the Note Purchase Agreement relating to the incurrence of the
LRGP Debt and the LRGP Guarantee but only on the terms and subject to the
conditions set forth herein, including, but not limited to, the provision that
the LRGP Debt, the LRGP Note and the LRGP Guarantee shall be unsecured and
subordinate in all respects to the Notes;
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, receipt of which is hereby acknowledged, the
parties hereto hereby agree as follows:
1. Waiver. Nomura hereby waives any Default or Event of Default under
the Note Purchase Agreement occurring solely by reason of the incurrence by
the Company of the LRGP Debt, the LRGP Note and the LRGP Guarantee, provided
that prior to the indefeasible payment in full in cash of all amounts owing
under the Notes and the Note Purchase
<PAGE> 2
Agreement (including any interest accruing after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to the Company or the LRGP Guarantor, whether or not a
claim for post-filing or post-petition interest is allowed in such proceeding)
(such amounts, the "Senior Debt"), no payment of any kind or character on
account of the principal of, premium, if any, or interest on, the LRGP Note
(including pursuant to the LRGP Guarantee) shall be made by the Company or the
LRGP Guarantor, including any distribution of assets or securities of the
Company or the LRGP Guarantor of any kind or character, whether or not in
connection with any dissolution or winding up or total or partial liquidation
or reorganization of the Company or the LRGP Guarantor. In the event that,
notwithstanding the foregoing, the holder of the LRGP Note shall receive any
payment on account of the principal of, premium, if any, or interest on, the
LRGP Note (including pursuant to the LRGP Guarantee) prior to the indefeasible
payment in full in cash of the Senior Debt, then any such payment or other
distribution shall be received and held in trust for the holders of the Senior
Debt and shall be paid over or delivered to such holders to the extent
necessary to pay in full in cash the Senior Debt.
2. Effectiveness. This March 1995 Waiver shall become effective as of
the date first above written (a) upon receipt by Nomura of counterparts of this
March 1995 Waiver, duly executed by the Company and Nomura, and consented to by
Crown Casino, GEMS and the Agent and (b) upon payment of the fees, expenses and
disbursements of counsel to Nomura due and payable pursuant to Section 21 of
the Note Purchase Agreement.
3. Limited Effect. Except as expressly waived hereby, all of the
covenants and provisions of the Note Purchase Agreement shall continue to be in
full force and effect in accordance with their respective terms. The waiver
contained herein shall be limited precisely as drafted and narrowly construed
and shall not constitute a waiver of, or an indication of Nomura's willingness
to waive, any other provision of the Note Purchase Agreement or any Security
Documents executed pursuant thereto.
4. Representations and Warranties. The Company represents and warrants
that each of the representations and warranties made by the Company in or
pursuant to the Note Purchase Agreement is true and correct on the date hereof
as if made on and as of the date hereof, other than representations and
warranties that relate solely to an earlier date which shall be true and
correct in all respects as of such earlier date or representations and
warranties changed as a result of changes to the subject matter of such
<PAGE> 3
representations and warranties which the Company has disclosed in writing to
Nomura.
5. GOVERNING LAW. THIS MARCH 1995 WAIVER SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
6. Counterparts. This March 1995 Waiver may be executed by the parties
hereto on any number of separate counterparts, and all of said counterparts
taken together shall be deemed to constitute one and the same instrument.
7. Expenses. The Company agrees to pay and reimburse Nomura for all of
its costs and expenses incurred in connection with the preparation, execution
and delivery of this waiver and ancillary documents including, without
limitation, the fees and disbursements of counsel to Nomura.
<PAGE> 4
IN WITNESS WHEREOF, the undersigned have caused this March 1995
Waiver to be duly executed and delivered as of the date first above written.
ST. CHARLES GAMING COMPANY, INC.
By: /s/ MARK D. SLUSSER
Title: CFO
NOMURA HOLDING AMERICA INC.
By:
Title:
Accepted and Agreed to:
CROWN CASINO CORPORATION
By: /s/ MARK D. SLUSSER
Title: CFO
GAMING ENTERTAINMENT MANAGEMENT SERVICES, INC.
By: /s/ MARK D. SLUSSER
Title: CFO
HIBERNIA NATIONAL BANK,
as Agent for the Purchasers and
as Escrow Agent
By: /s/ ROBERT SEGARI
Title: Asst. V.P. & T.O.
<PAGE> 5
EXHIBIT A
PROMISSORY NOTE
$700,000.00 Shreveport, Louisiana March 3, 1995
FOR VALUE RECEIVED, after date, without grace, in the manner, on the
dates and in the amount herein stipulated, ST. CHARLES GAMING COMPANY, INC., a
Louisiana corporation (the "Maker" or the "Company") promises to pay to the
order of LOUISIANA RIVERBOAT GAMING PARTNERSHIP, a Louisiana partnership (the
"Payee"), at its offices at 500 Slattery Building, Shreveport, Louisiana 71165,
or such other place as the Payee shall designate in writing to the Maker, which
at the time of payment is legal tender of the United States of America for the
payment of public and private debts, the principal sum of SEVEN HUNDRED
THOUSAND and no/100 DOLLARS ($ 700,000.00), together with interest thereon from
and after date hereof until maturity at a fixed rate per annum which shall from
day to day be equal to eleven and one-half percent (11.5%) per annum, computed
on the basis of a year of 365 or 366 days, as the case may be, and for the
actual number of days elapsed (including the first day but excluding the last
day). All past due principal and interest shall bear interest from and after
maturity until paid, regardless of how maturity occurs, at an interest rate
which, from day to day, shall be equal to eighteen percent (18%) per annum.
The principal and accrued interest of this Note shall be due and
payable on the later of i) August 1, 1995, or ii) three (3) business days after
the Maker retires all its outstanding debt under that certain Note Purchase
Agreement dated as of May 31, 1994 among the Company, its parent corporation,
Crown Casino Corporation ("Crown Casino" or the "Guarantor"), Hibernia National
Bank, an agent for the Noteholders defined therein and Nomura Holding America
Inc. (as amended, supplemented or otherwise modified from time to time, the
"Note Purchase Agreement").
The Maker shall have the privilege to prepay at any time, and from
time to time, all or any part of the principal amount of this Note, without
notice, penalty or fee, but in no event prior to paying its debt under the Note
Purchase Agreement. Such advances or prepayments will be applied, first to the
payment of interest then accrued and unpaid hereon, including the amount of
interest accruing and to accrue on the amount of principal being prepaid, and
the balance, if any, to the payment of principal.
All makers, endorsers, sureties and guarantors hereof, as well as
other parties to become liable on this Note, hereby severally: (i) waive demand
and presentment for payment of this Note, notice of non-payment, protest,
notice of protest, filing of suit, diligence in collection or enforcing any of
the security for this Note; (ii) agree that they are and shall be jointly,
severally, directly and primarily liable for the repayment of all sums due and
owing under this Note; (iii) consent to any and all renewals, extensions and
modification in the time of payment and to any other indulgence with respect to
this Note; (iv) agree that the Payee shall not be required first to institute
suit or exhaust its remedies against the Maker or others liable or to become
liable on this Note, or to enforce its rights against them or any security for
this Note; and (v) agree to any substitution, subordination, exchange or
release of any security for this Note, or the release of any party primarily or
secondarily liable on this Note.
In the event default is made in the prompt payment of this Note when
due, and the same is placed in the hands of any attorney for collection, or
suit is brought on same, or the same is collected through any Bankruptcy Court,
or any judicial proceeding whatsoever, then the Maker agrees and promises to
pay the Payee's reasonable attorney's fees.
Page 1 of 2 Pages
<PAGE> 6
All notices required or permitted under this Note shall be in writing
and shall be deemed to have been sufficiently given or served for all purposes
when presented personally or deposited with the United States Postal Service,
postage prepaid, certified mail, return receipt requested, to the Maker at the
address set forth below, or at such other address of which the Maker shall have
notified the President or any Vice President of the Payee in writing at least
thirty (30) days prior to the date of the Payee giving such notice. Where
appropriate, any pertinent noun, verb or pronoun shall be construed and
interpreted to include both the proper number and gender. This Note shall not
be renewed, extended, or modified except by a written instrument evidencing the
same.
The indebtedness evidenced by this Note is and shall be subordinate to
the indebtedness of the Company evidenced by that certain promissory note (the
"Senior Note") issued by the Company dated June 3, 1994 pursuant to the terms
of the Note Purchase Agreement. In furtherance thereof, prior to the
indefeasible payment in full in cash for all amounts owing under the Senior
Note and the Note Purchase Agreement (including any interest accruing after the
filing of any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to the Maker or the Guarantor,
whether or not a claim for post-filing or post-petition interest is allowed in
such proceeding) (such amounts, the "Senior Debt"), no payment of any kind or
character on account of the principal of, premium, if any, or interest on, this
Note (including any payment by Crown Casino pursuant to any guarantee of this
Note) shall be made by the Maker or the Guarantor, including any distribution
of assets or securities of the Maker or the Guarantor of any kind or character,
whether or not in connection with any dissolution or winding up or total or
partial liquidation or reorganization of the Maker or the Guarantor. In the
event that, notwithstanding the foregoing, the holder hereof shall receive any
payment on account of the principal of, premium, if any, or interest on, this
Note (including any payment by Crown Casino pursuant to any guarantee of this
Note) prior to the indefeasible payment in full in cash of the Senior Debt,
then any such payment or other distribution shall be received and held in trust
for the holders of the Senior Debt and shall be paid over or delivered to such
holders to the extent necessary to pay in full in cash the Senior Debt.
This Note shall be governed by and construed in accordance with the
laws of the State of New York, without giving effect to conflicts of law
principles.
MAKER
Address: ST. CHARLES GAMING COMPANY, INC.
2415 W. Northwest Hwy.
Suite 103
Dallas, Texas 75220 By: /s/ MARK D. SLUSSER
Mark S. Slusser, CFO
This Note is guaranteed by Crown Casino Corporation (the "Guarantee") and the
Guarantor acknowledges and agrees that any payments pursuant to its obligation
under this Guarantee shall be subject to the subordination provisions set forth
in paragraph seven of this Note and (ii) it will not take any action in
violation of such subordination provisions.
GUARANTOR:
CROWN CASINO CORPORATION
By: /s/ MARK D. SLUSSER
Mark S. Slusser, CFO
Page 2 of 2 Pages
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1995
<PERIOD-END> JAN-31-1995
<CASH> 902,856
<SECURITIES> 0
<RECEIVABLES> 296,455
<ALLOWANCES> (140,911)
<INVENTORY> 0
<CURRENT-ASSETS> 2,141,903
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0
0
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