<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: MARCH 31, 1995
-----------------
[ ] 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: 1-9481
-------------
SAHARA GAMING CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
NEVADA 88-0304348
----------------------------- -------------------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
2535 LAS VEGAS BLVD. SOUTH, LAS VEGAS, NEVADA 89109
----------------------------------------------------
(Address of principal executive office and zip code)
(702) 737-2111
------------------------------------------------------
(Registrant's telephone number, including area code)
---------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by a 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
----- -----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. YES_____ NO_____
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
6,194,433 as of May 10, 1995
- - --------------------------------------------------------------------------------
Amount Outstanding Date
<PAGE>
SAHARA GAMING CORPORATION AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Item 1. Consolidated Condensed Financial Statements Page
----
<S> <C>
Balance sheets at March 31, 1995
(unaudited) and September 30, 1994 2
Statements of Operations for the three and six
months ended March 31, 1995 and 1994
(unaudited) 3
Statement of Changes in Stockholders' Equity
for the six months ended March 31, 1995
(unaudited) 4
Statements of Cash Flows for the six months
ended March 31, 1995 and 1994 (unaudited) 5
Notes to Consolidated Condensed Financial
Statements (unaudited) 6
Independent Accountants' Review Report 15
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 16
PART II. OTHER INFORMATION 30
</TABLE>
1
<PAGE>
Sahara Gaming Corporation and Subsidiaries
Consolidated Condensed Balance Sheets
<TABLE>
<CAPTION>
March 31, September 30,
ASSETS 1995 1994
- - ---------------------------------------------- ------------ -------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and short-term investments $ 38,534,261 $ 55,582,503
Accounts receivable, net 9,605,327 7,907,050
Accounts receivable, officer 515,863 500,525
Inventories 2,585,712 2,787,397
Prepaid expenses & other 7,118,871 7,323,786
------------ ------------
Total current assets 58,360,034 74,101,261
Restricted cash - less current portion 21,236,471 23,079,791
Property and equipment, net 324,705,680 314,470,366
Goodwill 48,203,785 48,835,414
Other assets 18,238,306 18,068,605
------------ ------------
Total assets $470,744,276 $478,555,437
============ ============
LIABILITIES and STOCKHOLDERS' EQUITY
- - ----------------------------------------------
Current liabilities:
Current portion of long-term debt $ 46,424,652 $ 23,238,239
Accounts payable 8,145,352 6,790,785
Interest payable 10,816,031 11,589,574
Accrued and other liabilities 15,831,272 15,970,810
------------ ------------
Total current liabilities 81,217,307 57,589,408
Deferred income taxes 2,226,335 4,945,335
Long-term debt - less current portion 356,596,752 379,092,885
Stockholders' Equity:
Common Stock, $.01 par value; authorized-100,000,000
shares; issued and outstanding-6,194,433 shares 61,944 61,944
Preferred stock, exchangeable, redeemable 8% cumulative,
stated at $2.14 liquidation value, authorized-10,000,000
shares; issued and outstanding-7,570,895 shares at
Sept. 30, 1994 and 7,873,223 at Mar. 31, 1995 16,848,697 16,201,715
Additional paid-in capital 51,513,504 51,513,504
Accumulated deficit (37,632,489) (30,761,580)
------------ ------------
Total 30,791,656 37,015,583
Less treasury stock - 4,875 shares, at cost (87,774) (87,774)
------------ ------------
Total stockholders' equity 30,703,882 36,927,809
------------ ------------
Total liabilities and stockholders' equity $470,744,276 $478,555,437
============ ============
</TABLE>
See the accompanying Notes to Consolidated Condensed Financial Statements.
2
<PAGE>
Sahara Gaming Corporation and Subsidiaries
Consolidated Condensed Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
March 31, 1995 March 31, 1994 March 31, 1995 March 31, 1994
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Revenues:
Casino $38,927,969 $40,019,590 $77,548,645 $77,561,668
Hotel 10,555,917 9,781,137 20,181,259 19,454,023
Food and beverage 8,440,479 8,038,629 15,726,126 15,889,362
Other revenues 6,409,411 7,144,906 12,517,660 13,210,086
---------------- ---------------- ---------------- ----------------
Total revenues 64,333,776 64,984,262 125,973,690 126,115,139
---------------- ---------------- ---------------- ----------------
Operating expenses:
Casino 18,338,953 17,542,316 35,390,676 34,760,475
Hotel 4,331,533 4,455,443 8,457,447 8,567,365
Food and beverage 10,867,506 9,646,947 19,924,497 18,877,047
Other operating expenses 3,611,952 3,551,505 7,002,356 6,961,808
Selling, general & administrative 7,906,794 7,656,467 15,270,237 14,831,478
Utilities & property expenses 6,456,625 5,817,059 12,457,688 11,306,241
Depreciation & amortization 7,266,411 6,759,172 14,042,793 13,379,735
---------------- ---------------- ---------------- ----------------
Total operating expenses 58,779,774 55,428,909 112,545,694 108,684,149
---------------- ---------------- ---------------- ----------------
Operating income 5,554,002 9,555,353 13,427,996 17,430,990
Interest expense 11,277,299 11,492,139 22,369,767 20,994,389
---------------- ---------------- ---------------- ----------------
Net loss before income tax benefit (5,723,297) (1,936,786) (8,941,771) (3,563,399)
Federal income tax benefit (1,769,000) (525,000) (2,719,000) (950,000)
---------------- ---------------- ---------------- ----------------
Net loss (3,954,297) (1,411,786) (6,222,771) (2,613,399)
Dividends on preferred shares 324,103 299,600 648,138 599,200
---------------- ---------------- ---------------- ----------------
Net loss applicable to common shares ($4,278,400) ($1,711,386) ($6,870,909) ($3,212,599)
================ ================ ================ ================
Average common shares outstanding 6,189,558 6,189,558 6,189,558 6,189,558
================ ================ ================ ================
Loss per common share ($0.69) ($0.28) ($1.11) ($0.52)
================ ================ ================ ================
</TABLE>
See the accompanying Notes to Consolidated Condensed Financial Statements.
3
<PAGE>
Sahara Gaming Corporation and Subsidiaries
Consolidated Condensed Statement of Stockholders' Equity
(Unaudited)
<TABLE>
<CAPTION>
Additional
Common Preferred Paid-in Accumulated Treasury
Stock Stock Capital Deficit Stock Total
-------- ----------- ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Balances, October 1, 1994 $61,944 $16,201,715 $51,513,504 $(30,761,580) $(87,774) $36,927,809
Net loss (6,222,771) (6,222,771)
Preferred stock dividend 646,982 (648,138) (1,156)
------- ----------- ----------- ------------ -------- -----------
Balances, March 31, 1995 $61,944 $16,848,697 $51,513,504 $(37,632,489) $(87,774) $30,703,882
======= =========== =========== ============ ======== ===========
</TABLE>
See the accompanying Notes to Consolidated Condensed Financial Statements.
4
<PAGE>
Sahara Gaming Corporation and Subsidiaries
Consolidated Condensed Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six Months Six Months
Ended Ended
March 31, 1995 March 31, 1994
---------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Cash and short-term investments
provided by operations $8,799,774 $11,470,961
Increase (decrease) in accounts payable 1,354,567 (2,351,961)
Decrease in inventories 201,685 237,676
Decrease(increase) in prepaid expenses & other 221,105 (231,889)
Decrease in deferred income taxes (2,719,000) (950,000)
Increase (decrease) in interest payable (773,543) 3,307,334
Increase (decrease) in other current liabilities (681,680) 2,899,008
Decrease (increase) in accounts receivable, net (1,698,277) 261,924
Decrease (increase) in due from officer (15,338) 1,974,598
Increase in other assets (1,475,922) (1,130,128)
----------- -----------
Net cash provided by operating activities 3,213,371 15,487,523
----------- -----------
Cash flows from investing activities:
Decrease (increase) in restricted cash 1,827,131 (35,379,504)
Capital expenditures (19,766,563) (27,414,009)
----------- -----------
Net cash used in investing activities (17,939,432) (62,793,513)
----------- -----------
Cash flows from financing activities:
Cash proceeds of long-term debt 1,800,000 130,000,000
Cash paid on long-term debt (4,122,181) (47,257,056)
Loan issue cost 0 (5,628,741)
----------- -----------
Net cash provided by (used in) financing activities (2,322,181) 77,114,203
----------- -----------
Increase (decrease) in cash and short-term investments (17,048,242) 29,808,213
Cash and short-term investments,
beginning of year 55,582,503 29,177,866
----------- -----------
Cash and short-term investments,
end of year $38,534,261 $58,986,079
=========== ===========
</TABLE>
See the accompanying Notes to Consolidated Condensed Financial Statements.
5
<PAGE>
SAHARA GAMING CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION AND GENERAL INFORMATION
Sahara Gaming Corporation (the "Company" or "Sahara Gaming"), a publicly traded
Nevada corporation, is the successor corporation of two affiliates, Sahara
Resorts and Sahara Casino Partners, L.P., which combined in a business
combination in September, 1993. The Company's primary business operations are
conducted through four wholly owned subsidiary corporations, Sahara Nevada Corp.
("SNC"), Hacienda Hotel Inc. ("HHI"), Santa Fe Hotel Inc. ("SFHI") and Pioneer
Hotel Inc. ("PHI") (the "Operating Companies"). The Operating Companies in turn
own the Sahara Hotel and Casino (the "Sahara"), the Hacienda Resort Hotel and
Casino (the "Hacienda"), and the Santa Fe Hotel and Casino (the "Santa Fe"),
each located in Las Vegas, Nevada, and the Pioneer Hotel & Gambling Hall (the
"Pioneer") in Laughlin, Nevada, respectively.
These consolidated condensed financial statements should be read in conjunction
with the consolidated financial statements and notes thereto included in the
Company's Annual Report to stockholders for the year ended September 30, 1994.
The results of operations for the three and six month periods ended March 31,
1995 are not necessarily indicative of the results to be expected for the entire
year.
In the opinion of the Company, the accompanying unaudited consolidated condensed
financial statements contain all adjustments (consisting of only normal
accruals) necessary to present fairly the financial position of the Company at
March 31, 1995, the results of its operations for the three and six month
periods ended March 31, 1995 and 1994, the changes in stockholders' equity for
the six month period ended March 31, 1995, and cash flows for the six month
periods ended March 31, 1995 and 1994.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Pre-Opening Expenses: All pre-opening expenses directly related to development
of gaming operations are capitalized as incurred and included in property, plant
and equipment.
Capitalization of Interest: Interest costs are capitalized on funds disbursed
during the development phase of projects and included in property, plant and
equipment.
Reclassifications: Certain balances in the 1994 financial statements have been
reclassified to conform with current year classifications.
6
<PAGE>
NOTE 3 - CASH AND SHORT-TERM INVESTMENTS
Approximately $6.8 million of the Company's consolidated cash and short-term
investments is held by PHI and is subject to certain restrictions, including
restrictions on its availability for distribution to the Company, by the terms
of an indenture pursuant to which $120.0 million principal amount of 13-1/2%
First Mortgage Bonds due 1998 ("13-1/2% Notes") of Pioneer Finance Corp. was
issued, the proceeds of which were loaned to PHI.
In addition, approximately $21.5 million of the Company's consolidated cash and
short term investments is held by SFHI and is subject to certain restrictions,
including restrictions on its availability for distribution to the Company, by
the terms of an indenture pursuant to which $115.0 million principal amount of
First Mortgage Notes due 2000 ("11% Notes") of SFHI was issued.
NOTE 4 - RESTRICTED CASH
Sahara Parkville, Inc., an indirect wholly-owned subsidiary of the Company
("Parkville Inc."), borrowed from SFHI proceeds of $32.0 million from the
offering of the 11% Notes. The proceeds are restricted for use in connection
with the development and construction of a proposed dockside riverboat gaming
facility in Parkville, Missouri. As of March 31, 1995, approximately $21.3
million remained available from the $32.0 million dedicated to the Parkville
development. Approximately $6.1 million had been used in connection with the
purchase of a riverboat for the site and approximately $4.6 million had been
spent in connection with other expenses associated with developing the proposed
Parkville project, including approximately $3.5 million in interim interest.
SFHI will be required, in July 1995, to offer to repurchase that principal
amount of 11% Notes that can be purchased with funds remaining in the Parkville
collateral account and, within a year thereafter, with funds obtained upon
disposition of assets related to the Parkville project, unless appropriate
waivers are obtained from the holders of the 11% Notes. See Note 8.
NOTE 5 - PROPERTY, PLANT AND EQUIPMENT, NET
In December 1994, the Company completed construction of an expansion of the
Santa Fe. The cost of construction and equipment was approximately $14.4
million. During the six-month period ended March 31, 1995, the Company recorded
approximately $12.0 million in construction costs associated with the expansion
of the Santa Fe.
In December 1994, the Company completed construction of an expansion of the
Pioneer. The cost of construction and equipment was approximately $4.1 million.
During the six-month period ended March 31, 1995, the Company recorded
approximately $2.2 million in construction costs associated with the expansion
of the Pioneer.
7
<PAGE>
In January 1995, the Company entered into an agreement to sell substantially all
of the assets of the Hacienda for $80 million in an all cash
transaction. The sale is subject to the buyer's obtaining all appropriate
regulatory licenses and approvals. The buyer submitted applications for Nevada
licensing approvals related to the acquisition of the Hacienda
assets in March 1995. In the event the sale has not been consummated by October
10, 1995, either the Company or the buyer may terminate the agreement. If the
buyer terminates the agreement for any reason other than the buyer's inability
to obtain necessary licenses or approvals from the Nevada Gaming Authorities or
as a result of a misrepresentation, or a default or breach of the agreement by
the Company, a $5 million earnest money deposit will be released to the Company.
The buyer has the option to extend the October 10, 1995 date to April 10, 1996,
in which event the $5 million earnest money deposit will be released to the
Company. The deposit, if released in connection with an extension of such date,
would be applied against the purchase price if the sale is consummated on or
prior to April 10, 1996, or retained by the Company if the sale is not
consummated by that date.
During the six-month period ended March 31, 1995, Sahara Parkville, Inc.
capitalized $2.4 million in connection with the development of a proposed
dockside riverboat gaming facility. As of March 31, 1995, the Company had
incurred $16.0 million in developing the proposed Parkville project. Of this
amount, approximately $8.0 million was used to purchase a riverboat for the
site, approximately $3.5 million was used for preliminary engineering and
development expenses and approximately $4.5 million represents capitalized
interest costs. (See Notes 4 and 8)
During the six-month period ended March 31, 1995, a wholly-owned subsidiary of
the Company capitalized approximately $700,000 in connection with the
development of the proposed casino-hotel complex in Henderson, Nevada. As of
March 31, 1995, the Company had recorded $18.6 million in developing the
proposed casino-hotel complex, of which $15.1 million represents the costs to
purchase a 40 acre parcel of land, and approximately $1.7 million represents
preliminary engineering and development costs and $1.8 million represents
capitalized interest. (See Notes 6 and 9)
NOTE 6 - LONG-TERM DEBT
If the sale of substantially all of the assets of the Hacienda is consummated,
$22.0 million of the proceeds will be required to be used to repay a note
secured by a first deed of trust ("PERS Note") on the Hacienda; $3.0 million of
the proceeds will be used to retire equipment financing and other costs of
closing; $15.5 million from the proceeds will be used to acquire $20 million
principal amount of 13-1/2% Notes, pursuant to an agreement described below;
and $32.0 million of proceeds will be used to satisfy an affiliate note (see
8
<PAGE>
below) in favor of SNC related to the $116.8 million principal amount of 12-1/8%
First Mortgage Notes ("12-1/8% Notes") issued by Sahara Finance Corp., and
loaned to SNC, which 12-1/8% Notes mature in August 1996.
The Company has entered into an agreement, contingent upon the consummation of
the sale of the Hacienda before December 31, 1995, to use $15.5
million in proceeds from the Hacienda sale to acquire $20.0 million principal
amount of the 13-1/2% Notes. The 13-1/2% Notes, if acquired pursuant to this
agreement, would be available to meet the Company's $12.75 million sinking fund
payment due in December 1996 on the 13-1/2% Notes.
On March 31, 1994, a wholly-owned subsidiary of the Company issued $15 million
principal amount 12% First Mortgage Notes guaranteed by the Company and secured
by, among other things, a first priority lien on the real property pursuant to
the deed of trust relating thereto ("12% Notes"). The principal amount of the
12% Notes and all accrued interest were originally payable on March 31, 1995.
However, the 12% Notes were amended in March 1995 to (i) extend the maturity
date to the earlier of September 30, 1995 or five days after the consummation of
a sale of substantially all of the assets of the Hacienda, and (ii) provide for
monthly cash interest payments on the principal amount of the 12% Notes and
interest accrued on the 12% Notes through March 31, 1995 ($16.8 million in the
aggregate). Additionally, in connection with the amendment, HHI guaranteed the
indebtedness evidenced by the 12% Notes. (See Notes 5 and 9)
Affiliate notes in the principal amounts of $32 million issued by the Hacienda
and $18 million issued by the Santa Fe, each in favor of SNC, mature
simultaneously with the maturity of the 12-1/8% Notes and may be prepaid under
the terms of the 12-1/8% Notes indenture. If either the Hacienda
or the Santa Fe is sold earlier than the August 1996 maturity date, the
affiliate note related to the property sold will be accelerated and will become
immediately due and payable. Therefore, upon consummation of the sale of
substantially all of the assets of the Hacienda, the $32 million affiliate note
will become due and will be paid out of the proceeds of the sale. Such funds
may then be used by SNC for capital expenditures at the Sahara, or may be loaned
to wholly-owned subsidiaries of the Company, pursuant to comparable affiliate
notes that would mature in August 1996. The Company expects to use a portion of
the $32 million received by SNC upon repayment of the affiliate note to make a
loan to a wholly-owned subsidiary for the purpose either of consummating the
purchase of 13-1/2% Notes or to repay the 12% Notes discussed above.
NOTE 7 - INCOME TAXES
For the six months ended March 31, 1995, a tax benefit of $2,719,000 was
recognized. All of the benefit was a deferred tax benefit. The tax benefit for
federal income taxes
9
<PAGE>
differs from the amounts computed by applying the federal income tax rate of 35%
to income before benefit for federal income taxes for the following items:
<TABLE>
<CAPTION>
% of Pretax
Amount Income
------- -------------
<S> <C> <C>
Expected benefit for federal
income taxes $3,130 35%
Amortization of goodwill (257) (3%)
Other (153) (2%)
------ --
Benefit for federal income taxes $2,719 30%
====== ==
</TABLE>
The Company, as of September 30, 1994 has federal net operating loss credit
carryforwards of approximately $32.0 million expiring at various dates through
2009.
NOTE 8 - SAHARA PARKVILLE, INC.
The development of the Parkville casino is subject to substantial uncertainties,
as discussed below, including the granting of necessary gaming (including a
license to permit a dockside, rather than "cruising", riverboat) and other
licenses and certain other approvals, commencement and completion of
construction, and the negotiation of additional agreements, as well as the risks
inherent in the establishment of a new business enterprise. On May 12, 1995, the
Department of the Army Corp of Engineers authorized the issuance of a permit to
Parkville, Inc. for construction of a riverboat casino.
At the request of the Missouri Gaming Commission ("MGC"), the Company updated
its gaming application in February 1995 and subsequently submitted additional
information required by the MGC in order to determine if and when to commence an
investigation of Parkville Inc. for licensing for gaming operations. The MGC
has not yet indicated whether or when the MGC intends to commence an
investigation of Parkville Inc., which would typically require several months to
complete. No assurance can be given that Parkville Inc. will be chosen for
investigation.
Unless appropriate waivers are obtained from the holders of the 11% Notes, in
July 1995 SFHI will be required under the 11% Note indenture to offer to
repurchase that principal amount of 11% Notes that can be purchased with the
funds remaining in the Parkville collateral account (See Note 4) and, within a
year thereafter, with funds obtained upon disposition of assets related to the
project. The indenture provides that a repurchase offer must be made if
Parkville Inc. is not licensed by June 30, 1995 or if the Parkville casino is
not operating by that date. If, prior to the date by which SFHI otherwise would
be required to make a repurchase offer, the MGC makes a determination to
commence a Parkville Inc. investigation by a specific date, SFHI intends to
evaluate the feasibility and timing of the project and may seek the consent of
the holders of the 11% Notes to modify the 11% Note indenture to extend the date
by which Parkville Inc. must be licensed and casino operations must be commenced
before a repurchase offer requirement is triggered.
10
<PAGE>
Such a modification would require the unanimous consent of the holders of the
11% Notes. No assurance can be given that consent to such a modification, if
solicited, would be obtained. The Company expects that implementation of the
repurchase offer in July 1995 will result in a $2.0 million non-recurring charge
to earnings related to debt premium payments and debt issue costs, assuming the
repurchase offer is accepted with regard to the entire amount in the Parkville
collateral account.
The estimated total cost of the Parkville project was originally expected to be
approximately $38.5 million. As a result of the delay in commencing
construction of the proposed facility, revisions to the scope of the project,
and increased construction costs associated with the project, it is currently
estimated that the project will cost approximately $50.0 million. No assurance
can be given that the estimated project costs will not increase due to the
continued delay in commencing construction and to revisions to the scope of the
project.
Parkville Inc. borrowed $32.0 million from the proceeds of the offering of the
11% Notes. The loan proceeds are restricted for use in connection with the
Parkville development. The balance of the anticipated cost of the project in
excess of the originally budgeted amount is expected to be financed, to the
extent permitted by the indenture under which the 11% Notes were issued, through
equipment financing, other financing sources and additional loans or equity
investments from the Company, although no assurance can be given that the
additional necessary funds will be available.
In the event the Company is required to commence the repurchase offer of the 11%
Notes, the Company may pursue development of the Parkville casino through a
joint venture or other arrangement. Although the Company continues the
analysis of the financial statement impact of either pursuit of the proposed
development through a joint venture or other arrangement, or ceasing the
development of a Missouri casino development, the Company expects that
implementation of either such action will result in a non-recurring charge to
earnings in an amount not yet determined.
NOTE 9 - HENDERSON, NEVADA PROJECT
On March 31, 1994, a wholly-owned subsidiary of Sahara Gaming purchased real
property in Henderson, Nevada, on which the Company is considering the
development of a casino-entertainment complex. In December 1994, the Company
entered into an agreement to sell the real property, subject to several
contingencies. In February 1995, the purchaser terminated the agreement in
accordance with its terms. In March 1995, the Company and the holders of the
12% Notes amended the 12% Notes, which were issued to finance the purchase of
the real property, among other things, to extend the maturity date from March
31, 1995 to the earlier to occur of September 30, 1995 or five days after the
consummation of the sale of all or substantially all of the assets of the
Hacienda. (See Notes 5 and 6) The Company is continuing to evaluate the
possibility of pursuing the development and financing for the proposed project.
11
<PAGE>
NOTE 10 - SUBSEQUENT EVENTS
In April 1995, an administrative law judge with the National Labor Relations
Board recommended to the National Labor Relations Board that the Company's
charges that representatives of Culinary Local 226 committed unfair labor
practices in connection with a 1993 union representation election at the Santa
Fe be dismissed, and the election results and the union's status as bargaining
agent for approximately 55% of the Santa Fe employees be certified. The Company
will appeal the decision. Pending the outcome of the appeal, the union has no
enforceable right to represent or bargain in behalf of Santa Fe employees.
NOTE 11 - SUPPLEMENTAL INFORMATION
Supplemental statement of cash flows information for the six-month period ended
March 31, 1995 and 1994 is presented below:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
Operating Activities:
<S> <C> <C>
Cash paid during the period
for interest, net of amount
capitalized of $2,851,325
for 1995 $22,163,561 $17,769,165
=========== ===========
Investing Activities:
Purchase accounting adjustments
to property due to adoption of
SFAS 109 $11,062,602
===========
</TABLE>
12
<PAGE>
NOTE 12 - Subsidiary Information
The Company's primary operations are in the hotel/casino industry and are
conducted through SNC, HHI, PHI and SFHI. The operations by subsidiary for the
three months ending March 31, 1995 and March 31, 1994 were as set forth in the
following table (dollars in thousands):
<TABLE>
<CAPTION>
For the three months ending March 31, 1995 and March 31, 1994
---------------------------------------------------------------------
Year SNC HHI PHI SFHI Other TOTAL
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating revenues 1995 $21,244 $13,989 $12,103 $16,954 $44 $64,334
========= ========= ========= ========= ========= =========
1994 $21,624 $13,710 $13,253 $16,151 $246 $64,984
========= ========= ========= ========= ========= =========
Operating Income (loss) 1995 $1,912 $174 $1,896 $1,979 $(407) $5,554
========= ========= ========= ========= ========= =========
1994 $1,630 $949 $3,079 $4,044 $(147) $9,555
========= ========= ========= ========= ========= =========
Interest Expense 1995 $2,011 $1,677 $3,462 $3,424 $703 $11,277
========= ========= ========= ========= ========= =========
1994 $2,023 $1,742 $3,470 $3,370 $887 $11,492
========= ========= ========= ========= ========= =========
Depreciation and Amortization 1995 $1,943 $1,504 $1,213 $2,445 $161 $7,266
========= ========= ========= ========= ========= =========
1994 $2,077 $1,324 $1,233 $1,961 $164 $6,759
========= ========= ========= ========= ========= =========
Capital Expenditures 1995 $320 $17 $1,834 $1,721 $82 $3,974
========= ========= ========= ========= ========= =========
1994 $573 $374 $328 $1,534 $14,672 $17,481
========= ========= ========= ========= ========= =========
</TABLE>
13
<PAGE>
NOTE 12 - Subsidiary Information
The Company's primary operations are in the hotel/casino industry and are
conducted through SNC, HHI, PHI and SFHI. The operations by subsidiary for the
six months ending March 31, 1995 and March 31, 1994 were as set forth in the
following table (dollars in thousands):
<TABLE>
<CAPTION>
For the six months ending March 31, 1995 and March 31, 1994
---------------------------------------------------------------------
Year SNC HHI PHI SFHI Other TOTAL
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating revenues 1995 $41,782 $27,477 $23,511 $33,150 $54 $125,974
========= ========= ========= ========= ========= =========
1994 $42,509 $26,810 $25,967 $30,643 $186 $126,115
========= ========= ========= ========= ========= =========
Operating Income (loss) 1995 $3,450 $1,325 $3,693 $5,639 $(679) $13,428
========= ========= ========= ========= ========= =========
1994 $2,943 $2,375 $5,257 $7,183 $(327) $17,431
========= ========= ========= ========= ========= =========
Interest Expense 1995 $4,020 $3,352 $6,937 $6,669 $1,392 $22,370
========= ========= ========= ========= ========= =========
1994 $4,054 $3,516 $6,939 $4,858 $1,627 $20,994
========= ========= ========= ========= ========= =========
Depreciation and Amortization 1995 $3,992 $2,771 $2,464 $4,481 $335 $14,043
========= ========= ========= ========= ========= =========
1994 $4,111 $2,589 $2,593 $3,761 $326 $13,380
========= ========= ========= ========= ========= =========
Capital Expenditures 1995 $750 $178 $3,287 $14,799 $753 $19,767
========= ========= ========= ========= ========= =========
1994 $1,230 $510 $481 $10,521 $14,672 $27,414
========= ========= ========= ========= ========= =========
Identifiable Assets 1995 $105,746 $78,281 $103,895 $147,081 $35,741 $470,744
========= ========= ========= ========= ========= =========
1994 $109,673 $84,674 $108,517 $153,420 $37,560 $493,844
========= ========= ========= ========= ========= =========
</TABLE>
14
<PAGE>
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
Sahara Gaming Corporation:
We have reviewed the accompanying consolidated condensed balance sheet of Sahara
Gaming Corporation and subsidiaries (the "Company") as of March 31, 1995, the
related consolidated condensed statements of operations and of cash flows for
the three-month periods ended March 31, 1995 and 1994, and of stockholders'
equity for the six-month periods ended March 31, 1995 in accordance with
Statements on Standards for Accounting and Review Services issued by the
American Institute of Certified Public Accountants. All information included in
these financial statements is the representation of the Company's management.
A review of interim financial information consists principally of inquiries of
Company personnel and analytical procedures applied to financial data. It is
substantially less in scope than an audit in accordance with generally accepted
auditing standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole. Accordingly, we do not
express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to such consolidated condensed financial statements in order for them to
be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Sahara Gaming Corporation and
subsidiaries as of September 30, 1994, and the related consolidated statements
of operations, stockholders' equity and cash flows for the year then ended (not
presented herein); and in our report dated December 16, 1994 we expressed an
unqualified opinion on those consolidated financial statements. In our opinion,
the information set forth in the accompanying consolidated condensed balance
sheet as of September 30, 1994 is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.
As discussed in Notes 6 and 9, the Company's note secured by a first deed of
trust on the Hacienda Resort Hotel and Casino (the "Hacienda") and the Company's
12% notes used to acquire certain land in Henderson, Nevada (collectively, the
"Notes") mature December 23, 1995 and September 30, 1995, respectively. The
current portion of long-term debt includes $38,800,000 relating to these Notes.
The Company intends to pay these amounts from the proceeds of the sale of the
Hacienda. The sale of the Hacienda is subject to approvals required from the
Nevada gaming authorities. A nonpayment under the Notes would, under cross-
default provisions, constitute a default under substantially all of the
Company's long-term debt agreements. Although the outcome of these matters is
not certain, management believes that the Company will be able to satisfy its
obligations under the Notes through the sale of the Hacienda or by other means.
DELOITTE & TOUCHE LLP
Las Vegas, Nevada
May 11, 1995
15
<PAGE>
SAHARA GAMING CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- - ---------------------
Six Months Ended March 31, 1995 and 1994
- - -----------------------------------------
Revenues - Sahara Gaming Corporation ("the Company") recorded revenues of $126.0
- - --------
million for the six months ended March 31, 1995 as compared to $126.1
million in the same period in the prior year. The Santa Fe Hotel and Casino
("Santa Fe") and the Hacienda Hotel and Casino ("Hacienda") recorded revenue
increases of $2.5 million, or 8.2%, and $700,000, or 2.5%, respectively, when
comparing the 1995 period with the prior year. The Pioneer Hotel and Gambling
Hall ("Pioneer") and the Sahara Hotel and Casino ("Sahara") reported decreases
of $2.5 million, or 10.4%, and $700,000, or 1.7%, respectively, when comparing
the two periods.
The Company's casino revenues totalled $77.5 million during the current six
month period, a slight decrease from the $77.6 million recorded for the same
period in the prior fiscal year. Increases in casino revenues of $1.6 million,
or 6.9%, at the Santa Fe, $300,000, or 1.8%, at the Sahara, and $200,000, or
1.6%, at the Hacienda were offset by a decrease in casino revenues at the
Pioneer of $2.2 million, or 9.4%. Management believes that the increase in
casino revenues at the Santa Fe is primarily due to the property's popularity
with the residents of northwest Las Vegas and the continuing growth of the local
population. However, the rate of growth in casino revenues is lower than in
recent periods, due primarily to the opening of a competing facility within four
miles of the Santa Fe in December 1994 and the opening and expansion of other
casinos targeting the local population in the Las Vegas valley. In addition,
Santa Fe casino revenues were impacted, to a lesser extent, due to restricted
access to the property due to construction on an interchange next to the
facility. The decrease in casino revenues at the Pioneer is believed to be
primarily due to the decreased growth rate in the Laughlin gaming market and
continued increase in the competitive environment in and around Laughlin
including Indian gaming facilities opened in southern Nevada, Arizona and
California, coupled with disruption of operations related to the construction of
the expansion which was completed in December 1994.
The Company's hotel revenues increased $700,000, or 3.7%, during the six months
ended March 31, 1995 from the corresponding 1994 period on a net decrease of
29,126 occupied room nights. Increases in hotel revenues of $600,000, or 11%,
at the Hacienda and $200,000, or 1.8%, at the Sahara, were partially offset by a
decrease at the Pioneer of $100,000, or 16.7%. The increases are believed to be
primarily the result of an increase in the average room rate associated with
tour and travel contracts at the Sahara and Hacienda. The increased average
room rate at the Sahara was offset by a decrease in occupied room nights
which resulted from primarily a change in strategy regarding filling rooms
16
<PAGE>
with low room rates. Room occupancy percentages were 84.7% at the Sahara, 93.5%
at the Hacienda, 96.0% at the Santa Fe and 84.9% at the Pioneer for the six
months ended March 31, 1995. This compares to 91.5%, 93.8%, 95.4% and 89.6% for
each of the hotel/casinos for the six months ended March 31, 1994, respectively.
The Company's food and beverage revenues decreased $200,000, or 1.0%. An
increase in food and beverage revenues at the Santa Fe of $600,000, or 18.3%,
was offset by decreases at the Sahara of $700,000, or 10.6%, and at the Pioneer
of $100,000, or 6.1%. The increase at the Santa Fe is believed to be primarily
due to the opening of additional food & beverage facilities in December 1994.
The decreases at the Sahara and Pioneer are considered to be primarily the
result of fewer occupied room nights.
Other revenues decreased $700,000, or 5.2%, with decreases of $500,000, or 9.4%,
$100,000, or 3.4%, and $100,000, or 12.5%, recorded at the Sahara, Hacienda and
Pioneer, respectively. The decrease at the Sahara is primarily due to a
decrease in revenues from timeshare contract sales. Management believes that
this decrease is largely due to a change in the profile of the Sahara's customer
base from leisure to convention and increased repeat business, two groups which
are not, traditionally, timeshare customers. At the Hacienda, a decrease in
revenues from timeshare contract sales of $700,000 was partially offset by an
increase in entertainment revenue of $500,000. The Company discontinued
timeshare contract sales at the Hacienda Hotel in January 1995.
Operating expenses increased $3.9 million, or 3.6%, in the current six month
- - ------------------
period when compared to the same prior year period. The Santa Fe and Hacienda
recorded operating expense increases of $4.1 million and $1.7 million,
respectively, when compared to the prior year period. The Sahara and Pioneer
reported decreases of $1.2 million and $1.1 million, respectively, compared to
the prior year period.
Casino expenses were $600,000, or 1.8%, higher for the Company's current six
month period, with the Sahara and Hacienda each reporting a relatively small
increase and decrease, respectively. The Santa Fe reported an increase of $1.7
million, or 19.9%, primarily due to increased payroll and other costs associated
with operating an additional 15,000 square feet of casino space, which includes
a new race. Casino expenses at the Pioneer decreased $1.2 million, or 10.5%, for
the six months ended March 31, 1995 over the comparable 1994 period, primarily
associated with the decrease in casino revenues.
Food and beverage expenses increased $1.0 million, or 5.6%. Increases of
$800,000, or 18.5%, at the Santa Fe and $600,000, or 12.2%, at the Hacienda were
partially offset by decreases of $200,000, or 9.4%, at the Pioneer and $100,000,
or 1.2%, at the Sahara. The increase at the Santa Fe is related to the increase
in revenues and increased payroll and other costs associated with the expansion
of food and beverage facilities. The increase at the Hacienda was due to
increased food costs and union wage increases. The decrease at the Pioneer was
volume related.
17
<PAGE>
Selling, general and administrative expenses for the Company increased $400,000,
or 3.0%, in the 1995 period. Increases of $400,000, or 13.2%, and $500,000, or
14.4%, at the Hacienda and Santa Fe, respectively, were primarily related to
increased advertising and promotional costs. At the Pioneer, the increase in
the covered period was $200,000, or 10.3%, and was primarily attributed to
payroll and promotional costs. The increases described above were offset by a
decrease of $900,000, or 14.7%, at the Sahara related to reduced advertising
costs in the period related to a change in marketing strategy.
Depreciation and amortization expense for the Company increased $700,000, or
5.0%, in the six months ended March 31, 1995 as compared to the prior year
period, primarily at the Santa Fe, due to increased depreciation on the
expansion project.
Operating income for the six months ended March 31, 1995 was $13.4 million, a
- - ----------------
$4.0 million decrease from the 1994 period. Period to period changes for the
four hotel/casinos were as follows: the Sahara had operating income of $3.4
million for the 1995 period as compared to $2.9 million for the six month period
in 1994, a 17.2% increase; the Santa Fe had operating income of $5.6 million in
the current period as compared to $7.2 million in the prior year period, a 21.5%
decrease; the Pioneer experienced operating income of $3.7 million in 1995
compared to $5.3 million in 1994, a 29.8% decrease; and the Hacienda's operating
income was $1.3 million in the six month period of this year compared to income
of $2.4 million last year, a 44.2% decrease.
Interest expense increased $1.4 million in the fiscal 1995 period to $22.4
- - ----------------
million as compared to $21.0 million for the six month period ended March 31,
1994. The increase in interest expenses is primarily the result of the issuance
of $115 million principal amount of 11% First Mortgage Notes due 2000 (the "11%
Notes") in December 1993.
Loss before federal income tax - The Company recorded loss before federal income
- - ------------------------------
tax of $8.9 million for the six months ended March 31, 1995 as compared to a
loss of $3.6 million for the same period in fiscal 1994.
Three Months Ended March 31, 1995 and 1994
- - ------------------------------------------
Revenues - The Company recorded revenues of $64.3 million for the quarter ended
- - --------
March 31, 1995 as compared to $65.0 million in the prior year quarter, a
$700,000, or 1.0% decrease. The Santa Fe recorded revenue increases of $800,000
to $17.0 million, or 5.0%, compared to the same period in the 1994 fiscal year.
This increase is less than the 22.2% increase in revenues achieved during the
1994 fiscal period. The Hacienda experienced a revenue increase of $300,000, or
2.0%, when comparing the 1995 period with the prior year. The Sahara reported
decreases of $400,000, or 1.8%, when comparing the two periods. In the second
quarter of 1995, the Pioneer's revenues decreased $1.2 million to $12.1 million,
or 8.7%, compared to the same period in the 1994 fiscal year. The decrease is
greater than the 4.2% decrease in revenues experienced during the 1994 fiscal
period.
18
<PAGE>
The Company's casino revenues totalled $38.9 million, a $1.1 million, or 2.7%,
decrease from the prior year's quarter. A $400,000, or 3.2%, increase in casino
revenues at the Santa Fe and a $200,000, or 3.1%, increase in casino revenues at
the Hacienda in the current year's quarter over that of the prior year were
offset by a decrease in casino revenues at the Pioneer of $1.1 million, or 9.0%,
and at the Sahara of $600,000, or 7.0%, when comparing the two fiscal periods.
Management believes that the increase in casino revenues at the Santa Fe is
primarily due to the property's popularity with the residents of northwest Las
Vegas and the continuing growth of the local population. However, the rate of
growth in casino revenues is lower than in recent periods due primarily to the
opening of a competing facility within four miles of the Santa Fe in December
1994 and the opening and expansion of other casinos targeting the local
population in the Las Vegas valley. In addition, Santa Fe casino revenues were
impacted, to a lesser extent, due to restricted access to the property due to
construction on an interchange next to the facility. The increase at the
Hacienda is the result of increased table game play in the current period. The
decrease in casino revenues at the Pioneer is believed to be primarily due to a
decreased growth rate in the Laughlin gaming market and continued increase in
the competitive environment in and around Laughlin, including Indian gaming
facilities opened in southern Nevada, Arizona and California. The decrease at
the Sahara is believed to be associated with the decrease in occupied room
nights.
The Company's hotel revenues increased $800,000 or 7.9%, during the three months
ended March 31, 1995 from the corresponding 1994 period on a net decrease of
19,205 occupied room nights. The Sahara recorded increased hotel revenues of
$600,000, or 9.7%, with a decrease in occupied rooms of 16,892, or 9.8%. This
is believed to be primarily the result of an increase in the average room rate
associated with tour and travel contracts and increased convention business
offset by a decrease in occupied room nights primarily the result of a change in
strategy regarding filling rooms with low room rates. The Hacienda recorded
increased hotel revenues of $200,000, or 9.2%, primarily as the result of an
increase in the average room rate associated with tour and travel contracts.
Room occupancy percentages were 85.0% at the Sahara, 94.6% at the Hacienda,
96.2% at the Santa Fe and 89.6% at the Pioneer for the three months ended March
31, 1995. This compares to 94.2%, 95.0%, 97.7% and 93.9% for each of the
hotel/casinos for the quarter ended March 31, 1994, respectively.
The Company's food and beverage revenues increased $400,000, or 5.0%. Increases
in food and beverage revenues of $500,000, or 28.6%, at the Santa Fe and
$100,000, or 7.1%, at the Pioneer were partially offset by a decrease at the
Sahara of $200,000, or 4.6%. The increase at the Santa Fe is due to the opening
of additional food and beverages facilities in December 1994. The decrease at
the Sahara is considered to be primarily the result of fewer occupied room
nights.
Other revenues decreased $700,000, or 10.3%, with decreases of $200,000, or
6.3%, $200,000, or 7.6%, $100,000, or 6.2%, and $100,000, or 23.3%, recorded at
the Sahara, Hacienda, Santa Fe and Pioneer, respectively. The decrease at the
Sahara is primarily due to a decrease in revenues from timeshare contract sales.
Management believes that this decrease is largely due to a change in the profile
of the Sahara's customer base from
19
<PAGE>
leisure to convention and increased repeat business, two groups which are not,
traditionally, timeshare customers. At the Hacienda, a decrease in revenues from
timeshare contract sales of $400,000 was partially offset by an increase in
entertainment revenues of $200,000. The Company discontinued timeshare contract
sales at the Hacienda Hotel in January 1995.
Operating expenses increased $3.4 million, or 6.1%, in the current quarter when
- - ------------------
compared to the same prior year period. The Santa Fe and Hacienda recorded
operating expense increases of $2.9 million and $1.1 million, respectively, when
compared to the prior year period. The Sahara reported a decrease of $700,000
compared to the prior year period.
Casino expenses were $800,000, or 4.5%, higher for the Company's current three
month period, with the Sahara and Hacienda each reporting a relatively small
increase. The Santa Fe reported an increase of $1.1 million, or 25.4%,
primarily due to the increase in the Santa Fe's business volume and increased
payroll and other costs associated with operating an additional 15,000 square
feet of casino space, which includes a new race book. Casino expenses at the
Pioneer decreased $400,000, or 7.4%, for the quarter ended March 31, 1995 over
the comparable 1994 period, primarily associated with the decrease in casino
revenues.
Food and beverage expenses increased $1.2 million, or 12.7%. An increase at the
Santa Fe of $900,000, or 40.2%, is related to the increase in revenues and
increased payroll and other costs associated with the expansion of food and
beverage facilities. An increase of $300,000, or 12.5%, at the Hacienda is due
to increased food costs and union wage increases. The Sahara's food and
beverage expenses did not decrease in proportion to the decrease in food and
beverage revenues, primarily due to union wage increases.
Selling, general and administrative expenses for the Company increased $300,000,
or 3.3%, in the 1995 period. Increases of $200,000, or 10.5%, and $200,000, or
10.1%, at the Hacienda and Santa Fe, respectively, were primarily related to
increased advertising and promotional costs. The increases described above were
offset by a decrease of $300,000, or 10.3%, at the Sahara related to reduced
advertising costs in the period related to a change in marketing strategy.
Depreciation and amortization expense for the Company increased $500,000, or
7.5%, in the quarter ended March 31, 1995 as compared to the prior year period,
with an increase of $500,000, or 24.7%, at the Santa Fe, primarily due to
increased depreciation on an expansion project.
Operating income for the three months ended March 31, 1995 was $5.6 million, a
- - ----------------
$4.0 million decrease from the 1994 period. Period to period changes for the
four hotel/casinos
20
<PAGE>
were as follows: the Sahara had operating income of $1.9 million for the 1995
period as compared to $1.6 million for the quarter in 1994, a 17.3% increase;
the Santa Fe had operating income of $2.0 million in the current period as
compared to $4.0 million in the prior year period, a 51.1% decrease; the
Pioneer experienced operating income of $1.9 million in 1995 compared to $3.1
million in 1994, a 38.4% decrease; and the Hacienda's operating income was
$200,000 in the three month period of this year compared to income of $900,000
last year, a 81.7% decrease.
Interest expense decreased $200,000 in the fiscal 1995 period to $11.3 million
- - ----------------
as compared to $11.5 million for the period ended March 31, 1994.
Loss before federal income tax - The Company recorded loss before federal income
- - ------------------------------
tax of $5.7 million for the three months ended March 31, 1995 as compared to a
loss of $1.9 million for the same period in fiscal 1994. Net loss in the
current period was $4.0 million as compared to a loss of $1.4 million last
year.
LIQUIDITY AND CAPITAL RESOURCES; TRENDS AND FACTORS RELEVANT TO FUTURE
OPERATIONS
The Company's earnings before interest, taxes, depreciation and amortization
("EBITDA") was $12.8 million and $27.5 million for the three and six months
ended March 31, 1995 as compared to $16.3 million and $30.8 million for the
prior year periods. EBITDA is presented to enhance the understanding of the
financial performance of the Company and its ability to service its
indebtedness, but should not be construed as an alternative to operating income
(as determined in accordance with generally accepted accounting principles) as
an indicator of the Company's operating performance, or to cash flows from
operating activities (as determined in accordance with generally accepted
accounting principles) as a measure of liquidity. As of March 31, 1995, the
outstanding amount of the Company's long-term debt in relation to its
stockholders' equity (13:1) or as a percent of total assets (86%) categorizes
the Company as highly leveraged.
21
<PAGE>
The Company's principal uses of funds generated from operations are for interest
payments on indebtedness and capital expenditures. Interest expense for the six
month period ended March 31, 1995 and 1994 was $22.4 million and $21.0 million,
respectively. (See Capital Expenditures below) Capital expenditures for the six
months ended March 31, 1995 and 1994 were $19.8 million and $27.4 million,
respectively. Future capital expenditures required to maintain the facilities
are generally expected to be financed with cash flows from operations.
Management believes capital expenditures to maintain the facilities will be
significantly less than that expended in the current periods in which expansion
projects have been undertaken. (See Capital Expenditures below) Additionally,
the Company has used funds generated from operations to satisfy the $2.2 million
annual sinking fund requirement due on the 10-1/4% debentures and to meet
principal payments due under equipment financing amortization schedules.
The Company historically generated sufficient cash liquidity from operations to
finance operations, meet existing debt service obligations, complete capital
improvements to maintain existing facilities, and provide working capital to the
parent company. However, indenture restrictions on Santa Fe Hotel Inc. ("Santa
Fe Inc.") and Pioneer Hotel Inc. ("Pioneer Inc.") restrict the distribution of
working capital to the parent company, and cash flow of these subsidiaries is
not currently available for distribution to the Company. Therefore, the Company
must rely on existing cash resources and cash flow generated by Sahara Nevada
Corp. ("Sahara Nevada") and Hacienda Hotel Inc. ("Hacienda Inc."), the
subsidiaries of the Company that own the Sahara and Hacienda, respectively, to
provide liquidity to fund cash requirements of the parent company. (See
Liquidity below.) In addition, the Company's long-term debt obligations cannot
be repaid from operating cash flow and must be refinanced or satisfied with
proceeds received upon disposition of assets. (See Debt Obligations below.)
Liquidity - Sahara Nevada, Hacienda and Other - Approximately $25.1 million of
- - ---------------------------------------------
the Company's current assets at March 31, 1995, including approximately $10.3
million of cash and short-term investments, were held by Sahara Nevada, Hacienda
Inc. and the Company and its subsidiaries other than Pioneer Inc. and Santa Fe
Inc. (collectively the "Other Entities"), which amounts are not subject to
indenture restrictions limiting the availability of such funds to the Company.
Excluding the working capital of Pioneer Inc. and Santa Fe Inc. and $16.8
million of indebtedness that matures in September 1995 and $22.0 million
indebtedness that matures in December 1995 reported in the current portion of
long-term debt (See "Debt Obligations"), the Company had a working capital
balance of approximately $3.5 million at March 31, 1995.
Results of operations of the Other Entities for the twelve months ended March
31, 1995, provided EBITDA of $22.1 million, approximately 1.27 times interest
expense during the same period. Based on current operations and available
resources, management believes that, barring unforeseen circumstances, the Other
Entities will have sufficient cash
22
<PAGE>
resources to meet operating requirements and debt service requirements other
than the debt maturities discussed above in September 1995 and December 1995,
through the twelve month period ending March 31, 1996, although no assurance can
be given to that effect. (See Debt Obligations below) The Company has entered
into an agreement to sell substantially all of the assets of the Hacienda. (See
"Asset Sale")
Liquidity - Santa Fe - The indenture under which the 11% Notes were issued
- - --------------------
contain restrictions on payments to and investments in affiliates by Santa Fe
Inc., including the Company. As a result of these restrictions, all of the cash
flow generated by Santa Fe Inc. is not currently and is not expected during the
next twelve months to be available for distribution to the Company.
Approximately $23.8 million of the Company's current assets, including
approximately $21.5 million of cash and short term investments, were held by
Santa Fe Inc. at March 31, 1995.
Results from operations at the Santa Fe for the twelve months ended March 31,
1995 provided EBITDA of $21.4 million, approximately 1.62 times interest expense
during the same period. (See Results of Operations - Revenues; Operating
Expenses) Management believes that, based on current operations and available
resources, barring unforeseen circumstances, Santa Fe Inc. will have sufficient
cash resources to meet its operating requirements and debt service requirements
through the twelve month period ending March 31, 1996. (See Debt Obligations)
Liquidity - Pioneer - The indenture under which the $120.0 million principal
- - -------------------
amount of First Mortgage Notes due 1998 ("13-1/2% Notes") were issued contain
restrictions on payments to and investments in affiliates by Pioneer Inc.,
including to the Company. As a result of these restrictions, all of the cash
flow generated by Pioneer Inc. is not currently, and is not expected during the
next twelve to be, available for distribution to the Company. Approximately $9.4
million of the Company's current assets, including approximately $6.8 million of
cash and short term investments, were held by Pioneer Inc. at March 31, 1995.
Results from operations at the Pioneer for the twelve months ended March 31,
1995 provided EBITDA of $12.8 million, approximately .92 times interest expense
during the same period. (See Results of Operations - Revenues and Operating
Expenses) Management believes that, based on current operations, and available
resources, primarily equipment financing permitted under the 13-1/2% Note
indenture, barring unforeseen circumstances, the Pioneer will have sufficient
cash resources to meet its operating requirements and debt service requirements
through the fiscal year ending September 30, 1995, including the June 1, 1995
semi-annual interest payment on the 13-1/2% Notes, although no assurance can be
given to that effect. The ability of Pioneer Inc. to meet operating requirements
and debt service payments through March 31, 1996, including the December 1, 1995
semi-annual interest payment, will depend, on the current operation, and
available resources, and in part, on the consummation of the purchase by the
Company of $20 million principal amount of 13-1/2% Notes, which is contingent
upon the Hacienda sale. (See Asset Sale below)
23
<PAGE>
In the event the Pioneer is unable to meet debt service payments through current
operations and available resources, the Pioneer will explore financing
alternatives, including but not limited to refinancing or modification of
existing indebtedness, and the incurrence of additional indebtedness.
Capital Expenditures - In December 1994, the Company completed construction of
- - ---------------------
an expansion at the Santa Fe. The cost of construction and equipment was
approximately $14.4 million. During the six-month period ended March 31, 1995,
the Company recorded approximately $12.0 million in construction costs
associated with the expansion of the Santa Fe.
In December 1994, the Company completed construction of an expansion of the
Pioneer. The cost of construction and equipment was approximately $4.1 million.
During the six-month period ended March 31, 1995, the Company recorded
approximately $2.2 million in construction costs associated with the expansion
of the Pioneer.
Asset Sale - In January 1995, the Company entered into an agreement to sell
- - ----------
substantially all of the assets of Hacienda for $80 million in an all cash
transaction. The sale is subject to the buyer's obtaining all appropriate
regulatory licenses and approvals. The buyer submitted applications for Nevada
licensing approvals related to the acquisition of the Hacienda assets in March
1995. In the event the sale has not been consummated by October 10, 1995, either
the Company or the buyer may terminate the agreement. Additionally, the
agreement may be terminated as a result of failure to meet certain conditions or
due to breaches or defaults. If the buyer terminates the agreement for any
reason other than the buyer's inability to obtain necessary licenses or
approvals from the Nevada Gaming Authorities or as a result of a
misrepresentation, or a default or breach of the agreement by the Company, a $5
million earnest money deposit will be released to the Company. The buyer has the
option to extend the October 10, 1995 date to April 10, 1996, in which event the
$5 million earnest money deposit will be released to the Company. The deposit if
released in connection with an extension of such date would be applied against
the purchase price if the sale is consummated on or prior to April 10, 1996, or
retained by the Company if the sale is not consummated by that date.
Proceeds from the sale, if consummated, will be used as follows: (i)
approximately $22.0 million will be used to repay a note secured by a first deed
of trust on the Hacienda ("PERS Note") , (ii) approximately $3.0 million will be
used to satisfy equipment indebtedness and other costs of closing, (iii) $15.5
million will be used to acquire $20.0 million principal amount of the 13-1/2%
Notes, and (iv) $32.0 million of proceeds will be used to satisfy an affiliate
note in favor of Sahara Nevada. (See affiliate notes discussed below)
Remaining proceeds of $7.5 million may be utilized for working capital purposes,
24
<PAGE>
including the development of proposed projects, expansion or renovation of
existing facilities and reduction of outstanding indebtedness.
Debt Obligations - On March 31, 1994, a wholly-owned subsidiary of the Company
- - ----------------
issued $15 million principal amount 12% First Mortgage Notes guaranteed by the
Company and secured by, among other things, a first priority lien on the real
property pursuant to the deed of trust relating thereto ("12% Notes"). The
principal amount of the 12% Notes and all accrued interest were originally
payable on March 31, 1995. The 12% Notes were amended in March 1995 to (i)
extend the maturity date to the earlier of September 30, 1995 or five days after
the consummation of a sale of substantially all of the assets of the Hacienda,
and (ii) provide for monthly cash interest payments on the principal amount of
the 12% Notes and interest accrued on the 12% Notes through March 31, 1995
($16.8 million in the aggregate). Additionally, in connection with the
amendment, HHI guaranteed the indebtedness evidenced by the 12% Notes.
The PERS Note, with respect to which approximately $22 million was outstanding
at March 31, 1995, matures in December 1995. The Company anticipates
satisfying the PERS Note from the proceeds of the sale of the Hacienda. (See
Asset Sale above)
The Company has entered into an agreement, contingent upon the consummation of
the sale of the assets of the Hacienda before December 31, 1995, to use $15.5
million in proceeds from the Hacienda sale to acquire $20.0 million principal
amount of the 13-1/2% Notes. The 13-1/2% Notes, if acquired pursuant to this
agreement, would be available to meet the Company's $12.75 million sinking fund
payment remaining due in December 1996 on the 13-1/2% Notes.
Affiliate notes in the principal amounts of $32 million issued by the Hacienda
and $18 million issued by the Santa Fe, each in favor of SNC, mature
simultaneously with the maturity of the 12-1/8% Notes and may be repaid under
the terms of the 12-1\8% notes indenture. If either the Hacienda or the Santa Fe
is sold earlier than the August 1996 maturity date, the affiliate note related
to the property sold will be accelerated and will become immediately due and
payable. Therefore, upon consummation of the sale of substantially all of the
assets of the Hacienda, the $32 million affiliate note will become due and will
be paid out of the proceeds of the sale. Such funds may then be used by SNC for
capital expenditures at the Sahara, or may be loaned to wholly-owned
subsidiaries of the Company, pursuant to comparable affiliate notes that would
mature in August 1996. The Company expects to use a portion of the $32 million
received by SNC upon repayment of the affiliate note to make a loan to a wholly-
owned subsidiary for the purpose either of consummating the purchase of 13-1/2%
Notes or to repay the 12% Notes discussed above.
Although management has in the past and is currently exploring refinancing
alternatives, as well as possible dispositions of certain assets (including the
sale of the Hacienda) in
25
<PAGE>
order to satisfy the Company's indebtedness as it matures, no assurance can be
given that the Company will be able to refinance some or all of its indebtedness
or dispose of assets to provide sufficient funds to repay indebtedness. Any
refinancing would be subject to the Company's future operations and the
prevailing market conditions at the time of such proposed refinancing.
If the Company is ultimately unable to refinance such debt prior to maturity,
and/or obtain sufficient proceeds from asset dispositions to repay the debt, and
if the holders of the various debt instruments were not to extend the maturity
dates, events of default would occur under certain of the Company's debt
agreements, which could result in cross-defaults in other material agreements
of the Company including, without limitation, agreements relating to
substantially all of the outstanding long-term debt of the Company and its
subsidiaries.
Parkville Inc. - The development of the Parkville casino is subject to
- - --------------
substantial uncertainties, as discussed below, including the granting of
necessary gaming (including a license to permit a dockside, rather than
"cruising", riverboat) and other licenses and certain other approvals,
commencement and completion of construction, and the negotiation of additional
agreements, as well as the risks inherent in the establishment of a new business
enterprise. On May 12, 1995, the Department of the Army Corp. of Engineers
authorized the issuance of a permit to Parkville Inc. for construction of a
riverboat casino.
At the request of the Missouri Gaming Commission ("MGC"), the Company updated
its gaming application in February 1995 and subsequently submitted additional
information required by the MGC in order to determine if and when to commence an
investigation of Parkville Inc. for licensing for gaming operations. The MGC
has not yet indicated whether or when the MGC intends to commence an
investigation of Parkville Inc., which would typically require several months to
complete. No assurance can be given that Parkville Inc. will be chosen for
investigation.
Unless appropriate waivers are obtained from the holders of the 11% Notes, in
July 1995 SFHI will be required under the 11% Note indenture to offer to
repurchase that principal amount of 11% Notes that can be purchased with the
funds remaining in the Parkville collateral account (See Note 4) and obtained
upon disposition of assets related to the project. The indenture provides that
a repurchase offer must be made if Parkville Inc. is not licensed by June 30,
1995 or if the Parkville casino is not operating by that date. If, prior to the
date by which SFHI otherwise would be required to make a repurchase offer, the
MGC makes a determination to commence a Parkville Inc. investigation by a
specific date, SFHI intends to evaluate the feasibility and timing of the
project and may seek the consent of the holders of the 11% Notes to modify the
11% Note indenture to extend the date by which Parkville Inc. must be licensed
and casino operations must be commenced before a repurchase offer requirement is
triggered. Such a modification would require the unanimous consent of the
holders of the 11% Notes. No assurance can be given that consent to such a
modification, if solicited, would be obtained. The Company expects that
26
<PAGE>
implementation of the repurchase offer in July 1995 will result in a $2.0
million non-recurring charge to earnings related to debt premium payments and
debt issue costs, assuming the repurchase offer is accepted with regard to the
entire principal amount.
The estimated total cost of the Parkville project was originally expected to be
approximately $38.5 million. As a result of the delay in commencing construction
of the proposed facility, revisions to the scope of the project and increased
construction costs associated with the project, it is currently estimated that
the project will cost approximately $50.0 million. No assurance can be given
that the estimated project costs will not increase due to the continued delay in
commencing construction and to revisions to the scope of the project.
Parkville Inc. borrowed $32.0 million from the proceeds of the offering of the
11% Notes. The loan proceeds are restricted for use in connection with the
Parkville development. The balance of the anticipated cost of the project in
excess of the originally budgeted amount is expected to be financed, to the
extent permitted by the indenture under which the 11% Notes were issued, through
equipment financing, other financing sources and additional loans or equity
investments from the Company, although no assurance can be given that the
additional necessary funds will be available.
In the event the Company is required to commence the repurchase offer of the 11%
Notes, the Company may pursue development of the Parkville casino through a
joint venture or other arrangement. Although the Company continues the analysis
of the financial statement impact of either pursuit of the proposed development
through a joint venture or other arrangement, or ceasing the development of a
Missouri casino development, the Company expects that implementation of either
such action will result in a non-recurring charge to earnings in an amount not
yet determined.
Treasure Bay The Company is incurring and expects to continue to incur
- - ------------
professional expenses and other expenses associated with legal proceedings
involving Treasure Bay and the Company's investment in Treasure Bay. The
Company included an estimate of such expenses in the charge against income
relating to the investment in Treasure Bay recorded in the fourth quarter of
fiscal 1994. The Company expects to review the status of the legal proceedings
involving Treasure Bay periodically in order to evaluate the adequacy of the
previously recorded charge against income.
Related Parties LICO, a company wholly-owned by Mr. Lowden, Chairman of the
- - ---------------
Board, Chief Executive Officer and 51% stockholder of the Company, borrowed
$476,000 from Hacienda Inc., pursuant to an unsecured demand loan. The
outstanding balance of the loan including accrued interest was $516,000 as of
March 31, 1995. The demand loan to LICO bears interest at 2% over the prime
rate.
As of September 30, 1993, Mr. Lowden had borrowed an aggregate of $1.9 million
from the Company. The unsecured demand loans were evidenced by promissory notes
and
27
<PAGE>
accrued interest at a rate equal to 2% over the prime rate. On January 4,
1994, Mr. Lowden repaid the loans from the Company in full, together with
accrued interest.
In November 1993, Mr. Lowden and Bank of America entered into a personal loan
agreement whereby the principal balance (approximately $4,614,917 as of April
30, 1995) of the loan is amortized through quarterly principal payments through
April 1998, with any remaining principal balance due July 31, 1998. The loan is
secured by substantially all of the common stock of the Company owned by Mr.
Lowden (the "Pledged Shares"). Mr. Lowden's loan agreement provides that in the
event the market value of the Pledged Shares is less than three times the
outstanding loan balance, the bank, at its sole option, may require either an
immediate reduction in the outstanding balance or the pledging of additional
collateral acceptable to the bank such that the value of the pledged collateral
is at least three times the outstanding loan balance. If an event of default
were to occur under Mr. Lowden's personal loan with the bank, and if the bank
acquired the Pledged Shares upon foreclosure, Mr. Lowden's ownership of the
Company's outstanding common stock would be reduced to below 50%. If Mr. Lowden
ceases to own more than 50% of the outstanding shares of the Company's common
stock, an event of default would result under certain of the Company's long-term
indebtedness, which could result in cross-defaults under substantially all of
the Company's other long-term indebtedness.
Effects of Inflation
- - --------------------
The Company has been generally successful in recovering costs associated with
inflation through price adjustments in its hotel and contract sales operations.
Any such increases in costs associated with casino operations and maintenance of
properties may not be completely recovered by the Company.
28
<PAGE>
SAHARA GAMING CORPORATION
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
Certain legal proceedings were disclosed in the Company's annual report on Form
10-K for the year ended September 30, 1994. Except as set forth below, there
were no material developments in any material legal proceeding during the
quarter ended March 31, 1995.
On December 12, 1994, the Company and Santa Fe Inc. filed a lawsuit in the
United States District Court, District of Nevada, naming Treasure Bay officers
A. Clay Rankin III, Joe N. Hendrix and Bernie Burkholder, and former officer
Francis L. Miller as defendants in matters involving violations of Section 10(b)
and Rule 10(b)-5 of the Securities Exchange Act, violation of Nevada state
securities laws, fraud and negligent misrepresentation in connection with the
Company's investment of $10 million in exchange for a 20% interest in Treasure
Bay, and the Company's guarantee of $4.5 million of Treasure Bay's indebtedness.
The defendants have filed answers to the complaint and discovery is continuing.
On December 15, 1994, Francis L. Miller filed a lawsuit in the Mississippi
Circuit Court, Second Judicial District, against the Company and Santa Fe Inc.
as well as Paul W. Lowden and Suzanne Lowden, alleging, among other things, that
the Company made certain misrepresentations which induced Francis Miller to
entrust the management of his investments in Treasure Bay's two Mississippi
casinos to the Company and Santa Fe Inc. and to sell the Company and Santa Fe
Inc. a 20% ownership interest in Treasure Bay. The Company and Santa Fe Inc.
believe that the suit is without merit and are defending themselves vigorously
while pursuing their own lawsuit. The Company and Santa Fe Inc. moved to
dismiss, stay or transfer it to the federal court in Nevada, on the grounds that
it should have been asserted, if at all, as a counterclaim in the Nevada action
described above. That motion has not yet been ruled on.
On or about January 17, 1995, the Company and Santa Fe commenced an adversary
proceeding in Treasure Bay's bankruptcy case in the United States Bankruptcy
Court for the Southern District of Mississippi. The adversary proceeding seeks
the return of bankroll or cage cash at Treasure Bay's casinos on the grounds
that such funds are held by Treasure Bay in constructive trust for the Company
and SFHI. The complaint alleges that Treasure Bay fraudulently induced the
Company to execute the guarantees of the loans by which Treasure Bay obtained
the bankroll or cage cash. The complaint also seeks an injunction from the
Bankruptcy Court requiring the bankroll or cage cash to be held intact pending
29
<PAGE>
the litigation. Treasure Bay filed an answer to the complaint denying Sahara's
claim. On March 18, 1995, the U.S. Bankruptcy Court granted the Company's
request for a preliminary injunction prohibiting Treasure Bay from using the
bankroll or cage cash except in the ordinary course of business until further
order of the Court. Sahara is vigorously pursuing its constructive trust claim.
On March 31, 1995, Treasure Bay Corp. commenced an adversary proceeding in its
bankruptcy case by filing a complaint for a preliminary and permanent injunction
pursuant to 11 U.S.C. Sec. 105 and Sec. 362 against the Company and Santa Fe.
The Complaint alleges that the filing of the action against Bernie Burkholder,
an officer of Treasure Bay Corp., in Nevada federal court violated the automatic
stay imposed by 11 U.S.C. Sec. 362, or alternatively, that the Bankruptcy Court
should issue an injunction pursuant to 11 U.S.C. Sec. 105 preventing Sahara from
proceeding with its action as against Burkholder. In addition to an injunction,
the complaint seeks actual and punitive damages and attorneys' fees. To the
Company's knowledge, Treasure Bay Corp. has not filed a motion for a temporary
restraining order or a preliminary injunction. The Company and Santa Fe intend
to defend the action vigorously.
In addition, the Company is subject to various lawsuits relating to routine
matters incidental to its business. The Company does not believe that the
outcome of such litigation, in the aggregate, will have a material adverse
effect on the Company.
Item 2 - Changes in Securities
None
Item 3 - Defaults Upon Senior Securities
None
Item 4 - Submission of Matters to a vote of Security Holders
The Annual Meeting of Shareholders was held on February 17, 1995, wherein the
following matters were submitted to a vote:
The result of the vote taken on the election of Directors was as follows:
Stephen J. Szapor, Jr. For: 5,361,566 Withheld: 110,045
L. Keith Ashworth For: 5,360,587 Withheld: 112,024
The result of the vote taken on the ratification of Deloitte & Touche LLP
as independent auditors for the Company was:
30
<PAGE>
For: 5,404,677 Against: 25,915 Abstain: 42,019
The result of the vote taken regarding the adoption of the 1993 Key
Employee Stock Option Plan was:
For: 4,877,755 Against: 177,750 Abstain: 32,908
(Broker Non-Votes: 384,198)
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
A. Exhibits:
10.108 Letter of Modification and Clarification by and between
Hacienda Hotel Inc., Sahara Gaming Corporation, as
Guarantor, and William G. Bennett dated March 3, 1995
10.109 Assignment and Consent to Assignment of Agreement for
Purchase and Sale dated January 10, 1995 by and among
Hacienda Hotel Inc., Sahara Gaming Corporation, as
Guarantor, and William G. Bennett to Circus Circus
Enterprises, Inc. dated March 5, 1995
10.110 Amendment #2 to Note Purchase Agreement dated March 30,
1995 between Sahara Mission Valley, Inc., Sahara Gaming
Corporation and Hacienda Hotel Inc. and each of Muico &
Co., PaineWebber Managed Investment Trust-PaineWebber High
Income Fund, Equifax Inc. U. S. Retirement Income Plan
Trust and Sherborne Group Master Trust
23 Consent of Deloitte & Touche
27 Financial Data Schedule
B. Reports:
1. The Registrant filed a Current Report on Form 8-K dated January
10, 1995 under Item 5. Other Events, reporting certain
information relating to the sale of assets of the Hacienda Hotel
and Casino.
31
<PAGE>
2. The Registrant filed a Current Report on Form 8-K dated February
7, 1995 under Item 5. Other Events, reporting certain information
relating to the termination of a sale agreement concerning
property in Henderson, Nevada.
3. The Registrant filed a Current Report on Form 8-K dated March 1,
1995 under Item 5. Other Events, reporting certain information
relating to various management changes.
4. The Registrant filed a Current Report on Form 8-K dated March 6,
1995 under Item 5. Other Events, reporting certain information
relating to the assignment of the Agreement relating to the sale
of substantially all of the assets of the Hacienda Hotel and
Casino.
32
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto authorized.
SAHARA GAMING CORPORATION, Registrant
By: /s/ Thomas K. Land
------------------------
Thomas K. Land, Chief Financial Officer
Dated: May 15, 1995
33
<PAGE>
EXHIBIT 10.108
March 3, 1995
William G. Bennett
6170 West Desert Inn Road
Las Vegas, Nevada 89134
Re: Sale of the Hacienda Resort Hotel and Casino
Dear Mr. Bennett:
This letter sets forth certain modifications and/or clarifications to the
Purchase and Sale Agreement ("Agreement") by and between Hacienda Hotel, Inc.
("Seller"), Sahara Gaming Corporation ("Guarantor") and William G. Bennett
("Buyer") entered into on January 10, 1995, pertaining to the sale of the assets
of the Hacienda Resort Hotel and Casino. The parties to the January 10, 1995
Agreement are hereinafter sometimes referred to as "the Parties". The following
modifications and clarifications to the Agreement are being made to facilitate
the contemplated assignment by Buyer of his rights and obligations under the
Agreement to Circus Circus Enterprises, Inc.
A. Clarification.
-------------
1. The Parties agree that all assets to be conveyed to the Buyer or
Buyer's assignee in accordance with the Agreement will be conveyed to
Buyer or Buyer's assignee free and clear of all liabilities, security
interests, liens and encumbrances except for those expressly approved
by Buyer or Buyer's assignee.
2. The parties agree that the title exceptions set forth in Exhibit A,
which is attached hereto and incorporated herein by reference,
constitute reasonable title objections to the Preliminary Title Report
prepared by United Title, dated February 13, 1995, and will be removed
by Seller on or before the Closing. The Parties agree that Buyer or
Buyer's assignee shall have five (5) days from the receipt of an
ALTA/ASCM survey of the real property to notify Seller of any
encroachments or any other matters, which in fact create a material
impairment to the continued operation of the Business on the Real
property (the "Survey Objections"). Buyer or Buyer's
<PAGE>
William G. Bennett
Page 2
March 3, 1995
assignee shall be deemed to have approved all title exceptions, except
for the exceptions set forth in Exhibit A. Except as provided in the
Agreement, Seller shall remove or cure all Survey Objections on or
before Closing. Any title exception in the Preliminary Title Report
approved or deemed approved by Buyer or Buyer's assignee shall
constitute a Permitted Exception. Seller has heretofore disclosed to
Buyer or Buyer's assignee that the Hacienda's variance allowing a 311
parking space reduction expires on or about October, 1995, and that a
renewal of the variance or application for a permit to operate at a
reduced level of parking spaces must be timely filed. Except as
clarified by this paragraph, all other provisions of Article 5 of the
Agreement dealing with the title remain in full force and effect.
3. Seller confirms that as of the effective date of this letter,
Seller has, to the best of its knowledge, provided Buyer or Buyer's
assignee with copies of the contracts and leases affecting the
property that will remain in effect after the Closing. Any contract
that Seller becomes aware of after the date hereof shall be submitted
to Buyer or Buyer's assignee as soon as Seller becomes aware of such
contracts and leases, and Buyer or Buyer's assignee will have fifteen
(15) days to notify Seller of any objections.
4. Seller agrees at Closing to make full and final settlement with
Seller's employees with respect to wages, salaries, bonus payments,
severance pay, union dues, contributions to benefit plans, payroll
taxes, holiday, birthday and other premium pay, and all liabilities
and obligations related to the employment by Seller, to the extent
earned and accrued to the Closing date, or to reduce the purchase
price by such amount as is acceptable to the Buyer or Buyer's
assignee. Buyer or Buyer's assignee assumes no obligations,
responsibilities or liabilities of any kind resulting or relating from
the employment and/or termination by Seller of its employees,
including but not limited to any obligation to continue to employ such
persons. The Parties agree that Seller will take all reasonable steps
to comply with the requirements of the Worker Adjustment and
Retraining Notification Act (29 U.S.C. (S)2101 et.seq.), and the
parties agree that the Closing date will not occur prior to the time
necessary for the Seller to comply with said Act.
<PAGE>
William G. Bennett
Page 3
March 3, 1995
B. Modifications.
-------------
1. The Parties acknowledge that certain information systems relating
to the operation of the property ("Systems") are connected to or
otherwise supported by Sahara Gaming Corporation, via its AS-400, T124
channel phone circuit, data communication lines between the Hacienda
Hotel and Casino and the Sahara Hotel and Casino. Seller agrees to
provide all computer software, hardware, communications interfaces and
other technical peripheral systems and/or technical support ("Computer
Services") necessary to enable Buyer to continue operation of the
property until Buyer is able to convert the Systems to its own
hardware/software platforms. The Parties shall cooperate to develop a
plan to assure the orderly conversion of the Systems as expeditiously
as possible, consistent with the operation of the property. Buyer
agrees to pay its pro-rata share of the monthly communication line
charges between the Hacienda Hotel and Casino and the Sahara Hotel and
Casino, and a reasonable fee to be determined by the Parties on or
before Closing, for the Computer Services until Buyer is able to
convert the Systems to its own hardware/software platforms.
2. The Parties agree that Section 12.2 (n) of the Agreement is hereby
deleted and that pursuant to and in order to comply with NRS 364A.200,
372.620, 612.695, 244.335 and 244.3352, such amounts as Buyer or
Buyer's assignee and Seller reasonably estimate are necessary to
comply with the provisions of the above-mentioned statutes will be
withheld by United Title out of the purchase price payable to Seller
at Closing until such time as Seller furnishes Buyer or Buyer's
assignee and United Title the receipts or certificates provided for in
such statutes, or if not so provided for, such evidence as Buyer or
Buyer's assignee may reasonably require to assure Buyer or Buyer's
assignee that the applicable obligations have been paid. If Seller
does not produce such receipts or certificates within the time period
provided for in such statutes, or if any lien or claim therefore is
asserted against Buyer or Buyer's assignee or the property, United
Title shall pay such withheld sums to the appropriate authority. Buyer
or Buyer's assignee and Seller shall execute mutual escrow
instructions to carry out the provisions of this paragraph, and to
authorize United Title to deposit such withheld amounts in an interest
bearing account for the benefit of Seller.
<PAGE>
William G. Bennett
Page 4
March 3, 1995
3. Seller and Buyer or Buyer's assignee designate United Title as the
"Reporting Person" for the transaction pursuant to Section 6045(e) of
the Internal Revenue Code.
4. The Parties agree that before destroying any files, records or
information of Seller with respect to the property, Seller shall
notify Buyer or Buyer's assignee and Buyer or Buyer's assignee may, at
its sole expense, copy and retain same. Buyer or Buyer's assignee
shall be entitled at all reasonable times to inspect and make copies
of such files, records and information maintained by the Seller with
respect to the property.
5. The Parties agree that references to Buyer's "Guarantor" are
inapplicable and are deleted.
6. The Parties agree that the notice provision of the Agreement is
amended to provide that notices to Buyer shall be as follows:
"Circus Circus Enterprises, Inc., 2880 Las Vegas Boulevard South, Las
Vegas, Nevada 89109, Attention: Mike Sloan, with copies to Lionel,
Sawyer & Collins, 300 South Fourth Street, Suite 1700, Las Vegas,
Nevada 89101, Attention: Jeffrey P. Zucker."
7. The Parties agree that Exhibits "E", "F", "H", "I", "K", and "M"
shall be amended to read as Exhibits "E", "F", "H", "I", "K" and "M"
attached hereto.
8. The Parties agree that except as amended or clarified hereby, the
Agreement shall remain unmodified and in full force and effect. To the
extent of any conflict between the Agreement and this letter, the
terms of this letter shall control.
Sincerely yours,
/s/ PAUL W. LOWDEN
Paul W. Lowden
AGREED AND CONSENTED TO
/s/ WILLIAM G. BENNETT
- - ----------------------------
William G. Bennett
<PAGE>
EXHIBIT 10.109
ASSIGNMENT AND CONSENT TO ASSIGNMENT
For good and valuable consideration, the sufficiency of which is
acknowledged, WILLIAM G. BENNETT ("Bennett"), Buyer under an Agreement for the
Purchase and Sale of the Hacienda Hotel & Casino among the Hacienda Hotel, Inc.
("Hacienda"), Sahara Gaming Corporation ("Sahara") and Bennett dated January 10,
1995 (the "Agreement"), hereby assigns all right, title and interest in and to
such agreement to Circus Circus Enterprises, Inc. ("Circus Circus").
Hacienda, a Nevada corporation, the Seller under the Agreement, and Sahara,
a Nevada corporation, Guarantor under the Agreement, hereby consent to the
foregoing Assignment. In acknowledging and consenting to the foregoing
Assignment, the undersigned President of Hacienda and Sahara represents that he
has full corporate authority to consent to the Assignment from Bennett to Circus
Circus.
Hacienda and Sahara represent and warrant to Circus Circus that attached
hereto and incorporated herein by reference is a true, correct and complete copy
of the Agreement.
Circus Circus, by acceptance of this Agreement, hereby acknowledges its
obligations to perform as Buyer under the Agreement and the provisions of that
certain Letter Agreement dated March 3, 1995.
Bennett represents, acknowledges and confirms that to the best of his
knowledge, he has fully and faithfully performed as the Buyer pursuant to the
Agreement. Similarly, Sahara and Hacienda represent, acknowledge and confirm
that to the best of their knowledge, Hacienda has fully and faithfully performed
as the Seller pursuant to the Agreement.
Circus Circus represents, acknowledges and confirms that it has performed
due diligence in anticipation of performing as the Buyer's assignee pursuant to
the Agreement, and is unaware of any breach and/or violation or default of any
terms and/or conditions of the Agreement.
DATED this 5th day of March, 1995.
HACIENDA HOTEL & CASINO
By /s/ PAUL LOWDEN
-----------------------
Paul Lowden, President
SAHARA GAMING CORPORATION
By /s/ PAUL LOWDEN
-----------------------
Paul Lowden, President
/s/ WILLIAM G. BENNETT
-----------------------
William G. Bennett
ACCEPTED AND APPROVED BY:
CIRCUS CIRCUS ENTERPRISES, INC.
By /s/ CLYDE TURNER
---------------------
Clyde Turner
<PAGE>
EXHIBIT 10.110
AMENDMENT #2 TO NOTE PURCHASE AGREEMENT
---------------------------------------
This Amendment #2 to Note Purchase Agreement (this "Amendment"), dated
---------
as of March 30, 1995, among Sahara Mission Valley Inc., a Nevada corporation
(the "Company"), Sahara Gaming Corporation, a Nevada corporation (the
-------
"Guarantor"), and Hacienda Hotel Inc, a Nevada corporation ("Hacienda Inc."), on
---------
the one hand and each of Muico & Co. ("Muico"), PaineWebber Managed Investments
-----
Trust-PaineWebber High Income Fund ("PaineWebber"), Equifax, Inc. U.S.
-----------
Retirement Income Plan Trust ("Equifax") and Sherborne Group Master Trust
-------
("Sherborne" and collectively with Muico, PaineWebber and Equifax, the
- - -----------
"Noteholders") on the other, supplements and amends the Note Purchase Agreements
- - ------------
dated as of March 31, 1994, as amended by Amendment #1 thereto, among the
Company and the Guarantor on the one hand and each of Muico and PaineWebber and
Equifax and Sherborne, as assignees of Cerberus Partners, on the other (the
"Note Purchase Agreement"). Capitalized terms used herein without definition
- - ------------------------
shall have the meanings assigned such terms in the Note Purchase Agreement.
RECITALS
--------
WHEREAS, pursuant to the terms of the Note Purchase Agreement, the
Company issued and sold $15,000,000 aggregate principal amount of its 12%
Convertible First Mortgage Notes Due 1995 (the "Notes") to the Noteholders.
-----
WHEREAS, the parties to the Note Purchase Agreement desire to amend
the Note Purchase Agreement to extend the Maturity Date of the Notes upon the
terms set forth herein.
NOW, THEREFORE, THE PARTIES HERETO AGREE AS FOLLOWS:
AGREEMENT
---------
1. Amendments.
(a) Section 1.1 of the Note Purchase Agreement is hereby amended to
read in its entirety as follows:
1.1 Description of the Notes. The Company will authorize the
------------------------
issuance and sale of $15,000,000 aggregate principal amount of its 12%
Convertible First Mortgage Notes Due 1995 (the "Notes"), to be dated
-----
the date of issuance. The Notes shall bear interest on the
outstanding principal balance thereof until paid at a rate per annum
equal to 12%. Except as otherwise provided in Article II and in this
Section 1.1, the entire $15,000,000 aggregate principal amount of the
Notes, together with all accrued and unpaid interest thereon, shall be
due and payable on the Maturity Date, provided that the Company may
from time to time, at its option, pay any interest that has accrued
and remains unpaid as of the date of such payment; and, provided
further, that the Company shall pay interest monthly in arrears at a
rate equal to 12% per annum from April 1, 1995 to the Maturity Date on
the unpaid principal amount of the Notes plus all accrued and unpaid
interest thereon as of March 31, 1995 (the "Extension Interest
Payments"). The Extension Interest Payments shall be made on the
fifth day of each month commencing on May 5, 1995 and continuing until
the Maturity Date. Interest on the Notes shall
<PAGE>
be computed based on a 360-day year and paid for the actual number of
days elapsed (including the date of issuance and excluding the date of
payment).
(b) The second sentence of Section 1.3 of the Note Purchase Agreement
is hereby amended to read in its entirety as follows:
In addition, pursuant to Article VIII, the Guarantor and Hacienda Inc.
are guaranteeing, for the benefit of the holders of the Notes, the
payment of principal of and interest on the Notes and other amounts
owing by the Company to the holders of the Notes in connection
therewith.
(c) Sections 8.4, 8.5 and 8.6 are hereby added to the Note Purchase
Agreement to read in their entirety as follows:
8.4 Hacienda Guaranty. Hacienda Inc. hereby unconditionally
-----------------
guaranties (such guaranty being the "Hacienda Guaranty") to each
-----------------
holder of a Note, irrespective of the validity and enforceability of
this Agreement, the Notes or the Deed of Trust or the obligations of
the Company under this Agreement, the Notes or the other Transaction
Documents, that: (a) the principal of and interest on the Notes will
be paid in full when due, whether at the maturity, by acceleration,
redemption or otherwise, all in accordance with the terms of this
Agreement and the Notes; and (b) in case of any extension of time of
payment or renewal of any Notes, it will be paid in full when due or
performed in accordance with the terms of the extension or renewal,
whether at maturity, by acceleration or otherwise. Failing payment
when due of any amount so guarantied for whatever reason, Hacienda
Inc. shall be obligated to pay the same whether or not such failure to
pay has become an Event of Default which could cause acceleration
pursuant to Section 6.2.
Hacienda Inc. hereby agrees that its obligations with regard to this
Hacienda Guaranty shall be absolute and unconditional, irrespective of
(a) the validity, regularity or enforceability of this Agreement, the
Notes or the other Transaction Documents, (b) the absence of any
action to enforce the same, (c) any waiver or consent by any Holder of
the Notes with respect to any provisions hereof or thereof or of any
other Transaction Document, (d) any delays in obtaining or realizing
upon or failures to obtain or realize upon the Collateral, (e) the
recovery of any judgment against the Company or any other obligor on
the Notes, (f) any other circumstances that might otherwise constitute
a legal or equitable discharge or defense of a guarantor or (g) any
amendment or modification of the Transaction Documents, including any
increase in the Notes, extension of maturity or addition to or release
from the Collateral. The Hacienda Guaranty is a guarantee of a
payment and not of collectibility. Hacienda Inc. hereby waives
diligence, presentment, demand of payment, filing of claims with a
court in the event of insolvency or bankruptcy of the Company or any
other obligor on the Notes, any right to require a proceeding first
against the Company or any other obligor on the Notes, protest, notice
and all demands whatsoever and covenants that this Hacienda Guaranty
will not be discharged except by complete performance of the
obligations contained in this Agreement, the Notes and the Transaction
Documents. Without
2
<PAGE>
limiting any of the provisions of this Section 8.4, Hacienda Inc.
further specifically waives any and all defenses that may be available
to the Company and waives any and all right to require any foreclosure
proceeding with respect to the property secured by the Deed of Trust
or any other Transaction Document prior to the enforcement of the
obligations of Hacienda Inc. hereunder including any "single action"
or "anti-deficiency" law.
If any holder of any Note is required by any court or otherwise to
return to the Company, Hacienda Inc. or any custodian, trustee or
similar official acting in relating to either the Company or Hacienda
Inc., any amount paid by the Company or Hacienda Inc. to such holder,
this Hacienda Guaranty, to the extent theretofore discharged, shall be
reinstated in full force and effect.
Hacienda Inc. further agrees that, as between Hacienda Inc., on the
one hand, and the holder, on the other hand, (i) the maturity of the
obligations guaranteed hereby may be accelerated as provided in
Section 6.2 of this Agreement for the purposes of this Hacienda
Guaranty, notwithstanding any stay, injunction or other prohibition
preventing such acceleration as to the Company or any other obligor on
the Notes of the obligations guaranteed hereby, and (ii) in the event
of any declaration of acceleration of those obligations as provided in
Section 6.2 of this Agreement, those obligations (whether or not due
and payable) will forthwith become due and payable by Hacienda Inc..
Hacienda Inc. hereby irrevocably waives any claim or other rights
which it may now have or hereafter acquire against the Company that
arise from the existence, payment, performance or enforcement of
Hacienda Inc.'s obligations under this Hacienda Guaranty, this
Agreement and the other Transaction Documents, including without
limitation any right of subrogation, reimbursement, exoneration,
indemnification and any right to participate in any claim or remedy of
any holder of Notes against the Company, whether or not such claim,
remedy or right arises in equity or under contract, statute or common
law, including without limitation, the right to take or receive from
the Company, directly or indirectly, in cash or other property or by
set-off or in any other manner, payment or security on account of such
claim or other rights. If any amount shall be paid to Hacienda Inc.
in violation of the preceding sentence and the Notes shall not have
been paid in full, such amount shall have been deemed to have been
paid to Hacienda Inc. for the benefit of, and held in trust for the
benefit of, Holders of the Notes, and shall forthwith be paid to such
Holders to be credited and applied upon the Notes, whether matured or
unmatured, in accordance with the terms of this Agreement. Hacienda
Inc. acknowledges that it will receive direct and indirect benefits
from the financing arrangements contemplated by this Agreement and
that the waiver set forth herein is knowingly made in contemplation of
such benefits.
If any provision of this Hacienda Guaranty shall be invalid, illegal
or unenforceable, the validity, legality, and enforceability of the
remaining provisions shall not in any way be affected or impaired
thereby.
8.5 Effectiveness of Hacienda Guaranty.
----------------------------------
3
<PAGE>
(a) To evidence the Hacienda Guaranty set forth in Section 8.4,
Hacienda Inc. agrees that a notation of the Hacienda Guaranty in
substantially the form included in the form of Note included in
Exhibit B shall be endorsed on each Note and that this Agreement shall
be executed on behalf of Hacienda Inc. by its Chairman of the Board,
its President or one of its Vice Presidents.
(b) Hacienda Inc. agrees that the Hacienda Guaranty set forth in
Section 8.4 will remain in full force and effect and apply to all the
Notes notwithstanding any failure to endorse on each Note a notation
of the Hacienda Guaranty.
(c) The Hacienda Guaranty set forth on any Note may be executed
manually or by facsimile. The delivery of any Note by the Company
shall constitute due delivery of the Hacienda Guaranty set forth in
this Agreement on behalf of Hacienda Inc.
8.6 Information Regarding Company. Hacienda Inc. expressly waives
-----------------------------
any duty which may now or hereafter exist on the part of any of you to
disclose to Hacienda Inc. any matter related to the business,
operations, character, collateral, credit, condition (financial or
otherwise), income or prospects of the Company or its properties or
management, whether now or hereafter known by any of you. Hacienda
Inc. represents, warrants and agrees that it assumes sole
responsibility for obtaining from the Company all information
concerning this Agreement and all other Transaction Documents and all
other information as to the Company and its properties or management
as Hacienda Inc. deems necessary or desirable.
(d) Article X of the Note Purchase Agreement is hereby amended to add
the following definitions:
"Hacienda Inc." shall mean Hacienda Hotel Inc., a Nevada corporation
and a wholly owned subsidiary of the Guarantor.
"Hacienda Guaranty" shall have the meaning set forth in Section 8.4.
(e) The definition of "Maturity Date" included in Article X of the
Note Purchase Agreement is hereby amended to read in its entirety as
follows:
"Maturity Date" shall mean the earlier of (i) September 30, 1995 or
(ii) five days after the consummation of a sale of substantially all
of the assets of the Hacienda Resort Hotel & Casino.
(f) Section 11.1 is hereby amended to read in its entirety as follows:
11.1 Notices. All notices, requests and demands hereunder shall be
-------
sufficient if given in writing or by telegraph, telex or telecopy.
Any notice by the Company, the Guarantor or Hacienda Inc. to you shall
be addressed to you at your respective addresses set forth on your
respective signature pages to this Agreement (or such other address as
any Purchaser shall provide by notice given in accordance with this
Section 11.1), and any notice by you to the Company, the Guarantor or
Hacienda Inc. shall be addressed as follows (or to such other address
the
4
<PAGE>
Company, the Guarantor or Hacienda Inc. shall provide you by
notice given in accordance with this Section 11.1):
To the Company, Sahara Gaming Corporation
the Guarantor or 2535 Las Vegas Boulevard
Hacienda Inc.: South Las Vegas, Nevada 89109
Attention: Chief Operating Officer
with a copy in each case to: Gibson, Dunn & Crutcher
333 South Grand Avenue
Los Angeles, CA 90071
Attention: Karen E. Bertero
(g) The first sentence of Section 11.2 is hereby amended to read in
its entirety as follows:
This Agreement shall be binding upon you, the Company, the Guarantor
and Hacienda Inc. and your respective successors and permitted
assigns.
(h) The first clause of the first sentence of Section 11.8 is hereby
amended to read in its entirety as follows:
This Agreement may be amended with the written consent of the Company,
the Guarantor, Hacienda Inc. and the holders of a majority in
principal amount of the Notes outstanding and purchased hereunder at
the time such action is taken;
(i) The introductory clause of Section 11.10 is hereby amended to read
in its entirety as follows:
11.10 Venue; Service of Process. Each of the Company, the Guarantor
-------------------------
and Hacienda Inc.:
(j) The last paragraph of Section 11.10 is hereby amended to read in
its entirety as follows:
Each of the Company, the Guarantor and Hacienda Inc. consents to
service of process in any such proceeding in any manner permitted by
the General Laws of the State of New York and agrees that service of
process by registered or certified mail, return receipt required, at
its address specified in or pursuant to Section 11.1 is reasonably
calculated to give actual notice.
(k) Section 11.11 of the Note Purchase Agreement is hereby amended to
read in its entirety as follows:
11.11 WAIVER OF TRIAL BY JURY. EACH OF THE COMPANY, THE GUARANTOR,
-----------------------
HACIENDA INC. AND YOU HEREBY WAIVES ITS RIGHT TO A TRIAL BY JURY IN
CONNECTION WITH THIS AGREEMENT, THE NOTES AND ANY OTHER TRANSACTION
DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
5
<PAGE>
Each of the Company, the Guarantor and Hacienda Inc. acknowledges that
it has been informed by you that the provisions of this Section 11.11
constitute a material inducement upon which you have relied and will
rely in entering into this Agreement and any other Transaction
Document, and that it has reviewed the provisions of this Section
11.11 with its counsel. You or the Company, the Guarantor or Hacienda
Inc. may file an original counterpart or a copy of this Section 11.11
with any court as written evidence of the consent of any parties
hereto to the waiver of their rights to trial by jury.
2. Miscellaneous Provisions.
(a) Upon execution and delivery of this Amendment, the Note Purchase
Agreement shall be modified and amended in accordance with the terms of this
Amendment, and all the terms and conditions of both shall be read together as
though they constitute one instrument except that, in case of conflict, the
provisions of this Amendment shall control.
(b) This Amendment shall bind and inure to the benefit of any
successors or assigns of the parties hereto.
(c) This Amendment shall be governed and construed in accordance with
the laws of the State of New York.
6
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Amendment to be
executed as of the date first written above.
SAHARA MISSION VALLEY INC.,
a Nevada corporation
By /s/ THOMAS K. LAND
-------------------------------------------
Name: Thomas K. Land
Title: Senior Vice President
SAHARA GAMING CORPORATION,
a Nevada corporation
By /s/ THOMAS K. LAND
-------------------------------------------
Name: Thomas K. Land
Title: Senior Vice President
HACIENDA HOTEL INC.,
a Nevada corporation
By /s/ THOMAS K. LAND
-------------------------------------------
Name: Thomas K. Land
Title: Senior Vice President
MUICO & CO., as nominee for each of the funds
listed below
By /s/ NICHOLAS A. PERAZZO
-------------------------------------------
Name: Nicholas A. Perazzo
Title: Assistant Vice President
The undersigned funds direct MUICO & CO.
to enter into the foregoing Amendment on
behalf of the respective funds:
PUTNAM HIGH YIELD TRUST ($ 4,925,000)
By /s/ ROBERT M. PAINE
-------------------------------------------
Name: Robert M. Paine
Title: Vice President
7
<PAGE>
PUTNAM HIGH YIELD ($ 1,000,000)
ADVANTAGE FUND
By /s/ ROBERT M. PAINE
-------------------------------------------
Name: Robert M. Paine
Title: Vice President
PUTNAM CAPITAL ($ 540,000)
MANAGER TRUST - PMC
HIGH YIELD FUND
By /s/ ROBERT M. PAINE
-------------------------------------------
Name: Robert M. Paine
Title: Vice President
PUTNAM MANAGED HIGH ($ 500,000)
YIELD TRUST
By /s/ ROBERT M. PAINE
-------------------------------------------
Name: Robert M. Paine
Title: Vice President
PUTNAM MASTER INCOME ($ 375,000)
TRUST
By /s/ ROBERT M. PAINE
-------------------------------------------
Name: Robert M. Paine
Title: Vice President
PUTNAM PREMIER ($ 950,000)
INCOME TRUST
By /s/ ROBERT M. PAINE
-------------------------------------------
Name: Robert M. Paine
Title: Vice President
PUTNAM DIVERSIFIED ($ 1,710,000)
INCOME TRUST
By /s/ ROBERT M. PAINE
-------------------------------------------
Name: Robert M. Paine
Title: Vice President
8
<PAGE>
PUTNAM CAPITAL ($ 100,000)
MANAGER TRUST -
PUTNAM DIVERSIFIED
INCOME FUND
By /s/ ROBERT M. PAINE
-------------------------------------------
Name: Robert M. Paine
Title: Vice President
(Total) ($10,000,000)
9
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Amendment to be executed
as of the date first written above.
SAHARA MISSION VALLEY INC.,
a Nevada corporation
By /s/ THOMAS K. LAND
-------------------------------------------
Name: Thomas K. Land
Title: Senior Vice President
SAHARA GAMING CORPORATION,
a Nevada corporation
By /s/ THOMAS K. LAND
-------------------------------------------
Name: Thomas K. Land
Title: Senior Vice President
HACIENDA HOTEL INC., a Nevada corporation
By /s/ THOMAS K. LAND
-------------------------------------------
Name: Thomas K. Land
Title: Senior Vice President
PAINEWEBBER MANAGED INVESTMENTS
TRUST--PAINEWEBBER HIGH INCOME FUND
By /s/ TERESA M. BOYLE
-------------------------------------------
Name: Teresa M. Boyle
Title: Vice President
10
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Amendment to be
executed as of the date first written above.
SAHARA MISSION VALLEY INC.,
a Nevada corporation
By /s/ THOMAS K. LAND
-------------------------------------------
Name: Thomas K. Land
Title: Senior Vice President
SAHARA GAMING CORPORATION,
a Nevada corporation
By /s/ THOMAS K. LAND
-------------------------------------------
Name: Thomas K. Land
Title: Senior Vice President
HACIENDA HOTEL INC., a Nevada corporation
By /s/ THOMAS K. LAND
-------------------------------------------
Name: Thomas K. Land
Title: Senior Vice President
SHERBORNE GROUP MASTER TRUST
By: KEYSTONE FIXED INCOME ADVISERS, INC.,
as Investment Manager
By /s/ JAMES R. MCCALL
-------------------------------------------
Name: James R. McCall
Title: President
EQUIFAX, INC. U.S. RETIREMENT
INCOME PLAN TRUST
By: KEYSTONE FIXED INCOME ADVISERS, INC.,
as Investment Manager
By /s/ JAMES R. MCCALL
-------------------------------------------
Name: James R. McCall
Title: President
11
<PAGE>
EXHIBIT 23
Sahara Gaming Corporation
Las Vegas, Nevada
We have made a review, in accordance with Statements on Standards for Accounting
and Review Services issued by the American Institute of Certified Public
Accountants, of the unaudited interim financial information of Sahara Gaming
Corporation and subsidiaries for the periods ended March 31, 1995 and 1994, as
indicated in our report dated May 11, 1995 (which includes an explanatory
paragraph regarding the Company's ability to repay certain indebtedness);
because we did not perform an audit, we expressed no opinion on that
information.
We are aware that our report referred to above, which is included in your
Quarterly Report on Form 10-Q for the quarter ended March 31, 1995 is
incorporated by reference In Registration Statement No. 33-44700 on Form S-8 and
in post-effective Amendment No. 1 to Registration Statement No. 33-7053 on Form
S-8.
We also are aware that the aforementioned report, pursuant to Rule 436(c) under
the Securities Act of 1933, is not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that act.
DELOITTE & TOUCHE LLP
Las Vegas, Nevada
May 11, 1995
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> MAR-31-1995
<CASH> 38,534,261
<SECURITIES> 0
<RECEIVABLES> 10,121,190
<ALLOWANCES> 0
<INVENTORY> 2,585,712
<CURRENT-ASSETS> 58,360,034
<PP&E> 461,501,780
<DEPRECIATION> 136,796,100
<TOTAL-ASSETS> 470,744,276
<CURRENT-LIABILITIES> 81,217,307
<BONDS> 356,596,752
<COMMON> 61,944
0
16,848,697
<OTHER-SE> 13,793,241
<TOTAL-LIABILITY-AND-EQUITY> 470,744,276
<SALES> 0
<TOTAL-REVENUES> 125,973,690
<CGS> 0
<TOTAL-COSTS> 70,774,976
<OTHER-EXPENSES> 41,770,718
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,369,767
<INCOME-PRETAX> (8,941,771)
<INCOME-TAX> (2,719,000)
<INCOME-CONTINUING> (6,222,771)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,222,771)
<EPS-PRIMARY> (1.11)
<EPS-DILUTED> 0
</TABLE>
