<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: DECEMBER 31, 1994
------------------------------
[ ] 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 Identification Number)
organization)
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 February 10, 1995
- ------------------------------------ ------------------------------------
Amount Outstanding Date
<PAGE>
SAHARA GAMING CORPORATION
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Condensed Financial Statements
Balance sheets at December 31, 1994
(unaudited) and September 30, 1994 2
Statements of Operations for the three months
ended December 31, 1994 and 1993 (unaudited) 3
Statement of Changes in Stockholders' Equity
for the three months ended December 31, 1994
(unaudited) 4
Statements of Cash Flows for the three months
ended December 31, 1994 and 1993 (unaudited) 5
Notes to Consolidated Condensed Financial
Statements (unaudited) 6
Independent Accountants' Review Report 13
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 14
PART II. OTHER INFORMATION 22
</TABLE>
1
<PAGE>
Sahara Gaming Corporation and Subsidiaries
Consolidated Condensed Balance Sheets
<TABLE>
<CAPTION>
December 31, September 30,
ASSETS 1994 1994
- -------------------------------------------- ------------ -------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and short-term investments $38,802,353 $55,582,503
Accounts receivable, net 8,442,689 7,907,050
Accounts receivable, officer 509,728 500,525
Inventories 2,775,545 2,787,397
Prepaid expenses & other 7,361,456 7,323,786
------------ ------------
Total current assets 57,891,771 74,101,261
Restricted cash 21,303,159 23,079,791
Property and equipment, net 325,938,013 314,470,366
Goodwill 48,449,091 48,835,414
Other assets 18,986,940 18,068,605
------------ ------------
Total assets $472,568,974 $478,555,437
============ ============
LIABILITIES and STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Current portion of long-term debt $23,373,901 $23,238,239
Accounts payable 12,074,804 6,790,785
Interest payable 5,385,111 11,589,574
Accrued and other liabilities 14,902,503 15,970,810
------------ ------------
Total current liabilities 55,736,319 57,589,408
Deferred income taxes 3,995,335 4,945,335
Long-term debt - less current portion 378,177,985 379,092,885
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 16,201,715 16,201,715
Additional paid-in capital 51,513,504 51,513,504
Accumulated deficit (33,030,054) (30,761,580)
------------ ------------
Total 34,747,109 37,015,583
Less treasury stock - 4,875 shares, at cost (87,774) (87,774)
------------ ------------
Total stockholders' equity 34,659,335 36,927,809
------------ ------------
Total liabilities and stockholders' equity $472,568,974 $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
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
December 31, 1994 December 31, 1993
----------------- -----------------
(Unaudited) (Unaudited)
<S> <C> <C>
Revenues:
Casino $38,620,676 $37,542,078
Hotel 9,625,342 9,672,886
Food and beverage 7,285,647 7,850,733
Other revenues 6,108,249 6,065,180
----------- -----------
Total revenues 61,639,914 61,130,877
----------- -----------
Operating expenses:
Casino 17,051,723 17,218,159
Hotel 4,125,914 4,111,922
Food and beverage 9,056,991 9,230,100
Other operating expenses 3,390,404 3,410,303
Selling, general & administrative 7,363,443 6,967,533
Utilities & property expenses 6,001,063 5,696,660
Depreciation & amortization 6,776,382 6,620,563
----------- -----------
Total operating expenses 53,765,920 53,255,240
----------- -----------
Operating income 7,873,994 7,875,637
Interest expense 11,092,468 9,502,250
----------- -----------
Net loss before income tax benefit (3,218,474) (1,626,613)
Federal income tax (benefit) (950,000) (425,000)
----------- -----------
Net loss (2,268,474) (1,201,613)
Dividends on preferred shares 324,034 299,600
----------- -----------
Net loss applicable to common shares ($2,592,508) ($1,501,213)
=========== ===========
Average common shares outstanding 6,189,558 6,189,558
=========== ===========
Loss per common share ($0.42) ($0.24)
=========== ===========
</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 (2,268,474) (2,268,474)
------- ----------- ----------- ------------ -------- -----------
Balances, December 31, 1994 $61,944 $16,201,715 $51,513,504 ($33,030,054) ($87,774) $34,659,335
======= =========== =========== ============= ========= ============
</TABLE>
See the accompanying Notes to Consolidated Condensed Financial Statements.
4
<PAGE>
Sahara Gaming Corporation and Subsidiaries
Consolidated Condensed Statements of Cash Flows
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
December 31, 1994 December 31, 1993
----------------- -----------------
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Cash and short-term investments
provided by operations $ 4,992,421 $ 5,617,507
Increase (decrease) in accounts payable 5,284,019 (810,381)
Decrease in inventories 11,852 38,270
Decrease(Increase) in prepaid expenses & other 57,039 (60,722)
Decrease in deferred income taxes (950,000) (425,000)
Decrease in interest payable (6,204,463) (3,898,331)
Increase (decrease) in other current liabilities (1,610,449) 672,855
Increase in accounts receivable, net (535,639) (33,092)
Increase in due from officer (9,203) (48,991)
Increase in other assets (1,443,523) (296,097)
------------ ------------
Net cash provided by (used in) operating activities (407,946) 756,018
------------ ------------
Cash flows from investing activities:
Increase (decrease) in restricted cash 1,681,925 (35,865,417)
Capital expenditures (15,793,062) (9,932,950)
------------ ------------
Net cash used in investing activities (14,111,137) (45,798,367)
------------ ------------
Cash flows from financing activities:
Cash proceeds of long-term debt 0 115,000,000
Cash paid on long-term debt (2,261,067) (45,798,505)
Loan issue cost 0 (4,050,312)
------------ ------------
Net cash provided by (used in) financing activities (2,261,067) 65,151,183
------------ ------------
Increase (decrease) in cash and short-term investments (16,780,150) 20,108,834
Cash and short-term investments,
beginning of year 55,582,503 29,177,866
------------ ------------
Cash and short-term investments,
end of year $ 38,802,353 $ 49,286,700
============ ============
</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 month period ended December 31, 1994
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
December 31, 1994, the results of its operations for the three month period
ended December 31, 1994 and 1993, the changes in stockholders' equity for the
three month period ended December 31, 1994, and cash flows for the three month
periods ended December 31, 1994 and 1993.
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.
Capitalization of Interest: Interest costs are capitalized on funds disbursed
during the development phase of projects.
Reclassifications: Certain balances in the 1993 financial statements have been
reclassified to conform with current year classifications.
6
<PAGE>
NOTE 3 - CASH AND SHORT-TERM INVESTMENTS
Approximately $5.1 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 $22.6 million of the Company's consolidated cash and
short term investments is held by SFHI and is subject to certain restrictions
and limitations on its use, 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
Net proceeds of $32.0 million from the offering of the 11% Notes were loaned to
the Company's indirect wholly-owned subsidiary, Sahara Parkville, Inc.
("Parkville, Inc."), and are restricted for use in connection with the
development and construction of a proposed dockside riverboat gaming facility in
Parkville, Missouri. As of December 31, 1994, 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.
(See Note 8)
NOTE 5 - PROPERTY, PLANT AND EQUIPMENT, NET
In March 1994, the Company, through a wholly-owned subsidiary, purchased for
approximately $15.1 million a 40-acre parcel of land located in southeast Las
Vegas, for future development of a proposed casino hotel complex. The purchase
was financed with the proceeds from a private placement of $15 million principal
amount of 12% First Mortgage Notes due March 31, 1995 ("12% Notes") issued by a
subsidiary of the Company and guaranteed by the Company. As of December 31,
1994, the Company had recorded approximately $1.2 million in preliminary
engineering and development costs and $1.7 million representing capitalized
interest. (See Notes 6 and 9)
During the three-month period ended December 31, 1994, Sahara Parkville, Inc.
capitalized $1.2 million in connection with the development of the proposed
dockside riverboat gaming facility. As of December 31, 1994, the Company had
incurred $14.8 million in developing the proposed Parkville project. Of this
amount, approximately $8.0 million was used to purchase a riverboat for the
site, approximately $3.1 million was used
7
<PAGE>
for preliminary engineering and development expenses and approximately $3.7
million represents capitalized interest costs. (See Notes 4 and 9)
The Company completed construction in December 1994 of an expansion of the Santa
Fe, including the addition of three themed restaurants, approximately 300 new
slot machines, a dedicated bingo room, race book and other public areas. The
cost of construction and equipment was approximately $14.4 million. During the
three-month period ended December 31, 1994, the Company recorded approximately
$12.0 million in construction costs associated with the expansion of the Santa
Fe.
The Company completed construction in December 1994 of an expansion of the
Pioneer, including the addition of casino space, the addition of a special
events area and increased administrative and support areas. The cost of
construction and equipment was approximately $4.1 million. During the three-
month period ended December 31, 1994, the Company recorded approximately $2.2
million in construction costs associated with the expansion of the Pioneer.
NOTE 6 - LONG-TERM DEBT
On March 31, 1994, a subsidiary of the Company issued the 12% Notes. The
principal amount of the 12% Notes and all accrued interest is due and payable on
March 31, 1995. The Company is in discussions with the holders of the 12% Notes
regarding a possible extension of the maturity date. The 12% Notes are
guarantied by the Company and are secured by, among other things, a first
priority lien on the real property pursuant to the Deed of Trust relating
thereto. (See Notes 5 and 9)
NOTE 7 - INCOME TAXES
For the three months ended December 31, 1994, a tax benefit of $950,000 was
recognized. All of the benefit was a deferred tax benefit. The tax benefit for
federal income taxes 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 $1,126,466 35
Amortization of goodwill (135,213) (3)
Other (41,253) (1)
---------- --
Benefit for federal income taxes $ 950,000 31
========== ==
</TABLE>
The Company has federal net operating loss credit carryforwards of approximately
$32.0 million expiring at various dates through 2009.
8
<PAGE>
NOTE 8 - SAHARA PARKVILLE, INC.
The development of the proposed Parkville casino is subject to substantial
uncertainties, as discussed below, including the granting of necessary gaming
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.
At the request of the Missouri Gaming Commission ("MGC"), the Company updated
its gaming application in February 1995 and is preparing to submit additional
information required before the MGC will determine whether to commence its
investigation of Parkville Inc. An investigation typically takes at least
several months to complete. No assurance can be given that Parkville Inc. will
be chosen for investigation, or if chosen, will be granted a license.
In order to use the vessel purchased for the Parkville casino, Parkville Inc.
will be required to obtain a gaming license permitting dockside, rather than
"cruising", riverboat gaming. It is the Company's intention to request such a
license in the application process from the MGC. No assurance can be given that
the MGC will grant Parkville Inc. a license for dockside gaming.
If Parkville Inc. is not licensed or if the construction of the proposed
facility is not complete by June 30, 1995, Parkville Inc. will be unable to
commence operations by that date and SFHI will be required under the terms of
the indenture under which the 11% Notes were issued to offer to repurchase that
principal amount of 11% Notes purchasable with the funds remaining in the
Parkville collateral account (See Note 4) and obtained upon disposition of
assets related to the project (unless waivers are obtained from the holders of
the 11% Notes). Based on current development and construction plans, the
Company does not believe the facility can be completed and operating before June
30, 1995. Therefore, the Company currently intends to seek approval from the
holders of the 11% Notes for, among other things, an extension of the date by
which operations of the proposed Parkville casino must be commenced before
Parkville Inc. is required to commence the repurchase offer. No assurance can
be given that if such approval is sought that it will be obtained. In the event
Parkville Inc. is required to commence a repurchase offer, the holders of
warrants to acquire additional 11% Notes will be entitled to acquire for no
additional consideration up to an additional $11.5 million principal amount of
the 11% Notes.
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.
9
<PAGE>
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 originally budgeted project cost was
expected to be financed through equipment financing and an equity contribution
from SFHI. 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
In December 1994, the Company entered into an agreement to sell the real
property located in Henderson, Nevada purchased for possible development of a
hotel/casino. (See Note 5) The agreement was subject to several contingencies.
In February 1995, the purchaser terminated the agreement in accordance with its
terms.
The 12% Notes issued in connection with the purchase of the property mature on
March 31, 1995. The Company is in discussions with the holders of the 12% Notes
regarding a possible extension of the maturity date. No assurance can be given
that the Company will be successful in obtaining an extension of the maturity
date. If the Company is unable to obtain a satisfactory extension, additional
financing or a sale of the property would be required to satisfy the 12% Notes.
If the Company is not successful in that regard before March 31, 1995, Sahara
Gaming would not have sufficient cash resources to repay the 12% Notes and would
default in the payment thereof, which would result in cross-defaults under
substantially all of the Company's long-term indebtedness. Assuming an extension
is negotiated, the Company is evaluating the possibility of pursuing the
development and financing for the proposed project.
10
<PAGE>
NOTE 10 - SUPPLEMENTAL INFORMATION
Supplemental statement of cash flows information for the three month period
ended December 31, 1994 and 1993 is presented below:
<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
Operating Activities:
Cash paid during the period
for interest, net of amount
capitalized of $1,804,035
for 1994 $16,812,419 $13,262,042
=========== ===========
Investing Activities:
Purchase accounting adjustments
to property due to adoption of
SFAS 109 $11,062,602
===========
</TABLE>
11
<PAGE>
NOTE 11-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 December 31, 1994 and December 31, 1993 were as set forth in
the following table (dollars in thousands):
<TABLE>
<CAPTION>
Year SNC HHI PHI SFHI Other TOTAL
---- -------- ------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating revenues 1994 $20,537 $13,488 $11,408 $16,195 $12 $61,640
======== ======= ======== ======== ======= ========
1993 $20,884 $13,100 $12,714 $14,492 ($59) $61,131
======== ======= ======== ======== ======= ========
Operating income (loss) 1994 $1,538 $1,151 $1,797 $3,660 ($272) $7,874
======== ======= ======== ======== ======= ========
1993 $1,313 $1,426 $2,179 $3,319 ($181) $7,876
======== ======= ======== ======== ======= ========
Depreciation and Amortization 1994 $2,050 $1,267 $1,251 $2,036 $172 $6,776
======== ======= ======== ======== ======= ========
1993 $2,034 $1,265 $1,360 $1,800 $162 $6,621
======== ======= ======== ======== ======= ========
Capital Expenditures 1994 $430 $161 $1,453 $13,078 $671 $15,793
======== ======= ======== ======== ======= ========
1993 $657 $136 $153 $8,987 $0 $9,933
======== ======= ======== ======== ======= ========
Identifiable Assets 1994 $107,203 $79,781 $100,791 $148,586 $36,208 $472,569
======== ======= ======== ======== ======= ========
1993 $110,351 $83,782 $105,243 $151,970 $19,730 $471,076
======== ======= ======== ======== ======= ========
</TABLE>
12
<PAGE>
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
Sahara Gaming Corporation:
We have reviewed the accompanying consolidated condensed balance sheet of Sahara
Gaming Corporation and subsidiaries as of December 31, 1994, the related
consolidated condensed statements of operations and of cash flows for the three-
month periods ended December 31, 1994 and 1993, and of stockholders' equity for
the three-month period ended December 31, 1994 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 Note 9, the Company's agreement to sell certain land in
Henderson, Nevada was terminated in February 1995. The current portion of long-
term debt includes $15,000,000 borrowed to acquire the land through a private
placement of 12% Notes (the "Notes") which mature in March 1995. Management of
the Company is currently negotiating to obtain an extension of the Notes. If the
Company is unable to obtain a satisfactory extension, additional financing or
the sale of the property would be required to repay the Notes in March 1995. A
nonpayment default 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 obtain an extension.
DELOITTE & TOUCHE LLP
Las Vegas, Nevada
February 10, 1995
13
<PAGE>
SAHARA GAMING CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
Three Months Ended December 31, 1994 and 1993
- ---------------------------------------------
Revenues increased $500,000 to $61.6 million for the quarter ended December 31,
- --------
1994 from $61.1 million in the prior year quarter. The Santa Fe Hotel and
Casino ("Santa Fe") and the Hacienda Hotel and Casino ("Hacienda") recorded
revenue increases of $1.7 million, or 11.8%, and $400,000, or 3.0%,
respectively, when comparing the 1994 period with the prior year. The Pioneer
Hotel and Gambling Hall ("Pioneer") and the Sahara Hotel and Casino ("Sahara")
reported decreases of $1.3 million, or 10.3%, and $300,000, or 1.7%,
respectively, when comparing the two periods.
The Company's casino revenues totalled $38.6 million, a $1.1 million, or 2.9%,
increase over the prior year's quarter. A $1.2 million, or 11.1%, increase in
casino revenues at the Santa Fe and a $900,000, or 11.4%, increase in casino
revenues at the Sahara in the current year's quarter over that of the prior year
were partially offset by a decrease in casino revenues at the Pioneer of $1.1
million, or 9.9%, when comparing the two fiscal periods. The Hacienda reported
casino revenues for the 1994 three month period that were comparable to the 1993
period. Management believes that the increase in casino revenues at the Santa
Fe is primarily due to the property's growing popularity with the residents of
northwest Las Vegas and the continuing growth of the local population. Slot
machine handle and revenues were higher at the Sahara for the fiscal 1994
quarter. Although the Sahara recorded a decrease in table game handle of 3.4%,
an increase in the table game hold percentage resulted in a net increase in
table game win of 11.7%. The decrease in casino revenues at the Pioneer is
believed to be primarily due to the construction of the expansion which was
completed in December 1994, coupled with a decreased growth rate in the Laughlin
gaming market and continued increase in the competitive environment in
Laughlin.
The Company's hotel revenues decreased $50,000, or 0.5%, during the three months
ended December 31, 1994 from the corresponding 1993 period on a net decrease of
9,921 occupied room nights. Contributing to this decrease were approximately
8,600 fewer room nights recorded at the Sahara in the period. The decrease at
the Sahara is believed to be the result of reduced convention business in the
period. Offsetting the decrease in revenues at the Sahara was an increase at
the Hacienda, primarily the result of an increase in the average room rate
associated with tour and travel contracts. Room occupancy percentages were 84.4%
at the Sahara, 92.4% at the
14
<PAGE>
Hacienda, 95.9% at the Santa Fe and 80.3% at the Pioneer for the three months
ended December 31, 1994. This compares to 88.9%, 92.5%, 93.2% and 85.4% for
each of the hotel/casinos for the quarter ended December 31, 1993, respectively.
The Company's food and beverage revenues decreased $600,000, or 7.2%, primarily
at the Sahara. The change is considered to be primarily the result of the fewer
occupied room nights and a decrease in banquet functions at the Sahara related
to the reduced convention business.
Operating expenses increased $500,000, or 1.0%, in the current quarter when
- ------------------
compared to the same prior year period. The Santa Fe and Hacienda recorded
operating expense increases of $1.2 million and $700,000, respectively, when
compared to the prior year period. The Sahara and Pioneer reported decreases of
$600,000 and $900,000, respectively, compared to the prior year period.
Casino expenses were $200,000, or 1.0%, lower for the Company's current three
month period, with the Sahara and Hacienda each reporting a relatively small
increase and decrease, respectively. The Santa Fe reported an increase of
$600,000, or 14.2%, primarily due to the increase in the Santa Fe's business
volume. Casino expenses at the Pioneer decreased $800,000, or 13.4%, for the
quarter ended December 31, 1994 over the comparable 1993 period, primarily
associated with the decrease in casino revenues.
Selling, general and administrative expenses for the Company increased $400,000,
or 5.7%, in the 1994 period. Increases of $200,000, or 16.3%, and $300,000, or
19.4%, 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 $300,000 or 41.9% and was primarily attributed to payroll and
promotional costs. The increases described above were offset by a decrease of
$600,000, or 19.1%, at the Sahara related to reduced advertising costs in the
period.
Depreciation and amortization expense for the Company increased $200,000, or
2.4%, in the quarter ended December 31, 1994 as compared to the prior year
period, with an increase of $200,000, or 13.1%, at the Santa Fe, primarily due
to increased depreciation on an expansion project, partially offset by a
decrease of $100,000, or 8.0%, at the Pioneer, due to decreased amortization of
intangible property.
Operating income for the three months ended December 31, 1994 was $7.9 million,
- ----------------
the same as in the 1993 period. Period to period changes for the four
hotel/casinos were as follows: the Santa Fe increased operating income to $3.7
million in the current period as compared to $3.1 million in the prior year
period, a 16.6% increase; the Sahara had operating income of $1.3 million for
the 1994 period as compared to $1.1 million for the quarter in 1993, a 21.9%
increase; the Pioneer experienced operating income of $1.8 million in 1994
compared to $2.2 million in 1993, a 17.5% decrease; and the Hacienda's
operating income was $1.2 million in the three month period of this year
compared to income of $1.4 million last year, a 19.3% decrease.
15
<PAGE>
Interest expense increased $1.6 million in the fiscal 1994 period to $11.1
- ----------------
million as compared to $9.5 million for the period ended December 31, 1993. 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 increased to $3.2 million for the three months
- ------------------------------
ended December 31, 1994 as compared to a loss of $1.6 for the same period in
fiscal 1994. Net loss in the current period was $2.3 million as compared to a
loss of $1.2 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 $14.7 million for the quarter ended December 31, 1994 as compared
to $14.5 million for the prior year period. 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.
The Company has 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, as of December 31, 1994, the outstanding amount of the
Company's long-term debt in relation to its stockholders equity balance (11:1)
or as a percent of total assets (85%) categorizes the Company as highly
leveraged.
The indentures under which the $120.0 million principal amount of First Mortgage
Notes due 1998 ("13-1/2% Notes") and the 11% Notes were issued contain
restrictions on payments to and investments in affiliates by Pioneer Hotel Inc.
("Pioneer Inc.") and Santa Fe Hotel Inc. ("Santa Fe Inc."), as applicable,
including to the Company. As a result of these restrictions, all or a
significant portion of the cash flow generated by Pioneer Inc. and Santa Fe
Inc., as applicable, is not currently and is not expected in the near future to
be available for distribution to the Company.
Approximately $32.9 million of the Company's current assets at December 31,
1994, including approximately $27.7 million of cash and short term investments,
were held by Pioneer Inc. and the Santa Fe Inc., and are subject to the
indenture restrictions described above and are not currently available for
distribution to the Company. Excluding the
16
<PAGE>
working capital of Pioneer Inc. and Santa Fe Inc., and $15.0 million of
indebtedness, together with accrued interest, that matures in March 1995 (See
"Debt Obligations"), the Company had a working capital balance of approximately
$2.8 million at December 31, 1994.
To the extent cash flow generated by Pioneer Inc. and Santa Fe Inc. is not
available for distribution to the Company, 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. Historically, the operating results
of Sahara Nevada and Hacienda Inc. have not generated sufficient cash flow to
provide liquidity to the Company. Based on current operations and available
resources, management believes that, barring unforeseen circumstances, the
Company will have sufficient cash resources to meet its operating requirements
through the fiscal year ending September 30, 1995, although no assurance can be
given to that effect. The Company has entered into an agreement to sell
substantially all of the assets of the Hacienda. (See "Debt Obligations")
The Company's principal uses of funds generated from operations for the last
three fiscal years have been for interest payments on indebtedness and capital
expenditures. Additionally, the Company has incurred indebtedness to finance its
capital expenditures. Interest expense for the quarter ended December 31,
1994, and for fiscal years 1994, 1993, and 1992 was $11.1 million, $43.2
million, $37.8 million and $39.6 million, respectively. Capital expenditures
for the quarter ended December 31, 1994 and for fiscal years 1994, 1993 and 1992
were $15.8 million, $40.1 million, $3.8 million and $5.5 million, respectively.
Excluding $12.0 million and $2.2 million incurred in the first quarter of fiscal
1995 at the Santa Fe Inc. and Pioneer Inc., respectively, related to expansions
of the Santa Fe and the Pioneer, management believes that future capital
expenditures required to maintain the facilities will be approximately $2.5
million per year in the aggregate. These expenditures are likely to be used for
the acquisition of slot machines and computer equipment and the refurbishment of
casinos, hotel rooms, food and beverage facilities and public areas and are
expected generally to be financed with cash flow from operations.
Capital Expenditures In May 1994, the Company commenced construction of an
- ---------------------
expansion of the Santa Fe, which was completed in December 1994. The expansion
included the addition of three themed restaurants, approximately 300 new slot
machines, a dedicated bingo room, race book, and other public areas. The cost
of construction and equipment was approximately $14.4 million. The expansion
was financed through working capital made available through the issuance of 11%
Notes.
The Company commenced construction of an expansion of the Pioneer in July 1994,
which was completed in December 1994. The Pioneer expansion included the
addition of casino space, the addition of a special events area and increased
administrative and support areas. The cost of construction and equipment was
approximately $4.1 million. The expansion was financed through working capital
and equipment financing.
17
<PAGE>
Debt Obligations The Company's $15.0 million principal amount of 12% Notes
- ----------------
due March 31, 1995 ("12% Notes"), are secured by the property acquired for the
possible development of a hotel/casino in Henderson, Nevada. In December 1994,
the Company entered into an agreement to sell this property, subject to several
contingencies. In February 1995, the buyer terminated the agreement in
accordance with its terms. The Company is in discussions with the holders of the
debt regarding a possible extension of the maturity date of the 12% Notes. No
assurance can be given that the Company will be successful in obtaining an
extension of the maturity date. If the Company is unable to obtain satisfactory
extensions, additional financing or a sale of the property would be required to
repay the Notes. If the Company is not successful in that regard before March
31, 1995, the Company would not have sufficient cash resources to repay the 12%
Notes and would default in the payment thereof, which would result in cross-
defaults under substantially all of the Company's long-term indebtedness.
Assuming an extension is negotiated, the Company is evaluating the possibilities
of pursuing the development and financing for the proposed project.
Approximately $22.0 million principal amount of indebtedness is scheduled to
mature in December 1995 under the terms of a note secured by a first deed of
trust ("PERS Note") on the Hacienda. In January 1995, the Company entered into
an agreement to sell substantially all of the assets of the Hacienda property
for $80 million in an all cash transaction. The sale is subject to several
contingencies, including the buyer's obtaining all appropriate regulatory
licenses and approvals. Additionally, the Company is aware that the buyer is a
defendant in litigation involving the buyer's acquisition of the Hacienda. The
buyer has informed the Company that he believes the allegations are without
merit and intends to defend the lawsuit vigorously. Proceeds from the sale, if
consummated, will be used in part to repay the PERS Note, approximately $22.0
million outstanding as of December 31, 1994. Additionally, $32.0 million of
proceeds will be used to satisfy an affiliate note in favor of Sahara Nevada.
(See affiliate notes discussed below) Furthermore, the Company has entered into
an agreement, contingent upon consummation of the sale of the assets of the
Hacienda, to acquire $20.0 million principal amount of the 13-1/2% Notes for
$15.5 million from the proceeds of the Hacienda sale. The 13-1/2% Notes 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.
Remaining proceeds may be utilized for working capital purposes, including the
development of proposed projects, expansion or renovation of existing facilities
and reduction of outstanding indebtedness.
The $115.0 million principal amount of 12-1/8% First Mortgage Notes due in 1996
("12-1/8% Note") is scheduled to mature in August 1996. Affiliate notes in the
principal amounts of $18 million issued by Santa Fe Inc. and $32 million issued
by Hacienda Inc., each in favor of Sahara Nevada, mature simultaneously with the
maturity of the 12-1/8% Notes or, if earlier, upon the sale of the Hacienda or
the Santa Fe. 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 Sahara Nevada
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. 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
18
<PAGE>
order to satisfy the 12-1/8% Notes when they mature, no assurance can be given
that the Company will be able to refinance some or all of its indebtedness or
dispose of any assets. Any such 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 would lead to 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.
Current operations are providing sufficient cash flow to meet operating
requirements and interest expense on existing indebtedness and to fund limited
capital improvements. No assurance can be given that operations will continue
to provide sufficient cash flow to meet operating requirements and interest
expense. Results from operations at the Pioneer for the twelve months ended
December 31, 1994 provided EBITDA of $14.0 million, approximately 1.0 times
annual debt service on the 13-1/2% Notes. During the three months ended
December 31, 1994, the Pioneer had EBITDA of $3.0 million compared to $3.5
million in the prior year period. (See Results of Operations - Revenues) As of
December 31, 1994, Pioneer had a working capital balance of $2.9 million.
Management believes that, based on current operations, the anticipated impact of
the recently completed expansion, and available resources, barring
unforeseen circumstances, the Pioneer will have sufficient cash resources to
meet its debt service requirements through the fiscal year ending September 30,
1995, although no assurance can be given to that effect.
Parkville Inc. The development of the proposed Parkville casino is subject to
- --------------
substantial uncertainties, as discussed below, including the granting of
necessary gaming 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.
At the request of the Missouri Gaming Commission ("MGC"), the Company updated
its gaming application in February 1995 and is preparing to submit additional
information required before the MGC will determine whether to commence its
investigation of Parkville Inc. An investigation typically takes at least
several months to complete. No assurance can be given that Parkville Inc. will
be chosen for investigation, nor if chosen, will be granted a license.
In order to use the vessel purchased for the Parkville casino, Parkville Inc.,
will be required to obtain a gaming license permitting dockside, rather than
"cruising", riverboat gaming. It is the company's intention to request such a
license in the application process from the MGC. No assurance can be given that
the MGC will grant Parkville Inc. a license for dockside gaming.
19
<PAGE>
If Parkville Inc. is not licensed or if the construction of the proposed
facility is not complete by June 30, 1995, Parkville Inc. will be unable to
commence operations by that date and SFHI will be required under the terms of
the indenture under which the 11% Notes were issued to offer to repurchase that
principal amount of 11% Notes purchasable with the funds remaining in the
Parkville collateral account (See Note 4) and obtained upon disposition of
assets related to the project (unless waivers are obtained from the holders of
the 11% Notes). Based on current development and construction plans, the
Company does not believe the facility can be completed and operating before June
30, 1995. Therefore, the Company currently intends to seek approval from the
holders of the 11% Notes for, among other things, an extension of the date by
which operations of the proposed Parkville casino must be commenced before
Parkville Inc. is required to commence the repurchase offer. No assurance can
be given that if such approval is sought that it will be obtained. In the event
Parkville Inc. is required to commence a repurchase offer, the holders of
warrants to acquire additional 11% Notes will be entitled to acquire for no
additional consideration up to an additional $11.5 million principal amount of
the 11% Notes.
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.
Parkville Inc. borrowed $32.0 million from the proceeds of the offering of the
11% Notes. The proceeds are restricted for use in connection with the Parkville
development. The balance of the originally budgeted project cost was expected
to be financed through equipment financing and an equity contribution from SFHI.
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 joint
venture or other arrangement. Although the Company continues 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.
20
<PAGE>
Treasure Bay The Company is incurring and expects to continue to incur
- ------------
professional expenses and other expenses associated with the 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 proceeding 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, had borrowed
$476,000 from Hacienda Inc., pursuant to an unsecured demand loan. The
outstanding balance of the loan including accrued interest was $510,000 as of
December 31, 1994. 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 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 $4,739,917 as of January
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 Sahara Gaming's common stock (the "Pledged
Shares") owned by Mr. Lowden. 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 his personal loan with the bank, and if the bank acquired
the Pledged Shares upon foreclosure, Mr. Lowden's ownership of Sahara Gaming's
outstanding common stock would be reduced to below 50%. If Mr. Lowden ceases to
own more than 50% of the outstanding shares of Sahara Gaming's common stock, an
event of default would be triggered under certain of Sahara Gaming's long-term
indebtedness, which would result in cross-defaults under substantially all of
Sahara Gaming's other long-term indebtedness, including the Notes.
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.
21
<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 December 31, 1994.
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 order of the Bankruptcy Court requiring the
bankroll or cage cash to be held in tact pending the litigation. The
defendants in the adversary proceeding, Treasure Bay Corp. and Treasure Bay
Gaming & Resorts, have not yet responded to the complaint.
Item 2 - Changes in Securities
None
Item 3 - Defaults Upon Senior Securities
None
Item 4 - Submission of Matters to a vote of Security Holders
None
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
10.102 Bill of Sale dated as of December 28, 1994 from PDS
Financial Corporation to Pioneer Hotel Inc. with respect
to the sale of certain gaming equipment.
10.103 Credit Agreement dated as of December 28, 1994 by and
between Pioneer Hotel Inc. and PDS Financial Corporation.
10.104 Promissory Note dated as of December 28, 1994 in the
amount of $627,800 by Pioneer Hotel Inc. to the order of
PDS Financial Corporation.
10.105 Security Agreement dated as of December 28, 1994 by
Pioneer Hotel Inc. in favor of PDS Financial Corporation.
10.106 Subordination Agreement dated as of December 28, 1994 by
and between PDS Financial Corporation and Pioneer Hotel
Inc.
10.107 Agreement for Purchase and Sale dated as of January 10,
1995 by and among Hacienda Hotel Inc., Sahara Gaming
Corporation, as Guarantor, and William G. Bennett.
23 Letter in lieu of Consent of Deloitte & Touche.*
27 Financial Data Schedule.*
(b) Reports on Form 8K.
None
----------
* Previously filed
22
<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: February 16, 1995
23
<PAGE>
EXHIBIT 10.102
BILL OF SALE
KNOW ALL MEN BY THESE PRESENTS:
That PDS Financial Corporation, a Minnesota corporation ("Seller"), for
good and valuable consideration, receipt of which is hereby acknowledged, does
hereby grant, convey, assign, transfer, bargain and sell, deliver and set over
unto Pioneer Hotel, Inc., a Nevada corporation ("Purchaser"), and unto its
successors and assigns forever, all of Seller's rights, title and interest in
the Equipment described in Attachment A attached hereto and incorporated herein
("Assets").
Seller hereby agrees that in the event Seller is required to reacquire the
Equipment from Purchaser in order to return the Equipment to Treasure Bay Corp.
or a trustee in bankruptcy or otherwise, Seller will, simultaneously with the
reacquisition of the Equipment, pay to Purchaser in immediately available funds
an amount equal to (i) $784,750.00 less (ii) $161.00 per piece of Equipment
required to be reacquired by Seller per month from the date hereof until the
date of reacquisition (such amount to be prorated for any partial month).
Seller agrees to use its best efforts to take any and all actions necessary or
desirable such that Seller does not become obligated or required to reacquire
the Equipment from Purchaser.
Seller hereby agrees that it will reimburse Purchaser for all costs and
expenses (including reasonable fees and disbursements of counsel), as they are
incurred by Purchaser in connection with investigating, preparing for or
defending any action, claim or proceeding relating to Seller's obligation to
reacquire the Equipment and return the same to Treasure Bay Corp., a trustee in
bankruptcy or otherwise (an "Action"), whether or not in connection with pending
or threatened litigation in which Purchaser is a party.
Seller shall assume the defense of any Action with respect to which
reimbursement of expenses is sought with counsel reasonably satisfactory to
Purchaser. Notwithstanding the preceding sentence, however, Purchaser shall
have the right to retain its own counsel at Seller's expense pursuant to the
terms of this paragraph to represent it in any Action in respect of which
reimbursement may be sought in the event (i) Purchaser has legal defenses
available to it that are different from, or inconsistent or in conflict with,
those available to Seller or (ii) Seller does not assume in a timely manner the
defense of a claim or Action to which indemnification hereunder is applicable.
If for any reason the foregoing reimbursement is unavailable to Purchaser
or insufficient to hold it harmless, then Seller shall contribute to the amount
paid or payable by Purchaser in an equitable manner so as to make Purchaser
whole. The obligations of Seller and its affiliates hereunder shall be in
addition to any rights that Purchaser may have at common law or otherwise.
1
<PAGE>
Solely for the purpose of enforcing this agreement, Seller and its
affiliates hereby consent to the personal jurisdiction and to service and venue
in any court in which any claim which is subject to this Agreement is brought
against Purchaser.
This Bill of Sale shall in all respects be governed in accordance with the
laws of the State of Minnesota.
IN WITNESS WHEREOF, Seller has caused this instrument to be duly executed
and delivered this 28th day of December, 1994.
SELLER:
PDS FINANCIAL CORPORATION,
A Minnesota corporation
By: /s/ RICHARD J. HEGSTRAND
------------------------------------
Richard J. Hegstrand, Vice President
STATE OF MINNESOTA )
)ss.
COUNTY OF HENNEPIN )
On this 28th day of December, 1994, before me personally appeared Richard
J. Hegstrand, the Vice President of PDS Financial Corporation, to me known to be
the person described in and who executed the foregoing instrument and
acknowledged that he executed the same.
- --------------------------------------------------------------------------------
Notary Public
2
<PAGE>
EXHIBIT 10.103
CREDIT AGREEMENT
----------------
THIS CREDIT AGREEMENT ("Agreement") is made and entered into as of the
28th day of December, 1994, by and between Pioneer Hotel, Inc., a Nevada
corporation with its principal place of business at 2200 South Casino Drive,
Laughlin, Nevada 89029 (the "Borrower") and PDS Financial Corporation, a
Minnesota corporation with its principal place of business at 7652 Executive
Drive, Eden Prairie, Minnesota 55344 (the "Lender"), as follows:
ARTICLE I
---------
GENERAL TERMS
SECTION 1.01. Terms Defined Above. As used in this Agreement, the
terms "Borrower" and "Lender" shall have the meaning indicated above.
SECTION 1.02. Certain Definitions. As used in this Agreement, the
following terms shall have the following meanings, unless the context otherwise
requires:
"Advance" shall mean a disbursement of the loan proceeds under the
extension of credit.
"Agreement" shall mean this Credit Agreement, as the same may from
time to time be amended or supplemented.
"Business Day" shall mean a day other than a Saturday, Sunday or legal
holiday for commercial banks in the State of Nevada.
"Closing Date" shall mean the date on which this Agreement shall be
executed and delivered by the Borrower to the Lender.
"Collateral" shall mean the property of the Borrower in which a
security interest is granted pursuant to Section 3.01 of this Agreement.
"Collateral Documents" shall mean collectively the documents required
by the Lender to obtain the security interests in the Collateral.
"Security Agreement" shall mean that certain Security Agreement of
even date herewith by and between the Borrower and the Lender.
"Event of Default" shall mean the occurrence of any of the events
specified in Article VII hereof.
"Financial Statement" shall mean the financial statement or statements
of the Borrower described or referred to in Section 5.01 hereof.
1
<PAGE>
"Funding Date" shall mean the date on which an Advance shall be funded
by the Lender and disbursed to the Borrower.
"Lien" shall mean, with respect to any asset, (i) any mortgage, lien,
pledge, security interest, charge or encumbrance of any kind in respect of any
such asset, or (ii) the interest of a vendor or lessor under any conditional
sales agreement, financing lease or other title retention agreement relating to
such asset.
"Loan" shall mean the credit facility made available by the Lender to
the Borrower pursuant to Article II of this Agreement.
"Note" shall mean the promissory note of the Borrower more fully
described in Article II of this Agreement.
"Obligations" shall mean any and all amounts and/or liabilities owing
from time to time by the Borrower to the Lender pursuant to this Agreement, and
whether such amounts or liabilities be liquidated or contingent, now existing or
hereafter arising.
"Person" shall mean any individual, corporation (other than the
Borrower), partnership, joint venture, association, joint stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof, or any other form of entity.
SECTION 1.03. Other Definitional Provisions.
(a) All terms defined in this Agreement shall have the defined
meanings when used in the Note or in any certificate or other document made or
delivered pursuant hereto unless the context shall otherwise require.
(b) Words used herein in the singular, where the context so permits,
shall be deemed to include the plural and vice versa. Likewise, the definitions
of words used in the singular herein shall also apply to such words when used in
the plural and vice versa, unless the context shall otherwise require.
(c) The words "hereof', "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement.
(d) Section, subsection, schedule and exhibit references are to this
Agreement unless otherwise specified.
SECTION 1.04 Accounting Terms. Unless otherwise specified herein, all
accounting terms used herein shall be interpreted, all accounting determinations
hereunder shall be made, and
2
<PAGE>
all financial statements required to be delivered hereunder shall be prepared in
accordance with generally accepted accounting principles.
ARTICLE II
----------
THE CREDIT
SECTION 2.01. Commitment to Lend. Subject to and upon the terms and
conditions contained in this Agreement, and relying on the representations and
warranties contained in this Agreement, the Lender agrees to make the following
Loan to the Borrower being more particularly described hereinafter. On the
Closing Date, the Borrower shall pay to the Lender, in immediately available
funds, a closing fee in an amount equal to one percent (1%) of the amount of the
Loan.
SECTION 2.02. Loan. On the Closing Date, the Lender agrees to make a
Loan Advance to the Borrower of Six Hundred Twenty-seven Thousand Eight Hundred
and 00/100 Dollars ($627,800.00). The obligation of the Borrower to repay the
Loan Advance shall be evidenced by the Note dated as of the Closing Date and
made payable to the order of the Lender in the principal sum of $627,800.00,
said amount to be repaid in thirty-six (36) monthly installments, with interest
at the rate of twelve percent (12%) per annum, all as more fully set forth in
the Note.
SECTION 2.03. Nature of Commitment. With respect to all Advances
hereunder, the Lender's obligation to make such Advances shall be deemed to be a
transaction made pursuant to a contract to make a loan or extend debt financing
or financial accommodations to the Borrower within the meaning of Sections
365(c)(2) and 365(e)(2)(B) of the Bankruptcy Code of the United States.
SECTION 2.04. Payments and Computations. The Borrower shall make each
payment hereunder and under the Note not later than 1:00 o'clock p.m. (central
time) on the day when due in lawful money of the United States of America by
automated monthly withdrawals from Borrower's account to Lender's account, or
other such account as designated by Lender from time to time. Whenever any
payment to be made hereunder or under the Note shall be stated to be due on a
day other than a Business Day, such payment shall be made on the next succeeding
Business Day, and such extension of time shall in such case be included in the
computation of payment of interest.
ARTICLE III
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SECURITY FOR THE OBLIGATIONS
SECTION 3.01. Security. The Obligations shall be secured by the
following collateral:
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(a) The Borrower shall execute and deliver to Lender a Security
Agreement, in a form satisfactory to Lender, granting to Lender a first priority
perfected purchase money security interest in certain gaming equipment
(collectively, the "Collateral"), all as more fully described in the said
Security Agreement to be executed and delivered in connection herewith.
ARTICLE IV
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REPRESENTATIONS AND WARRANTIES
In order to induce the Lender to enter into this Agreement, the
Borrower represents and warrants to the Lender that:
SECTION 4.01. Corporate Existence and Licensure. The Borrower is a
corporation duly organized, validly existing and in good standing under the laws
of Nevada. The Borrower is duly qualified to do business in Nevada and has all
necessary licenses, permits and approvals to conduct its business.
SECTION 4.02. Power and Authorization. The making and performance by
the Borrower of this Agreement, the borrowing by the Borrower and issuance of
the Note hereunder, and the giving of security by the Borrower, all as provided
herein, have been duly authorized by all necessary action and will not (i)
violate any material provision of law or of the articles of incorporation or by-
laws of the Borrower, or (ii) result in a breach of, or constitute a default
under, any material indenture or agreement or other instrument to which the
Borrower is a party or by which it is bound, except in the case of clause (ii)
where any such breach or default would not result in a material adverse effect
on the Borrower's financial condition or results of operations.
SECTION 4.03. Binding Obligations. This Agreement, the Note, and the
Security Agreement to which the Borrower is a party will upon their creation,
issuance, execution and delivery constitute valid and binding obligations of the
Borrower enforceable against the Borrower in accordance with their terms, except
as the same may be limited by the effect of bankruptcy, insolvency,
reorganization, moratorium, arrangement or other similar laws affecting
creditors' rights generally and by general principles of equity.
SECTION 4.04. No Consent. No consent or approval of any governmental
agency or authority is required in connection with execution, delivery and
performance by the Borrower of this Agreement, the Note, the Collateral
Documents and all other documents required hereunder, except for (i) consents or
approvals that have been obtained and (ii) where the failure to obtain any such
consents or approvals would not result in a material adverse effect on the
Borrower's financial condition or results of operations.
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SECTION 4.05. Other Agreements. The Borrower is not in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any indenture, agreement or other instrument to which it
is a party, except in the case of clause (ii) where any such breach or default
would not result in a material adverse effect on the Borrower's financial
condition or results of operations.
SECTION 4.06. Liabilities and Litigation. There is no litigation,
legal or administrative proceeding, investigation or other action of any nature
pending or, to the knowledge of the Borrower, threatened against or affecting
the Borrower which if adversely determined would materially and adversely affect
the financial condition or results of operations of the Borrower or the
Borrower's ability to carry on business as now conducted.
SECTION 4.07. Taxes and Governmental Charges. The Borrower has filed
all tax returns and reports required to be filed and has paid all taxes,
assessments, fees and other governmental charges levied upon it or upon any
property owned by it, or upon its income, which are due and payable, including
interest and penalties, or has provided adequate reserves for the payment
thereof.
SECTION 4.08. Default. The Borrower is not in default under any
indenture, mortgage, deed of trust, agreement or other instrument to which it is
a party or by which it is bound, except (i) as disclosed to the Lender in
writing, or (ii) for any such default which is not reasonably likely to result
in a material adverse effect on the Borrower's financial condition or results of
operations.
SECTION 4.09. Financial Condition. The financial statements of the
Borrower as heretofore furnished to the Lender are true and accurate, have been
prepared in accordance with generally accepted accounting principles, and
fairly, completely, and accurately present the financial condition of the
Borrower as of those dates. The Borrower has no contingent obligation or
liability for taxes not disclosed by or reserved against in said financial
statements that is required to be so disclosed or reserved in accordance with
generally accepted accounting principles and, since the date of the most recent
of said financial statements, there has been no material adverse change in the
financial condition of the Borrower from that set forth in said financial
statements. The Borrower is not the subject of any pending or, to the
Borrower's knowledge, threatened bankruptcy or insolvency proceedings.
SECTION 4.10. Other Information. All information, reports, papers,
employer I.D. numbers and data given to Lender by the Borrower pursuant to this
Agreement and in connection with Borrower's application for the Loan, are
accurate and correct in all material respects.
SECTION 4.11. Regulation U. The Borrower is not engaged in the
business of extending credit for the purpose of purchasing or carrying margin
stock (within the meaning of Regulation U issued by the Board of Governors of
the Federal Reserve System,) and no proceeds of the Loan will be used to
purchase or carry any margin stock or to extend credit to others for the purpose
of purchasing or carrying any margin stock.
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SECTION 4.12. SEC Compliance. No proceeds of the Loan will be used
to acquire any security in any transaction which is subject to Sections 13 and
14 of the Securities and Exchange Act of 1934.
SECTION 4.13. Retirement Plans. The Borrower is in compliance in all
material respects with the Employee Retirement Income Security Act of 1974 to
the extent applicable and has received no notice to the contrary from the
Pension Benefit Guaranty Corporation or any other governmental entity or agency.
SECTION 4.14. Officers and Directors. To the best knowledge of the
Borrower, based upon reasonable inquiry, no director, shareholder, officer,
employee or agent of, or consultant to, Borrower is prohibited by law, by
regulation, by contract or by the terms of any license, franchise, permit,
certificate, approval or consent from participating in the business of Borrower
as director, shareholder, officer, employee or agent of, or as consultant to,
Borrower or is the subject of any pending or, to the Borrower's best knowledge,
threatened proceeding which, if determined adversely, would or could result in
such a prohibition.
SECTION 4.15. Use of Loan Proceeds. The Borrower will use the
proceeds of the Loan solely for the purchase of gaming equipment and for payment
of costs associated therewith.
ARTICLE V
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COVENANTS
The Borrower hereby agrees that, so long as any part of the
Obligations are outstanding, unless compliance shall have been waived in writing
by the Lender, the Borrower shall at all times comply with the covenants
contained in this Article.
SECTION 5.01. Financial Statements.
(a) Borrower's Financial Statements. Within sixty (60) days after the
-------------------------------
end of each quarter and within one hundred twenty (120) days after the end of
each fiscal year, the Borrower shall deliver to the Lender a balance sheet and a
statement of operations for such fiscal period conforming to generally accepted
accounting principles. The quarterly and annual financial statements shall be
prepared and certified by the Borrower as being prepared in accordance with
generally accepted accounting principles and in the event the Borrower otherwise
has any such financial statements audited, the Borrower shall deliver to the
Lender a copy of such audited financial statements within ten business days of
such audited financial statements being available.
(b) Borrower's Tax Returns. Within fifteen (15) days after the filing
----------------------
thereof, the Borrower shall deliver to the Lender a copy of the Borrower's
federal income tax return for each fiscal year during the term hereof, with all
schedules attached, and any other information and
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documentation regarding the financial condition of the Borrower as the Lender
may reasonably request from time to time.
SECTION 5.02. Taxes and Other Liens. The Borrower shall pay and
discharge all taxes, assessments and governmental charges or levies imposed upon
the Borrower, or upon its income and profits prior to the date on which
penalties might attach thereto and all lawful claims which, if unpaid, might
become a lien or charge upon the assets of the Borrower; provided, however, that
the Borrower shall not be required to pay and discharge any such tax,
assessment, charge, levy or claim so long as the legality thereof shall be
contested in good faith and by appropriate proceedings.
SECTION 5.03. Maintenance of Corporate Existence and Licensure. The
Borrower will (i) maintain its corporate existence, rights, franchises, and
licenses and (ii) observe and comply with all valid laws, statutes, codes, acts,
ordinances, orders, judgments, decrees, injunctions, rules, regulations,
certificates, franchises, permits, licenses, authorizations, directions and
requirements of all federal, state, county, municipal and other governments,
departments, commissions, boards, courts, authorities, officials and officers,
domestic or foreign applicable to it, except where the failure to observe or
comply therewith would not have a material adverse effect on the Borrower's
financial condition or results of operations.
SECTION 5.04. Further Assurances. The Borrower will promptly cure any
defects in the creation, execution and delivery of this Agreement. The Borrower
at its expense will promptly execute and deliver to the Lender upon reasonable
request all such other and further documents, agreements and instruments in
compliance with or accomplishment of the covenants and agreements of the
Borrower in this Agreement or in the Collateral Documents or to further evidence
and more fully describe the Collateral, or to correct any omissions in the
Collateral Documents, or more fully to state the security obligations set out
herein or in any of the Collateral Documents, or to perfect, protect or preserve
any Liens created pursuant to any of the Collateral Documents, or to make any
recordings, to file any notices, or obtain any consents, all as may be
reasonably necessary or appropriate in connection therewith.
SECTION 5.05. Performance of Obligations and Other Indebtedness of
Borrower. The Borrower will pay the Obligations according to the reading, tenor
and effect of this Agreement; and the Borrower will do and perform every act and
discharge all of the Obligations provided to be performed and discharged by the
Borrower under this Agreement and the Collateral Documents at the time or times
and in the manner specified.
SECTION 5.06. Reimbursement of Expenses. The Borrower will, upon
request, promptly reimburse the Lender for all reasonable amounts expended,
advanced or incurred by the Lender in accordance with the terms of this
Agreement and the Collateral Documents to satisfy any obligation of the Borrower
under this Agreement or any Collateral Document, or to protect the Collateral or
to collect the Obligations, or to enforce the rights of the Lender under this
Agreement or any Collateral Document, which amounts will include all court
costs, reasonable attorneys' fees, and
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expenses reasonably incurred by the Lender in connection with any such matters,
together with interest at the rate of twelve percent (12%) per annum on each
such amount from the date that the same is expended, advanced or incurred by the
Lender until the date of reimbursement to the Lender.
SECTION 5.07. Insurance. The Borrower now maintains and will continue
to maintain insurance with respect to the assets of the Borrower, said insurance
providing coverage against such liabilities, casualties, risks and contingencies
and in such types and amounts and with security payable clauses as set forth in
the Collateral Documents, or if not set forth therein, as is deemed appropriate
by the Borrower, including without limitation all risk casualty insurance
insuring the Collateral for the full replacement value thereof naming Lender as
loss payee.
SECTION 5.08. Accounts and Records. The Borrower will keep books of
record and accounts in which full, true and correct entries will be made in
accordance with generally accepted accounting principles, consistently applied
except for changes in accounting principles or practices acceptable to the
independent certified public accountants of Borrower.
SECTION 5.09. Right of Inspection. The Borrower will permit any
officer, employee or agent of the Lender to visit and inspect any of the
property of the Borrower, examine the books of record and accounts of the
Borrower, take copies and extracts therefrom, and discuss the affairs, finances
and accounts of the Borrower with its officers, accountants and auditors, all at
such reasonable times and as often as the Lender may desire.
SECTION 5.10. Notice of Certain Events. The Borrower shall promptly
notify the Lender of (i) any change in location of the Borrower's principal
places of business or the offices where it keeps its records concerning accounts
and contract rights; (ii) the arising of any litigation or dispute pending or,
to the Borrower's knowledge, threatened against or affecting the Borrower or its
assets which, if adversely determined, would have a material adverse effect upon
the financial condition or business of the Borrower; or (iii) any act of default
under this Agreement, or under any contract to which the Borrower is a party and
which default would materially and adversely affect Borrower; or any
acceleration of indebtedness of monetary value exceeding $250,000.00; or (iv)
filing of any tax lien against Borrower.
SECTION 5.11. Change in Business. The Borrower shall not permit any
material change to be made in the character of its business as carried on as of
the Closing Date without the permission of Lender, which permission will not be
unreasonably withheld.
SECTION 5.12. Indenture. The Borrower shall comply with all of the
covenants, restrictions, agreements, terms and conditions set forth in any
indenture to which it is a party; provided that, in the event that all of the
obligations of the Borrower under any such indenture are satisfied in full
during the term of this Agreement, all such covenants, restrictions, agreements,
terms and conditions shall survive as if fully set forth herein until payment in
full of the Obligations.
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ARTICLE VI
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CONDITIONS OF LENDING
SECTION 6.01. Conditions to Effectiveness. The obligation of the Lender to
make the Loan shall be conditional upon the receipt of all of the following
documents:
(a) Agreement. A duly executed counterpart of
---------
this Agreement signed by all the parties hereto.
(b) Note. The duly executed Note dated the Closing Date.
----
(c) Collateral Documents. Duly executed counterparts or originals of the
--------------------
Collateral Documents.
(d) Charter. Copies, certified as true by the Nevada Secretary of State of
-------
the articles or certificate of incorporation of the Borrower and certificates of
good standing of the Borrower issued by the Secretary of State of Nevada, and
copies of the bylaws of the Borrower, certified as true by its corporate
secretary.
(e) Certificate. The certificate of the Secretary of the Borrower, setting
-----------
forth resolutions in form and substance satisfactory to the Lender with respect
to the authorization of the Note, this Agreement and the Collateral Documents.
(f) No Event of Default. No Default shall have occurred and be continuing,
-------------------
and there shall not have occurred any condition, event or act which constitutes,
or with notice or lapse of time (or both) would constitute an Event of Default
under this Agreement.
ARTICLE VII
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DEFAULT
SECTION 7.01. Event of Default. Any of the following events shall be
considered an "Event of Default" as that term is used herein:
(a) A failure to pay any principal or interest on the Note when due.
(b) A default in the payment of principal or interest (i) on any other Debt
of the Borrower to the Lender or on (ii) any Debt of the Borrower to any other
Person for borrowed money, as a result of which the maturity of indebtedness for
borrowed money in the aggregate
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amount of $250,000.00 or more is accelerated prior to its expressed maturity.
(c) Any representation or warranty made herein, or in any Collateral
Document or in any certificate furnished to the Lender hereunder shall prove to
have been materially incorrect when made.
(d) The violation or breach by the Borrower of any covenant, warranty, or
other agreement or condition (other than the payment of money) contained herein,
or in any Collateral Document, and such violation or breach shall not have been
cured within thirty (30) days after notice of violation or breach given by the
Lender to the Borrower.
(e) If by the order of a court of competent jurisdiction, a receiver or
liquidator or trustee of the Borrower or any part of the Collateral shall be
appointed and shall have not been discharged within a period of sixty (60) days
or if, by decree of such a court, the Borrower shall be adjudicated as bankrupt
or any substantial part of its property shall be sequestered and such decree
shall continue undischarged and unstayed for a period of sixty (60) days after
the entry thereof or a petition to reorganize the Borrower pursuant to the
Federal Bankruptcy Code, as it now exists or as it may hereafter be amended or
pursuant to any other analogous statute applicable to the Borrower as now or
hereinafter in effect, shall be filed against the Borrower and shall not be
dismissed within sixty (60) days.
(f) If the Borrower shall file a petition in voluntary bankruptcy under any
provision of any bankruptcy law or a petition to take advantage of any
insolvency act, or shall make an assignment for the benefit of its creditors, or
shall admit in writing its inability to pay its debts generally as they become
due, or shall consent to the appointment of a receiver or receivers of all or
any part of the Collateral or shall consent to the filing of any bankruptcy or
reorganization petition against it under any provision of the bankruptcy law, or
(without limiting the generality of the foregoing) Borrower shall file a
petition or answers seeking reorganization of the Borrower pursuant to the
Federal Bankruptcy Code, as it now exists or as it may hereinafter be amended,
or pursuant to any other analogous statute applicable to Borrower as now or
hereinafter in effect.
(g) If Borrower shall have a custodian (as such term is defined in the
Federal Bankruptcy Code) or a state court receiver or trustee appointed for it
or have any court take jurisdiction of its property, or the major part thereof,
in any involuntary proceeding for the purpose of reorganization, arrangement,
dissolution, or liquidation if such custodian, receiver or trustee shall not be
discharged or if such jurisdiction shall not be relinquished, vacated or stayed
on appeal or otherwise within sixty (60) days of the appointment.
SECTION 7.02. Remedies. Upon the happening of any Event of Default
specified in Section 7.01, the Lender may by written notice to the Borrower
declare the entire principal amount of all obligations then outstanding,
including interest accrued thereon, to be immediately due and payable without
presentment, demand, protest, notice of protest or dishonor or other notice of
default of any kind, all of which are hereby expressly waived by the Borrower.
The remedies
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provided for herein are non-inclusive and shall be in addition to any other
remedies available under law or any Collateral Documents to Lender.
ARTICLE VIII
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GENERAL INDEMNIFICATION
SECTION 8.01. General Indemnification. Except as provided in Section
9.02, Borrower agrees to indemnify and hold Lender and its shareholders,
directors, agents, officers, subsidiaries, affiliates, successors and assigns
harmless from and against any and all damages, losses, settlement payments,
obligations, liabilities, claims, actions or causes of action, and reasonable
costs and expenses incurred, suffered, sustained or required to be paid by an
indemnified party by reason of or resulting from the transactions herein
undertaken or which otherwise arise in connection therewith unless directly
caused by the gross negligence, bad faith, or failure to fund without lawful
contractual cause on the part of Lender. In litigation, or the preparation
therefor, Lender shall be entitled to select its own counsel, which counsel
shall be reasonably acceptable to the Borrower. Borrower agrees to pay promptly
the reasonable fees and expenses of such counsel selected by Lender and
acceptable to the Borrower.
ARTICLE IX
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MISCELLANEOUS
SECTION 9.01. Notices. All communications under or in connection with
this Agreement shall be in writing and shall be mailed by first class mail or
express delivery, postage prepaid, or otherwise sent by telex, telegram,
telecopy or other similar form of rapid transmission, or personally delivered to
an officer of the receiving party with a copy to be sent to Borrower by
certified mail. Notice shall be deemed given five (5) days from date of
mailing, or date of receipt if sent by any other form of communication. All
such communications shall be mailed, sent or delivered,
To the Lender: PDS Financial Corporation
Attention: Johan P. Finley
7652 Executive Drive
Eden Prairie, Minnesota 55344
To the Borrower: Pioneer Hotel, Inc.
Attention: Thomas Land
2200 South Casino Drive
Laughlin, Nevada 89029
SECTION 9.02. Invalidity. In the event that any one or more of the
provisions contained
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in this Agreement, the Note or in any Collateral Document shall, for any reason,
be held invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement, the Note or any Collateral Documents.
SECTION 9.03. Survival of Agreements. All representations and
warranties of the Borrower herein, and all covenants and agreements shall
survive the Closing Date, and the Loan.
SECTION 9.04. Successors and Assigns. All covenants and agreements
contained by or on behalf of the Borrower in this Agreement, the Note and the
Collateral Documents shall bind its successors and assigns and shall inure to
the benefit of the Lender and its successors and assigns.
SECTION 9.05. Renewal or Extension. All provisions of this Agreement
relating to the Note and the Collateral Documents shall apply with equal force
and effect to each and all promissory notes or Collateral Documents hereinafter
executed which in whole or in part represent a renewal, extension for any
period, increase or rearrangement of any part of the Note or such Collateral
Documents.
SECTION 9.06 Waivers. No course of dealing on the part of the Lender,
its officers, employees, consultants or agents, nor any failure or delay by the
Lender with respect to exercising any right, power or privilege of the Lender
under this Agreement, the Note or the Collateral Documents shall operate as
waiver thereof.
SECTION 9.07. Cumulative Rights. Rights and remedies of the Lender
under this Agreement, the Note and the Collateral Documents shall be cumulative,
and the exercise or partial exercise of any such right or remedy shall not
preclude the exercise of any other right or remedy.
SECTION 9.08. Governing Law. This Agreement is, and the Note will be,
a contract made under and shall be construed in accordance with and governed by
the laws of the State of Minnesota.
SECTION 9.09. Tax Identification Number. The federal tax
identification number for the Borrower is 88-0305353.
SECTION 9.09. Counterparts. This Agreement may be executed in two or
more counterparts, and it shall not be necessary that the signatures of all
parties hereto be contained on any one counterpart hereof; each counterpart
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
SECTION 9.10. Name and Logo. Borrower hereby consents to Lender's use
of Borrower's name and logo in any tombstone ads or other promotional materials
without any consideration to Borrower other than the Loan.
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be duly executed as of the date first above written.
PIONEER HOTEL, INC.,
a Nevada corporation
By: /s/ Thomas K. Land
--------------------------------------
Its: Senior Vice President and
------------------------------------
Chief Financial Officer
------------------------------------
PDS FINANCIAL CORPORATION,
a Minnesota corporation
By: /s/ Richard J. Hegstrand
--------------------------------------
Its: Vice President
------------------------------------
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EXHIBIT 10.104
PROMISSORY NOTE
$627,800.00 MINNEAPOLIS, MINNESOTA
DECEMBER 28, 1994
FOR VALUE RECEIVED, the undersigned, PIONEER HOTEL, INC., a corporation
under the laws of the State of Nevada (the "Borrower"), agrees and promises to
pay to the order of PDS FINANCIAL CORPORATION, a Minnesota corporation ("PDS"),
its endorsees, successors and assigns (the "Holder"), in lawful money of the
United States at its principal office at 7652 Executive Drive, Eden Prairie,
Minnesota 55344, or such other place as the Holder may from time to time
designate, the principal sum of Six Hundred Twenty-seven Thousand Eight Hundred
and 00/100 Dollars ($627,800.00), together with interest on the unpaid principal
balance at an annual rate of interest (the "Note Rate") of twelve percent (12%).
Interest shall be computed on the basis of a Three Hundred and Sixty (360)
day year.
The principal balance hereof and accrued interest hereunder shall be due
and payable in Thirty Six (36) consecutive monthly payments in the amount of
Twenty Thousand Seven Hundred Sixty-nine and 36/100 Dollars ($20,769.36) each
commencing on January 15, 1995 and continuing on the fifteenth (15th) day of
each month thereafter until December 15, 1997, on which date all principal and
interest hereunder shall be due and payable in full.
All payments shall be applied first to interest and then to principal.
Except as otherwise provided herein, this Note may not be prepaid in whole
or in part at any time prior to the Maturity Date. Notwithstanding the
foregoing, this Note may be prepaid (i) in whole but not in part in the event
the indebtedness of Pioneer Finance Corp., a Nevada corporation ("Pioneer
Finance"), under that certain Indenture dated as of December 8, 1988 among
Pioneer Finance, as issuer Sahara Gaming Corporation (as successor in interest
to Sahara Casino Partners, L.P.), as Guarantor and Bank of America, NT & SA (as
successor in interest to Security Pacific National Bank), is repaid in full, or
(ii) in whole or in part in the event PDS is required to reacquire some or all
of the Equipment (as such term is defined in the Security Agreement, defined
below).
This Note is secured by:
(i) that certain Security Agreement dated of even date herewith
between PDS, as secured party and the Borrower, as debtor (the
"Security Agreement");
(ii) the interest of the Borrower in the equipment described in the
Security Agreement; and
(iii) the proceeds of the foregoing.
Upon the occurrence and during the continuation of an Event of Default (as
hereinafter defined) the Holder shall have the right to set off any and all
amounts due hereunder by the Borrower to the Holder against any indebtedness or
obligation of the Holder to the Borrower.
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A late payment charge of two percent (2%) of any installment remaining
unpaid five (5) days following the due date thereof, including Sundays and
holidays, shall be added to each such past due installment.
At the option of the Holder, the unpaid principal balance and all accrued
but unpaid interest thereon shall become immediately due and payable, without
notice or demand, upon the occurrence at any time of any Event of Default under
that certain Credit Agreement of even date herewith between the Borrower and the
Holder (individually an "Event of Default"):
If this Note is not paid when due, whether at maturity or by acceleration,
the Borrower agrees to pay all reasonable costs of collection, including but not
limited to reasonable attorneys' fees and reasonable expenses incurred in
connection with the protection or realization of the collateral securing this
Note or enforcement of any guaranty hereof incurred by the Holder hereof on
account of such collection, whether or not suit is filed hereon.
The Borrower hereby waives: (a) presentment, protest and demand; and (b)
notice of protest, demand, dishonor and nonpayment of this Note and all other
notices of every kind and nature whatsoever. No single or partial exercise of
any power hereunder or any other security given as security therefore, shall
preclude other or further exercise thereof or the exercise of any other power.
No delay or omission on the part of the Holder hereof in exercising any right
hereunder shall operate as a waiver of such right or of any other right under
this Note.
No provision of this Note or any instrument securing payment hereof or
otherwise relating to the debt evidenced hereby shall require the payment or
permit the collection of interest in excess of the maximum permitted by
applicable law. If any excess of interest is herein provided for, or shall be
adjudicated to be so provided for herein, the provisions of this paragraph shall
govern and neither the Borrower nor any endorsers or guarantors of this Note or
their respective heirs, personal representatives, successors or assigns shall be
obligated to pay the amount of such interest to the extent that it is in excess
of the amount permitted by applicable law. Notwithstanding the invalidity or
unenforceability of any provision hereof under applicable law, the remaining
provisions of this Note shall remain valid and enforceable. All rights and
remedies of the Holder expressed in this Note shall be in addition to and not in
lieu of all other rights and remedies available to the Holder by agreement, at
law, in equity or otherwise.
The Borrower warrants and represents that all funds advanced under this
Note shall be applied and are intended solely for business or commercial
purposes and not for any personal, family or household purposes.
The obligation evidenced by this Note was negotiated, delivered and
accepted in the State of Minnesota, the laws of which state shall in all
respects be controlling in the interpretation and validity of this Note and all
obligations evidenced hereby.
Time is of the essence. No delay or omission on the part of the Holder in
exercising any right hereunder shall operate as a waiver of such right or of any
other remedy under this Note. A waiver on any one occasion shall not be
construed as a bar to or waiver of any such right or remedy on a future
occasion.
2
<PAGE>
Consent is given to any extension or alteration of the time or terms of
payment hereof, any renewal, any release all or any part of the security given
for the payment hereof, any acceptance of additional security of any kind, and
any releases of, or resort to any party liable for payment hereof.
Executed as of the date first above written.
PIONEER HOTEL, INC.,
A NEVADA CORPORATION
By /s/ THOMAS K. LAND
-------------------------------------
Its Senior Vice President and
------------------------------------
Chief Financial Officer
------------------------------------
3
<PAGE>
EXHIBIT 10.105
SECURITY AGREEMENT
This Security Agreement ("Security Agreement") is made and given as of
this 28th day of December, 1994, by PIONEER HOTEL, INC., a Nevada corporation
(hereinafter called "Debtor"), with an office at 2200 South Casino Drive,
Laughlin, Nevada 89029, in favor of PDS FINANCIAL CORPORATION, a Minnesota
corporation, with an office at 7652 Executive Drive, Eden Prairie, MN 55344
(hereinafter called "Secured Party").
RECITALS
A. Pursuant to a Promissory Note in the amount of $627,800.00 (the
"Note") of Debtor dated December 28, 1994, Secured Party provided financing (the
"Loan") in connection with the purchase by Debtor of certain equipment and
fixtures described on Attachment A attached hereto and incorporated herein (the
"Equipment").
B. The Equipment is being used in connection with the gaming
operations of Debtor at the property commonly known as Pioneer Hotel & Gambling
Hall in Laughlin, Nevada.
C. The Note and this Security Agreement and any other instruments or
documents given as security for the Loan are herein after collectively referred
to as the "Loan Documents".
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged by Debtor, it is agreed as follows:
1. Grant of Security Interest. As security for the payment and
--------------------------
performance of the Note and all other liabilities, obligations and indebtedness
of Debtor to Secured Party due or to become due, direct or indirect, absolute or
contingent, joint or several, howsoever created, arising or evidenced, now or
hereafter at any time created, arising or evidenced under or pursuant to the
Loan Documents (hereinafter collectively referred to as the "Obligations"),
Debtor does hereby transfer, assign and grant to Secured Party a security
interest in all of Debtor's right, title and interest in and to the following
(hereinafter collectively referred to as the "Collateral"), whether now owned or
hereafter acquired or arising:
(a) the Equipment and all accessions, replacements, increases,
substitutions, upgrades and modifications thereto and all
security interests thereon;
(b) all rights in and to any proceeds of insurance now or
hereafter payable to Debtor and damages or awards resulting
from any authority exercising the rights of eminent domain
with respect to the Equipment;
(c) any proceeds or products of any of the foregoing.
2. Debtor represents, warrants, covenants and agrees as follows:
1
<PAGE>
(a) Incorporation. Debtor is a corporation duly organized, validly
-------------
existing and in good standing under the laws of the State of Nevada and has
all requisite power and authority to execute, deliver and perform the Loan
Documents.
(b) Authorization. The execution, delivery and performance of the
-------------
Loan Documents have been duly authorized by all necessary corporate action
and will not (i) require any consent or approval of any entity which has
not been obtained; (ii) violate any provision of any indenture, contract,
agreement or instrument to which it is a party or by which it is bound,
except in each case where the failure to obtain any consent or approval, or
where any such violation, will not result in a material adverse effect on
the Borrower's financial condition or results of operation.
(c) Performance by Debtor. Debtor shall, unless Debtor obtains Secured
----------------------
Party's written consent to the contrary:
(i) faithfully abide by, perform and discharge each and every
obligation, covenant and agreement under the Loan Documents
to be performed by Debtor hereunder;
(ii) not sell, transfer or assign, or offer to sell, transfer or
assign all or any part of the Collateral or permit all or
any part of the Collateral to be sold, transferred or
assigned;
(d) Security Interests. Except as contemplated hereby, Debtor has not
------------------
granted, and will not grant or permit to exist, any liens or security
interests in all or any portion of the Collateral. Debtor shall defend the
Collateral against all claims and demands of all and any other persons at
any time claiming any interest therein adverse to Secured Party.
(e) Actions and Proceedings. There are no actions at law, suits in
-----------------------
equity or by other proceedings pending before any governmental agency,
commission, bureau, tribunal or other arbitration proceedings pending
against Debtor that if adversely determined would adversely affect Debtor's
interest in the Collateral or would adversely affect the rights of Debtor
to pledge and assign all or a part of the Collateral or the rights and
security afforded Secured Party hereunder.
(f) Costs of Collection. In the event of any action or proceeding to
-------------------
collect or realize upon the Collateral or to enforce any of Secured Party's
rights hereunder, Debtor shall pay all of Secured Party's attorneys' fees
and legal expenses incurred by Secured Party in connection with or arising
out of such collection or enforcement.
3. Events of Default. It shall be an Event of Default under this
-----------------
Security Agreement upon the happening of any of the following:
2
<PAGE>
(a) failure to make any payment on the Note whether principal or
interest, when and as the same becomes due (whether at the stated maturity
or at a date fixed for any installment payment or any accelerated payment
date or otherwise); or
(b) failure to comply with or perform in any material respect any of
the terms, conditions or covenants of this Security Agreement; or
(c) any representation or warranty made by Debtor herein or in any
document, instrument or certificate given in connection with the Note shall
be false when made.
(d) Debtor shall fail to pay its debts as they become due, shall make
an assignment for the benefit of its creditors, shall admit in writing its
inability to pay its debts as they become due, shall file a petition under
any chapter of the Federal Bankruptcy Code or any similar law, state or
federal, now or hereafter existing, shall become "insolvent" as that term
is generally defined under the Federal Bankruptcy Code, shall in any
involuntary bankruptcy case commenced against it file an answer admitting
insolvency or inability to pay its debts as they become due, or shall fail
to obtain a dismissal of such case within sixty (60) days after its
commencement or convert the case from one chapter of the Federal Bankruptcy
Code to another chapter, or be the subject of an order for relief in such
bankruptcy case, or be adjudged a bankrupt or insolvent, or shall have a
custodian, trustee or receiver appointed for, or have any court take
jurisdiction of its property, or any part thereof, in any proceeding for
the purpose of reorganization, arrangement, dissolution or liquidation, and
such custodian, trustee or receiver shall not be discharged, or such
jurisdiction shall not be relinquished, vacated or stayed within sixty (60)
days of the appointment; or
(e) Debtor shall be dissolved, liquidated or wound up or shall fail to
maintain its existence as a going concern in good standing (excepting,
however, reorganizations, consolidations and/or mergers into or with
affiliates owned by, owning or under common control of or with such entity
or into the parent of such entity, provided the succeeding organization
assumes and accepts such entity's obligations hereunder); or
(f) Debtor defaults in any material respect under any other instrument
given as security for the Note.
4. Remedies. Upon an Event of Default Secured Party may declare all
--------
Obligations immediately due and payable, and may, at its option, without notice,
(i) either in person or by agent, with or without bringing any action
or proceeding, or by a receiver to be appointed by a court,
enforce and exercise all of the rights of Secured Party under the
Note and all of the rights of Secured Party hereunder,
3
<PAGE>
(ii) without demand, advertisement or notice of any kind (except such
notice as may be required under the Minnesota Uniform Commercial
Code (the "Code")) and all of which are, to the extent permitted
by law, hereby expressly waived sell, lease or dispose of the
Collateral by public or private sale,
(iii) exercise any of the remedies available to a secured party under
the Code,
(iv) proceed immediately to exercise each and all of the powers,
rights, and privileges reserved or granted to Secured Party
under this Security Agreement,
(v) proceed to protect and enforce this Security Agreement by suits
or proceedings or otherwise, and for the enforcement of any
other legal or equity available to Secured Party, or
(vi) take possession of the Equipment.
In the event that any notice is required under the Code such requirements
for reasonable notice shall be satisfied by giving at least ten (10) days notice
prior to the event or thing given rise to the requirement of notice.
5. Further Assurances. Debtor shall execute and deliver to Secured
------------------
Party, promptly and at Debtor's expense, such other documents and assurances,
and take such further action as Secured Party may reasonably request, in order
to effectively carry out the intent and purpose of this Agreement, and to
establish and protect the rights, interests and remedies of Secured Party
hereunder. This shall include, without limitation, providing Code financing
statements, and evidence of tax filings and payments. Debtor agrees that Secured
Party is authorized, at its option, to file financing statements or amendments
thereto without the signature of Debtor and, if a signature is required by law,
then Debtor appoints Secured Party as Debtor's attorney-in-fact to execute any
such financing statements.
6. Cumulative Remedies. All of Debtor's rights and remedies herein are
-------------------
cumulative and in addition to any rights or remedies available at law or in
equity including the Code, and may be exercised concurrently or separately.
Debtor shall pay all costs, expenses, losses, damages and legal costs (including
attorneys' fees) incurred by Secured Party as a result of enforcing any terms or
conditions of this Agreement.
7. No Liability Imposed on Secured Party. Secured Party shall not be
-------------------------------------
obligated to perform or discharge, nor does it hereby undertake to perform or
discharge any obligation, duty or liability for the control, care, management or
repair of the Equipment, nor shall it operate to make Secured Party responsible
for any dangerous or defective condition of the Equipment.
4
<PAGE>
8. Attorney-in-Fact. Upon the occurrence of any Event of Default and at
----------------
any time during the continuance thereof, Debtor hereby irrevocably appoints
Secured Party and its successors and assigns as its agent and attorney-in-fact,
irrevocable, which appointment is coupled with an interest, to exercise any
rights or remedies with respect to the Collateral or to endorse any checks which
constitute part of the Collateral.
9. Continuing Rights. The rights and powers of Secured Party or any
-----------------
receiver hereunder shall continue and remain in full force and effect until all
Obligations are paid in full.
10. Books and Records. Debtor will permit Secured Party and its
-----------------
representatives to examine Debtor's books and records (including data processing
records and systems), with respect to the Collateral and make copies thereof, at
any time and from time to time and Debtor will furnish such information reports
to Secured Party and its representatives regarding the Collateral as Secured
Party and its representatives may from time to time reasonably request. Secured
Party shall have the authority, at any time, to require Debtor to place upon
Debtor's books and records relating to the Collateral and other rights to
payment covered by the security interest created in this Agreement hereby a
notation stating that any such Collateral and other rights of payment are
subject to a security interest in favor of Secured Party.
11. Chief Executive Office. The location of the chief executive office of
----------------------
Debtor is set forth in the preamble hereto and will not be changed without
thirty (30) days' prior written notice to Secured Party. Debtor represents that
its books and records concerning accounts and chattel paper are located at its
chief executive office.
12. Name of Debtor. Debtor's true name is as set forth in the preamble
--------------
hereto. Debtor agrees that it will not change its name without thirty (30)
days' written notice to Secured Party.
13. Successors and Assigns. This Agreement and each and every covenant,
----------------------
agreement and provision hereof shall be binding upon Debtor and its successors
and assigns and shall inure to the benefit of Secured Party and its successors
and assigns.
14. Governing Law. This Agreement is executed pursuant to and shall be
-------------
governed by the laws of the State of Minnesota.
15. Severability. It is the intent of this Agreement to confer upon
------------
Secured Party the rights and benefits hereunder to the full extent allowable by
law including all rights available under the Code. The unenforceability or
invalidity of any provisions hereof shall not render any other provision or
provisions herein contained unenforceable or invalid. Any provisions found to be
unenforceable shall be severable from this Agreement.
16. Notices. Any notices and other communications permitted or required
-------
by the provisions of this Agreement (except for telephonic notice expressly
permitted) shall be in writing
5
<PAGE>
and shall be deemed to have been properly given or served by depositing the same
with the United States Postal Service, or any official successor thereto,
designated as Registered or Certified Mail, Return Receipt Requested, bearing
adequate postage, or delivery by reputable private carrier such as Federal
Express, Airborne, DHL or similar overnight delivery service, and addressed as
hereinafter provided. Each such notice shall be effective upon being deposited
as aforesaid. The time period within which a response to any such notice must be
given, however, shall commence to run from the date of receipt of the notice by
the addressee thereof. Rejection or other refusal to accept or the inability to
deliver because of changed address of which no notice was given shall be deemed
to be receipt of the notice sent. By giving to the other party hereto at least
ten (10) days' notice thereof, either party hereto shall have the right from
time to time and at any time during the term of this Agreement to change its
address and shall have the right to specify as its address any other address
within the United States of America. Each notice shall be addressed to the
address of the recipient as set forth in the preamble to this Agreement.
17. Captions and Headings. The captions and headings of the various
---------------------
sections of this Agreement are for convenience only and are not to be construed
as confining or limiting in any way the scope or intent of the provisions
hereof. Whenever the context requires or permits, the singular shall include
the plural, the plural shall include the singular and the masculine, feminine
and neuter shall be freely interchangeable.
IN WITNESS WHEREOF, Debtor has caused this Agreement to be executed as of
the date first above written.
PIONEER HOTEL, INC.,
A NEVADA CORPORATION
By /s/ THOMAS K. LAND
----------------------------------
Its SR. V.P. & CFO
---------------------------------
PDS FINANCIAL CORPORATION, A MINNESOTA
CORPORATION
By /s/ RICHARD J. HEGSTRAND
----------------------------------
Its Vice President
---------------------------------
6
<PAGE>
EXHIBIT 10.106
SUBORDINATION AGREEMENT
-----------------------
Dated as of December 28, 1994
LENDER: PDS Financial Corporation, a Minnesota corporation
BORROWER: Pioneer Hotel, Inc., a Nevada corporation
WHEREAS, the Borrower desires to borrow the principal sum of Six Hundred
Twenty-seven Thousand Eight Hundred and 00/100 Dollars ($627,800.00) from Lender
(the "Loan") pursuant to the terms and conditions of a Credit Agreement ("Credit
Agreement"), Promissory Note ("Note") and certain other documents which secure
the repayment of such a loan (the "Collateral Documents") (the Loan and all
indebtedness of every type and description which Borrower may now or at any time
hereafter owe to Lender under the Credit Agreement, the Note, the Collateral
Documents or other related documents, whether such indebtedness now exists or is
hereafter created or incurred and whether it is several or joint and several, is
hereinafter collectively referred to as the "Lender Indebtedness"); and
WHEREAS, the Borrower is now or may hereafter also be indebted to Sahara
Gaming Corporation, a Nevada corporation ("Sahara"); and
WHEREAS, the Lender is unwilling to make the Loan to the Borrower unless
the Borrower and Sahara subordinate the payment of any now existing or hereafter
created or incurred indebtedness, obligations or other disbursements of any kind
or nature of Borrower to Sahara, to the repayment of the Lender Indebtedness as
provided herein.
NOW, THEREFORE, in consideration of the premises, the Loan and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Borrower, Sahara and Lender hereby mutually agree as follows:
1. The payment of any indebtedness, obligations or other
disbursements of any kind by the Borrower to Sahara of every type and
description, whether now existing or hereafter created or incurred and whether
several or joint and several (all such indebtedness, obligations and
disbursements hereinafter collectively referred to as "Subordinated Payments"),
is hereby expressly subordinated to the extent and in the manner hereinafter set
forth to the payment in full of all of the Lender Indebtedness.
2. Without the Lender's prior written consent upon the occurrence and
during the continuation of an Event of Default (as defined in the Credit
Agreement), Borrower will not make, discharge or pay, in whole or in part, any
Subordinated Payments to Sahara until all of the Lender Indebtedness has been
paid in full.
1
<PAGE>
3. In the event that Sahara shall receive any payment on the
Subordinated Payments which Sahara is not entitled to receive under the
provisions of the foregoing paragraph 2, Sahara shall hold the amount so
received in trust for the Lender and shall forthwith turn over such payment to
the Lender in the form received (except for the endorsement of Sahara where
necessary) for application on the then existing Lender Indebtedness (whether due
or not due), in such manner of application as Lender may deem appropriate. In
the event of the failure of Sahara to make any endorsement required under this
Subordination Agreement, the Lender, or any of its officers or employees in
behalf of the Lender, is hereby irrevocably appointed as the attorney-in-fact
for Sahara to make the same in Sahara's name.
4. Upon the occurrence and during the continuation of an Event of
Default, Sahara will not commence any action or proceeding against the Borrower
to recover all or any part of the unpaid amount of the Subordinated Payments, or
join with any creditor (unless the Lender shall so join) in bringing any
proceedings against the Borrower under any bankruptcy, reorganization,
readjustment of debt, arrangement of debt, receivership, liquidation or
insolvency law or statute of the federal or any state government, unless and
until the Lender Indebtedness has been paid in full.
5. In the event of any receivership, insolvency, bankruptcy,
assignment for the benefit of creditors, reorganization or arrangement with
creditors, whether or not pursuant to bankruptcy laws, the sale of all or
substantially all of the assets, dissolution, liquidation or any other
marshalling of the assets or liabilities of the Borrower, Sahara shall file all
claims, proof of claim or other instrument of similar character necessary to
enforce the obligations of the Borrower in respect of the Subordinated Payments
and shall hold in trust for the Lender and promptly pay over to the Lender in
the form received (except for the endorsement of Sahara where necessary) for
application on the then existing Lender Indebtedness, any and all moneys,
dividends or other assets received in any such proceedings on account of the
Subordinated Payments, unless and until the Lender Indebtedness has been paid in
full. In the event that Sahara shall fail to take any such action, the Lender,
as attorney-in-fact for Sahara, may take such action on behalf of Sahara.
Sahara hereby irrevocably appoints the Lender, or any of its officers or
employees in behalf of the Lender, as the attorney-in-fact for Sahara to demand,
sue for, collect and receive any and all such moneys, dividends or other assets
and give acquittance therefor and to file any claim, proof of claim or other
instrument of similar character, and to take such other proceedings in the
Lender's own name or in the name of Sahara as the Lender may deem necessary or
advisable for the enforcement of the agreements contained herein, and Sahara
will execute and deliver to the Lender such other and further powers-of-attorney
or instruments as the Lender may request in order to accomplish the foregoing.
6. The Borrower will cause all notes, bonds, debentures or other
instruments evidencing the Subordinated Payments or any part thereof to contain
a specific statement thereon to the effect that the indebtedness thereby
evidenced is subject to the provisions of this Subordination Agreement. At the
request of the Lender upon the occurrence and during the continuation of an
Event of Default, the Borrower will deposit with the Lender all of the notes,
2
<PAGE>
bonds, debentures or other instruments evidencing the Subordinated Payments or
any part thereof, which notes, debentures or other instruments may be held by
the Lender so long as there remains outstanding any Lender Indebtedness and
until this Subordination Agreement is terminated as hereinafter provided.
7. None of the provisions of this Subordination Agreement shall be
deemed or construed to constitute a commitment or an obligation on the part of
the Lender to make any future loans or other extensions of credit or financial
accommodation to the Borrower.
8. This Subordination Agreement shall constitute a continuing
agreement of subordination, and the Lender may continue, without notice to or
consent by Sahara, to make loans and extend other credit or financial
accommodation to or for the account of the Borrower in reliance upon this
Subordination Agreement until written notice of revocation of this Subordination
Agreement shall have been received by the Lender from the Borrower and Sahara.
Any such notice of revocation shall not affect this Subordination Agreement in
relation to any Lender Indebtedness then existing or created thereafter pursuant
to any previous commitment of the Lender to the Borrower, or any extension,
modification, amendment or renewal of any such Lender Indebtedness and as to
such Lender Indebtedness and extensions, modifications, amendments or renewals
thereof, this Subordination Agreement shall continue effective until the same
have been fully paid with interest. If there be more than one signer of this
Subordination Agreement, such notice of revocation shall be effective only as to
the one giving such notice of revocation.
9. The Lender may, at any time, and from time to time, either before
or after any such notice of revocation, without the consent of or notice to
Sahara without incurring responsibility to Sahara, and without impairing or
releasing any of its rights or any of the obligations of Sahara hereunder: (a)
change the interest rate or change the amount of payment or otherwise modify,
amend, alter or renew the terms of any Lender Indebtedness or any instrument
evidencing the same in any manner; (b) sell, exchange, release or otherwise deal
with all or any part of any property at any time securing payment of the Lender
Indebtedness or any part thereof; (c) release anyone liable in any manner for
the payment or collection of the Lender Indebtedness or any part thereof; (d)
exercise or refrain from exercising any right against the Borrower or others
including Sahara) and (e) apply any sums received by the Lender, by whomsoever
paid and however realized, to the Lender Indebtedness in such manner as the
Lender shall deem appropriate.
10. No waiver shall be deemed to be made by the Lender of any of its
rights hereunder unless the same shall be in writing signed on behalf of the
Lender, and each such waiver, if any, shall be a waiver only with respect to the
specific matter or matters to which the waiver relates and shall in no way
impair the rights of the Lender or the obligations of Sahara to the Lender in
any other respect at any other time.
3
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11. This Subordination Agreement and every part hereof shall be
binding upon and shall inure to the benefit of the Borrower and Sahara and their
respective successors and assigns, and of each of them, respectively, from and
after the date of its execution and delivery to the Lender irrespective of
whether this or any similar agreement is executed by any other creditor of the
Borrower. Notice of acceptance by the Lender of this Subordination Agreement or
of reliance by Lender upon the subordination herein contained is hereby waived
by the Borrower and Sahara.
12. If there be more than one signer of this Subordination Agreement,
then the covenants, promises and agreements herein contained shall be construed
to be the several promises, covenants and agreements of each of the undersigned.
IN WITNESS WHEREOF, the parties have executed this Subordination
Agreement as of the day and year first above written.
BORROWER:
PIONEER HOTEL, INC.,
a Nevada corporation
By: /s/ THOMAS K. LAND
____________________________________
Its: Senior Vice President and
___________________________________
Chief Financial Officer
___________________________________
SAHARA:
SAHARA GAMING CORPORATION,
a Nevada corporation
By: /s/ THOMAS K. LAND
____________________________________
Its: Senior Vice President and
___________________________________
Chief Financial Officer
___________________________________
LENDER:
PDS FINANCIAL CORPORATION,
a Minnesota corporation
By: /s/ RICHARD S. HEGSTRAND
____________________________________
Its: Vice President
___________________________________
4
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EXHIBIT 10.107
PURCHASE AND SALE BY AND BETWEEN
HACIENDA HOTEL, INC. ("Seller")
and
WILLIAM G. BENNETT and/or Assigns ("Buyer")
of the
HACIENDA HOTEL AND CASINO
Las Vegas, Nevada
Dated: January 10, 1995
Counsel for Counsel for
"Seller" "Buyer"
William J. Raggio, Esq. George P. Kelesis, Esq.
John P. Sande, III, Esq. Cherry, Bailus & Kelesis
Vargas & Bartlett 600 S. 8th Street
201 W. Liberty St. Las Vegas, Nevada 89101
P. O. Box 281 702/385-3788
Reno, Nevada 89504
702/786-5000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I................................................. 1
1 Definitions........................................ 1
ARTICLE II................................................ 2
2 Sale of Property................................... 2
2.1 Closing Date.............................. 2
2.2 Property Exceptions....................... 4
2.3 Prorations and Allocations................ 6
ARTICLE III............................................... 7
3 Purchase Price..................................... 7
3.1 Purchase Price............................ 7
3.2 Payment................................... 7
3.3 Costs..................................... 9
3.4 Gaming Taxes.............................. 9
3.5 Allocation of Purchase Price.............. 9
ARTICLE IV................................................ 10
4 Contracts and Assumption of Liabilities............ 10
4.1 Contracts................................. 10
4.2 Assumption of Liabilities by Buyer........ 12
4.3 Excluded Liabilities...................... 14
ARTICLE V................................................. 14
5 Title to Real Property............................. 14
5.1 Title Reports and Exceptions.............. 14
5.2 Title Policy.............................. 16
ARTICLE VI................................................ 17
6 Representations and Warranties..................... 17
6.1 Seller's Representations and Warranties... 17
(a) Due Organization..................... 17
(b) Binding Effect....................... 17
(c) Notices and Approvals; No Violation
of Agreement....................... 17
(d) Compliance with Laws................. 18
(e) Contracts............................ 18
(f) Litigation........................... 19
(g) Employees, Officers and Directors:
Employment and Similar
Contracts: Benefits................ 19
(h) Eminent Domain or Other Proceedings.. 20
(i) Properties........................... 20
(j) Leases............................... 21
(k) Insurance............................ 21
(l) Condition............................ 21
(m) Hazardous Waste...................... 22
(n) Reports.............................. 23
(o) Condemnation Proceeding.............. 23
</TABLE>
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<TABLE>
<S> <C>
(p) Zoning............................... 23
(q) Affiliated Parties................... 23
6.2 Buyer's Representation and Warranties..... 24
(a) Due Organization..................... 24
(b) Binding Effect....................... 24
(c) Notices and Approvals, No Violation
of Agreements...................... 24
(d) Litigation........................... 25
ARTICLE VII............................................... 25
7 Condition of the Property; Access and Observers;
Independent Investigation........................ 25
7.1 Access and Observers...................... 25
7.2 Inspections............................... 26
7.3 Maintenance of Property................... 26
ARTICLE VIII.............................................. 27
8 Conditions Precedent to Closing and Covenants...... 27
8.1 Buyer's Conditions........................ 27
8.2 Seller's Conditions....................... 28
8.3 Hart-Scott-Rodino Filing.................. 28
8.4 Cooperation............................... 29
8.5 Asset Transfer............................ 29
8.6 Gaming Licenses........................... 30
ARTICLE IX................................................ 30
9 Conduct of Business................................ 30
9.1 Seller's Conduct of Business.............. 30
9.2 No Solicitation........................... 33
ARTICLE X................................................. 34
10 Risk of Loss...................................... 34
10.1 Risk of Loss............................. 34
10.2 Material Loss............................ 35
10.3 Uniform Act.............................. 35
ARTICLE XI................................................ 35
11 Termination; Remedies............................. 35
11.1 Termination.............................. 35
11.2 Effect of Termination.................... 36
11.3 Notice of Seller's Breach; Right to Cure. 37
11.4 Specific Performance..................... 39
ARTICLE XII............................................... 39
12 Closing........................................... 39
12.1 Closing.................................. 39
12.2 Seller's Delivery........................ 39
12.3 Buyer's Delivery......................... 42
12.4 Approval of Closing Documents............ 43
12.5 Possession............................... 43
12.6 No Merger................................ 43
</TABLE>
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<TABLE>
<S> <C>
ARTICLE XIII.............................................. 43
13 Post Closing Covenant............................. 43
13.1 Further Assurances....................... 43
13.2 Cooperation Retention of Records......... 43
13.3 Labor Arbitration and Grievances of
Sellers................................ 44
ARTICLE XIV............................................... 45
14 Brokerage Fees.................................... 45
ARTICLE XV................................................ 45
15 Survival of Representations and Warranties:
Indemnification................................. 45
15.1 Seller's Indemnity....................... 45
15.2 Buyer's Indemnity........................ 46
15.3 Notice of Claim.......................... 46
ARTICLE XVI............................................... 48
16 Guarantor......................................... 48
16.1 Guarantee (Bennett)...................... 48
16.2 Guarantee (Sahara Gaming Corp.).......... 48
ARTICLE XVII.............................................. 48
17 Notices........................................... 48
ARTICLE XVIII............................................. 49
18 Miscellaneous..................................... 49
18.1 Nevada Law............................... 49
18.2 Assignment; Binding Effect............... 49
18.3 Partial Invalidity....................... 49
18.4 Time of Essence.......................... 49
18.5 Captions................................. 50
18.6 Pronouns................................. 50
18.7 Knowledge of Party....................... 50
18.8 Entire Agreement; Amendment; Waiver...... 50
18.9 No Third Party Beneficiary............... 50
18.10 Counterparts............................. 51
18.11 Attorney's Fees.......................... 51
18.12 Jurisdiction............................. 51
18.13 No Party Deemed Drafter.................. 51
EXHIBIT(S)................................................ 52
"A" Real Property Description................... 53
"B" Choses in Action............................ 54
"C" Third Party (Tangible Personal Property).... 55
"D" Personal Property Retained by Seller........ 56
"E" Other Assets Retained by Seller............. 57
"F" Purchase Price Allocation................... 58
"G" Material Contracts.......................... 59
"H" Contracts (Excluding Material Contracts).... 60
"I" Assumed Liabilities......................... 61
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
"J" Assumed Customer Benefits................... 62
"K" Contracts (Other than those described
in Exhibits "G" and "H")................... 63
"L" Affiliated Parties.......................... 64
"M" Seller Litigation and Other Actions......... 65
"N" Employee Benefit Plans...................... 66
"O" Leases and Licenses......................... 67
"P" Insurance Policies and Contracts............ 68
"Q" Buyer Litigation and Other Actions.......... 69
</TABLE>
iv
<PAGE>
AGREEMENT FOR PURCHASE AND SALE
THIS AGREEMENT FOR PURCHASE AND SALE ("Agreement") is made and entered into
by and among Hacienda Hotel, Inc., a Nevada corporation, doing business as
Hacienda Resort Hotel & Casino ("Seller") and Sahara Gaming Corporation
("Guarantor") and WILLIAM G. BENNETT and/or Assigns ("Buyer").
W I T N E S S E T H :
---------------------
WHEREAS, Seller is the owner of certain improved Real Property located in
Clark County, Nevada, commonly known as the Hacienda Resort Hotel and Casino,
which is more particularly described on Exhibit "A" attached hereto; and
WHEREAS, the parties hereto have reached an understanding with respect to
the sale by Seller and the purchase by Buyer of the Real Property and of the
assets of the Business, except as hereinafter specifically excluded; and
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, and upon and subject to the terms and conditions
hereinafter set forth, Seller and Buyer agree as follows:
ARTICLE I
[Intentionally left blank]
1
<PAGE>
ARTICLE II
2 Sale of Property
-----------------
2.1 Closing Date. At the Closing, Seller agrees to sell, transfer and
------------
convey to Buyer, and Buyer agrees to purchase from Seller, for the consideration
hereinafter provided, the following assets owned by Seller (which assets are
herein collectively called the "Property"):
(a) Certain improved real property located in Clark County, Nevada, owned
by Seller, and more particularly described in Exhibit "A", attached hereto (the
"Hacienda Parcel"), together with rights, appurtenances, buildings and
improvements thereto and thereon, including the following:
(i) All of Seller's right, title and interest in and to (A) all rights,
privileges and easements appurtenant to the Hacienda Parcel, and (B) all
development rights, air rights, water, water rights and all of Seller's right,
title and interest in and to any minerals, oil, gas and other hydrocarbon
substances on or under said real property relating to the Hacienda Parcel; and
(ii) All of Seller's right, title and interest in and to the improvements
and fixtures (including heating and air conditioning systems and fixtures used
to provide any utility services, food and beverage services, recreation, and
other services or activities) located on the Hacienda Parcel.
The Hacienda Parcel, together with all rights and appurtenances thereto and
all buildings, improvements, fixtures and other items of real property thereon
is hereinafter referred to as the "Real Property".
(b) All of Seller's right, title and interest in and to the furniture and
furnishings, equipment, appliances, motor vehicles and other transportation
equipment, tools, signs and signage, utensils, tableware, chinaware, glassware,
silverware, telephone
2
<PAGE>
equipment and all of its related software, all computer hardware, computer
software, owned or licensed by Seller, including, without limitation, all source
codes and data whether on tape, disc, or other computerized format, all related
user manuals, computer records, service codes, programs, stored material and
data bases, all access codes and instructions to obtain access and/or utilize
the information contained on such computer records, all internal manuals, all
operational manuals, all personnel manuals, all administrative manuals, and all
other tangible personal property owned by Seller on the Closing Date and used in
the ownership, operation and maintenance of the business (hereinafter "Personal
Property" and/or "Business"), including, but not limited to, all assignable
warranties and guarantees on any such items of Personal Property.
(c) All of Seller's right, title and interest, if any, in and to any
intangible personal property owned by Seller and used in the ownership, use and
operation of the Business ("Intangible Personal Property"), including without
limitation, the name "Hacienda Resort Hotel & Casino", displays, symbols, color
arrangements, logos, trademarks, copyrights, licenses, patents and words and
devices, relating directly or indirectly to and used by Seller solely in
connection with the Business, or which identify the products or services of the
Business (and any goodwill associated with such name and with such marks).
Seller specifically makes no representations regarding the validity of any marks
or registrations of record, if any, with regards to the name or use of Hacienda
Resort Hotel & Casino and makes no representations or warranties concerning the
name or use of Hacienda Resort Hotel & Casino;
(d) All of Seller's right, title and interest in and to all customer lists,
and customer mailing lists, relating to the business;
3
<PAGE>
(e) All of Seller's right, title and interest in and to all advance
reservations, bookings, originals of casino credit cards and credit files. In
addition to the foregoing, copies of such accounting records and reports
relating to the Business as Buyer may reasonably request or which are necessary
for the continued and uninterrupted operation of the Business by Buyer from and
after the Closing Date;
(f) All of Seller's right, title and interest in and to any telephone
numbers used exclusively in connection with the business;
(g) All assignable Contracts as described in Section 4.1 hereof;
(h) Upon final licensing approval to transfer the gaming devices by Nevada
State Gaming Control Board and Commission and Clark County authorities, all of
Seller's right, title and interest to all gaming devices and/or equipment used
in connection with the Business.
(i) The Real Property and the Personal Property, described herein above,
shall be conveyed to Buyer free and clear of all liabilities, obligations,
security interest, liens and encumbrances except for those expressly approved by
the Buyer.
2.2 Property Exceptions. Anything in Section 2.1 of this Agreement to the
-------------------
contrary notwithstanding, the Property does not include and Seller reserves and
retains all right, title and interest in and to:
(a) All cash and cash equivalents;
(b) All Hacienda gaming chips (including reserve chips) and tokens;
(c) All contracts for the use of the Recreational Vehicle Park located on
the Real Property that were entered into pursuant to the "Hacienda Adventure
Program".
4
<PAGE>
Seller shall take such steps as are necessary to terminate within eighteen (18)
months of the Closing Date (hereinafter "Termination Period") any rights of the
members of the program to use the Recreational Vehicle Park or any part of the
Real Property. During the Termination Period, Seller shall pay monthly to Buyer
all direct expenses that Buyer incurs in operating the recreational vehicle
park, including, but not limited to, utilities and labor; but at the end of the
Termination Period, Seller shall have no obligation to remove any improvements
or facilities from the Recreational Vehicle Park. Except for Buyer's
obligations to maintain and operate the Recreational Vehicle Park during the
period, Buyer assumes no obligations or duties to any of the members of the
Hacienda Adventure Program after the period and any such obligations or duties
shall be Excluded Liabilities under Section 4.3 and be subject to
Indemnification by Seller. To the extent necessary for Seller to transfer said
memberships, Seller shall be entitled to receive that portion of rights required
of well permit 25324, or its equivalent thereof in Buyer's discretion, and Buyer
and Seller shall cooperate fully to effect such transfer.
(d) All Seller's inventories of food and beverage stocks, and gift shop
inventory, unless Buyer elects to purchase any or all of such items at Closing.
Should Buyer so elect, the purchase price of any such items shall be its cost to
Seller. (Seller and Buyer shall complete the inventory Twenty-Four (24) hours
prior to Closing)
(e) All of Seller's right, title and interest in and to all markers, guest
ledger receivables (lounge, restaurant and others), rents and other accounts and
notes receivable relating to the Business accrued on or before the Closing Date.
(f) Seller's books and records, except as provided in Section 2.1(d).
(g) Securities, investments, bank accounts, deposits by Seller and refund
claims, whether or not such assets relate to Seller's ownership of the Property
or operation of the Business;
5
<PAGE>
(h) Any insurance and rights thereunder except as otherwise provided in
this Agreement;
(i) Choses in action, claims and litigation, described in Exhibit "B";
(j) Any tangible personal property, described in Exhibit "C", owned by
third parties, leased, or loaned to Seller for use in the Business, unless the
lease therefor is a Contract;
(k) Any items of equipment or other personal property (other than any books
and records covered by Section 2.1(e) hereof) which are not used exclusively in
connection with the ownership, or necessary to, the operation of the Business,
described in Exhibit "D";
(l) Any other assets which are not designated for use or exclusively used
in connection with the ownership, operation or maintenance of the Business,
described in Exhibit "E";
(m) That certain real property located in Las Vegas, Nevada, known as the
"Cambridge Building", any assets used in connection with Hacienda Hawaiian and
the Mount Charleston Properties.
2.3 Prorations and Allocations
--------------------------
(a) Credits and payments shall be prorated as of the Closing (except as
otherwise indicated), including, but not limited to:
(i) Non-delinquent real and personal property taxes and assessments (and
including any supplemental assessments);
(ii) Utilities shall be prorated as of the Closing (or as soon as
practicable theretofore or thereafter). Buyer shall make appropriate
arrangements for transfer of all necessary utility and other services in its own
name to be effective as of the Closing (or as soon as practicable theretofore or
thereafter);
6
<PAGE>
(iii) rents or periodic payments on any leases, contracts, and hotel rooms;
(iv) security deposits on any leases and contracts; and
(v) premiums on any insurance policies retained by the Buyer.
(b) Concerning Seller's Gold Key Time Share Memberships, which are to be
assumed by Buyer, the parties acknowledge that certain of the membership
contracts are fully paid (the purchase price has been fully paid and the member
only pays an annual maintenance fee in January of each year), and certain
contracts not fully paid, since the purchase price (together with interest and
maintenance fees) is paid in monthly installments. Any annual maintenance fees
paid under fully paid contracts shall be prorated as of the Closing, the
proration shall be based on the total contract term and total contract payments.
There shall be no proration of payments under contracts not fully paid, but
Buyer shall be entitled to any monthly payments under such contracts which
become due and payable after Closing.
ARTICLE III
3 Purchase Price
--------------
3.1 Purchase Price. For and in consideration of the Property, Buyer shall
--------------
pay to Seller a purchase price of Eighty Million dollars ($80,000,000.00)
("Purchase Price"). The Purchase Price may be adjusted for any insurance or
condemnation proceeds which may accrue or be paid on or prior to Closing as
provided in Section 10.1 and under other circumstances expressly set forth in
this Agreement.
3.2 Payment. The Purchase Price shall be paid as follows:
-------
(a) Earnest money deposit of Five Million Dollars ($5,000,000.00)
("Deposit") shall be deposited by Buyer with United Title Company ("Title
Company") prior
7
<PAGE>
to execution of this Agreement in an interest-bearing account, with interest
accruing in favor of Buyer. Any interest accruing as of the Closing Date on the
Deposit shall be applied as a credit against the Purchase Price. If Buyer fails
to complete the purchase of the Property in accordance with the terms of this
Agreement for any reason, Seller shall retain and be entitled to the Deposit as
liquidated damages for breach of contract as Seller's sole and exclusive remedy.
Notwithstanding anything to the contrary in this Agreement, if Buyer fails to
complete the purchase due to Buyer's inability to obtain the licenses and/or a
finding of suitability by the Nevada Gaming Authorities to enable Buyer to
conduct gaming at the Real Property, or for Seller's misrepresentation, default
and/or breach of any terms and conditions of this Agreement and/or the failure
to receive approval of the Department of Justice of the United States of America
and/or the Federal Trade Commission of the United States of America pursuant to
the Hart-Scott Act in such event the Title Company shall return to the Buyer the
Deposit and any interest thereon.
(b) At the Closing, Buyer shall pay Seller subject to offsets and/or
reductions as stated in this Agreement, the remaining balance of the purchase
price in cash or by bank cashiers or certified check payable in immediately
available federal funds, or by wire transfer of funds to a bank account of
Seller, said account identity to be provided to Buyer.
(c) If Buyer so instructs in writing, Title Company shall invest the
Deposit in (a) direct obligations of the United States of America or any agency
thereof, (b) certificates of deposit issued by any bank organized under the laws
of the United States or any state thereof, provided such bank has capital,
surplus and undivided profits aggregating at least Fifty Million Dollars
($50,000,000) or (c) commercial paper given the highest rating by a nationally
recognized credit rating agency. If the transactions provided for herein close,
income or interest on such investments shall be applied as provided in Section
3.2(a).
8
<PAGE>
Should the investment not have matured at the Closing, income or interest
therefrom earned as of the Closing shall be calculated, Buyer and Title Company
shall assign all of their interest in the Deposit to Seller and the amount of
income or interest accrued as of the Closing will be credited against the
payments due pursuant to Section 3.2(a).
3.3 Costs. Costs and expenses relating to the transactions contemplated by
-----
this Agreement shall be borne and paid as follows:
(a) All motor vehicle transfer taxes, vehicle registration fees, sales, use
and excise taxes and documentary stamp or transfer taxes (including, but not
limited to, those set forth in Nevada Revised Statutes Section 375.020) relating
to the purchase and sale of the Property shall be borne and paid one-half (1/2)
by Buyer and one-half (1/2) by Seller;
(b) All fees for recording any grant, bargain and sale deed or deeds and
assignments of the Real Property to be conveyed and assigned pursuant hereto
shall be borne and paid by Buyer. Fees for the Title Policy shall be paid as
provided in Section 5.2 hereof;
(c) Any fees and expenses of the Title Company shall be paid one-half (1/2)
by Buyer and one-half (1/2) by Seller;
(d) Except as otherwise specifically provided in this Agreement, Seller and
Buyer shall bear their own costs and expenses arising out of the negotiation,
execution, delivery and performance of this Agreement, and the consummation of
the transactions contemplated herein, including without limitation, legal and
accounting fees and expenses.
3.4 Gaming Taxes. Seller shall be and remain liable for any fees or taxes
------------
due pursuant to Chapter 463 of the Nevada Revised Statutes which accrue prior to
the Closing Date.
3.5 Allocation of Purchase Price. The purchase price shall be allocated in
----------------------------
accordance with the agreed value as of the Closing Date as set forth in Exhibit
"F":
9
<PAGE>
Seller and Buyer shall timely comply with its Internal Revenue Service
information reporting requirements by completing and attaching all required
forms to its Income Tax Return for the tax year that includes the date on which
the sale and purchase of the property is consummated. Such information
reporting obligations shall be discharged in accordance with the terms of this
Agreement.
ARTICLE IV
4 Contracts and Assumption of Liabilities:
---------------------------------------
4.1 Contracts.
---------
(a) For purposes of this Agreement, the term "Material Contract" shall
mean: any contract or agreement to which Seller is a party which relates to the
Business and (i) was not incurred in the normal and ordinary course of business,
or (ii) represents an obligation of Seller during the remaining term thereof in
an amount greater than Ten Thousand Dollars ($10,000), (e.g., Seller's existing
contract with YESCO for the construction and installation of a new free-standing
sign, which Buyer has agreed to assume) and/or (iii) is listed on Exhibit "G"
attached hereto. For purposes of this Agreement, the term "Contracts" shall mean
and include: (1) all Material Contracts existing on the date hereof; (2) all
current collective bargaining agreements or other contracts or commitments to or
with any labor unions or other employee representative or groups of employees,
and all such future agreements, contracts, or commitments made or entered into
before closing, provided that Buyer is allowed to participate in any
negotiations with such labor unions or other employee representative or groups
of employees; (3) all contracts and agreements incurred in connection with the
Business which would not constitute Material Contracts, currently existing or
incurred after the date hereof prior to the Closing Date in the normal and
ordinary course of business; (4) any Contracts approved (or deemed approved) by
Buyer
10
<PAGE>
as herein provided; and (5) any other contracts and agreements incurred by
Seller before or after the date hereof in connection with the Business and
approved in writing by Buyer. (Collectively referred to as the Contracts
described in Exhibit "H").
(b) Seller has made Buyer aware of the general nature of the Contracts,
which Buyer would assume. Within fifteen (15) business days of Seller's Board
of Directors approval of this Agreement, Seller will deliver to Buyer a copy of
any Contracts which will be in force on or after the Closing Date. Within
fifteen (15) business days after receipt by Buyer of such Contracts, Buyer shall
notify Seller in writing of any objections thereto; it being acknowledged and
agreed by Buyer that Buyer shall not object to any such Contract which (i) was
incurred in the normal and ordinary course of the business by Seller; (ii) which
is not a Material Contract as defined in this Agreement (iii) contains terms and
conditions which are not materially less favorable than those which would have
been available for such product or service as of the date of execution of such
Contract; (iv) is not between Seller and any third party affiliated with or
related to Seller; and (v) was approved by the Chairman of the Board, Chief
Financial Officer or Chief Operating Officer of Sahara Gaming. Buyer and Seller
shall undertake in good faith to resolve any objections which Buyer may have to
any such Contracts. However, if Buyer's objections are not resolved, Seller
shall retain said Contract and remain solely liable and responsible for the
same. Buyer shall be deemed to have approved all Contracts which are not
objected to as hereinabove provided. Any Contract that Seller becomes aware of
that were not listed on Exhibits "G" and "H" or provided to Buyer within fifteen
(15) days of execution of this Agreement shall be submitted to Buyer as soon as
Seller becomes aware of such Contracts and Buyer will have fifteen (15) days to
notify Seller of any objections;
(c) Seller, upon execution of this Agreement, and prior to Closing, shall
not enter into any agreement, contract or incur any obligation which term or
duration
11
<PAGE>
exceeds a period of thirty (30) days or is not incurred in the ordinary course
of business without Buyer's written consent;
(d) At the Closing, subject to Section 4.1(b), Seller shall assign and
transfer to buyer all of Seller's right, title and interest in and to the
Contracts and Buyer agrees to assume and perform all obligations and liabilities
on the part of Seller under the Contracts accruing after the Closing Date;
provided, that to the extent that the assignment of any Contract is not
- --------
permitted without the consent of the other party or parties to such Contract,
this Agreement shall not be effective to assign such Contract if such consent is
not given; provided, further, that at the request of Buyer, Seller shall use all
-------- -------
reasonable efforts to obtain such consent. If (i) any such consent is not
obtained or (ii) if Buyer's assumption of such Contract is prohibited by law,
Seller agrees, to the extent permitted by law, to undertake with Buyer to enter
into a subcontract or other arrangement pursuant to which Buyer shall receive
the benefits of such Contract upon Buyer's payment of the consideration provided
in the Contract and assumption of the obligation to perform the same; provided,
--------
however, that with respect to (i) above, if any Contract may only be assigned
- -------
upon payment, directly or indirectly, of additional consideration, then Buyer
may either (1) pay any such additional consideration whereupon Seller shall
assign such Contract to Buyer or (2) elect not to assume such Contract, which
shall be and remain the sole responsibility of Seller, and Buyer shall have no
rights under any such Contract. In the event Buyer's assumption of any such
Contract is prohibited by law, Buyer shall not be required to assume such
Contract, which shall be and remain the sole responsibility of Seller's and
Buyer shall have no rights under any such Contract;
4.2 Assumption of Liabilities by Buyer. At the Closing, Buyer shall agree
----------------------------------
to assume and pay, perform and discharge, and indemnify and hold Seller harmless
from and against, the following obligations and liabilities of Seller
(collectively, "Assumed Liabilities"):
12
<PAGE>
(a) All of Seller's obligations and commitments under the Contracts,
arising after, and concerning the period after, the Closing Date listed on
Exhibit "I";
(b) All liability of Seller existing as of the Closing with respect to
amounts shown on internal progressive slot machines, meters, or meters for other
games or gaming devices, provided, however, that the amount of such liability
shall be applied as a credit against the Purchase Price. With respect to
progressive pool programs in which Seller participates with other gaming
entities, Buyer shall assume all liability and any payments under such programs
which become due and payable after the Closing Date listed on Exhibit "I".
(c) Any commitments or coupons or slot club points for free or discounted
accommodations, services, tickets, food or beverages issued or granted by Seller
to customers or others in the ordinary course of the Business and which remain
outstanding after the Closing Date and which were issued or granted pursuant to
any Contract, listed on Exhibit "J";
(d) Any and all claims, liabilities, loss, cost, damage or expense
(including reasonable counsel fees and expenses) resulting or arising out of
ownership of the Property or conduct of the Business, or caused by or occurring
upon the Property, after the Closing Date.
The assumption by Buyer of the Assumed Liabilities shall not enlarge any
rights or remedies of any third party under any Contracts with Seller. Buyer
shall not be prevented from contesting in good faith any of the Assumed
Liabilities. Buyer agrees to indemnify, defend and hold Seller and its
directors, officers, employees, agents, successors and assigns harmless from and
against any and all liability, loss, cost, damage and/or expense (including,
without limitation, reasonable attorneys' fees and costs) pertaining to the
Assumed Liabilities.
13
<PAGE>
4.3 Excluded Liabilities. Except as provided in Section 4.2 with respect
--------------------
to the Assumed Liabilities, Buyer expressly disclaims responsibility for and
shall not assume or be obligated to pay, perform or discharge, and Seller shall
pay, perform, discharge and indemnify and hold Buyer harmless from and against,
any debt, obligation, expense or liability of Seller, whether absolute or
contingent, arising out of or in connection with the Property or the Business,
including, without limitation, any liabilities or obligations arising out of
ownership or operation of the Property or the conduct of the Business by Seller
prior to the Closing Date (collectively, "Excluded Liabilities"). Seller and
Seller's Parent Corporation agrees to indemnify, defend and hold Buyer, and its
employees, officers, agents, successors and assigns and Guarantor harmless from
and against any and all liability, loss, cost, damage and/or expense (including,
without limitation, reasonable attorneys' fees and costs) directly or indirectly
arising out of or attributable to Excluded Liabilities.
ARTICLE V
5 Title to Real Property.
----------------------
5.1 Title Reports and Exceptions.
----------------------------
(a) Seller shall, within Fifteen (15) days of the Seller's Board of
Director's approval, deliver to Buyer a preliminary title report (and a survey
within a reasonable time thereafter) of the Real Property ("Preliminary Title
Report") from the Title Company. Buyer shall have ten (10) business days after
receipt of the Preliminary Title Report in which to review such report. "Title
Objection" shall mean any item or matter appearing in a Preliminary Title Report
other than (i) inchoate statutory liens for taxes or assessments not due and
payable, (ii) any such matter which does not in fact create a material
impairment to the continued operation of the Business on the Real Property;
(iii) any matter of which Buyer has not notified Seller in writing (stating the
reason Buyer contends that such matter
14
<PAGE>
constitutes a Title Objection) within ten (10) business days after receipt of a
continuation report from the Title Company in which such matter not previously
referenced in a continuation report or the Preliminary Title Report first
appears, together with a copy of the document, if any, creating such new matter
(each such period herein called the "Title Review Period") stating in good faith
the reason Buyer contends such matter constitutes a Title Objection; (iv) any
matter approved by Buyer; or (v) any matter which is caused by, or otherwise
results from the actions of Buyer. Upon termination of any applicable Title
Review Period, any matter not timely listed as a Title Objection by Buyer as of
such date shall be deemed approved as a Permitted Exception and not constitute a
Title Objection. Seller shall have until the Closing to remove or cure any Title
Objection subject to subparagraph (b) hereinbelow;
(b) If, after the date hereof, a matter is disclosed to Buyer which Buyer
contends to be a Title Objection, Seller shall notify Buyer within ten (10)
business days after notice from Buyer to Seller of the matter which Buyer
contends to be a Title Objection, whether Seller will undertake to cure or
otherwise remove such matter on or prior to Closing. If Seller gives written
notice to Buyer that Seller is unable or unwilling to cure such matter on or
prior to Closing, Buyer, as its sole and exclusive remedy, shall have the right
and option, if such matter is a Title Objection, exercisable by written notice
to Seller within seven (7) business days after Buyer has received Seller's
notice that Seller will not undertake to cure, to (i) waive same and agree to
accept conveyance of the Property subject to such Title Objection at closing
with offset, reimbursement or payment or (ii) terminate this Agreement and
receive a complete and total refund of any and all monies (the Deposit)
described in Paragraph 3.2. Should Buyer not give any notice within the seven
(7) business day period referenced above, such title matter shall be
conclusively deemed waived by Buyer and be conclusively deemed a Permitted
Exception.
15
<PAGE>
(c) A Title Objection other than one involving a matter set forth in the
Preliminary Title Report shall be deemed cured by Seller and no longer to
constitute a Title Objection if such matter is either removed of record by
appropriate release or other instrument, removed as an exception in a
continuation report, (whether by reason of "bonding around" or "insured around")
by Seller or otherwise. "Insured Around" as used herein means that the Title
Policy shall affirmatively indemnify and defend the Buyer from and against any
and all loss and liability, including litigation costs and attorneys' fees in
connection therewith. Notwithstanding Seller's election to "bond around" or
"insure around" the title objection the Seller shall affirmatively effect any
action required to remove the title objection. All exceptions to title of the
Property disclosed in the Preliminary Title Report or in any continuation report
thereof which are not Title Objections, or which are waived by Buyer pursuant to
this Agreement, are herein referred to as the "Permitted Exceptions", and Buyer
agrees to take title to the Property at Closing subject to the Permitted
Exceptions. Seller is under no obligation to initiate legal proceedings or to
incur any expense to cure Title Objections, except that Seller shall remove any
voluntary contractual liens created by Seller.
5.2 Title Policy. Except as otherwise provided in Section 5.1 at the
------------
Closing, Seller shall deliver to Buyer at Seller's expense: (i) a ALTA/ACSM
Owner's Policy ("Title Policy") from a company satisfactory to Buyer dated the
Closing Date in the aggregate amount of Thirty Million Dollars ($30,000,000)
insuring Buyer as owner of fee title to the Real Property subject only to the
Permitted Exceptions. The Parties agree that the Title Policy may be written on
a co-insured or re-insured basis by other title insurance companies to the
extent required by the Title Company, reasonably satisfactory to the Buyer.
Buyer shall pay that portion of the premium expense for such Title Policy which
is attributable to any special endorsements requested by Buyer. Seller shall
pay that portion of the premium
16
<PAGE>
expense for such Title Policy which is attributable to any special endorsements
requested by Seller.
ARTICLE VI
6 Representations and Warranties.
------------------------------
6.1 Seller's Representations and Warranties. Seller represents and
---------------------------------------
warrants to Buyer that:
(a) Due Organization. Seller and Seller's Parent are corporations duly
----------------
organized, validly existing, in good standing and duly qualified to do business
under the laws of the State of Nevada, and upon receiving the approval of this
Agreement by Seller and Seller's Parent's Board of Directors, shall have all
requisite corporate power and authority to enter into, perform and carry out all
of its duties and obligations in the transactions contemplated by this
Agreement;
(b) Binding Effect. This Agreement, subject to the approval of Seller's
--------------
Board of Directors and Seller's Parent's Board of Directors, which shall be
received by Buyer no later than thirty days of the date of this Agreement and
the other documents to be delivered on the part of Seller pursuant hereto are
(or will be when executed and delivered pursuant hereto) legal, valid and
binding obligations of Seller enforceable in accordance with their terms:
(c) Notices and Approvals; No Violation of Agreement. Except for the
------------------------------------------------
notice specified in Section 8.3, the approval of this Agreement by Seller's
Board of Directors, and the consents which may be required to permit assignment
to Buyer of certain of the Contracts or leases, (i) no notice to, or approval or
consent of, any court or governmental authority or other person or entity is
required in connection with the execution, delivery and performance of this
Agreement by Seller and (ii) neither the execution and
17
<PAGE>
delivery of this Agreement, nor consummation of the transactions contemplated
thereunder, nor compliance by Seller with any of the provisions thereof, will
(1) conflict with any provision of Seller's certificate of incorporation or
bylaws, or (2) violate, conflict with, result in a breach of or constitute a
default under or pursuant to any statute, agreement, judicial or administrative
order, injunction, award, judgment or decree to which Seller is a party or by
which Seller is bound, which violation, conflict, breach or default in the case
of (1) or (2) above would have a material adverse affect on the Real Property,
Personal Property, Assets or Business;
(d) Compliance with Laws. To the best of Seller's knowledge, Seller is in
--------------------
compliance with the requirements of all laws, rules, regulations, licenses,
permits, orders, judgments and decrees of federal, state or local judicial or
governmental authorities ("Regulations") that are applicable to ownership or
operation of the Real Property and the Business conducted thereon, where any
such noncompliance would have a materially adverse affect on the Business or the
Real Property;
(e) Contracts. With respect to Contracts which relate to or affect
---------
ownership of the Real Property or operation of the Business, to the best of
Seller's knowledge,: (1) as of the date of execution of this Agreement, there
are no Material Contracts other than those set forth on Exhibit "G" hereto or
provided pursuant to Section 4.1(b); (ii) except as provided in Exhibit "K" or
otherwise disclosed to Buyer in writing, all Material Contracts and all other
Contracts described in Exhibit "H" are in full force and effect (except any such
Contract which expires by its terms or is terminated by Seller prior to the
Closing Date), Seller has paid all amounts due thereunder and satisfied all
other material obligations accrued thereunder and Seller has not received any
written notice of default in any material respect thereunder and no event has
occurred that with the passage of time or the giving of notice, or both, will
constitute a default in any material respect thereunder (other than any default
18
<PAGE>
which may result from the failure or inability of Seller to obtain the consents
of certain parties to the assignment to Buyer of certain of the Contracts,
Seller shall defend and indemnify and hold the Buyer harmless of any and all
losses, damages and/or obligations for any default which may result from the
failure or inability of the Seller to obtain the consents of parties to the
assignment of the contracts to the Buyer); and (iii) other than as disclosed by
Seller to Buyer in writing prior to the Closing Date, no other party is in
default in any respect under any Material Contract and/or Contract;
(f) Litigation. On the date hereof, Seller is not a party to any legal or
----------
governmental actions, claims, suits, administrative or other proceedings or
investigations before or by any governmental department, commission, board,
regulatory authority, bureau or agency, whether foreign, federal, state or
municipal, or any court, arbitrator or grand jury which would prevent or
materially interfere with the consummation of the transactions contemplated by
this Agreement or which, individually or in the aggregate, if resolved against
Seller would impair or interfere in any material respect with the ownership of
the Real Property by Buyer or operation by Buyer of the Business. Except as to
those matters as set forth in Exhibit "M", no additional such proceedings are
threatened or contemplated by any governmental authority or any other person or
entity;
(g) Employees, Officers and Directors: Employment and Similar Contracts:
--------------------------------------------------------------------
Benefits. Except (i) for those medical, dental and other insurance and
- --------
employee benefit arrangements, including but not limited to 401(k) deferred
compensation program, VEBA Plan, Cafeteria Plans, Qualified and Non-Qualified
Plans and any other Fringe Benefit Plans for employees of Seller's engaged in
the Business described on Exhibit "N" hereto (which employee benefit
arrangements either are not assumable or are not being assumed by Buyer), (ii)
for such contracts and covenants, if any, as are implied at law between an
employer and employee under applicable laws or are terminable at the will of the
employer. Seller is nei-
19
<PAGE>
ther a party to, nor has any express or implied obligations, with respect to any
(A) agreement, contract or commitment with any employee, officer, director,
agent, consultant, advisor, property manager or other person engaged in the
Business; (B) agreement, contract or arrangement providing for the payment of
any wages, incentive compensation, raise, bonus or commission or containing any
deferred compensation or severance or termination pay liabilities or
obligations, or (C) pension, profit-sharing, retirement, group life insurance,
hospitalization insurance, or other employee benefit or welfare plan, agreement
or arrangement, in the foregoing instances which relates to employees engaged in
the Business and will be in effect after the Termination Date;
(h) Eminent Domain or Other Proceedings. Except for the possible
-----------------------------------
condemnation of certain of the Real Property adjacent to Hacienda Boulevard,
which may be required for realignment purposes if Hacienda Boulevard is
extended. Seller has not received any written or oral notice of any initiated
or pending condemnation or eminent domain proceedings, or contemplated sales in
lieu thereof, involving a partial or total taking of any of the Real Property,
nor has Seller received written or oral notice of any zoning or special
assessment proceedings affecting the Real Property;
(i) Properties. On the Closing Date, Seller shall have good and
----------
indefeasible title to all of the Real Property, free and clear of any and all
liens, security interests, mortgages, pledges, claims, options, leases,
imperfections of title, easements, or other encumbrances or rights of third
parties except only for (i) liens for current taxes which are not delinquent and
other constitutional or statutory inchoate liens which shall be pro-rated as
setforth in Section 2.3; (ii) such minor imperfections of title as do not either
individually or in the aggregate materially adversely affect use of the Real
Property in conduct of the Business, or materially detract from the value of
such Real Property or Business; and (iii) claims
20
<PAGE>
based upon or included in the Assumed Liabilities expressly accepted by Buyer
(such excepted items being herein collectively referred to as "Permitted
Encumbrances");
(j) Leases. Attached hereto as Exhibit "O" is a list of all leases and
------
licenses existing on the date of execution of this Agreement pursuant to which
any third party has the right to occupy any portion of the Real Property (said
lease or license, including all amendments and modifications thereto, being
called individually a "Lease" and collectively "Leases", and the tenant,
occupant or licensee thereunder being called a "Tenant" and collectively
"Tenants"). The Leases are without default in any material respect by Seller,
and there exists no event, occurrence or condition which (with notice or lapse
of time or both) would constitute a default in any material respect by Seller
under any such Lease and, to Seller's knowledge (except as otherwise disclosed
to Buyer in writing) are without default by any other party thereto. Seller
shall provide Buyer with a true, correct and complete copy of each such Lease,
including all amendments and modifications thereto. Seller shall deliver to
Buyer an estoppel certificate to be approved by the Buyer for each Tenant under
each Lease executed by such Tenant not more than ninety (90) days prior to the
Closing Date, Seller shall be released of any liability for breach of this
Section 6.1(i) with respect to such Lease to the extent the matter in dispute is
the subject of such an estoppel certificate;
(k) Insurance. Seller shall provide Buyer with a correct and complete list
---------
of all policies of fire and liability coverage and other forms of insurance
described in Exhibit "P" maintained by Seller on the date of execution of this
Agreement relating to ownership of the Real Property and the operation of the
Business no later than thirty days of the date of this Agreement;
(l) Condition. On the date hereof, Seller has no knowledge of any
---------
condition which would have a material adverse effect on the Real Property or the
Business;
21
<PAGE>
(m) Hazardous Waste. To the best of the Seller's knowledge, except for the
---------------
Report dated May 13, 1993, there is no contamination, hazardous waste or toxic
substance in existence on or below the surface of the Real Property, including,
without limitation, asbestos in or on the Real Property, PCB's in any
transformer or other equipment located in or on the Real Property, contamination
of the soil, sub-soil or ground water or any use or storage of hazardous waste
material on the Real Property, which constitutes a material violation of any
law, rule or regulation or standard of any governmental entity having
jurisdiction thereof. Buyer may, in Buyer's sole discretion, and at Buyer's
cost, retain a Consultant to review and investigate the condition of the
property to determine if there exists a violation or potential violation of any
law, rule, regulation, or standard of any governmental entity having
jurisdiction thereof. If Buyer determines a material violation or potential
violation exists, Buyer shall notify Seller of the violations or potential
violations and may elect to: (1) terminate this Agreement, unless Seller is able
to remedy or remove the cause for such violation or potential violation prior to
Closing. In the event Buyer terminates this Agreement, the Deposit shall be
returned to the Buyer without further obligation or liability; (2) If the Buyer
does not terminate this Agreement Seller shall promptly and thoroughly perform
any and all Remedial Work prescribed by the Consultant to bring the property
into compliance with any and all applicable law, rule, regulation, or standard
of any governmental entity. Seller shall complete the Remedial Work to Buyer's
reasonable satisfaction prior to the Closing date. Notwithstanding the
foregoing, if the Remedial Work costs, as reasonably estimated by the
Consultant, exceeds One Hundred Thousand Dollars ($100,000), Seller may elect
not to perform the Remedial Work by delivering written notice to the Buyer
within fifteen days after Buyer's notice of the Remedial Work to be performed.
Upon receipt of Seller's notice, Buyer shall have the right to elect, within
fifteen days thereof to: (a) terminate this Agreement and in such event the
Title Company shall return the Deposit to the
22
<PAGE>
Buyer; or (b) cause the sale of the property to be completed pursuant to this
Agreement without Seller performing the Remedial Work but with a reduction of
the Purchase Price in the amount of the reasonable costs and expenses to perform
the Remedial Work.
(n) Reports. To the best of the Seller's knowledge, except for the report
-------
dated May 13, 1993 delivered to Buyer there exists no written or tangible
report, synopsis or summary of any asbestos, toxic waste or hazardous substance
investigation made with respect to all or any portion of the Real Property,
Personal Property and Business (whether or not prepared by experts and whether
or not in the possession of Seller).
(o) Condemnation Proceeding. There are no pending or, to the best of
-----------------------
Seller's knowledge, contemplated actions or proceedings which would result in
condemnation of any portion of the Real Property, except for the possible
condemnation described in Paragraph 6.1(h) or which will have the effect of
modifying in any adverse fashion present land use entitlement of the Real
Property, including, without limitation, height and bulk, parking lot coverage,
landmark, zoning, moratorium, access to abutting rights-of-way and fire safety.
(p) Zoning. To the Best of Seller's Knowledge, the Real Property is
------
currently zoned to permit all of its present uses.
(q) Affiliated Parties. Except as noted on Exhibit "L", attached hereto and
------------------
incorporated herein by reference, no officer, director or employee whose annual
compensation exceeds Thirty Thousand Dollars ($30,000) or consultant receiving
fees at an annual rate of Twenty Thousand Dollars ($20,000), of Seller, or
affiliate of the foregoing, to Seller's knowledge (a) owns, directly or
indirectly any interest in, or is an officer, director, consultant, agent or
employee of any corporation, firm, association or other business, entity or
organization which is a competitor, lessor, lessee, lender, borrower, customer,
supplier or distributor of Seller or any subsidiary or (b) owns, directly or
indirectly, in whole or in part, any property, asset, permit, license or secret
or confidential information which Seller is
23
<PAGE>
using or the use of which is necessary, desirable or material for the conduct of
the Business. Any such transaction involving Seller or any subsidiary on the one
hand, and any such person or entity on the other, which are required in
accordance with generally accepted accounting principles to be reflected in the
financial statements of Seller have been so reflected. Each such transaction has
taken place at prices, interest rates, charges and other terms that are
substantially the same as those that would have been paid or incurred in similar
transactions involving Seller, or any subsidiary, as the case may be, and
unaffiliated parties.
6.2 Buyer's Representation and Warranties. Buyer hereby represents and
-------------------------------------
warrants to Seller that:
(a) Due Organization. In the event Buyer assigns this Agreement to a
----------------
corporation, the corporation shall be duly organized, validly existing, in good
standing and duly qualified to do business under the laws of the State of
Nevada, shall have all requisite corporate power and authority to enter into,
perform and carry out all of its duties and obligations in the transactions
contemplated by this Agreement;
(b) Binding Effect. This Agreement and the other documents to be delivered
--------------
on the part of Buyer pursuant hereto are (or will be when executed and delivered
pursuant hereto) legal, valid and binding obligations of Buyer enforceable in
accordance with their terms;
(c) Notices and Approvals, No Violation of Agreements. Except for the
-------------------------------------------------
notices specified in Sections 8.3 and 8.6 hereto; (i) no notice to, or approval
or consent of, any court or governmental authority or other person or entity is
required in connection with the execution, delivery and performance of this
Agreement by Buyer; and (ii) neither the execution and delivery of this
Agreement by Buyer, nor the consummation of the transactions contemplated
hereunder, nor compliance by Buyer with any of the provisions hereof, will
violate, conflict with, result in a breach of or constitute a default under or
pursuant to any
24
<PAGE>
statute, agreement, judicial or administrative order, injunction, award,
judgment or decree to which Buyer is a party by which it is bound, which
violation, conflict, breach or default would have a material adverse effect on
the assets, business or financial condition of Buyer;
(d) Litigation. Except for the matters set forth on Exhibit "Q" hereto,
----------
Buyer is not a party to any legal governmental actions, claims, suits,
administrative or other proceedings or investigations before or by any
governmental department, commission, board, regulatory authority, bureau or
agency, whether foreign, federal, state or municipal, or any court, arbitrator
or grand jury which would either (i) prevent or materially interfere with the
consummation of the transactions contemplated by this Agreement, or (ii) if
decided adversely to Buyer, have a material adverse effect upon the assets,
Business or financial condition of Buyer. To the best of Buyer's knowledge, no
such proceedings are threatened or contemplated by any governmental authority or
any other person or entity.
ARTICLE VII
7 Condition of the Property; Access and Observers; Independent Investigation.
--------------------------------------------------------------------------
7.1 Access and Observers. Subsequent to Seller's Board of Director's
--------------------
approval and prior to Closing, Seller shall give Buyer, or its designated
agents, access during normal business hours to the Property and to the books and
records relating thereto and shall furnish Buyer during such period with such
information in Seller's possession concerning the Property and its operation as
Buyer may reasonably request; provided, that (a) such access and the furnishing
--------
of such information shall not interfere with Seller's normal business activities
and (b) Buyer shall be accompanied by, or make requests for information through,
those personnel designated by Seller to Buyer in writing. To the extent
permitted by applicable Nevada gaming laws, Buyer will have the right, prior to
Closing and at such times and in such
25
<PAGE>
manner as shall be reasonably specified by Seller, to place its agents on the
Real Property for the purpose of observing the conduct of Seller's Business.
Buyer agrees that such agents shall not interfere with the normal operation of
the Business prior to Closing. Buyer hereby waives any and all claims, demands
or causes of action for personal injury or property damage which Buyer, its
directors, officers, employees and agents may have by reason of entering onto
the Real Property, and Buyer indemnifies and holds Seller, its directors,
officers, employees, agents and guests harmless from any and all claims,
liabilities, loss, cost, damage or expense (including reasonable attorneys' fees
and expenses) arising out of any activities of Buyer, its agents, employees,
representatives or contractors upon the Property, or in connection with exercise
by Buyer of its rights in this Section 7.1.
7.2 Inspections. In making the decision to enter into this Agreement and
-----------
to consummate the transactions contemplated hereby, Buyer has relied solely on
the basis of its own independent investigation of Seller's Business and Property
and upon the express representations, warranties and covenants in this
Agreement. Without diminishing the scope of the express representations,
warranties and covenants of Seller in this Agreement and without affecting or
impairing Buyer's right to rely thereon, Buyer acknowledges that Seller has not
made, and SELLER HEREBY EXPRESSLY DISCLAIMS AND NEGATES ANY OTHER REPRESENTATION
OR WARRANTY, EXPRESS, IMPLIED OR STATUTORY, RELATING TO THE CONDITION OF THE
PROPERTY (INCLUDING WITHOUT LIMITATION ANY IMPLIED OR EXPRESS WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE) AND FURTHER, BUYER ACCEPTS
ALL THE PROPERTY IN ITS "AS IS, WHERE IS" CONDITION.
7.3 Maintenance of Property. Notwithstanding anything in this Agreement to
-----------------------
the contrary, Seller shall be responsible for all costs prior to the Closing
Date, if any, associated
26
<PAGE>
with maintaining applicable compliance with Clark County Building Code and any
other State and Federal law, rule and/or regulation, including the "American
Disability Act" for the property.
ARTICLE VIII
8 Conditions Precedent to Closing and Covenants
----------------------------------------------
8.1 Buyer's Conditions. The obligations of Buyer to purchase the Property,
to make payments of the Earnest Money Deposit and to make payment of the
remaining balance of the Purchase Price at the closing are subject to the
satisfaction on or prior to the Closing Date of each of the following conditions
(any one or more of which may be waived in writing by Buyer);
(a) All terms, covenants, agreements and conditions of this Agreement to be
complied with and performed by Seller on or prior to the Closing Date shall have
been complied with and performed in all material respects, and all of the
representations and warranties of Seller contained in Section 6.1 shall be true
on the Closing Date as if made on and as of such date, except as any of such
representations and warranties may be affected by actions taken pursuant to or
in compliance with this Agreement (including, but not by way of limitation, the
provisions of Section 11.3 hereof), and Seller shall have delivered to Buyer a
certificate, executed by the President or an Executive Vice-President of Seller
and dated as of the Closing, to that effect;
(b) Seller shall have delivered to Buyer the instruments, documents,
certificates, opinions and other matters described in Section 12.2;
27
<PAGE>
(c) Buyer shall have obtained the licenses from and/or a finding of
suitability by the Nevada Gaming Authorities to enable buyer to conduct gaming
at the Real Property.
(d) The notice filing, if required under the Hart-Scott Act, shall have
been complied with and all waiting periods required thereby shall have expired;
8.2 Seller's Conditions. The obligation of Seller to deliver the Property
-------------------
to Buyer at the Closing is subject to the satisfaction on or prior to the
Closing Date of each of the following conditions (any one or more of which may
be waived in writing by Seller):
(a) The approval of this Agreement by Seller's Board of Directors;
(b) All the terms, covenants, agreements and conditions of this Agreement
to be complied with and performed by Buyer on or prior to the Closing Date shall
have been complied with and performed in all material respects, the
representations and warranties of Buyer contained in Section 6.2 shall be true
on the closing Date as if made on and as of such date except as any of such
representations and warranties may be affected by actions taken pursuant to or
in compliance with this Agreement.
(c) Buyer shall have paid to Seller the Purchase Price as set forth in
Section 3.1;
(d) Buyer shall have delivered to Seller the instruments, documents,
certificates, opinions and other matters described in Section 12.3;
(e) The notice filing, if required under the Hart-Scott Act, shall have
been complied with and all waiting periods required thereby shall have expired;
8.3 Hart-Scott-Rodino Filing. If the transaction contemplated herein is
------------------------
determined to be subject to the notification requirements of the (S)7a of the
Clayton Act, 15 U.S.C. (S)18A and the Rules promulgated thereunder as set forth
Chapter 16 CFR (S)(S) 801 and 803, as
28
<PAGE>
amended ("Hart-Scott Act"), Buyer and Seller will file the respective reports
required of them under the Hart-Scott Act, and the regulations thereunder as
soon as possible (and in no event later than Thirty [30] days) after the
Seller's Board of Directors approval. The parties agree to use their best
efforts to satisfy any requests for additional information or other requirements
imposed by the Federal Trade Commission or the Department of Justice in
connection with the transactions contemplated by this Agreement and to request
early termination of any waiting period imposed by statute.
8.4 Cooperation. Each party shall make or file all other required
-----------
notifications and use all reasonable effort to obtain all consents, approvals
and authorizations which must be obtained by such party in order to consummate
the transactions contemplated hereby. Each party shall render the other its
full and complete cooperation in giving such notices or obtaining such consents,
approvals and authorizations; provided, however, that neither party shall be
-------- -------
required to incur any cost or expense in giving any notice or obtaining any
consent, approval or authorization which the other party is required to give or
obtain pursuant to the terms hereof. Each party covenants and agrees promptly
to furnish to the other all information and data in the furnishing party's
possession requested in writing by the requesting party which is reasonable and
necessary in order to assist the requesting party to give the necessary notices
or secure any permits, licenses and approvals required in connection with the
Business.
8.5 Asset Transfer. Seller and Seller's Parent Corporation agrees to
--------------
defend and indemnify and hold Buyer harmless from and against any liability,
loss, cost, damage and/or expense (including, without limitation, reasonable
attorney's fees and costs) incurred by Buyer as a result, directly or
indirectly, of any failure of the Seller to transfer the Personal
29
<PAGE>
Property and Business, free and clear of any and all liens, encumbrances,
security interests and/or obligations of Seller.
8.6 Gaming Licenses. Within thirty (30) days after the approval of Seller
---------------
and its Parent Company Board's of Directors hereof, Buyer covenants and agrees
to submit to the Nevada Gaming Control Board, Nevada Gaming Commission and the
Clark County Liquor and Gaming Licensing Board (collectively, "Nevada Gaming
Authorities") its application for licensing of all persons or entities who, as
of the date hereof, would be required to be licensed under applicable Nevada
gaming laws and regulations, or any other persons who have or are investing or
advancing funds in connection with the transactions set forth herein, which
application, when filed, shall, to the best of Buyer's knowledge, be complete in
all material respects. Buyer covenants and agrees not knowingly to submit for
licensing any person or entity who Buyer reasonably believes is unable or
unwilling to qualify for and obtain whatever licenses or finding of suitability
that may be required of such person by the Nevada Gaming Authorities. Following
submission of such application, Buyer covenants and agrees to use its best
efforts and pursue diligently obtaining the licenses from and/or a finding of
suitability by the Nevada gaming Authorities and to provide the data reasonably
requested by such Authorities in order to obtain such licenses and/or finding of
suitability as soon as reasonably possible after the execution hereof.
ARTICLE IX
9 Conduct of Business
-------------------
9.1 Seller covenants and agrees that, after the execution hereof and prior
to Closing (unless Buyer consents in writing otherwise):
30
<PAGE>
(a) Seller will conduct the Business at the Property in the ordinary course
and will use all reasonable efforts to preserve its relationships with
suppliers, customers and others having relationships with Seller pertaining to
the Business;
(b) Seller will make such repairs and replacements and perform such
maintenance operations as are necessary to maintain and keep the Property in
substantially the same repair, working order and condition as such Property is
in on the date hereof (reasonable wear and tear and damage from fire or other
casualty excepted), and will not commit to make any capital expenditure relating
to the Property which would be required to be paid or assumed by Buyer after
Closing;
(c) Seller will not voluntarily sell or otherwise dispose of (i) any Real
Property; or (ii) any other Property, except in the ordinary course of business
as previously conducted. To the extent Seller sells or disposes of any Property
other than Real Property, Seller shall replace same with a similar item or a
suitable alternative therefor approved by the Buyer.
(d) Seller will maintain in full force and effect its existing insurance
covering the improvements on the Property and the contents thereof. Buyer
acknowledges that such insurance coverages are not assumable by Buyer. At the
request of Buyer and at Buyer's sole cost and expense (which shall be paid or
secured in advance to the reasonable satisfaction of Seller), the amount of
insurance against fire and other casualties which, at the date of this
Agreement, Seller carries on the Real Property, shall be increased by such
amount or amounts as Buyer shall reasonably specify to Seller in writing;
(e) Seller will not terminate or waive any rights under any Material
Contract or Contract to be assigned to and assumed by Buyer hereunder without
the express consent of the Buyer;
31
<PAGE>
(f) Seller shall not enter into any contract or agreement following the
execution of this Agreement which has a duration in excess of thirty (30) days,
without Buyer's written consent;
(g) Seller shall promptly comply with any and all notices of violation of
laws, federal, state, municipal or county ordinances, regulations, orders or
requirements of departments of housing, building, fire, or other federal, state,
municipal or county departments or other governmental authorities having
jurisdiction over the Property or the use or operation thereof;
(h) Seller shall promptly disclose in writing to Buyer any change in any
facts or circumstances which would make any of the Representations inaccurate,
incomplete or misleading to the detriment of Buyer;
(i) From the date hereof through and including the Closing, except as
expressly provided herein or with Buyer's written consent, Seller shall not (1)
mortgage, pledge, or subject to lien, encumbrance or charge any of the Assets;
(ii) sell or transfer any of the Assets; (iii) permit any damage, destruction
or loss (whether or not covered by insurance) which would materially and
adversely affect the Assets; or (iv) waive any material rights with respect to
the Real Property, Personal Property and/or Business.
(j) All federal and state tax returns and reports of Seller for the
Business required by law to be filed have been and will be duly filed on a
timely basis (subject to timely and properly filed extensions), and all federal,
state and other material taxes, assessments, fees and other governmental charges
with respect to the Personal Property or the Business which are due and payable,
the nonpayment of which would interfere with Buyer's ownership, use and/or
operation of the Business, have been and will be paid on a timely basis.
32
<PAGE>
(k) Other than (i) for customary review and wage increases for Seller's
employees consistent with historical practices of Seller, and (ii) for
commitments which arise by Seller's hiring of employees in the ordinary course
of the Business, Seller shall not adopt or amend any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation,
employment or other employee benefit plan, agreement, trust, plan, fund or other
arrangement for the benefit or welfare of any employee or increase in any manner
the compensation or fringe benefits of any employee or pay any benefit not
required by any existing plan, current practice or arrangement. No Represented
Employee Agreement which results from the renegotiation of any prior Represented
Employee Agreement between the date hereof and the Closing Date (the
"Renegotiated Agreements") or other Represented Employee Agreement which relates
to the Business shall be entered into; provided, however, that Seller may enter
into Renegotiated Agreements if the same shall generally be no less favorable to
the Business than those pertaining to the other hotel-casinos of comparable
size, status and character in the metropolitan Las Vegas area, Seller provides
Buyer with notice prior to entering into such Renegotiated Agreements and, after
receipt of such notice, Buyer approves, in writing, the terms of the
Renegotiated Agreements and Seller will take all actions necessary to comply
with the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended,
(l) Seller shall not make any representation to any employee of Seller that
is inconsistent with or contrary to the provisions of this Agreement.
9.2 No Solicitation. From and after the date hereof, and continuing unless
---------------
and until Buyer fails or refuses to proceed toward the Closing hereunder or is
in default, Seller shall not in any way make, solicit, accept, negotiate,
consider or request other offers or proposals for the purchase or sale (or
change of ultimate ownership in any form) of the Property or the
33
<PAGE>
Business, enter into discussions therefor, or disclose the terms of this
Agreement to any actual, proposed or potential alternative purchaser. This
Section 9.02 shall have no further effect after the Closing Date as defined
herein this Agreement, or such later date to which Closing is extended, or if
Buyer is in default of this Agreement.
ARTICLE X
10 Risk of Loss
------------
10.1 Risk of Loss. In the event of material destruction or damage of any
------------
buildings or other improvements located on the Real Property or the condemnation
of a material portion of the Real Property (as such terms are defined in Section
10.2 hereof) prior to Closing, Seller shall either (i) upon providing Buyer with
a description thereof, repair such damage and destruction at Seller's expense
prior to Closing or (ii) promptly notify Buyer of the damage or destruction and
Seller's inability or decision not to repair it. Within ten (10) days after
receipt by Buyer of Seller's notification of its inability or decision not to
repair, Buyer shall have the right to notify Seller of Buyer's election to
terminate this Agreement or Buyer's election to offset and reduce the purchase
price. If any destruction, damage or condemnation of any building or other
improvement on the Real Property is not material, or if such destruction, damage
or condemnation is material and unrepaired by Seller prior to Closing but Buyer
does not elect to terminate this Agreement as hereinabove provided, Buyer shall
be entitled to a credit against the Purchase Price of an amount equal to the
cost to replace or repair the property by reason of such damage, destruction, or
condemnation (to the extent such funds have not been expended on, or committed
to, the repair or restoration of such damaged, destroyed or condemned property),
shall otherwise be consummated as though such destruction, damage or
condemnation (except for necessary changes in matters relative to title set
forth in the Title Policy and Deed resulting from any condemnation) had not
occurred.
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<PAGE>
10.2 Material Loss. For the purposes of Section 10.1 hereof, "material
-------------
destruction or damage" shall be deemed to have occurred if the damage is such
that it may be reasonably expected to prevent or materially and adversely affect
the conduct of gaming operations, or operation of the Business, for a period in
excess of sixty (60) days, or result in an uninsured loss in excess of One
Hundred Thousand Dollars ($100,000.00) for which Seller is unwilling to assume
responsibility thereof. In the case of condemnation, for purposes of Section
10.1 hereof, the affected Real Property shall be deemed to be a "material
portion of the Real Property" if such condemnation may be reasonably expected to
interfere with the operation of the Business as presently being conducted or
the ability of Buyer to further develop a portion of the Real Property for
hotel/casino purposes.
10.3 Uniform Act. This Article X is intended as an express provision with
-----------
respect to destruction and condemnation which supersedes the provisions of the
Nevada Uniform Vendor and Purchaser Risk Act, Nev. State. Section 113.030 et
--
seq.
- ----
ARTICLE XI
11 Termination: Remedies
---------------------
11.1 Termination. Subject to the provisions of Sections 11.1 and 11.2
-----------
hereof, this Agreement may be terminated at any time prior to Closing by:
(a) The mutual consent of Seller and Buyer in the event the Seller and
Buyer agree to terminate this Agreement, Buyer shall be entitled to and receive
all of the Deposit described in Paragraph 3.2.;
(b) Seller or Buyer, on or at any time after nine months from the Date of
this Agreement, if the Closing or the transactions contemplated hereunder shall
not have occurred by such date for any reason, provided, however, that at the
request of Buyer, this
35
<PAGE>
time period shall be extended for an additional six months upon Buyer releasing
the Deposit to Seller. If the Closing occurs within such six month extended
period, the Deposit shall be applied to the Purchase Price; otherwise, this
Agreement shall be deemed to be terminated and the Deposit shall be retained
unconditionally by Seller as liquidated damages as its sole and exclusive
remedy;
(c) Seller at any time on or prior to the Closing if (i) any of the
representations or warranties of Buyer contained herein shall prove to be
inaccurate or incomplete in any material respect or Buyer shall materially
breach any covenant or other obligation imposed on it pursuant to this Agreement
or (ii) if the conditions set forth in Section 8.2 hereof shall not have been
met by the Closing Date;
(d) Buyer at any time on or prior to the Closing Date if (i) any of the
representations or warranties of Seller contained herein shall prove to be
inaccurate or incomplete in any respect, or Seller shall breach any covenant or
other obligation imposed on it pursuant to this Agreement, or (ii) if the
conditions set forth in Section 8.1 hereof shall not have been met by the
Closing Date; or (iii) under the circumstances described in Sections 5.1, 10.1,
and 11.3 hereof.
11.2 Effect of Termination. Except for any obligations of a party accrued
---------------------
as of the effective time of any termination or as otherwise expressly provided
in this Agreement, in the event of termination of this Agreement, this Agreement
shall become void and have no effect, without any liability on the part of any
party or its directors, officers or stockholders and Buyer shall be entitled to
receive the Deposit described in Paragraph 3.2. Notwithstanding, Buyer and
Seller agree:
(a) If this Agreement is terminated by a party under circumstances in which
the other party has willfully or in bad faith failed to satisfy a covenant or
condition of
36
<PAGE>
the Closing ("Defaulting Party"), the Defaulting Party shall be and remain
responsible for any and all liability, loss, cost, damage and expense which does
or may result from such action and the resulting failure or inability to
consummate the transactions contemplated by this Agreement;
(b) The provisions of this Section 11.2 shall survive any termination of
this Agreement.
11.3 Notice of Seller's Breach; Right to Cure.
----------------------------------------
(a) If at any time between the date hereof and the Closing Date, Buyer
becomes aware of any fact or circumstances which leads Buyer to believe that any
representation or warranty made by Seller hereunder either was inaccurate in a
material respect when made or will be inaccurate in a material respect as of the
Closing Date, or that any covenant or condition of Seller cannot be performed by
Seller in a material respect on or before the Closing date (any such inaccuracy
or inability being herein referred to as a "Noncompliance Matter", but excluding
any representation, warranty, covenant or condition pertaining to title to Real
Property, which matters are treated exclusively in Article V of this Agreement
), the Buyer shall give prompt written notice to the Seller, which notice shall
set forth in reasonable detail the asserted Noncompliance Matter on the part of
Seller. Seller shall have the right at its option (but shall not be obligated)
either to (i) cure such Noncompliance Matter or (ii) reduce or grant a credit
against the Purchase Price in an amount required to cure such Noncompliance
Matter, in which event such Noncompliance Matter shall not constitute a default
hereunder. In the event that Seller shall on or prior to Closing correct any
Noncompliance Matter or grant a credit against the Purchase Price as aforesaid,
Buyer may not subsequently terminate or decline to consummate this Agreement on
the grounds of the inaccu-
37
<PAGE>
racy of the representation or warranty or failure of the covenant or condition,
nor shall Buyer have any rights to recover damages by reason thereof;
(b) If the Noncompliance Matter is one which is not a liquidated claim
which can be discharged by the payment of money alone ("Unliquidated
Noncompliance Matter"), Seller shall have the right (but shall not be obligated)
to undertake to cure and remove same prior to Closing or, if Seller is unable
(or unwilling to state that Seller will be able to do so) Seller shall have the
sole right and option, based upon its evaluation of the asserted Unliquidated
Noncompliance Matter, to determine whether Seller will agree to indemnify Buyer
against any claim, liability, loss, cost, damage or expense (including
reasonable attorneys' fees and expenses) which is the direct and proximate
result of the Unliquidated Noncompliance Matter in question, in which event:
(i) If Seller and Seller's Parent will agree to indemnify Buyer as
aforesaid with respect to such Unliquidated Noncompliance Matter, then Buyer
shall be obligated to consummate the transactions contemplated by this Agreement
unless such Unliquidated Noncompliance Matter can reasonably be expected to have
a materially adverse effect on the Property or operation of the Business. Any
indemnification instrument shall exclude any liability on the part of Seller for
any special or consequential damages and shall be in a form approved by the
Buyer.
(ii) If either (A) Seller will not agree to indemnify Buyer as aforesaid in
connection with such Unliquidated Noncompliance Matter or (B) such Unliquidated
Noncompliance Matter can reasonably be expected to have a materially adverse
effect on the Property or operation of the Business, Buyer shall have the right
and option either to (1) waive such Unliquidated Noncompliance Matter and
proceed with Closing with credit and offset against the Purchase price or (2)
terminate this Agreement;
38
<PAGE>
(ii) If prior to Closing a dispute arises between the parties hereto as to
(i) whether any matter asserted is a Noncompliance Matter or Unliquidated
Noncompliance Matter; (ii) the cost to correct any Noncompliance Matter; or
(iii) whether any Unliquidated Noncompliance Matter can reasonably be expected
to have a materially adverse effect on the Property or operation of the
Business, such dispute shall be resolved by final and binding arbitration in
accordance with the provisions of the Nevada Uniform Arbitration Act, Nev. Rev.
Stat. Section 38.015 et seq. ("Arbitration Act").
-------
11.4 Specific Performance. Buyer and Seller each acknowledge that the
--------------------
transactions contemplated by this Agreement are unique and there may be no
adequate remedy at law if Seller fail to perform any of their obligations
hereunder. In addition to any other rights or remedies Buyer may have, Buyer
shall have the right to obtain specific performance of the obligations of Seller
hereunder.
ARTICLE XII
12 Closing
-------
12.1 Closing. Unless extended as permitted in this Agreement, the closing
-------
("Closing") shall be held at the offices of United Title Company, on or before
the tenth (10th) day after Buyer obtains the licenses from and/or a finding of
suitability by the Nevada Gaming Authorities to enable Buyer to conduct gaming
on the Real Property, or at such other time and place in metropolitan Las Vegas,
Nevada as the parties may agree (the actual date of closing being herein
referred to as the "Closing Date").
12.2 Seller's Delivery. At the Closing, Seller shall deliver possession of
-----------------
the following to Buyer:
39
<PAGE>
(a) A grant, bargain and sale deed ("Deed") conveying the Real Property to
Buyer subject only to the Permitted Exceptions and other matters permitted under
Section 5.1;
(b) A bill of sale conveying the Personal Property to Buyer, subject to no
liens or encumbrances other than Permitted Encumbrances;
(c) An assignment to Buyer of all of Seller's right, title and interest in
and to the Intangible Personal Property;
(d) An assignment to Buyer of all of Seller's right, title and interest in
and to all assignable Contracts, to be effective at the Closing Date;
(e) An assignment to Buyer of all of Seller's right, title and interest in
and to the Leases to be effective at the Closing Date;
(f) The Material Contracts and other Contracts, except to the extent
previously delivered to Buyer or located at the Real Property;
(g) All consents obtained by Seller with respect to assignment of any of
the Contracts;
(h) The Title Policy and Reinsurance Agreements (if any);
(i) A "non-foreign affidavit," properly executed by officers of Seller in
recordable form, containing such information as shall be required by Section
1445(b)(2) of the Internal Revenue Code of 1986, as amended ("Code") and the
temporary regulations issued thereunder. In the event that final regulations
shall have been issued under Section 1445(b)(2) of the Code by the Closing Date,
such non-foreign affidavit shall be in the form required thereunder;
40
<PAGE>
(j) Possession of the Property shall be delivered to Buyer as of midnight
on the Closing Date, to the extent applicable, the transfer of possession shall
be pursuant to the closing memorandum approved by the Nevada Gaming Authorities.
(k) On the Closing Date, authorized representatives of Buyer and Seller
shall take inventory of (i) all baggage, suitcases, luggage, valises and trunks
of hotel guests checked or left in the care of Seller, (ii) all luggage or other
property of guests retained by Seller as security for unpaid accounts
receivable, and (iii) the contents of the storage room; provided, however, that
no such baggage, suitcases, luggage, valises or trunks shall be opened. Except
for such of the property referred to in (ii) above, which shall be removed from
the Premises by Seller on the Closing Date, all such baggage and other items
shall be sealed in a manner to be agreed upon by the parties and listed in an
inventory prepared and signed jointly by representatives of Buyer and Seller on
the Closing Date. Buyer shall be responsible from and after said date for all
baggage and other items listed in such inventory and, where the seals have been
broken, for the contents thereof. Seller shall be responsible for said contents
if the seals have not been broken and for all luggage or other property of
guests not listed on such inventory or retained by Seller as security for unpaid
accounts receivable. By conveying the Property to Buyer on the Closing Date,
Seller shall be deemed, without further action, to have assigned any storage,
warehouse or innkeepers liens it may have under applicable law.
(l) Safe deposit boxes in use by customers at the Closing Date will be
sealed in a reasonable manner mutually agreeable to Buyer and Seller.
Representatives of both Buyer and Seller shall be given notice and an
opportunity to be present when a seal is broken. Seller will have no further
responsibility for seals broken without the presence of Seller's representative
unless such representative fails to be present after being provided notice
pursuant to this Section.
41
<PAGE>
Buyer will have no responsibility for loss or theft from a safe deposit box
whose seal was broken in the presence of Seller's representative or without the
presence of such representative but after giving such representative notice as
provided below. Seller will make a representative available within one (1) hour
after Buyer notifies the person whom Seller will from time to time designate. At
the Closing, Seller shall designate in writing its initial safe deposit
representative. All safe deposit keys, combinations and records shall be
delivered to Buyer at the Closing.
(m) At the Closing, Seller and Buyer shall perform the following functions
for all motor vehicles that were checked and placed in the care of Seller: (i)
mark all motor vehicles with a sticker or tape; and (ii) prepare an inventory of
such items ("Inventoried Vehicles") indicating the check number applicable
thereto and any damage thereto. Thereafter, Buyer shall be responsible for the
Inventoried Vehicles except for damage indicated in the inventory and Seller
shall be liable for claims with respect to any other vehicles.
(n) Such other agreements, notices, certificates or other instruments as
are required to be delivered by Seller hereunder, including but not limited to,
any receipts or certificates provided for in NRS 364A.200, 372.620, 612.695 and
244.335.
12.3 Buyer's Delivery. At the Closing Buyer shall deliver or cause to be
----------------
delivered to Seller the following:
(a) Payment of the Purchase Price pursuant to Section 3.2 hereof and any
other payments to be made on the Closing Date by Buyer as provided in this
Agreement;
(b) An instrument evidencing assumption by Buyer of the Assumed
Liabilities effective as of the Closing Date;
(c) Such other agreements, notices, certificates and other instruments as
are required to be delivered by Buyer hereunder.
42
<PAGE>
12.4 Approval of Closing Documents. All certificates, instruments,
-----------------------------
documents and agreements to be executed and delivered at Closing shall be in
form and substance reasonably acceptable to and approved by the parties and
their counsel.
12.5 Possession. Possession of the Property shall be delivered to Buyer
----------
at Closing.
12.6 No Merger. None of the covenants and agreements of Buyer and Seller,
---------
as the case may be, contained in this Agreement shall merge with any deed or
conveyance, and such covenants and agreements shall survive the Closing and
shall continue in full force and effect until such time, if any, as provided in
such covenant or agreement or otherwise limited by law.
ARTICLE XIII
13 Post Closing Covenants
----------------------
13.1 Further Assurances. Each party shall, at the request of the other, at
------------------
any time and from time to time following the Closing, execute and deliver to the
requesting party all such further instruments as may be reasonably necessary or
appropriate in order more effectively to (a) assign, transfer and convey to
Buyer, or to perfect or record Buyer's title to or interest in the Property, (b)
evidence and confirm the assumption by Buyer of the liabilities of Seller to be
assumed by Buyer pursuant to this Agreement, or (c) confirm or carry out the
provisions of this Agreement.
13.2 Cooperation Retention of Records. Each party acknowledges that the
--------------------------------
other may be a party to legal proceedings following the Closing which relate to
the Business or Property, and covenants to maintain and make available to the
other upon reasonable request and at the expense of the requesting party, (a)
any and all file and business records in its custody or control relating to the
Business or Property, and (b) any and all individuals employed by
43
<PAGE>
the other party hereto whose testimony or knowledge, in the reasonable opinion
of the other party's counsel, is necessary or useful to it with respect to the
issues involved in such litigation or preparation therefor. Buyer shall keep and
maintain all files, records and other information which Seller shall deliver to
Buyer or leave on the Real Property either at Buyer's offices on the Real
Property or at storage locations in Las Vegas, Nevada for a period of at least
five (5) years after the Closing. Before destroying any such files, records or
information Buyer shall notify Seller and Seller may, at its expense, retain the
same. Seller shall be entitled at all reasonable times to inspect and make
copies at Seller's expense of such files, records and information.
13.3 Labor Arbitration and Grievances of Sellers. In the event there are
-------------------------------------------
any claims concerning or arising from periods prior to the Closing Date which
are unasserted as of the Closing Date or there are pending and unresolved as of
the Closing Date any employee complaints, charges or grievances before any
court, governmental agency or arbitrator between Seller and any applicant,
employee, or discrimination complaints in any state or federal agency or court
filed by or on behalf of any applicants, employees or former employees of
Seller, arising in connection with the Business, Seller shall be solely
responsible for the handling and/or the resolution of said matters subject to
the following conditions:
(a) Buyer shall make available to Seller all records in the possession of
Buyer and all witnesses employed by Buyer which Seller reasonably believes are
necessary or appropriate in connection with the handling or resolution of such
matters. Buyer agrees to cooperate with Seller in any other manner reasonably
requested by Seller for the satisfactory resolution of such matters;
(b) In the event the resolution of any such matter requires that any
terminated employee be reinstated, Buyer agrees to reinstate said employee in
its operation in ac-
44
<PAGE>
cordance with said resolution provided that no voluntary resolution shall result
--------
in a reinstatement without the consent of Buyer, which consent shall not be
unreasonably withheld;
(c) Any duty to pay wages or benefits to or on behalf of a terminated
employee from the date of termination to the date of reinstatement shall remain
the obligation of Seller. Any such obligation accruing after reinstatement
shall be the responsibility of Buyer.
ARTICLE XIV
14 Brokerage Fees
--------------
Each of the parties hereto agree to indemnify and hold and save the other
or others harmless from any brokerage or finder's fees, commissions,
compensation or expenses (including reasonable attorneys' fees and other
expenses incurred in connection with any such claim) which may be due or
asserted by reason of any such agreement or purported agreement by the
indemnifying party regarding the transaction contemplated herein.
ARTICLE XV
15 Survival of Representations and Warranties: Indemnification
-----------------------------------------------------------
15.1 Seller's Indemnity. Seller and its Parent Corporation (Guarantor)
------------------
covenants and agrees to defend and indemnify and save and hold Buyer and
Guarantor harmless at all times after the Closing in respect of any and all
claims, liabilities, loss, cost, damage and expense, including reasonable
attorneys' fees and expenses arising from, by reason of or in connection with
any untruth, breach or inaccuracy in any material respect of any representation
or warranty on the part of Seller under Section 6.1 of this Agreement, or in any
certificate or other instrument provided for in this Agreement.
45
<PAGE>
15.2 Buyer's Indemnity. Buyer covenants and agrees to indemnify and save
-----------------
and hold Seller and it's Parent Corporation harmless at all times after the
Closing in respect of any and all claims, liabilities, loss, cost, damage and
expense, including reasonable attorneys' fees and expenses any and all damages,
arising from, by reason of, or in connection with any untruth, breach or
inaccuracy in any material respect of any representation or warranty on the part
of Buyer under Section 6.2 of this Agreement, or in any certificate or other
instrument provided for in this Agreement.
Further, Buyer covenants and agrees to indemnify and save and hold Seller
harmless at all times after the execution of this Agreement in respect of any
and all claims, liabilities, loss, cost, damage and expense, including
reasonable attorneys' fees and expenses arising from any claim by a third party
asserting that Buyer's execution of and performance of this Agreement is
unlawful and/or violates any duty of Buyer to such third party.
15.3 Notice of Claim. Each indemnified party hereunder agrees that
---------------
promptly upon its discovery of any event, occurrence, fact, circumstance or
other matter which, in its reasonable judgment, gives rise to a claim for
indemnity under the provisions of this Agreement, including receipt by it of
notice of any demand, assertion, claim, action or proceeding, judicial or
otherwise, by any third party (any such third party action being collectively
referred to herein as a "Claim") with respect to any matter as to which it is
entitled to indemnity under the provisions of this Agreement, it will give
prompt notice thereof in writing to the indemnifying party together with a
statement of such information respecting such Claim as it shall then have and
that such Claim is one as to which such party is entitled to indemnification
under this Agreement. The omission of any indemnified party so to notify an
indemnifying party of any such Claim shall not relieve the indemnifying party
from any liability in respect of such Claim which it may have otherwise had to
such indemnified party on account
46
<PAGE>
of any damages which are the subject of such Claim except and only to the extent
that the indemnifying party is prejudiced thereby, and in no event shall the
indemnifying party be relieved of any other liability which it may have to such
indemnified party pursuant to this Agreement. Upon receiving such notice, the
indemnifying party, at its election, shall have the right of defense against
such Claim, by counsel of its own choosing, at the indemnifying party's expense.
The indemnified party shall cooperate fully in all respects with the
indemnifying party in any such defense, including, without limitation, by making
available to the indemnifying party all pertinent information under the control
of the indemnified party (including consultation with, and testimony, advise and
assistance of officers, employees and agents of the indemnified party having
knowledge of the matters in dispute). If the indemnifying party does not notify
the indemnified party, within ten (10) days of the indemnified party's notice to
the indemnifying party of a Claim, that the indemnifying party will defend the
same, or should the indemnifying party fail to file any answer or other pleading
at least five (5) days before the same is due, the indemnified party may defend
or settle such Claim in such manner as the indemnified party deems appropriate,
in its sole discretion. If the indemnifying party so notifies the indemnified
party concurrently with the indemnifying party's notice of election to defend,
the indemnifying party may defend, but not settle, a Claim without waiving its
rights to assert that such Claim is not subject to the indemnity agreements in
this Article 15. If the indemnifying party elects to defend a Claim, the
indemnified party may, at the indemnified party's expense, participate in such
matter with counsel of the indemnified party's own choosing.
47
<PAGE>
ARTICLE XVI
16 Guarantor
---------
16.1 In the event that William G. Bennett assigns this Agreement pursuant
to Paragraph 18.2 to an entity in which he is the majority owner, William G.
Bennett hereby guarantees prompt and satisfactory performance of this Agreement
in accordance with all its terms and conditions.
16.2 Sahara Gaming Corporation, the Parent Company of Seller, hereby
guarantees prompt and satisfactory performance of this Agreement in accordance
with all its terms and conditions.
ARTICLE XVII
17 Notices
-------
17.1 Any and all notices or demands permitted or required to be given
hereunder shall be in writing and shall be validly given or made when personally
delivered or when actually received as prepaid, certified or registered mail,
return receipt requested, or by commercial courier service, addressed as
follows:
If to Seller, to: with copies to:
Hacienda Hotel, Inc. Vargas & Bartlett
c/o Paul Lowden c/o William Raggio
2535 Las Vegas Blvd., South P.O. Box 281
Las Vegas, NV 89109 Reno, NV 89504
If to Buyer, to: with copies to:
William G. Bennett Cherry, Bailus & Kelesis
6170 W. Desert Inn Road c/o George P. Kelesis
Las Vegas, NV 89134 600 So. Eighth Street
Las Vegas, NV 89101
48
<PAGE>
Any party hereto may change its address for the purpose of receiving
notices or demands by written notice to the other party hereto given as herein
provided.
ARTICLE XVII
18 Miscellaneous
-------------
18.1 Nevada Law. The laws of the State of Nevada applicable to contracts
----------
made and wholly performed therein shall govern the validity, construction,
performance and effect of this Agreement.
18.2 Assignment; Binding Effect. Buyer may not assign, transfer or convey
--------------------------
any of its rights herein or hereunder to any person or entity whatsoever without
the prior written consent of Seller. Notwithstanding the foregoing, Buyer may
assign his rights and interests hereunder, without obtaining Seller's consent,
to any entity Buyer is a majority owner thereof. Other than stated herein, any
attempt to assign or transfer this Agreement without such consent shall, at
Seller's option, be considered null and void and of no force and effect. This
Agreement shall inure to the benefit of and be binding upon the parties hereto,
their respective successors and permitted assigns.
18.3 Partial Invalidity. If any term, provision, covenant or condition of
------------------
this Agreement, or any application thereof, should be held by a court of
competent jurisdiction to be invalid, void or unenforceable, all provisions,
covenants and conditions of this Agreement, and all applications thereof, not
held invalid, void or unenforceable, shall continue in full force and effect and
shall in no way be affected, impaired or invalidated.
18.4 Time of Essence. Time is of the essence of this Agreement and all of
---------------
the terms, provisions, covenants and conditions hereof.
49
<PAGE>
18.5 Captions. The captions appearing at the commencement of the Articles
--------
and Sections hereof are descriptive only and for convenience in reference to
this Agreement and in no way whatsoever define, limit or describe the scope or
intent of this Agreement.
18.6 Pronouns. Masculine or feminine pronouns shall be substituted for the
--------
neuter form and vice versa in any place or places herein in which the context
requires such substitution or substitutions.
18.7 Knowledge of Party. Any representation or warranty herein contained
------------------
made by or on behalf of a party to the knowledge of such party shall be deemed
to mean and be limited to actual knowledge of an executive officer of such party
of the matter in question, or actual knowledge of such facts as would charge
such executive officer of such party with knowledge of the matter in question.
18.8 Entire Agreement; Amendment; Waiver. This Agreement constitutes the
-----------------------------------
entire agreement between the parties pertaining to the subject matter contained
in it and supersedes all prior agreements, brochures, informational memoranda,
representations and understandings of the parties. No amendment or modification
of this Agreement shall be binding unless executed in writing by the parties.
Except as may be otherwise provided in this Agreement, no waiver of any of the
provisions, whether or not similar, nor shall any waiver constitute a continuing
waiver, and no waiver shall be binding unless evidenced by an instrument in
writing executed by the party against whom the waiver is sought to be enforced.
18.9 No Third Party Beneficiary. This Agreement is for the benefit of, and
--------------------------
may be enforced only by, Seller and Buyer and their respective successors and
permitted assigns, and is not for the benefit of, nor intended to be for the
benefit of, and may not be enforced by, any third party.
50
<PAGE>
18.10 Counterparts. This Agreement may be executed in any number of
------------
counterparts, with each counterpart being deemed to be an original instrument,
but all such counterparts together shall constitute but one agreement.
18.11 Attorney's Fees. If any action is brought by any party hereto
---------------
concerning a breach of any of the provisions of this Agreement, the prevailing
party shall be entitled to recover from the other party the reasonable
attorneys' fees and expenses of the prevailing party incurred in connection
therewith.
18.12 Jurisdiction. Seller and Buyer agree that the State of Nevada shall
------------
have sole and exclusive jurisdiction over any action brought to enforce the
terms of this Agreement.
18.13 No Party Deemed Drafter. The parties agree that neither party shall
-----------------------
be deemed to be the drafter of this Agreement and that in the event this
Agreement is ever construed by a court of law or entity, such court shall not
construe this Agreement or any provision hereof against either party as the
drafter of the Agreement, Seller and Buyer acknowledging that each has
contributed substantially and materially to the preparation hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement for
Purchase and Sale as of the 10th day of January, 1995.
"SELLER" "SELLER'S PARENT CORPORATION
GUARANTOR"
HACIENDA HOTEL, INC. SAHARA GAMING CORPORATION
By: /s/ PAUL W. LOWDEN By: /s/ PAUL W. LOWDEN
----------------------------- ------------------------------
Its: President Its: President
---------------------------- -----------------------------
"BUYER"
/s/ WILLIAM G. BENNETT
__________________________
WILLIAM G. BENNETT
51
<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 December 31, 1994 and 1993,
as indicated in our report dated February 10, 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 December 31, 1994 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
February 10, 1995
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