<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended: MARCH 31, 2000
-----------------------
[ ] 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
---------------------------------------------------------
SANTA FE GAMING CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Nevada 88-0304348
- ------------------------------------- --------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
4949 N. Rancho Drive, Las Vegas, Nevada 89130
- --------------------------------------------------------------------------------
(Address of principal executive office and zip code)
(702) 658-4300
---------------------------
(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.
6,195,356 as of May 12, 2000
- -------------------------------------------------- -------------------------
<PAGE>
SANTA FE GAMING CORPORATION
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1 Consolidated Condensed Financial Statements
CONSOLIDATED CONDENSED BALANCE SHEETS
March 31, 2000 (UNAUDITED) and
September 30,1999......................................... 2
CONSOLIDATED CONDENSED STATEMENTS OF
OPERATIONS (UNAUDITED) for the three and six months
ended March 31, 2000 and 1999..............................3
CONSOLIDATED CONDENSED STATEMENT OF
STOCKHOLDERS' DEFICIENCY (UNAUDITED) for the
six months ended March 31, 2000...........................4
CONSOLIDATED CONDENSED STATEMENTS OF CASH
FLOWS (UNAUDITED) for the six months ended
March 31, 2000 and 1999....................................5
NOTES TO CONSOLIDATED CONDENSED FINANCIAL
STATEMENTS (UNAUDITED).....................................6
ITEM 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................15
ITEM 3 Market Risk Disclosure........................................29
PART II. OTHER INFORMATION.............................................30
</TABLE>
<PAGE>
SANTA FE GAMING CORPORATION and SUBSIDIARIES
Consolidated Condensed Balance Sheets
<TABLE>
March 31, September 30,
ASSETS 2000 1999
- ---------------------------------------- --------------------- ----------------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 16,483,145 $ 13,710,226
Accounts receivable, net 1,461,267 1,097,626
Inventories 1,376,162 1,185,514
Prepaid expenses & other 4,344,785 4,049,669
Assets held for sale 0 25,856,829
--------------------- ----------------------
Total current assets 23,665,359 45,899,864
Land held for development 23,109,400 23,109,400
Property and equipment, net 101,814,893 105,972,969
Other assets 1,906,903 3,042,463
--------------------- ----------------------
Total assets $150,496,555 $178,024,696
===================== ======================
LIABILITIES and STOCKHOLDERS' DEFICIENCY
- ----------------------------------------
Current liabilities:
Accounts payable $ 3,912,373 $ 4,815,886
Interest payable 3,902,815 2,613,709
Accrued and other liabilities 6,716,518 7,020,748
Debt due upon sale of assets 0 19,482,336
--------------------- ----------------------
14,531,706 33,932,679
Current portion of long-term debt, net 131,883,807 17,466,041
--------------------- ----------------------
Total current liabilities 146,415,513 51,398,720
Long-term debt - less current portion 7,686,342 122,074,897
Liabilities subject to compromise, net 44,354,503 63,810,662
Stockholders' deficiency (47,959,803) (59,259,583)
--------------------- ----------------------
Total liabilities and stockholders' deficiency $150,496,555 $178,024,696
===================== ======================
</TABLE>
See the accompanying Notes to Consolidated Condensed Financial Statements.
2
<PAGE>
SANTA FE GAMING CORPORATION and SUBSIDIARIES
Consolidated Condensed Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
March 31, 2000 March 31, 1999 March 31, 2000 March 31, 1999
-------------------- -------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Revenues:
Casino $ 27,520,148 $ 25,372,327 $ 53,117,671 $ 49,687,991
Hotel 1,449,393 1,451,177 2,829,309 2,847,023
Food and beverage 5,900,837 5,320,889 11,442,079 10,755,884
Other revenues 3,791,408 3,371,252 7,545,136 5,685,385
-------------------- -------------------- ------------------- --------------------
Gross revenues 38,661,786 35,515,645 74,934,195 68,976,283
Less casino promotional
allowances (3,576,552) (3,264,112) (7,040,496) (6,570,836)
-------------------- -------------------- ------------------- --------------------
Net operating revenues 35,085,234 32,251,533 67,893,699 62,405,447
-------------------- -------------------- ------------------- --------------------
Operating expenses:
Casino 11,813,017 11,528,469 23,794,046 22,847,994
Hotel 479,323 538,535 945,903 1,005,579
Food and beverage 3,810,771 3,546,037 7,545,561 7,091,720
Other operating expenses 2,756,634 2,129,064 5,725,511 3,461,922
Selling, general and administrative 3,284,590 3,261,160 6,993,897 6,368,696
Corporate expenses 718,028 959,180 1,449,129 1,849,747
Utilities and property expenses 2,584,698 2,632,320 6,246,128 5,151,648
Depreciation and amortization 2,635,673 3,419,562 5,902,373 6,674,103
Reorganization expenses 528,343 350,472 1,405,109 350,472
-------------------- -------------------- ------------------- --------------------
Total operating expenses 28,611,077 28,364,799 60,007,657 54,801,881
-------------------- -------------------- ------------------- --------------------
Operating income 6,474,157 3,886,734 7,886,042 7,603,566
Interest expense 5,044,808 6,311,237 11,459,151 12,834,102
Gain on sale of assets 0 0 12,098,609 0
Other expenses 0 0 0 532,497
-------------------- -------------------- ------------------- --------------------
Income (loss) before
extraordinary item 1,429,349 (2,424,503) 8,525,500 (5,763,033)
Extraordinary item-gain on early
extinquishment of debt, net of tax
provision of $0 703,713 0 2,774,280 0
-------------------- -------------------- ------------------- --------------------
Net income (loss) 2,133,062 (2,424,503) 11,299,780 (5,763,033)
Dividends accrued on preferred
shares 568,597 521,214 1,137,194 1,042,428
-------------------- -------------------- ------------------- --------------------
Net income (loss) applicable to
common shares $ 1,564,465 $ (2,945,717) $ 10,162,586 $ (6,805,461)
==================== ==================== =================== ====================
Average common shares
outstanding 6,195,356 6,195,356 6,195,356 6,195,356
==================== ==================== =================== ====================
Income (loss) before extraordinary
item per common shares $ 0.23 $ (0.39) $ 1.38 $ (0.93)
==================== ==================== =================== ====================
Income (loss) per common share $ 0.25 $ (0.48) $ 1.64 $ (1.10)
==================== ==================== =================== ====================
</TABLE>
See the accompanying Notes to Consolidated Condensed Financial Statements.
3
<PAGE>
SANTA FE GAMING CORPORATION and SUBSIDIARIES
Consolidated Condensed Statement of Stockholders' Deficiency
<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, 1999 $61,954 $ 24,117,989 $ 51,513,504 $(134,865,256) $ (87,774) $ (59,259,583)
Net income 11,299,780 11,299,780
Preferred stock
dividends accrued 1,137,194 (1,137,194) 0
------------ ---------------- ----------------- ------------------- ------------- ----------------
Balances, March 31, 2000 $61,954 $ 25,255,183 $ 51,513,504 $(124,702,670) $ (87,774) $ (47,959,803)
============ ================ ================= =================== ============= ================
</TABLE>
See the accompanying Notes to Consolidated Condensed Financial Statements
4
<PAGE>
SANTA FE GAMING CORPORATION and SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six Months Six Months
Ended Ended
March 31, 2000 March 31, 1999
- ----------------------------------------------------------------- ------------------- ---------------------
<S> <C> <C>
Cash flows from operating activities:
Cash and cash equivalents provided by operations $ 5,214,125 $ 1,907,046
Charges in:
Accounts receivable, net (363,641) 540,333
Inventories (190,648) (176,617)
Prepaid expenses & other (295,113) (275,381)
Other assets 878,456 (1,542,059)
Accounts payable (903,513) (947,143)
Interest payable (3,885,132) 3,359,401
Accrued and other liabilities (2,189,960) 1,463,649
-------------------- ------------------
Net cash provided by (used in) operating activities
before reorganization items (1,735,426) 4,329,229
Reorganization expenses paid in connection with
Chapter 11 and related legal proceedings (1,405,109) (350,472)
-------------------- -----------------
Net cash provided by (used in) operating activities (3,140,535) 3,978,757
-------------------- -----------------
Cash flows from investing activities:
Proceeds from sale of land held for development
and related agreements 37,126,512 0
Capital expenditures (1,056,609) (1,843,276)
Development costs (25,388) (653,534)
-------------------- -----------------
Net cash provided by (used in) investing activities 36,044,515 (2,496,810)
-------------------- -----------------
Cash flows from financing activities:
Cash proceeds of long-term debt 1,000,000 0
Cash paid on long-term debt (31,112,003) (7,989,577)
Debt issue cost (19,058) (99,238)
-------------------- -----------------
Net cash used in financing activities (30,131,061) (8,088,815)
-------------------- -----------------
Increase (decrease) in cash and cash equivalents 2,772,919 (6,606,868)
Cash and cash equivalents,
beginning of period 13,710,226 22,650,882
-------------------- -----------------
Cash and cash equivalents,
end of period $ 16,483,145 $ 16,044,014
==================== =================
</TABLE>
See the accompanying Notes to Consolidated Condensed Financial Statements.
5
<PAGE>
SANTA FE GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - General Information and Basis of Presentation
Santa Fe Gaming Corporation, formerly known as Sahara Gaming Corporation, (the
"Company" or "Santa Fe Gaming"), a publicly traded Nevada corporation, is the
successor corporation of two affiliates, Sahara Resorts ("SR") and Sahara Casino
Partners, L.P., which combined in a business combination in September, 1993.
The Company's primary business operations are conducted through two wholly-owned
subsidiary corporations, Santa Fe Hotel Inc. ("SFHI") and Pioneer Hotel Inc.
("PHI") (the "Operating Companies"). SFHI owns and operates the Santa Fe Hotel
and Casino (the "Santa Fe"), located in Las Vegas, Nevada, and PHI owns and
operates the Pioneer Hotel & Gambling Hall (the "Pioneer") in Laughlin, Nevada.
The Company owns, through SFHI, real estate adjacent to the Santa Fe, and
through an indirect wholly-owned subsidiary, Sahara Las Vegas Corp. ("SLVC"),
real estate on Las Vegas Boulevard South (the "Strip").
In November 1999, SLVC sold real property located in Henderson, Nevada. In
connection with the sale, the Company, SLVC, SFHI and members of the family of
Paul W. Lowden, majority stockholder of the Company, entered into non-compete
agreements, in which they agreed not to compete through November 15, 2014 within
a five-mile radius of two of the buyer's casinos located in the Henderson area.
Additionally, the Company and SFHI entered into a Right of First Refusal
Agreement with the buyer, pursuant to which SFHI granted the buyer a 15-year
right of first refusal, subject to certain exceptions, to purchase either
capital stock or debt or other securities convertible into capital stock of SFHI
or SFHI assets in the event SFHI sells a substantial portion of its assets.
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. As shown in the financial
statements, Liabilities subject to compromise are $44.4 million at March 31,
2000, which is attributable to principal and accrued interest on the 13 1/2%
Notes issued by Pioneer Finance Corp ("PFC") which matured December 1, 1998 and
were not paid (the "13 1/2% Notes") and are net of debt owned by an affiliate.
PFC and PHI filed for relief under Chapter 11 of the United States Bankruptcy
Code (the "Bankruptcy Code") in February and April 1999, and a plan of
reorganization was confirmed on April 28, 2000. In addition, SFHI is in default
under the 9 1/2% Notes issued by SFHI and guaranteed by the Company (the "9 1/2%
Notes") which mature in December 2000, as a result of the failure to pay the 13
1/2% Notes. The lenders of the 9 1/2% Notes have not demanded immediate
payment, although they are entitled to do so at anytime. The Company has
guaranteed substantially all the other debt of its subsidiaries, SLVC and SFHI.
In addition, at March 31, 2000, current liabilities exceed current assets by
approximately $122.8 million, which is primarily
6
<PAGE>
attributable to (i) $99.4 million principal amount of 11% First Mortgage Notes
issued by SFHI and guaranteed by the Company (the "11% Notes"), of which $33.1
million is owned by SLVC (ii) $44.0 million principal amount of notes issued by
SLVC and guaranteed by the Company (the "SLVC Notes") and (iii) $14.0 million
principal amount of 9 1/2% Notes, all of which mature in December 2000.
Furthermore, there is a stockholders' deficiency of $48.0 million. The Company's
inability to meet the repayment terms of the 13 1/2% Notes, its net losses and
its stockholders' deficiency raise substantial doubt about its ability to
continue as a going concern.
The plan of reorganization for PFC and PHI was confirmed on April 28, 2000. The
plan provides for repayment in full by August 31, 2000, of all the 13 1/2% Notes
held by non-affiliates, and the retirement of the 13 1/2% Notes held by
affiliates. Management is exploring refinancing alternatives for the 13 1/2%
Notes as well as substantially all of the Company's other debt. The Company has
no arrangement in place for the refinancing. In the event the 13 1/2% Notes are
not paid in full by August 31, 2000, PFC, PHI and the Company have agreed not to
raise any objections to the indenture trustee for the 13-1/2% Notes pursuing
remedies for failure to pay the debt, although the Company has not waived any
defenses it may have to enforcement of its guaranty of the 13-1/2% Notes.
Additionally, under the plan of reorganization, the Company has agreed, under
certain circumstances with regard to specified entities, to terminate
forbearance agreements entered into in PFC's 1998 consent solicitation, pursuant
to which certain 13-1/2% Noteholders agreed not to take action against PFC, PHI
or the Company with respect to the 13-1/2% Notes or the Company's guaranty of
the 13-1/2% Notes. If any 13-1/2% Noteholder successfully seeks to enforce
payment under the 13-1/2% Notes or the Company's guaranty, the Company will
evaluate all possible alternatives available to it, which may include filing for
relief under Chapter 11 of the Bankruptcy Code. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
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, 1999.
The results of operations for the three and six month periods ended March 31,
2000 are not necessarily indicative of the results to be expected for the entire
year.
In the opinion of the Company, the accompanying unaudited consolidated condensed
financial statements contain all adjustments (consisting of only normal
accruals) necessary to present fairly the financial position of the Company at
March 31, 2000, the results of its operations for the three and six month
periods ended March 31, 2000 and 1999, the changes in stockholders' deficiency
for the six month period ended March 31, 2000, and cash flows for the six month
periods ended March 31, 2000 and 1999.
NOTE 2 - Summary of Significant Accounting Policies
Estimates and Assumptions
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period.
Significant estimates used by the Company include estimated useful lives for
depreciable and amortizable assets, certain other estimated liabilities and
valuation reserves, and estimated cash flows in assessing the recoverability of
long-lived assets. Actual results may differ from estimates.
7
<PAGE>
Bankruptcy - Related Accounting
The Company has accounted for all transactions related to the PFC and PHI
Chapter 11 case in accordance with Statement of Position 90-7 ("SOP 90-7"),
"Financial Reporting by Entities in Reorganization Under the Bankruptcy Code."
Accordingly, Liabilities subject to compromise under the Chapter 11 case have
been segregated on the Consolidated Condensed Balance Sheets and are recorded
for the amounts that are expected to be allowed under the Joint Plan. In
addition, the Consolidated Condensed Statements of Operations and Consolidated
Condensed Statements of Cash Flows for the period ended March 31, 2000, disclose
costs, related to the Chapter 11 case as reorganization expenses.
NOTE 3 - Cash and Cash Equivalents
As of March 31, 2000, the Company held cash and cash equivalents of $16.5
million compared to $13.7 million at September 30, 1999. Substantially all of
the cash and cash equivalents were held by SFHI, PHI and SLVC, and were subject
to restrictions which restrict distribution of this cash to the Company.
At March 31, 2000, approximately $8.3 million of the Company's consolidated cash
and cash equivalents were held by SFHI and was 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 the
11% Notes of SFHI was issued. As of March 31, 2000, SFHI did not meet the
conditions precedent to making a distribution to the Company.
At March 31, 2000, approximately $6.0 million of the Company's consolidated cash
and cash equivalents was held by PHI and was subject to certain restrictions,
including restrictions on its availability for distribution to the Company, by
the terms of an indenture pursuant to which the 13 1/2% Notes of PFC were
issued. As of March 31, 2000, PHI did not meet the conditions precedent to
making a distribution to the Company. Approximately $700,000 of PHI's cash is
reserved for payments to be made to certain holders of the 13 1/2% Notes,
pursuant to an order of the Bankruptcy Court. See Note 8.
At March 31, 2000, approximately $1.0 million of the Company's consolidated cash
and cash equivalents was held by SLVC and was subject to certain restrictions
and limitations on its use by the terms of a note purchase agreement pursuant to
which the SLVC Notes were issued.
8
<PAGE>
NOTE 4 - Assets Held for Sale
In March 1994, the Company purchased for approximately $15.1 million a 39-acre
parcel of land located in Henderson, Nevada, for future development of a
proposed casino hotel complex. At September 30, 1999 the cost to acquire the
property was included in Assets held for sale in the Consolidated Condensed
Balance Sheet. In addition to costs to acquire the property, the Company
recorded approximately $10.8 million in preliminary architectural, engineering,
permitting, and other development costs, which were also included in Assets held
for sale in the accompanying Consolidated Condensed Balance Sheet at September
30, 1999.
In November 1999, SLVC sold the real property in Henderson, Nevada and the
Company and certain affiliates entered into certain agreements for $37.2
million. In connection with the sale, SLVC, the Company, SFHI and members of
the family of Paul W. Lowden, majority stockholder of the Company, entered into
non-compete agreements and the Company and SFHI granted rights of first refusal
with respect to the Santa Fe Hotel assets and securities. The total
consideration of $37.2 million was comprised of $22.5 million in cash and a
promissory note, payable on 60-days notice, in the principal amount of $14.75
million. The promissory note was pledged to secure the SLVC Notes. Of the cash
proceeds, SLVC used $20.6 million to pay $6.1 million in accrued interest and
fees on the SLVC Notes, of which $5.0 million was included in Debt due upon sale
of assets in the Consolidated Condensed Balance Sheet at September 30, 1999, and
to repay $14.5 million principal amount of the SLVC Notes. Additionally, SLVC
used approximately $500,000 to pay development and construction obligations
associated with the property. The balance of the cash of approximately $1.4
million was retained for working capital.
In December 1999, SLVC received payment of the $14.75 million unsecured
promissory note received in connection with the disposition of the Henderson
property. The Company reported a pre-tax gain on sale of assets in the quarter
ending December 31, 1999 of approximately $12.1 million. See Notes 7 and 8
NOTE 5 - Current Portion of Long-Term Debt
As of March 31, 2000, the Company had approximately $131.9 million in current
maturities of long-term debt due to third parties during the twelve-month period
ending March 31, 2001, net of debt discount of $1.0 million and debt obligations
owned but not retired of $33.1 million of 11% Notes. Current maturities of long
term debt is comprised primarily of $99.4 million principal amount of 11% Notes,
less $33.1 million owned by SLVC but not retired, $44.0 million principal
amount of SLVC Notes, $14.0 million principal amount of 9 1/2% Notes and a $4.8
million Note (the "Sierra Note"), all of which mature in December 2000.
9
<PAGE>
In December 1999, SLVC and the Company amended the terms of the SLVC Notes. As
amended, the SLVC Notes bear interest at 12% per annum, payable on June 20,
2000, and mature on December 14, 2000. Under certain conditions, SLVC is
permitted to borrow an additional $7.5 million, for the purchase of 13 1/2%
Notes or debt service on the SLVC Notes. In March 2000, SLVC borrowed $1.0
million of the additional $7.5 million. Under certain circumstances, SLVC may
distribute up to $7.5 million to the Company in the form of cash or principal
amount of 13 1/2% Notes. SLVC has a mandatory $3.0 million redemption
obligation on June 20, 2000.
NOTE 6 - Long-Term Debt, Net
As of March 31, 2000, the Company had $7.7 million in long-term debt, net of
current maturities of $131.9 million, comprised primarily of $6.8 million
principal amount of promissory notes secured by equipment at the Santa Fe which
mature in April 2001.
NOTE 7 - Liabilities Subject to Compromise
Between December 1999 and March 2000, SLVC purchased approximately $16.7 million
principal amount of 13 1/2% Notes, plus accrued and unpaid interest, for
approximately $17.1 million. The 13 1/2% Notes purchased by SLVC have been
pledged as collateral for the SLVC Notes. The Company reported extraordinary
gain on the acquisition of the 13 1/2% Notes by SLVC of approximately $700,000
and $2.8 million in the accompanying Consolidated Condensed Statements of
Operations for the three and six month periods ended March 31, 2000,
respectively.
At March 31, 2000, Liabilities subject to compromise is reported net of debt
owned by affiliates and not retired and consists of approximately $37.6 million
of principal and approximately $6.8 million of accrued interest due on the 13
1/2% Notes. See Note 8.
NOTE 8 - Petition for Relief Under Chapter 11 of the United States Bankruptcy
Code and Liabilities Subject to Compromise
Modified Joint Plan
- -------------------
On February 7, 2000 the Debtors filed a proposed Disclosure Statement to
accompany their Fifth Amended Joint Plan of Reorganization (the "Modified Joint
Plan"). The Bankruptcy Court approved the Disclosure Statement accompanying the
Modified Joint Plan at a hearing on March 24, 2000. On April 7, 2000, the
Debtors filed a motion to amend the Modified Joint Plan in accordance with terms
contained in the Restated Fifth Amended Joint Plan of Reorganization (the
"Restated Modified Joint Plan"). At a hearing on April 27, 2000, the Bankruptcy
Court approved the motion to amend the Modified Joint Plan. On April 28, 2000,
the Bankruptcy Court confirmed the Restated Modified Joint Plan.
10
<PAGE>
The Restated Modified Joint Plan provides that the Debtors' creditors, including
holders of Pioneer Finance Corp.'s 13 1/2% First Mortgage Notes (the "13 1/2
Notes"), will be paid in full on or before August 31, 2000. Although no
financing commitments are in place with respect to refinancing the 13 1/2%
Notes, the Company, the Debtors and the Company subsidiaries are exploring
alternatives to obtain financing for that purpose by the August 31, 2000
deadline. In the event the 13 1/2% Notes and other liabilities of the Debtors
are not paid by August 31, 2000, the Debtors and the Company have agreed not to
raise objections to the Indenture Trustee for the 13 1/2% Notes pursuing
remedies for failure to pay the 13 1/2% Notes, although the Company has not
waived any defenses it may have to enforcement of its guaranty of the 13 1/2%
Notes. Additionally, under the Restated Modified Joint Plan, the Company has
agreed, under certain conditions and with respect to specified entities, to
terminate as of August 31, 2000 forebearance agreements entered into in
connection with PFC's 1998 consent solicitation, pursuant to which certain 13
1/2% Noteholders agreed not to take action against PFC, PHI or the Company with
respect to the 13 1/2% Notes or the Company's guarantee of the 13 1/2% Notes.
Finally, the Company and certain of its non-debtor affiliates agreed to
restrictions with respect to certain transactions including incurrence of
additional debt and certain types of asset sales through December 31, 2000. If
the 13-1/2% Notes are not repaid by August 31, 2000 and any 13-1/2% Noteholder
seeks to enforce payment under the 13-1/2% Notes or the Company's guaranty, the
Company will evaluate all possible alternatives available to it, which may
include filing for relief under Chapter 11 of the Bankruptcy Code.
Guarantor Litigation -GMS
In January 2000, SLVC and PHI, acquired the approximately $6.5 million principal
amount of 13 1/2% Notes, plus accrued and unpaid interest for approximately $7.9
million from the GMS Group. In connection with the purchase, the GMS Group
agreed to dismiss without prejudice its legal action in the state of New York
against the Company, in which GMS was seeking to recover amounts it claims are
past due on the Company's guaranty of the 13 1/2% Notes. The approximate $5.8
million principal amount of the 13 1/2% Notes acquired by SLVC were pledged as
collateral for the SLVC Notes. PHI acquired approximately $700,000 of the 13
1/2% Notes in accordance with an order by Bankruptcy Court approving redemption
of 10.83% of principal amount of certain 13 1/2% Notes plus accrued interest.
Guarantor Litigation - Other
The Company is the defendant in a pending action titled Chelonian Corp v. The
Santa Fe Gaming Corp., No 00/601852. This action was instituted on or about May
4, 2000 by means of a motion for summary judgement in lieu of complaint filed in
the Supreme Court for the State of New York, County of New York, Chelonian
alleges that it holds 13 1/2% Notes in the principal amount of $5,106,000 and
that the Company is in default on its guarantee of such 13 1/2% Notes. The
action seeks to recover the amounts Chelonian Corp. claims are past due on such
13 1/2% Notes. The Company has not yet filed a response in this action.
Other
- -----
In January 2000, pursuant to an order of the Bankruptcy Court, PHI paid $1.4
million to holders of consented 13 1/2% Notes, representing 50% of the interest
due for the semi-annual period ended December 1, 1999.
11
<PAGE>
On April 21, 2000, pursuant to an order of the Bankruptcy Court, the Debtors
issued a notice of redemption pursuant to the optional redemption provisions of
the Indenture under which the 13 1/2% Notes were issued to all holders of 13
1/2% Notes with respect to which consents to the 1998 Consent Solicitation were
not received, approximately $14.2 million principal amount. The notice of
redemption provides that 10.83% of the outstanding principal amount of 13 1/2%
Notes, plus accrued interest will be redeemed on May 26, 2000 (the "Redemption
Date")
In April 2000, PFC and PHI filed a motion to authorize payment of 50% of the
interest due for the semi-annual period ended June 1, 2000 to all holders of 13
1/2% Notes. A hearing is scheduled for May 18, 2000.
NOTE 9 - Supplemental Statement of Cash Flows Information
Supplemental statement of cash flows information for the six month periods ended
March 31, 2000 and 1999 is presented below:
Operating Activities: 2000 1999
---------- ----------
(In thousands)
Cash paid during the period for interest $ 11,462 $ 8,829
========== ==========
Investing and Financing Activities:
Debt insurred in connection with the
acquisition of machinery and equipment $ 391 $ 285
========== ==========
12
<PAGE>
NOTE 10 - Segment Information
The Company's primary operations are in the hotel/casino industry and in fiscal
years 2000 and 1999 were conducted through PHI and SFHI. "Other" below includes
financial information for the Company's other operations and eliminating
entries.
<TABLE>
<CAPTION>
(In thousands)
For the six months ended: March 31, 2000 March 31, 1999
(Unaudited)
<S> <C> <C>
Pioneer Hotel
- -------------------------
Operating revenues $ 23,786 $ 22,741
============== ==============
Operating income $ 1,925 $ 2,285
============== ==============
Interest expense $ 3,325 $ 3,816
============== ==============
Depreciation and amortization $ 1,283 $ 1,327
============== ==============
Rents $ 368 $ 361
============== ==============
EBITDA (1) $ 5,481 $ 4,874
============== ==============
Capital expenditures $ 826 $ 511
============== ==============
Identifiable assets (2) $ 42,253 $ 43,098
============== ==============
Santa Fe Hotel
- -------------------------
Operating revenues $ 43,521 $ 39,084
============== ==============
Operating income $ 7,095 $ 7,379
============== ==============
Interest expense $ 7,327 $ 7,336
============== ==============
Depreciation and amortization $ 3,848 $ 3,662
============== ==============
Rents $ 0 $ 0
============== ==============
EBITDA (1) $ 12,833 $ 11,647
============== ==============
Capital expenditures $ 622 $ 5,128
============== ==============
Identifiable assets (2) $ 84,379 $ 86,595
============== ==============
Other & Eliminations
- -------------------------
Operating revenues $ 587 $ 580
============== ==============
Operating loss $ (1,134) $ (2,060)
============== ==============
Interest expense $ 807 $ 1,682
============== ==============
Depreciation and amortization $ 771 $ 1,685
============== ==============
Rents $ 0 $ 0
============== ==============
EBITDA (1) $ 243 $ 317
============== ==============
Capital expenditures $ 0 $ (3,511)
============== ==============
Identifiable assets (2) $ 23,865 $ 53,527
============== ==============
Total
- -------------------------
Operating revenues $ 67,894 $ 62,405
============== ==============
Operating income $ 7,886 $ 7,604
============== ==============
Interest expense $ 11,459 $ 12,834
============== ==============
Depreciation and amortization $ 5,902 $ 6,674
============== ==============
Rents $ 368 $ 361
============== ==============
EBITDA (1) $ 18,557 $ 16,838
============== ==============
Capital expenditures $ 1,448 $ 2,128
============== ==============
Identifiable assets (2) $ 150,497 $ 183,220
============== ==============
</TABLE>
(1) EBITDA represents earnings before interest, taxes, depreciation and
amortization, rents, corporate expenses, reorganization expenses and other non-
operating charges. The Company's definition of EBITDA may not be the same as
that of similarly captioned measures used by other companies.
(2) Indentifiable assets represents total assets less elimination for
intercompany items.
13
<PAGE>
NOTE 11 - Segment Information
The Company's primary operations are in the hotel/casino industry and in fiscal
years 2000 and 1999 were conducted through PHI and SFHI. "Other" below includes
financial information for the Company's other operations and eliminating
entries.
<TABLE>
<CAPTION>
(In thousands)
For the three months ended: March 31, 2000 March 31, 1999
(Unaudited)
<S> <C> <C>
Pioneer Hotel
- -------------------------------------
Operating revenues $ 12,543 $ 12,123
===================== =====================
Operating income $ 1,721 $ 1,368
===================== =====================
Interest expense $ 1,325 $ 1,834
===================== =====================
Depreciation and amortization $ 636 $ 656
===================== =====================
Rents $ 186 $ 181
===================== =====================
EBITDA (1) $ 3,322 $ 2,806
===================== =====================
Capital expenditures $ 379 $ 177
===================== =====================
Santa Fe Hotel
- -------------------------------------
Operating revenues $ 22,157 $ 19,683
===================== =====================
Operating income $ 4,388 $ 3,411
===================== =====================
Interest expense $ 3,647 $ 3,653
===================== =====================
Depreciation and amortization $ 1,911 $ 1,910
===================== =====================
Rents $ 0 $ 0
===================== =====================
EBITDA (1) $ 7,189 $ 5,626
===================== =====================
Capital expenditures $ 438 $ 4,614
===================== =====================
Other & Eliminations
- -------------------------------------
Operating revenues $ 385 $ 446
===================== =====================
Operating income (loss) $ 365 $ (892)
===================== =====================
Interest expense $ 73 $ 824
===================== =====================
Depreciation and amortization $ 89 $ 854
===================== =====================
Rents $ 0 $ 0
===================== =====================
EBITDA (1) $ 234 $ 365
===================== =====================
Capital expenditures $ 0 $ (3,525)
===================== =====================
Total
- -------------------------------------
Operating revenues $ 35,085 $ 32,252
===================== =====================
Operating income $ 6,474 $ 3,887
===================== =====================
Interest expense $ 5,045 $ 6,311
===================== =====================
Depreciation and amortization $ 2,636 $ 3,420
===================== =====================
Rents $ 186 $ 181
===================== =====================
EBITDA (1) $ 10,745 $ 8,797
===================== =====================
Capital expenditures $ 817 $ 1,266
===================== =====================
</TABLE>
(1) EBITDA represents earnings before interest, taxes, depreciation and
amortization, rents, corporate expenses, reorganization expenses and other
non-operating charges. The Company's definition of EBITDA may not be the same as
that of similarly captioned used by the other companies.
14
<PAGE>
SANTA FE GAMING CORPORATION
Item 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
- -------
RESULTS OF OPERATIONS - Six Months Ended March 31, 2000 and 1999
- ----------------------------------------------------------------
Consolidated
Net Operating Revenues. Consolidated revenues for the six months ended March
31, 2000 were $67.9 million, representing a $5.5 million, or 8.8%, increase from
$62.4 million for the same period in the prior year. Revenues increased by $4.4
million at the Santa Fe and $1.1 million at the Pioneer.
Operating Expense. Total operating expenses increased $5.2 million, or 9.5%,
to $60.0 million in the six months ended March 31, 2000 from $54.8 million in
the six months ended March 31, 1999. Operating expenses increased by $4.7
million, or 14.9%, at the Santa Fe and by $1.4 million, or 6.4%, at the Pioneer,
and decreased by $700,000 at SLVC. The decrease at SLVC is attributable to loan
issue costs being fully amortized by December 1999. The Company recorded a $1.2
million charge in utilities and property expenses and other expenses primarily
to reserve the carrying value of timeshare assets.
Operating Income. Consolidated operating income for the six months ended March
31, 2000 was $7.9 million, representing a $300,000, or 3.7%, increase from $7.6
million for the same period in the prior year. Operating income decreased by
$300,000 at the Santa Fe and by $400,000 at the Pioneer offset by an improvement
of $800,000 at SLVC.
Other Expense. Consolidated interest expense for the six months ended March 31,
2000 was $11.5 million, representing a $1.3 million, or 10.7%, decrease compared
to $12.8 million for the same period in the prior year. During the six month
1999 period, PHI incurred costs and expenses in connection with restructuring
the 13 1/2% Notes resulting in a $500,000 charge to earnings.
Gain on Sale of Assets and Related Agreements. The Company recorded a $12.1
million gain on the sale of real property in Henderson, Nevada and related
agreements.
Income (Loss) Before Extraordinary Item. Consolidated income before
extraordinary item for the six months ended March 31, 2000 was $8.5 million,
representing a $14.3 million, or 247.9%, improvement compared to a $5.8 million
loss in the same period in the prior year, principally due to the gain on the
sale of real property and related agreements.
15
<PAGE>
Extraordinary Item. During the six months ended March 31, 2000, SLVC purchased
$16.7 million principal amount of 13 1/2% Notes plus accrued and unpaid interest
for approximately $17.1 million, resulting in a $2.8 million gain on the
extinguishment of debt.
The Company did not record an income tax provision in the current six month
period. Accounting Principles Board Opinion 28 states that tax expense for an
interim period be measured using an estimated annual effective rate for the
annual period. The Company's annualized effective tax rate is 0%. The Company
did not record an income tax benefit in the prior year's six month period due to
the uncertainty of the Company's ability to recognize a benefit of the net
operating loss. The preferred stock accrued dividend rate increased to 12% in
the current period compared to an 11% dividend rate in the prior year.
Consolidated net income applicable to common shares was $10.2 million, or $1.64
per common share, compared to a $6.8 million net loss, or $1.10 loss per common
share, in the prior year period.
Santa Fe
Net Operating Revenues. Revenues at the Santa Fe increased $4.4 million, or
11.4%, in the six months ended March 31, 2000 to $43.5 million from $39.1
million in the same period in the prior year.
Casino revenues increased $2.8 million, or 8.8%, to $34.1 million from $31.3
million in the same six month period of 1999, due to an increase in the customer
volume and the introduction of new slot equipment. Slot and video poker revenues
increased $2.5 million, or 8.9%, to $29.7 million in the 2000 period from $27.2
million in the 1999 period. Other gaming revenues, including table game
revenues, increased $300,000, or 8.0%, primarily due to increased sports book,
keno and bingo revenue. Casino promotional allowances increased $200,000, or
7.2%, to $3.6 million in the 2000 period from $3.4 million in the 1999 period
due to the increase in customer volume.
Hotel revenues decreased $100,000, or 3.5%, to $1.6 million for the six months
ended March 31, 2000 compared to $1.7 million for the six months ended March 31,
1999, due to a decrease in occupancy rate to 83.8% from 86.9%. Management
believes that the decrease in occupancy is attributable to the opening of non-
gaming hotels near the Santa Fe. Food and beverage revenues increased $700,000,
or 10.2%, to $7.1 million in the six months ended March 31, 2000 compared to
$6.4 million in the six months ended March 31, 1999 due to an increase in
customer volume. Other revenues increased $1.4 million, or 44.2% to $4.4
million in the six months ended March 31, 2000 from $3.0 million in the six
months ended March 31, 1999, primarily due to the opening in February 1999 of an
additional retail outlet.
Operating Expense. Operating expenses increased $4.7 million, or 14.9%, to
$36.4 million in the six months ended March 31, 2000 from $31.7 million in the
six months ended March 31, 1999.
16
<PAGE>
Casino expenses increased $800,000, or 5.4%, to $14.5 million in the six months
ended March 31, 2000 from $13.7 million in the six months ended March 31, 1999,
related to the increase in casino revenues. However, casino expenses as a
percentage of casino revenues decreased to 42.4% in the six months ended March
31, 2000 from 43.8% in the six months ended March 31, 1999. Hotel expenses were
unchanged at $600,000 for the six months ended March 31, 2000 and 1999 despite
the decrease in occupancy rate due to increased costs incurred to attract hotel
customers. Food and beverage expenses increased $600,000, or 11.7%, to $5.3
million in the six months ended March 31, 2000 from $4.7 million in the six
months ended March 31, 1999. Food and beverage expenses as a percentage of food
and beverage revenues increased to 74.8% in the six months ended March 31, 2000
from 73.8% in the six months ended March 31, 1999, due to an increase in labor
cost for the 2000 period compared to the 1999 period, partially offset by a
decrease in the cost of beverage sales. Other expenses increased $1.5 million,
or 98.7%, to $3.1 million for the six months ended March 31, 2000 compared to
$1.6 million for the six months ended March 31,1999, primarily due to the costs
associated with the additional retail outlet which opened in February 1999.
Selling, general and administrative expenses increased $1.7 million, or 37.9%,
to $6.1 million in the six months ended March 31, 2000 from $4.4 million in the
six months ended March 31, 1999, primarily due to increased labor costs,
professional services and management fees payable to the Company. Selling,
general and administrative expenses as a percentage of revenues increased to
14.1% in the six months ended March 31, 2000 from 11.4% in the six months ended
March 31, 1999. Utilities and property expenses were substantially unchanged at
$3.0 million in the six months ended March 31, 2000 and 1999. Utilities and
property expenses as a percentage of revenues decreased to 7.0% in the six
months ended March 31, 2000 from 7.7% in the six months ended March 31, 1999.
Depreciation and amortization expenses increased $100,000, or 5.1%, to $3.8
million in the six months ended March 31, 2000 from $3.7 million in the six
months ended March 31, 1999.
Interest Expense. Interest expense was unchanged at $7.3 million in the 2000
period and the 1999 period.
Net Income (Loss). As a result of the factors discussed above, the Santa Fe
recorded a net loss of $200,000 for the six months ended March 31, 2000,
compared to net income of $40,000 in the six months ended March 31, 1999.
Pioneer
Net Operating Revenues. Revenues at the Pioneer increased $1.1 million, or
4.6%, to $23.8 million in the six months ended March 31, 2000 as compared to
$22.7 million in the same period in the prior year. Management believes that
2000 results were positively impacted by an improvement in the Laughlin market
compared to prior periods.
17
<PAGE>
Casino revenues increased $700,000 or 3.7%, to $19.1 million from $18.4 million
when compared to the same six months of 1999. The increase in casino revenues
was due to an increase of $700,000, or 4.2%, in slot and video poker revenues to
$16.7 million in the 2000 period from $16.0 million in the 1999 period. Other
gaming revenues, including table games, were unchanged at $2.3 million, due to
increased table game play offset by decreased play in keno. Casino promotional
allowances increased $200,000 or 7.1%, to $3.4 million in the 2000 period from
$3.2 million in the 1999 period due to the increase in customer volume.
Hotel revenues were unchanged at $1.2 million for the six months ended March 31,
2000 compared to the six months ended March 31, 1999, as a rise in occupancy
rate to 72.1% from 67.6% was offset by a 3.7% decrease in average daily room
rate. Food and beverage revenues were unchanged at $4.3 million in the six
months ended March 31, 2000 and 1999. Other revenues increased $500,000, or
24.9%, to $2.6 million in the six months ended March 31, 2000 compared to $2.1
million in the six months ended March 31, 1999 due to increased sales in retail
outlets.
Operating Expense. Operating expense increased $1.4 million, or 6.9%, to $21.9
million in the six months ended March 31, 2000 from $20.5 million in the six
months ended March 31, 1999. Excluding $1.4 million of reorganization expenses
in the 2000 six months compared to $400,000 in the 1999 six months, operating
expense increased $400,000, or 1.7%.
Casino expenses increased $200,000, or 2.2%, to $9.3 million for the six months
ended March 31, 2000 from $9.1 million in the six months ended March 31, 1999,
primarily due to increased promotional expenses. Casino expenses as a
percentage of casino revenues decreased to 49.0% in the six months ended March
31, 2000 from 49.7% in the six months ended March 31, 1999. Hotel expenses were
unchanged at $400,000 for the six months ended March 31, 2000 compared to the
six months ended March 31, 1999. Food and beverage expenses decreased $100,000,
or 4.4%, to $2.2 million in the six months ended March 31, 2000 from $2.3
million in the six months ended March 31, 1999 due to a decrease in cost of
sales. Food and beverage expenses as a percentage of food and beverage revenues
decreased to 51.5% in the six months ended March 31, 2000 from 54.2% in the six
months ended March 31, 1999. Other expenses increased $500,000, or 28.5%, to
$2.4 million for the six months ended March 31, 2000 compared to $1.9 million
for the six months ended March 31, 1999 due to the increase in retail sales.
Other expenses as a percentage of other revenues increased to 93.7% in the 2000
six months from 91.1% in the 1999 six months.
Selling, general and administrative expenses decreased $200,000, or 7.9% to $2.8
million in the six months ended March 31, 2000 compared to $3.0 million in the
six months ended March 31, 1999, primarily due to decreased professional
services and fees pursuant to the management agreement between PHI and the
Company. Selling, general and administrative expenses as a percentage of
revenues decreased to 11.8% in the six months ended March 31, 2000 from 13.4% in
the six months ended March 31, 1999. Utilities and property expenses were
relatively unchanged at $2.0 million in the
18
<PAGE>
six months ended March 31, 2000, compared to $1.9 million in the six months
ended March 31, 1999. Depreciation and amortization expenses were unchanged at
$1.3 million in the six months ended March 31, 2000 and 1999. During the six
months ended March 31, 2000, PHI incurred approximately $1.4 million in
reorganization expenses related to the Pioneer bankruptcy proceedings as
compared to $400,000 in the prior year period. During the six month 1999 period,
PHI incurred costs and expenses in connection with restructuring the 13 1/2%
Notes resulting in a $500,000 charge to earnings.
Other Expense. Interest expense decreased $500,000, or 12.9%, to $3.3 million
in the 2000 period from $3.8 million in the 1999 period. During the six month
1999 period, PHI incurred costs and expenses in connection with restructuring
the 13 1/2% Notes resulting in a $500,000 charge to earnings.
Net Loss. As a result of the factors discussed above, net loss decreased
$700,000, or 32.2%, to $1.4 million in the six months ended March 31, 2000 from
$2.1 million in the six months ended March 31, 1999.
RESULTS OF OPERATIONS - Three Months Ended March 31, 2000 and 1999
- ------------------------------------------------------------------
Consolidated
Net Operating Revenues. Consolidated revenues for the three months ended March
31, 2000 were $35.1 million, representing a $2.8 million, or 8.8%, increase from
$32.3 million for the same period in the prior year. Revenues increased by $2.5
million at the Santa Fe and $400,000 at the Pioneer.
Operating Expense. Total operating expenses increased $200,000, or 0.9%, to
$28.6 million in the three months ended March 31, 2000 from $28.4 million in the
three months ended March 31, 1999. Operating expenses increased by $1.5
million, or 9.2%, at the Santa Fe, were unchanged at the Pioneer and decreased
by $700,000 at SLVC. The decrease at SLVC is attributable to loan issue costs
being fully amortized by December 1999.
Operating Income. Consolidated operating income for the three months ended
March 31, 2000 was $6.5 million, representing a $2.6 million, or 66.5%, increase
from $3.9 million for the same period in the prior year. Operating income
increased by $1.0 million at the Santa Fe, $400,000 at the Pioneer and
$600,000 at SLVC.
Other Expense. Consolidated interest expense for the three months ended March
31, 2000 was $5.0 million, representing a $1.3 million, or 20.1%, decrease
compared to $6.3 million for the same period in the prior year, primarily due to
the application of proceeds from the sale of the Henderson property and related
agreements to reduce SLVC indebtedness and to the purchase of 13 1/2% Notes by
SLVC.
19
<PAGE>
Income (Loss) Before Extraordinary Item. Consolidated income before
extraordinary item for the three months ended March 31, 2000 was $1.4 million,
representing a $3.8 million, or 159.0%, improvement compared to a $2.4 million
loss in the same period in the prior year.
Extraordinary Item. During the quarter ended March 31, 2000, SLVC purchased
$7.2 million principal amount of 13 1/2% Notes, plus accrued and unpaid
interest, resulting in a $700,000 gain on the extinguishment of debt.
The Company did not record an income tax provision in the current quarter.
Accounting Principles Board Opinion 28 states that tax expense for an interim
period be measured using an estimated annual effective rate for the annual
period. The Company's annualized effective tax rate is 0%. The Company did not
record an income tax benefit in the prior year's quarter due to the uncertainty
of the Company's ability to recognize a benefit of the net operating loss. The
preferred stock accrued dividend rate increased to 12% in the current period
compared to an 11% dividend rate in the prior year.
Net Income (Loss) Consolidated net income applicable to common shares was $1.6
million or $.25 per common share for the three months ended March 31, 2000
compared to a $2.9 million net loss, or $.48 per common share in the prior year
period.
Santa Fe
Net Operating Revenues. Revenues at the Santa Fe increased $2.5 million, or
12.6%, in the three months ended March 31, 2000 to $22.2 million as compared to
$19.7 million in the same period in the prior year.
Casino revenues increased $1.8 million, or 11.3%, to $17.4 million from $15.6
million when compared to the same three months of 1999, due to an increase in
the customer volume and the introduction of new slot equipment. Slot and video
poker revenues increased $1.6 million, or 11.6%, to $15.3 million in the 2000
quarter from $13.7 million in the 1999 quarter. Other gaming revenues,
including table game revenues, increased $200,000, or 9.4%, primarily due to
increased keno and bingo revenues. Casino promotional allowances increased
$200,000, or 8.0%, to $1.8 million in the 2000 quarter from $1.6 million in the
1999 quarter due to the increase in customer volume.
Hotel revenues were unchanged at $800,000 for the three months ended March 31,
2000 and 1999. Food and beverage revenues increased $500,000, or 16.3%, to $3.6
million in the three months ended March 31, 2000 compared to $3.1 million in the
three months ended March 31, 1999 due to an increase in customer volume. Other
revenues increased $300,000, or 20.1% to $2.1 million in the three months ended
March 31, 2000 from $1.8 million in the three months ended March 31, 1999,
primarily due to the opening in February 1999 of an additional retail outlet.
20
<PAGE>
Operating Expense. Operating expenses increased $1.5 million, or 9.2%, to $17.8
million in the quarter ended March 31, 2000 from $16.3 million in the quarter
ended March 31, 1999.
Casino expenses increased $300,000, or 4.2%, to $7.1 million in the three months
ended March 31, 2000 from $6.8 million in the three months ended March 31, 1999,
related to the increase in casino revenues. However, casino expenses as a
percentage of casino revenues decreased to 40.9% in the three months ended March
31, 2000 from 43.7% in the three months ended March 31, 1999. Hotel expenses
were unchanged at $300,000 for the three months ended March 31, 2000 and 1999.
Food and beverage expenses increased $300,000, or 12.7%, to $2.7 million in the
three months ended March 31, 2000 from $2.4 million in the three months ended
March 31, 1999, due to the increase in food and beverage revenues. Food and
beverage expenses as a percentage of food and beverage revenues decreased to
74.0% in the three months ended March 31, 2000 from 76.4% in the three months
ended March 31, 1999, due to a decrease in the cost of beverage sales for the
2000 quarter compared to the 1999 quarter, partially offset by an increase in
labor cost. Other expenses increased $500,000, or 49.4%, to $1.5 million for
the three months ended March 31, 2000 compared to $1.0 million for the three
months ended March 31, 1999, primarily due to the costs associated with the
additional retail outlet which opened in February 1999.
Selling, general and administrative expenses increased $500,000, or 20.1%, to
$2.8 million in the three months ended March 31, 2000 from $2.3 million in the
three months ended March 31, 1999, primarily due to increased labor costs and
management fees. Selling, general and administrative expenses as a percentage of
revenues increased to 12.5% in the three months ended March 31, 2000 from 11.7%
in the three months ended March 31, 1999. Utilities and property expenses were
unchanged at $1.5 million in the three months ended March 31, 2000 and 1999.
Utilities and property expenses as a percentage of revenues decreased to 6.8% in
the three months ended March 31, 2000 from 7.8% in the three months ended March
31, 1999. Depreciation and amortization expenses were unchanged at $1.9 million
in the three months ended March 31, 2000 and 1999.
Interest Expense. Interest expense was unchanged at $3.6 million in the 2000 and
the 1999 quarter.
Net Income (Loss). As a result of the factors discussed above, the Santa Fe
recorded net income of $700,000 for the quarter ended March 31, 2000, compared
to net loss of $200,000 in the quarter ended March 31, 1999.
Pioneer
Net Operating Revenues. Revenues at the Pioneer increased $400,000, or 3.5%, to
$12.5 million in the March 2000 quarter as compared to $12.1 million in the same
period in the prior year. Management believes that the 2000 results were
positively impacted by an improvement in the Laughlin market compared to prior
periods.
21
<PAGE>
Casino revenues increased $400,000 or 3.9%, to $10.1 million from $9.7 million
when compared to the same quarter of 1999. The increase in casino revenues was
due primarily to an increase of $300,000, or 3.5%, in slot and video poker
revenues to $8.8 million in the 2000 period from $8.5 million in the 1999
period. Other gaming revenues, including table games, increased $100,000, or
7.0%, due to increased table game play offset by decreased play in keno. Casino
promotional allowances increased $200,000, or 11.2%, to $1.8 million in the 2000
quarter from $1.6 million in the 1999 quarter due to the increase in customer
volume.
Hotel revenues were relatively unchanged at $700,000 for the three months ended
March 31, 2000 compared to $600,000 for the three months ended March 31, 1999,
as a rise in occupancy rate to 78.6% from 73.6% was offset by a 4.1% decrease in
average daily room rate. Food and beverage revenues increased $100,000, or 3.5%,
to $2.3 million in the three months ended March 31, 2000 from $2.2 million in
the three months ended March 31, 1999 primarily due to an increase in the amount
of complimentary food provided to customers. Other revenues increased $100,000,
or 10.9%, to $1.3 million in the three months ended March 31, 2000 compared to
$1.2 million in the three months ended March 31, 1999 due to increased sales in
retail outlets.
Operating Expense. Operating expense was unchanged at $10.8 million
in the quarters ended March 31, 2000 and March 31, 1999. Operating expenses
include $500,000 of reorganization expenses in the fiscal 2000 quarter and
$400,000 in the fiscal 1999 quarter.
Casino expenses were unchanged at $4.7 million for the three months ended March
31, 2000 and 1999. Casino expenses as a percentage of casino revenues decreased
to 46.4% in the three months ended March 31, 2000 from 48.2% in the three months
ended March 31, 1999. Hotel expenses were unchanged at $200,000 for the three
months ended March 31, 2000 compared to the three months ended March 31, 1999.
Food and beverage expenses were unchanged at $1.2 million in the quarter ended
March 31, 2000 compared to the quarter ended March 31, 1999. Food and beverage
expenses as a percentage of food and beverage revenues decreased to 50.0% in the
three months ended March 31, 2000 from 53.2% in the three months ended March 31,
1999. Other expenses increased $100,000, or 11.2%, to $1.2 million for the
three months ended March 31, 2000 compared to $1.1 million for the three months
ended March 31, 1999 due to the increase in retail sales. Other expenses as a
percentage of other revenues increased to 96.5% in the 2000 quarter from 96.2%
in the 1999 quarter.
Selling, general and administrative expenses decreased $100,000, or 7.5% to $1.4
million in the three months ended March 31, 2000 compared to $1.5 million in the
three months ended March 31, 1999, primarily due to decreased professional
services and fees pursuant to the management agreement between PHI and the
Company. Selling, general and administrative expenses as a percentage of
revenues decreased to 11.4% in the three months ended March 31, 2000, from 12.7%
in the three months ended
22
<PAGE>
March 31, 1999. Utilities and property expenses were unchanged at $1.0 million
in the three months ended March 31, 2000 and 1999. Depreciation and amortization
expenses were relatively unchanged at $600,000 in the three months ended March
31, 2000, compared to $700,000 in the three months ended March 31, 1999. During
the quarter ended March 31, 2000, PHI incurred approximately $500,000 in
reorganization expenses related to the Pioneer bankruptcy proceedings compared
to $400,000 during the quarter ended March 31, 1999.
Other Expense. Interest expense decreased $500,000, or 27.8%, to $1.3 million
in the 2000 quarter from $1.8 million in the 1999 quarter.
Net Income (Loss). As a result of the factors discussed above, the Pioneer
recorded net income of $400,000 in the quarter ended March 31, 2000, an
improvement of $900,000, or 185.1%, compared to a net loss of $500,000 in the
quarter ended March 31, 1999.
Liquidity and Capital Resources; Trends and Factors Relevant to Future
Operations
Liquidity. As of March 31, 2000, the Company held cash and cash equivalents of
$16.5 million compared to $13.7 million at September 30, 1999.
Earnings before interest, taxes, depreciation and amortization, rents, corporate
expenses, reorganization expenses and other non-operating charges ("EBITDA")
increased $1.8 million, or 10.2%, to $18.6 million in the six months ended March
31, 2000, from $16.8 million in the six months ended March 31, 1999. The Company
incurred rent expense of $400,000 in the six months ended March 31, 2000 and
1999. Other non-operating charges were $1.5 million and $0 for 2000 and 1999,
respectively, and were comprised primarily of a reserve related to the carrying
value of timeshare assets and legal expenses incurred in connection with
proceedings involving the Company's former investment in a minority owned
business. The Company will incur less net interest expense in future periods as
a result of reductions in the outstanding principal amount of SLVC Notes by
$14.5 million and SLVC's purchase of $16.7 million of 13 1/2% Notes.
EBITDA should not be construed as a substitute for operating income or a better
indicator of liquidity than cash flow from operating, investing and financing
activities, which are determined in accordance with accounting principles
generally accepted in the United States of America ("GAAP"), and is included
herein to provide additional information with respect to the ability of the
Company to meet its future debt service, capital expenditures and working
capital requirements. Although EBITDA is not necessarily a measure of the
Company's ability to fund its cash needs, management believes that EBITDA is a
useful tool for measuring the ability of the Company to service its debt. The
Company's definition of EBITDA may not be same as that of similarly captioned
measures used by other companies.
23
<PAGE>
Management believes that, based on operations for the three and six months ended
March 31, 2000, the Company will have sufficient resources from operations,
together with potential liquidity associated with the real property owned by
SLVC on Las Vegas Boulevard South, to meet its operating requirements.
Management is exploring financing alternatives to address the debt service and
repayment obligations related to the 13 1/2% Notes, which are the subject of the
PFC and PHI bankruptcy proceedings, and the Company's $131.9 million of current
maturities of long-term debt, substantially all of which mature in December
2000. No assurance can be given that the Company will have sufficient resources
for operating requirements or that it will be successful in refinancing the 13
1/2% Notes by August 31, 2000 or the balance of the Company's debt by December
2000 .
At March 31, 2000, and excluding the 13 1/2% Notes, the Company had
approximately $131.9 million in current maturities of long-term debt, net of
debt discount of $1.0 million and debt obligations owned but not retired of
$33.1 million of 11% Notes. Current maturities of long term debt, net is
comprised primarily of $99.4 million principal amount of 11% Notes, less $33.1
million owned but not retired, $44.0 million principal amount of SLVC Notes, $14
million principal amount of 9 1/2% Notes and a $4.8 million Note (the "Sierra
Note"), all of which mature in December 2000. The Company had $7.7 million in
long-term debt, net of current maturities, as of March 31, 2000.
Although management has in the past and is currently exploring refinancing or
debt modification alternatives, as well as a possible disposition of the Las
Vegas Boulevard South property, in order to satisfy the 13 1/2% Notes repayment
by August 31, 2000 and the balance of the debt obligations that mature in 2000,
no assurance can be given that the Company will be able to refinance or modify
some or all of its indebtedness or dispose of, or obtain financing with respect
to, the Las Vegas Boulevard South property. Any such refinancing or modification
would be subject to the Company's future operations and the prevailing market
conditions at the time of such proposed transaction and may require the approval
of the Nevada Gaming Authorities for such financings or asset sales. If the
Company is ultimately unable to refinance or modify any such debt prior to the
required payment dates, it is likely the Company would file for relief under
Chapter 11 of the Bankruptcy Code.
Debt agreements restrict the distribution of cash from certain of the Company's
subsidiaries to the Company. Cash flow from SFHI, and PHI is not currently, and
is not expected in the foreseeable future to be, available for distribution to
the Company. The agreement under which the SLVC Notes were issued permits up to
$7.5 million to be distributed to the Company for the limited purpose of
acquiring 13 1/2% Notes. In addition, debt agreements limit additional
indebtedness of such subsidiaries, and in the PFC and PHI Plan of
Reorganization, SFHI and SLVC have agreed to restrictions on additional debt
incurrence and certain types of asset sales through December 31, 2000.
Therefore, the Company and its subsidiaries other than SLVC, PHI and SFHI
(collectively "Corporate") must rely on existing cash and available resources,
or, subject to contractual restrictions, cause subsidiaries to dispose of or
refinance assets, to provide liquidity to fund Corporate cash requirements.
24
<PAGE>
Cash Flow from Operating Activities. The Company's cash used in operations was
$3.1 million for the six months ended March 31, 2000 as compared to cash
provided by operations of $4.0 million for the prior year period. The increase
in cash used in operations was primarily due to the payment of accrued interest
and fees on the SLVC Notes, PFC and PHI reorganization expenses and legal
expenses.
Cash Flow from Investing Activities. Cash provided by investing activities was
$36.0 million during the six months ended March 31, 2000, compared to cash used
in investing activities of $2.5 million during the six months ended March 31,
1999. In November 1999, the Company sold real property in Henderson, Nevada and
entered into related agreements for total consideration of $37.2 million. In the
fiscal 2000 six months period, the Company incurred $1.1 million of capital
expenditures, comprised primarily of improvements at the Santa Fe and the
Pioneer.
Cash Flow from Financing Activities. Cash used in financing activities was
$30.1 million in the 2000 six month period compared to $8.1 million during the
same period in 1999. In fiscal 2000, the Company used proceeds from the sale of
the Henderson property and related agreements to reduce the outstanding
principal amount of SLVC Notes by $14.5 million and purchase $16.7 million of 13
1/2% Notes. Cash used in financing activities in the 1999 fiscal period
represents primarily a principal payment to repurchase and retire $5.0 million
principal amount of the 13 1/2% Notes and repayment of a $1.6 million first
mortgage note secured by the approximate 21-acre parcel of undeveloped real
property adjacent to the Santa Fe.
SFHI - At March 31, 2000, approximately $12.8 million of the Company's current
- ----
assets, including approximately $8.3 million of cash and cash equivalents, was
held by SFHI.
Results of operations at the Santa Fe for the three and six months ended March
31, 2000 generated EBITDA, as defined, of $7.2 million and $12.8 million,
compared to $5.6 million and $11.6 million of EBITDA in 1999. SFHI's principal
uses of cash from operations are interest payments on indebtedness, capital
expenditures to maintain the facility, and charges for management services from
Corporate. In both six month periods, Santa Fe incurred no rent expense. In the
fiscal 2000 three and six months periods, the Santa Fe reported approximately
$800,000 and $1.7 million in charges for management services provided by
Corporate compared to $300,000 and $600,000 in the fiscal 1999 three and six
months periods. In July 1999, Santa Fe and the Company formalized the terms
under which the Company provides management services to Santa Fe by entering
into a management agreement which provides for an annual base fee and an
incentive fee, based on achievement of specified levels of operating results not
to exceed $2.9 million in the aggregate annually. In the fiscal 2000 three and
six month periods, Santa Fe incurred non-operating charges of $100,000 and
$200,000 in connection with legal proceedings involving SFHI's former investment
in a minority owned business. Interest expense in fiscal 2000 is expected to be
approximately the same as expended in fiscal 1999. Capital expenditures to
maintain the facility in fiscal 2001 are expected to be approximately the same
as fiscal 2000.
25
<PAGE>
Management believes that, based on operations for the three and six months ended
March 31, 2000, SFHI will have sufficient cash resources to meet its operating
requirements through the twelve month period ending March 31, 2001, although no
assurance can be given to that effect. However, SFHI's 11% Notes and 9 1/2%
Notes mature in December 2000. Additionally, the 9 1/2% Notes are in default,
and the holders may accelerate the debt at any time. SFHI is exploring
alternatives for refinancing the 9 1/2% Notes and 11% Notes. The Company has no
arrangements for any refinancings or modifications. No assurance can be given
that SFHI will be successful in refinancing its indebtedness. If it is not
successful SFHI would expect to enter into negotiations with the lenders with
respect to a debt restructuring. If it were not able to restructure the debt it
is likely that SFHI would file for relief under Chapter 11 of the Bankruptcy
Code.
SLVC - At March 31, 2000, approximately $1.0 million of the Company's cash and
cash equivalents was held by SLVC.
SLVC's primary source of cash is interest income on $33.1 million principal
amount of 11% Notes and $16.7 million principal amount of 13 1/2% Notes. SLVC's
principal use of cash is to satisfy principal and interest obligations on the
SLVC Notes. Under certain conditions, SLVC is permitted to borrow an additional
$6.5 million, the proceeds of which may be used by SLVC to purchase 13 1/2%
Notes, pay principal or interest on the SLVC Notes or to make a distribution to
the Company for the purpose of acquiring 13 1/2% Notes. SLVC owns a 27-acre
parcel of real estate on Las Vegas Boulevard South, which is subject to a lease
with a water theme park operator. SLVC generates minimal cash from the lease
agreement after payment of property costs.
The SLVC Notes mature in December 2000 and there is a mandatory $3.0 million
prepayment requirement on June 20, 2000. SLVC is discussing with the lender
modification of the $3.0 million prepayment requirement. SLVC is exploring
alternatives for repayment of the SLVC Notes, including but not limited to the
sale of the 27-acre parcel on Las Vegas Boulevard South and refinancing or
modification of the SLVC Notes. The Company has no arrangements for any such
refinancings, modifications, dispositions or other financings, and no assurance
can be given that SLVC will successfully make such arrangements. No assurance
can be given that SLVC will be successful in refinancing its indebtedness or
obtaining modification of the June 2000 prepayment obligation. If it is not
successful SLVC would expect to enter into negotiations with the lenders with
respect to a debt restructuring. If it were not able to restructure the debt it
is likely that SLVC would file for relief under Chapter 11 of the Bankruptcy
Code.
PHI - At March 31, 2000 approximately $7.8 million of the Company's current
- ----
assets, including approximately $6.0 million of cash and cash equivalents, was
held by PHI. Of this amount, approximately $700,000 is reserved for payments
to holders of 13 1/2% Notes pursuant to an order of the Bankruptcy Court.
26
<PAGE>
Results of operations at the Pioneer for the three and six months ended March
31, 2000 generated EBITDA, as defined, of $3.3 million and $5.5 million,
compared to $2.8 million and $4.9 million of EBITDA in 1999, respectively. PHI's
principal uses of cash are for operating lease payments, corporate expenses,
interest payments on indebtedness, reorganization expenses and capital
expenditures to maintain the facility. Pioneer incurred charges for management
services from Corporate of $250,000 and $500,000 in the three and six months
ended March 31, 2000, compared to $250,000 and $550,000 in three and six months
ended March 31, 1999, respectively. In March 1999, the Pioneer and the Company
entered into a management agreement which, as of January 2000, provides for a
base fee and an incentive fee based on the Pioneer achieving specified levels of
operating results not to exceed $1.0 million in the aggregate annually. Pioneer
reported rent expense of approximately $200,000 and $400,000 in the three and
six months ended March 31, 2000 and March 31, 1999. PHI incurred reorganization
expenses of $500,000 and $1.4 million in the three and six month periods ended
March 31, 2000, compared to $400,000 for both the three and six month periods
ended March 31, 1999. Capital expenditures to maintain the facility in fiscal
2000 are expected to be approximately the same as in fiscal 1999 of
approximately $1.1 million.
Although results of operations of the Pioneer have not been noticeably adversely
impacted since PFC's February 1999 filing for relief under Chapter 11 of the
Bankruptcy Code, no assurance can be given that the filing for relief under
Chapter 11 by PFC, and by PHI, and potentially by the Company and other
subsidiaries of the Company, will not have a material adverse affect on the
operations and financial condition of the Pioneer.
Management believes that, based on operations for the three and six months ended
March 31, 2000, PHI will have sufficient cash and available resources to meet
its operating requirements through the twelve months ending March 31, 2001,
although no assurance can be given to that effect.
PFC and PHI filed for relief under Chapter 11 of the United States Bankruptcy
Code and the joint plan of reorganization was confirmed on April 28, 2000. See
"Legal Proceedings" for information regarding the bankruptcy cases and confirmed
plan of reorganization.
Corporate - Approximately $1.9 million of the Company's current assets at March
- ---------
31, 2000, including approximately $1.2 million of cash and cash equivalents, was
held by Corporate.
Corporate consists primarily of non-operating entities which do not generate
cash flow from operations. Corporate's principal uses of cash are for debt
service, administrative and professional expenses and costs associated with the
evaluation and development of proposed projects. Additional potential uses of
cash by Corporate include obligations that may arise as a result of the
Company's guarantee of subsidiary debt, and the guarantee of the tenant loan if
the Company terminates a third party lease on the parcel on Las Vegas Boulevard
South owned by SLVC. The guaranteed debt of the Company's subsidiaries, PHI,
SLVC and SFHI, include the 13 1/2% Notes which are the
27
<PAGE>
subject of PFC's and PHI's bankruptcy proceedings, the 9 1/2% Notes, which are
in default, as well as the SFHI 11% Notes and the SLVC Notes which mature in
December 2000.
Management believes that Corporate has sufficient working capital and available
resources to meet its operating requirements through the twelve month period
ending March 31, 2001, although no assurance can be given to that effect. The
Sierra Note, with an outstanding principal balance of $4.8 million at March 31,
2000, matures in December 2000, and the Company has guaranteed $157.4 million of
subsidiary debt (the 11% Notes, the 9 1/2% Notes and the SLVC Notes) that mature
in December 2000. Additionally, the Company has guaranteed the 13 1/2% Notes,
which are required by the plan of reorganization be paid in full by August 31,
2000. Although management is exploring refinancing or debt modification
alternatives, as well as possible disposition of the Las Vegas Boulevard South
property, in order to satisfy the maturities of debt obligations in 2000, no
assurance can be given that the Company will be able to refinance or modify some
or all of its indebtedness, or dispose of the Las Vegas Boulevard South
property. If it is unable to do so, it is likely that the Company will file
for relief under Chapter 11 of the Bankruptcy Code.
Preferred Stock
- ---------------
The Company's preferred stock provides that dividends accrue on a semi-annual
basis, to the extent not declared. The Company is a party to financing
arrangements that restrict the Company's ability to exchange the preferred stock
for subordinated notes commencing in September 1998 and to declare and pay
dividends or make distributions with respect to the Company's capital stock,
which currently prohibit the payment of cash dividends on the preferred stock.
The Company has accrued the semi-annual preferred stock dividends due in fiscal
years 2000, 1999, 1998 and 1997. Because dividends in an amount equal to
dividend payments for one dividend period have accrued and remain unpaid for two
years, the preferred stockholders, voting as a separate class, were first
entitled to elect two directors at the annual meeting held in May 1999. In
October 1999, the dividend rate increased to 12.0% and will increase by 50 basis
points each semi-annual period thereafter, up to a maximum of 16%. At March 31,
2000, the aggregated liquidation preference of the Preferred Stock was
$25,255,183, or $2.85 per share.
Related Parties
- ------------------
In fiscal years 1993 and 1992, Hacienda Hotel Inc's., predecessor made loans to
LICO, a Nevada corporation wholly owned by Paul W. Lowden, which provided
entertainment services to the Hacienda Resort Hotel and Casino and the Sahara
Hotel and Casino, in the aggregate amount of $476,000. In January 1998, the
loans to LICO were satisfied through an offset against Mr. Lowden's bonus for
fiscal year 1998 in the amount of $800,000 ("Fiscal Year 1998 Bonus") and a fee
in the amount of $100,000 due to Mr. Lowden for personal guarantees he issued
for certain Company financing arrangements (the "Personal Guarantee Fee"). In
December 1998, at the request of Mr. Lowden, the
28
<PAGE>
Company's payment of $350,000 of the Fiscal Year 1998 Bonus and the Personal
Guarantee Fee which satisfied, in part, the loan to LICO, was rescinded, and
LICO's obligation to pay the Company $350,000, together with interest thereon
from January 1998, was reinstated. The Company remained obligated to pay Mr.
Lowden the additional $350,000 of the Fiscal Year 1998 Bonus. In February 1999,
the Company offset the $350,000 remaining payment to Mr. Lowden, payable in
connection with the Fiscal Year 1998 Bonus, against the remaining outstanding
obligation of LICO to the Company. In December 1999, at the request of Mr.
Lowden, the Company's payment of $175,000 of bonus and fee obligations satisfied
through the offset of the LICO loan was rescinded, and LICO's obligation to pay
to the Company $175,000, together with interest thereon from January 1998, was
reinstated. The Company satisfied its obligation to pay the remaining $175,000
obligation to Mr. Lowden by the offset of the outstanding $175,000 obligation of
LICO to the Company in January 2000.
In January 2000, the Company paid $50,000 to each of Messers. Paul W. Lowden,
Christopher W. Lowden and David G. Lowden in exchange for each of them
individually having entered into a fifteen year non-compete agreement in
November 1999 in connection with the sale of the real property in Henderson,
Nevada and related agreements.
Effects of Inflation
- --------------------
The Company has been generally successful in recovering costs associated with
inflation through price adjustments in its hotels. Any such increases in costs
associated with casino operations and maintenance of properties may not be
completely recovered by the Company.
Private Securities Litigation Reform Act
- ----------------------------------------
Certain statements in this Quarterly Report on Form 10-Q which are not
historical facts are forward looking statements, such as statements relating to
future operating results, existing and expected competition, financing and
refinancing sources and availability and plans for future development or
expansion activities and capital expenditures. Such forward looking statements
involve a number of risks and uncertainties that may significantly affect the
Company's liquidity and results in the future and, accordingly, actual results
may differ materially from those expressed in any forward looking statements.
Such risks and uncertainties include, but are not limited to, those related to
effects of bankruptcy, competition, leverage and debt service, financing and
refinancing efforts, general economic conditions, changes in gaming laws or
regulations (including the legalization of gaming in various jurisdictions) and
risks related to development and construction activities.
Item 3. Market Risk Disclosure
----------------------
The Company has debt instruments with interest rates which fluctuate based on
certain indexes. The Company believes that the market risk arising from these
financial instruments is not material.
29
<PAGE>
SANTA FE GAMING CORPORATION
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
Petition for Relief Under Chapter 11
As previously disclosed, on February 23, 1999, PFC voluntarily commenced a
Chapter 11 proceeding. On April 12, 1999, PHI voluntarily commenced its Chapter
11 proceeding to facilitate the reorganization of the 13 1/2% Notes in
accordance with PFC's 1998 Consent Solicitation, described below.
Contemporaneously with the filing of PHI's voluntary petition, PFC and PHI
(collectively, the "Debtors") filed with the Bankruptcy Court a proposed
Disclosure Statement and Joint Plan of Reorganization as amended (the "Joint
Plan"). The Joint Plan was filed in accordance with consents obtained from
holders of approximately 75% of the outstanding principal amount of 13 1/2%
Notes, pursuant to which PFC agreed to file for relief under Chapter 11 and the
consenting holders agreed to vote to accept a plan of reorganization
substantially similar to the treatment proposed in PFC's Consent Solicitation
Statement, dated October 23, 1998, as amended, ("Consent Solicitation"). On
August 30, 1999 the Bankruptcy Court approved the Disclosure Statement to
accompany the Joint Plan. On October 25, 1999, the Debtors' proposed
modifications to the Joint Plan to satisfy balloting thresholds without
resoliciting the Joint Plan. The Bankruptcy Court ruled against the Debtors
proposed modifications to the Joint Plan and held that the Debtors proposed
modifications would require re-solicitation. The Court terminated the Debtors'
exclusivity, expressly subject to reinstatement, thereby granting other parties
in interest the right to file a plan to reorganize the Debtors. On November 8,
1999 the Bankruptcy Court refused to permit a Disclosure Statement to accompany
the plan of reorganization filed on behalf of Hudson Bay Partners LLC ("HBP").
On December 14, 1999, the Bankruptcy Court refused to approve a Joint Disclosure
Statement to accompany the plan of reorganization filed by HBP and High River
Partnership ("High River"). In addition, the Bankruptcy Court reinstated
exclusivity for the Debtors. On February 7, 2000 the Debtors filed a proposed
Disclosure Statement to accompany their Fifth Amended Joint Plan of
Reorganization (the "Modified Joint Plan"). The Bankruptcy Court approved the
Disclosure Statement accompanying the Modified Joint Plan at a hearing on March
24, 2000. On April 7, 2000, the Debtors filed a motion to amend the Modified
Joint Plan in accordance with terms contained in the Restated Fifth Amended
Joint Plan of Reorganization (the "Restated Modified Joint Plan"). At a hearing
on April 27, 2000, the Bankruptcy Court approved the motion to amend the
Modified Joint Plan. On April 28, 2000, the Bankruptcy Court confirmed the
Restated Modified Joint Plan.
30
<PAGE>
Modified Joint Plan
- --------------------
On February 7, 2000 the Debtors filed a proposed Disclosure Statement to
accompany their Fifth Amended Joint Plan of Reorganization (the "Modified Joint
Plan"). The Bankruptcy Court approved for solicitation the Disclosure Statement
accompanying to the Modified Joint Plan at a hearing on March 24, 2000. On
April 7, 2000, the Debtors filed a motion to amend the Modified Joint Plan in
accordance with terms contained in the Restated Fifth Amended Joint Plan of
Reorganization (the "Restated Modified Joint Plan"). At a hearing on April 27,
2000, the Bankruptcy Court approved the motion to amend the Modified Joint Plan.
On April 28, 2000, the Bankruptcy Court confirmed the Restated Modified Joint
Plan.
The Restated Modified Joint Plan provides that the Debtors' creditors, including
holders of Pioneer Finance Corp.'s 13 1/2% First Mortgage Notes (the "13 1/2
Notes"), will be paid in full on or before August 31, 2000. Although no
financing commitments are in place with respect to refinancing the 13 1/2%
Notes, the Company, the Debtors and the Company subsidiaries are exploring
alternatives to obtain financing for that purpose by the August 31, 2000
deadline. In the event the 13 1/2% Notes and other liabilities of the Debtors
are not paid by August 31, 2000, the Debtors and the Company have agreed not to
raise objections to the Indenture Trustee for the 13 1/2% Notes pursuing
remedies for failure to pay the 13 1/2% Notes, although the Company has not
waived any defenses it may have to enforcement of its guaranty of the 13 1/2%
Notes. Additionally, under the Restated Modified Joint Plan, the Company has
agreed, under certain conditions and with respect to specified entities, to
terminate as of August 31, 2000 forebearance agreements entered into in
connection with PFC's 1998 consent solicitation, pursuant to which certain 13
1/2% Noteholders agreed not to take action against PFC, PHI or the Company with
respect to the 13 1/2% Notes or the Company's guarantee of the 13 1/2% Notes.
Finally, the Company and certain of its non-debtor affiliates agreed to
restrictions with respect to certain transactions including incurrence of
additional debt and certain types of asset sales through December 31, 2000. If
any 13-1/2% Noteholder successfully seeks to enforce payment under the 13-1/2%
Notes or the Company's guaranty, the Company will evaluate all possible
alternatives available to it, which may include filing for relief under Chapter
11 of the Bankruptcy Code.
If the Company were to file for relief under Chapter 11 of the Bankruptcy Code,
if an involuntary bankruptcy case were to be initiated against the Company and
not be timely dismissed or an order for relief were to be entered thereon, an
event of default would occur under the agreements pursuant to which SFHI's and
SLVC's outstanding indebtedness was issued, which would result in automatic
acceleration of the 11% Notes, the 9 1/2% Notes and SLVC Notes.
Guarantor Litigation - Other
The Company is the defendant in a pending action titled Chelonian Corp v. The
Santa Fe Gaming Corp., No 00/601852. This action was instituted on or about May
4, 2000 by means of a motion for summary judgement in lieu of complaint filed in
the Supreme Court for the State of New York, County of New York, Chelonian
alleges that it holds 13 1/2% Notes in the principal amount of $5,106,000 and
that the Company is in default on its guarantee of such 13 1/2% Notes. The
action seeks to recover the amounts Chelonian Corp. claims are past due on such
13 1/2% Notes. The Company has not yet filed a response in this action.
Item 2 - Changes in Securities
None
31
<PAGE>
Item 3 - Defaults Upon Senior Securities
PFC has $54.3 million of principal and approximately $9.7 million accrued
interest due on the 13 1/2% Notes as of March 31, 2000 which is presented
net of $16.7 million principal and $3.0 million accrued interest owned by
affiliates as Liabilities subject to compromise in the Consolidated
Condensed Balance Sheet contained elsewhere herein. See "Legal
Proceedings".
Pursuant to the terms of the $14 million principal amount of 9 1/2% Notes
due 2000 (the "9 1/2% Notes") which SFHI issued, certain events related to
the non-payment by PFC of the 13 1/2% Notes at maturity, created events of
default under the 9 1/2% Notes. The holders of the 9 1/2% Notes have not
accelerated the 9 1/2% Notes, although no assurance can be given that the 9
1/2% Notes will not be accelerated. The Company is also exploring
refinancing alternatives for the 9 1/2% Notes. If the holders of the 9 1/2%
Notes accelerate the payment of the 9 1/2% Notes, a default would occur
under the 11% Notes which would permit the 11% Notes to accelerate. If the
9 1/2% Notes or the 11% Notes were to be accelerated and the Company is
unable to refinance the indebtedness or sell all or a portion of its assets
and realize sufficient proceeds to satisfy the debt, it is likely that SFHI
and the Company will file for relief under Chapter 11 of the Bankruptcy
Code.
If the Company were to file for relief under Chapter 11 of the Bankruptcy
Code or if an order for relief is entered in the Company's involuntary
bankruptcy case, an event of default would occur under the 11% Notes
Indenture, and the agreement under which the SLVC Notes were issued
resulting in automatic acceleration of the 11% Notes and the SLVC Notes.
Preferred Stock
---------------
The Company's preferred stock provides that dividends accrue on a semi-
annual basis, to the extent not declared. The Company is a party to
financing arrangements that restrict the Company's ability to exchange the
preferred stock for subordinated notes commencing in September 1998 and to
declare and pay dividends or make distributions with respect to the
Company's capital stock, which currently prohibit the payment of cash
dividends on the preferred stock. The Company has accrued the semi-annual
preferred stock dividends due in fiscal years 2000, 1999, 1998 and 1997.
Because dividends in an amount equal to dividend payments for one dividend
period have accrued and remain unpaid for two years, the preferred
stockholders, voting as a separate class, were first entitled to elect two
directors at the annual meeting held in May 1999. In October 1999, the
dividend rate increased to 12.0% and will increase by 50 basis points each
semi-annual period thereafter, up to a maximum of 16%. At March 31, 2000,
the aggregated liquidation preference of the Preferred Stock was
$25,255,183, or $2.85 per share, which includes $6,301,950 of accrued and
unpaid dividends.
Item 4 - Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Stockholders held on May 8, 2000, Common
Stockholders elected two directors, voted on a proposal to amend the 1993
Employee Stock Option Plan and voted on a proposal to ratify the selection
of Deloitte & Touche LLP as the Company's public accountants. Preferred
Stockholders elected two special directors.
The Common Stockholders Directors whose terms in office continued after the
meeting are as follows:
Thomas K. Land through 2001
Paul W. Lowden through 2002
James W. Lewis through 2002
The result of the vote taken on the election of Common Stockholders
Directors to hold office until the 2003 Annual Meeting of Stockholders and
until their successor are elected and have qualified was as follows:
<TABLE>
<CAPTION>
For Withheld from Voting
--------------- --------------------
<S> <C> <C>
Suzanne Lowden 5,904,463 72,796
John W. Delaney 5,905,147 72,113
</TABLE>
32
<PAGE>
The result of the vote taken for a proposal to amend the 1993 Employee
Stock Option Plan.
For: 5,807,089 Against: 146,029 Votes abstaining: 24,142
The result of the vote taken for ratification of selection of Deloitte &
Touche LLP as the Company's public accountants are as follows:
For: 5,947,796 Against: 22,565 Votes abstaining: 6,899
The result of the vote taken on the election of two special directors by
Preferred Stockholders, was as follows:
<TABLE>
<CAPTION>
For Withheld from Voting
----------- --------------------
<S> <C> <C>
David H. Lesser (Class II: until
the 2001 Annual Meeting of
Stockholders and until his
successor is elected and has
qualified) 4,541,741 183,837
Howard E. Foster (Class I: until
the 2003 Annual Meeting of
Stockholders and until his
successor is elected and has
qualified) 4,541,741 183,837
</TABLE>
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
10.75 Restated Fifth Amended Plan of Reorganization of Pioneer Finance
Corp. and Pioneer Hotel Inc. date April 25, 2000
27 Financial Data Schedules
Reports
None
33
<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.
SANTA FE GAMING CORPORATION, Registrant
By: /s/ Thomas K. Land
---------------------------------------
Thomas K. Land, Chief Financial Officer
Dated: May 15, 2000
34
<PAGE>
Exhibit 10.75
GORDON & SILVER, LTD.
GERALD M. GORDON, ESQ.
Nevada Bar No. 0229
THOMAS H. FELL, ESQ.
Nevada Bar No. 3717
3960 Howard Hughes Parkway
Ninth Floor
Las Vegas, Nevada 89109
Tel: (702) 796-5555
Fax: (702) 369-2666
Attorneys for Debtors
UNITED STATES BANKRUPTCY COURT
DISTRICT OF NEVADA
In re Case No.: BK-S-99-11404-LBR
PIONEER FINANCE CORP., Chapter 11
a Nevada corporation,
Debtor.
___________________________________/
Case No.: BK-99-12854-LBR
In re Chapter 11
PIONEER HOTEL INC., (Jointly Administered)
a Nevada corporation,
Date: April 25, 2000
Debtor Time: 9:30 a.m.
___________________________________/
RESTATED FIFTH AMENDED PLAN OF REORGANIZATION
OF
PIONEER FINANCE CORP. AND PIONEER HOTEL INC.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Article I. INTRODUCTION.............................................. 7
Article II. DEFINITIONS............................................... 7
2.1 Administrative Claim...................................... 7
2.2 Administrative Claim Bar Date............................. 8
2.3 Administrative Tax Claim.................................. 8
2.4 Affiliate................................................. 8
2.5 Allowed Claim or Allowed Equity Interest.................. 8
2.6 Avoidance Actions......................................... 9
2.7 Bankruptcy Code........................................... 9
2.8 Bankruptcy Court.......................................... 9
2.9 Bankruptcy Rules.......................................... 10
2.10 Bar Date.................................................. 10
2.11 Business Day.............................................. 10
2.12 Cash...................................................... 10
2.13 Chapter 11 Professionals.................................. 10
2.14 Claims.................................................... 10
2.15 Class..................................................... 10
2.16 Class 6 Fund.............................................. 10
2.17 Collateral................................................ 11
2.18 Confirmation Date......................................... 11
2.19 Confirmation Hearing...................................... 11
2.20 Confirmation Order........................................ 11
2.21 Creditor.................................................. 11
2.22 Cure...................................................... 11
2.23 Debt...................................................... 11
2.24 Debtors................................................... 12
2.25 Debtors' Professionals.................................... 12
2.26 Disbursing Agent.......................................... 12
2.27 Disclosure Statement...................................... 12
2.28 Disposition............................................... 12
2.29 Disputed Claim or Disputed Interest....................... 12
2.30 Distribution Date......................................... 13
2.31 Effective Date............................................ 13
2.32 Effective Date Cash....................................... 14
2.33 Equity Interests.......................................... 14
2.34 Equity Securities......................................... 14
2.35 Estates................................................... 14
2.36 Executory Contract........................................ 14
2.37 Final Order............................................... 14
2.38 Gaming Authorities........................................ 14
2.39 Gaming Board.............................................. 14
2.40 Gaming Commission......................................... 14
2.41 General Unsecured Claim................................... 15
2.42 Insiders.................................................. 15
2.43 Lien...................................................... 15
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
2.44 Management Agreement...................................... 15
2.45 1988 Bonds................................................ 15
2.46 1988 Bonds Assignment..................................... 15
2.47 1988 Bonds Documents...................................... 15
2.48 1988 Bonds Indenture Trustee.............................. 15
2.49 1988 Bonds Trust Indenture................................ 15
2.50 1988 Bondholders.......................................... 15
2.51 1988 Bondholders Claims................................... 16
2.52 Notice and Hearing........................................ 16
2.53 Other Equity Interests.................................... 16
2.54 PFC....................................................... 16
2.55 PFC Common Stock.......................................... 16
2.56 PFC Equity Holders........................................ 16
2.57 PFC Equity Interests...................................... 16
2.58 PFC Petition Date......................................... 16
2.59 PHI....................................................... 16
2.60 PHI Common Stock.......................................... 16
2.61 PHI Deed of Trust......................................... 16
2.62 PHI Equity Holders........................................ 17
2.63 PHI Equity Interests...................................... 17
2.64 PHI Note.................................................. 17
2.65 PHI Petition Date......................................... 17
2.66 Person.................................................... 17
2.67 Petition Dates............................................ 17
2.68 Pioneer Ground Lease...................................... 17
2.69 Pioneer Hotel & Gambling Hall............................. 17
2.70 Plan...................................................... 18
2.71 Plan Supplement........................................... 18
2.72 Priority Tax Claim........................................ 18
2.73 Priority Unsecured Claim.................................. 18
2.74 Professional Fee Claims................................... 18
2.75 Professional Fees Bar Date................................ 18
2.76 Pro Rata or Pro Rata Share................................ 19
2.77 Record Date............................................... 19
2.78 Reorganization Cases...................................... 19
2.79 Reorganized Debtors....................................... 19
2.80 Reorganized PFC........................................... 19
2.81 Reorganized PFC Articles.................................. 19
2.82 Reorganized PFC By-laws................................... 19
2.83 Reorganized PHI........................................... 19
2.84 Reorganized PHI Articles.................................. 20
2.85 Reorganized PHI By-laws................................... 20
2.86 SFGC...................................................... 20
2.87 SFGC Group................................................ 20
2.88 SFGC Guarantee............................................ 20
2.89 SFGC Guarantee Collateral................................. 20
2.90 Secured Claim............................................. 20
2.91 Secured Creditors......................................... 20
2.92 Secured Tax Claim......................................... 20
2.93 Solicitation.............................................. 21
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
2.94 Trust Indenture Act....................................... 21
2.95 Unsecured Claim........................................... 21
2.96 Unsecured Creditor........................................ 21
2.97 Wet & Wild Sale........................................... 21
Article III. UNCLASSIFIED CLAIMS....................................... 21
3.1 Treatment of Administrative Claims........................ 21
3.2 Treatment of Priority Tax Claims.......................... 22
Article IV. CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS............. 23
4.1 Class 1: Priority Unsecured Claims........................ 23
4.2 Class 2: Secured Tax Claims............................... 23
4.3 Class 3: Secured 1988 Bondholders Claims.................. 23
4.4 Class 4: Unsecured 1988 Bondholders Claims................ 23
4.5 Class 5: Other Secured Claims............................. 23
4.6 Class 6: General Unsecured Claims......................... 23
4.7 Class 7: PHI Equity Interests............................. 23
4.8 Class 8: PFC Equity Interests............................. 23
Article V. TREATMENT OF CLASSES OF CLAIMS AND EQUITY INTERESTS....... 24
5.1 Treatment of Class 1 (Priority Unsecured Claims).......... 24
5.2 Treatment of Class 2 (Secured Tax Claims)................. 24
5.3 Treatment of Class 3 (Secured 1988 Bondholders Claims..... 24
5.4 Treatment of Class 4 (Unsecured 1988 Bondholders Claims).. 25
5.5 Treatment of Class 5 (Other Secured Claims)............... 25
5.6 Treatment of Class 6 (General Unsecured Claims)........... 26
5.7 Treatment of Class 7 (PHI Equity Interests)............... 26
5.8 Treatment of Class 8 (PFC Equity Interests)............... 26
Article VI. MEANS FOR IMPLEMENTATION OF PLAN.......................... 26
6.1 Structure of Reorganized Debtors.......................... 26
(a) Reorganized PHI...................................... 26
(b) Reorganized PFC...................................... 26
(c) Other Equity Interests............................... 27
6.2 Directors................................................. 27
6.3 Funding of this Plan...................................... 27
6.4 Authority to Borrow....................................... 27
6.5 No Corporate Action Required.............................. 28
6.6 Filing of Corporate Documents............................. 28
6.7 1988 Bonds................................................ 28
(a) Distribution Agent................................... 28
(b) Certification of 1988 Bondholders Claims............. 29
(c) Surrender and Cancellation of 1988 Bonds............. 29
6.8 1988 Bonds Indenture Trustee.............................. 29
6.9 Retention of Liens and Guaranties......................... 29
6.10 Rights of Action.......................................... 30
Article VII. OBJECTIONS TO CLAIMS OR EQUITY INTERESTS.................. 31
7.1 Objections................................................ 31
7.2 Distributions............................................. 31
Article VIII. TREATMENT OF EXECUTORY CONTRACTS.......................... 32
8.1 Assumption and Rejection of Executory Contracts........... 32
8.2 Rejection Claims Bar Date................................. 32
8.3 Vesting................................................... 32
Article IX. DISCHARGE AND INJUNCTION.................................. 32
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
Article X. EFFECTIVE DATE............................................ 33
10.1 Regulatory Approvals...................................... 33
10.2 Confirmation Order........................................ 33
10.3 Effective Date Cash....................................... 33
10.4 Repayment of 1988 Bondholder Claims....................... 33
10.5 Default or Failure to Become Effective.................... 34
Article XI. MODIFICATIONS OF THE PLAN................................. 34
Article XII. OFFICIAL COMMITTEES....................................... 34
Article XIII. RETENTION OF JURISDICTION................................. 34
13.1 In General................................................ 34
13.2 Plan Disputes and Enforcement............................. 35
13.3 Further Orders............................................ 35
13.4 Other Actions............................................. 35
13.5 Final Decree.............................................. 36
13.6 Appeals................................................... 36
13.7 Executory Contracts....................................... 36
Article XIV.. GENERAL PROVISIONS........................................ 36
14.1 Additional Assurances..................................... 36
14.2 Extension of Payment Dates................................ 36
14.3 Vesting................................................... 36
14.4 Interest on Claims........................................ 36
14.5 Joint and Several Claims.................................. 37
14.6 No Admission of Joint Liability........................... 37
14.7 Exculpation and Limitation of Liability................... 37
14.8 Captions.................................................. 38
14.9 Payment of Statutory Fees................................. 38
14.10 Successors and Assigns.................................... 38
14.11 SFGC Group Participation.................................. 38
14.12 SFGC Group Obligations.................................... 39
14.13 Governing Law............................................. 40
14.14 Revocation................................................ 41
14.15 Reservation of Rights..................................... 41
14.16 Fractional Dollars........................................ 41
14.17 Unclaimed Property........................................ 41
14.18 Payment Option............................................ 41
14.19 Amendments................................................ 42
14.20 Notices................................................... 42
14.21 U.S. Trustee Fees......................................... 43
14.22 Post-Confirmation Reportings.............................. 44
</TABLE>
5
<PAGE>
EXHIBIT LIST
------------
EXHIBITS IN PLAN SUPPLEMENT
---------------------------
Exhibit "1" Second Amended and Restated Articles of Incorporation of
Pioneer Hotel Inc.
Exhibit "2" Amended and Restated By-laws of Pioneer Hotel Inc.
Exhibit "3" Amended and Restated Articles of Incorporation of
Pioneer Finance Corp.
Exhibit "4" Amended and Restated By-laws of Pioneer Finance Corp.
Exhibit "5" Management Agreement
Exhibit "6" Rejected Executory Contracts
6
<PAGE>
ARTICLE I
---------
INTRODUCTION
------------
This Restated Fifth Amended Plan of Reorganization ("Plan") is proposed by
the Debtors and Debtors-In-Possession in the above captioned, jointly
administered Chapter 11 cases, specifically, PIONEER HOTEL INC., a Nevada
corporation ("PHI"), and PIONEER FINANCE CORP., a Nevada corporation ("PFC" and
together with PHI the "Debtors").
NO SOLICITATION MATERIALS OTHER THAN THE DISCLOSURE STATEMENT AND RELATED
MATERIALS TRANSMITTED THEREWITH AND APPROVED BY THE BANKRUPTCY COURT HAVE BEEN
AUTHORIZED BY THE BANKRUPTCY COURT FOR USE IN SOLICITING ACCEPTANCES OR
REJECTIONS OF THIS PLAN.
ARTICLE II
----------
DEFINITIONS
-----------
For purposes of this Plan, and except as expressly provided otherwise
herein or unless the context otherwise requires, all of the defined terms stated
in Article II of this Plan will have the meanings stated below. For purposes of
this Plan and such defined terms, the singular and plural uses of such defined
terms and the conjunctive and disjunctive uses thereof will be fungible and
interchangeable (unless the context otherwise requires) and the defined terms
will include masculine, feminine, and neuter genders. The defined terms stated
in Article II of this Plan also are substantive terms of this Plan; and such
terms as defined in this Article II will be deemed incorporated throughout the
remainder of this Plan to apply the substantive provisions included in the
defined terms. Accordingly, the defined terms are as follows:
2.1 Administrative Claim. This term will refer to and mean every
--------------------
cost or expense of administration of the Reorganization Cases
allowed under Sections 503(b), 507(b) or 546(c)(2) of the
Bankruptcy Code and entitled to priority under Section 507(a)(1)
of the Bankruptcy Code arising prior to the Effective Date,
including, without limitation: (a) fees payable pursuant to
Section 1930 of Title 28 of the United States Code; (b) the
actual and necessary costs and expenses incurred after
7
<PAGE>
the Petition Dates of preserving, maintaining and operating the
Estates; (c) all Professional Fee Claims approved by the Bankruptcy
Court pursuant to interim and final allowances in accordance with
Sections 330, 331 and 503(b) of the Bankruptcy Code; (d) all fees and
charges assessed against the Estates under Chapter 123 of Title 28,
United States Code; (e) fees and costs associated with gaming
applications, investigations and waivers necessary to effectuate this
Plan for Debtors, SFGC and persons designated as officers, directors
and key employees of Debtors; and (f) to the extent that a Claim is
allowed as an Administrative Claim pursuant to Section 365(d)(3) of
the Bankruptcy Code.
2.2 Administrative Claim Bar Date. The date or dates established by the
-----------------------------
Bankruptcy Court for the filing of Administrative Claims.
2.3 Administrative Tax Claim. This term will refer to and mean every Claim
------------------------
of any state or local governmental unit for unpaid real property
taxes, unpaid personal property taxes, unpaid gaming taxes, or unpaid
sales taxes or leasing taxes, and every prorated portion thereof
arising on and after the Petition Dates until the Effective Date.
2.4 Affiliate. This term will refer to and mean with respect to any
---------
specified Person, any other Person directly or indirectly controlling
or controlled by or under direct or indirect common control with such
Person and, with respect to any specified natural person, any other
Person having a relationship by blood, marriage or adoption not more
remote than first cousins with such natural Person. For purposes of
this definition, "control" (including with correlative meanings, the
terms "controlled by" and "under common control with"), as used with
respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the
management or policies of such Person, whether through the ownership
of voting securities, by agreement or otherwise.
2.5 Allowed Claim or Allowed Equity Interest. This term will refer to and
----------------------------------------
mean with respect to and used in connection with a Claim or Equity
Interest, every
8
<PAGE>
Claim or Equity Interest against either of the Debtors: (a) as to
which a proof of such Claim or Equity Interest has been filed within
the time fixed by the Bankruptcy Court or, if such Claim arises from a
Debtor's rejection of an Executory Contract, no later than the first
Business Day which is thirty (30) days after the Confirmation Date, or
(b) which the Debtors have scheduled in their respective schedules of
assets and liabilities (including any amendments thereto) filed with
the Bankruptcy Court as liquidated in amount and undisputed; and in
either event: (i) as to which no objection to the allowance of such
Claim or Equity Interest has been filed within any applicable time
period fixed by the Bankruptcy Court, or (ii) as to which the order
allowing such Claim or Equity Interest has become final and non-
appealable without any appeal, review, or other challenge of any kind
to that order having been taken or being still timely. The term
"Allowed Claim" and "Allowed Equity Interest" may be used throughout
this Plan with each of the various Claims or Equity Interests or
Classes of those Claims or Equity Interests (e.g., "Allowed
----
Administrative Claims" or "Allowed Class 1 Claims") to signify that
such Claims or Equity Interests are, will be, or must be Allowed
Claims or Allowed Equity Interests to qualify for certain treatment
under this Plan.
2.6 Avoidance Actions. This term refers to and means all actions preserved
-----------------
for the Estates as set forth in Sections 510, 542, 543, 544, 545, 547,
548, 549 and 550 of the Bankruptcy Code.
2.7 Bankruptcy Code. This term will refer to and mean Title 11 of the
---------------
United States Code, 11 U.S.C. (S)(S)101, et seq., as it may be amended
-- ---
from time to time during the Reorganization Cases.
2.8 Bankruptcy Court. This term will refer to and mean the United States
----------------
Bankruptcy Court for the District of Nevada (or such other court
conferred with jurisdiction over the Reorganization Cases) and, with
respect to any particular proceedings within or related to those
Reorganization Cases, any other
9
<PAGE>
Bankruptcy Court (including the United States District Bankruptcy
Court for the District of Nevada) which may be exercising jurisdiction
over such proceeding.
2.9 Bankruptcy Rules. This term will refer to and mean the Federal Rules
----------------
of Bankruptcy Procedure, promulgated pursuant to 28 U.S.C. (S) 2075
and the Local Rules of Practice of the United States District
Bankruptcy Court, District of Nevada as applicable from time to time
during the Reorganization Cases.
2.10 Bar Date. The date or dates established by the Bankruptcy Court for
--------
the filing of proofs of Claims and Equity Interests for all holders of
Claims and Equity Interests except for the holders of Administrative
Claims and Professional Fee Claims.
2.11 Business Day. This term will refer to and mean any day except
------------
Saturday, Sunday, or a day on which commercial banks in Clark County,
Nevada are authorized or required by law to close.
2.12 Cash. This term will refer to and mean cash, cash equivalents, bank
----
deposits, and negotiable instruments payable on demand and supported
by collected funds.
2.13 Chapter 11 Professionals. This term will refer to and mean the
------------------------
Debtors' Professionals and other professionals which are or may be
employed with the Bankruptcy Court's approval at the expense of the
Estates, or any of them, pursuant to Sections 327(a) and (e), or
1103(a) of the Bankruptcy Code, wherever such professionals are
referred to collectively in this Plan.
2.14 Claims. This term will refer to and mean a "claim" as defined in
------
Section 101(5) of the Bankruptcy Code.
2.15 Class. This term will refer to and mean each of the classifications
-----
of Claims and Equity Interests, which are described in Article IV of
this Plan. Any subclass of a Class provided in this Plan will be
treated as a separate Class of this Plan for voting purposes.
2.16 Class 6 Fund. This term will refer to and mean the funds to be
------------
deposited by Reorganized PHI with the Disbursing Agent for the
exclusive benefit of holders
10
<PAGE>
of Class 6 Claims for distribution pursuant to Section 5.6 of this
Plan.
2.17 Collateral. This term will refer to and mean any property or interest
----------
in property of the Estates of the Debtors subject to a Lien to secure
the payment or performance of a Claim, which Lien is not subject to
avoidance under the Bankruptcy Code or otherwise invalid under the
Bankruptcy Code or applicable state law.
2.18 Confirmation Date. This term will refer to and mean the date on which
-----------------
the Bankruptcy Court enters the Confirmation Order.
2.19 Confirmation Hearing. This term will refer to and mean the hearing
--------------------
held before the Bankruptcy Court pursuant to Section 1128 of the
Bankruptcy Code regarding confirmation of this Plan, as adjourned or
continued from time to time.
2.20 Confirmation Order. This term will refer to and mean the order
------------------
entered by the Bankruptcy Court confirming this Plan pursuant to
Section 1129 of the Bankruptcy Code.
2.21 Creditor. This term will refer to and mean any holder of a Claim
--------
whether or not such Claim is an Allowed Claim, encompassed within the
statutory definition set forth in Section 101(a)(10) of the Bankruptcy
Code.
2.22 Cure. The distribution on the Effective Date or as soon thereafter as
----
practicable of Cash, or such other property as may be agreed upon by
the parties or ordered by the Bankruptcy Court, with respect to the
assumption of an Executory Contract pursuant to Section 365(b) of the
Bankruptcy Code, in an amount equal to all unpaid monetary
obligations, without interest, or such other amount as may be agreed
upon by the parties, under such Executory Contract, to the extent such
obligations are enforceable under the Bankruptcy Code and applicable
non-bankruptcy law.
2.23 Debt. This term will refer to and mean any obligations for borrowed
-----
money, including, but not limited to, secured financing transactions
characterized as leases and guarantees of Debt, operating leases or
similar economic transactions.
11
<PAGE>
2.24 Debtors. This term will collectively refer to and mean the Debtors
-------
and Debtors-In-Possession in these Reorganization Cases, specifically,
Pioneer Hotel Inc., a Nevada corporation, and Pioneer Finance Corp., a
Nevada corporation.
2.25 Debtors' Professionals'. This term will refer to and mean: (i) the
-----------------------
law firm of Gordon & Silver, Ltd., the Debtors' bankruptcy counsel;
(ii) accountants employed by the Debtors; (iii) valuation consultants,
advisors or experts employed by the Debtors; and (iv) any and all
other similar professionals which the Debtors have employed or may
employ to assist in the conduct of the Reorganization Cases or to
provide professional services for a specified purpose, all in
accordance with Sections 327(a) and 327(e) of the Bankruptcy Code.
2.26 Disbursing Agent. This term will refer to and mean Reorganized PHI in
----------------
its capacity as disbursing agent for the Class 6 Claims.
2.27 Disclosure Statement. This term will refer to and mean the written
--------------------
disclosure statement and any supplement thereto that relates to the
Debtors' Fifth Amended Plan, as approved by the Bankruptcy Court
pursuant to Section 1125 of the Bankruptcy Code and Bankruptcy Rule
3017, as such disclosure statement may be amended, modified or
supplemented from time to time.
2.28 Disposition. This term will refer to and mean any sale, lease,
-----------
assignment, transfer, abandonment or other disposition, including any
of the foregoing that occurs upon liquidation, dissolution or winding
up; and the term "dispose" has a correlative meaning.
2.29 Disputed Claim or Disputed Interest. This term will refer to and mean
-----------------------------------
a Claim or Equity Interest which is: (i) subject to timely objection
interposed by the Debtors or any party in interest entitled to file
and prosecute such objection in the Reorganization Cases, if at such
time such objection remains unresolved; (ii) listed by the Debtors as
disputed, unliquidated or contingent in the Schedules; or (iii) if no
objection has been timely filed, a Claim or Equity Interest which has
been asserted in a timely filed proof of Claim or Equity Interest in
an amount
12
<PAGE>
greater than or in a Class different than that listed by the Debtors
in the Schedules as liquidated in amount and not disputed or
contingent; provided, however, that the Bankruptcy Court may estimate
a disputed Claim for purposes of allowance pursuant to Section 502(c)
of the Bankruptcy Code. The term "Disputed", when used to modify a
reference in this Plan to any Claim or Equity Interest or Class of
Claims or Equity Interests shall mean a Claim or Equity Interest (or
any Claim or Equity Interest in such Class) that is a Disputed Claim
or Equity Interest. In the event there is a dispute as to
classification or priority of a Claim or Equity Interest, it shall be
considered a Disputed Claim or Equity Interest in its entirety. Until
such time as a contingent Claim becomes fixed and absolute, such Claim
shall be treated as a Disputed Claim and not an Allowed Claim for
purposes related to allocations and distributions under this Plan.
2.30 Distribution Date. This term will refer to and mean the date,
-----------------
occurring as soon as practicable after the Effective Date, upon which
distributions are made to holders of Allowed Claims or Allowed Equity
Interests under this Plan.
2.31 Effective Date. This term will refer to and mean the Business Day on
--------------
which all of the conditions set forth in Article X of this Plan have
been satisfied and in no event later than August 31, 2000. Except
where performance earlier than the Effective Date is expressly
required by this Plan or where it is lawful and expressly permitted by
this Plan to perform after the Effective Date, performance under this
Plan will be due on the Effective Date. The Debtors and Reorganized
Debtors reserve the right to render any or all of their performance
under this Plan prior to what otherwise would be the Effective Date if
they deem it appropriate to do so. This includes, but is not limited
to, the right to render performance under any circumstances which
would moot any appeal, review or other challenge of any kind to the
Confirmation Order if the Confirmation Order is not stayed pending
such appeal, review or other challenge.
13
<PAGE>
2.32 Effective Date Cash. This term will refer to and mean all Cash held
-------------------
by Debtors less customer deposits and the minimum bankroll
requirements established by the Gaming Authorities and maintained
through the Reorganization Case, held by the Debtors on the Effective
Date.
2.33 Equity Interests. This term will refer to and mean the PHI Equity
----------------
Interests and the PFC Equity Interests.
2.34 Equity Securities. This term will refer to and mean (i) common
-----------------
stock, (ii) preferred stock, (iii) other equity interests, and (iv)
warrants, options, participations, or other agreements for the
issuance or delivery of common stock, preferred stock, or other equity
interests.
2.35 Estates. This term will refer to and mean the bankruptcy estates of
-------
the Debtors created in the Reorganization Cases pursuant to Section
541 of the Bankruptcy Code.
2.36 Executory Contract. This term will refer to and mean every unexpired
------------------
lease or other executory contract which is subject to being assumed or
rejected by either of the Debtors pursuant to Section 365 of the
Bankruptcy Code.
2.37 Final Order. This term will refer to and mean an order or judgment
-----------
which has not been reversed, stayed, modified or amended, or is no
longer subject to appeal, certiorari proceeding or other proceeding
for review or rehearing, or for which no appeal, certiorari
proceeding, or other proceeding for review or rehearing shall then be
pending.
2.38 Gaming Authorities. This term will refer to and mean the Gaming
------------------
Board, the Gaming Commission, the Clark County, Nevada Board of County
Commissioners and any other body that has gaming regulatory authority
over the Debtors.
2.39 Gaming Board. This term will refer to and mean the State of Nevada
------------
Gaming Control Board established pursuant to Nev. Rev. Stat.
(S)463.010, et seq., as amended.
-- ---
2.40 Gaming Commission. This term will refer to and mean the State of
-----------------
Nevada
14
<PAGE>
Gaming Commission established pursuant to Nev. Rev. Stat (S) 463.010,
et seq., as amended.
2.41 General Unsecured Claim. This term will refer to and mean every
-----------------------
Unsecured Claim against the Debtors, or any of them, which is not a
Priority Tax Claim or a Priority Unsecured Claim.
2.42 Insiders. This term will have the same meaning as such term is
---------
defined in Section 101 of the Bankruptcy Code.
2.43 Lien. This term shall have the meaning set forth in Section 101(37)
----
of the Bankruptcy Code.
2.44 Management Agreement. This term will refer to and mean the management
--------------------
agreement executed by PHI and SFGC on December 30, 1998.
2.45 1988 Bonds. This term will refer to and mean the outstanding 13 1/2%
----------
Bonds due December 1, 1998 in the original cumulative principal amount
of $120,000,000 issued by PFC in December of 1988.
2.46 1988 Bonds Assignment. This term will refer to and mean the
---------------------
Assignment dated as of December 1, 1988, whereby PFC assigned to the
1988 Bonds Indenture Trustee the PHI Note, the PHI Deed of Trust and
other 1988 Bonds Documents.
2.47 1988 Bonds Documents. This term will refer to and mean the operative
--------------------
documents evidencing and relating to the 1988 Bonds, including,
without limitation, the SFGC Guarantee.
2.48 1988 Bonds Indenture Trustee. This term will refer to and mean IBJ
----------------------------
Whitehall Bank and Trust Company in its capacity as trustee under the
1988 Bonds Trust Indenture or any successor indenture trustee chosen
in accordance with the 1988 Bonds Trust Indenture prior to the
Effective Date.
2.49 1988 Bonds Trust Indenture. This term shall refer to and mean the
--------------------------
Trust Indenture dated as of December 1, 1988, and all amendments and
supplements thereto, with regard to the 1988 Bonds.
2.50 1988 Bondholders. This term will refer to and mean the holders of the
----------------
15
<PAGE>
outstanding 1988 Bonds.
2.51 1988 Bondholders Claims. This term will refer to and mean all of the
-----------------------
Claims of the 1988 Bondholders with respect to the 1988 Bonds.
2.52 Notice and Hearing. This term shall have the same meaning as provided
------------------
for in Section 102(1) of the Bankruptcy Code.
2.53 Other Equity Interests. This term will refer to and mean all entities
----------------------
owned in full or part by PHI as of the Confirmation Date.
2.54 PFC. This term will refer to and mean Pioneer Finance Corp., a Nevada
---
corporation.
2.55 PFC Common Stock. This term will refer to and mean the issued and
----------------
outstanding shares of common stock in PFC, together with the rights of
any Person to purchase PFC Common Stock pursuant to any warrants,
options or other agreements.
2.56 PFC Equity Holders. This term will refer to and mean the holders of
------------------
the PFC Common Stock.
2.57 PFC Equity Interests. This term will refer to and mean all the
--------------------
rights, title and interests represented by the PFC Common Stock.
2.58 PFC Petition Date. This term will refer to and mean February 23,
-----------------
1999, the filing date of the PFC voluntary Chapter 11 petition
commencing its Reorganization Case.
2.59 PHI. This term will refer to and mean Pioneer Hotel Inc., a Nevada
---
corporation.
2.60 PHI Common Stock. This term will refer to and mean the issued and
----------------
outstanding shares of common stock in PHI, together with the rights of
any Person to purchase PHI Common Stock pursuant to any warrants,
options or agreements.
2.61 PHI Deed of Trust. This term will refer to and mean the deed of trust
-----------------
and security agreement dated December 1, 1988 executed by Pioneer
Operating Limited Partnership (predecessor-in-interest to PHI), as
trustor, in favor of PFC,
16
<PAGE>
as beneficiary, and Security Pacific National Bank, as trustee, to
secure the PHI Note, which PHI Deed of Trust was assigned to the 1988
Bonds Indenture Trustee by the 1988 Bonds Assignment. The PHI Deed of
Trust is a Lien on the Pioneer Hotel & Gambling Hall.
2.62 PHI Equity Holders. This term will refer to and mean the holders of
------------------
the PHI Common Stock.
2.63 PHI Equity Interests. This term will refer to and mean all the
--------------------
rights, title and interests represented by the PHI Common Stock.
2.64 PHI Note. This term will refer to and mean the promissory note in the
--------
original principal amount of $120,000,000 issued by PHI to PFC on
December 1, 1988, and assigned to the 1988 Bonds Indenture Trustee by
the 1988 Bonds Assignment.
2.65 PHI Petition Date. This term will refer to and mean April 12, 1999,
-----------------
the filing date of the PHI voluntary Chapter 11 petition commencing
its Reorganization Case.
2.66 Person. This term will refer to and mean "person" as defined in
------
Section 101(41) of the Bankruptcy Code.
2.67 Petition Dates. This term will refer to and mean collectively the PFC
--------------
Petition Date and PHI Petition Date.
2.68 Pioneer Ground Lease. This term will refer to and mean that real
--------------------
property lease with PHI as lessee for a portion of the ground
underlying the Pioneer Hotel & Gambling Hall scheduled to terminate in
December, 2078.
2.69 Pioneer Hotel & Gambling Hall. This term will refer to and mean the
-----------------------------
real property, improvements, and personal property, which comprise the
hotel, casino and related facilities located in Laughlin, Nevada,
commonly known as the Pioneer Hotel & Gambling Hall. The Pioneer Hotel
& Gambling Hall is owned and operated by PHI.
17
<PAGE>
2.70 Plan. This term will refer to and mean this Restated Fifth Amended
----
Plan of Reorganization, in its present form or as it may be amended,
supplemented or modified from time to time, including all exhibits
and schedules annexed hereto or referenced herein and the Plan
Supplement.
2.71 Plan Supplement. This term will refer to and mean the supplement
---------------
accompanying this Plan which contains all of the exhibits to this
Plan, as such exhibits may be amended, supplemented or modified. By
this reference, the Plan Supplement is incorporated into, and is made
a part of, this Plan.
2.72 Priority Tax Claim. This term will refer to and mean every pre-
------------------
petition Claim, other than Secured Tax Claims, entitled to priority
under Sections 502(i) and 507(a)(8) of the Bankruptcy Code.
2.73 Priority Unsecured Claim. This term will refer to and mean every
------------------------
Unsecured Claim or portion thereof which is not a Priority Tax Claim
and which is entitled to priority pursuant to Sections 507(a)(2)
through (a)(7) and 507(a)(9) of the Bankruptcy Code.
2.74 Professional Fee Claims. This term will refer to and mean
-----------------------
Administrative Claims for compensation and reimbursement submitted
pursuant to Sections 330, 331 or 503(b) of the Bankruptcy Code of
Persons; (i) employed pursuant to an order of the Bankruptcy Court
under Sections 327 or 1103 of the Bankruptcy Code; or (ii) for whom
compensation and reimbursement has been allowed by the Bankruptcy
Court pursuant to Section 503(b) of the Bankruptcy Code.
2.75 Professional Fees Bar Date. This term will refer to and mean the
--------------------------
date, as set by order of the Bankruptcy Court, on or before which
final applications for compensation or expense reimbursement,
including Professional Fee Claims payable pursuant to Section 503(b)
of the Bankruptcy Code, must be filed with the Bankruptcy Court and
served on PHI and PFC or Reorganized PHI and Reorganized PFC, as the
case may be, and their counsel.
18
<PAGE>
2.76 Pro Rata or Pro Rata Share. This term will refer to and mean the
--------------------------
proportion that an Allowed Claim or Allowed Equity Interest in a
particular Class bears to the aggregate amount of all Allowed Claims
or Allowed Equity Interests in such Class.
2.77 Record Date. This term will refer to and mean, for purposes of
-----------
voting, the date set forth by the Bankruptcy Court in the order
approving the Disclosure Statement and, for purposes of distribution,
the Effective Date.
2.78 Reorganization Cases. This term will refer to and mean the Debtors'
--------------------
cases under Chapter 11 of the Bankruptcy Code, which were commenced
by the Debtors' filing of their respective voluntary Chapter 11
petitions on the Petition Dates.
2.79 Reorganized Debtors. This term will refer to and mean the Debtors as
-------------------
reorganized from and after the Effective Date. Unless otherwise
expressly stated or the context otherwise requires, alternative
references to the Debtors or Reorganized Debtors, or any of them,
throughout various provisions of this Plan are intended to anticipate
whether an event may occur before or after the Effective Date.
However, this reference shall not be construed or interpreted as
substantively consolidating either Debtor with the other or
establishing one Debtor as liable for the Claims of the other Debtor.
2.80 Reorganized PFC. This term will refer to PFC as reorganized from and
---------------
after the Effective Date, one of the Reorganized Debtors.
2.81 Reorganized PFC Articles. This term will refer to and mean the
------------------------
Amended and Restated Articles of Incorporation of PFC, substantially
in the form of Exhibit "3" to the Plan Supplement.
2.82 Reorganized PFC By-laws. This term will refer to and mean the Amended
-----------------------
and Restated By-laws of Pioneer Finance Corp., substantially in the
form of Exhibit "4" to the Plan Supplement.
2.83 Reorganized PHI. This term will refer to PHI as reorganized from and
---------------
after the
19
<PAGE>
Effective Date, one of the Reorganized Debtors.
2.84 Reorganized PHI Articles. This term will refer to and mean the Second
------------------------
Amended and Restated Articles of Incorporation of PHI, substantially
in the form of Exhibit "1" to the Plan Supplement.
2.85 Reorganized PHI By-laws. This term will refer to and mean the Amended
-----------------------
and Restated By-laws of PHI, substantially in the form of Exhibit "2"
to the Plan Supplement.
2.86 SFGC. This term will refer to and mean Santa Fe Gaming Corporation, a
----
Nevada corporation.
2.87 SFGC Group. This term will refer to and mean SFGC, Santa Fe Hotel
----------
Inc., Sahara Las Vegas Corp. and Sahara Resorts.
2.88 SFGC Guarantee. This term will refer to and mean those certain
--------------
guarantees executed by SFGC in favor of the 1988 Bondholders to
guarantee the 1988 Bonds as set forth both in the 1988 Bonds and the
1988 Bonds Trust Indenture.
2.89 SFGC Guarantee Collateral. This term will refer to and mean the
-------------------------
security for the SFGC Guarantee as set forth in the 1988 Bonds Trust
Indenture.
2.90 Secured Claim. This term will refer to and mean the portion of any
-------------
Claim determined pursuant to Section 506(a) or by election of Section
1111(b) of the Bankruptcy Code as of the Confirmation Date, which is
secured by a valid and perfected Lien on Collateral, express or
implied, arising by contract, operation of law, or otherwise.
2.91 Secured Creditors. This term will refer to and mean each holder of a
-----------------
Secured Claim in the Reorganization Cases.
2.92 Secured Tax Claim. This term will refer to and mean every Claim of
-----------------
any state and local governmental unit which is secured by property of
the Estates by operation of applicable nonbankruptcy laws, including,
but not limited to, Claims for unpaid real property taxes, unpaid
personal property taxes or unpaid sales taxes.
20
<PAGE>
2.93 Solicitation. This term will refer to and mean The Offering Circular
------------
and Consent Solicitation Statement Dated October 23, 1998 and
Supplement Dated November 14, 1998 or Offering Circular and Consent
Solicitation Statement Dated October 23, 1988 of PFC.
2.94 Trust Indenture Act. This term will refer to and mean the Trust
-------------------
Indenture Act of 1939, as amended.
2.95 Unsecured Claim. This term will refer to and mean every Claim, or
---------------
portion thereof, against any of the Debtors regardless of the
priority of such Claim, which is not an Administrative Claim,
Priority Tax Claim, Secured Claim or Secured Tax Claim.
2.96 Unsecured Creditor. This term will refer to and mean every Creditor
------------------
holding an Unsecured Claim in the Reorganization Cases.
2.97 Wet & Wild Sale. This terms shall refer to and mean a disposition of
---------------
the of the property generally located at 2601 Las Vegas Boulevard
South, Las Vegas, Nevada, commonly known as the "Wet & Wild
Property", by SLVC by means of an arms length transaction for a price
which (i) is all cash; (ii) is sufficient to pay all existing liens
and charges on the Wet & Wild Property ("Wet & Wild Liens"); (iii)
all amounts in excess of amounts necessary to satisfy the Wet & Wild
Liens, if any, have actually been pledged, assigned and paid to the
1988 Bonds Indenture Trustee; and (iv) all remaining assets of SLVC
have been pledged and assigned to the 1988 Bond Indenture Trustee and
such loan and security documents evidencing such pledge and
assignment are in a form and content reasonably acceptable to the
1988 Bonds Indenture Trustee.
ARTICLE III
-----------
UNCLASSIFIED CLAIMS
-------------------
3.1 Treatment of Administrative Claims. Every Creditor holding an
----------------------------------
Administrative Claim will be paid by the Reorganized Debtor obligated
on that Claim: (a) fully and in Cash on the Effective Date if the
Claim is then an Allowed
21
<PAGE>
Claim; (b) fully and in Cash (including any interest allowed by the
Bankruptcy Court) when and if the Claim becomes an Allowed Claim
after the Effective Date; or (c) as otherwise agreed in writing by
the Creditor holding the Allowed Claim and the Debtor or ordered by
the Bankruptcy Court. Every Allowed Administrative Claim for a post-
petition operating expense incurred in the ordinary course of the
Debtors' operations will be paid fully and in Cash by the Reorganized
Debtor obligated on that Claim in the ordinary course of business
(including any payment terms applicable to any such expense). Each
Reorganized Debtor will remain obligated on the Allowed
Administrative Claims owed by the corresponding Debtor (e.g.,
----
Reorganized PHI will remain obligated on Allowed Administrative
Claims owed by PHI).
----
3.2 Treatment of Priority Tax Claims. Every Creditor holding a Priority
--------------------------------
Tax Claim, as and when it is an Allowed Claim, will be paid by the
Reorganized Debtor obligated on that Claim at the election of the
Reorganized Debtor obligated on the Claim: (a) in full and in Cash on
the later of the Effective Date or the date upon which such Claim
becomes an Allowed Claim; or (b) in equal quarterly installments of
principal and interest over a period commencing at the end of the
first calendar quarter after the Effective Date, and continuing at
the end of each calendar quarter thereafter until the date that is
six years after the assessment date with respect to such Claim, with
interest fixed at a rate per annum equal to the rate provided for by
Internal Revenue Code Sections 6621 and 6622, in effect on the
Effective Date. Each such Allowed Claim shall include all pre-
petition and post-petition statutory interest and pre-petition
statutory penalties. Each Reorganized Debtor will remain solely
obligated on the Allowed Priority Tax Claims owed by the
corresponding Debtor (e.g., Reorganized PHI will remain solely
----
obligated on Allowed Priority Tax Claims owed by PHI).
22
<PAGE>
ARTICLE IV
----------
CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS
---------------------------------------------
All Claims and the Equity Interests are classified under this Plan as
hereafter stated in this Article IV. As of the Confirmation Hearing, any Class
of Claims which does not contain any unpaid Claims will be deemed automatically
deleted from this Plan. Any Class of Claims which does not contain an impaired
Allowed Claim (or a Claim temporarily or provisionally allowed by the Bankruptcy
Court for voting purposes) will not be entitled to vote on confirmation of this
Plan.
4.1 Class 1: Priority Unsecured Claims. Class 1 will consist of all
----------------------------------
Priority Unsecured Claims.
4.2 Class 2: Secured Tax Claims. Class 2 will consist of all Secured Tax
---------------------------
Claims. Each Secured Tax Claim shall be deemed a separate subclass of
Class 2 for all purposes under this Plan.
4.3 Class 3: Secured 1988 Bondholders Claims. Class 3 will consist of the
----------------------------------------
Secured Claim portion of all of the 1988 Bondholders Claims.
4.4 Class 4: Unsecured 1988 Bondholders Claims. Class 4 shall consist of
------------------------------------------
the Unsecured Claim portion of the 1988 Bondholders Claims.
4.5 Class 5: Other Secured Claims. Class 5 will consist of all Secured
-----------------------------
Claims, if any, other than Secured Claims in Class 2, Class 3, and
Class 4. Each Other Secured Claim, if any, shall be deemed a separate
subclass of Class 5 for all purposes under this Plan.
4.6 Class 6: General Unsecured Claims. Class 6 shall consist of all
---------------------------------
General Unsecured Claims.
4.7 Class 7: PHI Equity Interests. Class 7 shall consist of all the PHI
-----------------------------
Equity Interests held by PHI Equity Holders.
4.8 Class 8: PFC Equity Interests. Class 8 shall consist of all of the PFC
-----------------------------
Equity Interests held by PFC Equity Holders.
23
<PAGE>
ARTICLE V
---------
TREATMENT OF CLASSES OF CLAIMS AND EQUITY INTERESTS
---------------------------------------------------
5.1 Treatment of Class 1 (Priority Unsecured Claims). Each holder of a
------------------------------------------------
Priority Unsecured Claim will be paid by the Reorganized Debtor
obligated on the Claim: (a) fully and in Cash on the Effective Date if
the Claim is then an Allowed Claim; (b) fully and in Cash (including
any interest allowed by the Bankruptcy Code) when and if the Claim
becomes an Allowed Claim after the Effective Date; or (c) as otherwise
agreed in writing by the Creditor holding the Allowed Claim and the
Debtor or as ordered by the Bankruptcy Court. Each Reorganized Debtor
will remain solely obligated on the Allowed Priority Unsecured Claims
owed by the corresponding Debtor (e.g., Reorganized PHI will remain
----
solely obligated on Allowed Priority Unsecured Claims owed by PHI).
Class 1 Claims are unimpaired pursuant to this Plan and Section 1124
of the Bankruptcy Code.
5.2 Treatment of Class 2 (Secured Tax Claims). With respect to Class 2 and
-----------------------------------------
each subclass thereof, each Creditor holding a Class 2 Secured Tax
Claim, as and when it is an Allowed Secured Claim, will be paid by the
Reorganized Debtor obligated on such Claim: (a) in full and in Cash on
the later of the Effective Date or the date upon which such Claim
becomes an Allowed Claim; or, (b) at the election of the Reorganized
Debtor obligated on that Claim, in full in the ordinary course of
business and in accordance with the, customary procedures for the
payment of such Claim, with the Creditor retaining its existing liens
and security interests on its collateral as security for its Allowed
Secured Tax Claim. Each Reorganized Debtor will remain solely
obligated on the Allowed Secured Tax Claims owed by the corresponding
Debtor (e.g., Reorganized PHI will remain solely obligated on Allowed
Secured Tax Claims owed by PHI). Class 2 Claims are unimpaired
pursuant to this Plan and Section 1124 of the Bankruptcy Code.
5.3 Treatment of Class 3 (Secured 1988 Bondholders Claims). The Debtors
------------------------------------------------------
acknowledge and agree that the PHI Note and PHI Deed of Trust and
related loan
24
<PAGE>
and security documents are valid, perfected and enforceable
obligations of the Debtors, including the amount, perfection,
priority, validity and enforceability of such liens and security
interests in accordance with 1988 Bonds Documents. The Allowed Secured
Claim portion of 1988 Bondholders Claims together with the Unsecured
Claims portion of 1988 Bondholders Claims treated in Class 4, as
determined by the Debtors and the 1988 Bonds Indenture Trustee, are in
the approximate amount of $54,200,000.00, plus accrued and unpaid
interest thereon (approximately $9,800,000.00 as of March 31st, 2000),
together with recoverable costs and expenses as provided under the
1988 Bonds Documents. On the Effective Date or as soon as practical
thereafter, each 1988 Bondholder as of the Record Date will receive
Cash in the full amount of such Allowed Secured Claim. Class 3 Claims
are unimpaired pursuant to this Plan and Section 1124 of the
Bankruptcy Code.
5.4 Treatment of Class 4 (Unsecured 1988 Bondholders Claims). The Allowed
--------------------------------------------------------
Unsecured Claim portion of 1988 Bondholders Claims together with the
Secured Claims portion of 1988 Bondholders Claims treated in Class 3,
as determined by the Debtors and the 1988 Bonds Indenture Trustee, are
in the approximate amount of $54,200,000.00 plus accrued and unpaid
interest thereon (approximately $9,800,000.00 as of March 31st, 2000),
together with recoverable costs and expenses as provided under the
1988 Bonds Documents. On the Effective Date, or as soon as practical
thereafter, each 1988 Bondholder as of the Record Date will receive
Cash in the full amount of such Allowed Unsecured Claim. Class 4
Claims are unimpaired pursuant to this Plan and Section 1124 of the
Bankruptcy Code.
5.5 Treatment of Class 5 (Other Secured Claims). The holder of every
-------------------------------------------
Allowed Secured Claim in Class 5 (or any subclass thereof) will
receive on the later of the Effective Date or the date upon which such
Claim becomes an Allowed Secured Claim, at the option of the
Reorganized Debtor obligated on that Secured Claim:
25
<PAGE>
(i) Cash in the full amount of such Allowed Secured Claim; (ii)
reinstatement of the underlying obligation or instrument or other
treatment in accordance with Section 1124 of the Bankruptcy Code, with
the holder retaining its existing Liens on its Collateral; or (iii)
abandonment to such Creditor of all of the Collateral for its Lien.
Each Reorganized Debtor will remain solely obligated on the Allowed
Class 5 Other Secured Claims owed by the corresponding Debtor. Class 5
Claims are unimpaired pursuant to this Plan and Section 1124 of the
Bankruptcy Code.
5.6 Treatment of Class 6 (General Unsecured Claims). On the Effective
-----------------------------------------------
Date, Reorganized PHI shall segregate in a separate depository account
as Disbursing Agent Cash equal to the amount of Allowed General
Unsecured Claims. The holders of Allowed General Unsecured Claims will
be paid their Allowed General Unsecured Claims in full by the
Disbursing Agent as soon as practicable after the Effective Date.
Interest at the appropriate Nevada statutory rate will be paid on
Class 6 Claims through the Effective Date. Class 6 Claims are
unimpaired pursuant to this Plan and Section 1124 of the Bankruptcy
Code.
5.7 Treatment of Class 7 (PHI Equity Interests). Following the Effective
-------------------------------------------
Date SFGC will retain its ownership of the PHI Common Stock.
5.8 Treatment of Class 8 (PFC Equity Interests). Following the Effective
-------------------------------------------
Date SFGC will retain its ownership of the PFC Common Stock.
ARTICLE VI
----------
MEANS FOR IMPLEMENTATION OF PLAN
--------------------------------
6.1 Structure of Reorganized Debtors. Following the Effective Date,
--------------------------------
Reorganized PHI and Reorganized PFC will continue to exist as separate
entities.
(a) Reorganized PHI. Reorganized PHI will remain a Nevada corporation.
---------------
From and after the Effective Date, the Reorganized PHI Articles and
Reorganized PHI By-laws will be in effect.
(b) Reorganized PFC. Reorganized PFC shall continue as a Nevada
---------------
corporation.
26
<PAGE>
From and after the Effective Date, the Reorganized PFC Articles and
Reorganized PFC By-laws will be in effect.
(c) Other Equity Interests. Reorganized PHI will retain all Other Equity
----------------------
Interests.
6.2 Directors. The existing directors of Reorganized Debtors, should they
---------
choose to do so, will continue to serve as directors from and after
the Effective Date in accordance with applicable articles and by-laws.
All directors of Reorganized Debtors will be compensated at the
compensation level for outside directors as it existed on the Petition
Dates so long as each director continues to serve as a director,
subject to modification after the Effective Date as provided for by
applicable articles of incorporation and by-laws.
6.3 Funding of this Plan. Payments due under this Plan on the Effective
--------------------
Date will be funded from Effective Date Cash. The funds necessary to
insure continuing performance under this Plan after the Effective Date
will come from excess Effective Date Cash and the global refinancing
by Debtors and Debtors' Affiliates through General Electric Capital
Corporation, as structuring and arranging agent for a $197.5 million
refinancing facility for SFGC (or such other refinancing procured by
Debtors at their discretion). In the sole discretion of Reorganized
PHI, and subject to the Management Agreement and any applicable credit
facility document, Reorganized Debtors will be entitled to transfer
funds among themselves as necessary to enable the Reorganized Debtors
to conduct their business operations after the Effective Date and
satisfy their obligations under this Plan.
6.4 Authority to Borrow. From and after the Confirmation Date and subject
-------------------
to Sections 6.10 and 14.12 below, Reorganized Debtors shall be
authorized to (a) negotiate and enter into such agreements to
accomplish the refinancing to fund this Plan as set forth in section
6.3 above, and (b) grant Liens on all their real and personal property
as may be necessary to secure such refinancing, provided the
27
<PAGE>
granting of such Liens are concurrent with or after payment in full of
Class 3 Claims and Class 4 Claims and release of the liens securing
the obligations under the 1988 Bonds Indenture. No further approvals
for the refinancing and granting of Liens authorized herein will be
required.
6.5 No Corporate Action Required. As of the Effective Date: (i) the
----------------------------
adoption of the Reorganized PHI Articles, Reorganized PFC Articles,
Reorganized PHI By-laws and Reorganized PFC By-laws; (ii) the
selection of Directors and Officers for Reorganized PFC and
Reorganized PHI; (iii) the adoption, execution, timely delivery and
implementation of all contracts, leases, instruments, releases and
other agreements related to or contemplated by this Plan; and (iv) the
other matters provided for under or in furtherance of this Plan
involving corporate acts to be taken by or required of the Debtors,
Reorganized PFC or Reorganized PHI, shall be deemed to have occurred
and be effective as provided herein, and shall be authorized and
approved in all respects without further order of the Bankruptcy Court
or any requirement of further action by the stockholders or directors
of the Debtors, Reorganized PFC or Reorganized PHI. As of the
Effective Date, the term of each of the officers and directors of the
Debtors not continuing in office, if any, shall terminate pursuant to
the confirmation order without further action by the stockholders or
directors of the Debtors, Reorganized PFC or Reorganized PHI.
6.6 Filing of Corporate Documents. On or after the Effective Date, the
-----------------------------
Reorganized PHI Articles and Reorganized PFC Articles shall be filed
with the Nevada Secretary of State .
6.7 1988 Bonds.
----------
(a) Distribution Agent. The 1988 Bonds Indenture Trustee shall act as
------------------
the disbursing agent for the purpose of exchanging the 1988 Bonds for
Cash on or after the Effective Date. Reorganized PFC shall pay all
reasonable fees and expenses of the 1988 Bonds Indenture Trustee in
acting as disbursing agent as and
28
<PAGE>
when such fees and expenses become due and payable without further
order of the Bankruptcy Court .
(b) Certification of 1988 Bondholders Claims. The 1988 Bonds Indenture
----------------------------------------
Trustee shall certify to PFC a list of the registered 1988 Bondholders
as of each Record Date for each of the 1988 Bonds designating the
name, address, taxpayer identification number (if known), certificate
number, and the amount of unpaid principal of the 1988 Bonds for each
holder. The unpaid principal designated shall be the amount
outstanding as of the Record Date. All distributions on the Effective
Date on account of 1988 Bondholders Claims shall be made to the
registered 1988 Bondholders as of the Record Date as set forth on the
list certified to PFC by the 1988 Bonds Indenture Trustee .
(c) Surrender and Cancellation of 1988 Bonds. As a condition to receiving
----------------------------------------
the distributions contemplated herein, each 1988 Bondholder shall
surrender its 1988 Bonds to the 1988 Bonds Indenture Trustee as the
disbursing agent. Upon surrender of the 1988 Bonds, 1988 Bondholders
will receive for the 1988 Bonds (without regard to that portion of the
1998 Bonds included in Class 3 and that portion included in Class 4)
Cash equal to the amount of their Allowed Claim.
6.8 1988 Bonds Indenture Trustee. No later than 30 days following the
----------------------------
Confirmation Date, the 1988 Bonds Indenture Trustee shall file with
the Bankruptcy Court an application seeking compensation for all of
its accrued and unpaid 1988 Bonds Indenture Trustee fees and expenses.
Reorganized PHI shall pay all such 1988 Bonds Indenture Trustee fees
and expenses, in Cash, upon the entry of a Final Order of the
Bankruptcy Court approving such application.
6.9 Retention of Liens and Guaranties. Until such time as the Allowed
---------------------------------
Claims of 1988 Bondholders in Class 3 and Class 4 are paid pursuant to
the terms hereof, the PHI Note will continue to be secured by all
Liens in the Collateral that secures the PHI Note and the SFGC
Guarantee shall continue to be secured by all Liens that currently
secure performance of the SFGC Guarantee, and the 1988
29
<PAGE>
Bondholders shall be entitled to pursue all rights and remedies
pursuant to the 1988 Bonds Documents and applicable nonbankruptcy law
on the earlier of a default under this Plan or September 1, 2000.
6.10 Rights of Action. 1988 Bondholders shall retain all of the legal,
----------------
equitable and contractual rights to which they are entitled under the
1988 Bonds Documents and applicable law. In the event that the Allowed
Claims of the 1988 Bondholders and the 1988 Bonds Indenture Trustee are
not paid in full on or before August 31, 2000, or another default as
provided for in this Plan, notwithstanding a default under this Plan or
the failure of this Plan to become effective, the 1988 Bondholders and
the 1988 Bonds Indenture Trustee shall have a presently effective
relief from the automatic stay in the Reorganization Cases without the
need of further Court order, to enforce any and all of their respective
rights and remedies under the 1988 Bonds Documents and applicable law
and; (b) Debtors and the SFGC Group shall be deemed to have waived the
rights to: (i) contest the appointment of a Chapter 11 Trustee or
examiner for the Debtors; (ii) contest the conversion of the Debtors'
Chapter 11 cases to chapter 7 proceedings; and (iii) contest the
appointment of a receiver or liquidating agent for the Debtors under
applicable state law. Debtors and the SFGC Group waive any rights they
may otherwise have to prevent enforcement of the rights set forth above
in this Section, whether under 11 U.S.C. (S)105(a), Federal Rules of
Bankruptcy Procedure 7065, and any other law or equitable principal,
provided however, that SFGC shall not be deemed to have waived or
----------------
released and shall retain any and all rights and defenses it may have
with respect to the SFGC Guarantee; and (iv) the Debtors and the SFGC
Group shall be deemed to have waived the right to cause or seek the
conversion of the pending Chapter 11 cases to a liquidation proceeding
under Chapter 7 of the Bankruptcy Code.
30
<PAGE>
ARTICLE VII
------------
OBJECTIONS TO CLAIMS OR EQUITY INTERESTS
----------------------------------------
7.1 Objections. Any objections to Claims or Equity Interests by the
----------
Debtors or Reorganized Debtors or any other Person entitled to file
and objection under the Bankruptcy Code and Bankruptcy Rules must be
filed with the Bankruptcy Court and served no later than 60 days
following the Effective Date. Any objection to a Claim or Equity
Interest must be served both upon the holder of the Claim to which the
objection has been made and upon the Debtors or Reorganized Debtors as
appropriate.
7.2 Distributions. In order to permit timely distributions to holders of
-------------
Allowed General Unsecured Claims in Class 6, to the extent there are
Disputed Claims in such Class, Reorganized PHI shall retain in the
Disbursing Agent depository account the payments or distributions
applicable to such Disputed Claims as if such Disputed Claims were
Allowed Claims, pending the allowance or disallowance of such Disputed
Claims. In the event that Reorganized PHI wishes to deposit or hold a
lesser amount than required herein and is unable to reach an agreement
with the Claimant on the amount to be deposited or held, the
Bankruptcy Court shall fix the amount after notice and hearing. Upon
Final Order of the Bankruptcy Court with respect to a Disputed Claim:
(a) If any part of the Disputed Claim has been allowed as a Claim, the
Claimant shall receive from the appropriate Reorganized Debtor that
payment or distribution to which it had been entitled if the part of
the Claim so allowed had been allowed as of the Effective Date. Such
payment or distribution shall be made as soon as practicable after the
order allowing the Claim has become a Final Order; and
(b) The balance of the amount held in the designated reserve account
after payment under Section 7.2(a), applicable to a previously
Disputed Claim in Class
31
<PAGE>
6 that has been disallowed in whole or in part, shall be returned to
Reorganized PHI.
ARTICLE VIII
------------
TREATMENT OF EXECUTORY CONTRACTS
--------------------------------
8.1 Assumption and Rejection of Executory Contracts. Those Executory
-----------------------------------------------
Contracts listed in Exhibit "6" to the Plan Supplement will be deemed
rejected on the Effective Date pursuant to Section 365 of the
Bankruptcy Code. Any Executory Contract that is not expressly rejected
pursuant to this Plan or which has not been otherwise rejected by the
Debtors in the Reorganization Cases will be deemed assumed on the
Effective Date.
8.2 Rejection Claims Bar Date. Every Claim asserted by a Creditor arising
-------------------------
from the rejection of an Executory Contract must be filed with the
Bankruptcy Court no later than the first Business Day which is thirty
(30) days after the entry of a Final Order rejecting such Executory
Contract. Every such Claim which is timely filed, as and when it
becomes an Allowed Claim, will be treated under the appropriate Class
of this Plan. Every such Claim which is not timely filed by the
deadline stated above will be barred and discharged and the Creditor
holding the Claim will not receive or be entitled to any distribution
under this Plan on account of such Claim.
8.3 Vesting. Each assumed Executory Contract will be vested in the
-------
appropriate Reorganized Debtor as of the Effective Date.
ARTICLE IX
----------
DISCHARGE AND INJUNCTION
------------------------
Except as otherwise provided in the Confirmation Order or this Plan, on the
Effective Date all Claims against and Equity Interests in the Debtors and each
of them, including, but not limited to, any Claim or Equity Interest which arose
at any time before the entry of the Confirmation Order and any Claim of a kind
described in Section 502(g), (h) or (i) of the Bankruptcy Code shall be
discharged. On and after the Effective Date, and as to every
32
<PAGE>
discharged Claimand Equity Interest, every holder of a Claim will be enjoined
and precluded from asserting against (and every holder of an Equity Interest
will be precluded from asserting in) the Debtors and/or Reorganized Debtors, and
any assets of the Debtors and/or Reorganized Debtors, any such discharged Claim
or Equity Interest and any rights, remedies, demands, damages, or liabilities of
any kind arising from or related to any such discharged Claim or Equity
Interest.
ARTICLE X
---------
EFFECTIVE DATE
--------------
This Plan shall not become effective unless and until the following
conditions have been satisfied; the date on which all such conditions have been
satisfied shall be the Effective Date.
10.1 Regulatory Approvals. All regulatory and other approvals required by
--------------------
the State of Nevada and County of Clark (including all necessary
approvals of the Gaming Authorities) and any other governmental
agencies of the transactions contemplated by this Plan have been
obtained.
10.2 Confirmation Order. The Confirmation Order shall have been entered by
------------------
the Bankruptcy Court after compliance with Bankruptcy Rule 9021,
including submission to the 1988 Bonds Indenture Trustee, more than
ten (10) days shall have elapsed since the Confirmation Date, no stay
of the Confirmation Order shall be in effect and the Confirmation
Order shall not have been reversed, modified or vacated.
10.3 Effective Date Cash. There is sufficient Effective Date Cash to make
-------------------
the payments required to be made on the Effective Date, including,
without limitation, payments to be made under this Plan, utility
deposits and any additional reserves or deposits required by the
Gaming Authorities and Cash to operate the Pioneer Hotel and Gambling
Hall.
10.4 Repayment of 1988 Bondholder Claims. The Debtors shall deposit with
-----------------------------------
the 1988 Bonds Indenture Trustee cash in the amount of the Allowed
1988 Bondholders Claims.
33
<PAGE>
10.5 Default or Failure to Become Effective. After the occurrence of the
--------------------------------------
Confirmation Date, any default under this Plan or the failure of this
Plan to become effective in accordance with its terms shall not impact
the enforceability of this Plan, including Sections 6.8, 6.9, 6.10,
10.4, 14.11 and 14.12.
ARTICLE XI
----------
MODIFICATIONS OF THE PLAN
-------------------------
The Debtors, prior to the Effective Date and after the Effective Date, may
modify this Plan subject to and in accordance with the provisions and
requirements of Section 1127 of the Bankruptcy Code; provided however, that no
-----------------
substantive modifications may be made without Court approval after notice and
hearing. Further, the additional written consent of the 1988 Bonds Indenture
Trustee is required to modify any Section of this Plan that materially affects
the rights of the 1988 Bondholders and/or the 1988 Bonds Indenture Trustee,
including, without limitation: Sections 2.30, 2.42-2.48, 5.3, 5.4, 6.3, 6.4,
6.8, 6.9, 6.10, 14.3, 14.11, 14.12, 14.13, Articles IX and, XI.
ARTICLE XII
-----------
OFFICIAL COMMITTEES
-------------------
As of the Effective Date, the duties of all statutory committees appointed
pursuant to Section 1102(a) of the Bankruptcy Code shall terminate, except with
respect to applications for approval of Professional Fees Claims.
ARTICLE XIII
------------
RETENTION OF JURISDICTION
-------------------------
Notwithstanding confirmation of this Plan, the Bankruptcy Court will retain
jurisdiction for the following purposes:
13.1 In General. The Bankruptcy Court will retain jurisdiction to determine
----------
the allowance and payment of any Claim(s) upon any objection(s)
thereto (or other appropriate proceedings) by the Debtors, the
Reorganized Debtors or any other party in interest entitled to proceed
in that manner as well as all other matters related to distributions
under this Plan. As part of such retained jurisdiction, the
34
<PAGE>
Bankruptcy Court will continue to determine the allowance of
Administrative Claims and any request(s) for payment(s) thereof.
Additionally, the Bankruptcy Court will retain jurisdiction to; (a)
determine the allowance, legality and payment of all Claims asserted
by the IRS pursuant to Section 505 of the Bankruptcy Code or
otherwise; (b) to resolve any issues regarding United States Trustee
quarterly fees; and (c) enforce or otherwise resolve any disputes
concerning any provision of this Plan including, without limitation,
Sections 14.11 and 14.12 hereof.
13.2 Plan Disputes and Enforcement. The Bankruptcy Court will retain
-----------------------------
jurisdiction to determine any dispute(s) which may arise regarding the
interpretation of any provision of this Plan and to enforce any
provisions of this Plan and any and all documents relating to this
Plan.
13.3 Further Orders. The Bankruptcy Court will retain jurisdiction to
--------------
facilitate the performance of this Plan by entering any further
necessary or appropriate order(s) regarding enforcement of this Plan
and any provisions thereof. In addition, the Bankruptcy Court will
retain jurisdiction to facilitate or implement the discharge of any
Claim, or any portion thereof, pursuant to this Plan.
13.4 Other Actions. Except as otherwise specifically provided in this Plan,
-------------
the Bankruptcy Court will retain jurisdiction to adjudicate any
cause(s) of action or other proceedings presently pending or otherwise
referenced here or elsewhere in this Plan, including, but not limited
to, the adjudication of any and all "core proceedings" under 28 U.S.C.
(S)157(b) (including equitable subordination pursuant to Section
510(a) of the Bankruptcy Code) which may be applicable to the
Reorganization Cases, Avoidance Actions and those actions which the
Debtors or Reorganized Debtors may deem appropriate to initiate and
prosecute before the Bankruptcy Court in aid of their reorganization.
This provision will not restrict the rights of the Debtors or
Reorganized Debtors to proceed in any other court of competent
jurisdiction; and it will not be construed to require the Debtors or
Reorganized Debtors to proceed in any other such court if the court
35
<PAGE>
also has proper jurisdiction.
13.5 Final Decree. The Bankruptcy Court will retain jurisdiction
------------
enter an appropriate final decree in the Reorganization Cases.
13.6 Appeals. In the event of an appeal of the Confirmation
-------
Order or any other type of review or challenge to the Confirmation
Order, and provided that no stay of the effectiveness of the
Confirmation Order has been entered, the Bankruptcy Court will retain
jurisdiction to implement and enforce the Confirmation Order and this
Plan according to their terms, including, but not limited to,
jurisdiction to enter such orders regarding this Plan or the
performance thereof as may be necessary or appropriate to effectuate
the Reorganization Cases.
13.7 Executory Contracts. The Bankruptcy Court will retain jurisdiction
-------------------
to determine any and all matters regarding Executory Contracts,
including, but not limited to, assumptions or rejections thereof, and
any and all Claims arising from such Executory Contracts, including,
but not limited to, rejection damages Claims.
ARTICLE XI V
------------
GENERAL PROVISIONS
------------------
14.1 Additional Assurances. The Debtors, Reorganized Debtors, and all
---------------------
other parties in interest herein will execute such other and further
documents as are necessary to implement any of the provisions of this
Plan.
14.2 Extension of Payment Dates. If any payment date falls due on a day
--------------------------
other than a Business Day, then such payment date will be extended to
the next Business Day.
14.3 Vesting. As of the Effective Date, the Reorganized Debtors will be
-------
vested with all property of their respective Debtor's Estate at that
time, free and clear of all Claims, Liens, Equity Interests other than
those Liens, Claims and Equity Interests retained or created pursuant
to this Plan.
14.4 Interest on Claims. Unless otherwise specifically provided for in this
------------------
Plan or the Confirmation Order, or required by applicable bankruptcy
law, post-petition
36
<PAGE>
interest shall not accrue or be paid on Claims, and no holder of a
Claim shall be entitled to interest accruing on or after the Petition
Dates on any Claim.
14.5 Joint and Several Claims. On the Confirmation Date, except as
------------------------
otherwise provided in this Plan, joint and several Claims against more
than one Debtor, and all guarantees of Claims against one Debtor for
an obligation incurred by the other Debtor shall be deemed to be one
obligation. Any Claim which is joint and several as to the Debtors or
any Claims based on a guarantee shall be deemed to be one Claim.
14.6 No Admission of Joint Liability. Except as provided specifically in
-------------------------------
this Plan, the consolidation for administrative purposes of the
Debtors and treatment of holders of Claims and Equity Interests herein
shall not constitute or be construed as an admission or finding of
joint liability or responsibility by either of the Debtors or
Reorganized Debtors for the liabilities of the other Debtor or
Reorganized Debtor.
14.7 Exculpation and Limitation of Liability. Neither the Reorganized
---------------------------------------
Debtors nor any statutory committees, nor any of their respective
present or former members, officers, directors, employees, advisors,
attorneys, or agents, shall have or incur any liability to any holder
of a Claim or an Equity Interest, or any other party-in-interest, or
any of their respective agents, employees, representatives, financial
advisors, attorneys, or affiliates, or any of their successors or
assigns, for any act or omission in connection with, relating to, or
arising out of, the Reorganization Cases, the pursuit of confirmation
of this Plan, the consummation of this Plan, or the administration of
this Plan or the property to be distributed under this Plan, except
for their willful misconduct or gross negligence, and in all respects
shall be entitled to reasonably rely upon the advice of counsel with
respect to their duties and responsibilities under this Plan.
Notwithstanding any other provisions of this Plan, no holder of a
Claim or Equity Interest or other party-in-interest and none of their
respective agents, employees, representatives, financial advisors,
attorneys,
37
<PAGE>
or affiliates, and no successors or assigns of the foregoing, shall
have any right of action against the Reorganized Debtors, or any
statutory committee, or any of their respective present or former
members, officers, directors, employees, advisors, attorneys, or
agents, for any act or omission in connection with, relating to, or
arising out of, the Reorganization Cases, the pursuit of confirmation
of this Plan, the consummation of this Plan, or the administration of
this Plan or the property to be distributed under this Plan, except
for their willful misconduct or gross negligence.
14.8 Captions. Section captions used in this Plan are for convenience only,
--------
and will not affect the construction of this Plan.
14.9 Payment of Statutory Fees. All fees payable pursuant to Section 1930
-------------------------
of Title 28 of the United States Code, or as determined by the
Bankruptcy Court at or in conjunction with the Confirmation Hearing,
will be paid when due.
14.10 Successors and Assigns. The rights and obligations of any holder of a
----------------------
Claim or Equity Interest referred to in this Plan will be binding
upon, and will inure to the benefit of, the successors, assigns,
heirs, devisees, executors, and personal representatives of such
holder.
14.11 SFGC Group Participation. The SFGC Group agrees to be bound by the
------------------------
provisions of this Plan relating to the SFGC Guarantee and SFGC
Guarantee Collateral and to perform any other obligations which this
Plan provides for the SFGC Group to perform, provided that: (i) this
Plan is confirmed and (ii) any amendments or modifications to this
Plan affecting the SFGC Guarantee or SFGC Guarantee Collateral shall
be subject to SFGC's approval in its sole and absolute discretion.
Nothing in this Plan shall affect the rights and remedies of the 1988
Bondholders and the 1988 Bonds Indenture Trustee with respect to the
SFGC Guarantee. The SFGC Group hereby waives, effective September 1,
2000, any forbearance agreement then in effect regarding the 1988
Bonds, 1988 Bondholders or the SFGC Guarantee arising out of the
Solicitation. The waiver by
38
<PAGE>
SFGC is only applicable to those holders of 1988 Bonds through August
31, 2000, that (i) forbear from exercising their rights and remedies
under the SFGC Guarantee; (ii) discontinue any action, case or
proceeding against the SFGC Group; and (iii) do not oppose
confirmation of this Plan before the Bankruptcy Court or appeal the
Confirmation Order. In connection herewith, the SFGC Group submits to
the jurisdiction of the Court in respect of, but solely in respect of,
such agreement and obligations and acknowledges that it is a
participant in this Plan; provided, however, that SFGC does not submit
to the jurisdiction of the Court for purpose of any action brought by
any party with respect to the SFGC Guarantee unless otherwise
appropriate. Nothing in this Section or in any other provisions of
this Plan calling for the SFGC Group to take any action under this
Plan shall be construed as, or constitute, any of the following: (1)
the filing of a petition by any of the SFGC Group for relief under the
Bankruptcy Code; (2) any of the SFGC Group having the status of a
debtor under the Bankruptcy Code; (3) any of the SFGC Group admitting
to, or acquiescing in, a substantive consolidation with these
Reorganization Cases; or (4) the consent by any of the SFGC Group to
the entry of an order for relief in any involuntary bankruptcy
proceedings.
14.12 SFGC Group Obligations. Until the earlier to occur of: (i) December
----------------------
31, 2000 or (ii) the payment in full of the Allowed 1988 Bondholder
Claim of the 1988 Bonds Indenture Trustee, the SFGC Group shall not do
any of the following:
(a) Except for SFGC and subject to the provisions of subsection
(f) below, issue any Equity Security;
(b) Pay any cash dividends with respect to any Equity Security
except for a Wet & Wild sale;
(c) Modify the Management Agreement;
(d) Enter into or modify other management contracts or other
similar arrangements with any Insider or Affiliates of the Debtors or
the SFGC Group;
39
<PAGE>
(e) Enter into or modify contracts concerning the employment or
compensation of any Insider or Affiliate of the Debtors or the SFGC
Group except to extend or renew existing contracts on existing terms;
(f) Incur any Debt or grant any Liens, except for Debts or Liens
in the ordinary course of business;
(g) Modify any existing credit arrangements, except that the
SFGC Group will be entitled to honor their obligations and benefits
and perform under the current terms of their existing credit
arrangements and shall have the ability to obtain waivers of defaults
thereunder, all within the ordinary course of business; or
(h) Engage in any transaction outside the ordinary course of
business except for a Wet & Wild Sale.
The SFGC Group shall provide fifteen (15) business days
prior notice (absent exigent circumstances as determined in good faith
by the SFGC Group in which case the best available prior reasonable
notice shall be given) to the 1988 Bonds Indenture Trustee, Foothill
Capital Corporation and High River Limited Partnership of any
transaction involving the incurrence of any Debt or pledge or grant of
any Lien in excess of $250,000.00. If the 1988 Bonds Indenture
Trustee, Foothill Capital Corporation, or the High River Limited
Partnership reasonably believe that any such transaction will
materially impair the SFGC Guarantee or the SFGC Guarantee Collateral,
such parties may bring this matter to the attention of the Bankruptcy
Court, including requesting expedited relief on notice and hearing to
Debtors and the SFGC Group agrees to submit to the jurisdiction of the
Bankruptcy Court to determine or resolve any such dispute.
14.13 Governing Law. Except to the extent the Bankruptcy Code or Bankruptcy
-------------
Rules are applicable to the Reorganized Debtors, the rights and
obligations arising under this Plan shall be governed by, and
construed and enforced in accordance with, the laws of the State of
Nevada, without giving effect to the principles of conflicts
40
<PAGE>
of law thereof.
14.14 Revocation. If Confirmation Date does not occur, then this Plan
----------
and the terms and conditions contained herein shall be deemed null
and void. Without limiting the foregoing, in such event, nothing
contained herein shall be deemed to constitute a waiver or release
of any Claims by or against Debtors or any other Person or to
prejudice in any manner the rights of the Debtors or any Person.
14.15 Reservation of Rights. The filing of this Plan, any statement or
---------------------
provision contained herein or in the Disclosure Statement or the
taking of any action by the Debtors with respect to this Plan is not
an admission or a waiver of any rights prior to the Effective Date,
except as specifically set forth in this Plan with respect to the
period of time prior to the Effective Date.
14.16 Fractional Dollars. Notwithstanding any other provision of this
------------------
Plan, no payments of or on account of fractions of dollars will be
made to any holder of an Allowed Claim. When any payment of or on
account of a fraction of a dollar to any holder of a Claim would
otherwise be called for, the actual payment made will reflect a
rounding of such fraction to the nearest whole number (up or down).
Reorganized Debtors shall not be required to make any distribution
or issue any check that would be in an amount less than Two ($2.00)
Dollars on account of any Claim.
14.17 Unclaimed Property. Any property held for distribution in
------------------
accordance with this Plan by Reorganized Debtors which is unclaimed
or undistributed on the first anniversary of the Effective Date
(except to the extent it is a Disputed Claim or Disputed Interest)
shall become property of Reorganized PHI and be distributed to
Reorganized PHI.
14.18 Payment Option. At the option of Reorganized PHI or Reorganized PFC,
--------------
except as otherwise required or provided in this Plan or by any
applicable agreement, any Cash payment to be made to Creditors of
PHI pursuant to this Plan may be made by check on a United States
bank mailed by first class mail or by wire transfer.
41
<PAGE>
14.19 Amendments. The authority of the Debtors and any other party to an
----------
agreement or instrument to agree to modifications, supplements or
amendments thereto shall be as provided in such agreement or
instrument, but may not be inconsistent with this Plan.
14.20 Notices. Any notices to be provided under this Plan shall be in
-------
writing and shall be deemed duly given (i) when delivered by hand,
(ii) when two (2) days have elapsed after its transmittal by
nationally recognized air courier service, or (iii) when delivered
by telephonic facsimile transmission (with a copy thereof so
delivered by hand, mail or air courier if the recipient does not
acknowledge receipt of the transmission). Notices shall be sent to
the addresses set forth below, or another as to which that party has
given written notice, in each case with a copy provided in the same
manner, same time to the persons shown below:
If to SFGC: Santa Fe Gaming Corporation
4949 North Rancho Drive
Las Vegas, NV 89130
Attn: Thomas K. Land
Tel: 702-658-4338
Fax: 702-658-4331
With a copy to: Gibson Dunn & Crutcher
333 South Grand Avenue
Los Angeles, CA 90071-3197
Attn: Karen E. Bertero, Esq.
Tel: 213-229-7360
Fax: 213-229-6360
If to PFC Pioneer Finance Corporation
or PHI: 4949 North Rancho Drive
Las Vegas, NV 89130
Attn: Thomas K. Land
Tel: 702-658-4338
Fax: 702-658-4331
With a copy to: Gordon & Silver, Ltd.
3960 Howard Hughes Parkway
Ninth Floor
Las Vegas, NV 89109
Attn: Gerald M. Gordon, Esq.
Tel: 702-796-5555
Fax: 702-369-2666
42
<PAGE>
If to Foothill: Foothill Capital Corporation
11111 Santa Monica Boulevard
Los Angeles, CA 90025
Attn: Dennis Ascher
Tel: 213-891-5002
Fax: 213-896-0400
With a copy to: Buchalter, Nemer, Fields & Younger
601 South Figueroa Street, Suite 2400
Los Angeles, CA 90017-5704
Attn: Paul S. Arrow, Esq.
Tel: 213-891-5002
Fax: 213-896-0400
If to High River: High River Limited Partnership
c/o Icahn Associates Corp.
767 Fifth Avenue - 47/th/ Floor
New York, NY 10153
Attn: Vincent Itrieri
Tel: 212-702-4328
Fax: 212-750-5815
With a copy to: Berlack, Israels & Liberman LLP
120 West 45/th/ Street
New York, NY 10036
Attn: Erica M. Ryland, Esq.
Tel: 212-209-4825
Fax: 212-704-0196
If to 1988 Bonds
Indenture Trustee: IBJ Whitehall Bank & Trust Company
One State Street
New York, NY 10004
Attn: Max Volmar
Tel: 212-858-2428
Fax: 212-858-6881
With a copy to: Squire, Sanders & Dempsey
Two Renaissance Square
40 North Central Avenue, #2700
Phoenix, AZ 85004
Attn: Craig D. Hansen, Esq.
Tel: 602-528-4085
Fax: 602-253-8129
14.21 U.S. Trustee Fees. U.S. Trustee quarterly fees accrued prior to
-----------------
confirmation of the Plan will be paid by the Debtors on or before the
Effective Date pursuant to 11
43
<PAGE>
U.S.C. (S) 1129(a)(12). All U.S. Trustee fees accrued after
confirmation of the Plan will be timely paid on a calendar quarter
basis and reported both on post-confirmation reports required by Local
Rule 3020 and in post-confirmation operating reports required by the
U. S. Trustee Guidelines. Final fees will be paid on or before the
entry of the Final Decree.
14.22 Post-Confirmation Reportings. Until the entry of the Final Decree, the
----------------------------
Reorganized Debtors shall comply with the post-confirmation reporting
requirements found in Local Rule 3020. Additionally, the Reorganized
Debtors shall file post-confirmation quarterly operating reports as
required by the United States Trustee Guidelines, para. 7.2.
DATED this 1st day of May, 2000.
CO-PROPONENTS: PIONEER HOTEL INC.,
a Nevada corporation
By Thomas K. Land
Its Senior Vice President and
Chief Financial Officer
PIONEER FINANCE CORP.,
a Nevada corporation
By Thomas K. Land
Its Senior Vice President and
Chief Financial Officer
Submitted By:
GORDON & SILVER, LTD.
By:_______________________
Gregory E. Garman, Esq.
Attorneys for Debtors
3960 Howard Hughes Parkway, 9/th/ Fl
Las Vegas, NV 89109
44
<PAGE>
Acknowledgement and Consent to Sections 14.11 and 14.12 of this
Restated Fifth Amended Plan of Reorganization of Pioneer Finance Corp. and
Pioneer Hotel Inc.
Santa Fe Gaming Corp., a
Nevada corporation
By Thomas K. Land
Its Senior Vice President and Chief Financial
Officer
Santa Fe Hotel Inc., a
Nevada corporation
By Thomas K. Land
Its Senior Vice President and Chief Financial
Officer
Sahara Las Vegas Corp., a
Nevada corporation
By Thomas K. Land
Its Senior Vice President and Chief Financial
Officer
Sahara Resorts, a
Nevada corporation
By Thomas K. Land
Its Senior Vice President and Chief Financial
Officer
45
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> MAR-31-2000
<CASH> 16,483,145
<SECURITIES> 0
<RECEIVABLES> 1,461,267
<ALLOWANCES> 0
<INVENTORY> 1,376,162
<CURRENT-ASSETS> 23,665,359
<PP&E> 186,696,555
<DEPRECIATION> 61,772,262
<TOTAL-ASSETS> 150,496,555
<CURRENT-LIABILITIES> 146,415,513
<BONDS> 52,040,845
0
25,255,183
<COMMON> 61,954
<OTHER-SE> (124,702,670)
<TOTAL-LIABILITY-AND-EQUITY> 150,496,555
<SALES> 0
<TOTAL-REVENUES> 67,893,699
<CGS> 0
<TOTAL-COSTS> 38,011,021
<OTHER-EXPENSES> 21,996,636
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,459,151
<INCOME-PRETAX> 8,525,500
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,573,109)
<DISCONTINUED> 12,098,609
<EXTRAORDINARY> 2,774,280
<CHANGES> 0
<NET-INCOME> 11,299,780
<EPS-BASIC> 1.64
<EPS-DILUTED> 1.64
</TABLE>
