<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
<TABLE>
<S> <C>
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998.
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
</TABLE>
COMMISSION FILE NO.: 0-20508
MTR GAMING GROUP, INC.
(exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 84-1103135
(State or other jurisdiction (IRS Employer Identification
of incorporation) Number)
</TABLE>
STATE ROUTE 2 SOUTH, P.O. BOX 358, CHESTER, WEST VIRGINIA 26034
(Address of principal executive offices)
(304) 387-5712
(Registrant's telephone number, including area code)
Indicate by check mark whether the Company: (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 Company
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes __X__ No ______
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
COMMON STOCK, $.00001 PAR VALUE
Class
20,855,775
Outstanding at November 9, 1998
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<PAGE>
MTR GAMING GROUP, INC.
INDEX FOR FORM 10-Q
<TABLE>
<CAPTION>
SECTION PAGE
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PART I--FINANCIAL INFORMATION
Item 1--Financial Statements............................................................................... 3
Condensed and Consolidated Balance Sheets at September 30, 1998 and December 31, 1997...................... 3
Condensed and Consolidated Statements of Operations for the Three Months and Nine Months Ended September
30, 1998 and 1997........................................................................................ 4
Condensed and Consolidated Statements of Cash Flow for the Nine months Ended September 30, 1998 and 1997... 5
Notes to Condensed and Consolidated Financial Statements................................................... 6
Item 2--Management's Discussion and Analysis of Financial Condition and Results of Operations.............. 9
Item 3--Quantitative and Qualitative Disclosures about Market Risk......................................... 24
PART II--OTHER INFORMATION
Item 1--Legal Proceedings.................................................................................. II-1
Item 2--Changes in Securities.............................................................................. II-1
Item 3--Defaults upon Senior Securities.................................................................... II-1
Item 4--Submission of Matters to a Vote of Securities Holders.............................................. II-1
Item 5--Other Information.................................................................................. II-2
Item 6--Exhibits and Reports on Form 8-K................................................................... II-2
SIGNATURE PAGE
</TABLE>
2
<PAGE>
PART 1
FINANCIAL INFORMATION
ITEM 1--FINANCIAL STATEMENTS
MTR GAMING GROUP, INC.
CONDENSED AND CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER 30 DEC. 31
1998 1997
------------- -------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents........................................................ $ 11,013,000 $ 7,715,000
Restricted cash.................................................................. 173,000 188,000
Accounts receivable net of allowance
For doubtful accounts of $122,000.............................................. 527,000 431,000
Deferred financing costs......................................................... 1,271,000 1,617,000
Deferred income taxes............................................................ 2,550,000 2,550,000
Other current assets............................................................. 832,000 516,000
------------- -------------
Total current assets............................................................... 16,366,000 13,017,000
------------- -------------
Property:
Land............................................................................. 4,136,000 371,000
Building......................................................................... 25,651,000 19,014,000
Equipment and automobiles........................................................ 8,108,000 6,388,000
Furniture and fixtures........................................................... 5,849,000 3,131,000
Construction in progress......................................................... 1,850,000 258,000
------------- -------------
45,594,000 29,162,000
------------- -------------
Less accumulated depreciation.................................................... (8,463,000) (6,363,000)
------------- -------------
37,131,000 22,799,000
------------- -------------
Net assets of discontinued oil and gas activities.................................. 2,693,000 2,616,000
------------- -------------
Other assets:
Excess of cost of investments over net assets acquired, net of accumulated
amortization of $1,417,000 and $1,274,000...................................... 2,357,000 2,500,000
Note Receivable.................................................................... 461,000 0
Deposits and other................................................................. 629,000 102,000
------------- -------------
3,447,000 2,602,000
------------- -------------
$ 59,637,000 $ 41,034,000
------------- -------------
------------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................................. $ 516,000 $ 594,000
Other accrued liabilities........................................................ 1,542,000 2,465,000
Current portion of long-term debt................................................ 31,000 40,000
Current portion of deferred income taxes......................................... 133,000 133,000
------------- -------------
Total current liabilities.......................................................... 2,222,000 3,232,000
------------- -------------
Deferred income taxes, less current portion........................................ 1,097,000 1,130,000
------------- -------------
Long-term debt, less current portion............................................... 33,455,000 21,559,000
------------- -------------
Shareholders' equity:
Common stock..................................................................... 2,000 2,000
Paid in capital.................................................................. 36,122,000 35,326,000
Accumulated deficit.............................................................. (13,261,000) (20,215,000)
------------- -------------
Total shareholders' equity......................................................... 22,863,000 15,113,000
------------- -------------
$ 59,637,000 $ 41,034,000
------------- -------------
------------- -------------
</TABLE>
3
<PAGE>
MTR GAMING GROUP, INC.
CONDENSED AND CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------------------ ------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues
Video lottery terminals............................................. $20,840,000 $14,400,000 $50,313,000 $37,185,000
Parimutuel commissions.............................................. 1,352,000 1,214,000 3,713,000 3,460,000
Food, beverage and lodging.......................................... 2,512,000 1,711,000 5,652,000 4,025,000
Other............................................................... 577,000 338,000 1,219,000 832,000
----------- ----------- ----------- -----------
Total revenues.................................................... 25,281,000 17,663,000 60,897,000 45,502,000
----------- ----------- ----------- -----------
Costs of revenue
Cost of video lottery terminals..................................... 12,249,000 8,894,000 30,101,000 23,199,000
Cost of parimutuel commissions...................................... 1,017,000 1,637,000 3,537,000 4,428,000
Cost of food, beverage and lodging.................................. 2,240,000 1,424,000 4,795,000 3,473,000
Cost of other revenues.............................................. 320,000 226,000 718,000 789,000
----------- ----------- ----------- -----------
Total cost of revenues............................................ 15,826,000 12,181,000 39,151,000 31,889,000
----------- ----------- ----------- -----------
Gross Profit.......................................................... 9,455,000 5,482,000 21,746,000 13,613,000
----------- ----------- ----------- -----------
Selling, general and administrative expenses:
Marketing and promotions............................................ 1,062,000 1,077,000 2,848,000 2,432,000
General and administrative.......................................... 2,696,000 1,131,000 6,948,000 3,716,000
Depreciation and amortization....................................... 683,000 591,000 2,243,000 1,588,000
----------- ----------- ----------- -----------
Total selling, general and administrative expenses................ 4,441,000 2,799,000 12,039,000 7,736,000
----------- ----------- ----------- -----------
Operating income...................................................... 5,014,000 2,683,000 9,707,000 5,877,000
----------- ----------- ----------- -----------
Interest income....................................................... 92,000 54,000 275,000 98,000
Interest expense...................................................... (1,233,000) (780,000) (3,055,000) (2,636,000)
----------- ----------- ----------- -----------
(1,141,000) (726,000) (2,780,000) (2,538,000)
----------- ----------- ----------- -----------
Income before benefit of income taxes................................. 3,873,000 1,957,000 6,927,000 3,339,000
Benefit for income taxes.............................................. (23,000) 224,000 27,000 290,000
----------- ----------- ----------- -----------
Net income............................................................ $ 3,850,000 2,181,000 6,954,000 3,629,000
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Net income per share.................................................. $ 0.18 $ 0.11 $ 0.34 $ 0.18
Net income per share assuming dilution................................ $ 0.16 $ 0.10 $ 0.29 $ 0.17
Weighted average number of shares outstanding:
Basic............................................................... 20,861,322 19,814,291 20,301,137 19,780,958
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Diluted............................................................. 23,662,597 21,378,434 24,088,681 20,881,375
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
4
<PAGE>
MTR GAMING GROUP, INC.
CONDENSED AND CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
-----------------------------
<S> <C> <C>
1998 1997
-------------- -------------
Cash flows from operating activities:
Net income....................................................................... $ 6,954,000 $ 3,629,000
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred financing cost amortization........................................... 346,000 1,242,000
Depreciation and amortization.................................................. 2,243,000 1,568,000
Deferred income taxes.......................................................... (33,000) (354,000)
Changes in operating assets and liabilities
Accounts receivable net of allowance......................................... (96,000) --
Other current assets......................................................... (316,000) (292,000)
Accounts payable and accrued liabilities..................................... (1,001,000) (325,000)
-------------- -------------
Net cash provided by operating activities.......................................... 8,097,000 5,488,000
-------------- -------------
Cash flows from investing activities:
Restricted cash.................................................................. 15,000 (18,000)
Net assets from discontinued activities.......................................... (77,000) --
Settlement of prior acquisition costs............................................ -- (383,000)
Notes Receivable................................................................. (461,000)
Deposits and other............................................................... (527,000) (38,000)
Capital expenditures............................................................. (16,432,000) (5,125,000)
-------------- -------------
Net cash used in investing activities.............................................. (17,482,000) (5,564,000)
-------------- -------------
Cash flows used in financing activities
Principal payments............................................................... -- (1,106,000)
Proceed from excise of stock options............................................. 796,000
Loan proceeds.................................................................... 11,887,000 5,377,000
-------------- -------------
Cash provided by financing activities.............................................. 12,683,000 4,271,000
-------------- -------------
NET INCREASE (DECREASE) IN CASH.................................................... 3,298,000 4,195,000
Cash, Beginning of Period.......................................................... 7,715,000 4,226,000
-------------- -------------
Cash, End of Period................................................................ $ 11,013,000 $ 8,421,000
-------------- -------------
-------------- -------------
</TABLE>
5
<PAGE>
MTR GAMING GROUP, INC
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--BASIS OF PRESENTATION
The accompanying unaudited condensed and consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and notes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments
(consisting of only normal recurring accruals) considered necessary for a fair
presentation have been included herein. Operating results for the nine months
ended September 30, 1998 are not necessarily indicative of the results that may
be expected for the year ended December 31, 1998. For further information, refer
to the consolidated financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1997.
NOTE 2--EQUITY TRANSACTIONS
During January 1998, the Company granted 800,000 options pursuant to its
1998 Stock Incentive Plan to employees. The options were granted at an exercise
price of $2.15625, the estimated fair market value of the Company's common stock
at the date of grant and vested immediately.
During January 1998, the Company granted 50,000 and 10,000 options outside
of the Company's stock option plan to employees and to a non-employee,
respectively. The options were granted at an exercise price of $2.15625, the
estimated fair market value of the Company's common stock at the date of grant,
and vested immediately.
During February 1998, the Company granted 50,000 options outside of the
Company's stock option plan to directors. The options were granted at an
exercise price of $2.50, the estimated fair market value of the Company's common
stock at the date of grant. The options vest in increments of 6,250 options
after attendance at meetings of the Board of Directors, audit committee, and
shareholders.
During March 1998, the Company granted 950,000 options pursuant to its 1992
Employee Stock Option Plan to employees. The options were granted at an exercise
price of $2.41, the estimated fair market value of the Company's common stock at
the date of grant and vested immediately. Approximately 1,200,000 options
exercisable at a price of $2.00 per share granted under such plan had expired
unexercised in October 1997.
During August and September 1998, holders of previously-issued options to
purchase the Company's common stock exercised options to purchase a total of
1,006,380 shares at prices ranging from $.50 to $1.21875 per share by delivery
of cash, notes, and other common stock of the Company, resulting in a net
increase in the number of issued and outstanding shares of 840,273 for proceeds
(cash and notes) totaling $795,000 as well as the delivery of 166,107 shares of
the Company's common stock.
NOTE 3--INCOME TAXES
The benefit for income taxes recorded in the accompanying statements of
operations for the nine months ended September 30, 1998 and 1997 results from
non-tax deductible depreciation expense attributable to the purchase method of
accounting for the investment in Mountaineer Park, Inc. At September 30, 1998
the Company recorded a valuation allowance of approximately $4.2 million against
its primary deferred tax assets (net operating loss carryforwards for federal
and state income tax purposes). At September 30, 1998 the Company has
approximately $18.3 million in federal net operating loss carryforwards and
approximately $4.6 million in state net operating loss carryforwards. The use of
such net
6
<PAGE>
MTR GAMING GROUP, INC
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3--INCOME TAXES (CONTINUED)
operating loss carryforwards earned from 1992 through 1995 are subject to
certain limitations as a result of common stock issuances. Due to limitations
under the Alternative Minimum Tax Rules of the Tax Reform Act of 1986, the
Company expects to make quarterly federal income tax payments.
NOTE 4--ACQUISITIONS
The Company through its newly formed, wholly owned subsidiary, Speakeasy
Gaming of Las Vegas, Inc., consummated the purchase on May 5, 1998 of the
Cheyenne Hotel & Casino, which has been renamed the Ramada Inn & Speedway
Casino, in North Las Vegas, Nevada (the "Las Vegas Property") for $5.5 million.
The transaction was an asset purchase for cash. The Company expects, during
November 1998, to apply for approval to operate casino gaming and, in the
interim, has leased the gaming area to Dynasty Games Distributing, a
non-affiliated, licensed casino operator. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations." The Company entered
into a franchise agreement for the Las Vegas Property with Ramada Franchise
Systems, Inc.
The Company through its newly formed, wholly owned subsidiary, Speakeasy
Gaming of Reno, Inc., consummated the purchase on May 5, 1998 of the Reno Ramada
in Reno, Nevada which has been renamed the Ramada Inn & Speakeasy Casino, for $8
million (the "Reno Property", collectively with the Las Vegas Property, the
"Nevada Properties"). The transaction was an asset purchase for cash. The
Company expects, during November 1998, to apply for approval to operate casino
gaming and, in the interim, has leased the gaming area to Dynasty Games
Distributing, a non-affiliated, licensed casino operator. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations." The
Company entered into a franchise agreement for the Reno Property with Ramada
Franchise Systems, Inc.
The Nevada Properties are qualified for nonrestricted casino gaming upon
licensing of a casino operator pursuant to "grandfather" provisions of
applicable state and municipal laws. Specifically, the Nevada Properties are
subject to legislation passed in 1991 by the Nevada Legislature which is
commonly referred to as the Resort Hotel Legislation. The key portions of this
legislation are found in Section 463.1605 of the Nevada Revised Statutes
("NRS"). NRS 463.1605 essentially provides that the Nevada Commission shall not
approve a nonrestricted gaming license for an establishment located in either
Clark County or Washoe County, Nevada, unless the establishment is a resort
hotel. A resort hotel is defined to include an establishment held out to the
public as a hotel with more than 200 rooms available for sleeping
accommodations, at least one bar with capacity for more than 30 patrons, and at
least one restaurant with capacity for more than 60 patrons. The Las Vegas
Property does not have 200 rooms and is therefore subject to the provisions of
NRS 463.1605. The Reno Property has more than 200 rooms so it is in compliance
with NRS 463.1605. A county, city or town may require resort hotels to meet
standards in addition to those required by NRS 463.1605 as a condition to
issuance of a gaming license by the particular county, city or town. The City of
Reno has by ordinance increased the room requirement for resort hotels to 300.
Therefore, the Reno Property does not conform to the 300 room City of Reno
requirement. The Las Vegas Property is exempt from NRS 463.1605 because this
location has held a non-restricted gaming license. The grandfathered exemption,
however, is only valid as to the Las Vegas Property until the earlier of the
commencement of gaming operations at that property or May, 1999. As to the Reno
Property, the Company is relying upon a January 22, 1998 determination by the
City of Reno that the property is grandfathered. The failure to keep the
grandfathered exemptions to NRS 463.1605 and the local regulations governing
resort hotels would have a materially adverse effect on the Company.
7
<PAGE>
MTR GAMING GROUP, INC
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4--ACQUISITIONS (CONTINUED)
DESCRIPTION OF THE RENO PROPERTY. The Company purchased the Reno Ramada
Hotel from Reno Hotel LLC, an affiliate of the Company's lender, for $8 million
in a negotiated transaction. The Reno Property was used as a hotel by the
previous owner prior to its purchase by the Company. The Reno Property has a
total of 262 hotel rooms, 236 of which are located in an eleven story tower and
26 of which are in a separate three-story structure. The property is located at
6th and Lake Streets in Reno and has parking for approximately 238 cars. The
tower also has a restaurant, a deli and two bars. The Company has also applied
for a liquor license for the Reno Property. The Reno Property has an 8,000
square foot casino area and a small convention facility. The Reno Property
recently underwent renovations of approximately $4 million prior to its
acquisition by the Company. The Company's development plans for the casino at
the Reno Property call for 350 slot machines, three blackjack tables, a roulette
wheel, and a craps table. The Reno Property casino's theme will be similar to
the Speakeasy concept in place at the Company's Mountaineer Racetrack & Gaming
Resort in West Virginia. The Company also plans to spend approximately $500,000
on renovations of the hotel and expansion of the capacity of the convention
facility.
DESCRIPTION OF THE LAS VEGAS PROPERTY. The Company purchased the Las Vegas
Property from Banter, Inc. for $5.5 million. The Las Vegas Property is a
131-room hotel consisting of one two-story building and one three-story building
located at 3227 Civic Center Drive in North Las Vegas at the intersection of
Cheyenne Avenue and Interstate 15. I-15 is a major interstate freeway, which
extends north into Utah and south into the Los Angeles Basin. The Las Vegas
Property is approximately five miles from the Las Vegas Motor Speedway and three
miles from Nellis Air Force Base. The hotel had a bar, restaurant, and swimming
pool as well as parking for approximately 172 cars. The prior owners had
operated 25 slot machines at the hotel's bar. The Company has commenced
construction of an addition of approximately 15,000 square feet to house a
casino. The Company's plan for the casino calls for 350 slot machines, three
blackjack tables, one roulette wheel, and one craps table. The Company plans to
implement a motor racing theme for the casino in an effort to accommodate
patrons of the nearby Las Vegas Motor Speedway. The Company estimates that the
cost of construction of the casino and renovation of some of the hotel rooms
will be approximately $2 million. The Company has acquired from a third party an
adjacent parcel of approximately 1/2 acre in order to increase the parking
capacity to 511 cars. The Company believes it can complete construction by
January of 1999.
FINANCING OF THE ACQUISITIONS. The Company financed the acquisition of the
Reno Property and the Las Vegas Property through its cash on hand and additional
borrowings from its existing lender, Madeleine LLC. Pursuant to a Third Amended
and Restated Term Loan Agreement entered as of April 30, 1998 by Mountaineer
Park, Inc., Speakeasy Gaming of Las Vegas, Inc., and Speakeasy Gaming of Reno,
Inc. jointly and severally as borrowers, the Company as guarantor, and Madeleine
LLC as lender, the Company increased its borrowings (previously the principal
sum of $21,476,500) by (i) $8 million, representing the full purchase price of
the Reno Property; (ii) $3,765,000 toward the purchase of the Las Vegas
Property; and (iii) $150,000 in lender's fees. The Company expended
approximately $2 million of its cash reserves for the balance of the purchase
price of the Las Vegas Property and closing costs and expenses of the
transactions. The loan amendment also provides a construction line of credit of
up to $1.7 million for the Las Vegas Property and increases Mountaineer's line
of credit by $5 million (up to $1.5 million of which may be used for
improvements at the Nevada Properties). The loans, as well as any draws against
the lines of credit, continue to be for a term ending July 2, 2001 with monthly
payments of interest only at the rate of 13% per year with all principal
becoming due at the end of the term. The loans likewise remain secured by
substantially all of the assets of Mountaineer and now Speakeasy Vegas and
Speakeasy Reno and are unconditionally guaranteed by the Company. The call
premium applicable to prepayment of the loans
8
<PAGE>
MTR GAMING GROUP, INC
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4--ACQUISITIONS (CONTINUED)
(3% between July 3, 1998 and July 2, 1999, 2% from July 3, 1999 until July 2,
2000, and 1% from July 3, 2000 until the end of the term), however, does not
apply to the $11.8 million borrowed for the acquisitions or draws on the $1.7
million construction line of credit.
ITEM 2--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION:
This document includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements other than
statements of historical fact included in this document, including, without
limitation, the statements under "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Liquidity and Sources of
Capital" regarding the Company's strategies, plans, objectives, expectations,
and future operating results are forward-looking statements. Although the
Company believes that the expectations reflected in such forward-looking
statements are reasonable at this time, it can give no assurance that such
expectations will prove to have been correct. Actual results could differ
materially based upon a number of factors including, but not limited to, history
of losses, leverage and debt service, gaming regulation and licensing,
dependence on key personnel, competition, no dividends, continued losses from
horse racing, road improvements, costs associated with maintenance and expansion
of Mountaineer Park's infrastructure to meet the demands attending increased
patronage, cyclical nature of business, limited public market and liquidity,
shares eligible for future sale, impact of anti-takeover measures, the Company's
common stock being subject to penny stock regulation and other risks detailed in
the Company's other Securities and Exchange Commission filings from time to
time.
RESULTS OF OPERATIONS
The Company earned revenues for the respective nine month and three month
periods in 1998 and 1997 as shown below:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------------------ ------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATING REVENUES
Video lottery operations............................... $20,840,000 $14,400,000 $50,313,000 $37,185,000
Parimutuel commissions................................. 1,352,000 1,214,000 3,713,000 3,460,000
Lodging, food and beverage............................. 2,512,000 1,711,000 5,652,000 4,025,000
Other revenues......................................... 577,000 338,000 1,219,000 832,000
----------- ----------- ----------- -----------
Total Revenues..................................... $25,281,000 $17,663,000 $60,897,000 $45,502,000
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
The emergence of video lottery operations as Mountaineer Park's dominant
profit center and the 1996 amendment of the West Virginia video lottery law (the
"Lottery Law") to permit the addition of video game themes depicting symbols on
reels commonly referred to as "line games" or "slot games" ("Slot Terminals")
have allowed the Company to generate increased revenues. Primarily as a result
of this significant increase in gaming revenues, the Company earned a $3,850,000
profit from continuing operations for the third quarter of 1998 and $6,954,000
profit from continuing operations for the nine months
9
<PAGE>
ending September 30, 1998. In March 1998, the Lottery Law was further amended
with respect to the permitted number and location of video lottery terminals
pursuant to which Mountaineer Park became entitled, effective June 13, 1998, to
change the ratio of video lottery terminals ("VLTs") located in its lodge
facility versus the racetrack building from 1:1 to 2:1. Terminals located in the
lodge's Speakeasy Gaming Saloon are more popular than those at the racetrack and
account for significantly more revenue. Beginning in July 1998, in accordance
with the new law and with the approval of the State Lottery Commission, the
Company increased the number of terminals from 1,000 to 1,200 (800 in the lodge
and Speakeasy Gaming Saloon; 400 at the racetrack) by relocating 100 terminals
from the racetrack and leasing 200 new "nickel" machines from Video Lottery
Concepts. See "Liquidity and Sources of Capital--Capital Improvements."
The Company anticipates that Mountaineer Park, particularly video lottery
operations, will continue to be the dominant factor in the Company's financial
condition. Ultimately, the profitability of the recently acquired Nevada
Properties will be directly related to whether and when the Company obtains all
necessary Nevada gaming approvals. The Company has been advised that the
licensing process may take approximately a year to complete, and that there can
be no assurance that the Company will obtain such licenses. The Company does not
believe that delays in the licensing process would have a material adverse
effect on its current cash flow, as evidenced by the fact that in the current
quarter, the Nevada Properties generated a net loss of only $489,000 despite
construction, interest charges, and lack of gaming operations.
THREE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1997
Total revenues increased from $17.7 million in the third quarter of 1997 to
$25.3 million in 1998, an increase of 43%. Approximately $6.4 million of the
increase was produced by video lottery operations, while the parimutuel
commissions and lodging, food, beverage and other operations at Mountaineer Park
contributed approximately $1.2 million of additional revenues. The Nevada
Properties contributed $478,000 in lodging, food and beverage revenues in the
quarter ended September 30, 1998.
VIDEO LOTTERY OPERATIONS. The Company, through Mountaineer Park, has
operated VLTs in West Virginia since December 1992; operations were conducted
under a provisional license until September 1994. The Lottery Law, signed in
March 1994, allowed the uninterrupted continuation of video lottery games at
Mountaineer Park, and permitted the Company to increase its number of VLTs from
165 to 400 on September 4, 1994. In July 1995, the Company placed into operation
an additional 400 VLTs, bringing the total number of VLTs in operation to 800.
The 800 VLTs then in operation offered only card games and keno ("Card
Terminals").
Upon the enactment of an amendment of the Lottery Law permitting Slot
Terminals, in July of 1996 Mountaineer Park replaced 350 Card Terminals with
Slot Terminals. In October of 1996, Mountaineer Park converted an additional 50
Card Terminals to Slot Terminals. In March of 1997, Mountaineer Park purchased
and installed 400 new Slot Terminals and removed 200 previously leased Card
Terminals, bringing the total number of VLTs to 1,000 as of March 13, 1997,
consisting of 800 Slot Terminals and 200 Card Terminals. In March 1998, the
Lottery Law was further amended with respect to the permitted number and
location of video lottery terminals pursuant to which Mountaineer Park is
entitled to change the ratio of VLTs located in its lodge facility versus the
racetrack building from 1:1 to 2:1. In July of 1998, having obtained the Lottery
Commission's approval to increase the facility's number of VLTs from 1,000 to
1,200, Mountaineer Park increased the number of VLTs in the Lodge from 500 to
800 by installing 200 new VLTs and moving 100 VLTs from the racetrack.
Accordingly, as of September 30, 1998, Mountaineer Park operated 800 VLTs at the
Lodge and 400 at the racetrack. On November 1, 1998, the Company replaced its
last 200 Card Terminals with leased Slot Terminals. See "Liquidity and Sources
of Capital--Capital Improvements."
The results of video lottery operations reflect a four-year trend of
significantly increasing aggregate net win, coupled with an increase in average
daily net win per terminal since the inception of Slot Terminals. The Company
plans to pursue additional growth in its video lottery operations. The
aggressive newspaper marketing campaign begun in July 1996 continued through
September 30, 1998 and is still continuing, coupled with an extensive direct
mail campaign. In January of 1997, Mountaineer also began
10
<PAGE>
broadcasting a 30-minute "infomercial" advertisement on television affiliates
within a two-hour driving radius.
In July 1998, Mountaineer Park completed a 12,000 square foot addition to
the Speakeasy Gaming Saloon to house additional VLTs and enlarge dining and
entertaining facilities. For the three months ended September 30, 1998, average
daily net win for VLTs placed at the racetrack was $75 (including $0 for days
when there was no live racing), compared to $246 on the Lodge-based terminals
for a facility-wide average of $189 per VLT per day. Management believes that
the increase from 500 to 800 VLTs at the lodge will result in a higher overall
net win for the facility. Although management believes that VLT revenues will
increase at the racetrack, the Company's primary focus is to expand its lodge
VLT operations. See "Parimutuel Commissions" and "Liquidity and Sources of
Capital--Capital Improvements."
A summary of the video lottery gross wagers less patron payouts ("net win")
for the three months ended September 30, 1998 and 1997 is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30
------------------------
1998 1997
----------- -----------
<S> <C> <C>
Total gross wagers........................................................................ $69,953,000 $49,265,000
Less patron payouts....................................................................... $49,113,000 $34,865,000
----------- -----------
Revenue--
video lottery operations.................................................................. $20,840,000 $14,400,000
----------- -----------
Average daily net win per terminal........................................................ $ 189 $ 157
----------- -----------
----------- -----------
</TABLE>
Revenues from video lottery operations increased by 44% from $14.4 million
in the third quarter of 1997 to $20.8 million in 1998. Management believes the
increase resulted primarily from increased patronage resulting from the July
opening of the 12,000 square foot addition to the Speakeasy Gaming Saloon, the
increase in the number of gaming machines from 1,000 to 1,200 facility-wide and
from 500 to 800 in the Speakeasy, the introduction of "nickel" (versus quarter)
machines, cross marketing to patrons attending live concert and boxing events,
increased advertising and, to a lesser extent, the increase in parimutuel purse
size. Increased attendance for the purchase of tickets for the multi-state
"Power Ball" lottery game during periods of unusually high jackpots also
contributed to the increase in revenues, as Power Ball players participated in
Mountaineer Park's other offerings.
PARIMUTUEL COMMISSIONS. Parimutuel commissions revenue is a function of
wagering handle, which means the total amount wagered without regard to
predetermined deductions, with a higher commission earned on a more exotic
wager, such as a trifecta, than on a single horse wager, such as a win, place,
or show bet. In parimutuel wagering, patrons bet against each other rather than
against the operator of the facility or with pre-set odds. The total wagering
handle is composed of the amounts wagered by each individual according to the
wagering activity. The total amounts wagered form a pool of funds from which
winnings are paid based on odds determined solely by the wagering activity. The
racetrack acts as a stakeholder for the wagering patrons and deducts from the
amounts wagered a "take-out" or gross commission, from which the racetrack pays
state and county taxes and racing purses. The Company's parimutuel commission
rates are fixed as a percentage of the total wagering handle or total amounts
11
<PAGE>
wagered. Mountaineer Park's parimutuel commissions for the three months ended
September 30, 1998 and 1997 are summarized below:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30
-----------------------------
<S> <C> <C>
1998 1997
-------------- -------------
Simulcast racing parimutuel handle............................. $ 6,011,000 $ 5,290,000
Live racing parimutuel handle.................................. 6,800,000 5,988,000
Less patrons' winning tickets.................................. (10,164,000) (8,940,000)
-------------- -------------
2,647,000 2,338,000
Less:
State and county parimutuel tax................................ (140,000) (131,000)
Purses and Horsemen's Association.............................. (1,155,000) (993,000)
-------------- -------------
Revenues--parimutuel commissions............................... $ 1,352,000 $ 1,214,000
</TABLE>
With the same number of live racing days (61) conducted during the two
quarters being compared, parimutuel handle increased by $1,533,000, or
approximately 13.5%, and parimutuel revenue increased by $138,000, or 11.3%. At
the same time, daily purses for live racing during the third quarter of 1998
averaged $70,700, an increase of 44.5% over the $48,900 average daily purses
paid during the third quarter of 1997. During the third quarter of 1998,
Mountaineer Park also had larger stakes races. For the August 1998 running of
the West Virginia Derby, Mountaineer Park's race participants were paid $345,000
in a single day, with $200,000 funded by the State Racing Commission for the
feature race.
While management does not view the increases in handle and revenues as
significant (in comparison to the increases in purses), management continues to
believe that periodic increases in average daily purses and purses for stakes
races will attract higher quality racehorses. Management believes that over time
such increases and improvements should lead to increased live racing handle, or
alternatively smaller decreases. Management also believes that the enhanced
quality of racehorses should improve the Company's prospects in export
simulcasting. Commencement of export simulcasting activity would not only create
a new source of revenue but the anticipated related increase in gross dollars
wagered on the Company's live races should also generate increases in live
handle (as a greater and more diverse wagering pool lessens the impact a
particular wager will have on the pay-off odds). Management intends to continue
its policy of increasing average daily purses (though not necessarily in the
winter months) as well as sponsor substantially increased stakes races
attempting to develop an export simulcast business. Management does not expect
results from racing operations to improve materially, despite larger daily
purses, stakes races, better horses, and reduced costs, unless and until
Mountaineer Park also commences export simulcasting. No assurance can be given,
however, that the Company will successfully commence export simulcasting or that
the anticipated results will be realized. See "Costs and Expenses" and
"Parimutuel Commission Operating Costs."
In 1997, the West Virginia legislature passed a bill which reduced the
minimum number of annually required racing days from 220 to 210 commencing in
1998. Additionally, the bill specified procedures which allow further reductions
in the required number of live race days if certain conditions exist, subject to
approval by the State Racing Commission. The Company believes that the reduction
in the number of racing days required will reduce the direct costs of its racing
operations.
FOOD, BEVERAGE AND LODGING OPERATIONS. Food, beverage and lodging revenues
at Mountaineer Park accounted for a combined increase of 47% to $2.5 million for
the three months ended September 30, 1998. Restaurant, bar and concession
facilities produced $247,000 of the revenue increase, while lodge revenues
increased $554,000. Food and beverage operations accounted for approximately 67%
and 72% of the revenues earned by this profit center in the third quarters of
1998 and 1997, respectively. Management believes that increased revenues from
lodging, food and beverage resulted primarily from enhanced video lottery
facilities and related advertising, which in turn led to increased consumption
of food and beverages by the Company's customers. The ratio of revenue from food
and beverage to revenue from lodging with
12
<PAGE>
respect to Mountaineer Park has generally remained constant, reflecting that
Mountaineer Park has historically drawn more day traffic than overnight stays.
The Company's Nevada Properties contributed additional lodging, food and
beverage revenues of $478,000 in the quarter ended September 30, 1998, with 96%
of these revenues originating from lodge operations.
OTHER OPERATING REVENUE. Other sources of revenues consist primarily of
non-core businesses such as admission, programs, golf, special events, check
cashing and ATM services. While these lines of business are not the Company's
most profitable, the Company believes they enhance the entertainment experience
for Mountaineer Park's gaming patrons. These other revenues increased by
$239,000 or 71% to $577,000 for the three-month period ended September 30, 1998
compared to the same period in 1997.
COSTS AND EXPENSES. Operating costs and gross profits earned from
operations for the three-month periods ended September 30, 1998 and 1997 are as
follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30
----------------------------
<S> <C> <C>
1998 1997
------------- -------------
Operating Costs
Video lottery operations....................................... $ 12,249,000 $ 8,894,000
Parimutuel commissions......................................... 1,017,000 1,637,000
Lodging, food and beverage..................................... 2,240,000 1,424,000
Other revenues................................................. 320,000 226,000
------------- -------------
Total Operating Costs........................................ $ 15,826,000 $ 12,181,000
------------- -------------
------------- -------------
Gross profit (Loss)
Video lottery operations....................................... $ 8,591,000 $ 5,506,000
Parimutuel commissions......................................... 335,000 (423,000)
Lodging, food and beverage..................................... 272,000 287,000
Other revenues................................................. 257,000 112,000
------------- -------------
Total Gross Profit........................................... $ 9,455,000 $ 5,482,000
------------- -------------
------------- -------------
</TABLE>
Mountaineer's 43% increase in revenues resulting from the expanded scope of
entertainment offerings resulted in higher total costs, as expenses increased by
30% to $15.8 million in the third quarter of 1998. Approximately $3.4 million of
the increase was attributable to the cost of operating video lottery terminals,
which includes applicable state taxes and fees and related advertising. The
Company experienced a 1% decrease in marketing and promotions expense, a 138%
increase in general and administrative expenses, and a 16% increase in
depreciation and amortization. The increase in general and administrative
expenses, as in the second quarter of the current fiscal year, was due primarily
to (1) additional personnel engaged in video lottery, housekeeping and security
to accommodate Mountaineer Park's larger crowds; (2) additional marketing and
promotional personnel, both to implement the Company's marketing plan and to
analyze the effectiveness of the Company's marketing efforts to obtain the
maximum long-term benefits of such efforts; (3) professional fees related to
financing and acquisition activity; and (4) the reallocation of general and
administrative costs (such as advertising, personnel, maintenance, housekeeping,
security and professional fees). These reallocations caused an increase of
$1,052,000 in the three months ending September 30, 1998 as compared to the
three months ending September 30, 1997. The Company is attempting to expand the
video lottery business, while attempting to reduce the losses of the parimutuel
business by increasing productivity, expanding marketing efforts in a more
cost-effective manner (in the current quarter, for example, by increasing
direct-mail versus print advertising), increasing purse sizes, attracting higher
quality jockeys and horses, and pursuing export simulcasting to increase
parimutuel wagering. See "Parimutuel Commissions." Gross profit from the
Company's four profit centers increased 72% from $5.5 million for the third
quarter of 1997 to $9.5 million for the same period in 1998.
13
<PAGE>
VLTS OPERATING COSTS. Costs of video lottery revenue increased by $3.4
million or 38% from $8.9 million for the three months ended September 30, 1997,
to $12.3 million for the three months ended September 30, 1998, primarily
reflecting an increase in statutory expenses. Additional expenses were incurred
in connection with video lottery, housekeeping and security personnel.
After payment of a State Administrative Fee of up to 4% of revenues,
Mountaineer is obligated to make payments from the remaining video lottery
revenues to certain funds administered by the West Virginia Lottery Commission
as follows: State Tax 30%, Horsemen's Purse Fund 15.5%, Tourism Promotion 3%,
Hancock County Tax 2%, Stakes Races 1%, Veteran Memorial 1% and Employee Pension
Fund 0.5%. Assessments paid to the Employee Pension Fund are returned by the
Lottery Commission to a defined contribution pension plan administered by
Mountaineer Park for the sole benefit of Mountaineer Park employees. Assessments
paid to the Horsemen's Purse Fund are returned by the Lottery Commission to bank
accounts administered by Mountaineer for the sole benefit of horse owners who
race at Mountaineer. These funds are used exclusively to pay purses for
thoroughbred races run at Mountaineer, in amounts determined by Mountaineer in
accordance with its agreement with the Horsemen's Benevolent and Protective
Association. Taxes and assessments paid to all of these funds are included in
"Costs of Video Lottery Terminals in the Consolidated Statement of Operations."
Statutory costs and assessments, including the State Administrative Fee, for
the respective three month periods are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30
-----------------------
1998 1997
----------- ----------
<S> <C> <C>
Employee Pension Fund..................................................................... $ 102,000 $ 70,000
Horsemen's Purse Fund..................................................................... 3,163,000 2,183,000
----------- ----------
SUBTOTAL................................................................................ $ 3,265,000 $2,253,000
State of West Virginia.................................................................... $ 6,557,000 $4,545,000
Tourism Promotion Fund.................................................................... 612,000 423,000
Hancock County............................................................................ 408,000 282,000
Stakes Races.............................................................................. 204,000 141,000
Veteran's Memorial........................................................................ 204,000 141,000
----------- ----------
TOTAL................................................................................... $11,250,000 $7,785,000
----------- ----------
----------- ----------
</TABLE>
The remaining significant expenses allocated to video lottery operations
consist of VLT lease expense ($326,000 in the third quarter of 1998 compared to
$266,000 in the third quarter of 1998 due to the leasing of 200 additional
machines in July of 1998), direct and indirect wages and employee benefits
($427,000 in the third quarter of 1998, compared to $352,000 in the third
quarter of 1997), and waste and sewage disposal ($29,000 in the third quarter of
1998 compared to $10,000 in the third quarter of 1997). Mountaineer Park's total
waste disposal costs are currently estimated by management to be approximately
$200,000 per quarter, substantially as a result of the increase in patron
attendance at Mountaineer Park. The State of West Virginia has authorized
Hancock County to build an expanded sewage system that would serve the Chester
area, which is scheduled to be completed in approximately December 1999. The
Company believes that such a system would reduce significantly Mountaineer
Park's waste and sewage disposal costs. Wages and benefits expense increased
from the third quarter of 1997 to the third quarter of 1998 in response to
higher levels of patron play.
PARIMUTUEL COMMISSIONS OPERATING COSTS. Costs (the individual components of
which are detailed below) of parimutuel commission revenue decreased by
$620,000, or 38%, from $1.6 million in the third quarter of 1997, to $1.0
million in the third quarter of 1998. Purse expense (consisting of statutorily
determined percentages of live racing handle) increased 15% to $675,000 in the
third quarter of 1998
14
<PAGE>
(which does not include $200,000 funded by the State Racing Commission for the
West Virginia Derby), which is consistent with the 14% increase in live handle.
In connection with simulcasting race operations, contractual fees paid to host
tracks and additional statutorily determined percentages of simulcast
commissions contributed to the purse fund for live racing increased $57,000 to
$417,000 in the third quarter of 1998 consistent with the 16% increase in
simulcasting wagers. Parimutuel commissions revenue is reported net of these
expenses in the Consolidated Statement of Operations.
Totalisator and other lease expenses remained stable at approximately
$134,000 in the third quarters of 1998 compared to $120,000 in 1997. Direct and
indirect wages and employee benefits attributable to racing operations decreased
($69,000) to $716,000 in the three months ended September 30, 1998. The number
of live race performances remained the same at 61 days in 1998 as compared to
the same period in 1997.
Other costs of parimutuel commissions revenue decreased in the aggregate by
approximately $565,000 in the third quarter of 1998 from $732,000 in the third
quarter of 1997 primarily as a result of management's decision no longer to
attempt to allocate general and administrative costs (such as advertising,
personnel, maintenance, housekeeping, security and professional fees) among the
Company's individual profit centers.
Mountaineer Park's labor agreement with approximately 50 mutual and 9 video
lottery employees has been extended to November 30, 2002. The Company's
agreement with HBPA has been extended until January 1, 2001.
FOOD, BEVERAGE AND LODGING OPERATING COSTS. Operating costs of the
Company's lodging, food and beverage operations increased by $816,000 from $1.4
million in the third quarter of 1997 to $2.2 million in the third quarter of
1998. Direct expenses of the Company's food and beverage operations increased
from $1.3 million in the third quarter of 1997 to $1.4 million for the same
period in 1998. Additionally, the Nevada Properties' food, beverage and lodging
operating costs in the third quarter of 1998 were $450,000.
Lodging direct costs totaled $823,000 for the third quarter of 1998 as
opposed to $289,000 in 1997. Of this increase, $438,000 was generated by the
Nevada Properties purchased in May of 1998. The West Virginia facility accounted
for the remaining direct costs of $385,000. $96,000 of the increase in costs can
be attributed to increased costs of waste disposal ($34,000) and lodge wages and
employee benefits ($62,000) in 1998. This increase was caused by an increase in
service personnel in these areas. See "VLTs Operating Costs".
COSTS OF OTHER OPERATING REVENUES. Costs of other revenues consisting
primarily of non-core businesses such as racing programs, golf, gift shop, check
cashing and ATM services increased by $94,000 from $226,000 in the third quarter
of 1997 to $320,000 in the third quarter of 1998.
MARKETING AND PROMOTIONS EXPENSE. Marketing expenses at Mountaineer Park
decreased approximately 1% to $1,062,000 in the third quarter of 1998.
Management has started an aggressive regional marketing campaign centered on its
30-minute infomercial broadcasts throughout portions of a two-hour driving
radius of Mountaineer Park. In the third quarter of 1997 and 1998, Mountaineer
Park's marketing and promotion costs were defrayed by a state grant in the
amount of approximately $150,000 from a convention and visitors bureau of which
Mountaineer Park is a member.
GENERAL AND ADMINISTRATIVE EXPENSES, AND INTEREST. The Company's general
and administrative expense increased by $1.6 million to $2.7 million, from $1.1
million for the three months ended September 30, 1998 as compared to the three
months ended September 30, 1997. Such increase resulted primarily from an
increase in acquisition costs (by $573,000 in 1998) and insurance expense (by
$53,000 in 1998). Also, the housekeeping (by $283,000 in 1998), maintenance (by
$458,000 in 1998), security (by $390,000 in 1998) and accounting (by $190,000 in
1998) are included in general and administrative. These departments
15
<PAGE>
caused an increase in general and administrative expenses of $1,052,000 for the
third quarter of 1998 as compared to the same period in 1997.
In the third quarter of 1998, the Company incurred $1.2 million of interest
expense as compared with $780,000 of interest expense in the third quarter of
1997. This increase is attributable to the Company's increased borrowing in
connection with the acquisition of the Nevada Properties.
Depreciation and amortization costs increased 16% from $591,000 in the third
quarter of 1997 to $683,000 in the third quarter of 1998, reflecting increased
capitalization of improvements completed at Mountaineer Park's facilities.
NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1997
Total revenues increased from $45.5 million in the first three quarters of
1997 to $60.9 million in 1998, an increase of $15.4 million or 34%. Of this
increase, 85%, or $13.1 million, can be attributed to the video lottery
operations. Parimutuel commissions increased by $253,000 for the nine months
ended September 30, 1998. Food, beverage, lodging and other operations
contributed $2.0 million of increased revenues for this period.
VIDEO LOTTERY OPERATIONS. A summary of the video lottery gross wagers less
patron payouts ("net win") for the nine months ended September 30, 1998 and 1997
is as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
---------------------------
1998 1997
------------- ------------
<S> <C> <C>
Total gross wagers........................................................................ $ 175,388,000 $128,435,000
Less patron payouts....................................................................... (125,075,000) (91,250,000)
------------- ------------
Revenues--video lottery operations........................................................ $ 50,313,000 $ 37,185,000
------------- ------------
------------- ------------
Average daily net win per terminal........................................................ $ 173 $ 144
------------- ------------
------------- ------------
</TABLE>
Revenues from video lottery operations increased by 35% from $37.2 million
in the first nine months of 1997 to $50.3 million in 1998. Management attributes
the increase to the following factors: extensive advertising, featuring a 30
minute infomercial broadcast on television affiliates within a two hour driving
radius and an aggressive print and direct mail campaign, greater familiarity of
customers with the Company's gaming machines, the July 1998 opening of the
12,000 square foot addition to the Speakeasy Gaming Saloon, the increase from
1,000 to 1,200 machines, the implementation of the 2:1 lodge versus racetrack
machine ratio, and, to a lesser extent, the increase in parimutuel purse size.
16
<PAGE>
PARIMUTUEL COMMISSIONS. Mountaineer's parimutuel commissions for the nine
months ended September 30, 1998 and 1997 are summarized below:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
------------------------------
<S> <C> <C>
1998 1997
-------------- --------------
Simulcast racing parimutuel handle............................ $ 17,506,000 $ 16,091,000
Live racing parimutuel handle................................. 17,253,000 15,967,000
Less patrons' winning tickets............................... (27,586,000) (25,402,000)
-------------- --------------
7,173,000 6,656,000
Less
State and county parimutuel tax............................. (384,000) (384,000)
Purses and Horsemen's Association........................... (3,076,000) (2,812,000)
-------------- --------------
Revenues--parimutuel commissions.............................. $ 3,713,000 $ 3,460,000
-------------- --------------
-------------- --------------
</TABLE>
Simulcast handle in the first nine months of 1998 increased 8.8% to $17.5
million in comparison to the same period in 1997. Live racing handle increased
by 8.1% from $16.0 million in 1997 to $17.3 million in 1998. These increases
resulted from increased video lottery attendance and cross-marketing from such
activity. Mountaineer has completed 164 days of the annually required 210 days
in the first three quarters of 1998 compared to 176 days in 1997.
Mountaineer paid average daily live purses of $62,600 in the first nine
months of 1998, a 42% increase over the $44,000 average for the corresponding
period of 1997. Mountaineer also sponsored stakes races of up to $35,000 as
compared with $25,000 in 1997, and also hosted the West Virginia Derby which had
a $200,000 purse which was reimbursed to the Company by the West Virginia Racing
Commission.
FOOD, BEVERAGE AND LODGING OPERATIONS. Food, beverage and lodging revenues
accounted for a combined increase of 40% to $5.7 million for the nine months
ended September 30, 1998. Restaurant, bar and concession facilities produced
$771,000 of the revenue increase, which is a 26% increase over the first nine
months of 1997. Lodging revenues increased $856,000 for an 86% increase over the
same period in 1997. Of the increase in lodging revenues, $736,000 can be
attributed to the Nevada Properties acquired in May 1998. As additional services
are offered to the Nevada Properties' customers, the revenues from these two
properties should increase significantly. The ratio of revenue from food and
beverage to revenue from lodging for the West Virginia property has generally
remained constant, reflecting that Mountaineer Park has historically drawn more
day traffic than overnight stays.
OTHER OPERATING REVENUE. Other sources of revenues increased by $387,000 to
$1.2 million for the nine month period ended September 30, 1998 compared to the
same period in 1997. Other operating revenues are primarily derived from the
sale of racing programs, check cashing and ATM services and admission fees
relating to Mountaineer's periodic boxing and concert events. Concert ticket
sales accounted for $159,000 of other operating revenues for the nine months
ended September 30, 1998 in comparison to $21,000 in 1997. Check cashing and ATM
services accounted for $255,000 of other operating revenues.
17
<PAGE>
COSTS AND EXPENSES. Operating costs and gross profit earned from operations
for the nine month periods ended September 30, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
------------------------
1998 1997
----------- -----------
<S> <C> <C>
Operating Costs:
Video lottery operations................................................................ $30,101,000 $23,199,000
Pari-mutuel commissions................................................................. 3,537,000 4,428,000
Lodging, food and beverage.............................................................. 4,795,000 3,473,000
Other revenues.......................................................................... 718,000 789,000
----------- -----------
Total Operating Costs................................................................. $39,151,000 $31,889,000
----------- -----------
----------- -----------
Gross Profit (Loss)
Video lottery operations................................................................ $20,212,000 $13,986,000
Pari-mutuel commissions................................................................. 176,000 (968,000)
Lodging, food and beverage.............................................................. 857,000 552,000
Other revenues.......................................................................... 501,000 43,000
----------- -----------
$21,746,000 $13,613,000
----------- -----------
----------- -----------
</TABLE>
Mountaineer's 34% increase in revenues resulted in higher total costs, as
expenses increased by 23% to $39.2 million in the three quarters of 1998. Gross
profit from the Company's four profit centers increased by 60% from the $13.6
million for the first three quarters of 1997 to $21.7 million for the same
period in 1998.
VIDEO LOTTERY OPERATING COSTS. Costs of VLTs increased by $6.9 million, or
30%, to $30.1 million for the nine months ended September 30, 1998, reflecting
the increase in statutory expenses directly related to the 35% increase in video
lottery revenues.
Statutory costs and assessments, including the State Administrative Fee, for
the respective nine month periods are as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
----------------------------
<S> <C> <C>
1998 1997
------------- -------------
Employees Pension Fund......................................... $ 247,000 $ 182,000
Horsemen's Purse Fund.......................................... 7,670,000 5,641,000
------------- -------------
Subtotal....................................................... $ 7,917,000 $ 5,823,000
State of West Virginia......................................... 15,677,000 11,712,000
Tourism Promotion Fund......................................... 1,484,000 1,092,000
Hancock County................................................. 990,000 728,000
Stakes Races................................................... 495,000 364,000
Veteran's Memorial............................................. 495,000 364,000
------------- -------------
$ 27,058,000 $ 20,083.000
------------- -------------
------------- -------------
</TABLE>
The remaining significant expenses of the Company with respect to its video
lottery operations consist of VLT lease expense incurred ($947,000 in the first
three quarters of 1998 compared to $852,000 in 1997), and utilities and waste
removal expense allocated ($302,000 in the first three quarters of 1998 compared
to $342,000 in 1997). Direct and indirect wages and employee benefits increased
by 22% to $1,163,000 for the first nine months of 1998 compared to $959,000 for
the same period in 1997.
18
<PAGE>
Wages and benefits expense increased from 1997 to 1998 in response to higher
levels of patron play and patron volume. Management believes these costs will
increase in future quarters due to the addition to the lodge and the growth of
customer volume.
PARIMUTUEL COMMISSIONS OPERATING COSTS. Costs of parimutuel commissions
decreased by $891,000 or 20%, from $4.4 million in the first three quarters of
1997 to $3.5 million in the first three quarters of 1998. Purse expense
(consisting of statutorily determined percentages of live racing handle) rose 8%
to $1.7 million in the first three quarters of 1998, which is consistent with
the 8% increase in live handle. In connection with simulcasting race operations,
contractual fees paid to host tracks and additional statutorily determined
percentages of simulcast commissions contributed to the purse fund for live
racing increased $105,000 to $1.2 million in the first three quarters of 1998,
which is consistent with the 9% increase in simulcasting wagering. Parimutuel
commissions revenue is reported net of these expenses in the Consolidated
Statement of Operations.
Totalisator and other lease expenses remained stable at approximately
$536,000 in the first three quarters of 1998 and 1997. Wages and benefits
relating to the Company's racing operations decreased $202,000 or 9% to
$1,942,000 in the nine months ended September 30, 1998. The number of live race
performances decreased by 12 days in 1998 to 164 days as compared to 176 days in
1997.
FOOD, BEVERAGE AND LODGING OPERATING COSTS. Operating costs of the
Company's lodging, food and beverage operations increased by 38% to $4.8 million
in the first nine months of 1998. Direct expenses of the Company's food and
beverage operations increased by 19% from $2.6 million in 1997 to $3.1 million
for the same period in 1998. The food and beverage operation earned a gross
profit of $657,000, an increase of 59%, in the first nine months of 1998,
compared to $412,000 in 1997.
Lodging direct costs totaled $1.7 million for the first nine months of 1998
as opposed to $864,000 in 1997. Of this amount, $653,000 was generated by the
Nevada Properties purchased in May 1998. The remaining $1.1 million of direct
cost is attributed to the West Virginia facility. Lodge wages and employee
benefits increased by $106,000 in 1998. This increase was caused by an increase
in service personnel in these areas.
COSTS OF OTHER OPERATING REVENUES. Costs of other revenues decreased by
$71,000 from $789,000 for the nine months ended September 30, 1997 to $718,000
for the nine months ended September 30, 1998.
MARKETING AND PROMOTIONS EXPENSE. Marketing expenses at the Company's
Mountaineer operation increased 17% from $2.4 million for the first three
quarters of 1997 to $2.8 million for the same period in 1998. The increase is
attributable to the continued broadcasting of the Company's infomercial and
increased print and direct-mail advertising and prize give-aways. During the
first nine months of 1997, the Company's marketing and promotion costs were
defrayed by a state grant in the amount of $315,000 as compared with $398,000 in
the first nine months of 1998. The Company has received additional grant funds
of $159,000 in November 1998 and has been awarded an additional grant of
$334,000 for marketing expenses incurred and to be incurred from July through
December of 1998, which the Company anticipates will be funded in the fourth
quarter of 1998.
GENERAL AND ADMINISTRATIVE AND INTEREST EXPENSES. General and
administrative expense increased by $3.2 million to $6.9 million, or 86%, from
$3.7 million for the nine month period ended September 30, 1998 and 1997,
respectively. Such increase resulted primarily from an increase in acquisition
costs, service personnel and professional fees and the inclusion of
housekeeping, security, accounting and maintenance costs rather than allocating
such costs among the Company's individual profit centers.
In the first three quarters of 1998, the Company incurred $3,055,000 of
interest expense as compared with $2,636,000 of interest expense in the first
three quarters of 1997 due to additional borrowing to finance the acquisition of
the Nevada Properties. See Note 4 to Condensed and Consolidated Financial
19
<PAGE>
Statements. The increase in interest expense is not directly proportionate to
the increase in the outstanding loan amount as a result of deferred financing
costs recorded in the first nine months of 1997.
DEPRECIATION AND AMORTIZATION EXPENSE. Depreciation and amortization
expenses increased by 41%, or $655,000, to $2.2 million for the nine months
ended September 30, 1998. This increase reflects the increased capitalization of
improvements completed at Mountaineer Park's facilities and the allocation of
$3.1 million for the purchase of 400 VLTs in March 1997 and $1.2 million with
respect to paving completed subsequent to the first quarter of 1997.
CASH FLOWS
The Company's net cash provided by operating activities in the nine months
ended September 30, 1998 was $8,097,000, compared to $5,488,000 provided in the
first nine months of 1997. The Company's net change in cash position, however,
was greater ($4,195,000) during the first nine months of 1997 than for the same
period in 1998 ($3,298,000), principally due to the Company's investment in the
Nevada Properties and the Speakeasy addition in West Virginia during 1998.
Current year noncash expenses include $2,243,000 of depreciation and
amortization and $346,000 for the amortization of deferred financing costs.
The Company invested $2.9 million in capital improvements for the West
Virginia property in the first three quarters of 1998 versus $5.1 million in
1997. The Company also invested $13.5 million with respect to the purchase of
the Nevada Properties.
In connection with the exercise of previously granted stock options to
purchase a total of 1,056,380 shares of the Company's common stock during the
first nine months of 1998, the Company received $335,000 in cash, a note for
$461,000, and 166,107 shares of previously issued common stock (which were
canceled and returned to authorized but unissued status) having a market value
at the time of delivery of approximately $280,300.
LIQUIDITY AND SOURCES OF CAPITAL
The Company's working capital balance as of September 30, 1998 was
$14,144,000 and its unrestricted cash balance was $11,013,000. Racing purses are
paid from funds contributed by the Company to bank accounts owned by the horse
owners who race at Mountaineer Park. At September 30, 1998, the balances in
these accounts exceeded purse obligations by $1,040,000. This amount is
available for payment of future purse obligations at the discretion of the
Company and in accordance with the terms of its agreement with the HBPA.
LONG-TERM DEBT AND LINE OF CREDIT REFINANCING. Effective July 2, 1997,
Mountaineer Park and the Company amended and restated the July 2, 1996 Term Loan
Agreement, which had been previously amended and restated as of December 10,
1996. The December 10, 1996 Amended Term Loan Agreement reflected an increase in
the amount borrowed from $5 million to $16.1 million, established a $5,376,500
revolving line of credit, and converted the lender's position from second to
first trust holder.
The July 2, 1997 Second Amended Term Loan Agreement (i) extended the term of
the loan to July 2, 2001 (compared to July 2, 1999); (ii) increased the total
amount borrowed to $21,476,500 (by virtue of Mountaineer Park drawing down the
line of credit); (iii) eliminated from the Amended Term Loan Agreement annual
fees of cash in the amount of 8% of the outstanding principal balance of the
loan that would have been due each November 15 while the loan is outstanding;
(iv) called for payments of interest only with the principal due at the end of
the four year term; (v) eliminated annual warrants to purchase 250,000 shares of
the Company's common stock at $1.06 per share which would have been issued on
November 15, 1997, 1998 and 1999; and (vi) eliminated annual warrants to
purchase additional shares in a number to be calculated under a formula defined
in the Amended Term Loan Agreement, which would have been issued on November 15,
1997, 1998 and 1999. The lender's rights pursuant to the Amended
20
<PAGE>
Term Loan Agreement with respect to the 550,000 shares of the Company's stock
and warrants to purchase 1,632,140 additional shares issued thereunder were
unaffected by the Second Amended Agreement. The Company continues to guarantee
the loan. In addition and as a result of the Second Amended Term Loan Agreement
the Company had excess funds available for investment (subject to negative
covenants contained in the Second Amended Term Loan Agreement) and further
expansion at Mountaineer Park.
As consideration for the lender's entering into the Second Amended Term Loan
Agreement, Mountaineer Park agreed (i) to pay a one time fee of approximately
$1.8 million or 8.5% of the total amount borrowed, which was payable over the
first year of the term (as of September 30, 1998, the Company paid the full
amount of this fee; (ii) to pay interest at the rate of 13% (compared to 12% on
the $16.1 million term loan and 15% on the $5.4 million line of credit under the
Amended Term Loan Agreement); and (iii) to pay a call premium equal to 5% in the
event of prepayment during the first year of the term, declining to 3% during
the second year, 2% in the third year and 1% in the final year.
The Company, as guarantor, entered into the Third Amended and Restated Term
Loan Agreement, dated as of April 30, 1998, by and among Mountaineer Park, Inc.,
Speakeasy Gaming of Las Vegas, Inc., Speakeasy Gaming of Reno, Inc. and
Madeleine LLC in order to finance certain acquisitions by subsidiaries of the
Company which were consummated on May 5, 1998. This increased the loan amount to
$33,391,500, which caused an increase in interest expense for the first nine
months of 1998 of $643,000.
CAPITAL IMPROVEMENTS. The Company is contemplating significant further
expansion of its Mountaineer Park facility including approximately doubling its
hotel room capacity and constructing a regional convention center, most likely
to commence in late 1999. The Company expects the cost of such expansion to be
approximately $7 to 8 million. The Company began to invest in significant
infrastructure improvements beginning with extensive paving in the fourth
quarter of 1997. Capital improvements of a near-term nature include numerous
smaller renovations, including a new entrance to the racetrack clubhouse,
expansion of administrative offices and a new telephone system. The Company also
intends to spend approximately $2 million to $2.5 million to develop export
simulcasting at Mountaineer Park during 1999.
The Company expects that expansion and renovation of the Las Vegas Property
will cost approximately $2 million, and that the renovation and redecoration of
the Reno Property will cost approximately $500,000. The Company has received the
necessary permits for construction at the Las Vegas Property and expects to
complete that construction early in the first quarter of 1999. See Note 4 to the
Condensed and Consolidated Financial Statements.
On October 7, 1997, Mountaineer entered into an agreement by which it
obtained an exclusive option to purchase 349 acres of real property located
adjacent to its Hancock County, West Virginia operation. Mountaineer paid
$100,000 in exchange for an irrevocable option to purchase the property for
$600,000 before October 1, 1998, with payment to be made in the form of a
$200,000 cash payment at closing and a $400,000 term note bearing interest at 9%
payable over five years. The Company has extended this option until October 1,
1999 without additional cash consideration and intends to exercise it to
purchase substantially all such 349 acres.
In February 1998, Mountaineer Park purchased from Realm, Inc. 350 acres in
Chester, West Virginia, located adjacent to Mountaineer Park's operations, for a
purchase price of $240,000, exclusive of brokerage fees and closing costs of
approximately $30,000. The Company has no current plans to develop this
unimproved property.
On November 2, 1998, the Company's subsidiary, Speakeasy Gaming of Las
Vegas, Inc., purchased a one-half acre parcel adjacent to the Las Vegas Property
for the sum of $120,000. See "Subsequent Events."
OUTSTANDING OPTIONS AND WARRANTS. As of September 30, 1998, there were
outstanding options and warrants to purchase 7,590,867 shares of the Company's
common stock. Of this amount, warrants to purchase 1,757,813 shares are held by
the Company's lender whose exercise rights are subject to a contractual
ownership limitation not to exceed 5% of the Company's outstanding voting shares
without
21
<PAGE>
prior approval of the West Virginia Lottery Commission. All but 70,000 of such
shares are either subject to registration rights or have been included in a
registration statement which the Company filed with the Securities and Exchange
Commission. See Note 2 to the Condensed and Consolidated Financial Statements.
If all such options and warrants were exercised, the Company would receive
proceeds of approximately $11.4 million. The Company expects that, subject to
shareholder approval, it will continue to grant options to its officers,
directors, and key employees.
DEFERRED INCOME TAX BENEFIT. Management believes that the substantial and
steady revenue increases earned in the past three years will continue, and
ultimately occur in amounts which will allow the Company to utilize its $18.3
million federal net operating loss tax carry forwards, although there are no
assurances that sufficient income will be earned in future years to do so. The
utilization of federal net operating losses may be subject to certain
limitations.
COMMITMENTS AND CONTINGENCIES. The Company has various commitments
including those under various employment agreements, consulting agreements,
operating leases, and the Company's pension plan and union contract. The Company
believes that it has the ability to meet all of its obligations under such
agreements. The Company believes that cash generated from operations, cash on
hand, and lines of credit will be sufficient to meet all of the Company's
currently anticipated commitments and contingencies and will be sufficient to
fund its currently-planned projects during the next 12 months. The Company also
has commitments with respect to common stock registration rights.
On October 30, 1998, the Company's oil and gas subsidiary, ExCal Energy
Corporation ("ExCal") sold to SABAL Corp., a non-affiliate of the Company, its
remaining interests in Michigan. In connection with the transaction, ExCal (i)
received an Assignment of Production Payment in the amount of $2.5 million,
which bears interest at the rate of 3% per year, matures after a term of fifteen
years, and is convertible, at the election of ExCal, into up to 25% of the
equity of SABAL; and (ii) agreed to lend to SABAL up to $500,000 to be used
principally for the development of the project. The loan to SABAL bears interest
at the rate of 15% per year (interest only for the first six months) and is for
a term of two years. See "Subsequent Events."
YEAR 2000. The Company has analyzed year 2000 issues with its computer and
software advisors and has assessed the impact of Year 2000 issues on the
Company's operations. Manufacturer's documentation of Year 2000 compliance has
been reviewed during this assessment. All information technology items, both
software and hardware, are Year 2000 compliant except for one software package
being used by the Video Lottery Department. The one software package that is not
compliant is IGT's SAMS 3 System. This system is the central communication
package that allows communication between the IGT VLTs on site and the Lottery
Commission software in Charleston, West Virginia. The solution to this Year 2000
noncompliance must be agreed upon by all four West Virginia tracks. The Company
determined that it would be more economical to replace the current SAMS 3 System
than to modify it so that it is Year 2000 compliant because the system was no
longer sufficient to meet the Company's anticipated needs irrespective of the
Year 2000 issue and because a new system would generally enhance the Company's
competitive position in the industry. The final determination of the replacement
system has not been made at this time. The Company anticipates that the
selection of the new software will be made within the next six months. The cost
of the replacement system may range from $250,000 to $500,000 per track.
A non-information technology system that is not in Year 2000 compliance at
this time is the telephone system for the West Virginia property. This phone
system is no longer sufficient to meet the Company's needs in any event. A new
system has been contracted for and installation should be completed by December
31, 1998. The cost of this system is approximately $320,000. Other software and
hardware replacements completed in 1998 involved scheduled updating of systems
and were not accelerated due to the Year 2000 issue. The Company believes that
all of its other non-information systems are Year 2000 compliant. The Company
believes that there are currently no other material Year 2000 issues to be
disclosed.
22
<PAGE>
RESULTS OF DISCONTINUED OPERATIONS. On March 31, 1993, the Company's Board
approved a formal plan to divest the Company of certain oil and gas operations
the Company owns in Michigan through a plan of orderly liquidation. This
decision was based upon several factors including (i) the anticipated potential
of the Company's gaming operations and the anticipated time to be devoted to it
by management, (ii) the expiration of "Section 29" credits, a credit against
federal income taxes derived from gas produced from Devonian Shale and "tight
sands" formations from wells commenced before January 1993, (iii) the impact of
delays in connection with the West Virginia Supreme Court litigation and
subsequent passage of enabling legislation for video lottery during 1994 which
caused management to focus the Company's efforts and financial resources on
Mountaineer Park, and (iv) the Company's desire to continue to place its primary
emphasis on its gaming and recreational businesses. That plan of orderly
liquidation provided for certain rework, remediation and development costs to
address environmental matters, increased production and enhancement of the value
of such properties for sale. The Company closed the sale of its remaining oil
and gas interests on October 30, 1998. See "Subsequent Events."
SUBSEQUENT EVENTS
DIVESTITURE OF OIL AND GAS INTERESTS. On October 30, 1998, the Company's
oil and gas subsidiary, ExCal Energy Corporation ("ExCal"), sold and transferred
to SABAL Corp., ("SABAL") all of its rights, title and interest in the joint
venture it had entered with Fleur-David corporation in December of 1992 with
respect to the Marathon-Otter Lake Field in Lapeer and Genesee Counties,
Michigan. Simultaneously, SABAL acquired Fleur-David's interest in the joint
venture as well as an adjacent gas processing plant, equipment and other
property from Tessenderlo-Kerley, Inc. ExCal and Fleur-David exchanged mutual
releases with respect to the prior joint venture. In return for its interest,
ExCal received from SABAL the assignment of a production payment in the
principal amount of $2,500,000 payable out of 1/4 of the net revenue
attributable to the interests acquired or after-acquired by SABAL in oil and gas
leases in Lapeer and Genesee counties, Michigan. The production payment is
convertible at the election of ExCal into up to 25% of the equity of SABAL and
bears interest at a rate of 3% per annum upon the unpaid balance, with all
principle and interest due, in any event, after a term of 15 years.
Also as a part of the above referenced transaction, ExCal agreed to lend
SABAL up to $500,000, of which $217,259.99 was advanced at closing, to be used
principally for the development of the project and the acquisition of additional
oil and gas leases in Michigan. The loan is for a term of two years and accrues
interest at a rate of 15% annually. The loan requires payments of interest only
for the first 6 months, and then becomes payable in equal monthly installments
of principle and interest. The Loan is also secured by substantially all the
assets of SABAL, including a first priority mortgage on the Otter Lake Gas Plant
and a perfected, first-priority security interest in the equipment SABAL
acquired from Tessenderlo-Kerley, Inc. The loan is also subject to an
Inter-Creditor Agreement between SABAL as Debtor and ExCal, Biscayne Petroleum
Corporation (an affiliate of the Company's president, Edson Arneault, which lent
money to Fleur-David (and which SABAL assumed) when ExCal lacked funds to pay
its proportionate costs of the joint venture) and Roger Landress, collectively,
as Creditors. Under the Inter-Creditor Agreement, payment to each of the
Creditors in the case of a sale of Sabal's assets is determined in proportion to
the amount owed each of the Creditors.
The sale to SABAL completes the Company's divestiture of its oil and gas
interests in accordance with the Plan of Orderly Liquidation adopted by the
Company's Board of Directors on March 31, 1993.
The Company has not determined whether the transaction will result in a
write down of the asset value on the Company's Condensed and Consolidated
Balance Sheet for the fiscal year ending December 31, 1998 or whether the
Company will reserve any amount with respect to the loan to SABAL.
ACQUISITION OF LAND ADJACENT TO THE RAMADA INN AND SPEEDWAY CASINO. On
November 2, 1998 Speakeasy Gaming of Las Vegas, Inc., a wholly owned subsidiary
of the Company, completed the acquisition from Union Oil Company of California,
of a 1/2 acre parcel of real property located adjacent to
23
<PAGE>
the Ramada Inn and Speedway Casino in North Las Vegas, Nevada for the sum of
$120,000. This property was acquired to augment the grounds surrounding the
Ramada Inn and Speedway Casino and to be utilized, primarily, to provide the
additional parking required by local authorities and needed to accommodate the
expansion of parking and operations at that location. Speakeasy will provide its
lender a first priority security interest in the parcel in accordance with the
terms of such lender's consent to the purchase.
APPLICATION FOR APPROVAL TO OPERATE CASINO GAMING. On November 12, 1998 the
Company filed its applications in the State of Nevada for approval to operate
casino gaming at the Nevada Properties.
ITEM 3.--QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not Applicable.
24
<PAGE>
PART II
OTHER INFORMATION
ITEM 1.--LEGAL PROCEEDINGS
There is incorporated by reference the information appearing under the
caption "Legal Proceedings" in the Company's Form 10-K for the year ended
December 31, 1997.
GEORGE JONES V. MOUNTAINEER PARK, INC. AND MTR GAMING GROUP, INC., Circuit
Court of Hancock County West Virginia, Civil Action No. 95-C-103G. In connection
with a Court-ordered settlement conference, the plaintiff voluntarily dismissed
all claims with the exception of the slander claim arising out of statements
made prior to the Company's acquisition of Mountaineer Park by the
then-president. Mountaineer Park and its insurer then settled the slander claim
for an amount that is not material to the Company's financial condition.
ITEM 2.--CHANGES IN SECURITIES
Not Applicable
ITEM 3.--DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4.--SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
The annual meeting of shareholders of the Registrant was held on August 21,
1998 for the purpose of (i) electing directors of the Company, (ii) approving
the adoption of the Company's 1998 Stock Incentive Plan, (iii) approving the
grant of Stock Options to the Company's independent directors, and (iv)
ratifying the appointment of the Registrant's independent public accountants for
the year ending December 31, 1998. Proxies for the meeting were solicited
pursuant to Regulation 14A of the Securities Exchange Act of 1934 and there was
no solicitation in opposition.
(a) The following directors were elected by the following vote:
<TABLE>
<CAPTION>
FOR WITHHELD
------------ ---------
<S> <C> <C>
Edson R. Arneault.............................................. 16,339,406 119,345
Robert L. Ruben................................................ 16,373,606 85,145
Robert A. Blatt................................................ 16,374,806 83,945
James V. Stanton............................................... 16,350,306 108,445
William D. Fugazy, Jr.......................................... 16,348,006 110,745
</TABLE>
(b) The proposal to approve the adoption of the Company's 1998 Stock
Incentive Plan:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
- ------------ --------- ---------
<S> <C> <C>
15,596,217 733,407 129,127
</TABLE>
(c) The proposal to ratify grant of Stock Options to the Corporation's
independent directors was approved by the following votes.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
- ------------ --------- ---------
<S> <C> <C>
15,595,887 742,532 120,332
</TABLE>
II-1
<PAGE>
(d) The proposal to ratify the appointment of the independent public
accountants for the year ending December 31, 1998 was approved by the following
vote:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
- ------------ --------- ---------
<S> <C> <C>
16,356,696 56,135 45,920
</TABLE>
ITEM 5.--OTHER INFORMATION
Not Applicable
ITEM 6.--EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<C> <S>
3.1 Articles of Incorporation, as amended (1)
3.2 Amended and Restated Articles of Incorporation, filed as of October 18,
1996 (2)
3.3 Amended Bylaws of the Company (3)
10.1 Exclusive Space Lease Agreement between the Company and Dynasty Games
Distributing (for Las Vegas Property) (4)
10.2 Exclusive Space Lease Agreement between the Company and Dynasty Games
Distributing (for Reno Property) (4)
10.3 Bill of Sale, Assignment and Quit Claim made by ExCal Energy Corporation
in favor of SABAL Corp. of ExCal's interest in oil and gas and interests
(4)
10.4 Assignment of Production Payment made by SABAL Corp. in favor of ExCal
Energy Corporation in the amount of $2.5 million (4)
10.5 Mutual Release by and between ExCal Energy Corporation, the Company and
Fleur-David Corporation (4)
10.6 Term Loan Agreement by and between ExCal Energy Corporation and SABAL
Corp. (4)
10.7 Term Note made by SABAL Corp. in favor of ExCal Energy Corporation in the
amount of $500,000 (4)
10.8 General Security Agreement made by SABAL Corp. in favor of ExCal Energy
Corporation (4)
10.9 Inter-Creditor Agreement among SABAL Corp., Roger Landress, Biscayne
Petroleum Corporation and ExCal Energy Corporation (4)
10.10 Mortgage made by SABAL Corp. in favor of ExCal Energy Corporation granting
ExCal a first priority security interest in the Otter Lake Gas Plant
recorded in Lapeer County, Michigan (4)
27.1 Financial Data Schedule (4)
99.1 Press Release Dated November 4, 1998 (4)
99.2 Press Release Dated November 2, 1998 (4)
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
99.3 Purchase Agreement by and between Speakeasy Gaming of Las Vegas, Inc. and
Union Oil Company of California for a 1/2 acre parcel of real property in
North Las Vegas, Nevada (4)
99.4 Deed transferring that 1/2 acre parcel of real property in North Las
Vegas, Nevada from Union Oil Company of California to Speakeasy Gaming of
Las Vegas, Inc. (4)
</TABLE>
- ------------------------
(1) Incorporated by reference from the Company's Annual Report on Form 10-K for
the year ended December 31, 1994.
(2) Incorporated by reference from the Company's Current Report on Form 8-K
dated October 18, 1996, filed November 1, 1996.
(3) Incorporated by reference from the Company's Current Report on Form 8-K
dated and filed on February 20, 1998.
(4) Filed herewith.
(b) Reports on Form 8-K.
The Company filed the following Current Reports on Form 8-K during the third
quarter of 1998 and thereafter:
(1) An amendment to the Current Report on Form 8-K (filed by the Company on
May 20, 1998) was filed by the Company on July 15, 1998 deleting the
description of the purchase of the Reno Ramada Hotel under Item 2 of such
Form and including such description under Item 5 of such Form.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1933, the Company has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
MTR GAMING GROUP, INC.
Date: November 13, 1998 By: /s/ EDSON R. ARNEAULT
------------------------------
Edson R. Arneault
CHAIRMAN, PRESIDENT, AND
CHIEF FINANCIAL OFFICER
<PAGE>
Exhibit 10.1
EXCLUSIVE SPACE LEASE AGREEMENT
THIS EXCLUSIVE SPACE LEASE AGREEMENT ("Agreement") dated for identification
purposes only as of the ____ day of August, 1998, is entered into by and between
SPEAKEASY GAMING OF LAS VEGAS, INC., a Nevada corporation ("SGLV"), and ROGER
LYNN FULLER AND DEE CONNIE FULLER, dba DYNASTY GAMES DISTRIBUTING ("Dynasty").
W I T N E S S E T H :
WHEREAS, SGLV and Dynasty desire to enter into this Agreement in order
for Dynasty to lease space from SGLV for the placement, operation, and servicing
of gaming devices at the Location (as defined herein).
WHEREAS, the parties have agreed that upon the complete satisfaction of
all conditions precedent as described in this Agreement, Dynasty shall lease
space from SGLV for the placement, operation, and servicing of gaming devices at
the Location pursuant to the terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein, SGLV and Dynasty hereby agree as follows:
ARTICLE I - DEFINITIONS
1.01 "Agreement" means this Agreement.
1.02 "Dynasty" means Roger Lynn Fuller and Dee Connie Fuller, dba
Dynasty Games Distributing.
1.03 "Change Person" means the person or persons employed by Dynasty as
change persons at the Location.
1.04 "Commencement Date" means the date Dynasty receives a
non-restricted license and all other required approvals from the Gaming
Authorities to operate gaming devices at the Location.
1.05 "Expiration Date" means one hundred twenty (120) days after the
Commencement Date, unless sooner terminated or renewed as provided in this
Agreement.
1.06 "Gaming Authorities" means, collectively, the Nevada Gaming
Control Board, the
1
<PAGE>
Nevada Gaming Commission, the City of North Las Vegas, and/or the County of
Clark.
1.07 "Gaming Devices" means the gaming devices Dynasty shall install
for the operation of gaming at the Location as more particularly described in
Section 5.02(A) hereof. The initial number of Gaming Devices to be installed
and operated at the Location shall be one hundred (100).
1.08 "Gaming Space" means the specific space the Location where the
Gaming Devices shall be located as determined by the parties' mutual agreement.
1.09 "Gaming Taxes" means the quarterly fee for a gaming license for a
restricted operation (NRS 463.373), the annual excise tax on slot machines (NRS
463.385), and any and all other license fees or taxes imposed on the operation
of the Gaming Devices by any governmental agency having jurisdiction over the
Location.
1.10 "Location" means the Ramada Inn and Speedway Casino located at
3227 Civic Center Drive, North Las Vegas, Nevada 89030.
1.11 "NGC Regulations" means, collectively, the Nevada Gaming Control
Act and the gaming regulations promulgated by the Nevada Gaming Commission.
1.12 "NRS" means the Nevada Revised Statutes.
1.13 "Operator of a Slot Machine Route" or "Route Operator" means the
person or entity that meets the definition of "Operator of a Slot Machine Route"
in NRS 463.018.
1.14 "SGLV" means Speakeasy Gaming of Las Vegas, Inc., a Nevada
corporation.
1.15 "Term" has the meaning ascribed to it in Section 4.01 of this
Agreement.
1.16 "Token" or "Tokens" means one dollar ($1) gaming tokens that have
been approved by the Gaming Authorities for use at the Location.
ARTICLE II - CONDITIONS PRECEDENT
2.01 CONDITION PRECEDENT. Dynasty acknowledges and agrees that
notwithstanding anything in this Agreement to the contrary, the requirement that
Dynasty, and any other person or persons associated with Dynasty required to be
licensed or found suitable by the Gaming Authorities, have been licensed or
found suitable by the Commencement Date to hold a non-restricted gaming license
for the Location shall constitute a condition precedent to the rights and
obligations of the parties under this Agreement and the validity and effect of
this Agreement.
ARTICLE III - EXCLUSIVE RIGHT
2
<PAGE>
3.01 EXCLUSIVE RIGHT. Subject to the termination provisions contained
in Article XII of this Agreement and satisfaction of the condition precedent
contained in Article II above, Dynasty hereby agrees to lease space from SGLV
and SGLV hereby agrees to lease space to Dynasty for the exclusive placement,
operation, and servicing of the Gaming Devices (the "Operation of Gaming
Devices") at the Location pursuant to the terms and conditions set forth in this
Agreement.
ARTICLE IV - TERM
4.01 TERM. Except as otherwise provided in this Agreement, the Term
shall commence on the Commencement Date and expire by its terms on the
Expiration Date without notice.
4.02 AUTOMATIC RENEWAL. This Agreement shall automatically renew for
consecutive and repetitive terms of sixty (60) days each (each a "Renewal
Term"), unless either party shall notify the other in writing at least thirty
(30) days prior to the end of the then expiring Term or Renewal Term of its
intention not to renew the Agreement.
ARTICLE V - SERVICE AND OPERATION OF GAMING DEVICES
5.01 DYNASTY'S RIGHTS AND RESPONSIBILITIES. Dynasty shall have the
exclusive space lease for the Operation of Gaming Devices during the Term of
this Agreement at the Location. SGLV shall have no participation in the
operation, service or maintenance, or revenue of the Gaming Devices or the costs
associated with operating, minting or servicing the Gaming Devices. Dynasty
shall maintain the Gaming Space in an orderly, clean, and sanitary fashion.
Dynasty shall be responsible for all Tokens to be used by Dynasty at the
Location, if any, and shall follow all requirements and obtain all approvals
related to the maintenance and use of Tokens set forth in the NGC Regulations.
5.02 LEASING OF GAMING DEVICES. Dynasty may lease a portion of the
Gaming Devices to be operated at the Location from PDS Financial Corporation
("PDS"). Upon termination of this Agreement, Dynasty shall assign and SGLV
shall assume all of Dynasty's right, title, and interest in and to the lease or
leases with PDS. Notwithstanding the preceding sentence, SGLV shall only be
required to assume the lease or leases with PDS if SGLV has obtained all
licenses and approvals from the Gaming Authorities to operate gaming at the
Location and own gaming devices (the "SGLV Gaming Approval"). Dynasty may also
lease Gaming Devices from other distributors. The parties agree that SGLV shall
assume such non-PDS leases, subject to the SGLV Gaming Approval, only if such
non-PDS leases are as favorable to SGLV as the PDS lease or leases are.
5.03 SGLV'S DUTIES AND RESPONSIBILITIES. SGLV shall provide Dynasty
with the equivalent of fifty (50) complimentary drinks per day. Dynasty shall
pay SGLV for drinks in excess of fifty (50) at SGLV's cost. SGLV shall also
provide security for the Location and for Dynasty to utilize for general
security purposes and for the drop and count of cash. Dynasty shall reimburse
SGLV for fifty percent (50%) of the actual cost to SGLV for employing such
security.
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ARTICLE VI - SPACE LEASE PAYMENTS
6.01 SPACE LEASE PAYMENTS. Dynasty shall pay to SGLV the following
amount as payment for the space lease:
(A) If Dynasty operates between 80 and 100 Gaming Devices at
the Location, Dynasty shall pay SGLV Twenty Dollars ($20) per Gaming Device per
day;
(B) If Dynasty operates between 101 and 125 Gaming Devices at
the Location, Dynasty shall pay SGLV Twenty Dollars ($25) per Gaming Device per
day beginning with the first five days the additional Gaming Devices are
installed at the Location;
(C) If Dynasty operates between 126 and 150 Gaming Devices at
the Location, Dynasty shall pay SGLV Twenty Eight Dollars ($28) per Gaming
Device per day beginning with the first day the additional Gaming Devices are
installed at the Location;
(D) If Dynasty operates between 151 and 200 Gaming Devices,
Dynasty shall pay SGLV Thirty Dollars ($30) per Gaming Device per day beginning
with the first day the additional Gaming Devices are installed at the Location.
If the parties agree that Dynasty may operate more than 200 Gaming
Devices at the Location, the parties shall determine in writing in advance the
amount per Gaming Device per day for the additional Gaming Devices. In no event
shall the amount per Gaming Device per day be less than Thirty Dollars ($30).
6.02 PAYMENT. Dynasty shall not be required to pay space lease
payments for the first month of the Term. Thereafter, space lease payments, as
adjusted in accordance with Section 6.01, shall be payable in advance on the
first day of each calendar month. For example, if the Commencement Date is
September 1, 1998, Dynasty shall pay the first space lease payment on October 1,
1998. All space lease payments, and all other amounts payable to SGLV by
Dynasty pursuant to the provisions of this Agreement, shall be paid to SGLV
without notice, demand, abatement, deduction or offset, in lawful money of the
United States at the Location or to such other person or at such other place as
SGLV may designate from time to time by written notice given to Dynasty. No
payment by Dynasty or receipt by SGLV of a lesser amount than the correct space
lease payment due hereunder shall be deemed to be other than a payment on
account; nor shall any endorsement or statement on any check or any letter
accompanying any check or payment be deemed to effect or evidence an accord and
satisfaction; and SGLV may accept such check or payment without prejudice to
SGLV's right to recover the balance or pursue any other remedy in this Agreement
or at law or in equity provided.
Dynasty shall pay to SGLV all amounts due and owing under Section
5.03 of this Agreement within seven (7) days of receiving an invoice from SGLV.
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6.03 LATE CHARGE; INTEREST. Dynasty acknowledges that the late payment
of space lease payments or any other amounts payable by Dynasty to SGLV
hereunder (all of which shall constitute additional rental to the same extent as
space lease payments) will cause SGLV to incur administrative costs and other
damages, the exact amount of which would be impracticable or extremely difficult
to ascertain. SGLV and Dynasty agree that if SGLV does not receive any such
payment on or before five (5) business days after the date the payment is due,
Dynasty shall pay to SGLV, as additional rent, (a) a late charge equal to five
percent (5%) of the overdue amount to cover such additional administrative
costs; and (b) interest on the delinquent amounts at the lesser of the maximum
rate permitted by law if any or twelve percent (12%) per annum from the date due
to the date paid.
ARTICLE VII - DYNASTY'S REPRESENTATIONS AND WARRANTIES
As a material inducement to SGLV to enter into this Agreement, Dynasty
covenants, represents, and warrants to SGLV, as of the date hereof as follows:
7.01 AUTHORITY; QUALIFICATION.
(A) Each of the individuals executing this Agreement has the full
right, power, and authority to enter into and carry out the transactions
contemplated by this Agreement. The entering into of this Agreement and the
carrying out of the transactions contemplated hereby does not and will not
constitute a default (or event which, with the giving of notice or the passage
of time, would constitute a default) under any agreement to which Dynasty or any
individual executing this Agreement is a party.
(B) This Agreement constitutes the valid and binding obligation
of Dynasty enforceable in accordance with its terms.
(C) The execution, delivery, and performance of this Agreement by
Dynasty will not materially conflict with or result in any material violation of
or constitute a material default under any judicial stipulation, judgment,
statute, writ, injunction, license, permit, or decree or order of any court or
other governmental authority relating to Dynasty and by which Dynasty is bound.
(D) There are no actions, suits, arbitration, or other legal,
administrative or other governmental proceedings pending or threatened against
or affecting Dynasty which might reasonably be expected to affect Dynasty's
ability to perform its obligations under this Agreement.
(E) All Gaming Devices installed in each of the Location under
this Agreement are or shall be approved by the Gaming Authorities and shall
comply with all applicable federal, state, county, and municipal laws.
(F) Dynasty currently has and shall retain throughout the Term a
Slot Machine Operator's License in good standing with the Gaming Authorities.
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ARTICLE VIII - SGLV'S REPRESENTATIONS AND WARRANTIES
As a material inducement to Dynasty to enter into this Agreement, SGLV
covenants, represents, and warrants to Dynasty, as of the date hereof as
follows:
8.01 AUTHORITY; QUALIFICATION.
(A) SGLV is duly incorporated and validly existing under the laws
of the State of Nevada. Each of the individuals executing this Agreement has
the full right, power, and authority to enter into and carry out the
transactions contemplated by this Agreement. The entering into of this
Agreement and the carrying out of the transactions contemplated hereby does not
and will not constitute a default (or event which, with the giving of notice or
the passage of time, would constitute a default) under any agreement to which
SGLV or any individual executing this Agreement is a party.
(B) This Agreement constitutes the valid and binding obligation
of SGLV enforceable in accordance with its terms. This Agreement and the
consummation of the transactions contemplated herein have been duly authorized
on behalf of SGLV by all requisite corporate action.
(C) The execution, delivery, and performance of this Agreement by
SGLV will not materially conflict with or result in any material violation of or
constitute a material default under:
(i) the Articles of Incorporation or Bylaws of SGLV.
(ii) any judicial stipulation, judgment, statute, writ,
injunction, license, permit, or decree or order of any court or other
governmental authority relating to SGLV and by which SGLV is bound.
(D) To the best of SGLV' knowledge, there are no actions, suits,
arbitration, or other legal, administrative or other governmental proceedings
pending or threatened against or affecting SGLV which might reasonably be
expected to affect SGLV' ability to perform its obligations under this
Agreement.
ARTICLE IX - INDEMNIFICATION AND INSURANCE
9.01 INDEMNIFICATION.
(A) INDEMNIFICATION BY DYNASTY. Dynasty shall indemnify, hold
harmless and, to the extent provided herein, defend SGLV, its shareholders,
affiliates, officers, directors, trustees, employees, agents, successors, and
assigns (collectively, "SGLV's Indemnified Persons") from and against, and
reimburse each of SGLV's Indemnified Persons with respect to, any and all
losses, damages, liabilities, costs, and expenses, including interest from the
date of such loss to the time of
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payment, and reasonable attorneys' fees (collectively, "Damages") incurred by
any of SGLV's Indemnified Persons by reason of or arising out of or in
connection with any act or omission of Dynasty or its agents, employees, or
contractors relating to Dynasty's use or occupancy of the Location, Dynasty's
operation of the Gaming Devices at the Location, or any patron dispute or
complaint lodged by the Gaming Authorities.
(B) INDEMNIFICATION BY SGLV. SGLV shall indemnify, hold
harmless and, to the extent provided herein, defend Dynasty, its officers,
directors, shareholders, and other affiliates, employees, agents, successors,
and assigns (collectively, "Dynasty's Indemnified Persons") from and against,
and reimburse each of Dynasty's Indemnified Persons with respect to, any and all
Damages incurred by any of Dynasty's Indemnified persons by reason of or arising
out of or in connection with any act or omission of SGLV or its agents,
employees, or contractors relating to SGLV's use or occupancy of the Location.
9.02 LIABILITY INSURANCE. At all times during the Term, Dynasty shall
procure and maintain, at its sole expense, commercial general liability
insurance applying to the use and occupancy of the Location. Such insurance
shall be primary and non-contributing with any other insurance procured by
Dynasty and shall have a minimum combined single limit of liability of at least
$1,000,000 per occurrence and a general aggregate limit of at least $3,000,000.
All such policies shall be written to apply to all bodily injury, property
damage, robbery of and/or by a gaming patron, or personal injury losses, and
shall be endorsed to include SGLV as an additional insured. Such liability
insurance shall be written as primary policies, not excess or contributing with
or secondary to any other insurance as may be available to the additional
insureds.
9.03 WORKERS' COMPENSATION INSURANCE. At all times during the Term,
Dynasty shall procure and maintain Workers' Compensation Insurance in accordance
with the laws of the State of Nevada for all of its employees working in or
around the Location.
ARTICLE XI - ASSIGNMENT
11.01. RESTRICTION - DYNASTY. Without the prior written consent of
SGLV, Dynasty shall not, either voluntarily or by operation of law, assign,
encumber, or otherwise transfer this Agreement or any interest or rights herein.
An assignment or other action in violation of the foregoing shall be void and,
at SGLV's option, shall constitute a material breach of this Agreement.
ARTICLE XII - DEFAULT, REMEDIES AND TERMINATION
12.01 EVENTS OF DEFAULT BY DYNASTY. The occurrence of any of the
following shall constitute a material default and breach of this Agreement by
Dynasty:
(A) The failure by Dynasty to continuously remain licensed and
in good standing with the Gaming Authorities as an Operator of a Slot Machine
Route at all times during the Term.
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(B) The failure by Dynasty to pay SGLV any amounts due and
owing under this Agreement when due.
(C) The failure by Dynasty to observe or perform any material
provision of this Agreement to be observed or performed by Dynasty if such
failure continues for thirty (30) days after written notice thereof by SGLV to
Dynasty.
(D) The making by Dynasty of any general assignment for the
benefit of creditors, the filing by or against Dynasty of a petition under any
federal or state bankruptcy or insolvency laws (unless, in the case of a
petition filed against Dynasty, the same is dismissed within thirty (30) days
after filing); the appointment of a trustee or receiver to take possession of
any of Dynasty's assets at the Location or Dynasty's interest in this Agreement;
or the attachment, execution, or other seizure of any of Dynasty's assets
located at the Location or SGLV's interest in this Agreement, if such seizure is
not discharged within thirty (30) days.
12.02 SGLV'S RIGHT TO TERMINATE UPON DYNASTY DEFAULT. In the event of
any material default by Dynasty as provided in Section 12.01 above, SGLV shall
have the right to immediately terminate this Agreement and recover possession of
the Gaming Space by giving written notice to Dynasty of SGLV's election to
terminate this Agreement, in which event SGLV shall be entitled to pursue any
remedies available to it under the law and this Agreement. The notice shall
give in reasonable detail the nature and extent of the failure and shall
identify the Agreement provision(s) containing the obligation(s).
12.03 TERMINATION WITHOUT CAUSE. Notwithstanding anything in this
Agreement to the contrary, Dynasty, in its sole discretion, may terminate this
Agreement for any reason, or for no reason, upon thirty (30) days prior written
notice to SGLV.
12.04 TERMINATION UPON SGLV GAMING APPROVAL. This Agreement shall
terminate immediately upon SGLV's obtaining the SGLV Gaming Approval.
12.05 PROCEDURE UPON TERMINATION. Upon the expiration, termination, or
cancellation of this Agreement, SGLV and Dynasty shall assist each other in the
orderly and non-disruptive conclusion hereof. Upon the effective date of such
expiration, termination, or cancellation of this Agreement, Dynasty, subject to
SGLV's responsibilities to assume the Gaming Device lease or leases, shall
remove all Gaming Devices and other property owned by Dynasty the Location in a
manner which creates the least amount of damage to property and disruption
within the Location. The cost for the removal of Dynasty's property and the
restoration of the Gaming Space to SGLV's reasonable satisfaction shall be borne
and paid by Dynasty. Upon the expiration, termination or cancellation of this
Agreement, Dynasty shall pay to SGLV all amounts due and owing under this
Agreement.
12.06 NON-WAIVER. Nothing in this Article shall be deemed to affect
either party's rights to indemnification for liability or liabilities arising
prior to termination of this Agreement for personal
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injury or property damages under the indemnification clause or clauses
contained in this Agreement.
ARTICLE XIII - NOTICES
13.01 NOTICES. All notices which Dynasty or SGLV may be required,
or may desire to serve on the other, may be served, as an alternative to
personal service, by mailing the same by registered or certified mail, postage
prepaid, addressed to Dynasty and SGLV at the addresses set forth below, or
addressed to such other address or addresses as either Dynasty or SGLV may from
time to time designate to the other in writing. Any notice shall be deemed to
have been served at the time the same was posted.
If to Dynasty: If to SGLV:
Dynasty SGLV
57 East Freeport Blvd. 200 East Sixth Street
North Las Vegas, Nevada 89030 Reno, Nevada 89501
Attn: Roger Fuller Attn: Bruce Dewing
[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY]
with copy to: with copy to:
___________________________ Jones Vargas
___________________________ 201 W. Liberty Street
___________________________ Reno, Nevada 89501
___________________________ Attn: Michael G. Alonso
ARTICLE XIV - MISCELLANEOUS
14.01 FORCE MAJEURE. Neither party shall incur any liability to the
other with respect to, and shall not be responsible for any failure to perform,
any obligations hereunder if such failure is caused by any reason beyond the
control of either party including, but not limited to, strike, labor trouble,
governmental rule, regulations, ordinance, statute, or interpretation, or by
fire, earthquake, civil commotion, or failure or disruption of utility services.
The amount of time for either party to perform any of their obligations shall be
extended by the amount of time each party is delayed in performing such
obligation by reason of any force majeure occurrence whether similar to or
different from the foregoing types of occurrences.
14.02 NEVADA LAW. The laws of the State of Nevada applicable to
contracts made and wholly performed therein shall govern the validity,
construction, performance, and effect of this Agreement.
14.03 ASSIGNMENT; BINDING EFFECT. Neither party may assign, transfer,
or convey any of its
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rights herein or hereunder to any person or entity whatsoever without the
prior written consent of the other party hereto. Any attempt to assign or
transfer this Agreement without such consent shall be considered null and
void and of no force and effect. This Agreement shall inure to the benefit
of and be binding upon the parties hereto, their respective successors and
permitted assigns.
14.04 SEVERABILITY. In the event any provision of this Agreement is
found to be unenforceable, the remainder of this Agreement shall not be
affected, and any provision found to be invalid shall be enforceable to the
extent permitted by law. The parties agree that in the event two different
interpretations may be given to any provision hereunder, one of which will
render the provision unenforceable, and one of which will render the provision
enforceable, the interpretation rendering the provision enforceable shall be
adopted.
14.05 TIME OF ESSENCE. Time is of the essence in this Agreement and all
of the terms, provisions, covenants, and conditions hereof.
14.06 CAPTIONS. The captions appearing at the commencement of the
Articles and Sections hereof are descriptive only and for convenience in
reference to this Agreement and in no way whatsoever define, limit, or describe
the scope or intent of this Agreement.
14.07 PRONOUNS. Masculine or feminine pronouns shall be substituted for
the neuter form and vice versa in any place or places herein in which the
context requires such substitution or substitutions.
14.08 KNOWLEDGE OF PARTY. Any representation or warranty herein
contained made by or on behalf of a party to the knowledge of such party shall
be deemed to mean and be limited to actual knowledge of an executive officer of
such party of the matter in question, or actual knowledge of such facts as would
charge such executive officer of such party with knowledge of the matter in
question.
14.09 ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Agreement constitutes
the entire agreement between the parties pertaining to the subject matter
contained in it and supersedes all prior agreements, brochures, informational
memoranda, representations, and understandings of the parties. This Agreement
may not be modified or terminated orally; and no modification, termination, or
waiver will be valid unless contained in a writing signed by both parties. In
addition, no such modification, termination, or waiver shall be effective for
any purpose unless it is signed by SGLV. Except as may be otherwise provided in
this Agreement, no waiver of any of the provisions, whether or not similar, nor
shall any waiver constitute a continuing waiver, and no waiver shall be binding
unless evidenced by an instrument in writing executed by the party against whom
the waiver is sought to be enforced.
14.10 NO THIRD PARTY BENEFICIARY. This Agreement is for the benefit of,
and may be enforced only by, Dynasty and SGLV and their respective successors
and permitted assigns, and is not for the benefit of, nor intended to be for the
benefit of, and may not be enforced by, any third
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party.
14.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, with each counterpart being deemed to be an original instrument,
but all such counterparts together shall constitute but one agreement.
14.12 ATTORNEY'S FEES. If any action is brought by any party hereto
concerning a breach of any of the provisions of this Agreement, the prevailing
party shall be entitled to recover from the other party the reasonable
attorneys' fees and expenses of the prevailing party incurred in connection
therewith.
14.13 NO PARTY DEEMED DRAFTER. The parties agree that neither party
shall be deemed to be the drafter of this Agreement and that in the event this
Agreement is ever construed by a court of law or entity, such court shall not
construe this Agreement or any provision hereof against either party as the
drafter of the Agreement, Dynasty and SGLV acknowledging that each has
contributed substantially and materially to the preparation hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
date written below.
SGLV: Dynasty:
SPEAKEASY GAMING OF LAS VEGAS,
INC., a Nevada corporation /s/ Robert L. Fuller
--------------------------
ROGER LYNN FULLER
By: /s/ Bruce E. Dewing Date: 8/25/98
-------------------------------
Print Title: Vice President /s/ Dee Connie Fuller
---------------------- --------------------------
DEE CONNIE FULLER
Date:
-----------------------------
Date: Sept. 1, 1998
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Exhibit 10.2
EXCLUSIVE SPACE LEASE AGREEMENT
THIS EXCLUSIVE SPACE LEASE AGREEMENT ("Agreement") dated for
identification purposes only as of the ____ day of August, 1998, is entered
into by and between SPEAKEASY GAMING OF RENO, INC., a Nevada corporation
("SGR"), and ROGER LYNN FULLER AND DEE CONNIE FULLER, dba DYNASTY GAMES
DISTRIBUTING ("Dynasty").
W I T N E S S E T H :
WHEREAS, SGR and Dynasty desire to enter into this Agreement in order
for Dynasty to lease space from SGR for the placement, operation, and
servicing of gaming devices at the Location (as defined herein).
WHEREAS, the parties have agreed that upon the complete satisfaction
of all conditions precedent as described in this Agreement, Dynasty shall
lease space from SGR for the placement, operation, and servicing of gaming
devices at the Location pursuant to the terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein, SGR and Dynasty hereby agree as follows:
ARTICLE I - DEFINITIONS
1.01 "Agreement" means this Agreement.
1.02 "Dynasty" means Roger Lynn Fuller and Dee Connie Fuller, dba
Dynasty Games Distributing.
1.03 "Change Person" means the person or persons employed by Dynasty
as change persons at the Location.
1.04 "Commencement Date" means the date Dynasty receives a
non-restricted license and all other required approvals from the Gaming
Authorities to operate gaming devices at the Location.
1.05 "Expiration Date" means one hundred twenty (120) days after the
Commencement Date, unless sooner terminated or renewed as provided in this
Agreement.
1.06 "Gaming Authorities" means, collectively, the Nevada Gaming
Control Board, the Nevada Gaming Commission, the City of Reno, and/or the
County of Washoe.
<PAGE>
1.07 "Gaming Devices" means the gaming devices Dynasty shall install
for the operation of gaming at the Location as more particularly described in
Section 5.02(A) hereof. The initial number of Gaming Devices to be installed
and operated at the Location shall be eighty (80).
1.08 "Gaming Space" means the specific space the Location where the
Gaming Devices shall be located as determined by the parties' mutual
agreement.
1.09 "Gaming Taxes" means the quarterly fee for a gaming license for
a restricted operation (NRS 463.373), the annual excise tax on slot machines
(NRS 463.385), and any and all other license fees or taxes imposed on the
operation of the Gaming Devices by any governmental agency having
jurisdiction over the Location.
1.10 "Location" means the Ramada Inn and Speakeasy Casino located at
200 East Sixth Street, Reno, Nevada 89501.
1.11 "NGC Regulations" means, collectively, the Nevada Gaming
Control Act and the gaming regulations promulgated by the Nevada Gaming
Commission.
1.12 "NRS" means the Nevada Revised Statutes.
1.13 "Operator of a Slot Machine Route" or "Route Operator" means
the person or entity that meets the definition of "Operator of a Slot Machine
Route" in NRS 463.018.
1.14 "SGR" means Speakeasy Gaming of Reno, Inc., a Nevada
corporation.
1.15 "Term" has the meaning ascribed to it in Section 4.01 of this
Agreement.
1.16 "Token" or "Tokens" means one dollar ($1) gaming tokens that
have been approved by the Gaming Authorities for use at the Location, as more
particularly described in Section 5.02(E) hereof.
ARTICLE II - CONDITIONS PRECEDENT
2.01 CONDITION PRECEDENT. Dynasty acknowledges and agrees that
notwithstanding anything in this Agreement to the contrary, the requirement
that Dynasty, and any other person or persons associated with Dynasty
required to be licensed or found suitable by the Gaming Authorities, have
been licensed or found suitable by the Commencement Date to hold a
non-restricted gaming license for the Location, shall constitute a condition
precedent to the rights and obligations of the parties under this Agreement
and the validity and effect of this Agreement.
ARTICLE III - EXCLUSIVE RIGHT
3.01 EXCLUSIVE RIGHT. Subject to the termination provisions contained
in Article XII of
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this Agreement and satisfaction of the condition precedent contained in
Article II above, Dynasty hereby agrees to lease from SGR and SGR hereby
agrees to lease space to Dynasty for the exclusive placement, operation, and
servicing of the Gaming Devices (the "Operation of Gaming Devices") at the
Location pursuant to the terms and conditions set forth in this Agreement.
ARTICLE IV - TERM
4.01 TERM. Except as otherwise provided in this Agreement, the Term
shall commence on the Commencement Date and expire by its terms on the
Expiration Date without notice.
4.02 AUTOMATIC RENEWAL. This Agreement shall automatically renew
for consecutive and repetitive terms of sixty (60) days each (each a "Renewal
Term"), unless either party shall notify the other in writing at least thirty
(30) days prior to the end of the then expiring Term or Renewal Term of its
intention not to renew the Agreement.
ARTICLE V - SERVICE AND OPERATION OF GAMING DEVICES
5.01 DYNASTY'S RIGHTS AND RESPONSIBILITIES. Dynasty shall have the
exclusive space lease for the Operation of Gaming Devices during the Term of
this Agreement at the Location. SGR shall have no participation in the
operation, service or maintenance, or revenue of the Gaming Devices or the
costs associated with operating, minting or servicing the Gaming Devices.
Dynasty shall maintain the Gaming Space in an orderly, clean, and sanitary
fashion. Dynasty shall be responsible for all Tokens to be used by Dynasty at
the Location, if any, and shall follow all requirements and obtain all
approvals related to the maintenance and use of Tokens set forth in the NGC
Regulations.
5.02 LEASING OF GAMING DEVICES. Dynasty may lease a portion of the
Gaming Devices to be operated at the Location from PDS Financial Corporation
("PDS"). Upon termination of this Agreement, Dynasty shall assign and SGR
shall assume all of Dynasty's right, title, and interest in and to the lease
or leases with PDS. Notwithstanding the preceding sentence, SGR shall only
be required to assume the lease or leases with PDS if SGR has obtained all
licenses and approvals from the Gaming Authorities to operate gaming at the
Location and own gaming devices ("SGR's Gaming Approval"). Dynasty may also
lease a portion of the Gaming Devices from other distributors. The parties
agree that SGLV shall assume such non-PDS leases, subject to the SGLV Gaming
Approval, only if such non-PDS leases are as favorable to SGLV as the PDS
lease or leases are.
5.03 SGR'S DUTIES AND RESPONSIBILITIES. SGR shall provide Dynasty
with the equivalent of fifty (50) complimentary drinks per day. Dynasty
shall pay SGR for drinks in excess of fifty (50) at SGR's cost. SGR shall
also provide security for the Location and for Dynasty to utilize for general
security purposes and for the drop and count of cash. Dynasty shall
reimburse SGR on a monthly basis for fifty percent (50%) of the actual cost
to SGR for employing such security.
ARTICLE VI - SPACE LEASE PAYMENTS
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6.01 SPACE LEASE PAYMENTS. Dynasty shall pay to SGR the following
amount as payment for the space lease:
(A) If Dynasty operates 80 Gaming Devices at the Location,
Dynasty shall pay SGR Ten Dollars ($10) per Gaming Device per day;
(B) If Dynasty operates between 81 and 100 Gaming Devices at
the Location, Dynasty shall pay SGR Twelve Dollars ($12) per Gaming Device
per day beginning with the first day the additional Gaming Devices are
installed at the Location;
(C) If Dynasty operates between 101 and 125 Gaming Devices
at the Location, Dynasty shall pay SGR Fourteen Dollars ($14) per Gaming
Device per day beginning with the first day the additional Gaming Devices are
installed at the Location;
(D) If Dynasty operates between 126 and 150 Gaming Devices,
Dynasty shall pay SGR Sixteen Dollars ($16) per Gaming Device per day
beginning with the first day the additional Gaming Devices are installed at
the Location.
If the parties agree that Dynasty may operate more than 150 Gaming
Devices at the Location, the parties shall determine in writing in advance
the amount per Gaming Device per day for the additional Gaming Devices. In
no event shall the amount per Gaming Device per day be less than Sixteen
Dollars ($16).
6.02 PAYMENT. Dynasty shall not be required to pay space lease
payments for the first month of the Term. Thereafter, space lease payments,
as adjusted in accordance with Section 6.01, shall be payable in advance on
the first day of each month. For example, if the Commencement Date is
September 1, 1998, Dynasty shall pay the first space lease payment on October
1, 1998. All space lease payments, and all other amounts payable to SGR by
Dynasty pursuant to the provisions of this Agreement, shall be paid to SGR
without notice, demand, abatement, deduction or offset, in lawful money of
the United States at the Location or to such other person or at such other
place as SGR may designate from time to time by written notice given to
Dynasty. No payment by Dynasty or receipt by SGR of a lesser amount than the
correct space lease payment due hereunder shall be deemed to be other than a
payment on account; nor shall any endorsement or statement on any check or
any letter accompanying any check or payment be deemed to effect or evidence
an accord and satisfaction; and SGR may accept such check or payment without
prejudice to SGR's right to recover the balance or pursue any other remedy in
this Agreement or at law or in equity provided.
Dynasty shall pay to SGR all amounts due and owing under Section 5.03
of this Agreement within seven (7) days of receiving an invoice from SGR.
6.03 LATE CHARGE; INTEREST. Dynasty acknowledges that the late
payment of space lease payments or any other amounts payable by Dynasty to
SGR hereunder (all of which shall constitute additional rental to the same
extent as space lease payments) will cause SGR to incur administrative
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costs and other damages, the exact amount of which would be impracticable or
extremely difficult to ascertain. SGR and Dynasty agree that if SGR does not
receive any such payment on or before five (5) business days after the date
the payment is due, Dynasty shall pay to SGR, as additional rent, (a) a late
charge equal to five percent (5%) of the overdue amount to cover such
additional administrative costs; and (b) interest on the delinquent amounts
at the lesser of the maximum rate permitted by law if any or twelve percent
(12%) per annum from the date due to the date paid.
ARTICLE VII - DYNASTY'S REPRESENTATIONS AND WARRANTIES
As a material inducement to SGR to enter into this Agreement, Dynasty
covenants, represents, and warrants to SGR, as of the date hereof as follows:
7.01 AUTHORITY; QUALIFICATION.
(A) Each of the individuals executing this Agreement has the
full right, power, and authority to enter into and carry out the transactions
contemplated by this Agreement. The entering into of this Agreement and the
carrying out of the transactions contemplated hereby does not and will not
constitute a default (or event which, with the giving of notice or the
passage of time, would constitute a default) under any agreement to which
Dynasty or any individual executing this Agreement is a party.
(B) This Agreement constitutes the valid and binding
obligation of Dynasty enforceable in accordance with its terms.
(C) The execution, delivery, and performance of this
Agreement by Dynasty will not materially conflict with or result in any
material violation of or constitute a material default under any judicial
stipulation, judgment, statute, writ, injunction, license, permit, or decree
or order of any court or other governmental authority relating to Dynasty and
by which Dynasty is bound.
(D) There are no actions, suits, arbitration, or other
legal, administrative or other governmental proceedings pending or threatened
against or affecting Dynasty which might reasonably be expected to affect
Dynasty's ability to perform its obligations under this Agreement.
(E) All Gaming Devices installed in each of the Location
under this Agreement are or shall be approved by the Gaming Authorities and
shall comply with all applicable federal, state, county, and municipal laws.
(F) Dynasty currently has and shall retain throughout the
Term a Slot Machine Operator's License in good standing with the Gaming
Authorities.
ARTICLE VIII - SGR'S REPRESENTATIONS AND WARRANTIES
As a material inducement to Dynasty to enter into this Agreement, SGR
covenants,
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represents, and warrants to Dynasty, as of the date hereof as follows:
8.01 AUTHORITY; QUALIFICATION.
(A) SGR is duly incorporated and validly existing under the
laws of the State of Nevada. Each of the individuals executing this
Agreement has the full right, power, and authority to enter into and carry
out the transactions contemplated by this Agreement. The entering into of
this Agreement and the carrying out of the transactions contemplated hereby
does not and will not constitute a default (or event which, with the giving
of notice or the passage of time, would constitute a default) under any
agreement to which SGR or any individual executing this Agreement is a party.
(B) This Agreement constitutes the valid and binding
obligation of SGR enforceable in accordance with its terms. This Agreement
and the consummation of the transactions contemplated herein have been duly
authorized on behalf of SGR by all requisite corporate action.
(C) The execution, delivery, and performance of this
Agreement by SGR will not materially conflict with or result in any material
violation of or constitute a material default under:
(i) the Articles of Incorporation or Bylaws of SGR.
(ii) any judicial stipulation, judgment, statute, writ,
injunction, license, permit, or decree or order of any court or other
governmental authority relating to SGR and by which SGR is bound.
(D) To the best of SGR' knowledge, there are no actions,
suits, arbitration, or other legal, administrative or other governmental
proceedings pending or threatened against or affecting SGR which might
reasonably be expected to affect SGR' ability to perform its obligations
under this Agreement.
ARTICLE IX - INDEMNIFICATION AND INSURANCE
9.01 INDEMNIFICATION.
(A) INDEMNIFICATION BY DYNASTY. Dynasty shall indemnify,
hold harmless and, to the extent provided herein, defend SGR, its
shareholders, affiliates, officers, directors, trustees, employees, agents,
successors, and assigns (collectively, "SGR's Indemnified Persons") from and
against, and reimburse each of SGR's Indemnified Persons with respect to, any
and all losses, damages, liabilities, costs, and expenses, including interest
from the date of such loss to the time of payment, and reasonable attorneys'
fees (collectively, "Damages") incurred by any of SGR's Indemnified Persons
by reason of or arising out of or in connection with any act or omission of
Dynasty or its agents, employees, or contractors relating to Dynasty's use or
occupancy of the Location, Dynasty's operation of the Gaming Devices at the
Location, or any patron dispute or
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complaint lodged by the Gaming Authorities.
(B) INDEMNIFICATION BY SGR. SGR shall indemnify, hold harmless
and, to the extent provided herein, defend Dynasty, its officers, directors,
shareholders, and other affiliates, employees, agents, successors, and assigns
(collectively, "Dynasty's Indemnified Persons") from and against, and reimburse
each of Dynasty's Indemnified Persons with respect to, any and all Damages
incurred by any of Dynasty's Indemnified persons by reason of or arising out of
or in connection with any act or omission of SGR or its agents, employees, or
contractors relating to SGR's use or occupancy of the Location.
9.02 LIABILITY INSURANCE. At all times during the Term, Dynasty shall
procure and maintain, at its sole expense, commercial general liability
insurance applying to the use and occupancy of the Location. Such insurance
shall be primary and non-contributing with any other insurance procured by
Dynasty and shall have a minimum combined single limit of liability of at least
$1,000,000 per occurrence and a general aggregate limit of at least $3,000,000.
All such policies shall be written to apply to all bodily injury, property
damage, robbery of and/or by a gaming patron, or personal injury losses, and
shall be endorsed to include SGR as an additional insured. Such liability
insurance shall be written as primary policies, not excess or contributing with
or secondary to any other insurance as may be available to the additional
insureds.
9.03 WORKERS' COMPENSATION INSURANCE. At all times during the Term,
Dynasty shall procure and maintain Workers' Compensation Insurance in accordance
with the laws of the State of Nevada for all of its employees working in or
around the Location.
ARTICLE XI - ASSIGNMENT
11.01. RESTRICTION - DYNASTY. Without the prior written consent of SGR,
Dynasty shall not, either voluntarily or by operation of law, assign, encumber,
or otherwise transfer this Agreement or any interest or rights herein. An
assignment or other action in violation of the foregoing shall be void and, at
SGR's option, shall constitute a material breach of this Agreement.
ARTICLE XII - DEFAULT, REMEDIES AND TERMINATION
12.01 EVENTS OF DEFAULT BY DYNASTY. The occurrence of any of the
following shall constitute a material default and breach of this Agreement by
Dynasty:
(A) The failure by Dynasty to continuously remain licensed and
in good standing with the Gaming Authorities as an Operator of a Slot Machine
Route at all times during the Term.
(B) The failure by Dynasty to pay SGR any amounts due and owing
under this Agreement when due.
(C) The failure by Dynasty to observe or perform any material
provision of this
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Agreement to be observed or performed by Dynasty if such failure continues
for thirty (30) days after written notice thereof by SGR to Dynasty.
(D) The making by Dynasty of any general assignment for the
benefit of creditors, the filing by or against Dynasty of a petition under any
federal or state bankruptcy or insolvency laws (unless, in the case of a
petition filed against Dynasty, the same is dismissed within thirty (30) days
after filing); the appointment of a trustee or receiver to take possession of
any of Dynasty's assets at the Location or Dynasty's interest in this Agreement;
or the attachment, execution, or other seizure of any of Dynasty's assets
located at the Location or SGR's interest in this Agreement, if such seizure is
not discharged within thirty (30) days.
12.02 SGR'S RIGHT TO TERMINATE UPON DYNASTY DEFAULT. In the event of
any material default by Dynasty as provided in Section 12.01 above, SGR shall
have the right to immediately terminate this Agreement and recover possession of
the Gaming Space by giving written notice to Dynasty of SGR's election to
terminate this Agreement, in which event SGR shall be entitled to pursue any
remedies available to it under the law and this Agreement. The notice shall
give in reasonable detail the nature and extent of the failure and shall
identify the Agreement provision(s) containing the obligation(s).
12.03 TERMINATION WITHOUT CAUSE. Notwithstanding anything in this
Agreement to the contrary, Dynasty, in its sole discretion, may terminate this
Agreement for any reason, or for no reason, upon thirty (30) days prior written
notice to SGR.
12.04 TERMINATION UPON SGR GAMING APPROVAL. This Agreement shall
terminate immediately upon SGR's obtaining the SGR Gaming Approval.
12.05 PROCEDURE UPON TERMINATION. Upon the expiration, termination, or
cancellation of this Agreement, SGR and Dynasty shall assist each other in the
orderly and non-disruptive conclusion hereof. Upon the effective date of such
expiration, termination, or cancellation of this Agreement, Dynasty, subject to
SGR's responsibilities to assume the Gaming Device lease or leases, shall remove
all Gaming Devices and other property owned by Dynasty the Location in a manner
which creates the least amount of damage to property and disruption within the
Location. The cost for the removal of Dynasty's property and the restoration of
the Gaming Space to SGR's reasonable satisfaction shall be borne and paid by
Dynasty. Upon the expiration, termination or cancellation of this Agreement,
Dynasty shall pay to SGR all amounts due and owing under this Agreement.
12.06 NON-WAIVER. Nothing in this Article shall be deemed to affect
either party's rights to indemnification for liability or liabilities arising
prior to termination of this Agreement for personal injury or property damages
under the indemnification clause or clauses contained in this Agreement.
ARTICLE XIII - NOTICES
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13.01 NOTICES. All notices which Dynasty or SGR may be required, or may
desire to serve on the other, may be served, as an alternative to personal
service, by mailing the same by registered or certified mail, postage prepaid,
addressed to Dynasty and SGR at the addresses set forth below, or addressed to
such other address or addresses as either Dynasty or SGR may from time to time
designate to the other in writing. Any notice shall be deemed to have been
served at the time the same was posted.
If to Dynasty: If to SGR:
Dynasty SGR
57 E. Freeport Blvd. 200 E. Sixth Street
Sparks, Nevada 89431 Reno, Nevada 89501
Attn: Roger Fuller Attn: Bruce Dewing
with copy to: with copy to:
_____________________ Jones Vargas
_____________________ 201 W. Liberty Street
_____________________ Reno, Nevada 89501
Attn:________________ Attn: Michael G. Alonso
ARTICLE XIV - MISCELLANEOUS
14.01 FORCE MAJEURE. Neither party shall incur any liability to the
other with respect to, and shall not be responsible for any failure to perform,
any obligations hereunder if such failure is caused by any reason beyond the
control of either party including, but not limited to, strike, labor trouble,
governmental rule, regulations, ordinance, statute, or interpretation, or by
fire, earthquake, civil commotion, or failure or disruption of utility services.
The amount of time for either party to perform any of their obligations shall be
extended by the amount of time each party is delayed in performing such
obligation by reason of any force majeure occurrence whether similar to or
different from the foregoing types of occurrences.
14.02 NEVADA LAW. The laws of the State of Nevada applicable to
contracts made and wholly performed therein shall govern the validity,
construction, performance, and effect of this Agreement.
14.03 ASSIGNMENT; BINDING EFFECT. Neither party may assign, transfer,
or convey any of its rights herein or hereunder to any person or entity
whatsoever without the prior written consent of the other party hereto. Any
attempt to assign or transfer this Agreement without such consent shall be
considered null and void and of no force and effect. This Agreement shall inure
to the benefit of and be binding upon the parties hereto, their respective
successors and permitted assigns.
14.04 SEVERABILITY. In the event any provision of this Agreement is
found to be unenforceable, the remainder of this Agreement shall not be
affected, and any provision found to be
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invalid shall be enforceable to the extent permitted by law. The parties
agree that in the event two different interpretations may be given to any
provision hereunder, one of which will render the provision unenforceable,
and one of which will render the provision enforceable, the interpretation
rendering the provision enforceable shall be adopted.
14.05 TIME OF ESSENCE. Time is of the essence in this Agreement and all
of the terms, provisions, covenants, and conditions hereof.
14.06 CAPTIONS. The captions appearing at the commencement of the
Articles and Sections hereof are descriptive only and for convenience in
reference to this Agreement and in no way whatsoever define, limit, or describe
the scope or intent of this Agreement.
14.07 PRONOUNS. Masculine or feminine pronouns shall be substituted for
the neuter form and vice versa in any place or places herein in which the
context requires such substitution or substitutions.
14.08 KNOWLEDGE OF PARTY. Any representation or warranty herein
contained made by or on behalf of a party to the knowledge of such party shall
be deemed to mean and be limited to actual knowledge of an executive officer of
such party of the matter in question, or actual knowledge of such facts as would
charge such executive officer of such party with knowledge of the matter in
question.
14.09 ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Agreement constitutes
the entire agreement between the parties pertaining to the subject matter
contained in it and supersedes all prior agreements, brochures, informational
memoranda, representations, and understandings of the parties. This Agreement
may not be modified or terminated orally; and no modification, termination, or
waiver will be valid unless contained in a writing signed by both parties. In
addition, no such modification, termination, or waiver shall be effective for
any purpose unless it is signed by SGR. Except as may be otherwise provided in
this Agreement, no waiver of any of the provisions, whether or not similar, nor
shall any waiver constitute a continuing waiver, and no waiver shall be binding
unless evidenced by an instrument in writing executed by the party against whom
the waiver is sought to be enforced.
14.10 NO THIRD PARTY BENEFICIARY. This Agreement is for the benefit of,
and may be enforced only by, Dynasty and SGR and their respective successors and
permitted assigns, and is not for the benefit of, nor intended to be for the
benefit of, and may not be enforced by, any third party.
14.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, with each counterpart being deemed to be an original instrument,
but all such counterparts together shall constitute but one agreement.
14.12 ATTORNEY'S FEES. If any action is brought by any party hereto
concerning a breach of
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any of the provisions of this Agreement, the prevailing party shall be
entitled to recover from the other party the reasonable attorneys' fees and
expenses of the prevailing party incurred in connection therewith.
14.13 NO PARTY DEEMED DRAFTER. The parties agree that neither party
shall be deemed to be the drafter of this Agreement and that in the event this
Agreement is ever construed by a court of law or entity, such court shall not
construe this Agreement or any provision hereof against either party as the
drafter of the Agreement, Dynasty and SGR acknowledging that each has
contributed substantially and materially to the preparation hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
date written below.
SGR: Dynasty:
SPEAKEASY GAMING OF RENO,
INC., a Nevada corporation /s/ Roger L. Fuller
-----------------------------
ROGER LYNN FULLER
By: /s/ Bruce E. Dewing Date: 8/25/98
- -----------------------------
Print Title: Vice President /s/ Dee Connie Fuller
-----------------------------
DEE CONNIE FULLER
Date: Date: Sept. 1, 1998
------------------------
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Exhibit 10.3
BILL OF SALE, QUIT CLAIM AND
ASSIGNMENT OF INTEREST
FOR AND IN CONSIDERATION of (i) the delivery by SABAL CORP., a Nevada
corporation with an address at 5830 McArdle No. 14 Crossroads, Suite 203,
Corpus Christi, Texas 78412 (herein called "Assignee") of that certain
Assignment of Production Payment of even date herewith (herein so called);
(ii) the execution and delivery of that certain mutual release by and between
Assignor and Fleur-David Corporation of even date herewith and (iii) for
other good and valuable consideration the receipt and sufficiency of which
are hereby acknowledged, EXCAL ENERGY CORPORATION, a Michigan corporation,
and MTR Gaming Group, Inc., a Delaware corporation, each with an address at
State Route 2, South, Chester, West Virginia 26034; (herein collectively
called "Assignor"), do hereby SELL, QUIT CLAIM, ASSIGN, TRANSFER, AND DELIVER
unto Assignee, its successors and assigns forever, all of Assignor's right,
title, and interest, without warranty or representation of any kind or nature
whatsoever, in and to the oil and gas leases described on Exhibit 1 hereto,
the interests being so sold and assigned being collectively referred to as
the "Leases" and do hereby release and forfeit any and all of Assignor's
rights and interests in and to the Area of Mutual Interest described on
Exhibit II hereto (the "AMI"). Exhibits I and II are incorporated herein, by
this reference.
Assignee, for itself and its successors and assigns, hereby accepts
and assumes the Leases and further warrants to fulfill all of the
representations, warranties, covenants, agreements and obligations of the
Assignor as to the Leases.
This sale and assignment is made pursuant to that certain Term Loan
Agreement of even date herewith between Assignor, as Lender, and Assignee, as
Borrower, and is subject to all of the terms and conditions of said Term Loan
Agreement.
EXECUTED as of the 30th day of October, 1998.
EXCAL ENERGY CORPORATION
By: /s/ Robert L. Ruben
----------------------------------
Robert L. Ruben, Attorney-in-Fact
MTR GAMING GROUP, INC.
By: /s/ Robert L. Ruben
----------------------------------
Robert L. Ruben, Attorney-in-Fact
SABAL CORP.
By: /s/ Roger Landress
----------------------------------
Roger Landress, President
<PAGE>
ACKNOWLEDGEMENTS
STATE OF )
COUNTY OF )
This instrument was acknowledged before me on the 27th day of
October, 1998, by Robert L. Ruben, Attorney-in-Fact of EXCAL ENERGY
CORPORATION.
/s/ Elva R. Barriteau
---------------------------------------------
Notary Public, District of Columbia
STATE OF )
COUNTY OF )
This instrument was acknowledged before me on the 27th day of
October, 1998, by Robert L. Ruben, Attorney-in-Fact of MTR GAMING GROUP, INC.
/s/ Elva R. Barriteau
--------------------------------------------
Notary Public, District of Columbia
STATE OF )
COUNTY OF )
This instrument was acknowledged before me on the 30th day of
October, 1998, by Roger Landress, President of SABAL CORP.
/s/ Jeanette E. Fuller
--------------------------------------------
Notary Public, State of Texas
2
<PAGE>
EXHIBIT 1 TO BILL OF SALE, QUIT CLAIM AND
ASSIGNMENT OF INTEREST
LEASES
GRANTOR: Robert F. Ulrich, et ux
GRANTEE: Fleur-David Corporation
DATE: October 5, 1993
DESCRIPTION: FOREST TNP, GENESEE COUNTY, SECTION 13, T9N-RSE The
NW/4 of NW/4, EXCEPT commencing at the NE comer of
the NW/4 of NWI/2 thence running West along Farrand
Rd. 18 rods, thence S 18 rods, thence N 18 rods,
thence N 18 rods to the POB, LSO EXCEPTING comm 18
rods W of the NE comer of the NW1/2 of NWI/4, thence
W260' ch. S 297 thence E 260' thence N 297' to POB,
ALSO EXCEPTING comm..at the NW comer of. the NWI/4
of NW, thence E 627' thence S 313.5, thence l56.75',
thence N313.5', thence WI56.75' to the POB.
GRANTOR: James Richardson, et ux
GRANTEE: FLEUR-DAVID CORPORATION
DATE: August 5, 1992
DESCRIPTION: in Lapeer County, Michigan, to-wit: Section 17,
T9N-R9E, Marathon Township NW 1/4 of NE 1/4 E 1/2 of
NW 1/4 N 1/2 of NE I/4 of SW1/4
GRANTOR: LEO SAMMONS, et ux
GRANTEE: FLEUR-DAVID CORPORATION
DATE: August 6, 1992
DESCRIPTION: in Genesee County, Michigan, to-wit: all that part
of N 1/2 of SW 1/4 lying wly of P.M.R.R. 36 acres
more or less. W.1/2 of S.E 1/4, Except 295.16 ft. of
S.295.16ft. 78 acres, more or less. And E. 1/2 of
S.E. 1/4 Sec. 1. 80 acres more or less. 158 acres,
more or less in Forest, Township, Range R8E.
AREA OF MUTUAL INTEREST
All of the lands lying within Sections 7 through 22, both inclusive, in
Township 9 North, Range 9 East, Lapeer County, Michigan and in Sections 1, 2,
11, 12, 13 and 14, in Township 9 North, Range 8 East, Genesee County, Michigan
are hereby declared to be an Area of Mutual Interest ("AMI") with respect to any
oil, gas and mineral leases, or mineral or royalty interest including any
contractual right to acquire any such interests, including without limitation
any options, farmout or farm-in agreements, or any other agreements under the
terms of which Sabal Corp. any of its affiliates may acquire any such interest,
except by devise, inheritance or gift from a family member.
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Exhibit 10.4
ASSIGNMENT OF PRODUCTION PAYMENT
STATE OF MICHIGAN )
)
COUNTIES LAPEER AND GENESEE )
KNOWN ALL MEN BY THESE PRESENTS: That SABAL CORP., a Nevada
corporation (hereinafter called "Assignor") whose address is 5830 McArdle No.
14 Crossroads, Suit 203, Corpus Christi, Texas 78412, for and in
consideration of the sum of Ten and No/100 Dollars ($10.00) to it in hand
paid by EXCAL ENERGY CORPORATION, a Michigan corporation (hereinafter called
"Assignee"), whose address is c/o MTR Gaming Group, Inc. State Route 2,
South, Chester, West Virginia 26034, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged
has, and by these presents, does hereby BARGAIN, SELL, TRANSFER, ASSIGN and
CONVEY unto the said EXCAL ENERGY CORPORATION a production payment in the
amount of Two Million Five Hundred Thousand and No/100 Dollars
($2,500,000.00) plus an additional amount calculated as interest at the rate
of 3% per annum upon the unpaid balance of such production payment from the
date hereof until paid (the amount remaining unpaid hereunder being called
the "Production Payment"). The Production Payment shall be payable out of
one-fourth (1/4) of the net revenue interest attributable to any interest
acquired by Assignor in and to any oil and gas leases (the "Leases") covering
the lands situated in Lapeer and Genesee Counties, Michigan which are covered
by any of the leases described on the Exhibit "A" attached hereto and
incorporated herein by reference for all purposes, and all leases hereafter
acquired in the Area of Mutual Interest described in Exhibit A -- in each
case after deducting therefrom the Lessor's royalty reserved in each of said
Leases and any overriding royalty interest or any other burdens upon said
Leases evidenced of record at the time of Assignor's acquisition of each such
Leases and all severance, production, excise or other similar taxes measured
by the amount of or the value of such production and provided further that
there shall be deducted from said amount one-fourth (1/4) of the Lifting Cost
as such term is hereinafter defined. Any portion of the Production Payment
remaining unpaid plus all accrued interest shall be due and payable fifteen
(15) years from the date of this Agreement.
<PAGE>
The term "Lifting Cost" as used herein shall include all of the costs of
acquiring, developing, operating and producing the oil or gas from the Leases
and of treating, transporting or marketing the oil or gas so produced as well as
the cost of reworking any well or wells located on the Leases.
Assignor agrees to furnish Assignee monthly statements reflecting the
total production from the Leases, the amount of monies received therefor and the
Lifting Cost incurred and further grants to Assignee the right to inspect and
copy Assignor's books and records pertaining to the Leases during regular
business hours.
All monies paid to Assignee hereunder shall be applied first to accrued
but unpaid interest, and the remainder to the unliquidated balance of the
Production Payment.
Assignee agrees to execute such documents as may be reasonably requested
by Assignor or its successors in interest from time to time to evidence the
unliquidated balance of the Production Payment or to evidence the termination
upon the Production Payment being paid in full.
Assignor reserves the right to pay to Assignee the unpaid balance of the
Production Payment at any time and upon such payment, the Production Payment
shall terminate.
For so long as the Production Payment is outstanding, Assignee may, at
its sole election, by written notice to Assignor and surrender of this
Production Payment, convert the Production Payment into that number of shares of
common stock of Assignor equal to twenty five percent (25%) of the common stock
of Assignor on a fully diluted basis after giving effect to such conversion;
PROVIDED, HOWEVER, that such percentage shall be reduced in proportion with any
payments made prior to such conversion by multiplying twenty five percent (25%)
by a fraction the numerator of which is the then-outstanding balance of the
Production Payment and the denominator of which is $2,500,000.00.
Nothing contained herein shall be deemed to constitute or create a joint
venture or partnership between Assignor and Assignee.
TO HAVE AND TO HOLD unto the said EXCAL ENERGY CORPORATION, its
successors and assigns forever in accordance with the terms hereof.
EXECUTED to be effective as of the 30 day of October, 1998.
SABAL CORP.
2
<PAGE>
By: /s/ Roger Landress
------------------------------
Roger Landress, President
3
<PAGE>
STATE OF TEXAS Section
Section
COUNTY OF TRAVIS Section
This instrument was acknowledged before me on the 30 day of October,
1998 by Roger Landress, President of SABAL CORP.
/s/ Jeanette E. Fuller
------------------------------------------
Notary Public, State of Texas
4
<PAGE>
Exhibit 10.5
MUTUAL RELEASE AGREEMENT
This Mutual Release Agreement (the "Release") is entered into by and
between EXCAL ENERGY CORPORATION ("EXCAL"), MTR GAMING GROUP, INC. ("MTR"),
FLEUR-DAVID CORPORATION ("FLEUR-DAVID") and SABAL CORPORATION ("SABAL")
effective as of this 30 day of October, 1998.
RECITALS
WHEREAS, contemporaneously with the execution of this Agreement, SABAL
and EXCAL have entered into a Term Loan Agreement (the "Loan Agreement"); and
WHEREAS, contemporaneously with the execution of this Agreement, EXCAL
and MTR have conveyed their interest in certain oil and gas leases to Sabal
pursuant to a Bill of Sale, Quitclaim and Assignment of Interest (the "Bill
of Sale"); and
WHEREAS, contemporaneously with the execution of this document, SABAL
executed an Assignment of Production Payment (the "Production Payment")
conveying a production payment to EXCAL; and
WHEREAS, SABAL and FLEUR-DAVID CORPORATION have entered into a Letter
Agreement dated October 13, 1998 (the "Letter Agreement") pursuant to
which SABAL will acquire certain oil and gas leases and contract rights from
FLEUR-DAVID, an Assignment and Assumption Agreement of even date herewith
(the "Assignment and Assumption Agreement"); a Bill of Sale and a Bill of
Sale, Quitclaim and Assignment of Interests (collectively the "F-D Bills of
Sale"); and
<PAGE>
WHEREAS, MTR and EXCAL, on the one hand, FLEUR-DAVID and SABAL, on the
other, wish to resolve certain claims which the parties might have against
each other and to set forth the terms of such agreement in a written
document, it is therefore agreed as follows:
AGREEMENT
1. For the foregoing and other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, MTR and EXCAL
hereby release FLEUR-DAVID and SABAL, their respective shareholders,
officers, directors, employees, representatives, attorneys and assigns from
any and all claims, causes of action, debts, losses, expenses or other
obligations of any kind or nature whatsoever, arising out of the prior
dealings of the parties with respect to certain oil and gas leases and
operations within the Area of Mutual Interest described on Exhibit 1 hereto.
2. For the foregoing and other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, FLEUR-DAVID and
SABAL hereby release MTR and EXCAL, their respective shareholders, officers,
directors, employees, representatives, attorneys and assigns from any and all
claims, causes of action, debts, losses, expenses or other obligations of any
kind or nature whatsoever, arising out of the prior dealings of the parties
with respect to certain oil and gas leases and operations within the Area of
Mutual Interest described on Exhibit 1 hereto.
3. Notwithstanding the foregoing releases, nothing herein shall
release MTR, EXCAL or SABAL from their duties and obligations with respect
to the Loan Agreement, the Bill of Sale, the Assignment of Production
Payment, or other documents executed in connection therewith, it being the
intention of the parties to this Release that only the causes of action which
existed prior
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to the execution of the Loan Agreement, the Bill of Sale and the Assignment
of Production Payment executed contemporaneously herewith be released.
4. Notwithstanding the foregoing releases, nothing herein shall
release SABAL or FLEUR-DAVID from their duties and obligations with respect
to the Letter Agreement, the Assignment and Assumption Agreement, the F-D
Bills of Sale or other documents executed in connection therewith, it being
the intention of the parties to this Release that only the causes of action
which existed prior to the execution of the Letter Agreement, the F-D Bills
of Sale and the Assignment and Assumption Agreement be released.
5. This Release may be executed in any number of counterparts, and
by different parties hereto in separate counterparts, each of which shall be
deemed to be an original, but all of which taken together shall constitute
one and the same agreement. This Agreement shall be effective upon receipt
by each of the parties hereto of a facsimile copy of an executed counterpart,
with the original executed counterpart to be forwarded to the other party as
soon as practicable thereafter.
EXCAL ENERGY CORPORATION
By: /s/ Robert L. Ruben
--------------------------------
Name: Robert L. Ruben
Title: Attorney-in-fact
SABAL CORP.
By: /s/ Roger Landress
--------------------------------
Name: Roger Landress
Title: President
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MTR GAMING GROUP, INC.
By: /s/ Robert L. Ruben
---------------------------------
Name: Robert L. Ruben
Title: Attorney-in-fact
Assistant Secretary, Director
FLEUR-DAVID CORPORATION
By: /s/ Ralph Curton Jr.
---------------------------------
Name: Ralph Curton Jr.
Title: Chairman, CEO
THE DISTRICT OF COLUMBIA Section
Section
Section
This instrument was acknowledged before me on the 27th day
of October, 1998 by ROBERT L. Ruben, Attorney-in-fact of EXCAL ENERGY
CORPORATION.
/s/ Elva R. Barriteau
--------------------------------
NOTARY PUBLIC, DISTRICT OF COLUMBIA
THE STATE OF TEXAS Section
Section
COUNTY OF TRAVIS Section
This instrument was acknowledged before me on the 19th day
of October, 1998 by ROGER LANDRESS, President of SABAL CORP.
/s/ Jeanette E. Fuller
--------------------------------
NOTARY PUBLIC, STATE OF TEXAS
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<PAGE>
DISTRICT OF COLUMBIA Section
Section
Section
This instrument was acknowledged before me on the 27th day
of October, 1998 by Robert L. Ruben, Attorney-in-fact of MTR GAMING GROUP, INC.
/s/ Elva R. Barriteau
--------------------------------
NOTARY PUBLIC, DISTRICT
THE STATE OF TEXAS Section
Section
COUNTY OF DALLAS Section
This instrument was acknowledged before me on the _____ day
of ________, 1998 by Ralph Curton, Jr., Chairman CEO of FLEUR-DAVID
CORPORATION.
/s/ Linda M. Poole
--------------------------------
NOTARY PUBLIC, STATE OF TEXAS
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Exhibit 10.6
TERM LOAN AGREEMENT
Dated as of October 19, 1998
between
SABAL CORP., as Borrower
and
EXCAL ENERGY CORPORATION, as Lender
<PAGE>
TERM LOAN AGREEMENT
TERM LOAN AGREEMENT ("Agreement"), dated as of October 30, 1998
(the "Effective Date"), between SABAL CORP. a Nevada corporation (the
"Borrower"), and EXCAL ENERGY CORPORATION, a Michigan corporation (the
"Lender").
RECITALS
WHEREAS, the Borrower and the Lender desire to set forth their
agreements regarding a variety of matters, including a loan by the Lender to
the Borrower in the initial principal amount of up to $500,000 (the "Loan");
NOW, THEREFORE, in consideration of the premises and the agreements
herein, the Lender and the Borrower hereby agree as follows:
ARTICLE I
DEFINITIONS; CERTAIN TERMS
SECTION I.1 DEFINITIONS. As used in this Agreement, the
following terms shall have the respective meanings indicated below, such
meanings to be applicable equally to both the singular and plural forms of
such terms:
"AFFILIATE" means, as to any Person, (i) any other Person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such Person, or (ii) any
trade or business (whether or not incorporated) which is a member of a group
of which such Person is a member and which is under common control within the
meaning of Section 414 of the Internal Revenue Code and the rules and
regulations promulgated thereunder from time to time.
"AMI" means the Area of Mutual Interest in Lapeer and Genessee
Counties, Michigan set forth on Exhibit A hereto.
"BILL OF SALE" means the Bill of Sale, Quit Claim, and Assignment of
Interest dated of even date herewith from Lender, as Assignor, to Borrower,
as Assignee, in the form attached hereto as Exhibit B.
"BORROWER" has the meaning specified therefor in the preamble hereto.
"BUSINESS DAY" means any day not a Saturday, Sunday or legal holiday
on which banks in the State of West Virginia are not required or authorized
to close.
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"COLLATERAL" means all of the property of the Borrower purported to
be subject to the lien or security interest purported to be created by any
security agreement, pledge agreement, assignment or other security document
heretofore or hereafter executed by the Borrower in favor of the Lender as
security for all or any part of the Obligations, including, without
limitation, any asset purchased, in whole or in part, with proceeds of the
Loan, subject to the limitation set forth in Section 6.01(j) hereof.
"DEFAULT" means any event that, with the giving of notice or the
passage of time or both, would result in an Event of Default.
"ENVIRONMENTAL LAW" means the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C. Section 9601, et Section 4.), the
Hazardous Materials Transportation Act (49 U.S.C. Section 1801, et M.), the
Resource Conservation and Recovery Act (42 U.S.C. Section 6901, et .), the
Federal Water Pollution Control Act (33 U.S.C. Section 1251 et Section eq.),
the Clean Air Act (42 U. S.C. Section 7401 et 54.), the Toxic Substances
Control Act (1 5 U.S.C. Section 2601 et seq.), the Occupational Safety and
Health Act (29 U.S.C. Section 6451 et .), and the Medical Waste Tracking Act
of 1988, Pub. L. No. 100-582, 102 Stat. 2950 (1988), as such laws have been
amended or supplemented from time to time, and any similar present or future
Federal, state or local statute, ordinance, rule or regulation.
"EVENT OF DEFAULT" means any of the events set forth in Section 7.01
hereof.
"FLEUR-DAVID" means Fleur-David Corporation, (formerly a subsidiary
of CABEC Energy Corporation) from which Borrower acquired certain interests
in the Otter-Lake oil field, and certain drilling equipment located in the
Cross S Ranch Subdivision, Zavala County, Texas.
"FUNDING DATE" means the first date on which Lender disburses any
proceeds of the Term Loan.
"GAAP" means generally accepted accounting principles as in effect
from time-to-time in the United States, consistently applied.
"GOVERNMENTAL AUTHORITY" means any nation or government, any federal,
state, city, town, municipality, county, local or other political subdivision
thereof or thereto and any department, commission, board, bureau,
instrumentality, agency or other entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to
government and having jurisdiction over the Parties to the Loan Documents.
"HAZARDOUS MATERIALS" means, without limit, any pollutant, waste,
flammable explosives, radioactive materials, hazardous materials, hazardous
wastes, hazardous or toxic substances, or other materials defined in or
regulated under any Environmental Law.
"INDEBTEDNESS" means (i) all indebtedness or other obligations of the
Borrower for borrowed money or for the deferred purchase price of property or
services, (ii) all obligations of the
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<PAGE>
Borrower under direct or indirect guaranties, contingent or other obligations
of the Borrower to purchase or otherwise acquire or assure a creditor against
loss in respect thereof,
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended from time to time.
"LENDER" has the meaning specified therefor in the preamble hereto.
"LIEN" means any security interest, mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or otherwise),
charge against or interest in property to secure payment of a debt or
performance of an obligation or other priority or preferential arrangement of
any kind or nature whatsoever.
"LOAN DOCUMENTS" means this Agreement, any Notice of Borrowing, the
Note, the Security Agreement, the Financing Statements, the Production
Payment and all schedules and exhibits hereto or thereto.
"MATURITY DATE" means the second anniversary of the Funding Date, or
such earlier date on which the Loan shall become due and payable by
acceleration.
"MORTGAGE" means the mortgage made by Borrower and delivered to
Lender in accordance herewith in the form attached hereto as Exhibit C.
"NOTE" means the Term Note made by Borrower and delivered to Lender
in accordance herewith in the form attached hereto as Exhibit D.
"NOTICE OF BORROWING" has the meaning specified in Section 2.02
hereof.
"OBLIGATIONS" means (i) the obligation of Borrower to pay, as and
when due and payable (by scheduled maturity or otherwise), all amounts from
time to time owing by it in respect of any Loan Document, whether for
principal, interest, (including interest accruing on or after the filing of
any petition in bankruptcy or for reorganization relating to the Borrower
whether or not a claim for post-filing interest is allowed pursuant to 11
U.S.C. Section 506, or otherwise in such cases), fees or otherwise and (ii)
the obligation of Borrower to perform or observe all of its other obligations
from time to time existing under any Loan Document.
"PAYMENT OFFICE" means ExCal Energy Corporation, c/o MTR Gaming
Group, Inc., State Route 2, South, Chester, West Virginia 26034, Attention:
Mr. Edson R. Arneault, President.
"PERSON" means an individual, corporation, partnership, association,
joint-stock company, trust, unincorporated organization, joint venture or
governmental authority.
"POST-DEFAULT RATE" means a rate per annum equal to the highest rate
allowed by law, not to exceed in any event 22%.
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<PAGE>
"PRODUCTION PAYMENT" has the meaning given such term in the
Assignment of Production Payment dated of even date herewith in the form of
Exhibit E hereto.
"PROPERTY" means the buildings, equipment, personalty and other
property used in connection with the operation of the gas plant and oil and
gas drilling and exploration business either previously acquired or to be
acquired by Borrower from Fleur-David Corporation, and Tessenderlo Kerley,
Inc., the successor by merger to Kerley, Inc. as more fully described in
Schedule I hereto.
"SECURITY AGREEMENT" means the General Security Agreement, dated of
even date herewith, made by the Borrower in favor of the Lender in the form
attached hereto as Exhibit F.
"TKI AGREEMENT" means the Agreement to be entered by and between
Tessenderlo Kerley, Inc. and Fleur-David, and assigned by Fleur-David to
Borrower, substantially in the form attached hereto as Exhibit G providing
for (i) the conveyance to Borrower of certain securities, real property,
improvements thereon, and furniture, fixtures and equipment included
therewith; (ii) the release of all liens held by and security interests
granted in favor of Tessenderlo Kerley, Inc. with respect to any property of
the Borrower; and (iii) the termination of any further obligations of
Fleur-David to Tessenderlo Kerley, Inc. created by the Purchase and Sales
Agreement dated July 6, 1992, as subsequently amended, by and among Kerley,
Inc., Kerley AG Inc., and Fleur-David as well as any obligations created by
any documents or agreements delivered or entered by Fleur-David in connection
with said Purchase and Sales Agreement (the "Kerley Purchase and Sales
Agreement").
"TERM LOAN" means the loans made by the Lender to the Borrower
pursuant to Article II hereof.
"TERMINATION DATE" means the earlier to occur of (a) the Maturity
Date and (b) the date on which all of the Obligations have been fully
performed.
SECTION I.2 ACCOUNTING AND OTHER TERMS. Unless otherwise
expressly stated herein, all accounting determinations hereunder shall be
made, all accounting terms used herein shall be interpreted, and all
financial statements required to be delivered hereunder shall be prepared in
accordance with GAAP. All terms used in this Agreement which are defined in
Article 9 of the Uniform Commercial Code in effect in the State of Texas on
the date hereof and which are not otherwise defined herein shall have the
same meanings herein as set forth therein.
ARTICLE II
AMOUNT AND TERMS OF THE TERM LOAN
SECTION II.1 TERM COMMITMENT. The Lender agrees, on the terms and
conditions hereinafter set forth, to make the Term Loan to the Borrower in a
principal amount not to exceed $500,000. Any principal amount of the Term
Loan which is repaid or prepaid by the Borrower may not be reborrowed.
5
<PAGE>
SECTION II.2 MAKING THE TERM LOAN. (a) Upon fulfillment of the
applicable conditions set forth in Article IV hereof, the Lender will make
available the initial advances of the Term Loan to the Borrower in an amount
not to exceed $217,259.99 by delivering the proceeds thereof to Borrower's
creditors and vendors in immediately available funds (either in the form of a
certified bank check or wire transfer). At the Closing, Lender will deliver
funds payable to (A) Tessenderlo Kerley, Inc. in the amount of $100,000 (or
such lesser amount as Tessenderlo Kerley, Inc. may accept in satisfaction of
Borrower's obligations under the TKI Agreement); (B) James V. Landress in the
amount of $9,172.10; (C) Julia Landress in the amount of $17,857.89; (D)
Jackson Walker L.L.P. in an amount not to exceed $25,000; (E) Kerry Duncan in
the amount of $14,000; (F) Metropolitan Title in the amount of $3,730.00; and
(G) Sabal Corp. in the amount of $47,500.00.
(b) After the Closing, the Lender will make available the
remainder of the Term Loan in accordance with the provisions of Section
5.01(m) of this Agreement by wire transfer to Borrower's account at
International Bank of Commerce on the fifth Business Day following
presentation by Borrower of a Notice of Borrowing indicating the use of
proceeds or other writing directing application of proceeds signed by
Borrower and consented to by Lender in its sole discretion and providing the
invoices or other documents supporting such payment in a form and substance
reasonably acceptable to Lender (such acceptance to be presumed if Lender has
not indicated otherwise in writing within five (5) Business Days after
receipt) and agrees to advance such funds unless (i) the indicated use is not
reasonably within the permitted use of proceeds provided for in Section
5.01(m) of this Agreement; or (ii) an Event of Default has occurred which has
not been cured or waived.
(c) The Borrower shall execute and deliver to the Lender,
at the Closing, a Term Note payable to the order of the Lender to evidence
the Term Loan in the original principal amount of the Loan. The Term Loan
amount may be increased by Lender to provide for the funding and payment of
the Lender's costs incurred in connection herewith, which Borrower has not
paid as of the Termination Date and which accrue thereafter, including but
not limited to the fees of Lender's counsel not to exceed $25,000. The books
and records of the Lender shall be presumptive evidence of the amount of
Obligations under the Term Loan outstanding from time to time, absent
manifest error.
SECTION II.3 TERM LOAN INTEREST.
(a) LOAN. The Term Loan shall bear interest on the
principal amount thereof from time to time outstanding until such principal
amount becomes due at an interest rate per annum of fifteen percent (15%).
(b) INTEREST PAYMENT. Interest on the Term Loan shall be
payable monthly, in arrears, on the last day of each month, commencing on the
last day of the calendar month following the Funding Date and on the
Termination Date (whether by demand, acceleration or otherwise). Interest at
the Post-Default Rate shall be payable on demand.
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<PAGE>
SECTION II.4. REPAYMENT. The Term Loan shall be payable as to
principal in eighteen (18) equal monthly installments commencing on the last
day of the seventh calendar month following the Funding Date and on the last
day of each succeeding calendar month until the Maturity Date. Any principal
outstanding on the Maturity Date, together with all such other amounts as may
be necessary to repay in full all unpaid Obligations to the Lender shall be
due and payable on the Maturity Date.
SECTION II.5 OPTIONAL PREPAYMENT OF THE TERM LOAN. Borrower may
prepay without cost or penalty, the outstanding amount of the Term Loan in
whole or in part with accrued interest to the date of such prepayment on the
amount prepaid.
ARTICLE III
PAYMENTS, DEFAULT INTEREST AND OTHER COMPENSATION
SECTION III.1 PAYMENTS AND COMPUTATIONS. The Borrower will make
each payment under the Loan Documents to which it is a party not later than
2:30 P.M. (West Virginia time) on the day when due, in lawful money of the
United States of America and in immediately available funds, to the Lender at
the Payment Office, or at such other place or to such account as the Lender
may designate by notice to the Borrower. All payments shall be made by the
Borrower without reduction for any defense, set-off or counterclaim to the
Lender. Subject to Section 7.01 below, all interest, fees, costs and
expenses for which the Borrower is obligated under any Loan Document shall,
if not timely paid by the Borrower, be added to the principal amount of the
Loan and the Borrower hereby authorizes the Lender to, and the Lender may,
from time to time, increase the principal amount of the Loan by any such
amounts due under any Loan Document to which the Borrower is a party. The
Borrower confirms that any addition to principal which the Lender so makes to
the Loan as herein provided will be made as an accommodation to the Borrower
and solely at the Lender's discretion. Whenever any payment to be made under
any such Loan Document shall be stated to be due on a day other than a
Business Day, such payment shall be made on the next succeeding Business Day
and such extension of time shall in such case be included in the computation
of interest. In no event shall prior recourse to any Collateral be a
prerequisite to the Lender's right to demand payment of any Obligation. The
Lender's records kept in the ordinary course of its business shall be
presumed to be correct and shall constitute prima facie evidence of the
amount owing or paid with respect to any Obligation, absent manifest error.
SECTION III.2 DEFAULT INTEREST. Any Obligation hereunder, which is
not paid when due (after any applicable grace period therefor set forth in
Section 7 hereto), whether upon demand, by acceleration or otherwise, and all
amounts payable after the occurrence and during the continuance of an Event
of Default, shall bear interest from the day when due until such amount is
paid in full at a rate per annum equal to the Post-Default Rate. In the
event that any amount of principal of, or interest on, a Loan is not paid
within thirty (30) days of the due date thereof (whether by demand,
acceleration or otherwise) when due, the borrower shall, upon demand, pay an
additional fee equal to 5% of the amount of such principle (or interest not
timely paid).
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<PAGE>
ARTICLE IV
CONDITIONS TO EFFECTIVENESS AND LENDING
SECTION IV.1. CONDITIONS TO FUNDING OF THE TERM LOAN. The Lender
shall have no obligation to make the initial funding of the Loan pursuant to
Section 2.02 until the date on which each of the following conditions
precedent shall have been satisfied:
(a) REPRESENTATIONS AND WARRANTIES; NO EVENT OF DEFAULT.
The representations and warranties contained in Section 5 of this Agreement
and in each other Loan Document and certificate or other writing delivered to
the Lender pursuant hereto on or prior to the Funding Date shall be correct
on and as of the Funding Date as though made on and as of such date; and no
Event of Default, or event which with the giving of notice or the lapse of
time or both would constitute an Event of Default, shall have occurred and be
continuing on the Funding Date or would result from the making of the Loan.
(c) DELIVERY OF DOCUMENTS. The Lender shall have
received on or before the Funding Date the following, each in form and
substance satisfactory to the Lender and, unless indicated otherwise, dated
the Funding Date:
(i) the Term Note representing the Term Loan,
duly executed by the Borrower;
(ii) the Security Agreement, duly executed by the
Borrower;
(iii) evidence satisfactory to the Lender and its
counsel that, upon payment to Tessenderlo Kerley, Inc. as set forth in the
TKI Agreement, all obligations of the Borrower and/or Fleur-David arising in
connection with the Kerley Purchase and Sales Agreement will have been
satisfied in full and have been released of record
(iv) acknowledgment copies of appropriate
financing statements on Form UCC-1 and the Mortgage, duly executed by the
Borrower and duly filed in such office of offices as may be necessary or, in
the opinion of the Lender, desirable to perfect the security interests
purported to be created by the Security Agreement and the Mortgage;
(v) duly executed UCC termination statements with
respect to UCC filings by Tessenderlo Kerley, Inc. or its predecessors in
interest in connection with any of the Collateral;
(vi) a copy of the resolutions adopted by the
Board of Directors of Borrower, certified as of the Funding Date by an
authorized officer thereof, authorizing (A) the borrowings hereunder and the
transactions contemplated by the Loan Documents to which Borrower is or will
be a party, and (B) the execution, delivery and performance by Borrower of
each Loan
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<PAGE>
Document to which it is or will be a party and the execution and delivery of
the other documents to be delivered in connection herewith;
(vii) a certificate of an authorized officer of
Borrower certifying the names and true signatures of the officers authorized
to sign each Loan Document to which Borrower is or will be a party and the
other documents to be executed and delivered by Borrower in connection
herewith, together with evidence of the incumbency of such authorized
officers;
(viii) a certificate, dated as of a date not more
than ten (10) Business Days prior to the Funding Date, of the appropriate
officials of the States of Nevada and Michigan, certifying as to the
subsistence in good standing of, and the payment of taxes by, Borrower in
such jurisdictions and listing all charter documents of Borrower on file with
such official(s);
(ix) a copy of the charter of Borrower, certified
as of a date not more than 30 days prior to the Funding Date by the
appropriate official(s) of the State of Nevada and as of the Funding Date by
an authorized officer of Borrower;
(x) a copy of the by-laws of Borrower, certified
as of the Funding Date by an authorized officer of Borrower;
(xi) the Inter-Creditor Agreement in the form
attached hereto as Exhibit H;
(xii) a certificate of insurance evidencing
insurance on all property of the Borrower as is required by Section 6.01 (f)
hereof, naming the Lender as additional insured as its interests may appear
for all insurance maintained by the Borrower;
(xiii) evidence reasonably satisfactory to the
Lender and its counsel that Borrower has acquired all of the interest of
Fleur-David and Tessenderlo Kerly, Inc. in the Collateral, such evidence to
be attached hereto as Exhibit I;
(xiv) evidence reasonably satisfactory to the
Lender and its counsel that any indebtedness of Borrower to Fleur-David or
interest of Fleur-David in the AMI has been subordinated to Lender, such
evidence to be attached hereto as Exhibit J;
(xv) such other agreements, instruments,
approvals, opinions and other documents as the Lender may reasonably request;
(xvi) an opinion of Jackson Walker L.L.P. in the
form attached hereto as Exhibit K.
ARTICLE V
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REPRESENTATIONS AND WARRANTIES
SECTION V.1 REPRESENTATIONS AND WARRANTIES OF THE BORROWER. The
Borrower represents and warrants as follows:
(a) ORGANIZATION, GOOD STANDING, ETC. Borrower (i) is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Nevada, (ii) has all requisite power and authority to
conduct its business as now conducted and as presently contemplated to make
the borrowings hereunder and to consummate the transactions contemplated
hereby and by each of the Loan Documents to which it is a party, and (iii) is
duly qualified to do business and is in good standing in the State of
Michigan. One Hundred percent (100%) of the voting stock of the Borrower is
owned by Roger Landress.
(b) AUTHORIZATION, ETC. The execution, delivery and
performance by Borrower of each Loan Document (i) have been duly authorized
by all necessary corporate action, (ii) do not and will not contravene the
charter or by-laws, law or any contractual restriction binding on or
otherwise affecting it or any of its properties, (iii) do not and will not
result in or require the creation of any lien, security interest or other
charge or encumbrance (other than contemplated by the Loan Documents) upon or
with respect to any of its property, and (iv) do not and will not result in
any suspension, revocation, impairment, forfeiture or nonrenewal of any
permit, license, authorization or approval applicable to its operations or
Property.
(c) GOVERNMENTAL APPROVALS. No authorization or approval
or other action by, and no notice to or filing with, any Governmental
Authority or other regulatory body is required in connection with the due
execution, delivery and performance by the Borrower of any Loan Document to
which Borrower is or will be a party.
(d) ENFORCEABILITY OF LOAN DOCUMENTS. This Agreement is,
and each other Loan Document to which the Borrower is or will be a party,
when delivered hereunder, will be a legal, valid and binding obligation of
Borrower, enforceable against Borrower in accordance with its terms.
(e) LITIGATION. There is no pending or threatened
action, suit or proceeding affecting the Borrower before any court or
Governmental Authority or any arbitrator except as set forth in that certain
Notice of Non-Compliance dated July 22, 1998, issued by the Michigan
Department of Environmental Quality to Fleur-David. There is no pending or
threatened action, suit or proceeding affecting the Borrower before any court
or other Governmental Authority or any arbitrator which may materially
adversely affect the operations or condition, financial or otherwise, of
Borrower or the ability of Borrower to perform its obligations under any Loan
document to which Borrower is or will be a party.
(f) COMPLIANCE WITH LAW, ETC. The Borrower is not in
violation of its charter or by-laws, any law or any material terms of any
agreement or instrument binding on or otherwise affecting it or any of its
properties.
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<PAGE>
(g) ADVERSE AGREEMENTS, ETC. The Borrower is not a party
to any agreement or instrument, or subject to any charter or other corporate
restriction or any judgment, order, regulation, ruling or other requirement
of a court or other Governmental authority or regulatory body, which
materially adversely affects, or, to the best knowledge of the Borrower, in
the future is reasonably likely to materially adversely affect, the condition
or operations, financial or otherwise, of the Borrower or the ability of the
Borrower to perform its obligations under any Loan Document to which the
Borrower is or will be a party.
(h) PERMITS, ETC. The Borrower has all permits,
licenses, authorizations and approvals required for it to lawfully own and
operate its businesses.
(i) TITLE TO PROPERTIES. The Borrower has, or will have
after the entry of the TKI Agreement, good and marketable title to all of its
properties and assets, free and clear of all liens, security interests and
other charges and encumbrances and other types of preferential arrangements,
except such as are permitted by Section 6.02(a) hereof. All of Borrower's
properties are titled in Borrower's legal name. Borrower has not used, or
filed a financing statement (or other evidence of a lien, charge or Security
Interest) under, any other name in any United States jurisdiction or
territory outside the United States for at least the last five (5) years.
(j) FULL DISCLOSURE. No Loan Document or schedule or
exhibit thereto and no certificate, report, statement or other document or
information furnished to the Lender in connection herewith or with the
consummation of the transactions contemplated hereby, contains any
misstatement of material fact or omits to state a material fact or any fact
necessary to make the statements contained herein or therein not misleading
There is no contingent liability or other material fact of which the Borrower
is aware after reasonable inquiry that may adversely affect the condition or
operations, financial or otherwise, or the business or prospects of the
Borrower.
(k) INDEBTEDNESS. The Borrower has no Indebtedness other
than Indebtedness set forth on Schedule II hereto.
(l) ENVIRONMENTAL MATTERS. The Borrower is in compliance
with all applicable Environmental laws, and none of the operations of the
Borrower is the subject of any Federal, state or local investigation to
determine whether any remedial action is needed to address the presence,
disposal, release or threatened release of any Hazardous Material into the
environment which may have a material adverse effect on the business,
operations, property, assets or financial or other condition of the Borrower,
and the Borrower does not have any contingent liability in connection with
any release of any Hazardous Material into the environment which may have a
material adverse effect on its business, operations, property, assets or
financial or other condition.
(m) USE OF PROCEEDS. The proceeds of the Loans shall be
used (i) up to $100,000 as consideration for the TKI Agreement; (ii) up to
$25,000 in the aggregate to satisfy indebtedness of Borrower to James V.
Landress and Julia Landress; (iii) up to $150,000 to purchase producing oil
and gas properties within the AMI; (iv) up to $50,000 to pay outside
professionals for
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fees and expenses incurred in connection with the TKI Agreement and the
transactions contemplated by the Loan Documents; and (v) up to $200,000 for
expenses to be incurred after the Funding Date in connection with the
acquisition and development of leases now held or to be acquired by Borrower
within the AMI, the reworking or drilling of wells thereon, the costs of
maintaining, insuring and operating such leases and wells and the costs
related to environmental compliance related thereto (including but not
limited to management fees of Roger Landress in an amount not to exceed
$50,000 per year).
(n.) INSURANCE. Borrower keeps its insurable properties
adequately insured and against such risks, including fire, as is customary
with companies in the same or similar business.
SECTION V.2 REPRESENTATIONS AND WARRANTIES OF LENDER. The Lender
represents and warrants to Borrower as follows:
(a) ORGANIZATION, GOOD STANDING, ETC. Lender (i) is a
corporation duly organized, validly existing and in good standing under the
laws of the state of Michigan and(ii) has all requisite power and authority
to conduct its businesses now conducted and as presently contemplated to make
the loans hereunder and to consummate the transactions contemplated hereby
and by each of the Loan Documents to which it is a party, and (iii) is duly
qualified to do business and is in good standing in the state of Michigan.
(b) AUTHORIZATION, ETC. The execution, delivery and
performance by Lender of each Loan Document (i) have been duly authorized by
all necessary corporate action, (ii) do not and will not contravene the
charter or by-laws, law or any contractual restriction binding on or
otherwise effecting it or any of its properties, (iii) do not and will not
result in or require the creation of any lien, security interest or other
charge or encumbrance (other than contemplated by the Loan Documents) upon or
with respect to any of its Property, and (iv) do not and will not result in
any suspension, revocation, impairment, forfeiture or non-renewal of any
permit, license, authorization or approval applicable to its operations or
property.
No authorization or approval or other action by, and
no notice to or filing with, any Governmental Authority or other regulatory
body is required in connection with the due execution, delivery and
performance by the Lender of any loan Document to which Lender is or will be
a party.
ARTICLE VI
COVENANTS OF THE BORROWER
SECTION VI.1 AFFIRMATIVE COVENANTS. So long as any principal of
or interest on the Loan shall remain unpaid or the Lender shall have any
commitment to make a Loan hereunder, the Borrower will, unless the Lender
shall otherwise consent in writing:
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(a) REPORTING REQUIREMENTS. Furnish to the Lender:
(i) as soon as available and in any event within
45 days after the end of each fiscal quarter of the Borrower, an interim (A)
balance sheet of the Borrower as at the end of such quarter, (B) statement of
income of the Borrower as at the end of such quarter and for the period
commencing at the end of the immediately preceding fiscal year and ending
with the end of such quarter, and (C) statement of cash flow of the Borrower
for such quarter and for the period commencing at the end of the immediately
preceding fiscal year and ending with the end of such quarter, all in
reasonable detail and prepared in accordance with generally accepted
accounting principles consistently applied;
(ii) as soon as available and in any event within
90 days after the end of each fiscal year of the Borrower, a (A) balance
sheet of the Borrower as at the end of such fiscal year, (B) statement of
income of the Borrower as at the end of such fiscal year, and (C) statement
of cash flow of the Borrower for such fiscal year, all in reasonable detail
and prepared in accordance with generally accepted accounting principles
consistently applied; and
(iii) promptly after the commencement thereof but
in any event not later than five (5) Business Days after service of process
with respect thereto on, or the obtaining of knowledge thereof by, the
Borrower, notice of each action, suit or proceeding before any court or other
Governmental Authority or other regulatory body or any arbitrator which may
materially adversely affect the condition or operations, financial or
otherwise, of the Borrower.
(iv) promptly after obtaining knowledge thereof
but in any event not later than five (5) days after the occurrence of an
Event of Default, or an event which, with the giving of notice or the lapse
of time or both, would constitute an Event of Default, or a material adverse
change in the condition or operations, financial or otherwise, of the
Borrower, the written statement of the chief executive officer or the chief
financial officer of the Borrower, setting forth the details of such Event of
Default, event or material adverse change and the action which the Borrower
proposes to take with respect thereto;
(v) promptly upon request, such other information
concerning the condition or operations, financial or otherwise, of the
Borrower as the Lender from time to time may reasonably request.
(b) COMPLIANCE WITH LAWS, ETC. Comply in all material
respects with all applicable laws, rules, regulations and orders, if the
failure to so comply would have a material adverse effect on the Collateral
or Borrower's ability to pay the Obligations as and when due.
(c) PRESERVATION OF EXISTENCE, ETC. Maintain and
preserve its existence, rights and privileges, and become or remain duly
qualified and in good standing in the States of Nevada and Michigan.
Maintain all licenses necessary to conduct the business of the Borrower.
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(d) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. Keep
adequate records and books of account, with complete entries made in
accordance with GAAP.
(i) INSPECTION RIGHTS. Permit the Lender or any
agent or representative thereof at any reasonable time and from time to time
to examine and make copies of and abstracts from its records and books of
account, to visit and inspect the Property, to conduct audits or
examinations, and to discuss its affairs, finances and accounts with any of
the directors, officers, employees, independent accountants or other
representatives thereof
(e) MAINTENANCE OF INSURANCE. Maintain insurance with
responsible and reputable insurance companies or associations (including,
without limitation, comprehensive general liability, personal liability and
hazard insurance) with respect to its properties and business, in such
amounts and covering such risks, as is required by any Governmental Authority
or other regulatory body having jurisdiction with respect thereto or as is
carried generally in accordance with sound business practice by companies in
similar businesses similarly situated.
(g) MAINTENANCE OF PROPERTIES, ETC. Maintain and
preserve all of its properties which are necessary or useful in the proper
conduct of its business in good working order and condition, ordinary wear
and tear excepted, and comply at all times with the provisions of all leases
which are necessary or useful in the proper conduct of its business to which
the Borrower is a party as lessee or under which the Borrower occupies
property, which are necessary or useful in the proper conduct of its business
so as to prevent any loss or forfeiture thereof or thereunder.
(h) ENVIRONMENTAL LAWS. Comply with the requirements of
all applicable Environmental Laws if the failure to so comply would have a
material adverse effect on the Collateral or Borrower's ability to pay the
Obligations as and when due.
(i) FURTHER ASSURANCES. Borrower shall execute,
acknowledge and deliver all such further deeds, conveyances, mortgages,
assignments, estoppel certificates, financing statements, notices of
assignment, transfers and assurances as the Lender may reasonably require
from time to time in order to better assure, convey, grant, assign, transfer
and confirm unto the Lender the rights now or hereafter intended to be
granted to the Lender under this Agreement, any Loan Document or any other
instrument under which Borrower may be or may hereafter become bound to
convey, mortgage or assign to the Lender to effect the intention or
facilitate the performance of the terms of the Agreement.
(j) ADDITIONAL SECURITY. The Borrower shall, within 10
days of a request by the Lender, execute and deliver all documents requested
by Lender's counsel necessary or desirable, in the opinion of such counsel,
to perfect a first priority security interest in favor of the Lender in any
asset purchased by the Borrower with the proceeds of the Loan, in whole or in
part; provided, however, that with respect to any asset that is partially
funded by a purchase money mortgage or purchase money security interest in
accordance with subsection 6.02(a)(iv) hereof, the Lender's security interest
may be subject to such purchase money mortgage or security interest.
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SECTION VI.2 NEGATIVE COVENANTS. So long as any principal of or
interest on the Loan, or any Obligation, shall remain unpaid, the Borrower
will not, without the prior written consent of the Lender:
(a) LIENS, ETC. Create or suffer to exist any Lien upon
or with respect to any of the Collateral, other than:
(i) Liens created pursuant to the Loan Documents;
(ii) Liens for taxes, assessments or governmental
charges or levies to the extent contested in good faith by proper proceedings
which stay the imposition of any penalty, fine or lien resulting from the
non-payment thereof and with respect to which adequate reserves have been set
aside for the payment thereof;
(iii) Liens created by operation of law, such as
materialmen's liens, mechanics' liens and other similar liens, arising in the
ordinary course of business and securing claims which are being contested in
good faith by proper proceedings which stay the imposition of any penalty,
fine or lien resulting from the non-payment thereof and with respect to which
adequate reserves have been set aside for the payment thereof;
(iv) (A) purchase money liens on or purchase money
security interests in Collateral acquired or held by the Borrower in the
ordinary course of its business to secure the purchase price of such
Collateral, or (B) liens or security interests existing on such Collateral at
the time of its acquisition, PROVIDED, that (1) no such lien or security
interests shall extend to cover any other Collateral of the Borrower, and (2)
the principal amount of the Indebtedness secured by any such lien or security
interest shall not exceed 100% of the lesser of the fair market value or the
cost of the Collateral so held or acquired;
(v) any Lien subordinate to the Liens in favor of
the Lender; and
(vi) any other Lien in favor of the Lender.
(b) INDEBTEDNESS. Create, incur or suffer to exist any
Indebtedness, other than:
(i) Indebtedness to the Lender;
(ii) Indebtedness created hereunder or under the
Notes;
(iii) Indebtedness existing on the date hereof, as
set forth in Schedule II hereto, and any extension of maturity, refinancing
or other modification of the terms thereof, PROVIDED, HOWEVER, that such
extension, refinancing or modification (A) is pursuant to terms that are not
less favorable to the Borrower than the terms of the Indebtedness being
extended, refinanced or modified, and (B) after giving effect of the
extension, refinancing or modification of
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such Indebtedness, the amount of such Indebtedness outstanding is not greater
than the amount of such Indebtedness outstanding immediately prior to such
extension, refinancing or modification;
(iv) Indebtedness represented by accounts payable
incurred in the ordinary course of business;
(v) Indebtedness secured by liens or security
interests permitted by subsection (a) of this Section 6.02;
(c) INVESTMENTS, ETC. Make any loan, advance or
contribution to any Person or purchase or otherwise acquire any capital
stock, properties, assets or obligations of, or any interest in, any Person,
other than (i) investments made in accordance with the Use of Proceeds set
forth in Section 5.01 (m) hereof; (ii) investments existing on the date
hereof, as set forth in Schedule III hereto.
(d) TRANSACTIONS WITH AFFILIATES. The Borrower shall not
enter into or be a party to any transaction with any of its Affiliates,
except in the ordinary course of business for fair consideration and on terms
no less favorable to the Borrower as are available from unaffiliated third
parties.
SECTION 6.03 SPECIAL COVENANT OF THE BORROWER. At the earliest
practicable time, Borrower shall sell in a commercially reasonable manner the
oil and gas equipment acquired from Fleur-David and located in Zavala County,
Texas (identified on Exhibit D to Schedule J hereto) and use the proceeds
thereof to prepay the Term Loan, subject to the Inter-Creditor Agreement.
ARTICLE VII
EVENTS OF DEFAULT
SECTION VII.1 EVENTS OF DEFAULT. If any of the following Events of
Default shall occur and be continuing:
(a) the Borrower shall fail to pay any principal on any
Loan within five (5) Business Days of the date when due (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise);
(b) the Borrower shall fail to pay any interest on any
Loan or any fee or other amount (whether by scheduled payment, acceleration,
demand or otherwise) within five (5) Business Days of the date when due;
(c) any representation or warranty made by the Borrower
or any officer of the Borrower under or in connection with any Loan Document
shall have been incorrect in any material respect when made and such could,
at the date of its discovery by Lender, reasonably be
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anticipated to have a material adverse effect on the Collateral or the rights
of the Lender to enforce its Liens on the Collateral or Borrower's ability to
pay the Obligations as and when due;
(d) the Borrower shall fail to perform or observe any of
the covenants contained in Sections 6.01 or 6.02 hereof and such failure
shall continue for 30 days after notice thereof to the Borrower by the Lender;
(e) the Borrower shall fail to perform or observe any
other term, covenant or agreement contained in any Loan Document and to be
performed or observed and such failure shall continue for 30 days after
notice thereof to the Borrower by the Lender;
(f) Borrower (i) shall institute any proceeding or
voluntary case seeking to adjudicate it a bankrupt or insolvent, or seeking
dissolution, liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief or composition of it or its debts under any
law relating to bankruptcy, insolvency, reorganization or relief of debtors,
or seeking the entry of an order for relief or the appointment of a receiver,
trustee, custodian or other similar official for such Person or for any
substantial part of its property, (ii) shall admit in writing its inability
to pay its debts generally, or (iii) shall make a general assignment for the
benefit of creditors;
(g) any proceeding shall be instituted against the
Borrower seeking to adjudicate it a bankrupt or insolvent, or seeking
dissolution, liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief of debtors, or seeking the entry of an order
for relief or the appointment of a receiver, trustee, custodian or other
similar official for such Person or for any substantial part of its property,
and either such proceeding shall remain undismissed or unstayed for a period
of 60 days or any of the actions sought in such proceeding (including,
without limitation, the entry of an order for relief against it or the
appointment of a receiver, trustee, custodian or other similar official for
it or for any substantial part of its property) shall occur;
(h) the Security Agreement, or any other security
document, after delivery thereof pursuant hereto, shall for any reason fail
or cease to create a valid and perfected and, to the extent provided for by
the terms hereof or thereof, first or second priority lien on or security
interest in any Collateral purported to be covered thereby and Borrower fails
to comply with the provisions of Section 6.01(i) hereof, or such efforts fail
to restore Lender to its security interest in the Collateral;
then, and in any such event, the Lender may, by notice to the Borrower,
declare the Loans, all interest thereon and all other amounts payable under
this Agreement to be forthwith due and payable, whereupon the Loans, all such
interest and all such amounts shall become and be forthwith due and payable,
without presentment, demand, protest or further notice of any kind, all of
which are hereby expressly waived by the Borrower.
ARTICLE VIII
MISCELLANEOUS
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SECTION VIII.1 NOTICES, ETC. All notices and other communications
provided for hereunder shall be in writing and shall be mailed, telecopied, with
a copy sent promptly thereafter by U.S. mail, return receipt requested or
delivered, if to the Borrower, at the following address:
SABAL Corp.
5830 McArdle
No. 14 Crossroads, Suite 203
Corpus Christi, Texas 78412
Telephone No.: (512) 953-1458
Telecopy No.: (512) 993-1518
with copies to:
Jackson Walker L.L.P.
816 Congress Avenue, Suite 1600
Austin, Texas 78701
Attention: Wade Cooper
Telephone No.: (512) 494-2440
Telecopy No.: (512) 494-2442
and if to the Lender, to it at the following address:
ExCal Energy Corporation
c/o MTR Gaming Group, Inc.
Route 2 South
Chester, West Virginia 26034
Attention: Mr. Edson Arneault, President
Telephone No.: (304) 387-2400
Telecopy No.: (304) 387-1598
with copies to:
Ruben & Aronson, LLP
3299 K Street, NW, Suite 403
Washington, DC 20007
Attention: Robert Ruben, Esq.
Telephone No.: (202) 965-3600
Telecopy No.: (202) 965-3700
or, as to each party, at such other address as shall be designated by such
party in a written notice to the other party complying as to delivery with
the terms of this Section 8.01. All such notices and other communications
shall be effective (i) if mailed, when received or three days after mailing,
whichever first occurs, (ii) if telecopied, when transmitted, provided same
is on a Business Day and,
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if not, on the next Business Day, or (iii) if delivered, upon delivery,
provided same is on a Business Day and, if not, on the next Business Day,
except that notices to the Lender pursuant to Article II hereof shall not be
effective until received by the Lender.
SECTION VIII.2 AMENDMENTS, ETC. No amendment of any provision of
this Agreement, any Note or any other Loan Document shall be effective unless
it is in writing and signed by the Borrower and the Lender, and no waiver of
any provision of this Agreement, any Note or any other Loan Document, nor
consent to any departure by the Borrower therefrom, shall be effective unless
it is in writing and signed by the Lender, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.
SECTION VIII.3 NO WAIVER; REMEDIES, ETC. No failure on the part of
the Lender to exercise, and no delay in exercising, any right hereunder or
under any other Loan Document shall operate as a waiver thereof, nor shall
any single or partial exercise of any right under any Loan Document preclude
any other or further exercise thereof or the exercise of any other right.
The rights and remedies of the Lender provided herein and in the other Loan
Documents are cumulative and are in addition to, and not exclusive of, any
right or remedy provided by law. The rights of the Lender under any Loan
Document against any party thereto are not conditional or contingent on any
attempt by the Lender to exercise any of its rights under any other Loan
Document against such party or against any other Person.
SECTION VIII.4 SEVERABILITY. Any provision of this Agreement, or of
any other Loan Document to which the Borrower is a party, which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining portions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.
SECTION VIII.5 SUCCESSORS AND ASSIGNS; DUE ON SALE. This Agreement
shall be binding upon and inure to the benefit of the Borrower and the Lender
and their respective successors and assigns, except that the Borrower may not
assign its rights hereunder or any interest herein without the prior written
consent of the Lender. In the event Borrower, without the prior written
consent of Lender, merges or consolidates with any Person or sells, assigns,
leases, engages in sale leaseback transactions or otherwise transfers or
disposes of, whether in one transaction or in a series of related
transactions, any substantial portion of its properties, rights or other
assets (whether now owned or hereafter acquired) to any Person, then in that
event the Loan and any accrued interest then outstanding shall immediately
become due and payable.
SECTION VIII.6 COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate
counterparts, each of which shall be deemed to be an original, but all of
which taken together shall constitute one and the same agreement.
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SECTION VIII.7 HEADINGS. Section headings herein are included for
convenience of reference only and shall not constitute a part of this
Agreement for any other purpose.
SECTION VIII.8 GOVERNING LAW. This Agreement, the Note, and the
other Loan Documents shall be governed by, and construed in accordance with,
the law of the State of Texas applicable to contracts made and to be
performed in such State without regard to conflicts of law principles.
SECTION 8.09 INDEMNIFICATION. In addition to all of their other
Obligations under this Agreement, the Borrower agrees to defend, protect,
indemnify and hold harmless the Lender and any assignee of the Lender's
rights hereunder, and all of their respective officers, directors, employees,
attorneys, consultants and agents ( including, without limitation, those
retained in connection with the satisfaction or attempted satisfaction of any
of the conditions set forth in this Agreement) (collectively called the
"Indemnitees") from and against any and all losses, damages, liabilities,
obligations, penalties, fees, costs and expenses (including without
limitation, attorneys' fees, costs and expenses) incurred by such Indemnitees
after the Effective Date, whether direct, indirect or consequential, as a
result of or arising from or relating to any suit, investigation, action or
proceeding by any Person, whether threatened or initiated, asserting a claim
for any legal or equitable remedy against any Person under any statute or
regulation, including, without limitation, any Federal or state securities or
labor laws, or under any Federal, state or local environmental, health or
safety laws, regulations or, common law principles, arising from or in
connection with the operations of the Borrower, arising from or in connection
with any of the following: (i) the negotiation, preparation, execution or
performance of this Agreement or of any document executed in connection with
the transactions contemplated by this Agreement, (ii) the Lender's furnishing
of funds to the Borrower under this Agreement, (iii) any matter relating to
the financing transactions contemplated by this Agreement or by any document
executed in connection with the transactions contemplated by this Agreement,
(collectively, the "Indemnified Matters"); PROVIDED, HOWEVER, that the
Borrower shall have no obligation to any Indemnitee hereunder for any
Indemnified Matter caused by or resulting from the gross negligence or
willful misconduct of such Indemnitee, as determined by a final judgment of a
court of competent jurisdiction. Such indemnification for all of the
foregoing losses, damages, fees, costs and expenses of the Lender shall be
part of the Obligations in respect of the Term Loan (the "Term Obligations"),
secured by the Collateral and added to the principal amount of the Term Loan.
To the extent that the undertaking to indemnify, pay and hold harmless set
forth in this Section 8.09 may be unenforceable because it is violative of
any law or public policy, the Borrower shall contribute the maximum portion
which it is permitted to pay and satisfy under applicable law, to the payment
and satisfaction of all Indemnified Matters incurred by the Indemnitees. The
provisions of this Section 8.09 shall survive termination of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
SABAL CORP.
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By: /s/ Roger Landress
---------------------------------------
Name: Roger Landress
Title: President
EXCAL ENERGY CORPORATION
By: /s/ Robert L. Ruben
---------------------------------------
Name: Robert L. Ruben
Title: Attorney-in-fact
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Exhibit 10.7
PROMISSORY NOTE
$500,000 Dated: October 30, 1998
FOR VALUE RECEIVED, SABAL CORP. a Nevada corporation (the "Borrower"),
HEREBY PROMISES TO PAY to the order of EXCAL ENERGY CORPORATION, a Michigan
corporation (the "Lender") (i) the principal amount of up to FIVE HUNDRED
THOUSAND DOLLARS ($500,000), subject to adjustment upon and under certain
circumstances set forth in the Loan Agreement, or, if less, the aggregate
unpaid principal amount of the Loan made by the Lender to the Borrower
pursuant to the Loan Agreement, payable on the Maturity Date (as defined in
the Loan Agreement), and (ii) interest on the unpaid principal amount of the
Obligations (as defined in the Loan Agreement) under the Loan Agreement from
the date such Loan is made until all such Obligations are paid in full, at
such interest rates, and payable at such times, as are specified in the Loan
Agreement.
Notwithstanding any other provision of this Note, interest paid or
becoming due hereunder or under the Loan Agreement, or any document or
instrument executed in connection herewith or therewith, shall in no event
exceed the maximum rate permitted by applicable law. Both principal and
interest are payable in lawful money of the United States of America in
immediately available funds to ExCal Energy Corporation, c/o MTR Gaming
Group, Inc., State Route 2, South, Chester, West Virginia 26034, Attention:
Mr. Edson R. Arneault, or such other office as the Lender may designate.
The Loan made by the Lender to the Borrower pursuant to the Loan
Agreement, and all payments made on account of principal hereof, shall be
recorded by the Lender and, prior to any transfer hereof, indorsed on
Schedule A attached hereto which is a part of this Note.
This Note is the Term Note referred to in the Term Loan Agreement,
dated of even date herewith (as amended or otherwise modified from time to
time, the "Loan Agreement"), between the Borrower and the Lender, and is
entitled to the benefits of the Loan Agreement, the Security Agreement and
the Inter-Creditor Agreement as provided for therein. The Loan Agreement,
among other things, contains provisions for the acceleration of the maturity
of the unpaid principal amount of this Note upon the happening of certain
stated Events of Default (as defined in the Loan Agreement), and also for
prepayments on account of principal hereof prior to the maturity hereof upon
the terms and conditions specified therein. The Borrower hereby waives
presentment for payment, demand, protest and notice of dishonor of this Note.
Notwithstanding any other provision of this Note, in the event that
Borrower sells any of its assets during the term hereof, then Borrower shall
use the proceeds of such asset sale (net of costs of advertising or brokerage
costs incurred in connection with such sale) to prepay the principal balance
of this Note then outstanding; provided however, that such prepayment
obligation shall be
<PAGE>
subject to that certain Inter-Creditor Agreement of even date herewith, among
Lender, Borrower, Roger Landress and Biscayne Petroleum Corporation.
This Note shall be governed by, and construed and interpreted in
accordance with, the internal laws of the State of Texas applicable to
contracts made and to be performed therein without consideration as to choice
of law.
SABAL CORP.
By: /s/ Roger Landress
--------------------------------
Roger Landress, President
2
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Exhibit 10.8
GENERAL SECURITY AGREEMENT
GENERAL SECURITY AGREEMENT dated October 30, 1998, made by SABAL
Corp., a Nevada corporation having as its address 5830 McArdle, No. 14
Crossroads, Suite 203, Corpus Christi, Texas 78412 (the "Grantor"), in favor
of ExCal Energy Corporation, a Michigan corporation, as lender having as its
address State Route 2, P.O. Box 358, Chester, West Virginia 36034 (the
"Lender" or "Secured Party").
W I T N E S S E T H :
WHEREAS, the Grantor, SABAL CORP., and the Lender are parties to a
Term Loan Agreement, dated as of even date herewith and as may be amended or
otherwise modified from time to time, being hereinafter referred to as the
"Loan Agreement";
WHEREAS, pursuant to the Loan Agreement, the Lender has agreed to make
a term loan (the "Term Loan") to the Borrower in an aggregate principal
amount not to exceed $500,000 (the "Loan");
WHEREAS, it is a condition precedent to the making of the Loan by the
Lender pursuant to the Loan Agreement that the Grantor shall have executed
and delivered to the Lender a security agreement providing for the grant to
the Lender of a first priority security interest in the Property (as defined
in the Loan Agreement) of the Grantor;
NOW, THEREFORE, in consideration of the premises and the agreements
herein and in order to induce the Lender to make and maintain the Loan
pursuant to the Loan Agreement, the Grantor hereby agrees with the Lender as
follows:
SECTION 1. DEFINITIONS. Reference is hereby made to the Loan
Agreement for a statement of the terms thereof. All terms used in this
Agreement which are defined in the Loan Agreement or in Article 9 of the
Uniform Commercial Code (the "Code") currently in effect in the State of
Texas and which are not otherwise defined herein shall have the same meanings
herein as set forth therein.
SECTION 2. GRANT OF SECURITY INTEREST. As collateral security for
all of the Obligations (as defined in Section 3 hereof), the Grantor hereby
pledges and assigns to the Lender, and grants to the Lender a continuing
first priority security interest in, all personal property, improvements,
furniture, fixtures, equipment (specifically excluding pipelines) of any kind
or character owned by Grantor, wherever located and whether now or hereafter
existing and whether now owned or hereafter acquired, of every kind and
description, tangible or intangible and all proceeds derived therefrom (the
"Collateral"), including, without limitation, the following:
(a) all of Grantor's right title and interest in and to all
equipment of any kind including, without limitation, the equipment described
in Schedule I hereto; the building known as the Propane Refrigerant
Hydrocarbon Gas Recovery Plant having the address of 13020 Washburn
<PAGE>
Road, Otter Lake, Michigan (the "Gas Plant"); all furniture, fixtures,
machinery, equipment, tools, all motor vehicles, tractors and other like
property (specifically excluding pipelines) (i) located at the Gas Plant or
(ii) located upon the leases described on Schedule II hereto (the "Leases"),
or (iii) located at Cross S Ranch Subdivision, Zavala County, Texas (the
"Texas Property") and whether now or hereafter existing and whether now owned
or hereafter acquired, together with all substitutes, replacements,
accessions and additions thereto, and all tools, parts, accessories and
attachments used in connection therewith (hereinafter collectively referred
to as the "EQUIPMENT");
(b) all of the Grantor's right, title and interest in and to
all inventory of any kind, (specifically excluding any oil and gas and
mineral reserves located at the Gas Plant or upon the Leases, and whether now
or hereafter existing and whether now owned or hereafter acquired, and all
accessions thereto and all proceeds and products thereof (any and all such
inventory, accessions and products being hereinafter referred to as the
"INVENTORY");
(c) all of Grantor's right, title and interest in and to:
(i) all accounts, contract rights, chattel paper, instruments, documents,
general intangibles and other rights or obligations of any kind, whether now
or hereafter existing and whether now owned or hereafter acquired, arising
out of or in connection with the sale of goods or the rendering of services
or otherwise; and (ii) all rights now or hereafter existing in and to all
security agreements, and other contracts, now or hereafter existing and
securing or otherwise relating to any such accounts, contract rights, chattel
paper, instruments, general intangibles or obligations (any and all such
accounts, contract rights, chattel paper, instruments, general intangibles
and obligations being hereinafter referred to as the "Receivables", and any
and all such security agreements, leases and other contracts being
hereinafter referred to as the "Related Contracts"); and
(d) all proceeds, revenue, chattel paper, promissory notes
and accounts receivable derived from the sale, exchange, transfer or
conveyance of oil gas reserves and minerals of any kind or character (the
"proceeds"). Notwithstanding the foregoing, in no instance shall such
security interest attach to the oil and gas reserves located at the Gas Plant
or the Leases.
(e) all proceeds and products of any and all of the
foregoing Collateral and, to the extent not otherwise included, all cash
payments for such products and all payments under insurance (whether or not
the Lender is the loss payee thereof), or any indemnity, warranty or
guaranty, payable by reason of loss or damage to or otherwise with respect to
any of the foregoing Collateral; in each case, howsoever the Grantor's
interest therein may arise or appear (whether by ownership, security
interest, claim or otherwise).
SECTION 3. SECURITY FOR OBLIGATIONS. The security interest created
hereby in the Collateral constitutes continuing collateral security for all
of the following obligations, whether now existing or hereafter incurred (the
"Obligations"):
(a) the prompt payment by the Grantor, as and when due and
payable, of all amounts from time to time owing by it in respect of the Loan
Agreement, the Note, the Production Payment, and the other Loan Documents; and
2
<PAGE>
(b) the due performance and observance by the Grantor of all
of its other obligations from time to time existing in respect of the Loan
Documents.
SECTION 4. REPRESENTATIONS AND WARRANTIES. The Grantor represents
and warrants as follows:
(a) The Grantor: (i) is a corporation duly organized,
validly existing and in good standing under the laws of the state of its
incorporation as set forth on the first page hereof; and (ii) has all
requisite power and authority to execute, deliver and perform this Agreement.
(b) All Equipment and Inventory now existing is, and all
Equipment and Inventory hereafter existing will be, located at the address of
the Gas Plant, within the Area of Mutual Interest, or at Cross S Ranch
Subdivision, Zavala County, Texas all of which are specified in Schedule II
hereto. The Grantor's chief place of business and chief executive office,
the place where the Grantor keeps its records concerning Receivables and all
originals of all chattel paper which constitute Receivables are located at
the address specified therefor in Schedule II.
(c) Subject to the terms of that certain agreement between
Fleur-David Corporation and Grantor dated , (the
"Letter Agreement") the Grantor is and will be at all times the owner of the
Collateral free and clear of any lien, security interest or other charge or
encumbrance except for the security interest created by this Agreement. No
effective financing statement or other instrument similar in effect covering
all or any part of the Collateral is on file in any recording or filing
office except (i) such as may have been filed in favor of the Lender relating
to this Agreement and (ii) such as may have been filed to perfect or protect
any security in favor of Tessenderlo Kerley, Inc., which is being released
contemporaneously herewith.
Grantor hereby covenants, represents, warrants and agrees that:
(d) The Collateral will not be misused, abused, wasted or
allowed to deteriorate, but shall be kept in good working order, condition
and repair, reasonable wear and tear from its sole use above excepted; and
all costs and expenses incurred in the repair, maintenance and preservation
of such Collateral shall be paid solely by Grantor;
(e) Grantor shall make all necessary renewals, replacements
and additions of Inventory as shall be necessary at all times adequately to
service its customers and properly and advantageously to carry on its
business in accordance with prudent business management;
(f) Grantor shall, at its sole cost and expense, defend the
Collateral against any claims of infringement and all other claims or demands
of any other party and all other liabilities of any nature whatsoever;
(g) The Collateral and the premises on which it is located
shall be insured by and at the expense of Grantor, at all times, and in the
amount of its full insurable value and against all
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<PAGE>
expected risks to which it may be exposed, including fire and extended
coverage and those which Secured Party may reasonably designate with policies
satisfactory to Secured Party and payable to both Secured Party and Grantor
as their interests may appear. Grantor, at its cost and expense, shall also
maintain liability insurance in such amounts as Secured Party may from time
to time designate, with Grantor and Secured Party each being named as
insureds. All said policies shall provide thirty (30) days minimum advance
cancellation notice to Secured Party and duplicate policies (or certified
copies of original policies) shall be deposited with Secured Party. The
proceeds of such insurance may be applied by Secured Party, at its option,
either to reduce any indebtedness secured hereby or to repair and replace
such Collateral;
(h) Grantor shall duly and promptly pay and discharge, or
cause to be paid and discharged, (1) all taxes, assessments and governmental
charges or levies upon or against it or its profits, income, properties or
assets; and (ii) all lawful claims, whether for labor, materials, supplies,
services or anything else which might or could, if unpaid, become a lien or
charge upon the properties or assets of GRANTOR, unless and to the extent
only that the same are being diligently contested in good faith by
appropriate proceedings and appropriate bonds have been posted to release any
lien and reserves therefor have been established in accordance with generally
accepted accounting principles consistently applied;
(i) Grantor shall promptly furnish Secured Party with all
information concerning the Collateral, the performance and payment of
Grantor's obligations, liabilities and indebtedness hereunder and the
business, operations and financial condition of Grantor, as Secured Party may
reasonably request, and shall annually furnish balance sheets and statements
of income and surplus account for the preceding fiscal or calendar period, in
comparative form, all in reasonable detail and certified (without any
qualification or exception deemed material by Secured Party) by independent
certified public accountants acceptable to Secured Party;
(j) Grantor shall immediately notify Secured Party of any
act, condition, or event which, with the giving of notice or lapse of time,
or both, would constitute an event of default (and "Event of Default")
hereunder, including the existence of any material litigation, arbitration or
other legal proceedings involving or affecting Grantor;
(k) In addition to the foregoing, specifically with respect
to the Inventory:(i)
(i) If Secured Party requests, Grantor shall deliver
to Secured Party annually, within sixty (60) days after the end of each
fiscal year, an inventory report showing the status of Grantor's Inventory as
of the end of such fiscal year. Such report shall be certified by Grantor to
be true and correct and shall be signed and sworn to by the Grantor's
President. In addition, if Secured Party requests, similar inventory reports
as of other dates shall be submitted to Secured Party as often as reasonably
requested by Secured Party. If Secured Party so requests at reasonable
intervals, Grantor will from time to time deliver to Secured Party a report
of Inventory prepared from a physical count of inventory taken under the
supervision of, and certified by, a certified public accountant acceptable to
Secured Party;
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<PAGE>
(ii) Secured Party shall have a security interest in
all proceeds of Grantor's Inventory, whether cash, negotiable instruments,
Accounts Receivable, chattel paper, or other proceeds. Upon a default by
Grantor under the Note, under this Security Agreement, or under the Lease, as
defined above, Secured Party shall have the right to demand that Grantor do
any one or more of the following: turn over to the Secured Party all
instruments and chattel paper received, with such endorsements and
assignments as may be necessary to transfer title thereof to Secured Party on
the day received; deposit daily all cash received in an account designated
for this purpose by Secured Party; mark with appropriate notation of
assignment to Secured Party all ledger accounts and other records showing
Accounts Receivable; and execute any documents which may be necessary to
transfer the title to Secured Party of any goods taken as proceeds of the
sale of Inventory covered by this Agreement. Failure of Secured Party to
demand performance of any of the above obligations of Grantor for any period
of time shall not be deemed a waiver of Secured Party's right to so demand at
any time that there exists any indebtedness from Grantor to Secured Party;
SECTION 5. (a) COVENANTS AS TO THE COLLATERAL. So long as any
of the Obligations (as such term is defined in clause (i) of Section 1.01 of
the Loan Agreement) shall remain outstanding, unless the Lender shall
otherwise consent in writing which may be withheld in Lender's sole and
absolute discretion.
(b) LOCATION OF EQUIPMENT AND INVENTORY. The Grantor will
keep the Equipment and Inventory (other than Inventory and used Equipment
sold in the ordinary course of business) at the location[s] specified
therefor in Section 4(b) hereof.
(c) CONDITION OF EQUIPMENT. The Grantor will cause the
Equipment to be maintained and preserved in good condition ordinary wear and
tear excepted.
(d) INSPECTION AND REPORTING. The Grantor shall permit
representatives of the Lender, upon reasonable notice and at any time during
normal business hours, to inspect and make abstracts from its books and
records pertaining to the Collateral, and permit representatives of the
Lender to be present at the Grantor's place of business to receive copies of
all communications and remittances relating to the Collateral, and to forward
copies of any notices or communications received or made by the Grantor with
respect to the Collateral, all in such manner as the Lender may require.
(e) TRANSFERS AND OTHER LIENS. The Grantor will not (i)
sell, assign (by operation of law or otherwise), exchange or otherwise
dispose of any of the Collateral (except for sales or other dispositions of
Inventory and used Equipment in the ordinary course of business).
SECTION 6. ADDITIONAL PROVISIONS CONCERNING THE COLLATERAL.
(a) The Grantor hereby authorizes the Lender to file,
without the signature of the Grantor, one or more financing or continuation
statements, and amendments thereto, relating to the Collateral necessary to
preserve, extend, amend or perfect Lender's lien granted by this Agreement.
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<PAGE>
(b) The Grantor hereby irrevocably appoints the Lender the
Grantor's attorney-in-fact and proxy, with full authority in the place and
stead of the Grantor and in the name of the Grantor or otherwise, from time
to time in the Lender's discretion, to take any action and to execute any
instrument which the Lender may deem necessary or advisable to accomplish the
purposes of this Agreement, including, without limitation: (i) to ask,
demand, collect, sue for, recover, compound, receive and give acquittance and
receipts for moneys due and to become due under or in respect of any
Collateral, (ii) to receive, indorse, and collect any drafts or other
instruments, documents and chattel paper in connection with clause (i) above
and (iii) to file any claims or take any action or institute any proceedings
which the Lender may deem necessary or desirable for the collection of any
Collateral or otherwise to enforce the rights of the Lender with respect to
any Collateral.
(c) If the Grantor fails to perform any agreement contained
herein after the expiry of any applicable grace period, the Lender may itself
perform, or cause performance of, such agreement or obligation, and the
expenses of the Lender incurred in connection therewith shall be payable by
the Grantor pursuant to Section 8 hereof.
(d) The powers conferred on the Lender hereunder are solely
to protect its interest in the Collateral and shall not impose any duty upon
it to exercise any such powers including but not limited to those for the
safe custody of any Collateral in its possession and the accounting for
moneys actually received by it hereunder. Further, the Lender shall have no
duty as to any Collateral or as to the taking of any necessary steps to
preserve rights against prior parties or any other rights pertaining to any
Collateral.
SECTION 7. REMEDIES UPON DEFAULT. If an Event of Default shall
have occurred and be continuing:
(a) The Lender may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise
available to it, all of the rights and remedies of a secured party on default
under the Code (whether or not the Code applies to the affected Collateral),
and also may: (i) upon demand require the immediate surrender to the Secured
Party of the actual possession of the Collateral, and the Secured Party may
thereafter enter and take possession of the Collateral and may exclude the
Grantor wholly therefrom; (ii) require the consent of the Grantor to the
appointment of a receiver or receivers of the Collateral and of all of the
earnings, revenues, rents, issues, profits, and such receiver to have all of
the powers and authority permitted by applicable law; (iii) require the
Grantor to, and the Grantor hereby agrees that it will, at its expense and
upon request of the Lender forthwith, assemble all or part of the Collateral
as directed by the Lender and make it available to the Lender at a place to
be designated by the Lender which is reasonably convenient to both parties;
and (iv) sell the Collateral or any part thereof in one or more parcels at
public or private sale, at any of the Lender's offices or elsewhere, for
cash, on credit or for future delivery, and at such price or prices and upon
such other terms as Lender shall determine it hereby being expressly waived
by Grantor any rights to claim or assert that such sale was not conducted in
a manner deemed to be commercially reasonable. The Grantor agrees that, to
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<PAGE>
the extent notice of sale shall be required by law, at least 10 days' notice
to the Grantor of the time and place of any public sale or the time after
which any private sale is to be made shall constitute reasonable
notification. The Lender shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given. The Lender may
adjourn any public or private sale from time to time by announcement at the
time and place fixed therefor, and such sale may, without further notice, be
made at the time and place to which it was so adjourned. The Grantor hereby
waives any claims against the Lender arising by reason of the fact that the
price at which the Collateral may have been sold at a private sale was less
than the price which might have been obtained at a public sale or was less
than the aggregate amount of the Obligations, even if the Lender accepts the
first offer received and does not offer the Collateral to more than one
offeree.
(b) In the event that the proceeds of any such sale,
collection or realization are insufficient to pay all amounts to which the
Lender is legally entitled, the Grantor shall be liable for the deficiency,
together with interest thereon at the highest rate specified in any Note for
interest on overdue principal thereof or such other rate as shall be fixed by
applicable law, together with the costs of collection and the reasonable fees
of any attorneys employed by the Lender to collect such deficiency.
(c) The proceeds of any such sale, collection or realization
shall be applied in the following order: first to cost of sale, then to
attorney's fees, interest, principal, and the remainder to Grantor.
SECTION 8. EXPENSES. The Grantor will upon demand pay to the
Lender the amount of any and all costs and expenses, including the reasonable
fees and disbursements of the Lender's counsel and of any expert which the
Lender may incur in connection with (i) the exercise or enforcement of any of
the rights of the Lender hereunder; (ii) the failure by the Grantor to
perform or observe any of the provisions hereof; or (iii) the preservation by
Lender of the security interest conveyed hereunder.
SECTION 9. NOTICES, ETC. All notices and other communications provided
for hereunder shall be in writing and shall be mailed, telecopied, with a copy
sent promptly thereafter by U.S. mail, return receipt requested or delivered, if
to the Borrower, at the following address:
Sabal Corp.
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<PAGE>
5830 McArdle
No. 14 Crossroads, Suite 203
Corpus Christi, Texas 78412
Telephone No.: (512) 993-1458
Telecopy No.: (512) 993-1518
Jackson Walker L.L.P.
816 Congress Avenue, Suite 1600
Austin, Texas 78701
Attention: Wade Cooper
Telephone No.: (512) 494-2440
Telecopy No.: (512) 494-2442
and if to the Lender, to it at the following address:
ExCal Energy Corporation
c/o MTR Gaming Group, Inc.
Route 2 South
Chester, West Virginia 26034
Attention: Mr. Edson Arneault, President
Telephone No.: (304) 387-2400
Telecopy No.: (304) 387-1598
with copies to:
Ruben & Aronson, LLP3299 K Street, NW, Suite 403Washington, DC 20007Attention:
Robert Ruben, Esq.Telephone No.: (202) 965-3600Telecopy No.: (202) 965-3700
or, as to each party, at such other address as shall be designated by such
party in a written notice to the other party complying as to delivery with
the terms of this Section 8.01. All such notices and other communications
shall be effective (i) if mailed, when received or three days after mailing,
whichever first occurs, (ii) if telecopied, when transmitted, provided same
is on a Business Day and, if not, on the next Business Day, or (iii) if
delivered, upon delivery, provided same is on a Business Day and, if not, on
the next Business Day, except that notices to the Lender pursuant to Article
II hereof shall not be effective until received by the Lender.
SECTION 10. MISCELLANEOUS.
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<PAGE>
(a) No amendment of any provision of this Agreement shall be
effective unless it is in writing and signed by the Grantor and the Lender,
and no waiver of any provision of this Agreement, and no consent to any
departure by the Grantor therefrom, shall be effective unless it is in
writing and signed by the Lender, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for
which given.
(b) No failure on the part of the Lender to exercise, and no
delay in exercising, any right hereunder or under any other Loan Document
shall operate as a waiver thereof; nor shall any single or partial exercise
of any such right preclude any other or further exercise thereof or the
exercise of any other right. The rights and remedies of the Lender provided
herein and in the other Loan Documents are cumulative and concurrent and are
in addition to, and not exclusive of, any rights or remedies provided by law.
The rights of the Lender under any Loan Document against any party thereto
are not conditional or contingent on any attempt by the Lender to exercise
any of its rights under any other Loan Document against such party or against
any other Person.
(c) Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or invalidity without
invalidating the remaining portions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.
(d) This Agreement shall create a continuing security
interest in the Collateral and shall: (i) remain in full force and effect
until the indefeasible payment in full or release of the Obligations (as such
term is defined in the Loan Agreement); and (ii) be binding on the Grantor
and its successors and assigns and shall inure, together with all rights and
remedies of the Lender hereunder, to the benefit of the Lender and its
respective successors, transferees and assigns. Without limiting the
generality of the foregoing, the Lender may assign or otherwise transfer any
Note or portion thereof held by it, and the Lender may assign or otherwise
transfer its rights under any other Loan Document to any other Person, and
such other Person shall thereupon become vested with all of the benefits in
respect thereof granted to the Lender, herein or otherwise. None of the
rights or obligations of the Grantor hereunder may be assigned or otherwise
transferred without the prior written consent of the Lender.
(e) Upon the satisfaction in full of the Obligations: (i)
this Agreement and the security interest created hereby shall terminate and
all rights to the Collateral shall revert to the Grantor; and (ii) the Lender
will, upon the Grantor's request and at the Grantor's expense, (A) return to
the Grantor such of the Collateral as shall not have been sold or otherwise
disposed of or applied pursuant to the terms hereof and (B) execute and
deliver to the Grantor such documents as the Grantor shall reasonably request
to evidence such termination.
(f) This Agreement shall be governed by and construed in
accordance with the law of the State of Texas.
(g) Any legal action or proceeding with respect to this
Agreement or any document related thereto may be brought in the courts of the
State of Michigan and, by execution
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<PAGE>
and delivery of this Agreement, the Grantor hereby accepts for itself and in
respect of its property, generally and unconditionally, the jurisdiction of
the aforesaid courts. The Grantor hereby irrevocably waives any objection,
including, without limitation, any objection to the laying of venue or based
on the grounds of FORUM NON CONVENIENS, which it may now or hereafter have
to the bringing of any such action or proceeding in such respective
jurisdictions and consents to the granting of such legal or equitable relief
as is deemed appropriate by the court.
(h) The Grantor irrevocably consents to the service of
process of any of the aforesaid courts in any such action or proceeding by
the mailing of copies thereof by registered or certified mail, postage
prepaid, to such Grantor at its address provided herein, such service to
become effective 30 days after such mailing.
(i) Nothing contained herein shall affect the right of the
Lender to serve process in any other manner permitted by law or commence
legal proceedings or otherwise proceed against the Grantor or any of the
Grantor's property in any other jurisdiction.
(j) THE GRANTOR WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED ON, ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
VERBAL OR WRITTEN STATEMENT OR OTHER ACTION OF THE PARTIES
HERETO.
IN WITNESS WHEREOF, the Grantor has caused this Agreement to be
executed and delivered by its officer thereunto duly authorized, as of the
date first above written.
ATTEST: SABAL CORP.
By: /s/ Robert Landress
---------------------------------
/s/ Roger Landress Secretary Roger Landress, President
- --------------------
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<PAGE>
Exhibit 10.9
INTER-CREDITOR AGREEMENT
INTER-CREDITOR AGREEMENT, dated as of October 30, 1998, by and
among Sabal Corp., a Nevada Corporation (the "Debtor"), and EXCAL ENERGY
CORPORATION, a Michigan corporation ("ExCal"), BISCAYNE PETROLEUM
CORPORATION, an Ohio corporation ("Biscayne"), and Roger Landress
("Landress") (ExCal, Biscayne, and Landress being referred to collectively
herein as "Creditors").
WHEREAS, Debtor has made a promissory note in favor of ExCal in the
original principal amount not to exceed $500,000, a copy of which is attached
hereto as Exhibit A-1; and
WHEREAS, Debtor has made a promissory note in favor of Biscayne in the
original principal amount of $97,808.87 copy of which is attached hereto as
Exhibit A-2; and
WHEREAS, Debtor has made a promissory note in favor of Landress in the
original principal amount of $113,697.98, a copy of which is attached hereto
as Exhibit A-3; and
WHEREAS, the Creditors have reached agreement among themselves and
with the Debtor with respect to the repayment of the various promissory notes
in certain circumstances; and
WHEREAS, the Debtor and the Creditors wish to reduce their agreement
to writing and with the intention of being bound hereby:
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, and with the understanding and expectation that each party
hereto intends to rely upon the representations and promises of the remaining
parties hereto, the Debtor and the Creditors hereby agree as follows:
1. AUTHORIZATION. The execution, delivery and performance by each
party hereto (i) have been duly authorized by all necessary corporate action,
(ii) do not and will not contravene the charter or by-laws, law or any
contractual restriction binding on or otherwise affecting such party.
2. ORDER OF PAYMENTS. Notwithstanding any provision to the
contrary in the promissory notes made by Debtor in favor of the Creditors, in
the event of a sale of assets by Debtor other than in the ordinary course of
business (but not in the case of a permitted sale of all or substantially all
of the assets of Debtor), the net proceeds of such sale shall be immediately
paid to the Creditors, whether as prepayment or otherwise, as follows: Debtor
shall immediately pay each of the Creditors that percentage of the net
proceeds calculated by multiplying the net proceeds by the product of (x) a
fraction the numerator of which shall be the principal balance together with
any accrued but unpaid interest then outstanding with respect to that
Creditor's promissory note (the "Outstanding Balance"), and the denominator
of which shall be the aggregate Outstanding Balance of all Creditors'
promissory notes; and (y) 100.
<PAGE>
3. NET PROCEEDS. For purposes of this Agreement, net proceeds
shall mean gross proceeds, whether in cash or in kind, less costs of
advertising or brokerage commissions paid to non-affiliates of Debtor in
connection with such sale.
4. ASSETS. For purposes of this Agreement, assets shall include
real property, personal property, buildings, furniture, fixtures, machinery,
motor vehicles, equipment, leases, contract rights, inventory, and
securities, whether now owned or hereafter acquired.
5. SECURITY INTERESTS. Except with respect to the General
Security Agreement dated as of October 30, 1998 made by Debtor in favor
of ExCal, each of the Creditors warrants and represents to the others that
he/it does not, by virtue of the promissory notes that are exhibits hereto or
otherwise, have a security interest in any property of the Debtor.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered as of the date first above written.
DEBTOR:
SABAL CORP.
By: /s/ Roger Landress
----------------------------------
Name: Roger Landress
Title: President
CREDITORS:
EXCAL ENERGY CORPORATION
By: /s/ Edson R. Arneault
----------------------------------
Name: Edson R. Arneault
Title: President
BISCAYNE PETROLEUM CORPORATION, an
Ohio corporation
By: /s/ Edson R. Arneault
----------------------------------
Its: President
Roger Landress
/s/ Roger Landress
-------------------------------------
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Exhibit 10.10
MORTGAGE
THIS MORTGAGE is given on the 30th day of October, 1998, by SABAL
CORP., a Nevada corporation, having an address at 5830 McArdle, No. 14
Crossroads, Suite 203, Corpus Christi, TX 78412 ("MORTGAGOR"), to EXCAL
ENERGY CORPORATION, a Michigan corporation, having an address c/o MTR Gaming
Group, Inc., Route 2 South, P.O. Box 358, Chester, West Virginia 26034
("LENDER").
FOR VALUE RECEIVED, Mortgagor mortgages and warrants to Lender
land located in the Township of Marathon, County of Lapeer, State of
Michigan, commonly known as 13020 Washburn Road, Otter Lake, Michigan 48064,
as more particularly described on Exhibit A hereto and (i) all buildings,
structures and other improvements now or in the future located on the land
and all easements, hereditaments and appurtenances now or in the future
belonging to the land, (ii) all fixtures now or in the future attached to or
used in connection with the land, (iii) all equipment (including, without
limitation, all machinery, engines, boilers, elevators and plumbing, heating,
air conditioning and ventilating equipment) now or in the future located on
the land, all of which equipment shall be considered to be fixtures and a
part of the realty, (iv) all rents, income and profits arising from the land
or from the buildings, structures, other improvements, fixtures and equipment
now or in the future located on the land and (v) all rights to make divisions
of the land that are exempt from the platting requirements of the Michigan
Land Division Act, as it shall be amended. In this Mortgage, the
above-described land, buildings, structures, improvements, easements,
hereditaments, appurtenances, fixtures and equipment are collectively called
"THE PREMISES."
THIS MORTGAGE SECURES PAYMENT AND PERFORMANCE OF ALL
INDEBTEDNESS AND OBLIGATIONS NOW AND IN THE FUTURE OWING TO LENDER BY
MORTGAGOR, INCLUDING ALL OBLIGATIONS OF MORTGAGOR UNDER THIS MORTGAGE. The
indebtedness and obligations now owing to Lender by Mortgagor include, BUT
ARE NOT NECESSARILY LIMITED TO, the indebtedness and obligations evidenced by
any promissory notes, guarantees and documents listed below.
<TABLE>
<CAPTION>
NOTE, GUARANTY OR PRINCIPAL AMOUNT
DOCUMENT DATE (IF ANY)
- ----------------- ---- ----------------
<S> <C> <C>
Promissory Note October , 1998 $500,000.00
</TABLE>
This Mortgage secures all present and future indebtedness and
obligations owing to Lender by Mortgagor, regardless of whether any such
indebtedness or obligation is (i) not listed above, (ii) not presently
intended or contemplated by Lender or Mortgagor, (iii) indirect, contingent
or secondary, (iv) unrelated to the premises or to any financing of the
premises by Lender, (v) of a
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kind or class that is different from any indebtedness or obligation now owing
to Lender by Mortgagor, or (vi) evidenced by a note or other document that
does not refer to this Mortgage.
If Lender assigns this Mortgage and the indebtedness that is
secured by it at the time of the assignment, then this Mortgage shall also
secure all indebtedness and obligations then and in the future owing to the
assignee by Mortgagor. From and after the assignment, each reference in this
Mortgage to Lender shall be considered to refer to the assignee.
The indebtedness and obligations secured by this Mortgage are
collectively referred to in this Mortgage as the "INDEBTEDNESS."
Mortgagor further warrants, represents and agrees as follows:
1. PAYMENT OF INDEBTEDNESS. Mortgagor agrees to pay or perform
all of the Indebtedness now or in the future owing by Mortgagor, including
all interest on it, in accordance with the terms of the instruments,
documents or agreements evidencing it ("INSTRUMENTS").
2. WARRANTIES. Mortgagor warrants and represents to Lender as
follows:
(a) All financial statements and other information
concerning Mortgagor, the premises, any guarantor of any of the
Indebtedness and any person obligated on any of the
Indebtedness, that have been or in the future are furnished to
Lender, are and shall be true and correct in all material
respects.
(b) The execution, delivery and performance of this
Mortgage by Mortgagor will not violate any law, rule, judgment,
order, agreement or instrument binding upon Mortgagor and will
not require the approval of any public authority or any third
party, and this Mortgage is the valid and binding obligation of
Mortgagor, enforceable in accordance with its terms.
(c) Mortgagor is a corporation and is duly organized
and validly existing in good standing in the State of Nevada;
Mortgagor has full power and authority to carry on its business
as presently conducted and to enter into and perform its
obligations under this Mortgage; the execution, delivery and
performance of this Mortgage by Mortgagor have been duly
authorized by all necessary action of its board of directors
and will not violate Mortgagor's certificate of incorporation
or bylaws and will not require the approval of its shareholders.
3. ASSIGNMENT OF LEASES AND CONTRACTS. Mortgagor assigns and
mortgages to Lender, and grants to Lender a security interest in, as additional
security for the Indebtedness, all of Mortgagor's right, title and interest in
and to all existing and future oral or written leases of all or any part of the
premises or of any interest in them and all existing and future land contracts
or other agreements by which the premises or any interest in them is being or
shall be sold, together with all rents and profits arising from, and all other
proceeds of, those leases, land contracts or other
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agreements. Without the written consent of Lender, Mortgagor shall not
cancel, accept a surrender of, modify, consent to an assignment of the
lessee's interest under, or make any other assignment or other disposition
of, any lease, land contract or other agreement or of any interest of
Mortgagor in it and shall not collect or accept any payment of rent or of
principal or interest or any other amount more than one month before it is
due and payable. Mortgagor shall pay and perform all obligations and
covenants required of Mortgagor by the terms of each lease, land contract or
other agreement. If Mortgagor shall default in the payment or performance of
any obligation or covenant, then Lender shall have the right, but shall have
no obligation, to pay or perform it on behalf of Mortgagor, and all sums
expended by Lender in doing so shall be payable by Mortgagor to Lender upon
demand, together with interest at the lesser of (i) five percent above the
rate of interest payable under the Promissory Note secured by this Mortgage,
or (ii) the highest rate to which Mortgagor could lawfully agree in writing
("DEFAULT RATE"). Neither this paragraph nor PARAGRAPH 10 of this Mortgage
implies that Lender consents to the sale, lease or transfer of the premises
or any interest in them.
4. MINERALS. Mortgagor assigns and mortgages to Lender, and
grants to Lender a security interest in, as additional security for the
Indebtedness, all of Mortgagor's right, title and interest in and to (i) all
oil, gas and other minerals located in, on or under the premises subject to
any oil, gas or mineral leases in effect with respect to such oil, gas or
other minerals, (ii) all oil, gas or mineral leases, royalty agreements and
other contracts that have been or in the future are entered into with respect
to the premises or with respect to any oil, gas or other minerals located in,
on or under the premises ("MINERAL LEASES"), and (iii) all rents, profits,
royalties and income at any time arising from the Mineral Leases or from the
sale of oil, gas or other minerals located in, on or under the premises.
Upon the occurrence of an event of default as defined in PARAGRAPH 14 of this
Mortgage, Lender shall be entitled to the present and full possession,
receipt and use of and right to such oil, gas, other minerals, Mineral
Leases, rents, profits, royalties and income, for application to the
Indebtedness in any manner that Lender in its sole discretion shall determine.
5. TAXES AND INSURANCE. Mortgagor shall pay, or cause to be paid,
before they become delinquent, all taxes, assessments and other similar
charges levied upon or with respect to the premises and shall promptly
deliver to Lender satisfactory evidence of payment of them. Mortgagor shall
cause all buildings, improvements and other insurable parts of the premises
to be insured against loss or damage by fire, by hazards included within
extended coverage and by other risks that Lender from time to time requires,
in amounts and with insurers that are acceptable to Lender, and Mortgagor
shall cause all premiums on the insurance to be paid when due. Lender shall
not, however, require hazard insurance covering any building or buildings
that are part of the premises to be in an amount greater than the replacement
cost of the building or buildings. Within 45 days after Lender notifies
Mortgagor that the premises are located in a special flood hazard area but
are not covered by flood insurance in the amount required by applicable law
(including, without limitation, the federal Flood Insurance Act of 1968, as
amended), Mortgagor shall obtain and at all times maintain in effect the
required insurance. Each policy evidencing insurance required by this
Paragraph shall provide that loss shall be payable to Lender as its interest
shall appear at the time of the loss, shall contain a standard mortgage
clause, shall be in form and substance acceptable to Lender and shall be
delivered to Lender. Each policy shall provide that the insurer shall give
Lender
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at least 10 days' prior written notice of any cancellation of or any material
change in the insurance. Each renewal of each policy shall be delivered to
Lender at least 10 days before the expiration date of the policy. Upon
foreclosure of this Mortgage or other transfer of the premises in
satisfaction of the Indebtedness, all right, title and interest of Mortgagor
in and to any insurance policies then in force, including the right to any
premium refund, shall vest in the purchaser or grantee. If there shall occur
any destruction of or damage to the premises, Mortgagor shall give immediate
notice to Lender, and Lender shall have the right to make proof of the loss
or damage, if Mortgagor does not promptly do so. Lender is authorized to
settle, adjust or compromise any claims for loss or damage under any
insurance policy. Mortgagor shall immediately endorse and deliver to Lender
all proceeds of any policy. Lender may require Mortgagor to pay a reasonable
fee to Lender for determining whether the premises are located in a special
flood hazard area, if either (i) Lender undertook the determination because
of a revision of floodplain areas or (ii) Lender purchased required flood
insurance, under PARAGRAPH 8 of this Mortgage, after Mortgagor failed to
purchase the required insurance following Lender's notification to Mortgagor
that Mortgagor was required to do so.
6. ESCROW. Upon request by Lender, Mortgagor shall pay to Lender
periodically, on each date that Lender shall designate, an amount equal to
(i) the amount that Lender from time to time estimates will be sufficient to
permit Lender to pay each annual tax, assessment and any other similar charge
levied upon or with respect to the premises and each premium for flood
insurance covering the premises, at least 30 days before it is due and
payable, divided by (ii) the number of regularly-scheduled payments upon the
Indebtedness that will occur between (A) the date of Lender's request, the
date of any new estimate by Lender of the amount of the annual tax,
assessment, other charge or flood insurance premium, or the date when Lender
last paid the tax assessment, other charge or flood insurance premium on
behalf of Mortgagor (whichever is applicable), and (B) the thirtieth day
before the tax, assessment, other charge or flood insurance premium will be
due and payable. Upon demand by Lender, Mortgagor shall pay to Lender any
additional sums that are necessary to make up any deficiency in the amount
necessary to enable Lender to pay fully those taxes, assessments, other
similar charges and flood insurance premiums when due. All sums that
Mortgagor pays to Lender under this paragraph may be commingled with the
general funds of Lender, and no interest shall be payable to Mortgagor with
respect to them. If an event of default, as defined in PARAGRAPH 14 of this
Mortgage, occurs, then Lender may apply any funds of Mortgagor it then holds
under this paragraph against the Indebtedness, in any manner that Lender
shall determine.
7. MAINTENANCE AND REPAIR. Mortgagor shall maintain the premises
in good condition and repair; shall not commit or suffer any waste of the
premises; shall not remove, demolish or substantially alter any building or
fixture on the premises without the prior written consent of Lender; shall
cause to be complied with all laws, ordinances, regulations and requirements
of any governmental authority applicable to the premises or to activities on
the premises; shall promptly repair, restore, replace or rebuild any part of
the premises that is damaged or destroyed by any casualty; and shall promptly
pay when due all charges for utilities and other services to the premises.
8. LENDER'S RIGHT TO PERFORM; RECEIVER. If Mortgagor shall
default in the performance of any obligation of Mortgagor under this Mortgage
(including, without limitation, its
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obligations to keep the premises in good condition and repair, to pay taxes
and assessments and to obtain and maintain insurance), then Lender shall have
the right, but shall have no obligation, to perform, or cause to be
performed, the obligation, and Mortgagor shall reimburse Lender on demand for
all sums expended by Lender in doing so, together with interest at the
Default Rate. Lender and any persons authorized by Lender shall have the
right to enter upon the premises at all reasonable times for the purpose of
inspecting the premises or effecting maintenance or repairs or taking any
other action under the preceding sentence. The failure of Mortgagor to pay
any taxes, assessments or similar charges upon the premises when due or to
obtain and maintain required insurance shall constitute waste and shall
entitle Lender to the appointment by a court of competent jurisdiction of a
receiver of the premises for the purpose of preventing the waste. The
receiver, subject to the order of the court, may collect the rents and income
from the premises and exercise control over the premises as the court shall
order. Any payment or performance by Lender, under PARAGRAPH 3 of this
Mortgage, of an obligation that Mortgagor has failed to perform under a
lease, land contract or other agreement, and any exercise by Lender of any
right, remedy or option under a lease, land contract or other agreement,
shall not be considered an assumption by Lender of the lease, land contract
or other agreement or of any obligation or liability under it.
9. CONDEMNATION. If all or any part of the premises is taken,
whether temporarily or permanently, under power of eminent domain or by
condemnation, the entire proceeds of the award or other payment for the
taking shall be paid directly to Lender.
10. SALE OR TRANSFER. If there shall be a sale or transfer, by
operation of law or otherwise, of all or any part of the premises, Lender may
deal with the buyer or transferee with respect to this Mortgage and the
Indebtedness as fully and to the same extent as it might with Mortgagor,
without in any way releasing, discharging or affecting the liability of
Mortgagor under this Mortgage and upon the Indebtedness.
11. PROPERTY INFORMATION. During any period when any part of the
premises is leased, Mortgagor shall promptly furnish to Lender, upon Lender's
request from time to time, (i) copies of all leases then in effect with
respect to all or any part of the premises, including all amendments, (ii) a
written schedule that shows for each tenant the tenant's name, the current
rental rate (including any percentage rent), any rental or leasing
concessions, the units or area leased and the lease expiration date, (iii) a
description of any parts of the premises that are not then leased, (iv)
detailed financial statements relating to the premises, prepared in
accordance with generally accepted accounting principles, for the periods and
as of the dates that Lender shall require, which statements shall show,
without limitation, all income and expenses, capital expenditures, tenant
improvements, leasing commissions, and all indebtedness secured by mortgages
or liens upon the premises, and (v) any additional information concerning the
premises and the leasing of them that Lender shall request. Lender shall
have the right at any reasonable time (whether or not any part of the
premises is then being leased) to inspect and make copies of Mortgagor's
records concerning the premises and any lease of or other transaction or
matter concerning the premises.
12. ENVIRONMENTAL AND ACCESS LAW WARRANTIES AND AGREEMENTS.
Mortgagor warrants and represents to Lender, and agrees, as follows:
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(a) Mortgagor, the premises and all activities of
Mortgagor and all other persons on the premises are and shall
continue to be in compliance with all environmental laws and
all access laws. No part of the premises is or shall in the
future be used as a "public accommodation," as defined in the
federal Americans With Disabilities Act, as amended. The
premises are not and shall not become a site or source of
environmental contamination. Except as expressly and
particularly disclosed in that certain Phase I Environmental
Site Assessment dated as of April 2, 1997 and that certain
Phase II Environmental Site Assessment dated as of May 21, 1997
(collectively, the "Assessments") delivered by Mortgagor to
Lender, (i) no asbestos or polychlorinated biphenyls are
present on or contained in the premises, and (ii) the premises
do not presently contain an underground storage tank and have
never contained an underground storage tank except as expressly
and particularly disclosed in the Assessments.
(b) In this Mortgage, (i) "ENVIRONMENTAL LAW" means
at any time any applicable federal, state, local or foreign law
(including common law), ordinance, rule, regulation, permit,
order or other legally binding requirement that then (A)
regulates the quality of air, water, soil or other
environmental media, (B) regulates the generation, management,
transportation, treatment, storage, recycling or disposal of
any wastes, (C) protects public health, occupational safety and
health, natural resources or the environment, or (D)
establishes liability for the investigation, removal or
remediation of, or harm caused by, environmental contamination;
(ii) "HAZARDOUS SUBSTANCE" means at any time any substance,
material or waste that is then subject to or regulated by any
environmental law, (iii) "ENVIRONMENTAL CONTAMINATION" means
the presence of a hazardous substance in or on, or the release,
discharge or emission of a hazardous substance from, the
premises in excess of any limit or criterion established or
issued under any environmental law, and (iv) "ACCESS LAW" means
at any time any applicable law, ordinance, rule, regulation or
order that then regulates the accessibility of property to
disabled persons, including, but not limited to, the federal
Americans With Disabilities Act, as amended.
13. ACCESS TO PREMISES. Lender and any persons authorized by
Lender shall have the right to enter upon the premises at all reasonable
times for the purpose of (i) appraising the premises, (ii) investigating
(including, without limitation, sampling soil, water and air) whether the
premises and activities upon them are in compliance with environmental laws
and access laws and whether the premises are a site or source of
environmental contamination or (iii) removing or remediating any
environmental contamination. Without limiting the foregoing, Lender shall
have the right to conduct and submit to appropriate governmental agencies a
"baseline environmental assessment" of the premises within the meaning of
Section 20101 of the Michigan Natural Resources and Environmental Protection
Act, MCL 324.20101, as it shall be amended from time to time. If, at the
time of the appraisal, investigation, assessment, removal or remediation,
there shall have occurred and be continuing an event of default, as defined
in PARAGRAPH 14 of this Mortgage, then Mortgagor shall reimburse Lender on
demand for all costs and expenses of the appraisal, investigation,
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assessment, removal or remediation, together with interest at the Default
Rate. Mortgagor shall consent to any consultant contract, waste manifest,
notice and other documents that Lender reasonably requests to enable Lender
to take or conduct any action or activity contemplated by this paragraph, if
Mortgagor is given a reasonable opportunity to negotiate the terms of the
contract, manifest, notice or other document.
14. EVENTS OF DEFAULT AND ACCELERATION. Upon the occurrence of any
of the following events of default, all or any part of the Indebtedness
shall, at the option of Lender, become immediately due and payable without
notice or demand:
(a) If default occurs in the payment or performance of any
of the Indebtedness, when and as it shall be due and payable, whether
at Maturity or otherwise.
(b) If default occurs in the performance of any other
obligation to Lender under any Instrument or under any other mortgage,
security agreement, loan agreement, assignment, guaranty or other
agreement that now or in the future secures or relates to any of the
Indebtedness or that evidences, secures or relates to any guaranty of
any of the Indebtedness ("SECURITY DOCUMENTS") or if default occurs in
the performance of any obligation to Lender under this Mortgage,
whether or not Lender shall have performed the obligation on
Mortgagor's behalf, under PARAGRAPH 8 of this Mortgage, and whether or
not Mortgagor shall have reimbursed Lender for any payments or
expenses it incurred in curing the default.
(c) If any warranty, representation or statement that has
been or is in the future made to Lender by Mortgagor or by any
guarantor of all or part of the Indebtedness ("GUARANTOR") in this
Mortgage or in any Security Document, credit application, financial
statement or otherwise, shall have been false in any material respect
when made or furnished.
(d) If Mortgagor shall default in payment of the principal
of or interest on any indebtedness for borrowed money now or in the
future owed to any person other than Lender.
(e) If Mortgagor or any Guarantor or any of the partners of
a Guarantor that is a partnership shall dissolve, become insolvent or
make an assignment for the benefit of creditors.
(f) If all or any material part of the premises shall be
damaged or destroyed by fire or other casualty, regardless of
insurance coverage for the loss, or shall be taken by condemnation or
power of eminent domain.
(g) If any law or government regulation shall impose a tax
or assessment upon mortgages or debts secured by mortgages.
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(h) If any guaranty that now or in the future secures
payment or performance of all or any part of the Indebtedness shall be
terminated or limited, for any reason, without the written consent or
agreement of Lender.
If a voluntary or involuntary case in Bankruptcy or
receivership shall be started by or against Mortgagor or any Guarantor or any
partner of any Guarantor that is a partnership, then the entire Indebtedness
shall automatically become immediately due and payable, without notice or
demand. All or any part of the Indebtedness also may become, or may be
declared to be, immediately due and payable under the terms and conditions
contained in any Security Document, Instrument or other agreement that at any
time evidences, secures or relates to the Indebtedness.
15. REMEDIES. Lender shall have all rights and remedies given by
this Mortgage or otherwise permitted by law. In addition, if the
Indebtedness shall not be paid at Maturity, Lender shall have the right and
is authorized:
(a) To collect and receive all rents, profits and other
amounts that are due or shall in the future become due under the terms
of any leases, land contracts, Mineral Leases, or other agreements,
now or later in effect, by which the premises or any interest in them
are then being sold or leased, and to exercise any other right or
remedy of Mortgagor under any lease, land contract, other agreement or
Mineral Lease; but Lender shall have no obligation to make any demand
or inquiry as to the nature or sufficiency of any payment received or
to present or file any claim or take any other action to collect or
enforce the payment of any amounts to which Lender may become
entitled, and Lender shall not be liable for any of Mortgagor's
obligations under any lease, land contract, other agreement or Mineral
Lease.
(b) To obtain or update abstracts of title, title searches,
title insurance and surveys with respect to the premises, and
Mortgagor shall reimburse Lender for all costs of doing so, together
with interest at the Default Rate.
(c) To foreclose this Mortgage by action under applicable law.
(d) To sell, release and convey the premises at public sale,
and to sign and deliver to the purchasers at the sale good and
sufficient deeds of conveyance, paying any surplus funds, after
payment of the Indebtedness in full and the expenses of the sale,
including attorney fees as provided by law, to Mortgagor, all in
accordance with Chapter 32 of the Michigan Revised Judicature Act, as
it may be amended from time to time, and any similar statutory
provisions that may in the future be enacted in addition to Chapter 32
or in substitution for it. The premises may, at the option of Lender,
be sold in one parcel.
All rights and remedies of Lender under this Mortgage, whether
or not exercisable only on default, shall be cumulative and may be exercised
from time to time, and no delay by Lender in the exercise of any right or
remedy shall be a waiver of it, and no single or partial exercise of any
right or remedy shall prevent other or further exercise of it or the exercise
of any other right or remedy, except to the extent otherwise provided by law.
In this Mortgage, "MATURITY" means the
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time when the Indebtedness shall be or shall become due and payable, whether
by the terms of the Instruments or under PARAGRAPH 14 of this Mortgage or
otherwise.
16. SECURITY INTEREST IN FIXTURES. Mortgagor grants to Lender a
security interest in all fixtures now or in the future located on the
premises. If the Indebtedness is not paid at Maturity, Lender, at its option,
may enforce this security interest in fixtures under the Michigan Uniform
Commercial Code or other applicable law or may include fixtures in any
foreclosure of this Mortgage under PARAGRAPH 15 of this Mortgage. Any
requirement of reasonable notice with respect to any sale or other
disposition of fixtures shall be met if Lender sends the notice at least 10
days before the date of sale or other disposition.
17. INDEMNIFICATION. Mortgagor shall indemnify and hold harmless
Lender with respect to any and all claims, demands, causes of action,
liabilities, damages, losses, judgments and expenses (including attorney
fees) that shall be asserted against or incurred by Lender by reason of (i)
any representation or warranty by Mortgagor in this Mortgage being inaccurate
in any respect, (ii) any failure of Mortgagor to perform any of Mortgagor's
obligations under this Mortgage, or (iii) any past, present or future
condition or use of the premises which has not been disclosed to Lender in
the Assessments (whether known or unknown), other than an excluded condition
or use, including, but not limited to, liabilities arising under any
"environmental law," as defined in PARAGRAPH 12 of this Mortgage. An
"EXCLUDED CONDITION OR USE" is one that both (A) does not exist or occur, to
any extent, at any time before Mortgagor has permanently given up possession
and control of the premises by reason of a foreclosure of this Mortgage or
Lender's acceptance of a conveyance of the premises to Lender in lieu of
foreclosure and (B) was not caused or permitted to exist, in whole or part,
by any act or omission of Mortgagor. Indemnification by Mortgagor under this
paragraph shall not limit any other right or remedy (including Lender's right
to accelerate payment of the Indebtedness) that is available to Lender by
reason of the circumstance in respect of which indemnity is made.
Mortgagor's obligations under this paragraph shall survive foreclosure of
this Mortgage and any conveyance of the premises in lieu of foreclosure.
If any action, suit, investigation or proceeding (an "Action")
shall be threatened or commenced by a third party in respect of which the
Lender may make a claim for indemnification hereunder, the Lender shall
notify Mortgagor to that effect with reasonable promptness (so as not to
prejudice Mortgagor's rights) after the commencement or threatened
commencement of such Action, and Mortgagor shall have the opportunity to
defend against such Action (or, if the Action involves to a significant
extent matters beyond the scope of the indemnity contained herein, those
claims that are covered hereby). If Mortgagor elects to defend against any
Action, (or, as described in the preceding parenthetical, one or more claims
relating thereto), Mortgagor shall notify Lender to that effect with
reasonable promptness. In such case, the Lender shall have the right to
employ its own counsel and participate in the defense of such matter, but the
fees and expenses of counsel shall be at the expense of the Lender unless the
employment of such counsel at the expense of Mortgagor shall have been
authorized in writing by Mortgagor. Whichever party is granted the right to
direct the defense of an Action shall: (i) keep the other fully informed of
material developments in the Action at all stages thereof; (ii) promptly
submit to the other copies of all pleadings, responsive pleadings, motions
and other similar legal documents and papers received in connection
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with the Action; (iii) permit the other and its counsel, to the extent
practicable, to confer on the conduct of the defense of the Action; and (iv)
to the extent practicable, permit the other and its counsel to review all
legal papers to be submitted prior to their submission.
18. WAIVERS.
(a) Mortgagor and any other person who in the future obtains
a mortgage or lien upon, or any other interest in, the premises
waives, with respect to any foreclosure of this Mortgage, (i) any
right to marshaling of the premises and any right to require a minimum
bid or "upset" price, and (ii) the benefit of any stay, extension,
exemption or moratorium law, now existing or enacted in the future.
(b) Lender may at any time release all or any part of the
premises from the lien of this Mortgage or release the liability of
any person for the Indebtedness, with or without consideration and
without giving notice to, or obtaining the consent of, the holder of
any mortgage or lien upon, or other interest in, the premises. A
release shall not impair or affect the validity or priority of this
Mortgage, regardless of the effect of the release upon the mortgage,
lien or other interest or the holder of it. This subparagraph does
not imply that Lender consents to the placing of a mortgage, lien or
other encumbrance on the premises.
19. EXPENSES. Mortgagor shall pay to Lender on demand all
expenses, including attorney fees and legal expenses, paid or incurred by
Lender in collecting or attempting to collect the Indebtedness or in
protecting and enforcing the rights of and obligations to Lender under any
provision of this Mortgage, including, without limitation, taking any action
in any Bankruptcy, insolvency or reorganization proceeding concerning
Mortgagor or foreclosing this Mortgage by advertisement or by action. The
expenses shall bear interest, from the date paid or incurred by Lender, at
the Default Rate.
20. APPLICATION OF PROCEEDS. If any rents or profits or any
proceeds of insurance or proceeds of any condemnation or eminent domain award
or proceeds from any sale of the premises at foreclosure are paid to Lender,
Lender shall have the right to apply the rents or profits or proceeds, in
amounts and proportions that Lender shall in its sole discretion determine,
to the full or partial satisfaction of any or all of the indebtedness and
obligations secured by this Mortgage, including any contingent or secondary
obligations, whether or not they shall then be due and payable by the primary
obligor.
21. OTHER. Any notice to Mortgagor or to Lender shall be
considered to be given if and when mailed, with postage prepaid, to the
respective address of Mortgagor or Lender appearing on the first page of this
Mortgage, or if and when delivered personally. The provisions of this
Mortgage shall be binding upon and inure to the benefit of Mortgagor and
Lender and their respective successors and assigns. Any provision of this
Mortgage prohibited or unenforceable by any applicable law shall be
ineffective only to the extent and for the duration of the prohibition or
unenforceability without invalidating the remaining provisions of this
Mortgage.
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Mortgagor has signed this Mortgage as of the date stated on the
first page of this Mortgage.
SABAL CORP.
- ------------------------------ /s/ /Roger Landress
--------------------------------------
By: Roger Landress
- ------------------------------ Its: President
STATE OF TEXAS )
: SS.
COUNTY OF TRAVIS )
This Mortgage was acknowledged before me on October 30, 1998,
by Roger Landress, the President of Sabal Corp., a Nevada corporation, on its
behalf.
/s/ Jeanette E. Fuller
------------------------------------
Notary Public, Travis County,
My commission expires: 02/06/02
THIS INSTRUMENT PREPARED BY
AND WHEN RECORDED RETURN TO:
Warner Norcross & Judd LLP
Judith Lowitz Adler
1000 Town Center, Suite 650
Southfield, Michigan 48075-1222
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EXHIBIT A
DESCRIPTION OF LAND
Land situated in the County of Lapeer, Township of Marathon, State of
Michigan, described as follows:
Parcel I
The Southwest fractional 1/4 of the Northeast fractional 1/4 of Section 18,
Town 9 North, Range 9 East, Marathon Township, Lapeer County, Michigan, Less
and Except a part of the Southwest 1/4 of the Northeast 1/4 of Section 18,
Town 9 North, Range 9 East, Marathon Township, Lapeer County, Michigan
described as beginning at a point distant North 88 degrees 57 minutes 42
seconds East 1652.36 feet along the East and West 1/4 line and North 01
degrees 18 minutes 01 seconds West 399.86 feet along the East _ line from the
West 1/4 corner of Section 18 and proceeding thence South 87 degrees 48
minutes 12 seconds West 286.89 feet; thence North 02 degrees 11 min. 48
seconds West 330.00 feet; thence North 87 degrees 48 minutes 12 seconds East
292.05 feet; thence along the East _ line South 01 degrees 18 minutes 01
seconds East 330.04 feet to the point of beginning.
Parcel II
Part of the Southwest 1/4 of the Northeast 1/4 of Section 18, Town 9 North,
Range 9 East, Marathon Township, Lapeer County, Michigan described as
beginning at a point distant North 88 degrees 57 minutes 42 seconds East
1652.36 feet along the East and West 1/4 line and North 01 degree 18 minutes
01 second West 399.86 feet along the East _ line from the West 1/4 corner of
Section 18, and proceeding thence South 87 degrees 48 minutes 12 seconds West
286.89 feet; thence North 02 degrees 11 minutes 48 seconds West 330.00 feet;
thence North 87 degrees 48 minutes 12 seconds East 292.05 feet; thence along
the East _ line South 01 degrees 18 minutes 01 seconds East 330.04 feet to
the point of beginning;
TOGETHER with an easement for ingress and egress 100.00 feet wide, being
50.00 feet on either side of the following described centerline; Beginning at
a point on the West line of Section 18 distant North 00 degrees 03 minutes 04
seconds West 78.00 feet from the West 1/4 corner of Section 18 and proceeding
thence North 89 degrees 52 minutes 42 seconds East 336.00 feet; thence North
50 degrees 47 minutes 21 seconds East 810.83 feet; thence North 88 degrees 41
minutes 59 seconds East 385.29 feet to the point of ending on the West line
of the above described Kerley parcel.
Parcels I and II above also having a street address known as 13020 Washburn
Road, Otter Lake, Michigan 48464.
Tax Item No. 44-013-018-010-00
Tax Item No. 44-013-018-010-50
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MTR GAMING
GROUP, INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 11,186,000
<SECURITIES> 0
<RECEIVABLES> 649,000
<ALLOWANCES> (122,000)
<INVENTORY> 0
<CURRENT-ASSETS> 16,366,000
<PP&E> 45,594,000
<DEPRECIATION> (8,463,000)
<TOTAL-ASSETS> 59,637,000
<CURRENT-LIABILITIES> 2,222,000
<BONDS> 33,455,000
0
0
<COMMON> 2,000
<OTHER-SE> 22,861,000
<TOTAL-LIABILITY-AND-EQUITY> 59,637,000
<SALES> 60,897,000
<TOTAL-REVENUES> 60,897,000
<CGS> 39,151,000
<TOTAL-COSTS> 51,190,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,055,000
<INCOME-PRETAX> 6,927,000
<INCOME-TAX> (27,000)
<INCOME-CONTINUING> 6,954,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,954,000
<EPS-PRIMARY> .34
<EPS-DILUTED> .29
</TABLE>
<PAGE>
Exhibit 99.1
F O R R E L E A S E NOVEMBER 4 AT 8:00 A.M.
COMPANY CONTACT: EDSON R. ARNEAULT, PRESIDENT
(304) 387-2400
MTR GAMING GROUP ANNOUNCES RECORD THIRD QUARTER
EPS $.18 (basic) $.16 (diluted)
Revenues Increase by 43% to $25.3 Million
EBITDA Increases by 74% to $5.7 Million
Nine Month Revenues Increase by 33.8% to $60.9 Million
Nine Month EPS $.34 (basic) $.29 (DILUTED)
Chester, West Virginia, November 4, 1998 -- MTR Gaming Group, Inc.
(NASDAQ: MNTG) today announced its results of operations for the three and
nine months ended September 30, 1998. The Company also announced that during
the quarter its Mountaineer unit's employee pension fund purchased 140,900
shares of the Company's common stock in the open market for an average price
of $1.99 per share.
Total revenues for the quarter rose 43.1% to $25,281,000, compared to
$17,663,000 for the third quarter of 1997. Video slots accounted for $20.8
million of such revenue, representing an increase of $6,440,000, or 44.7%,
over video slot revenue for the third quarter of 1997. EBITDA (earnings
before interest, taxes, depreciation and amortization) was $5,696,000,
compared to $3,274,000 for the third quarter of 1997, representing an
increase of 74%.
The Company's net income for the quarter rose 76.5% to $3,850,000, or
$.18 per basic share and $.16 per diluted share, compared to $2,181,000, or
$.11 per basic share and $.10 per diluted share for the third quarter of
1997. Per share results are based on a weighted average of basic shares
outstanding of 20,861,322 and 19,814,291 during the third quarters of 1998
and 1997, respectively; and a weighted average number of diluted shares
outstanding of 23,662,597 and 21,378,434 during the third quarters of 1998
and 1997, respectively.
Total revenues for the nine months ended September 30, 1998 increased
33.8% to $60,897,000 from $45,502,000 reported for the same period last year.
Net income for the first nine
1
<PAGE>
months of 1998 was $6,954,000, or $.34 per basic share and $.29 per diluted
share, compared to $3,629,000, or $.18 per basic share and $.17 per diluted
share for the first nine months of 1997. Per share results are based on a
weighted average number of basic shares outstanding of 20,301,137 and
19,780,958 during the first nine months of 1998 and 1997, respectively; and a
weighted average number of diluted shares outstanding of 24,088,681 and
20,881,375 during the first nine months of 1998 and 1997, respectively.
During the third quarter, the Company's Nevada subsidiaries contributed
$478,000 in hotel, food and beverage revenue but generated an aggregate net
loss of $489,000, or $.02 per diluted share, principally because of the
closing of the North Las Vegas property due to construction, interest expense
of $389,000, and the fact that neither the Company nor a third-party casino
operator has commenced gaming operations in those locations. During the
third quarter, however, the Company entered leases with Dynasty Games, an
unaffiliated, licensed casino operator, to operate gaming at both Nevada
properties while the Company pursues licensing. Dynasty's application for
permission to conduct gaming at the properties may be heard by the Nevada
gaming authorities in December, and, if that permission is granted, the
Company anticipates that gaming operations will commence in early 1999.
The Company also recently signed franchise agreements with Ramada
Franchise Systems, Inc. for the Nevada properties. The North Las Vegas
property will be known as the Ramada Inn & Speedway Casino, and the Reno
property will be known as the Ramada Inn & Speakeasy Casino.
Commenting on the results, Edson R. "Ted" Arneault, President and Chief
Executive Officer of MTR Gaming, said, "We continue to be pleased with the
growth of our video slot business and the successful marketing of Mountaineer
Racetrack & Gaming Resort as a gaming and entertainment complex. The third
quarter opening of the 12,000 square foot expansion of the Speakeasy Gaming
Saloon, the reconfiguration of the number and types of video slots, and the
combination of horseracing, concerts, and nationally televised boxing events
all contributed to our record results. Significantly, the July 1998 increase
from 1,000 to 1,200 video slots coincided with an increase in the average net
win-per-day-per-machine to $189 during the third quarter of 1998,
2
<PAGE>
compared to $157 during the third quarter of 1997. Average net win-per-day-
per-machine for the first nine months of 1998 was $173, compared to $144 for
the same period in 1997. Based on this success, as we announced on Monday,
we plan to increase the number of video slots from 1,200 to 1,355 during the
first quarter of 1999 and to use 100 of the new machines in our first
progressive jackpot networks."
MTR Gaming Group, Inc., a West Virginia based corporation, through
subsidiaries, owns and operates the Mountaineer Racetrack & Gaming Resort in
Chester, West Virginia and has recently acquired hotel/casino properties in
North Las Vegas and Reno, Nevada. The Mountaineer complex currently
encompasses a thoroughbred racetrack, including off track betting, 1,200
video lottery terminals, a 101 room hotel, nine hole executive golf course,
fine dining and entertainment, the Speakeasy Gaming Saloon, Big Al's Deli,
the Gatsby Lounge, and the Hollywood Knights Saloon.
EXCEPT FOR HISTORICAL INFORMATION, THIS PRESS RELEASE CONTAINS
FORWARD-LOOKING STATEMENTS CONCERNING, AMONG OTHER THINGS, FUTURE PLANS AND
OPERATING RESULTS. SUCH STATEMENTS ARE BASED ON THE COMPANY'S CURRENT PLANS
AND EXPECTATIONS. ACTUAL RESULTS COULD DIFFER MATERIALLY BASED UPON A NUMBER
OF FACTORS, INCLUDING BUT NOT LIMITED TO WEATHER CONDITIONS, GAMING
REGULATION AND LICENSING, COMPETITION, GENERAL ECONOMIC CONDITIONS AFFECTING
THE RESORT BUSINESS, DEPENDENCE UPON KEY PERSONNEL, AND OTHER FACTORS
DESCRIBED IN THE COMPANY'S PERIODIC REPORTS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.
-TABLE FOLLOWS-
3
<PAGE>
MTR GAMING GROUP, INC.
CONDENSED AND CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine months Ended
September 30 September 30
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues
Video lottery terminals $20,840,000 $14,400,000 $50,313,000 $37,185,000
Parimutuel commissions 1,352,000 1,214,000 3,713,000 3,460,000
Food, beverage and lodging 2,512,000 1,711,000 5,652,000 4,025,000
Other 577,000 338,000 1,219,000 832,000
----------- ----------- ----------- -----------
Total revenues 25,281,000 17,663,000 60,897,000 45,502,000
----------- ----------- ----------- -----------
Costs of revenue
Cost of video lottery terminals 12,249,000 8,894,000 30,101,000 23,199,000
Cost of parimutuel commissions 1,017,000 1,637,000 3,537,000 4,428,000
Cost of food, beverage and lodging 2,240,000 1,424,000 4,795,000 3,473,000
Cost of other revenues 320,000 226,000 718,000 789,000
----------- ----------- ----------- -----------
Total cost of revenues 15,826,000 12,181,000 39,151,000 31,889,000
----------- ----------- ----------- -----------
Gross Profit 9,455,000 5,482,000 21,746,000 13,613,000
----------- ----------- ----------- -----------
Selling, general and administrative expenses:
Marketing and promotions 1,062,000 1,077,000 2,848,000 2,432,000
General and administrative 2,696,000 1,131,000 6,948,000 3,716,000
Depreciation and amortization 683,000 591,000 2,243,000 1,588,000
----------- ----------- ----------- -----------
Total selling, general and administrative expenses 4,441,000 2,799,000 12,039,000 7,736,000
----------- ----------- ----------- -----------
Operating income 5,014,000 2,683,000 9,707,000 5,877,000
----------- ----------- ----------- -----------
Interest income 92,000 54,000 275,000 98,000
----------- ----------- ----------- -----------
Interest expense (1,233,000) (780,000) (3,055,000) (2,636,000)
----------- ----------- ----------- -----------
(1,141,000) (726,000) (2,780,000) (2,538,000)
----------- ----------- ----------- -----------
Income before benefit of income taxes 3,873,000 1,957,000 6,927,000 3,339,000
Benefit for income taxes (23,000) 224,000 27,000 290,000
----------- ----------- ----------- -----------
Net income $3,850,000 2,181,000 6,954,000 3,629,000
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Net income per share $0.18 $0.11 $0.34 $0.18
Net income per share assuming dilution $0.16 $0.10 $0.29 $0.17
Weighted average number of shares outstanding:
Basic 20,861,322 19,814,291 20,301,137 19,780,958
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Diluted 23,662,597 21,378,434 24,088,681 20,881,375
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
<PAGE>
Exhibit 99.2
F O R I M M E D I A T E R E L E A S E
COMPANY CONTACT: EDSON R. ARNEAULT, PRESIDENT
(304) 387-2400
MTR GAMING GROUP ANNOUNCES STATE APPROVAL TO
INCREASE FROM 1,200 TO 1,355 VIDEO SLOTS
-- Company to Implement Progressive Jackpots --
Chester, West Virginia, November 2, 1998 -- MTR Gaming Group, Inc.
(NASDAQ: MNTG) today announced that it has obtained the approval of the West
Virginia Lottery Commission to increase the number of video slots at the
Company's Mountaineer Racetrack & Gaming Resort from 1,200 to 1,355. In July
of 1998, the Company increased the number of machines from 1,000 to 1,200 as
part of the opening of the 12,000 square foot expansion of the Speakeasy
Gaming Saloon located at the Mountaineer Lodge. The Company plans to add the
155 machines during the first quarter of 1999 and to link 100 of the new
machines in one or more progressive jackpot networks. By pooling a small
percentage of the amount wagered in each of the linked machines into a single
jackpot, progressives increase the amount a player can win on a single wager.
Similar progressive networks recently implemented at two other West Virginia
tracks, where gross video slot wagers are substantially less than at
Mountaineer, have created jackpots exceeding $150,000 at each track. The
Company believes that progressives will have a positive impact on video
lottery operations.
The Company also announced that on Wednesday, November 4, the Company
will release its results of operations for the three and nine months ended
September 30, 1998.
MTR Gaming Group, Inc., a West Virginia based corporation, through
subsidiaries, owns and operates the Mountaineer Racetrack & Gaming Resort in
Chester, West Virginia and has recently acquired hotel/casino properties in
North Las Vegas and Reno, Nevada. The Mountaineer complex currently
encompasses a thoroughbred racetrack, including off track betting, 1,200
video lottery terminals, a 101 room hotel, nine hole executive golf course,
fine dining and entertainment, the Speakeasy Gaming Saloon, Big Al's Deli,
the Gatsby Lounge, and the Hollywood Knights Saloon.
EXCEPT FOR HISTORICAL INFORMATION, THIS PRESS RELEASE CONTAINS
FORWARD-LOOKING STATEMENTS CONCERNING, AMONG OTHER THINGS, FUTURE PLANS AND
OPERATING RESULTS. SUCH STATEMENTS ARE BASED ON THE COMPANY'S CURRENT PLANS
AND EXPECTATIONS. ACTUAL RESULTS COULD DIFFER MATERIALLY BASED UPON A NUMBER
OF FACTORS, INCLUDING BUT NOT LIMITED TO WEATHER CONDITIONS, GAMING
REGULATION AND LICENSING, COMPETITION, GENERAL ECONOMIC CONDITIONS AFFECTING
THE RESORT BUSINESS, DEPENDENCE UPON KEY PERSONNEL, AND OTHER FACTORS
DESCRIBED IN THE COMPANY'S PERIODIC REPORTS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.
<PAGE>
Exhibit 99.3
Property # 6484 Escrow No.: 98120462-071-SR
Date Escrow Opened: ______________________
Escrow Holder: United Title of Nevada
AGREEMENT FOR SALE OF
REAL PROPERTY
AND ESCROW INSTRUCTIONS
THIS AGREEMENT is made and entered into this 23rd day of October
1998, by and between SPEAKEASY GAMING OF LAS VEGAS, INC., a Nevada
corporation, ("BUYER"), and UNION OIL COMPANY OF CALIFORNIA, a California
corporation, doing business as UNOCAL ("COMPANY").
R E C I T A L S:
A. COMPANY is the owner of certain real property in the City of Las
Vegas, County of Clark, State of Nevada, located at Civic Center Drive and
Cheyenne, and described on EXHIBIT "A" attached hereto (the "Property").
COMPANY reserves the right to revise the legal description attached as EXHIBIT
"A" upon receipt of the Preliminary Report and/or the ALTA survey already
obtained by BUYER pursuant to Section 4.3.2. Furthermore, the Property is the
subject of a certain condemnation action in the District Court, Clark County,
Nevada, encaptioned, "THE STATE OF NEVADA v. UNION OIL COMPANY OF CALIFORNIA,
et al.", Case No. A375884 (the "Condemnation Action"). Although the Property
will be conveyed hereunder in its entirety, it is subject to being reduced and
modified by the finalizing of the take in the Condemnation Action.
B. The Property has been the subject of dispute between COMPANY and
Banter, Inc. ("Banter") BUYER's predecessor in interest with respect to the
ownership of certain real property adjoining the Property. The sale of the
Property to BUYER as described herein is to settle any dispute relating to the
Property and in furtherance of the Settlement Agreement and General Release of
All Claims ("Release") among COMPANY, BUYER and Banter to which the form of this
Agreement is attached as an exhibit, as further described in such Release.
C. BUYER has offered to purchase and COMPANY has offered to sell the
Property upon the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants, agreements and conditions hereof, the parties agree as follows:
SECTION 1. PURCHASE PRICE
EXHIBIT "B"
<PAGE>
1.1 SALE AND PURCHASE. BUYER hereby agrees to purchase and COMPANY
hereby agrees to sell the Property, upon the terms and conditions contained
herein.
EXHIBIT "B"
1.2 PURCHASE PRICE. The total purchase price to be paid by BUYER for
the Property is One Hundred Twenty Thousand Dollars ($120,000.00 ) (the
"Purchase Price").
1.3 EARNEST MONEY DEPOSIT. Contemporaneously with BUYER's execution
of this Agreement, BUYER shall deposit into escrow, by cashier's check, the
amount of Twenty-Five Thousand Dollars ($25,000.00) ("Deposit") as consideration
for this Agreement, which amount will be applied to the Purchase Price at "Close
of Escrow" as defined in Section 4.7 hereof. To effect such Deposit, BUYER shall
provide to COMPANY, along with three (3) copies of this Agreement fully executed
by BUYER, a cashier's check made payable to Escrow Holder in the amount of the
Deposit. Failure of BUYER to provide such cashier's check with the executed
copies of this Agreement shall mean that this Agreement shall not be executed by
COMPANY and Escrow will not be opened. COMPANY shall forward the cashier's
check to the Escrow Holder along with the fully executed copies of this
Agreement to open Escrow. "Escrow Holder," as defined in Section 4.1 hereof,
shall deposit the Deposit in an interest bearing account. Notwithstanding
anything contained herein to the contrary, however, in the event COMPANY, in its
sole and absolute discretion, elects to open escrow without receipt of a
cashier's check for the Deposit, such election shall not constitute a waiver by
COMPANY of BUYER's obligation to pay the Deposit.
SECTION 2. NO CONDITIONS OUTSIDE OF ESCROW
BUYER hereby represents and warrants, and understands that COMPANY is
expressly relying on such representations and warranties in entering into this
Agreement, that it has made an independent study of the Property prior to
entering into this Agreement, including but not limited to the matters set forth
below, that it has had adequate time to do so, and that there shall be no
contingencies to BUYER's closing of the escrow and acquiring the Property.
2.1. The parties acknowledge that COMPANY has provided to BUYER copies
of the following documents, which are hereinafter referred to as
"Disclosure Documents": environmental reports and pertinent leases,
contracts, soils engineering reports, soils compaction reports, toxic and
geological studies, endangered species studies, conserved habitat and/or
wetlands studies, development agreements, letters or reports received
from governmental entities and other documents pertaining to the Property
(excluding, however, any documents disclosed on the Preliminary Report or
any supplementary report). The Disclosure Documents include only those
documents in existence and known to Pat Ellis, the Property Manager of
COMPANY with the most recent direct responsibility for the Property which
the Property Manager reasonably believes would be material to a
reasonable person purchasing the Property for commercial use, after
having made an independent investigation of the files concerning the
Property of which Property Manager is aware. A list of the Disclosure
Documents is set forth on Exhibit "B" attached hereto and incorporated
herein by this reference ("Disclosure Documents"). COMPANY has also
provided to BUYER a preliminary report (the "Preliminary Report")
prepared by United Title of Nevada ("Title Company").
2
EXHIBIT "B"
<PAGE>
2.2 BUYER hereby acknowledges that it has inspected the Property;
performed any tests it desired; satisfied itself as to the economic
feasibility of the transaction; and reviewed and approved all studies,
documents and other matters which BUYER determined necessary, including
but not limited to the Disclosure Documents; the Preliminary Report upon
the terms and conditions contained in Section 4.3.1 hereof; soils
engineering, toxic and geological studies; easements, endangered species,
habitat and wetlands issues; and requirements and conditions of
governmental bodies with jurisdiction, including appropriate zoning and
applicable ordinances.
SECTION 3. MATTERS DURING ESCROW
3.1 LICENSE. From and after execution of this Agreement by COMPANY,
COMPANY agrees to allow BUYER or its agents, employees, officers, attorneys and
other representatives to enter the Property during the escrow period at BUYER's
expense and risk to make any further investigation of the Property required by
BUYER (which shall not constitute a contingency by BUYER). However,
notwithstanding anything in this Agreement to the contrary, should BUYER wish to
enter the Property for any invasive testing during the term of the escrow, BUYER
shall first provide written notice thereof to COMPANY setting forth in detail
BUYER's purpose for entering onto the Property and the time or times BUYER
wishes to make such entry. COMPANY shall thereupon have the right to approve or
disapprove such entry in writing. Such approval shall not be unreasonably
withheld or delayed, but may be conditioned at the reasonable discretion of
COMPANY. In the event the Property is the subject of an existing lease or of
operations by COMPANY or any affiliate thereof, BUYER shall not enter onto the
Property except in compliance with any such lease or operations agreement and
shall not disturb any of such operations during its investigation hereunder.
3.2 INSURANCE. During the escrow period, BUYER, before entering the
Property, and at its own expense, shall procure and maintain during the
performance of its obligations under this Agreement, policies of liability
insurance in the State of Nevada reasonably acceptable to COMPANY, which are
primary as to any other existing, valid and collectible insurance insuring BUYER
against loss or liability caused by or in connection with the performance of
this Agreement by BUYER, its agents, servants, employees, invitees, guests,
contractors or subcontractors, in amounts not less than:
3.2.1 Commercial General Liability Insurance Occurrence Form, or
the equivalent, including Blanket Contractual Liability, with a combined
single limit of ONE MILLION DOLLARS ($1,000,000) each occurrence, TWO
MILLION DOLLARS ($2,000,000) aggregate, for Bodily Injury and Property
Damage, including Personal Injury.
3.2.2 Comprehensive Automobile Liability Insurance or Business
Auto Policy covering all owned, hired or otherwise operated non-owned
vehicles, with a minimum combined single limit of ONE MILLION DOLLARS
($1,000,000) each occurrence for Bodily Injury and Property Damage.
3.2.3 Workers' Compensation Insurance as required by law, and
Employers' Liability Insurance with a minimum limit of ONE MILLION
DOLLARS ($1,000,000) each
3
EXHIBIT "B"
<PAGE>
occurrence.
The policies of liability insurance shall name COMPANY, its parent, subsidiary
and affiliated companies, including but not limited to Unocal Corporation, and
their respective officers, directors, agents and employees (collectively, the
"COMPANY Group"), as an additional insured and shall not exclude or restrict
coverage based upon alleged or actual negligence of an additional insured.
BUYER shall deliver to COMPANY a certificate of insurance and additional insured
endorsements evidencing the existence of the policies and further evidencing
that coverage will not be canceled or materially changed prior to forty-five
(45) days' advance written notice to COMPANY. Subrogation against COMPANY and
the COMPANY Group shall be waived as respects all of the insurance policies set
forth above (including without limitation policies of any subcontractor). The
insurance required hereunder in no way limits or restricts the Indemnification
under Section 6, nor is the insurance to be carried limited by any limitation in
Section 6, nor by any limitation placed on the indemnity as a matter of law.
Any deductible amount, which shall not exceed One Thousand Dollars ($1,000), is
the responsibility of BUYER.
3.3 CONDEMNATION. Except with respect to the pending Condemnation
Action, in the event that any condemnation or eminent domain proceedings
affecting all or any part of the Property are initiated prior to Close of
Escrow, neither party may terminate this Agreement, but in such event COMPANY
shall assign to BUYER all of its right, title and interest in and to any award
made or to be made in connection with such proceedings and shall permit BUYER to
conduct all negotiations and enter into all agreements with respect thereto.
The Action shall be handled pursuant to the terms of the Release.
SECTION 4. ESCROW.
4.1 OPENING OF ESCROW. BUYER and COMPANY agree that an escrow shall
be opened within ten (10) days after the date hereof, with United Title of
Nevada as escrow holder ("Escrow Holder"), provided that three (3) duplicate
fully executed originals of this Agreement and three (3) duplicate fully
executed originals of (i) the Release, executed by both parties (which may be in
counterpart); (ii) the Stipulation for Entry of Judgment of Condemnation and
Final Order of Condemnation (the "Stipulation") executed by Unocal, and (iii)
the Acknowledgment by Speakeasy attached to the Stipulation executed by
Speakeasy (the "Speakeasy Acknowledgment") shall be deposited in said escrow in
order to open escrow. Escrow Holder is hereby instructed to fill in the
information on the first page of this Agreement and to send a duplicate original
of this Agreement promptly to BUYER and COMPANY. This Agreement shall become a
part of the escrow and shall constitute the basic instructions of BUYER and
COMPANY to Escrow Holder. However, both BUYER and COMPANY agree to execute such
additional instructions and documents as are reasonably required to complete the
closing of the sale of the Property in accordance with the terms and conditions
of this Agreement. In case of conflict, this Agreement shall govern.
4.2 LIQUIDATED DAMAGES CLAUSE:
4.2.1 AS LIQUIDATED DAMAGES, IT IS AGREED BETWEEN THE BUYER AND
COMPANY THAT THE DEPOSIT AS SET FORTH IN SECTION 1.3 HEREOF IS
NON-REFUNDABLE IN THE EVENT ESCROW FAILS TO CLOSE DUE TO A DEFAULT OF
BUYER, OTHERWISE THE DEPOSIT WILL BE CREDITED, TOGETHER
4
EXHIBIT "B"
<PAGE>
WITH INTEREST ACCRUED THEREON, TOWARD THE PURCHASE PRICE UPON CLOSE
OF ESCROW.
4.2.2 IF BUYER FAILS TO COMPLETE THE PURCHASE OF THE PROPERTY BY
REASON OF A DEFAULT OF BUYER, COMPANY SHALL BE ENTITLED TO CANCEL THIS
ESCROW AND SHALL BE RELEASED FROM ITS OBLIGATION TO SELL THE PROPERTY TO
BUYER, AND COMPANY MAY PURSUE ANY REMEDY IN LAW OR EQUITY THAT IT MAY
HAVE AGAINST BUYER ON ACCOUNT OF SUCH DEFAULT. ANY ACTION FOR SPECIFIC
PERFORMANCE AGAINST BUYER SHALL INCLUDE COMPANY'S RIGHT TO OBTAIN
DELIVERY OF, AND RENDER EFFECTIVE, WHETHER OR NOT DELIVERED, THE RELEASE
TO WHICH THIS AGREEMENT IS ATTACHED AS AN EXHIBIT, AND THE SPEAKEASY
ACKNOWLEDGMENT REFERENCED THEREIN, AS FURTHER DESCRIBED IN THE RELEASE.
4.2.3 IN THE ALTERNATIVE, HOWEVER, BY PLACING THEIR INITIALS
HERE,,
BUYER /s/ ERA AND COMPANY /s/LNW AGREE THAT:
------- ------
IN THE EVENT OF A DEFAULT OR BREACH OF THIS AGREEMENT BY BUYER, COMPANY
WILL SUFFER DAMAGES (INCLUDING BUT NOT LIMITED TO LOSS OF OTHER POTENTIAL
BUYERS, UNRECOVERABLE MARKETING, SALES AND PROCESSING COSTS AND COSTS OF
HOLDING PROPERTY BEYOND TERM OF ESCROW AND POTENTIAL LOSS OF MARKET
VALUE), AND WILL BE ENTITLED TO COMPENSATION FOR THESE DAMAGES, BUT SUCH
DAMAGES WILL BE EXTREMELY DIFFICULT AND IMPRACTICAL TO ASCERTAIN BECAUSE:
4.2.2.1 THE DAMAGES TO WHICH THE COMPANY WILL BE ENTITLED
IN A COURT OF LAW WILL BE BASED IN PART ON THE DIFFERENCE BETWEEN
THE ACTUAL VALUE OF THE PROPERTY AT THE SCHEDULED CLOSE OF ESCROW
AND THE PURCHASE PRICE FOR THE PROPERTY AS SET FORTH IN THIS
AGREEMENT, WHICH DIFFERENCE MUST BE BASED ON OPINIONS OF VALUE OF
THE PROPERTY, WHICH CAN VARY IN SIGNIFICANT AMOUNTS; AND
4.2.2.2 IT IS IMPOSSIBLE TO PREDICT, AS OF THE DATE
HEREOF, WHETHER THE VALUE OF THE PROPERTY WILL INCREASE OR
DECREASE AS OF THE SCHEDULED CLOSE OF ESCROW, AND BUYER DESIRES TO
LIMIT THE AMOUNT OF DAMAGES FOR WHICH BUYER MIGHT BE LIABLE, AND
BUYER AND COMPANY WISH TO AVOID THE COSTS AND LENGTHY DELAYS WHICH
WOULD RESULT IF THE COMPANY FILED A LAWSUIT TO COLLECT ITS DAMAGES
FOR BREACH OF THIS AGREEMENT.
4.2.3 IN THE EVENT OF DEFAULT OR BREACH OF THIS AGREEMENT BY
BUYER, (i) THE AMOUNT OF THE DEPOSIT AS SET FORTH IN SECTION 1.3 HEREOF
SHALL, AT COMPANY'S SOLE ELECTION, CONSTITUTE LIQUIDATED DAMAGES TO
COMPANY; AND (ii) IN SUCH EVENT THE PAYMENT OF SUCH
5
EXHIBIT "B"
<PAGE>
LIQUIDATED DAMAGES TO COMPANY SHALL CONSTITUTE THE EXCLUSIVE REMEDY
OF COMPANY ON ACCOUNT OF THE DEFAULT BY BUYER.
4.2.4 IF COMPANY ELECTS TO OBTAIN LIQUIDATED DAMAGES RATHER THAN
TO MAINTAIN AN ACTION AGAINST BUYER AT LAW AND/OR IN EQUITY, AT ANY TIME
AFTER BUYER DEFAULTS UNDER THE TERMS OF THIS AGREEMENT, OR AT ANY TIME
AFTER THE DATE PROVIDED HEREIN FOR CLOSE OF ESCROW OR ANY EXTENDED DATE
FOR CLOSE OF ESCROW, COMPANY MAY GIVE WRITTEN NOTICE THEREOF TO ESCROW
HOLDER AND TO BUYER BY REGISTERED OR CERTIFIED MAIL AND ESCROW HOLDER
SHALL PAY TO COMPANY THE AMOUNTS OF ANY DEPOSITS THEN HELD IN ESCROW AND
SHALL CANCEL THE ESCROW NO LATER THAN (10) DAYS AFTER RECEIPT OF SUCH
NOTICE.
4.2.5 BUYER AND COMPANY EACH AGREES TO INDEMNIFY AND HOLD ESCROW
HOLDER HARMLESS FROM ANY CLAIM BY THE OTHER ARISING OUT OF ANY
DISTRIBUTIONS MADE BY ESCROW HOLDER IN ACCORDANCE WITH AND PURSUANT TO
THE PROVISIONS OF THIS SECTION.
4.2.6. IN THE EVENT ESCROW FAILS TO CLOSE DUE TO A DEFAULT OF
COMPANY, BUYER MAY MAINTAIN AN ACTION AT LAW OR IN EQUITY AGAINST
COMPANY; PROVIDED, HOWEVER, THAT IN THE EVENT BUYER OBTAINS A JUDGMENT OF
SPECIFIC PERFORMANCE AGAINST COMPANY, THE RELEASE AND THE SPEAKEASY
ACKNOWLEDGMENT, SHALL THEREUPON BECOME EFFECTIVE, ALL AS FURTHER SET
FORTH IN THE RELEASE.
4.3 TITLE MATTERS.
4.3.1 TITLE CONDITION.
4.3.1.1, Title to the Property shall be subject to the
following:
4.3.1.1.1 Any and all existing building and use
restrictions, easements, rights-of-way, conditions,
covenants, restrictions, reservations, liens, encumbrances,
exceptions and other matters of record.
4.3.1.1.2 All dedicated roads, streets and
highways.
4.3.1.1.3 All building and zoning ordinances, laws,
regulations, and restrictions by any municipal or other
governmental authority applicable to the Property.
4.3.1.1.4 All general and special taxes and
assessments which are a lien but not yet due and payable or
for which statements have not yet been tendered.
6
EXHIBIT "B"
<PAGE>
4.3.1.1.5 All matters apparent from an inspection
of the Property, or which a current, accurate survey of the
Property would disclose (including but not limited to
encroachments, overlaps or boundary line disputes).
4.3.1.2 The Property shall be subject to the terms and
conditions set forth in the Agreement and Declaration of
Covenants, Conditions, Restrictions, Waiver and Release, attached
hereto as EXHIBIT "C" (the "CC&R's") which shall be recorded
immediately after recordation of the deed. BUYER hereby
acknowledges that BUYER has read and understands the CC&R's and
agrees to its terms.
4.3.1.3 BUYER hereby acknowledges that it has approved the
Preliminary Report. Furthermore, BUYER acknowledges that it has
been fully apprised of the taking of a portion of the Property in
the Condemnation Action, which portion is already in possession of
the condemning authority but which taking has not been recorded
other than as a lis pendens, and BUYER understands that the
Property and its legal description shall be modified at such time
as the judgment in condemnation is recorded.
4.3.1.4 In the event, prior to Close of Escrow,
of the addition of a new exception(s) to title to those exceptions
reflected by the Preliminary Report, by a matter (a) not caused by
COMPANY or any member of the COMPANY Group, (b) not caused by
BUYER or any member of the BUYER Group, or (c) as a result of the
Condemnation Action, the parties shall mutually endeavor, in good
faith, to have any such new exception to title that is reasonably
disapproved by BUYER deleted as soon as reasonably possible.
Close of Escrow shall be delayed, unless mutually agreed by the
parties, until the earlier of (i) the date that such matter is
resolved satisfactorily to both parties; or (ii) ninety (90) days
from the date that such matter first becomes an exception to
title, but in no event shall the deletion of such item from title
become a contingency to the Close of Escrow.
4.3.2 TITLE INSURANCE. COMPANY shall instruct Title Company to
issue, a standard policy of title insurance on an ALTA Form B standard
title policy form on the Property, including such endorsements as Buyer
shall reasonably require, in the amount of the Purchase Price in favor of
BUYER at Close of Escrow showing the Property vested in BUYER, subject
only to (i) the title matters set forth in Section 4.3.1 which have been
approved by BUYER ; (ii) the conditions described in Section 4.3.1.2
above; and (iii) any matters created by BUYER. In the event BUYER
desires an extended coverage policy of title insurance, COMPANY shall
reasonably cooperate with Escrow Holder and BUYER in the preparation and
issuance of such policy, including the execution of such documents as may
reasonably be required; provided, however, that in no event shall any
matter involved in the issuance of an extended coverage title policy
delay or extend any times set forth in this Agreement. COMPANY shall pay
only the premium for a standard policy of title insurance. BUYER shall
pay the difference in cost in obtaining an extended coverage policy over
a standard policy, including, but not limited to, any ALTA survey and
additional endorsements required for such extended coverage policy or
otherwise
7
EXHIBIT "B"
<PAGE>
required by BUYER.
4.4 DEPOSITS INTO ESCROW. BUYER and COMPANY shall deposit into
escrow, on or before Close of Escrow, or as otherwise set forth in this
Agreement, all documents and funds necessary to carry out this Agreement,
including:
4.4.1 By COMPANY
4.4.1.1 A Grant, Bargain and Sale deed, in proper form for
recording, which shall be duly executed and acknowledged so as to
convey to BUYER all of the Property in accordance with the terms
of this Agreement. The exact vesting required by BUYER shall be
submitted into escrow by BUYER no later than ten (10) days before
the scheduled Close of Escrow.
4.4.1.2 A certificate of its authorized officer to the
effect that, as of the date of the Close of Escrow, it is not a
foreign person as defined in the Internal Revenue Code of 1986, as
amended, and Income Tax Regulations ("FIRPTA Certificate"), such
FIRPTA Certificate to be substantially in the form described in
Treasury Regulation Section 1.1446-2(b)(2)(iii)(B), or otherwise
within the requirements of Section 1.1445-2(b)(2) of that
regulation and any comparable local laws.
4.4.1.3 The CC&R's, in proper form for recording, which
shall be duly executed and acknowledged.
4.4.1.4 The Release and Stipulation, each of which
shall be duly executed by COMPANY, as further described in Section
4.1 hereof.
4.4.1.5. If requested to do so by BUYER or Title Company,
COMPANY shall execute and deliver to Title Company an owner's
affidavit, with respect to the absence of claims that would give
rise to mechanic's liens, in common form and substance reasonably
acceptable to COMPANY, or shall provide such other reasonable
assurances regarding mechanic's liens as shall be required to
enable BUYER to obtain the title insurance policy.
4.4.2 By BUYER:
4.4.2.1 Cash, cashier's check payable to Escrow Holder, or
wire transfer of immediately available funds representing the
Purchase Price, less the Deposit, plus BUYER's share of escrow
fees and related charges as are standard practices in Clark
County, Nevada, plus the additional premium for an extended
coverage policy of title insurance, including the costs of
additional endorsements pursuant to Section 4.3.2, if applicable.
4.4.2.2 The CC&R's, in proper form for recording, which
shall be duly executed and acknowledged.
4.4.2.3 The Release and Speakeasy Acknowledgment,
each of which
8
EXHIBIT "B"
<PAGE>
shall be duly executed by BUYER , as further described in
Section 4.1 hereof.
4.5 PRORATIONS AND PAYMENTS. All items of income and expense,
including without limitation real property taxes and assessments for the
current fiscal year, shall be prorated between the parties as of the date of
the Close of Escrow. BUYER shall file or cause to be filed all required
reports and returns incident to taxes which are due on or after the Close of
Escrow, and shall pay or cause to be paid to the taxing authorities all such
taxes reflected on such reports or returns. COMPANY shall be credited with
COMPANY's prorated share at the Close of Escrow. The parties shall each pay
such portions of deed taxes, sales taxes, recording fees and other transfer
taxes, and costs and expenses relating to close of escrow including Title
Company charges, in accordance with the terms of this Agreement, or, if not
otherwise specified, in accordance with the standard division of fees in
Clark County, Nevada, as determined in good faith by Escrow Holder.
4.6 CLOSING DATE. Unless extended pursuant to the terms of this
Agreement, escrow shall close no later than the day which is three (3) weeks
after receipt by Unocal of all settlement documents executed by and on behalf
of Banter pursuant to the Release, but in no event later than November 25,
1998.
4.6.1 If said escrow terminates because of the failure of both
parties to perform any of their respective material obligations, then the
parties hereto shall each pay one-half (1/2) of said fees and related
charges.
4.6.2 If said escrow terminates due to the failure of only one
(1) party to perform any of its obligations, such defaulting party shall
pay all such fees and related charges. Such payment shall not affect
other rights between parties.
4.6.3 Except as otherwise provided in this Section 4.6, escrow
can only be extended upon BUYER and COMPANY agreeing to an extension in
writing and signed by both BUYER and COMPANY.
4.7 CLOSE OF ESCROW. When all of the conditions and instructions
herein provided for have been satisfied and properly complied with and said
escrow is ready to close in all respects, Escrow Holder shall promptly close
same by recording all appropriate documents and delivering to each of the
appropriate parties all the documents and funds on deposit in said escrow as
herein provided, ("Close of Escrow").
4.8 POSSESSION. Possession shall be delivered to BUYER at Close of
Escrow, free and clear of leases or other encumbrances entered into after the
opening of escrow by COMPANY without BUYER's consent.
SECTION 5. ENVIRONMENTAL MATTERS
5.1 NO LIABILITY FOR CONTAMINATION.
BUYER acknowledges that it has been advised that the Property
was never developed by COMPANY, except that the Property has been used as
a parking lot. BUYER agrees that it is the express intent of the
parties that: (i) upon Close of Escrow,
9
EXHIBIT "B"
<PAGE>
the risk of any Contamination on, within or emanating from the
Property shall shift to BUYER, and (ii) COMPANY shall have no
obligation for any Contamination, on, within or emanating from the
Property, including but not limited to any remediation thereof.
Expressly, but without limiting the generality of the foregoing,
COMPANY shall have no liability for remediation of any Contamination
of the Property, for changes in the any guidelines or in any law
concerning appropriate levels of cleanup of such Contamination, or for
any third-party claims resulting from any such Contamination. BUYER
hereby releases COMPANY from all claims, liability, damages, demands,
costs, and causes of action of all kinds arising out of or in
connection with the existence, assessment or remediation of
Contamination upon, under, in or emanating from, the soils or
groundwater of the Property, including without limitation any claims
for any special, indirect or consequential damages, loss of use,
rents, anticipated profit or business opportunity, or business
interruption, diminution in value, or mental or emotional distress or
fear of injury or disease trespass, nuisance or otherwise for any
response costs it may incur with respect to the Property under any
existing or future federal, state or local law, statute, ordinance,
regulation, legal cause of action or theory of any kind, including but
not limited to any claim under CERCLA (42 USC 9601 ET SEQ.), RCRA (42
USC 6901 ET SEQ.) or similar or comparable state, federal, or local
laws. BUYER further recognizes that there is a risk, that subsequent
to Close of Escrow, BUYER will incur or suffer loss, damage or
injuries which are in some way caused by the matters which are the
subject of this release, and which may be unknown or unanticipated at
the time of Close of Escrow, and BUYER assumes this risk and agrees
that this release shall apply to all such unknown or unanticipated
loss, damage, or injury, and hereby waives any and all rights under
California Civil Code Section 1542 or any comparable Nevada law.
California Civil Code Section 1542 reads as follows:
A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor at
the time of executing the release, which if known by him
must have materially affected his settlement with the
debtor.
BUYER'S INITIALS: /s/ ERA
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5.2 ASSIGNMENT OF REIMBURSEMENTS. In the event any fund is or
becomes available for reimbursement of any costs for environmental
investigation and/or remediation of real property in the area of the Property
and COMPANY has expended any money for environmental investigation or
remediation of the Property, BUYER hereby assigns its interest in any such
fund to COMPANY to the extent of COMPANY's expenditures with relation to the
Property.
5.3 DEFINITION OF CONTAMINATION. The word "Contamination," as used
herein, shall mean any hazardous or toxic material, substance, chemical or
waste, contaminant, emission, discharge or pollutant or comparable material
listed, identified or regulated pursuant to any federal, state or local law,
ordinance or regulation which has as a purpose the protection of health,
safety or the environment, including but not limited to petroleum or
petroleum products or wastes derived therefrom.
10
EXHIBIT "B"
<PAGE>
5.4 Definition of APPLICABLE CONTAMINATION. The phrase "Applicable
Contamination" as used herein shall mean any Contamination which resulted
from COMPANY's use of the Property during the time COMPANY owned the
Property.
SECTION 6. INDEMNIFICATION
BUYER, for itself and on behalf of "BUYER Group" (as that term is herein
defined), shall protect, defend, indemnify, and hold COMPANY, its parent,
subsidiary, affiliated, and successor companies, and their respective
officers, directors, agents, and employees (individually and collectively the
"COMPANY Group"), free and harmless from any and all claims, liability,
damages, demands, costs, expenses, and causes of action of all kinds,
including but not limited to claims of the death, illness, or injury of any
person or persons, including but not limited to members of BUYER Group (as
that term is herein defined), and/or from damage to or loss or destruction of
any property (real or personal) arising out of or in connection with (i) the
performance or non-performance of any action or obligation under this
Agreement by BUYER or its affiliated or successor companies, their officers,
directors, agents, servants, employees, tenants, lessees, invitees, or
guests, or by any contractor or subcontractor employed by BUYER, or by the
agents, servants, employees, invitees or guests of any such tenant, lessee,
contractor or subcontractor (individually and collectively, the "BUYER
Group"); or (ii) the possession or use of or operation on, under or within
the Property or the holding of any interest in the Property or any condition
existing or occurring on, under or within the Property after Close of Escrow,
including but not limited to matters relating to any Contamination (as that
term is defined in this Agreement) existing on, under or within, or
emanating from the Property (all of the foregoing individually and
collectively referred to in this Agreement as "Claims"). BUYER's obligations
under this Section 6 shall apply in every event, whether such Claims are made
pursuant to subsections (i) or (ii) above, whether COMPANY is alleged or
proven to have been negligent, actively or passively, or to be strictly or
absolutely liable, except to the extent that such matters with respect to
Claims made by any individual or entity other than BUYER Group are shown by a
"Final Judgment" (which for purposes of this Section 6 shall be a judgment
after all appeal periods have run and all filed appeals have been exhausted)
to have been caused by the sole negligence or willful misconduct of COMPANY
or any member of the COMPANY Group which occurred after the date of this
Agreement. Notwithstanding anything contained herein to the contrary,
however, BUYER shall not be required to indemnify COMPANY hereunder for any
Claim made by a person who is not a government entity or who is not a member
of the BUYER Group which Claim BUYER proves is the result of Applicable
Contamination which has not been exacerbated by any member of the BUYER
Group. In no event shall the above exception from BUYER Group's indemnity
obligations set forth in this provision be deemed or interpreted to mean that
COMPANY has any liability to BUYER Group for any Claims of BUYER Group or of
a government entity regarding Applicable Contamination. BUYER's indemnity
hereunder shall in no way be limited or restricted by the amounts or types of
insurance required to be provided by BUYER to COMPANY under this Agreement.
In the event the indemnity hereunder provided for herein is found in a Final
Judgment entered by a court of competent jurisdiction to exceed that
permitted by applicable law, such indemnity shall be construed so as to
preserve the maximum indemnity permitted thereby. This indemnity shall
survive any termination of this Agreement; provided, however, that in the
event of a termination of this Agreement without escrow closing, BUYER's
obligations hereunder shall be limited to the indemnity set forth in (i)
above.
11
EXHIBIT "B"
<PAGE>
SECTION 7. REPRESENTATIONS AND WARRANTIES
7.1. COMPANY'S REPRESENTATIONS AND WARRANTIES. As a material
inducement to BUYER's entering into this Agreement, and except as
otherwise stated in any of the materials listed on Exhibit "B" and
provided to BUYER, COMPANY represents and warrants to BUYER as follows:
7.1.1. COMPANY is a corporation duly organized, validly
existing and in good standing under the laws of the State of
California and has the power to own property and carry on its
business as presently conducted.
7.1.2. COMPANY has the legal power, right and authority to
enter into this Agreement and the instruments referenced herein
and to consummate the transactions contemplated hereby.
7.1.3. All requisite action (corporate) has been taken by
COMPANY in connection with entering into this Agreement, the
instruments referenced herein and the consummation of the
transactions contemplated hereby, and no consent of any partner,
shareholder, creditor, investor, judicial or administrative body,
governmental authority or other party is required by COMPANY which
has not been obtained.
7.2. BUYER'S REPRESENTATIONS AND WARRANTIES. As a material
inducement to COMPANY's entering into this Agreement, BUYER represents
and warrants to COMPANY as follows:
7.2.1. BUYER is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Nevada and has the power to own property and carry on its business
as presently conducted.
7.2.2. BUYER has the legal power, right and authority to
enter into this Agreement and the instruments referenced herein
and to consummate the transactions contemplated hereby.
7.2.3. All requisite action (corporate, partnership or
otherwise) has been taken by BUYER in connection with entering
into this Agreement, the instruments referenced herein and the
consummation of the transactions contemplated hereby, and no
consent of any partner, shareholder, creditor, investor, judicial
or administrative body, governmental authority or other party is
required by BUYER which has not been obtained.
SECTION 8. GENERAL PROVISIONS
8.1 "AS IS" PURCHASE.
BUYER AGREES THAT THE PROPERTY IS TO BE SOLD TO AND ACCEPTED BY BUYER "AS
IS" AND "WHERE IS," WITH ALL FAULTS, IF ANY, INCLUDING, WITHOUT LIMITATION, THE
ENVIRONMENTAL CONDITION OF THE PROPERTY, AND COMPANY
12
EXHIBIT "B"
<PAGE>
DOES HEREBY DISCLAIM ANY AND ALL WARRANTIES, AND MAKES NO REPRESENTATIONS OR
WARRANTIES, EXPRESS OR IMPLIED OF ANY KIND TO BUYER INCLUDING, WITHOUT
LIMITATION, WARRANTIES RELATING TO THE PHYSICAL CONDITION OF THE LAND,
IMPROVEMENTS, IF ANY, AND ANY PERSONAL PROPERTY, OR THE HABITABILITY OF THE
PROPERTY, IMPROVEMENTS OR PERSONAL PROPERTY, OR THEIR SUITABILITY FOR ANY
PARTICULAR PURPOSE.
BUYER COVENANTS, REPRESENTS AND WARRANTS THAT (i) BUYER HAS INSPECTED OR
WILL INSPECT THE PROPERTY, AND IMPROVEMENTS ON THE PROPERTY, IF ANY, AND ALL
MATTERS RELATING THERETO WHICH BUYER DESIRES; (ii) NEITHER COMPANY NOR ANYONE ON
COMPANY'S BEHALF HAS MADE, OR IS MAKING, ANY WARRANTIES OR REPRESENTATIONS
RESPECTING THE PROPERTY OTHER THAN THOSE EXPRESSLY SET FORTH IN THIS AGREEMENT,
IF ANY; (iii) BUYER IS RELYING SOLELY ON BUYER'S OWN INVESTIGATION OF THE
PROPERTY AND ALL MATTERS PERTAINING THERETO, INCLUDING BUT NOT LIMITED TO THE
ENVIRONMENTAL CONDITION OF THE PROPERTY; AND (iv) EXCEPT AS EXPRESSLY SET FORTH
HEREIN, BUYER IS PURCHASING THE PROPERTY "AS IS."
BUYER ACKNOWLEDGES THAT COMPANY MAKES NO, AND EXPRESSLY DISCLAIMS ANY,
WARRANTIES OR REPRESENTATIONS CONCERNING THE ACCURACY OR COMPLETENESS OF ANY OF
THE DISCLOSURE DOCUMENTS.
FURTHER, BUYER ACKNOWLEDGES AND AGREES THAT, NOTWITHSTANDING ANYTHING IN THIS
AGREEMENT TO THE CONTRARY, IN NO EVENT SHALL COMPANY BE LIABLE FOR ANY SPECIAL,
INDIRECT OR CONSEQUENTIAL DAMAGES, INCLUDING BUT NOT LIMITED TO CLAIMS FOR LOSS
OF USE, RENTS, ANTICIPATED PROFIT OR BUSINESS OPPORTUNITY, OR BUSINESS
INTERRUPTION, DIMINUTION IN VALUE, OR MENTAL OR EMOTIONAL DISTRESS OR FEAR OF
INJURY OR DISEASE.
BUYER'S INITIALS /s/ ERA
--------
8.2 ASSIGNMENT. This Agreement shall be personal to BUYER, and BUYER
shall not assign, agree to assign, offer to assign or solicit offers to purchase
BUYER's interest in or rights to purchase the Property without first obtaining
written approval from COMPANY, which approval shall be in COMPANY's sole and
absolute discretion. Any assignment, agreement, offer or solicitation by BUYER
to any other person or entity, without COMPANY's written approval, shall
constitute a default under this Agreement and shall terminate and void this
Agreement and any escrow pursuant hereto. No written consent by COMPANY
hereunder shall be deemed a waiver by COMPANY of any of the provisions hereof
except to the extent expressly provided in such consent.
8.3 NO PARTNERSHIP OR AGENCY. BUYER and COMPANY agree that nothing
contained herein shall be construed as creating the relationship of principal
and agent or of partnership or of joint venture or of any other form of legal
association which would impose liability upon one party for the act or failure
to act of another party.
8.4 APPROVALS. All approvals called for herein shall be in writing
and all time limits, unless otherwise stated, shall commence upon the opening of
escrow which shall be the date
13
EXHIBIT "B"
<PAGE>
that a duly executed duplicate original of this Agreement is deposited into
escrow by the parties hereto.
8.5 COMMISSION(S).
8.5.1 COMPANY will pay a commission to:
CB Commercial
533 Fremont Avenue
10th Floor
Los Angeles, CA 90071-1798
Attention: Larry Fischer
Telephone: (213) 513-3311
Fax: (213) 613-3005
("Broker") only in the event of entering into an agreement with Broker
providing for payment of such commission upon Close of Escrow and
consummation of the sale described herein. Broker's total commission in
the sum of Seven Thousand Two Hundred Dollars ($7,200.00), representing
a commission of six percent (6%) of the Purchase Price, shall thereupon
be paid at Close of Escrow.
8.5.2 Other than Broker, BUYER and COMPANY each hereby warrants
and represents to the other that such party has not employed any broker,
finder or agent, and has not agreed to pay or otherwise include any
brokerage fee, finder's fee or commission with respect to the transaction
contemplated by this Agreement nor has such party dealt with anyone
purporting to act in the capacity of a broker or finder with respect
thereto. BUYER hereby indemnifies and agrees to hold COMPANY and COMPANY
Group harmless from any claims resulting from a breach of this paragraph
by BUYER, and COMPANY hereby indemnifies and agrees to hold BUYER and
BUYER Group harmless from any claims resulting from a breach of this
paragraph by COMPANY.
BUYER'S INITIALS /s/ ERA COMPANY'S INITIALS /s/ LNW
------- -------
8.6 NOTICES. Any notices, requests, approvals or elections hereunder
shall be in writing and shall be deemed received when (a) personally served, (b)
three (3) days after mailing by certified or registered United States mail,
return receipt requested, postage prepaid, or (c) one (1) day after transmission
by facsimile machine, with transmission and receipt confirmed, and a copy sent
by United States mail, addressed to BUYER as follows:
Speakeasy Gaming of Las Vegas, Inc.
Route 2--South, P.O. Box 558
Chester, West Virginia 26034
Attn.: Edson A. Arneault
Phone: (304) 387-2400
Fax: (304) 387-1598
and if BUYER has an attorney, to:
14
EXHIBIT "B"
<PAGE>
Louis M. Aronson, Esq.
Ruben & Aronson, LLP
3299 K Street, N.W., Suite 403
Washington, D.C. 20007
Phone: (202) 965-3600
Fax: (202) 965-3700
and addressed to COMPANY as follows:
Unocal Asset Management Group
376 South Valencia Avenue
Brea, CA 92823
Attn.: Karen E. Bruton
Fax: (714) 577-2966
and addressed to ESCROW HOLDER as follows:
United Title of Nevada
3980 Howard Hughes Parkway, #100
Las Vegas, NV 89109
Attn.: Wayne Gillins
Fax: (702) 836-8155
8.7 INTEGRATION. This instrument and the exhibits hereto obtain the
entire agreement between BUYER and COMPANY respecting the Property. Any
agreements or representations covering the Property or the duties of either
BUYER or COMPANY not set forth in this Agreement or its exhibits are of no
effect.
8.8 SURVIVAL. All agreements of the parties shall survive the Close
of Escrow and the delivery of any deed.
8.9 INTERPRETATION. Each party has reviewed this Agreement, and any
question of doubtful interpretation shall not be resolved by any rule or
interpretation providing for interpretation against the drafting party. This
Agreement shall be construed pursuant to the laws of the State of NEVADA (where
the Property is located), except that in the event the Agreement or a provision
thereof would be found to be unenforceable or otherwise invalid under Nevada
law, and the Agreement or such provision(s) would not be so found in California,
then California law shall apply to the Agreement or such provision(s) only. The
captions and headings contained herein are for convenience only and shall not
affect the meaning or interpretation of this Agreement.
8.10 WAIVER. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provision, whether or
not similar, nor shall any waiver constitute a continuing waiver. No waiver
shall be binding unless executed in writing by the party making the waiver.
8.11 TIME. Time is of the essence of each provision of this Agreement.
Notwithstanding the above, however, should the calculation of any time period
provided for
15
EXHIBIT "B"
<PAGE>
herein result in any obligation becoming due upon, or scheduled time for an
event occurring on, a Saturday, Sunday or legal holiday, then such due date
or scheduled time shall be delayed until the next business day.
8.12 COUNTERPARTS. This Agreement may be executed in several
counterparts and all counterparts so executed shall constitute one Agreement
binding on the parties hereto.
8.13 SEVERABILITY. In case any one or more of the provisions contained
in this Agreement shall be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
8.14 NO THIRD PARTY BENEFICIARIES. Nothing in this Agreement, whether
expressed or implied, is intended to confer any rights or remedies under or by
reason of this Agreement on any person other than the parties to it and their
respective successors and assigns, if any, nor shall any provision give any
third parties any right of subrogation or action against any party to this
Agreement.
8.15 ATTORNEYS' FEES. If any legal action or proceeding, including but
not limited to arbitration, is brought for the enforcement or for a declaration
of rights and duties under this Agreement, or because of an alleged dispute,
breach or default in connection with any of the provisions of this Agreement,
the prevailing party shall be entitled to recover reasonable attorneys' fees and
other costs incurred in such action or proceeding, in addition to any other
relief to which such party may be entitled.
8.16 SUCCESSORS AND ASSIGNS. Subject to the provisions of Section 8.2
hereof, this Agreement, and all surviving terms hereof, shall be binding upon
the parties' respective heirs, administrators, successors and assigns.
8.17 AUTHORITY TO ENTER AGREEMENT. Each of the signatories hereto
hereby represents and warrants that he or she has the right, power, legal
capacity and authority to execute into this Agreement and to bind the entity he
or she represents to this Agreement and the obligations hereunder.
8.18 WAIVER OF JURY TRIAL. Notwithstanding the provisions of Section
8.19 below, each of the parties hereto waives the right to trial by jury in any
action, suit, proceeding or counterclaim of any kind arising out of or related
to this Agreement or any obligation contained herein. However, the parties
agree that the provisions of Section 8.19 take precedence over this provision.
8.19 ARBITRATION OF DISPUTES. ANY DISPUTE UNDER THIS AGREEMENT SHALL BE
DECIDED BY BINDING ARBITRATION IN ACCORDANCE WITH THE RULES OF THE AMERICAN
ARBITRATION ASSOCIATION (THE "AAA") IN EFFECT AS OF THE CLOSING DATE. SUCH
DISPUTE SHALL BE SUBMITTED TO A PANEL OF THREE (3) ARBITRATORS, SELECTION OF
WHOM SHALL BE MADE AS FOLLOWS:
8.19.1 WITHIN SEVEN (7) CALENDAR DAYS AFTER WRITTEN NOTICE FOR
16
EXHIBIT "B"
<PAGE>
ARBITRATION BY EITHER PARTY UPON THE OTHER PARTY, EACH PARTY SHALL
DESIGNATE ONE (1) MEMBER TO THE BOARD OF ARBITRATION ("BOARD"). THE
ARBITRATORS SHALL EACH BE EXPERTS IN THE SUBJECT MATTER OF THE DISPUTE
WITH, IF POSSIBLE, NO LESS THAN FIVE (5) YEARS' SUBSTANTIAL EXPERIENCE
ARBITRATING DISPUTES IN THE LAS VEGAS, NEVADA,
AREA WITH RESPECT THERETO.
8.19.2 THE TWO ARBITRATORS SHALL THEREUPON ENDEAVOR TO SELECT A
THIRD (3RD) ARBITRATOR MEETING THE QUALIFICATIONS DESCRIBED IN SECTION
8.19.1 ABOVE. IF THEY ARE UNABLE TO AGREE ON SUCH SELECTION, THE THIRD
(3RD) ARBITRATOR SHALL BE SELECTED FROM A LIST OF NAMES SUPPLIED BY THE
AAA AS MEETING THE QUALIFICATIONS DESCRIBED IN SECTION 8.19.1 ABOVE FROM
WHICH THE TWO SELECTED ARBITRATORS SHALL ALTERNATELY STRIKE A NAME FROM
SUCH LIST UNTIL THE LAST REMAINING NAME SHALL BE THE THIRD (3RD)
ARBITRATOR. SUCH SELECTION SHALL BE COMPLETED WITHIN THIRTY (30)
CALENDAR DAYS AFTER THE REQUEST FOR ARBITRATION.
THE ARBITRATORS SHALL FOLLOW THE STATUTORY AND DECISIONAL LAW OF THE STATE OF
NEVADA AT ALL TIMES DURING ANY ARBITRATION PERFORMED PURSUANT TO THIS SECTION
8.19.
THE PARTIES AGREE THAT THE DETERMINATION OF THE ARBITRATORS AND AWARD, IF ANY,
MAY BE ENTERED WITH ANY COURT HAVING JURISDICTION AND THE DETERMINATION AND
AWARD, IF ANY, MAY THEN BE ENFORCED AMONG THE PARTIES, WITHOUT FURTHER
EVIDENTIARY PROCEEDINGS, AS IF ENTERED BY A COURT AT THE CONCLUSION OF A
JUDICIAL PROCEEDING IN WHICH NO APPEAL WAS TAKEN.
NOTICE: BY INITIALING IN THE SPACE BELOW YOU ARE AGREEING TO HAVE ANY DISPUTE
ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION
DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY CALIFORNIA LAW OR ANY EQUIVALENT
NEVADA LAW, AND YOU ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE
DISPUTE LITIGATED IN A COURT OR JURY TRIAL. BY INITIALING IN THE SPACE BELOW
YOU ARE GIVING UP YOUR JUDICIAL RIGHTS TO DISCOVERY AND APPEAL, UNLESS SUCH
RIGHTS ARE SPECIFICALLY INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION. IF
YOU REFUSE TO SUBMIT TO ARBITRATION AFTER AGREEING TO THIS PROVISION, YOU MAY BE
COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF THE CALIFORNIA CODE OF CIVIL
PROCEDURE OR ANY EQUIVALENT NEVADA LAW. YOUR AGREEMENT TO THIS ARBITRATION
PROVISION IS VOLUNTARY.
WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES ARISING
OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION TO
NEUTRAL ARBITRATION.
BY PLACING THEIR INITIALs here:
17
EXHIBIT "B"
<PAGE>
(BUYER /s/ ERA; COMPANY /s/ LNW),
THE PARTIES AGREE TO ARBITRATION.
8.20. NO FURTHER ENCUMBRANCES. Between the date of this Agreement
and the Close of Escrow, COMPANY shall not, except with respect to matters
which COMPANY believes, in its sole and absolute discretion, are required
with respect to the Condemnation Action, (i) voluntarily grant, create,
assume or permit to exist any new lien, lease, encumbrance, easement,
covenant, condition, right-of-way or restriction upon the Property, or (ii)
voluntarily take any action adversely affecting title to the Property as it
exists on the date of this Agreement, without obtaining the consent of BUYER,
which consent shall not be unreasonably withheld or delayed.
8.21. CONFIDENTIALITY. COMPANY and BUYER agree that the proposed
terms and conditions, and all information (other than information which is a
matter of public record or is provided by other sources readily available to
the public) shared or developed in the context of this transaction shall be
kept strictly confidential, except in discussions with BUYER's or COMPANY's
attorneys (in-house or outside), accountants and financiers, governmental
authorities including but not limited to the State of Nevada in relation to
the Condemnation Action, Title Company and Escrow Holder, or except as may be
necessary or desirable by law. Any disclosures, press releases or
announcements concerning this Agreement and the sale contemplated herein
shall be approved unanimously by the parties in writing in the exercise of
the parties' reasonable discretion.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement for Sale of
Real Property and Escrow Instructions to be effective as of the date first above
written.
"BUYER" "COMPANY"
SPEAKEASY GAMING OF LAS VEGAS, INC. UNION OIL COMPANY OF CALIFORNIA,
a Nevada corporation a California corporation
By: Edson R. Arneault By: L.N. Weiss
-------------------------- --------------------------------
Its: President Its: General Manager
------------------------- Asset Management Group
-------------------------------
18
EXHIBIT "B"
<PAGE>
EXHIBITS
EXHIBIT "A" Description of Property
EXHIBIT "B" List of Disclosure Documents
EXHIBIT "C" Agreement and Declaration of Covenants, Conditions,
Restrictions, Waiver and Release
19
EXHIBIT "B"
<PAGE>
Exhibit 99.4
GRANT, BARGAIN AND SALE DEED
FOR ONE DOLLAR ($1.00) AND OTHER CONSIDERATION NOT SET FORTH HEREIN,
receipt of which is hereby acknowledge, UNION OIL COMPANY OF CALIFORNIA, a
California corporation, dba UNOCAL, ("Grantor"), does hereby grant bargain sell
and convey to SPEAKEASY GAMING OF LAS VEGAS, INC., a Nevada corporation,
("Grantee"), the following described real property (the "Property") in the City
of Las Vegas, County of Clark, State of Nevada:
PER ATTACHED EXHIBIT "A" WHICH HEREBY BECOME A PART HEREOF.
together with all tenements, hereditaments and appurtenances thereto belonging.
SUBJECT TO (i) any and all existing building and use restrictions,
easements, rights-of-way, conditions, covenants, restrictions, reservations.
liens, encumbrances, exceptions and other matters of record, (ii) that certain
Agreement and Declaration of Covenants, Conditions, Restrictions, Waiver and
Release entered into by and between Grantor and Grantee and recorded
contemporaneously herewith, (iii) all matters apparent from an inspection of the
Property or which a current, accurate survey of the Property would disclose
(including but not limited to encroachments, overlaps or boundary line disputes;
and (iv) all general and special taxes and assessments which are a lien not yet
due and payable.
IN WITNESS WHEREOF, said corporation has caused its corporate name and
seal to be affixed hereto and this instrument to be executed by the following
authorized officials.
Dated: October 29, 1998
UNION OIL COMPANY OF CALIFORNIA,
a California corporation
dba UNOCAL
By: /s/ L.N. Weiss
-----------------------------------
L.N. WEISS, GENERAL MANAGER
ASSET MANAGEMENT GROUP
ATTEST: /s/ George F. Wirzbicki
-------------------------------
George F. Wirzbicki
Assistant Secretary
Attach Appropriate Notary Acknowledgements
<PAGE>
ALL PURPOSE ACKNOWLEDGEMENT
STATE OF CALIFORNIA )
) SS.
COUNTY OF ORANGE )
On October 29, 1998, before me, Aurora N. Legaspi, a Notary Public, personally
appeared Luis N. Weiss aka L. N. Weiss and George F. Wirzbicki personally known
to me to be the person(s) whose name(s) are subscribed to the within instrument
and acknowledged to me that they executed the same in their authorized
capacity(ies), and that by their signature(s) on the instrument the person(s),
or the entity upon behalf of which the person(s) acted, executed the instrument.
Witness my hand and official seal.
/s/ Aurora N. Legaspi
- ----------------------------------------
Notary's Signature
- --------------------------------------------------------------------------------
ATTENTION NOTARY: Although the information requested below is optional, it
could prevent fraudulent attachment of this certificate to
unauthorized document.
THIS CERTIFICATE Title or type of Document: Grant, Bargain and Sale Deed
MUST BE ATTACHED (SS #6484)
TO THE DOCUMENT
DESCRIBED AT RIGHT Number of Pages: 3 Date of Document October 29, 1998
Capacity of Signers: General Manager and Assistant Secretary
Signer Represents: Union Oil Company of California
Signer(s) Other Than Names Above:
---------------------
<PAGE>
EXHIBIT "A"
LEGAL DESCRIPTION
The land referred to herein is situated in the City of Las Vegas, County of
Clark, State of Nevada known as Assessor's Parcel Nos. 139-11-185-003 and
139-11-815-004 and more particularly described as follows:
A portion of Lots Eleven (11) and Twelve (12), Block "B", Highland Industrial
Tract No. 1, as recorded in Book 4, Page 95, in the Office of the County
recorder of Clark County, Nevada, being situate in a portion of the Southeast
Quarter (SE 1/4) of Section 11, township 20 South, range 61 East, M.D.B. & M.,
more particularly described as follows:
BEGINNING at the most Easterly corner of said Lot 11;
Thence South 30DEG. 34' 44" West, along the Easterly line of said Lot 11, a
distance of 102.21 feet to a point of intersection with the right-of-way line of
Cheyenne Avenue, said point further described as bearing North 30DEG. 34' 44"
East, a distance of 14.52 feet from the Northerly P.C. of said Lot 11;
Thence North 80DEG. 30' 17" West, along the aforesaid right-of-way line of
Cheyenne Avenue, a distance of 150.00 feet to a point;
Thence North 30DEG. 34' 44" east, along a line parallel with the said East line
of Lot 11, a distance of 203.96 feet to a point;
Thence South 59DEG. 25' 16" East, at right angles to the said East line of Lot
11, a distance of 139.96 feet to a point of intersection with the Northerly
prolongation of the said East line of Lot 11, said point further described as
being situate on the East line of the aforesaid Lot 12;
Thence South 30DEG. 34' 44" West, along the said East line of Lot 12, a
distance of 47.79 feet to the Point of Beginning.
EXCEPTING THEREFROM, the following described property which has been dedicated
as a right-of-way.
COMMENCING at the most Easterly corner of Lot Eleven (11), Block "B" Highland
Industrial Tract No. 1, as recorded in Book 4 of Plats, Page 95, in the Office
of the County Recorder, Clark County, Nevada;
Thence South 30DEG. 34' 44" West along the Easterly line of said Lot 11, a
distance of 85.05 feet to the TRUE POINT OF BEGINNING;
(CONTINUED ON NEXT PAGE)
<PAGE>
EXHIBIT "A"
LEGAL DESCRIPTION
(CONTINUED)
Said point further described as bearing North 30DEG. 34' 44" East a distance of
17.16 feet from the intersection of the right-of-way line of Cheyenne Avenue
with the said Easterly line of Lot 11; Thence continuing South 30DEG. 34' 44"
West along the said easterly line of Lot 11, a distance of 17.16 feet to the
aforementioned point of intersection with the right-of-way line of Cheyenne
Avenue;
Thence North 80DEG. 30' 17" West along said right-of-way line of Cheyenne
Avenue, a distance of 17.16 feet to a point;
Thence from a tangent bearing South 80DEG. 30' 17" East along a curve concave
to the Northwest, having a radius of 25.00 feet and subtending a central angle
of 68DEG. 54' 59" an arc length distance of 30.07 feet to a point of tangency,
said point being the TRUE POINT OF BEGINNING.
EXCEPT a one-half (1/2) interest in and to all crude oil, gas, brea, asphaltum
and kindred substances, as reserved by Harry Edward hazard, a married man; and
Evan Wayne McLeod, a married man, in that certain Deed recorded March 3, 1954,
in Book 3, as Document No. 4448 of Official Records, Clark County, Nevada
records.
Said Property is also described as follows:
Beginning at the most Easterly corner of said Lot 11; Thence South 30DEG. 35'
16" West along the Easterly line of said Lot 11, a distance of 85.25 feet to a
point on a curve concave Northwesterly; Thence Southwest along said curve have a
radius of 25.00 feet and subtending a central angel of 68DEG. 59' 42" an arc
length of 30.10 feet; thence North 80DEG. 25' 02" West, along the Northerly
right-of-way of Cheyenne Avenue, a distance of 132.74 feet; Thence North 30DEG.
35' 16" East a distance of 203.89 feet; Thence South 59DEG. 24' 44" East a
distance of 139.96 feet; thence South 30DEG. 35' 16" West a distance of 47.72
feet to the point of beginning.
