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SECURITIES AND EXCHANGE: COMMISSION
Washington, D.C. 20549
FORM 10-KSB
AMENDMENT #2
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 (FEE REQUIRED)
For the fiscal year ended September 30, 1996
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE
ACT OF 1934 (NO FEE REQUIRED)]
Commission file number 0-22242
CASINO RESOURCE CORPORATION
(Name of the small business issuer in its charter)
MINNESOTA 41-0950482
(State or jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1719 Beach Boulevard, Suite 306
Biloxi, Mississippi 39531
(Address of principal executive offices)
Issuer's telephone number (601) 435-1976
Securities registered pursuant to Section 12(b) of the Exchange Act: None
Name of each exchange on which registered: N/A
Securities registered pursuant to Section 12(g) of the Exchange Act: Common
Stock and Class A Warrants
Check whether the company (1) has filed all reports required to be filed
by Section 13 or 15(d) of the 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 .
--- ---
Check if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-B is not contained herein, and will not be contained, to the best of
Registrant's knowledge, in the definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]
The Company's revenues for the fiscal year ended September 30,1996 were
$12,906,000.
As of December 13, 1996, 10,043,364 shares of Common Stock were
outstanding, and the aggregate market value of such Common Stock (based upon the
last reported sale price on the Nasdaq National Market), excluding outstanding
shares beneficially owned by affiliates was approximately $17,575,887.
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DOCUMENTS INCORPORATED BY REFERENCE
Part of Form 10-K
Document Into Which Incorporated
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Casino Resource Corporation's
Definitive Proxy Statement for the
1997 Annual Meeting (to be filed) Part III
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PART I
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ITEM 1. BUSINESS
GENERAL
The Company was organized in 1969. In 1987, the Company merged into an
inactive public corporation, and in 1993, it changed its name to Casino Resource
Corporation. Prior to 1987, the Company engaged in various business activities
unrelated to its current or proposed businesses. Between 1987 and 1991, the
Company's primary business was owning and managing recreational vehicle resorts,
and providing related direct marketing services. The Company sold its
capital-intensive camp resort properties during 1988 through 1991 and began
offering its direct marketing services to the recreational real estate industry,
primarily focusing on time share and camp resort developments and, eventually,
to the casino industry. The Company sold its time-share and camp resort direct
marketing business in May 1994, and directed its focus to the hospitality and
entertainment industry in both gaming and high-tourist areas, and to the
emerging gaming industry.
The Company entered the hospitality and entertainment industries by
acquiring or developing four businesses, one of which has been sold. In March
1994, the Company purchased a musical production company which stages an
award-winning show at the Aladdin Hotel in Las Vegas, Nevada. Also in March
1994, the Company purchased its "Country Tonite Theatre" in Branson, Missouri,
which was reopened for business in May 1994. In May 1994, the Company completed
construction of and opened its 154-room hotel, the "Grand Hinckley Inn," on 7.5
acres of leased land in northern Minnesota adjacent to the Grand Casino
Hinckley, an Indian gaming facility operated by Grand Casinos, Inc. ("Grand
Casinos"). Also, in May 1994, the Company completed construction of the
1,872-seat "Biloxi Star Theatre" adjacent to the Grand Casino Biloxi on the Gulf
Coast of Mississippi. This facility was subsequently sold to Grand Casinos in
September 1994. In March 1997, a third venue for the Country Tonite Show is
scheduled to open in Pigeon Forge, Tennessee. The Country Tonite Theatre, LLC,
a joint venture between CRC of Tennessee, Inc., a wholly owned subsidiary and
Burkhardt Ventures, LLC, will present the show in a 1,500-seat, state-of-the-art
theatre in Pigeon Forge, Tennessee, currently the home of country star T.G.
Shepard. CRC of Tennessee will be the manager and will own 60% of the joint
venture. In April 1997, the Branson theatre is scheduled to add a second show,
"The Golden Girls", in a joint venture with Greg Thompson Productions. The
Company plans to increase its hospitality and entertainment businesses as
opportunities arise.
Although the company does not presently own, operate, or manage any gaming
facilities, significant steps were taken in 1996 toward establishing the company
as a casino operator in fiscal 1997.
On September 23, 1996, the Company, along with its joint venture partners
Robert and Lawana Low, submitted a contract to purchase assets of the Palace
Casino located in Biloxi, Mississippi, for
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$14.25 million, consisting of $11.5 million cash and the balance in notes. On
October 15, 1996, the purchase of the Palace Casino assets was approved by the
United States Bankruptcy Court for the Southern District of Mississippi.
Subject to regulatory approval, the closing is scheduled for the second quarter
of fiscal 1997. The Lows will initially own 80% of the joint venture, New
Palace Casino, LLC, and Casino Resource Corporation will own 20%, with the
Company having an option to purchase an additional 29% within a two year
period.
In addition, the Company, through a wholly owned subsidiary, CRC of
Tunisia, Inc., will lease and operate a casino and theatre in Sousse,
Tunisia. The facility is currently under construction and is scheduled to
open in June 1997.
The Company had previously entered into a Technical Assistance and
Consulting Agreement with Harrah's Entertainment, Inc. ("Harrah's") who is to
develop and manage one or more casinos to be funded by Harrah's for the Pokagon
Band of Potawatomi Indians in northern Indiana and southwestern Michigan. The
Company will, upon commencement of operations, receive 21.6% of Harrah's
management fee, but is not required to provide any development capital.
EXISTING OPERATIONS
GRAND HINCKLEY INN (HINCKLEY, MN)
In May 1994, the Company opened its Grand Hinckley Inn on 7.5 acres of
leased land located adjacent to the Grand Casino Hinckley, a 46,000 square-foot
casino owned by the Mille Lacs Band of Ojibwe Indians and operated by Grand
Casinos near Hinckley, Minnesota. The casino attracts approximately four
million patrons per year. The 154-room hotel is largely occupied by casino
patrons.
The hotel is located approximately 90 miles north of Minneapolis near the
intersection of Interstate 35 and State Highway 48. The intersection contains
approximately 250 hotel or motel rooms plus an additional 285 rooms under
construction, together with food and retail establishments. Grand Casinos is
the lessor of the Grand Hinckley Inn site.
The hotel is a luxury facility featuring 138 standard rooms and 16 suites.
Amenities include a swimming pool, a whirlpool and sauna, a video arcade, cable
television with video programming and games, and surface parking for 189
vehicles. The hotel features a spacious lobby and library, vaulted fireplace
sitting areas, a conference room, and guest laundry facilities. The hotel
provides complimentary continental breakfasts to all guests and free 24-hour
shuttle service to and from the casino seven days a week.
The hotel has achieved an average occupancy rate of approximately 86% for
the fiscal year ended September 30, 1996, and generally reaches full capacity on
weekends. For the fiscal year ended September 30, 1996, the hotel had an
average room rate of $54.85.
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The Company has entered into several beneficial arrangements with Grand
Casinos and the tribe regarding the hotel: the Company leases the land on which
the hotel is situated from Grand Casinos at the rate of $1 per annum; the casino
arranges room reservations at the hotel for its preferred customers; and each
business highlights the other in its marketing efforts. In addition, under a
Marketing Enhancement Agreement, the Company receives a $20 fee per night per
occupied room from the "Enterprise," (a combination of Grand Casinos and the
Mille Lacs Band of Ojibwe). In return for the marketing enhancement fee, the
hotel has entered into a revenue sharing plan with the Enterprise which requires
that 50% of all room revenues above a defined cumulative threshold be paid to
the Enterprise up to the amount of the marketing enhancement fees received by
the hotel. During the fiscal year ended September 30, 1995, hotel revenues
exceeded the cumulative threshold and the Company was required to pay
approximately $361,000 back to the Enterprise. Payments due to the Enterprise
under this "windfall profit sharing arrangement" for fiscal 1996 totaled
$786,000. Payments in the future will vary based on revenues and increases, if
any, in the hotel's annual operating cost threshold.
The Company and the Tribal Commission of the Mille Lacs Band have entered
into an agreement regarding future ownership of the hotel. The Tribal
Commission has the unilateral right to purchase the hotel on the anniversary
dates of its initial occupancy (May 1994) in each of years 2001 through 2006 at
a cost equivalent to the original development cost of the hotel plus the
depreciated cost of personal property and all inventories. Conversely, in the
event that the Tribal Commission allows the construction of more than 500 hotel
or equivalent rooms on property owned by the Tribal Commission or Grand Casinos,
the Company has the right to require the Tribal Commission to purchase the hotel
at the cost stated above.
The Company obtained mortgage financing in the amount of $3.3 million for
the development of the hotel in 1994. This debt is collateralized by the hotel,
as well as by certain stock pledged by Grand Casinos. The mortgage note matures
on May 1, 2004 and bears interest at an annual rate equal to the prime rate plus
2%, up to a maximum of 11%. The note is payable in monthly installments of
principal and interest of $43,942. Approximately $2.8 million in principal
amount was outstanding at September 30, 1996. In addition to the mortgage, the
Company secured $900,000 of equipment financing collateralized by the hotel's
furniture, fixtures and equipment and guaranteed by Grand Casinos. This debt
was repaid in full in August 1996. Finally, a $1,289,000 line of credit
extended by Grand Casinos to the Company for working capital purposes is secured
by a second mortgage on the hotel. Principal repayments of $600,000 were made
through July 31, 1996. Starting in August 1996 the credit line which bears a
10% interest rate is being amortized at the rate of $50,000 per month plus
interest. At September 30, 1996, $589,000 of the credit line remains
outstanding.
COUNTRY TONITE THEATRE (BRANSON, MO)
The Company purchased the former Ray Stevens Theatre, now the Country
Tonite Theatre (the "Theatre"), in Branson, Missouri in March 1994. In May
1994, the 2,000-seat theatre began running
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two shows daily, featuring dancers, singers, comics and other variety acts. The
show is produced by the Company's Las Vegas-based subsidiary, Country Tonite
Enterprises, Inc. ("CTE"). The Theatre includes 38,000 square feet on two
floors with an auditorium, a stage area, control booths, dressing rooms,
upstairs offices, a lounge, a gift shop which offers a wide variety of souvenirs
with the Country Tonite theme, and a concession stand. In addition, the Theatre
parking lot accommodates 600 cars and 30 buses.
The Country Tonite show has been voted "Best Live Country Music Show in
America" by the Country Music Associations of America for three consecutive
years through 1995. In November 1995, the show was voted "Show of the Year" by
the 1995 Branson Entertainment Awards. Theatre revenues increased 54% for
fiscal 1996 compared to fiscal 1995, due in part to an increased marketing
effort, an increase in group ticket sales, and product recognition attributable
to the show's quality and longevity. The Theatre has achieved 40% of capacity
during the fiscal year ended September 1996, with an average ticket price of
$15.57, which is competitive with the average ticket price at other theatres in
Branson.
In April, 1997 the Company plans to offer a morning show, "Golden Girls",
in the Branson theatre. The show will be a joint venture with Greg Thompson
Productions. The Company plans to present two shows a day, six days a week.
Branson, Missouri is a popular resort destination for country music lovers
from across the nation. Branson is located at the intersection of U. S. Highway
76 and Interstate Highway 65, which connects Branson and Springfield, Missouri.
With a population of approximately 3,000, Branson is home to over 30 theatres
featuring music stars such as Wayne Newton, Charley Pride and the Osmond family.
In addition to roughly 20,000 hotel rooms, Branson offers diverse eating,
shopping and recreational activities to its approximately 6 million annual
visitors, most of whom visit between the months of March and December. Typical
visitors to Branson are senior citizens participating in bus tours through
Missouri. Families also comprise a large part of Branson's visitors and they
are drawn to Branson not only by the country music, but by the additional
activities offered in the summer months by the many lakes in the Branson area
and the Arkansas Ozarks, another popular tourist destination area only 50 miles
from Branson.
The Company purchased the Theatre for $2 million in cash and a promissory
note collateralized by the Theatre for $8 million in principal amount. The
note, with a principal balance of $7.6 million at September 30, 1996, bears
interest at the prime rate plus 1%, with a floor of 7% and a ceiling of 10%, and
matures on April 1, 1999. The note is payable in monthly installments of
principal and interest of $73,035, with a final payment due at maturity of
$7,077,978.
COUNTRY TONITE PRODUCTION SHOW (LAS VEGAS, NV)
CTE, the Company's musical production subsidiary based in Las Vegas,
Nevada, was acquired in March 1994. The production show involves a country and
western theme, and has played at the
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Aladdin Hotel and Casino(Aladdin) in Las Vegas since 1992. The show is under
contract at the Aladdin through December 31, 1996. The Aladdin has verbally
agreed to extend the contract through December 31, 1997. In addition to the
CMAA award mentioned above, other awards received by the show include "Best
Television Program in Nevada", "Electronic Media Award 1994", "Recording of the
Year -- Karen Nelson Bell/Country Tonite Live!", and a host of individual
awards. A second cast of the Country Tonite show performs at the Country Tonite
Theatre in Branson, Missouri.
The Company purchased all the shares of CTE (then known as "Ping Corp.")
for 91,305 shares of the Company's common stock valued then at $525,000 and
$500,000 in cash. The Company guaranteed a share price of $5.75 until September
30, 1994, for 34,783 of such shares. In connection with the reduction in the
value of the Company's stock as of September 30, 1994, and in connection with
the guaranteed share price, the Company amended the original purchase agreement
to provide for additional cash payments aggregating $134,781, together with
issuing 10,000 additional shares.
The Company will add a third venue for the Country Tonite Show in Pigeon
Forge, Tennessee, which is scheduled to begin in March 1997. The Company is
exploring other venues for its popular Country Tonite Show.
DEVELOPMENT ACTIVITIES
COUNTRY TONITE THEATRE - PIGEON FORGE
CRC of Tennessee, Inc. ("CRCT"), a wholly owned subsidiary of the Company
and Burkhart Ventures, LLC have formed a joint venture, Country Tonite Theater,
LLC to present the Country Tonite Show in a 1,500-seat state-of-the-art theatre
located in the heart of Pigeon Forge, Tennessee which is scheduled to begin in
March, 1997. CRCT will own 60% of the joint venture and manage the theater.
There are currently 8 comparable theaters operating in the Pigeon Forge
area. Pigeon Forge is considered an emerging area for theater based
entertainment.
Pigeon Forge, located at the base of the Smoky Mountains, enjoys twice as
many visitors each year as Branson, Missouri, drawing over 12 million tourists
annually in contrast to the Branson marketplace which hosts approximately 6
million visitors per year. Country Tonite Enterprises will produce and perform
its Country Tonite Show in the Pigeon Forge theater.
POKAGON CONSULTING AGREEMENT
In January 1995, the Company and Monarch Casinos, Inc. ("Monarch") executed
a Memorandum of Understanding (which was modified in December 1995) whereby the
Company acquired Monarch's rights to potential Indian gaming contracts in
exchange for shares of the Company's Common Stock, certain financial assistance
and a consulting agreement, all as described below. In
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addition to the Hoh Indian gaming contract, which was executed by the Company
and subsequently abandoned during the fiscal year ended September 30, 1995, the
Company assumed Monarch's rights with respect to the potential award of a gaming
management contract by the Pokagon Band of Potawatomi Indians, domiciled in
northern Indiana and southwestern Michigan.
Also in January 1995, the Company executed a Memorandum of Understanding
with the Promus Companies Incorporated (now Harrah's Entertainment, Inc.),
whereby Harrah's would act on behalf of itself, and the Company in seeking the
Pokagon award. A Management and Development Agreement was awarded by the
Pokagon band to a subsidiary of Harrah's in September 1995, and final agreements
between Harrah's and the Pokagon band were entered into in November and December
1995. The agreements call for Harrah's to provide or cause to be provided one
or more loans to finance the construction of one or more casinos in the Pokagon
band's service area of northern Indiana and southwestern Michigan. The band
will then be responsible for repaying the loans and paying to Harrah's a
management fee, as defined for each Pokagon casino.
Under the Technical Assistance and Consulting Agreement with Harrah's, the
Company will receive 21.6% of Harrah's management fee as consulting fees over
the five-year term of Harrah's management contract (and any extensions thereof)
with the Pokagon band. The Company has, in turn, agreed to pay to two
consultants to the Company who assisted in the acquisition of rights from
Monarch (including Kevin M. Kean, a principal stockholder of the Company), an
aggregate of 10% of its consulting fee income less the Company's related direct
operating costs, subject to certain limits in the case of Mr. Kean. (Similar
fees may also be payable to Mr. Kean out of revenues if any, received by the
Company from other Indian businesses, including gaming.)
The Company will have no obligation to provide Harrah's or the Pokagon band
with any funding. However, to the extent not recouped by Harrah's from the
Pokagon band, the Company will reimburse Harrah's for the Company's share
(21.6%) of specified development and licensing costs incurred by Harrah's. The
Management and Development Agreement and related agreements between Harrah's and
the Pokagon band cannot take effect until approved by the National Indian Gaming
Commission ("NIGC"). The Company's obligation to reimburse Harrah's will be
payable in equal installments over 24 months without interest, and will be
subject to reduction for payments due the Company from Harrah's. Under the
Technical Assistance and Consulting Agreement, Harrah's has agreed to pay to the
Company a one-time fee of $250,000 (recorded in fiscal 1995) in connection with
the signing of the Management and Development Agreement with the Pokagon Band,
and a one-time fee of $600,000 as consideration for the relinquishment of any
rights or claims to any other business venture of Harrah's and its affiliates,
which is payable over five years, commencing with the opening of the first
Pokagon casino. In turn, the Company has agreed to pay to Harrah's, $5,000 per
month for a period of 40 months for the administration of the Pokagon contract,
commencing with the opening of the first Pokagon casino.
In consideration for the rights acquired from Monarch, the Company issued
to Monarch 100,000 shares of the Company's common stock in May 1995, and has
agreed to issue to Monarch an additional 400,000 shares of common stock upon the
ground breaking for the first Pokagon casino
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and 1,500,000 shares of common stock upon commencement of operations of the
first Pokagon casino. Additionally, the Company has agreed to assume up to
$179,000 of Monarch's accounts payable, to make certain cash advances to Monarch
or its principals and to reimburse Monarch's executives for travel and business
development costs related to certain gaming opportunities. The Company has also
executed a Consulting Agreement with Monarch, which was subsequently assigned by
Monarch to Willard E. Smith, requiring the Company to (i) pay monthly fees
commencing (retroactively) January 1995 at various rates of from $3,000 to
$14,250 per month; (ii) loan an aggregate of $250,000 (all of which has been
advanced as of September 30, 1996), which may be forgiven in part or in whole
upon the occurrence of certain events; (iii) reimburse travel expenses, and (iv)
lease to Mr. Smith the Company's Ocean Springs, Mississippi residence at a
below-market lease rate. The Consulting Agreement extends for the duration of
the Harrah's Management and Development Agreement with the Pokagon Band, unless
canceled earlier based on certain nonperformance provisions.
PALACE CASINO
New Palace Casino, L.L.C., a joint venture, 20% owned by the Company, is
scheduled to close the purchase of the Palace Casino assets in the second
quarter of 1997, subject to regulatory approvals.
The Palace Casino, which opened in April 1994, is a three-story floating
facility situated on a State of Mississippi tidelands lease, with approximately
twenty acres of adjacent and non-contiguous leased real estate used primarily
for surface parking. In addition, the facility is at the east boundary of
Biloxi, two blocks north of U.S. Highway 90. The facility encompasses a total
of 78,000 square feet of interior space. While it currently offers
approximately 750 slot machines and 40 table games, the facility could
accommodate up to 1,500 gaming machines. Casino amenities include a 400-seat
buffet, a 60-seat seafood bar, a 125-seat dinner restaurant, a 500-seat show
theatre and a bar and lounge. The parking facilities currently accommodate up
to 850 vehicles.
TUNISIA CASINO
The Company, through its wholly owned subsidiary, CRC of Tunisia, has
signed a definitive agreement in July 1996 with the Samara Casino Company to
lease and operate a casino, video arcade and 500-seat theatre in Sousse,
Tunisia. The 42,000 square foot casino resort will have over 10,000 square feet
of gaming space with present plans to include up to 350 slot machines and 25
table games., and is scheduled to open in June 1997, subject to regulatory
approval. Capital expenditures to open the Tunisia Casino will total
approximately $6,000,000.
The entertainment complex/casino will be constructed as a free-standing
building which will be located on a triangular piece of property in front of
the Hotel Samara. The site is located on the main street through Sousse in
the heart of the tourist center and directly off the beach. The site is
approximately 1.5 acres in size. This Casino will be the first in the City
of Sousse. No casinos are currently open in Tunisia however at least two
other casinos are under construction in other Tunisia municipalities at
distances of approximately 50 to 100 miles.
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Samara Casino Company will operate a gourmet restaurant, gift shop and
additional food and bar service on the property. The casino is going to be
situated in front of the 425-room Hotel Samara, one of three hotels that Samara
controls. The two other hotels have 125 and 275 rooms respectively.
The Republic of Tunisia is a small country in the northern most part of
North Africa and is bordered on the north and east by the Mediterranean, on
the southeast by Libya, and on the west by Algeria. It is approximately
62,608 square miles in size or relatively the same size as Illinois. Tunisia
is a destination area known for its beaches. The City of Sousse borders the
Mediterranean. Casino's are a new attraction for the tourist trade in
Tunisia.
The total number of annual tourists visiting Tunisia is estimated to be
4.5 million. The average length of stay for tourists is approximately 6
days. There are approximately 20,000 hotel rooms to rent in the city of
Sousse with many more in the outlying areas. The tourist season is May 15
through October. During this time the hotel rooms are historically, on
average, 80% occupied. The average occupancy rate year-round is 53%. The
closest airport to Sousse is approximately 30 minutes away. Tourists take a
bus from the airport to Sousse.
MARKETING AND COMPETITION
The entertainment and hospitality businesses of the Company rely on the
attraction of the Grand Casino Hinckley, in the case of the Grand Hinckley Inn;
the national reputation of Las Vegas, Nevada, in the case of the Company's stage
show at the Aladdin Hotel in Las Vegas; and the tourist attraction of Branson,
Missouri, in the case of the Country Tonite Theatre.
HINCKLEY, MINNESOTA MARKET
The Grand Hinckley Inn is located near the intersection of Interstate
Highway 35 and Minnesota State Highway 48, adjacent to Hinckley, Minnesota.
Hinckley is within ninety miles of Hayward, Wisconsin, and the Minnesota cities
of Minneapolis/St. Paul, Duluth, St. Cloud and Brainerd. Interstate Highway 35
links Minneapolis/St. Paul and Duluth, which are Minnesota's two largest
population centers, and the Highway 48 intersection is a traditional rest stop
for travelers. The intersection contains approximately 250 hotel or motel rooms
plus a number of restaurants and retail outlets. In addition, Grand Casinos
owns or has developed approximately 400 acres of land adjacent to Grand Casino
Hinckley. The Grand Hinckley Inn depends substantially on patronage by visitors
to the neighboring Grand Casino Hinckley, as well as on enhancement payments by
Grand Casinos.
Although the Grand Hinckley Inn has maintained occupancy levels exceeding
82% since opening in May 1994, there is no assurance that the adjacent casino
will continue to attract its historically high levels of patronage. The
Enterprise has begun construction of a 285 room hotel adjacent to the Grand
Casino which is anticipated to open in the fall of 1997. This hotel will
directly compete with
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the Grand Hinckley Inn and could adversely impact both the occupancy and room
rates. A decrease in casino business or an additional increase in the number of
guest rooms could also adversely impact present occupancy and room rate levels.
The hotel's success has, to a large part, been attributable to co-marketing
activities conducted by both the Company and Grand Casinos, as operator of the
adjacent casino. The hotel has benefited from referral reservations from the
casino; from the purchase by the casino of rooms to satisfy its obligations
under frequent-player programs; joint advertising themes and programs; and the
marketing enhancement fee paid by the casino for each daily occupied room.
Should any of these factors change in a material manner, the Company's success
at the hotel could be adversely impacted.
BRANSON, MISSOURI MARKET
Branson, Missouri is a nationally known destination for country music
lovers. Approximately 6 million tourists visit Branson, Missouri each year,
lured by its attractive geography and climate, as well as by its substantial
number of family-oriented musical and show theatres. The area contains
approximately 33 theatres providing a wide range of family entertainment for all
ages.
The Company attracts "walk up" patrons (approximately 85% of total sales),
both through local media advertising and "word-of-mouth", and markets to
pre-arranged bus tours (approximately 15% of total sales). Although monthly
revenues in fiscal 1996 have increased significantly over comparable periods in
fiscal 1995, the number of competing theatres and number of shows could at some
point attract ticket buyers away from the Company's theatre. Also, other area
tourist attractions could limit the growth or even decrease ticket sales. In
addition, other geographic areas such as Myrtle Beach, South Carolina and
Gatlinburg, Tennessee are currently actively seeking to increase their tourist
bases, which could, at some point, negatively impact the number of annual
visitors to Branson. The Country Tonite Show playing at the Company's theatre,
while having won major awards could be duplicated by a competing theatre with
possible adverse consequences to the Company. Finally, there is no assurance
that the planned morning show, "Golden Girls", will be successful.
LAS VEGAS, NEVADA MARKET
The Company's Country Tonite stage show plays at the Aladdin Hotel, a
casino with 1,100 hotel rooms located on the Las Vegas "Strip". The Company
believes that the show competes effectively in its highly competitive
environment with other similar entertainment in Las Vegas on the basis of its
quality and the popularity of its country theme. To some extent, the level of
show patronage depends on business levels at the Aladdin.
Numerous individual and group acts and production casts operate in Las
Vegas, competing for tourist expenditures. Although the Country Tonite Show has
successfully attracted strong patronage, there is no assurance that such
patronage will continue or that the show will be contracted beyond December 31,
1997, the date of expiration of its current engagement.
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PIGEON FORGE, TENNESSEE MARKET
The Company's Country Tonite Show will add a venue in Pigeon Forge,
Tennessee, scheduled to begin in March 1997. This is a new market for the
Company's award winning Country Tonite Show. Currently, 8 family oriented
musical and show theatres are operating in the Pigeon Forge area. It is likely
that additional theatres will open in the future. Although the Pigeon Forge area
draws approximately twice the number of tourists (approximately 12 million
annually) as the Branson, Missouri area, there are no assurances that the Pigeon
Forge show will duplicate the success of the Las Vegas and Branson shows. The
theatre will compete for the tourist dollar against other theatre venues and
other forms of family entertainment in the Pigeon Forge area.
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POKAGON TRIBAL AREA MARKET
The Pokagon Indian tribe does not have a designated reservation but has
been assigned certain service areas in northern Indiana and southwestern
Michigan within which one or more casinos may be constructed subject to the
approval of various regulatory authorities. In May 1996, the Pokagon Band
announced the selection of a site in the New Buffalo township for its proposed
Michigan service area. Although the Governor of Michigan signed a compact with
the Pokagon Tribe in September 1995, the Michigan legislature failed to approve
the compact in May 1996. The compact is expected to be resubmitted for
legislative approval in January 1997 until the compact is approved, no
timetable for development is determinable. The Company expects eventual
approval of the compact as Michigan already has Class III gaming with seven
other tribes. Although 13 million people reside within 150 miles of the
service areas, the planned casino(s) could encounter significant competition
from existing riverboat casinos now operating in Illinois and Indiana.
Likewise, there is a possibility that other native American land-based
casinos could be developed, and which could provide substantial competition
to the Pokagon casino(s). In either event, while the Company will have only
a minimal capital investment and related risk in the Pokagon venture,
significant competition could severely reduce the Company's anticipated
future management fee income.
BILOXI GAMING MARKET
Mississippi law does not limit the number of gaming licenses that may be
granted. Currently thirteen gaming facilities (including the Palace) with floor
space in excess of 600,000 square feet are located or under construction in the
Misisssippi Gulf Coast area. All thirteen facilities are located in a 30 mile
area, stretching from Biloxi to Bay St. Louis, Mississippi, with nine in Biloxi,
three in Gulfport and one facility in Bay St. Louis, Mississippi.
Several of the Palace's competitors have hotel facilities and other
amenities which the Palace does not currently offer. In addition, it is likely
that the Palace's competitors will add to or enhance their existing facilities
and that new competitors will enter the Mississippi Gulf Coast market. Certain
existing and future competitors have more extensive financial resources than the
New Palace Casino joint venture partners. Intense competition on the
Mississippi Gulf Coast has led to the closing and/or filing of bankruptcy
proceedings (include the Palace) of several facilities.
The success of gaming facilities in the New Orleans, Louisiana area or the
legalization of casino gaming in Alabama could adversely impact the operations
of the New Palace Casino joint venture.
EMPLOYEES
At September 30, 1996, the Company employed 14 employees at its
headquarters in Biloxi, Mississippi; 69 employees at the Grand Hinckley Inn; 114
employees at the Country Tonite Theatre; and 40 employees at the Country Tonite
production show in Las Vegas. None of the Company's employees are represented
by a union, and management considers its labor relations to be good.
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REGULATION AND LICENSING OF GAMING ACTIVITY
The Company is not actively engaged in gaming and is not currently subject
to gaming regulations and licensing. However, the Company has the right to
receive fees based on the casino management fees paid to Harrah's by the Pokagon
Band, and has under contract the potential acquisition and operation of the
Palace Casino in Biloxi, Mississippi, and a wholly owned subsidiary, CRC of
Tunisia, Inc., has signed an agreement to lease and operate a casino in Sousse,
Tunisia. The Company will be required to apply for and obtain gaming licensing
applications with the National Indian Gaming Commission ("NIGC") in connection
with the Pokagon project and the Mississippi Gaming Commission in connection
with the Palace Casino acquisition. To date, preliminary background information
has been submitted to the NIGC and the Company's Mississippi gaming license
application is in progress. The Company's proposed operation in Tunisia is
also subject to governmental regulation. The planned Tunisia Casino is
also subject to governmental regulation.
INDIAN GAMING REGULATION
INDIAN GAMING REGULATORY ACT AND TRIBAL/STATE COMPACTS. Gaming on Indian
lands within the United States is authorized by the Indian Gaming Regulatory Act
(the "IGRA"), a federal statute enacted in 1988. The IGRA provides for three
classes of gaming. Class I gaming consists of non-commercial social games
played solely for prizes of minimal value or traditional forms of Indian gaming,
and is subject to the exclusive jurisdiction of the applicable Indian tribe.
Class II gaming includes bingo, pulltabs and non-banking card games that are
already permitted in a state, and is subject to the concurrent jurisdiction of
and the applicable Indian tribe. Class III gaming is a residual category
composed of all forms of gaming that are not Class I or Class II gaming,
including casino style gaming.
The IGRA provides that before tribes can engage in Class III gaming in a
particular state, the tribe must negotiate a "tribal/state compact" with that
state to regulate such gaming. Under the IGRA, the scope of Class III gaming in
which tribes can engage in a particular state depends on the state's "public
policy" towards such gaming. The courts have developed a shorthand test to
determine a state's public policy, which is expressly incorporated in the IGRA.
If a state permits Class III gaming by any person, organization or entity in the
state, whether or not such gaming is subject to restrictive regulations, then
the state's "public policy" toward such gaming is deemed permissive and the
state must negotiate a compact with an Indian tribe in good faith at the request
of the tribe. If it does not, the tribe would have the right to file a "bad
faith lawsuit" and ultimately, if the court found that the state had refused to
negotiate in good faith and a compact still could not be negotiated, the
Secretary of the Interior could authorize procedures to conduct Class III gaming
in that state without a state-negotiated compact.
The terms of the tribal/state compacts negotiated pursuant to the IGRA vary
from state to state, and may vary from tribe to tribe within a state. At least
23 states (Arizona, California, Colorado, Connecticut, Idaho, Iowa, Kansas,
Louisiana, Michigan, Minnesota, Mississippi, Montana, Nebraska, Nevada, New
Mexico, New York, North Carolina, North Dakota, Oklahoma, Oregon, South Dakota,
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Washington and Wisconsin) have signed tribal/state compacts with Indian
tribes that permit certain types of Class III gaming on Indian land. (A
compact has been reached by the Pokagon Band with the Governor of Michigan,
but such compact has not received the necessary ratification of the State's
legislature.) Changes in state gaming laws may limit the types of gaming that
are eligible for tribal/state compacts. Certain states have resisted
entering into or renegotiating existing tribal/state compacts, and
tribal/state compacts have been the subject of litigation in several states,
including Alabama, California, Florida, Kansas, Louisiana, Michigan,
Minnesota, Mississippi, New York, North Carolina, Rhode Island, Texas,
Washington and Wisconsin. The Eleventh Circuit Court of Appeals and several
federal courts have held that the Eleventh Amendment to the United States
Constitution immunizes states from suit by Indian tribes in federal court
without the state's consent. Therefore, in these jurisdictions, Indian
tribes may not have a forum to compel a state to negotiate a tribal/state
compact. Several other Circuit Courts have, however, held otherwise. The
United States Supreme Court has agreed to review the decision of the Eleventh
Circuit Court of Appeals and will likely render a decision in 1997. The
outcome of such decision, and its effect on the Company, is uncertain.
In addition, because portions of the IGRA have been the subject of
controversy between the Indian tribes and governors in a number of states, the
Senate Committee of Native American Affairs proposed amendments to the IGRA in
1994. Those amendments, however, were rejected by tribal leaders and others. In
response, the Senate Committee proposed new amendments to the IGRA in March
1995. In addition, several bills to amend the IGRA have been introduced in the
House. It is unknown whether or when these proposed amendments will be proposed
or enacted and, if enacted, their effects on such activities. Even where tribes
and states have negotiated a compact, any changes in the IGRA may have a
material effect on how gaming on tribal lands will be conducted.
MANAGEMENT CONTRACTS. The NIGC has adopted regulations pursuant to the
IGRA that govern the submission requirements for and content of management
contracts with Indian tribes. A management contract has no legal effect until
it is approved by the Chairman of the NIGC. The NIGC regulations provide
detailed requirements as to certain provisions which must be included in
management contracts, including a term not to exceed five years, except that
upon request of a tribe, a term of seven years may be allowed by the NIGC
Chairman if the Chairman is satisfied that the capital investment and income
projections for the gaming facility require the additional time. Further, the
fee received by the manager of a gaming facility may not exceed 30% of the net
revenues, except that a fee in excess of 30% and up to of 40% of net revenues
may be approved if the NIGC Chairman is satisfied that the capital investment
and income projections for the gaming facility require the additional fee. The
NIGC has the power to require contract modifications under certain circumstances
or to void a contract if the management company fails to comply with applicable
laws and regulations.
In addition to ensuring that a management contract contains certain terms,
the Chairman of the NIGC may disapprove a management contract if it is
determined that the management contractor's prior activities, criminal record,
if any, or reputation, habits and associations pose a threat to the public
interest or create a danger of illegal practices, or that such contractor has
interfered with or unduly influenced the tribal governmental decision-making
process. The NIGC also requires that
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certain information pertaining to persons and entities with a financial interest
in, or having management responsibility for, a management contract be disclosed
for purposes of a suitability review. This is expected to include the Company
by virtue of its percentage consulting fee. The NIGC regulations provide that
each of the 10 persons who have the greatest direct or indirect financial
interest in the management contract must be found suitable in order for the
management contract to be approved by the NIGC. The NIGC regulations provide
that any entity with a financial interest in a contract must be found suitable,
as must the directors and 10 largest shareholders (or owners of 5% or more of
issued and outstanding stock) of such entities in the case of a corporate
entity, or the 10 largest holders of interest in the case of a trust or
partnership. The Chairman of the NIGC may reduce the scope of information to be
provided by institutional investors. Specifically, the Company, its directors,
persons with management responsibilities and certain of the Company's owners,
must provide background information and be investigated by the NIGC and be found
suitable to be affiliated with a gaming operation in order for the management
contract to be approved by the NIGC. At any time, the NIGC has the power to
investigate and require the finding of suitability of any person with a direct
or indirect interest in a management contract, as determined by the NIGC. The
Company must pay all fees associated with background investigations by the NIGC.
The NIGC is responsible for conducting the requisite background investigation on
the foregoing individuals and entities in the case of Class II gaming
operations; the applicable state gaming agency and tribe are responsible for
conducting the background investigation with respect to Class III gaming
operations and then providing its findings to the NIGC. Generally, the
applicable tribal/state compact will delineate responsibilities and issues
relating to background checks for Class III operations.
The NIGC regulations require that background information as described above
must be submitted for approval within 10 days of any proposed change in
financial interest in a management contract. The NIGC regulations do not address
any specialized procedures for investigations and suitability findings in the
context of publicly held corporations. If, subsequent to the approval of a
management contract, the NIGC determines that any of its requirements pertaining
to the management contract have been violated, it may require the management
contract to be modified or voided, subject to rights of appeal. In addition,
any amendments to the management contract must be approved by the NIGC.
The NIGC regulations provide that the management contract must be
disapproved if the NIGC determines that: (a) any person with a direct or
indirect financial interest in, or having management responsibility for, a
management contract (i) has been convicted of a felony or any misdemeanor gaming
offense; (ii) if the person's prior activities make them unsuitable to be
connected with gaming; (iii) is an elected member of the governing body of a
tribe that is party to the management contract; or (iv) has knowingly provided
materially false statements to the NIGC or a tribe or has refused to respond to
questions from the NIGC; (b) the management contractor has attempted to unduly
interfere with or influence tribal decisions relating to the gaming operation or
has deliberately or substantially failed to follow the management contract and
applicable tribal ordinances; or (c) a trustee would not approve the management
contract.
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In addition to requirements governing management contracts and submissions,
the regulations require each tribe to enact an ordinance authorizing and setting
out standards for the conduct of gaming on its lands, which must be approved by
the NIGC. The ordinance must mandate the tribe to conduct background
investigations and issue licenses to key employees and primary management
officials employed by the gaming enterprise, submit annual independent audits to
the NIGC, and pay a variable user fee to the NIGC. The NIGC also has extensive
access, investigatory, monitoring, compliance and enforcement powers to ensure
that the management contractor, the tribe and the gaming enterprise comply with
its regulations.
The NIGC has only recently been provided the regulatory authority to
approve management contracts. It is not yet clear how this authority interacts
with the statutory rights of approval of the Bureau of Indian Affairs (the
"BIA") for contracts between Indian tribes and non-Indians. Pursuant to BIA
regulations, contracts between non-Indians and Indian tribes which do not adhere
to certain statutory requirements are void. At present, it is unclear as to
whether and how the BIA intends to assert jurisdiction to approve collateral
agreements related to management contracts (such as promissory notes) or whether
the NIGC will have approval authority over such collateral agreements. Pursuant
to current procedures, all such documents are to be submitted to the NIGC, which
will then determine whether review and approval resides with the NIGC or the
BIA.
MISSISSIPPI GAMING REGULATION
The ownership and operation of a gaming business in Mississippi is subject
to extensive laws and regulations, including the Mississippi Gaming Control Act
(the "Mississippi Act") and the regulations (the "Mississippi Regulations")
promulgated thereunder by the Mississippi Gaming Commission (the "Mississippi
Commission") and the Mississippi State Tax Commission Regulations for Gaming
Establishments ("Mississippi Tax Regulations") promulgated by the Mississippi
State Tax Commission ("Mississippi Tax Commission"). The Mississippi Commission
and Mississippi Tax Commission (together the "Mississippi Gaming Authorities")
are empowered to oversee and enforce the Mississippi Act. Gaming in Mississippi
can be legally conducted only on floating vessels of a certain minimum size in
navigable waters of the Mississippi River or in waters of the State of
Mississippi (so called dockside gambling) which lie adjacent and to the south
(principally in the Gulf of Mexico) of the counties of Hancock, Harrison and
Jackson, and only in counties in Mississippi in which the registered voters have
not voted to prohibit such activities. The voters in Jackson County, the
southeastern most county of Mississippi, have voted to prohibit gaming in that
county. However, gaming could be approved in Jackson County in any subsequently
held referendum.
The underlying policy of the Mississippi Act is to ensure that gaming
operations in Mississippi are conducted (i) honestly and competitively, (ii)
free of criminal and corruptive influences, and (iii) in a manner which protects
the rights of the creditors of gaming operations. The laws, regulations and
supervisory procedures of the Mississippi Act seek to (i) establish and maintain
responsible accounting practices and procedures; (ii) maintain effective control
over the financial practices of licensees, including establishing minimum
procedures for internal fiscal affairs and safeguarding assets
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and revenues, providing reliable record keeping, and making periodic reports to
the Mississippi Gaming Authorities; and (iii) provide a source of state and
local revenues through taxation and licensing fees. Changes in such laws,
regulations and procedures could have an adverse effect on the Company.
The Mississippi Act requires that a person (including any corporation or
other entity) must be licensed to conduct gaming activities in Mississippi. A
license will be issued only for a specified location which has been approved as
a gaming site by the Mississippi Commission prior to issuing such license.
Gaming licenses are issued for an initial two-year period and are renewable
every two years thereafter. The Mississippi Act also requires that each officer
or director of a gaming licensee, or other person who exercises a material
degree of control over the licensee, either directly or indirectly, must be
found suitable by the Mississippi Commission. The Mississippi Commission will
not issue a license or make a finding of suitability unless it is satisfied,
only after an extensive investigation paid for by the applicant, that the
persons associated with the gaming licensee or applicant for a license are of
good character, honesty and integrity, with no relevant or material criminal
record. In addition, the Mississippi Commission will not issue a license unless
it is satisfied that the licensee is adequately financed or has a reasonable
plan to finance its proposed operations from acceptable sources, and that
persons associated with the applicant have sufficient business probity,
competence and experience to engage in the proposed gaming enterprise. Other
parties, including the Partnership's or the Company's lenders, holders of
evidences of indebtedness, underwriters and employees, may be required to be
licensed, and such applications for licensing, if any, may be denied for any
cause deemed reasonable by the Mississippi Commission. The Mississippi
Commission may refuse to issue a work permit to a gaming employee (i) if the
employee has committed larceny, embezzlement or any crime of moral turpitude, or
knowingly violated the Mississippi Act or Mississippi Regulations, or (ii) for
any other reasonable cause.
In October 1994, the Mississippi Gaming Commission adopted a regulation
requiring, as a condition of licensure or license renewal, that a gaming
establishment's site development plan include certain infrastructure facilities
in close proximity to the casino complex which will amount to at least 25% of
the cost of the casino facility. Parking facilities, roads, sewage and water
systems or facilities normally provided by governmental entities do not meet the
infrastructure requirement.
The Mississippi Commission has the power to deny, limit, condition, revoke
and suspend any license, finding of suitability or registration, or fine any
person, as it deems reasonable and in the public interest, subject to an
opportunity for a hearing. The Mississippi Commission may fine any licensee or
persons who was found suitable up to $100,000 for each violation of the
Mississippi Act or the Mississippi Regulations, which is the subject of an
initial complaint, and up to $250,000 for each such violation which is the
subject of any subsequent complaint. The Mississippi Act provides for judicial
review of any final decision of the Mississippi Commission by petition to a
Mississippi Circuit Court, but the filing of such petition does not necessarily
stay any action taken by the Mississippi Commission pending a decision by the
Circuit Court.
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Owners of a casino in Mississippi must submit detailed financial and
operating reports to the Mississippi Gaming Authorities. Substantially all
loans, leases, sales of securities and other financing transactions entered into
by the owner or operator must be reported to, and, in some cases, approved by,
the Mississippi Gaming Authorities.
Under the Mississippi Regulations, a gaming license may not be held by a
publicly traded company, although an affiliate corporation, such as the Company,
may be publicly held so long as the Company receives the approval of the
Mississippi Commission. In addition, approval of any public offering of the
securities of the Company must be obtained from the Mississippi Commission if
any part of the proceeds from that offering are intended to be used to
construct, acquire or finance the operation of gaming facilities in Mississippi
or to retire or extend obligations incurred for any such purpose.
Under the Mississippi Regulations, a person is prohibited from acquiring
control of the Company without prior approval of the Mississippi Commission.
The Company is also prohibited from consummating a plan of recapitalization
proposed by management in opposition to an attempted acquisition of control of
the Company and which involves the issuance of a significant dividend to Common
Stockholders, where such dividend is financed by borrowing from financial
institutions or the issuance of debt securities. In addition, the Company is
prohibited from repurchasing any of its voting securities under circumstances
(subject to certain exemptions) where the repurchase involves more than one
percent of the Company's outstanding Common Stock at a price in excess of 110%
of the then market value of the Company's Common Stock from a person who owns
and has for less than one year owned more than three percent of the Company's
outstanding Common Stock, unless the repurchase has been approved by a majority
of the Company's shareholders voting on the issue (excluding the person from
whom the repurchase is being made) or the offer is made to all other
shareholders for the Company.
Any person who, directly or indirectly, or in association with others,
acquires beneficial ownership of more than five percent of the Common Stock of
the Company must notify the Mississippi Commission of this acquisition and may
be required to be found suitable by the Mississippi Commission. Any person who
becomes a beneficial owner of more than 10% of the Company's Common Stock must
apply for a finding of suitability by the Mississippi Commission. Furthermore,
regardless of the amount of securities purchased, any person who acquires any
beneficial ownership in the Common Stock of the Company may be required to be
found suitable if the Mississippi Commission has reason to believe that the
acquisition and ownership would be inconsistent with the declared policy of
Mississippi. Any person who is required to be found suitable must apply for a
finding of suitability from the Mississippi Commission within 30 days after
being requested to do so, and must deposit with the State Tax Commission a sum
of money which is adequate to pay the anticipated investigatory costs associated
with such finding. Any person who is found not to be suitable by the
Mississippi Commission shall not be permitted to have any direct or indirect
ownership in the Company's Common Stock. Any person who is required to apply
for a finding of suitability and fails to do so or who fails to dispose of his
or her interest in the Company's Common Stock if found unsuitable, is guilty of
a misdemeanor. If a finding of suitability with respect to any person is
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not applied for where required, or if it is denied or revoked by the Mississippi
Commission, the Company is not permitted to pay such person for services
rendered, or to employ or enter into any contract with such person.
The Mississippi legislature has declared that some corporate acquisitions
opposed by management, repurchases of voting securities and other corporate
defense tactics that affect corporate gaming licensees in Mississippi, and
corporations whose stock is publicly traded that are affiliated with those
operations, may be injurious to stable and productive corporate gaming. The
Mississippi Commission has established a regulatory scheme to ameliorate the
potentially adverse effects of these business practices upon Mississippi's
gaming industry and to further Mississippi's policy to (i) assure the financial
stability of corporate gaming operators and their affiliates; (ii) preserve the
beneficial aspects of conducting business in the corporate form, and (iii)
promote a neutral environment for the orderly governance of corporate affairs.
Approvals are, in certain circumstances, required from the Mississippi
Commission before the Company can make exceptional repurchases of voting
securities above the current market price thereof (commonly referred to as
"greenmail") and before a corporate acquisition opposed by management can be
consummated. Mississippi's gaming regulations also requires prior approval by
the Mississippi Commission if the Company were to adopt a plan of
recapitalization proposed by the Company's Board of Directors in opposition to a
tender offer made directly to its stockholders for the purposes of acquiring
control of the Company.
Neither the Company nor any controlled affiliate may engage in gaming
activities in Mississippi and outside of Mississippi without approval of the
Mississippi Commission. The Mississippi Commission may require, among other
things, that there be adequate governmental regulation of gaming in the
out-of-state location and that there is a means of the Mississippi Commission to
have access to information concerning the out-of-state gaming operations and
persons associated with them.
TUNISIA GAMING REGULATION
The Company's proposed casino venture in Tunisia is subject to laws and
regulations affecting the ownership and operation of casinos in that country.
As is inherent in international operations, the Company's proposed venture is
subject to the risks of unpredictable and inconsistent regulatory
requirements, politicial and economic changes and disruptions, tariffs or
other restrictions on trade, transportation and communication delays,
currency fluctuations and staffing difficulties.
ITEM 2. PROPERTIES
The Company's owned or leased properties include principally the Grand
Hinckley Inn, the Country Tonite Theatre, the Company's executive offices and a
residential property. The Grand Hinckley Inn is a 154-room, upscale hotel owned
by the Company adjacent to the Grand Casino Hinckley near Hinckley, Minnesota.
It is situated on 7.5 acres of real estate leased at a cost of $1 per annum from
Grand Casinos. The 2,000-seat Country Tonite Theatre in Branson, Missouri is
owned by the Company, including underlying real estate of 10.7 acres. The
Company leases pursuant to a
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one-year lease approximately 3,585 square feet of executive office space in
Biloxi, Mississippi at a rate of $40,800 per annum. The Company owns a
residence in Ocean Springs, Mississippi which is leased to a principal of
Monarch at a below-market rate, and is under negotiations to be sold to such
individual.
In addition, the Company owns several small lots and real estate parcels in
Wisconsin which it will attempt to sell or dispose of in fiscal 1997. These
lots and parcels were derived from the Company's former resort development
activities. Also, several small storage rooms are rented at various locations
on a month-to-month lease basis. Annual rent amounts are nominal.
ITEM 3. LEGAL PROCEEDINGS
The Company commenced an arbitration action in November 1994 with the
Arbitration Association in Minneapolis, Minnesota, against Cunningham
Hamilton Quiter, P.A. (CHQ), the architect it retained in connection with the
construction of the Biloxi theatre. In this action, the Company seeks to
recover the damages it believes it incurred as a result of the architectural
design work on the Biloxi theatre relating to cost overruns in the
construction of the Biloxi theatre. The arbitration demand seeks damages in
an amount in excess of $1,000,000. On December 30, 1994, the architectural
firm commenced a suit in a Mississippi state court seeking, among other
things, to foreclose on a mechanics' lien it filed on the Biloxi theatre
project in the amount of approximately $321,000. The architectural firm has
also asserted claims for breach of contract, tortuous interference with
economic advantage and punitive damages. The Company previously placed
$321,000 in escrow to cover such mechanics' lien claim. The Company and the
architectural firm have agreed to, among other things, resolve all disputes
between them with respect to the Biloxi theatre project in the Minneapolis
arbitration action and stay the lawsuit in Mississippi. The arbitration
action was heard by a panel of arbitrators in November. On December 26, 1996,
the Arbitrators for the CHQ arbitration case announced their decision. The
Company's recovery was limited to a reduction of previously escrowed fees of
approximately $321,000, on deposit with a Mississippi state court, to
approximately $142,000. The decision, which is subject to appeal, would result
in a gain to the Company of approximately $139,000.
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On January 24, 1995, a suit was brought against the Company by Gelb
Production, Inc., a New Jersey corporation, in the Federal District Court of
New Jersey in connection with the Company's former ownership of the Biloxi
Star Theatre. The Company sold the Biloxi Star Theatre in September 1994.
Venue was subsequently transferred to the Federal District Court for the
Southern District of Mississippi. The plaintiff asserts it had a contract
with the company for the promotion of eight professional boxing events at the
Company's former Biloxi theatre. Total claims are for $500,000 in compensatory
damages, punitive damages and attorneys' fees, interest and costs, and other
relief the court may deem just and proper. The Company intends to vigorously
defend itself in this action.
In May 1995, the Company was advised by written correspondence that claims an
interest in certain assets of Monarch, principally Monarch's interest in
Indian gaming ventures. No specific amount was claimed. On November 13, 1995
Casino Resorts, Inc. commenced an action in the state district court for the
Fourth Judicial District Court of Minnesota against Monarch and the Company
seeking monetary damages and alleging breach of contract against Monarch and
tortuous interference with a contractual or business relationship against the
Company. The plaintiff seeks compensatory damages and has not claimed a
specific amount of damages but claims damages in excess of $50,000. The
plaintiff also seeks reimbursement of its costs and disbursements. Management
of the Company and Monarch plan to vigorously defend themselves against the
claims.
James Barnes and Prudence Barnes, two former officers of a subsidiary of the
Company, brought suit on January 31, 1996 against the Company in the State
District Court, Clark County, Nevada, in connection with their employment
termination in June 1995. No specific amount of damages has been claimed,
however, prior to the filing of the suit, the plaintiffs offered to settle
the matter for $500,000. The Company intends to vigorously defend itself in
this matter.
In March 1996, PDC, a Minnesota limited liability company, and two of its
officers filed suit against the Company and Harrah's Entertainment, in
Minnesota, the Fourth Judicial District Court of Minnesota, (and Michigan,
which venue has been dropped), alleging tortuous interference with its
business relations and prospective economic advantage, as well as false light
invasion of privacy in connection with the Pokagon Indian Gaming Award. The
plaintiffs seek compensatory damages and have not claimed a specific amount of
damages, but claim such damages exceed $50,000. The plaintiffs also seek
recovery of their attorneys' fees. The Company's general liability carrier
has taken up the defense of the Company. The Company intends to vigorously
defend itself in this matter.
The Company is also party to other items of litigation, none of which, either
individually or collectively, are material.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to a vote of security holders during the
fourth quarter of the fiscal year ended September 30, 1996.
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PART II
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ITEM 5. MARKET PRICE FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
The Company's common stock (symbol "CSNR") and its Class A warrants (symbol
"CSNRW") are traded on the Nasdaq National Market. The following table sets
forth, for the fiscal periods indicated, high and low sales prices of the common
stock and Class A warrants as reported by Nasdaq:
Common Stock Warrants
---------------- -----------------
High Low High Low
------ ------ ------ -------
FISCAL YEAR ENDED SEPTEMBER 30, 1995
First Quarter $2.50 $1.50 $ .61 $ .25
Second Quarter $4.25 $1.69 $ .94 $ .25
Third Quarter $5.63 $2.88 $ .91 $ .41
Fourth Quarter $6.25 $4.19 $ 1.56 $ .25
FISCAL YEAR ENDED SEPTEMBER 30, 1996
First Quarter $4.81 $2.38 $ .98 $ .31
Second Quarter $3.38 $1.75 $ .50 $ .20
Third Quarter $3.94 $1.63 $ .81 $ .31
Fourth Quarter $2.75 $1.50 $ .56 $ .25
Each warrant entitles the holder to purchase one share of the Company's
common stock at a price of $6.75, subject to adjustment. The warrants expire
September 15, 1997, and are subject to redemption by the Company for $.05 per
warrant if the closing price of the common stock exceeds $8.50 per share for 20
consecutive trading days, subject to adjustment.
HOLDERS
On November 14, 1996 there were 320 record holders of the common stock, and
84 record holders of the warrants. In addition, the Company estimates there are
an additional 2,700 shareholders and 400 warrant holders who own shares or
warrants, respectively, in nominee or street name, at that date.
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REGISTRATION RIGHTS
Pursuant to agreements with certain shareholders, holders of certain
options, and holders of warrants other than the Class A warrants, the Company
has granted demand and piggyback registration rights to 2,091,230 currently
issued shares and 70,000 shares which may be issued upon exercise of related
options or warrants.
DIVIDENDS
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Company opened the Country Tonite Theatre in Branson, Missouri; the
Grand Hinckley Inn in Hinckley, Minnesota in May 1994. The Company had
previously purchased the Country Tonite production show in March 1994.
RESULTS OF OPERATIONS
The following financial data presented below has been derived from the
Company's Consolidated Financial Statements for the fiscal years ended
September 30, 1996 and 1995.
Year Ended September 30
------------------------
1996 1995
-------- ---------
(in thousands)
INCOME FROM CONTINUING OPERATIONS
Entertainment revenues $8,938 $ 6,750
Hospitality revenues 3,968 3,658
Operating expense - entertainment 6,215 5,743
Operating expense - hospitality 2,660 2,032
General and administrative expense 2,190 2,006
Interest expense 1,278 1,193
Other income (expense) (540) (443)
INCOME (LOSS) FROM CONTINUING OPERATIONS 23 (123)
DISCONTINUED OPERATIONS
Income from discontinued operations - 162
NET INCOME $ 23 $ 39
Following is management's discussion and analysis of significant factors
which have affected the Company's financial position and operating results
during the periods reflected in the accompanying consolidated financial
statements.
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FISCAL 1996 COMPARED TO FISCAL 1995
CONSOLIDATED
The Company's revenues from continuing operations were $12,905,949, an
increase of $2,498,076, or 24%, from the $10,407,873 recorded in fiscal 1995.
Of the increase $2,188,241, or 88%, was provided by the entertainment segment
with the hospitality segment accounting for the remaining increase of $309,835.
ENTERTAINMENT
COUNTRY TONITE PRODUCTION SHOW
Country Tonite Production show revenues totaled $2,192,360 in fiscal 1996,
a decline of $173,762, or 7.3%, from fiscal 1995 revenues of $2,366,122. The
decline was due principally to a lower contractual rate with the Aladdin Hotel
in calendar 1996. Despite the decline in revenues, operating income increased
$205,300, or 85%, to $446,271 in fiscal 1996 from $240,971 in fiscal 1995.
Management successfully reduced operating costs (including project, general and
administrative costs and depreciation) from $2,125,152 in fiscal 1995 to
$1,746,089 in fiscal 1996, a savings of $379,063, or 18%, principally through a
concerted effort to reduce general and administrative expenses.
COUNTRY TONITE THEATRE
With paid attendance at the Branson Theatre reaching 40% of capacity in
fiscal 1996, up from 29% in fiscal 1995, and average ticket prices increasing
from $14.87 in fiscal 1995 to $15.57 in fiscal 1996, revenues increased
$2,362,003, or 54%, from the fiscal 1995 total of $4,383,934 to $6,745,937 in
fiscal 1996. Operating expenses (including project, general and administrative
costs and depreciation) rose at a lower pace by $850,376, or 24%, to $4,468,470
in fiscal 1996 from $3,618,094 in fiscal 1995. The economies of scale evident
at the 40% paid occupancy level provided an increase in operating income of
$1,511,627 or 197% to $2,277,467 in fiscal 1996 from $765,840 in fiscal 1995.
The marketing efforts at the Country Tonite Theatre and its acceptance in the
market have resulted in significant year to year increases in attendance and
revenues from the initial 1994 period.
HOSPITALITY
GRAND HINCKLEY INN
In fiscal 1996, the Grand Hinckley Inn continued its historical high
occupancy rates, achieving an average occupancy of 86% and average daily rate of
$54.85 compared to an average occupancy rate of 82% and an average daily rate of
$56.63 in fiscal 1995. Revenues
25
<PAGE>
for fiscal 1996 increased $309,835, or 8%, to $3,967,652 in fiscal 1996 from
$3,657,817 in fiscal 1995. Operating income fell $318,199, or 20%, from
$1,625,585 in fiscal 1995 to $1,307,386 in fiscal 1996. Operating expenses
(including project, general and administrative costs and depreciation) rose
$628,034, or 31%, to $2,660,266 in fiscal 1996 from $2,032,232 in fiscal 1995.
The increase in operating expenses and resulting decrease in operating income
were principally the result of higher property taxes and profit sharing
expenses. Profit sharing with the Enterprise totaled $786,000 in fiscal 1996
compared to $361,000 in fiscal 1995, as hotel revenues exceeded the cumulative
threshold during fiscal 1995.
GENERAL AND ADMINISTRATIVE
The Company's general and administrative expenses aggregated $2,190,154 in
fiscal 1996 compared to $2,006,272 for fiscal 1995. The increase resulted
primarily from higher legal and professional fees.
GAMING
Loss on gaming projects of $742,000 for fiscal 1996 consists principally of
the loss on abandonment of the Palace Casino acquisition in January 1996 of
$727,000. Although the Company reached an agreement as part of a joint venture
to again acquire the Palace Casino in September 1996, generally accepted
accounting principles do not allow reversal of the abandonment loss.
Loss on gaming projects for fiscal 1995 consists of $250,000 of fee income
received upon signing of a gaming contract, $600,000 of fee income in exchange
for the relinquishment of rights to gaming contracts, offset by $944,248 of
abandonment costs related principally to the Hoh, Cherokee and Louisiana gaming
projects.
OTHER
Other income for 1995 includes $403,000 from the reversal of excess
reserves principally related to the closing of the Biloxi Star Theatre.
During fiscal 1994, management elected to discontinue its recreational
property marketing efforts, and revenue and expenses from those activities were
categorized as discontinued operations. A gain of $162,217 from discontinued
operations during fiscal 1995 resulted from final revenues being received, and
from the reversal of excess reserves related to closing the Company's Wisconsin
offices.
Interest expense totaled $1,278,052 for fiscal 1996 compared to $1,193,403
for fiscal 1995.
The FASB has issued SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets
26
<PAGE>
Being Disposed of," which provides guidance on how and when impairment losses
are recognized on long-lived assets. This statement, when adopted, is not
expected to have a material impact on the Company.
The FASB has issued SFAS No. 123, "Accounting for Stock-Based
Compensation," which establishes a fair value based method of accounting for
stock-based compensation plans. This statement provides a choice to either
adopt the fair value based method of accounting or continue to apply APB Opinion
No. 25, which would require only disclosure of the pro forma net income and
earnings per share, determined as if the fair value based method had been
applied. The Company plans to continue to apply APB Opinion No. 25 when
adopting this statement, and accordingly, this statement is not expected to have
a material impact on the Company.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents increased $503,469 to $1,546,422 at September 30,
1996 from $1,042,953 at September 30, 1995. In addition to funds provided by
operations, the Company's principal source of funds in fiscal 1996 consisted of
a placement of convertible subordinated debentures of $1,493,000 and warrant
exercises which provided $918,000. The Company's principal use of funds in
fiscal 1996 consisted of additions to deferred development costs of $2,039,165
payments of notes payable and long-term debt totaling $1,389,322 and capital
expenditures of $278,722.
At September 30, 1996, the Company has approximately $100,000 available
under a line of credit with a bank.
The Company expects that available cash and cash from future operations
will be sufficient to meet the capital expenditures, debt service and working
capital requirements of its existing businesses. The Company will need to
raise approximately $7,000,000 to meet the currently estimated capital
requirements of its new businesses (Tunisia Casino - $5,000,000 and Pigeon
Forge Theatre - $600,000) and proposed acquisition (Palace Casino -
$1,400,000). These estimates are subject to change as future development
takes place. The sources of such funding have not yet been identified and
cannot be assured. As of September 30, 1996, the Company has deferred costs
totalling $682,435 related to the Tunisia project and $466,398 related to the
proposed Palace Acquisition. In addition the Company made $75,000 of capital
contributions to the Country Tonite - Pigeon Forge joint venture through
September 30, 1996.
Notes receivable totaling $1,232,000 related to the warrant exercise
originally due in January and December 1996 are in the process of being
restructured due to the payor's failure to pay. Collection of monies due
is not anticipated in the 1997 fiscal year.
27
<PAGE>
CAPITAL EXPENDITURES
Capital expenditures by the Company were $278,722 for the year ended
September 30, 1996 compared to $85,836 for the 1995 fiscal year. Capital
expenditures for 1996 consisted principally of additional equipment purchases
for the entertainment segment.
FUTURE OPERATIONS
The Company is currently evaluating new venues for its Country Tonite
production in such high-tourist areas as Myrtle Beach, South Carolina; Reno,
Nevada; and Laughlin, Nevada.
Potential new hospitality opportunities continue to be explored as well.
The Grand Hinckley Inn has been profitable since inception and management
is presently exploring potential new hospitality endeavors.
The Country Tonite production, playing at the Aladdin Hotel and Casino in
Las Vegas, is contracted through December 31, 1997.
In September 1995 the Company abandoned its efforts as to the Cherokee,
Louisiana and Hoh gaming projects, but concluded negotiations with Harrah's
Entertainment, Inc. ("Harrah's") whereby the Company will act as a consultant in
the development and management of one or more casinos to be funded by Harrah's
for the Pokagon Band of Potawatomi Indians in northern Indiana and in
southwestern Michigan. The Company will, upon commencement of operations,
receive 21.6% of Harrah's management fee, without being required to provide any
of the capital necessary for development.
In March 1997, the Company, through a 60% owned joint venture, will operate
a theatre in Pigeon Forge, Tennessee, as a new venue for the Country Tonite
Show.
Under terms of the prospective transaction to purchase the Palace Casino as
part of a joint venture, the Company is scheduled to close the transaction in
January 1997, assuming all regulatory clearances have been obtained.
The Company continues to pursue other opportunities to own and manage
additional non-gaming and gaming facilities either singularly or in conjunction
with other gaming industry participants.
28
<PAGE>
SEASONALITY
The Company expects its hotel operations will be affected by seasonal
factors, including holidays, weather and travel conditions. The theatre
operation in Branson, Missouri will also be affected by seasonal factors and in
addition will be closed annually from mid-December through mid-March, a period
when theatres normally close in Branson.
IMPACT OF INFLATION
Management of the Company does not believe that inflation has had any
significant adverse impact on the Company's financial condition or results of
operations for the periods presented. However, an increase in the rate of
inflation could adversely affect the Company's future operations and expansion
plans.
FOREIGN CURRENCY TRANSACTIONS
The Company's transactions with respect to the proposed casino venture in
Tunisia will be in dinars. As such, there are all the risks pertaining to
fluctuations in foreign exchange rates and potential restrictions or costs
associated with the transfer of funds to the United States.
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
All statements contained herein that are not historical facts are based on
current expectations. These statements are forward looking in nature and
involve a number of risks and uncertainties. Actual results may differ
materially. Among the factors that could cause actual results to differ
materially are the following: the availability of sufficient capital to finance
the Company's business plan on terms satisfactory to the Company; competitive
factors, such as the introduction of new hotels or renovation of existing hotels
in the same markets; changes in travel patterns which could affect demand for
the Company's hotels; changes in development and operating costs, including
labor, construction, land, equipment, and capital costs; general business and
economic conditions; and other risk factors described from time to time in the
Company's reports filed with the Securities and Exchange Commission. The
Company wishes to caution readers not to place undue reliance on any such
forward looking statements, which statements are made pursuant to the Private
Securities Litigation Reform Act of 1995, and as such, speak only as to the date
made.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
29
<PAGE>
The Index to Financial Statements appears at page F-1 hereof, the Report of
Registrant's Independent Accountants appears at page F-2 hereof, and the
Consolidated Financial Statements and Notes to Consolidated Financial Statements
of the Registrant appear beginning at page F-3 hereof.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
30
<PAGE>
- --------------------------------------------------------------------------------
PART III
- --------------------------------------------------------------------------------
ITEM 9. DIRECTOR'S AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by this Item is incorporated by reference to the
Company's definitive Proxy Statement relating to its annual meeting expected to
be held in April 1996, upon such definitive Proxy Statement being filed with the
Securities and Exchange Commission.
ITEM 10. EXECUTIVE COMPENSATION.
The information required by this item is incorporated by reference to the
Company's definitive Proxy Statement relating to its annual meeting expected to
be held in April 1996, upon such definitive Proxy Statement being filed with the
Securities and Exchange Commission.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this Item is incorporated by reference to the
Company's definitive Proxy Statement relating to its annual meeting expected to
be held in April 1996, upon such definitive Proxy Statement being filed with the
Securities and Exchange Commission.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this Item is incorporated by reference to the
Company's definitive Proxy Statement relating to its annual meeting expected to
be held in April 1996, upon such definitive Proxy Statement being filed with the
Securities and Exchange Commission.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
The Exhibits to this Report are listed on page E-1 hereof:
(b) Reports on Form 8-K
31
<PAGE>
(i) A report on Form 8-K was filed on July 1, 1996 announcing
an agreement by a wholly owned subsidiary of the Company
to lease and operate a casino in Tunisia.
(ii) A report on Form 8-K was filed on July 2, 1996 announcing
new venues in Mississippi and Tennessee for the Country
Tonite Show.
(iii) A report on Form 8-K was filed on September 23, 1996. The
Company announced the proposed acquisition of the Palace
Casino as part of a joint venture.
32
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, hereunto duly authorized.
CASINO RESOURCE CORPORATION
Date: March 10, 1997 By: /s/ JOHN J. PILGER
-----------------------------------
John J. Pilger,
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below on March 11, 1997 by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
Signature and Title
-------------------
/s/ JOHN J. PILGER
-------------------------------------------
John J. Pilger, Chief Executive Officer,
President and Chairman of the Board of
Directors
/s/ MAURICE GAUDET
-------------------------------------------
Maurice Gaudet, Chief Financial Officer
/s/ NOREEN POLLMAN
-------------------------------------------
Noreen Pollman, Vice President - Operations
and Director
/s/ ROBERT J. ALLEN
-------------------------------------------
Robert J. Allen, Vice President -
Entertainment and Director
33
<PAGE>
CASINO RESOURCE CORPORATION AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT F-2
CONSOLIDATED FINANCIAL STATEMENTS
Balance Sheets F-3-4
Statements of Operations F-5
Statements of Stockholders' Equity F-6
Statements of Cash Flows F-7-8
Notes to Consolidated Financial Statements F-9-23
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Casino Resource Corporation
and Subsidiaries
Biloxi, Mississippi
We have audited the accompanying consolidated balance sheets of Casino
Resource Corporation and Subsidiaries as of September 30, 1996 and 1995, and
the related consolidated statements of operations, stockholders' equity and
cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Casino Resource Corporation and Subsidiaries at September 30, 1996 and
1995, and the results of their operations and their cash flows for the years
then ended, in conformity with generally accepted accounting principles.
BDO SEIDMAN, LLP
Chicago, Illinois
November 5, 1996, except for Note 14
as to which the date is
December 26, 1996
F-2
<PAGE>
CASINO RESOURCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
September 30, 1996 1995
- --------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $1,546,422 $1,042,953
Restricted cash 338,602 327,261
Accounts receivable - trade and other, net of
allowance for uncollectibles of $3,043 in 1996
and $3,000 in 1995 307,204 525,885
Prepaid expenses 438,042 413,897
- --------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 2,630,270 2,309,996
- --------------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT, LESS ACCUMULATED DEPRECIATION
AND AMORTIZATION 15,082,906 15,860,940
- --------------------------------------------------------------------------------------
OTHER ASSETS
Cost in excess of fair value of assets acquired, less
accumulated amortization of $124,645 in 1996 and
$76,395 in 1995 599,097 647,347
Deferred development costs 2,201,211 895,358
Notes and advances receivable - related parties 556,895 443,931
Deferred charges, less accumulated amortization
of $244,047 in 1996 and $231,825 in 1995 40,781 102,526
Deposits and other 673,384 691,350
- --------------------------------------------------------------------------------------
TOTAL OTHER ASSETS 4,071,368 2,780,512
- --------------------------------------------------------------------------------------
$21,784,544 $20,951,448
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
</TABLE>
F-3
<PAGE>
CASINO RESOURCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
September 30, 1996 1995
- --------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $1,173,449 $1,657,878
Notes and accounts payable to related parties - 103,243
Note payable - Grand Casinos, Inc. 589,410 1,289,410
Current maturities of long-term debt 547,755 677,801
Accrued expenses and other liabilities 917,370 600,237
Provision for contingencies 29,647 101,000
- --------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 3,257,631 4,429,569
- --------------------------------------------------------------------------------------
LONG-TERM LIABILITIES
Long-term debt, less current maturities 9,952,366 10,487,701
Subordinated Convertible Debentures 350,000 -
- --------------------------------------------------------------------------------------
Total long-Term Liabilities 10,302,366 10,487,701
- --------------------------------------------------------------------------------------
TOTAL LIABILITIES 13,559,997 14,917,270
Commitments and Contingencies
STOCKHOLDERS' EQUITY
Preferred stock, 8% cumulative; $.01 par value;
authorized 5,000,000 shares; none issued - -
Common stock, $.01 par value; authorized 30,000,000
shares; 9,761,803 and 7,746,007 shares issued and
outstanding in 1996 and 1995, respectively 97,618 77,460
Additional paid-in capital 22,121,175 18,741,575
Notes receivable - common stock (1,232,000) -
Deficit (12,762,246) (12,784,857)
- --------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 8,224,547 6,034,178
- --------------------------------------------------------------------------------------
$21,784,544 $20,951,448
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
CASINO RESOURCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, 1996 1995
- --------------------------------------------------------------------------------------
<S> <C> <C>
REVENUE
Revenue - entertainment $8,938,297 $6,750,056
Revenue - hospitality 3,967,652 3,657,817
- --------------------------------------------------------------------------------------
Total revenue 12,905,949 10,407,873
- --------------------------------------------------------------------------------------
COSTS AND EXPENSES
Operating costs - entertainment 6,214,560 5,743,246
Operating costs - hospitality 2,660,266 2,032,232
General and administrative 2,190,154 2,006,272
Other (income) expense - principally adjustments
of provisions of contingencies in 1995 (65,893) (503,071)
Interest expense - net of interest income of
$136,019 and $34,959 in 1996 and 1995 1,142,033 1,158,444
Loss on abandonment of gaming projects - net 742,218 94,248
- --------------------------------------------------------------------------------------
Total costs and expenses 12,883,338 10,531,371
- --------------------------------------------------------------------------------------
Income(loss) from continuing operations 22,611 (123,498)
- --------------------------------------------------------------------------------------
INCOME FROM DISPOSAL OF DISCONTINUED OPERATIONS - 162,217
- --------------------------------------------------------------------------------------
Income from discontinued operations - 162,217
- --------------------------------------------------------------------------------------
NET INCOME $22,611 $38,719
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
INCOME (LOSS) PER COMMON SHARE
Loss from continuing operations $0.00 ($0.01)
Income from disposal of discontinued operations 0.02
- --------------------------------------------------------------------------------------
NET INCOME PER COMMON SHARE $0.00 $0.01
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 8,980,105 7,609,076
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
CASINO RESOURCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
Additional Notes
Common Stock Paid-in Receivable
Shares Amount Capital Common Stock Deficit Total
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, SEPTEMBER 30, 1994 7,390,007 $73,900 $17,561,810 $ - ($12,823,576) $4,812,134
Issuance of common stock - purchase
of gaming contract 100,000 1,000 330,250 - 331,250
Issuance of common stock - acquisition 10,000 100 20,212 - 20,312
Issuance of common stock - employee stock
options 29,000 290 3,980 - 4,270
Issuance of common stock - settlement of
advances and expenses 92,000 920 183,973 - 184,893
Issuance of common stock - exercise of
warrants 125,000 1,250 530,000 - 531,250
Other - - 111,350 - 111,350
Net income - - - 38,719 38,719
- --------------------------------------------------------------------------------------------------------------------------------
BALANCE, SEPTEMBER 30, 1995 7,746,007 77,460 18,741,575 - (12,784,857) 6,034,178
Issuance of common stock - conversion of
debenture 839,852 8,399 1,218,390 - 1,226,789
Issuance of common stock - acquisition 17,500 175 35,919 - 36,094
Issuance of common stock - settlement of
litigation 15,000 150 31,725 - 31,875
Issuance of common stock - exercise of
warrants 1,143,444 11,434 2,138,566 (1,232,000) - 918,000
Cancellation of previously issued warrants - - (45,000) - (45,000)
Net income - - - 22,611 22,611
- --------------------------------------------------------------------------------------------------------------------------------
BALANCE, SEPTEMBER 30, 1996 9,761,803 $97,618 $22,121,175 ($1,232,000) ($12,762,246) $8,224,547
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
CASINO RESOURCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
Year ended September 30, 1996 1995
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Income(loss) from continuing operations $22,611 ($123,498)
Adjustments to reconcile loss from continuing operations to
net cash provided by (used in) operating activities
Depreciation and amortization 1,203,049 1,349,909
Abandonment cost - gaming ventures 742,218 255,255
Provision for doubtful accounts 43 (33,458)
Expenses paid through issuance of common stock 57,297 84,893
Loss on sale/abandonment of property and equipment - 104,986
Changes in assets and liabilities
Accounts receivable - trade and other 218,638 71,448
Prepaid expenses 22,141 (97,733)
Other assets 17,966 103,087
Accounts payable - trade (484,429) (1,216,295)
Accrued expenses and other liabilities 317,133 (192,093)
- ---------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY CONTINUING OPERATING ACTIVITIES 2,116,667 306,501
Income from discontinued operations - 162,217
Change in provision for contingencies (71,353) (189,565)
- ---------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 2,045,314 279,153
- ---------------------------------------------------------------------------------------------------
Cash Flows From Investing Activities
Decrease (increase) in restricted cash (11,341) 692,793
Increase in deferred development costs (2,039,165) (759,220)
Purchase of property and equipment (278,722) (85,536)
Increase in due to/from related parties (26,207) (91,670)
Increase in deferred charges and other (272,584) (106,492)
- ---------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (2,628,019) (350,125)
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
</TABLE>
F-7
<PAGE>
CASINO RESOURCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
Year ended September 30, 1996 1995
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock and other equity
transactions 801,555 586,869
Proceeds from (payments on) line-of-credit borrowings (700,000) 1,289,410
Proceeds from long-term debt 1,673,941
Payments on long-term debt (689,322) (902,292)
- ---------------------------------------------------------------------------------------------------
Net cash provided by financing activities 1,086,174 973,987
- ---------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents 503,469 903,015
Cash and Cash Equivalents, at beginning of year 1,042,953 139,938
- ---------------------------------------------------------------------------------------------------
Cash and Cash Equivalents, at end of year $1,546,422 $1,042,953
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for
Interest $1,296,763 $1,166,139
Income taxes 68,603 21,223
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND
FINANCING ACTIVITIES
Issuance of common stock as payment for deferred
development costs $36,084 $491,250
Conversion of subordinated convertible debentures 1,300,000 -
Deferred cost write-offs (49,670) -
</TABLE>
F-8
<PAGE>
NOTE 13. COMMITMENTS AND CONTINGENCIES
A) Under a Marketing Enhancement Agreement, entered into with the Tribal
Commission of the Mille Lacs Band of Ojibwe Indians (owners of the Grand Casino
Hinckley) and Grand, the Company receives a $20 fee per night per occupied room.
The Company recognized approximately $982,000 and $925,000 from the marketing
subsidy in 1996 and 1995, respectively. In return for the marketing enhancement
fee, the hotel has entered into a revenue-sharing plan with the casino which
requires that 50% of all room revenues above a defined cumulative threshold (up
to the amount of marketing subsidy paid to the hotel) be paid to the casino.
The cumulative threshold was exceeded in fiscal 1995. Payments due under the
revenue sharing plan totaled $786,000 and $361,000 in 1996 and 1995,
respectively. Payments to Grand under this windfall profit sharing agreement
for fiscal 1997 will vary based on revenues and the change, if any, in the
operating cost threshold. The Company and the Tribal Commission of the Mille
Lacs Band have entered into an agreement regarding future ownership of the
hotel. The Tribal Commission has the unilateral right to purchase the hotel on
the anniversary date of its initial occupancy (May 1994) in each of years 2001
through 2006 at a cost equivalent to the original development cost of the hotel
plus the depreciated cost of personal property and all inventories. Conversely,
in the event that the Tribal Commission allows the construction of more than 500
hotel or equivalent rooms on property owned by the Tribal Commission or Grand,
the Company has the right to require the Tribal Commission to purchase the hotel
at the cost stated above.
B) The Company has guaranteed rent payments, totaling $360,000 per year
for up to five years, of its 60% owned joint venture, Country Tonite Theatre,
L.L.C., commencing March 1, 1997.
<PAGE>
C) The Company commenced an arbitration action in November 1994 with the
Arbitration Association in Minneapolis, Minnesota, against Cuningham Hamilton
Quiter, P.A. (CHQ), the architect it retained in connection with the
construction of the Biloxi theatre. In this action, the Company seeks to
recover the damages it believes it incurred as a result of the architectural
design work on the Biloxi theatre relating to cost overruns in the construction
of the Biloxi theatre. The arbitration demand seeks damages in an amount in
excess of $1,000,000. On December 30, 1994, the architectural firm commenced a
suit in a Mississippi state court seeking, among other things, to foreclose on a
mechanics' lien it filed on the Biloxi theatre project in the amount of
approximately $321,000. The architectural firm has also asserted claims for
breach of contract, tortuous interference with economic advantage and punitive
damages. The Company previously placed $321,000 in escrow to cover such
mechanics' lien claim. The Company and the architectural firm have agreed to,
among other things, resolve all disputes between them with respect to the Biloxi
theatre project in the Minneapolis arbitration action and stay the lawsuit in
Mississippi. The arbitration action was heard by a panel of arbitrators in
November. A decision was rendered on December 26, 1996 (See Note 14).
D) In 1995, a suit was brought against the Company in the Federal District
Court of New Jersey in connection with the Company's former ownership of the
Biloxi theatre. The Company sold the Biloxi Star Theatre in September 1994.
Venue was subsequently transferred to the Federal District Court for the
Southern District of Mississippi. The plaintiff asserts it had a contract
with the Company for the promotion of eight professional boxing events at the
Company's former Biloxi theatre. Total claims are for $500,000 in compensatory
damages, punitive damages and attorneys' fees, interest and costs, and other
relief the court may deem just and proper. The Company intends to vigorously
defend itself in this action.
E) In May 1995, the Company was advised by written correspondence that a
Minnesota company claims an interest in certain assets of Monarch, principally
Monarch's interest in Indian gaming ventures. No specific amount was claimed.
On November 13, 1995 Casino Resorts, Inc. commenced an action in the Hennepin
County District Court in Minneapolis, Minnesota against Monarch and the Company
alleging breach of contract against Monarch and tortuous interference with a
contractual or business relationship against the Company. Management of the
Company and Monarch each plan to vigorously defend themselves against the
claims.
F) James Barnes and Prudence Barnes, two former officers of a subsidiary
of the Company have brought suit on January 31, 1996 against the Company in the
State District Court, Clark County, Nevada, in connection with their employment
termination in June 1995. No specific amount of damages has been claimed,
however, prior to the filing of the suit the plaintiffs offered to settle the
matter for $500,000. The Company intends to vigorously defend itself in this
matter.
In March 1996, PDC, a Minnesota limited liability company, and two of its
officers filed suit against the Company and Harrah's Entertainment, in
Minnesota, the Fourth Judicial District Court of Minnesota, (and Michigan,
which venue has been dropped), alleging tortuous interference with its
business relations and prospective economic advantage, as well as false light
invasion of privacy in connection with the Pokagon Indian Gaming Award. The
Company's general liability carrier has taken up the defense of the Company.
The Company intends to vigorously defend itself in this matter.
G) The Company is also party to other items of litigation, none of which,
either individually or collectively, are material.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
Casino Resource Corporation and Subsidiaries (the "Company") is primarily
engaged in the hospitality and entertainment businesses. The Company owns
and operates a hotel in Hinckley, Minnesota (the Grand Hinckley Inn), a
production theatre in Branson, Missouri (the Country Tonite Theatre) and
a production company in Las Vegas, Nevada (Country Tonite Enterprises)
and has formed a joint venture, Country Tonite Theatre, L.L.C., to lease
and operate a theatre in Pigeon Forge, Tennessee beginning in March 1997.
The Company is in the process of entering the gaming industry as a result
of its participation with Harrah's Entertainment, Inc. in a major Indian
gaming award in Indiana and Michigan, its pending contract as part of a
joint venture to purchase an existing casino in Biloxi, Mississippi, and
its agreement to lease and operate a casino in Tunisia.
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts
of Casino Resource Corporation and its majority and wholly owned
subsidiaries. All significant intercompany balances and transactions have
been eliminated.
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statement, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
F-9
<PAGE>
CASH AND CASH EQUIVALENTS
For purposes of the consolidated statements of cash flows, cash
equivalents consist of short-term investments having an original maturity
of three months or less. Carrying amounts approximate fair value because
of the short-term maturity of the investments.
RESTRICTED CASH
The Company has restricted cash being held by a Mississippi state court
in conjunction with litigation involving the construction and subsequent
sale of the Biloxi Star Theatre.
CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash instruments and
accounts receivables. The Company maintains cash, cash equivalents with
various financial institutions. The Company provides credit in the normal
course of business. The Company performs ongoing credit evaluation of its
customers and maintains allowances for potential credit loses, if
necessary.
ADVERTISING
Advertising expenditures are generally charged to operations in the year
incurred and totaled $289,906 in 1996 and $271,186 in 1995. The company has
advertising commitments for fiscal 1997 totaling $24,960 at September 30,
1996, which consist primarily of outdoor sign contracts.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. For financial reporting
purposes depreciation and amortization is computed over the estimated
useful lives of the assets (or the lease term, if shorter) by the
straight-line method over the following lives:
Land improvements 20 - 25 years
Buildings 35 - 40 years
Leasehold improvements 10 - 15 years
Office equipment 5 - 6 years
Transportation equipment 5 - 7 years
Other 5 years
COST IN EXCESS OF FAIR VALUE OF ASSETS ACQUIRED
Cost in excess of fair value of assets acquired is amortized using the
straight-line method over fifteen years.
F-10
<PAGE>
DEFERRED DEVELOPMENT COSTS
Deferred development costs consist of external costs incurred in the
evaluation of potential ventures. The costs are expensed if a
determination is made to abandon the project.
DEFERRED CHARGES
Deferred charges consist of pre-opening expenses at the Country Tonite
Theatre, loan and convertible debt origination fees and organization
expenses. Amortization is on the straight-line method over estimated
useful lives ranging from one to five years.
DISCONTINUED OPERATIONS
Until the third quarter of 1994, the Company was in the resort marketing
business. The operations of this business segment have been accounted for
as a discontinued operation. A gain of $162,217 from discontinued
operations in 1995 results from reversing a portion of the provision for
contingencies established in 1994 and from additional revenues being
received during 1995 whereas related operating expenses were previously
recognized.
NET INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE
Net income (loss) per share data are computed using the weighted average
number of common stock outstanding during each period. Common equivalent
shares from stock options and warrants have been included in the
computation using the treasury stock method only when their effect would
be dilutive. Fully dilutive net income per share has not been presented
as the difference is not significant.
RECLASSIFICATIONS
Certain reclassifications have been made to the previously reported 1995
financial statements to conform with the 1996 presentation.
RECENT ACCOUNTING PRONOUNCEMENTS
Effective for fiscal years beginning after December 15, 1995, Statement
of Financial Accounting Standards Number 121; "Accounting for the
Impairment of Long-Lived Assets to be Disposed of" ("Statement 121")
was adopted by the Financial Accounting Standards Board ("FASB"). The
adoption by the Company of Statement 121 is not expected to have a
materially adverse effect on the Company's financial condition or results
of operations.
In December 1995, FASB issued Statement of Financial Standards Number
123, "Accounting for Stock-Based Compensation." This standard encourages a
new method of recognizing stock-based compensation expense using an option
pricing model measurement of estimated fair value of employee stock options.
Alternatively, companies may choose to retain the current approach set forth
in Accounting Principles Board Opinion Number 25, "Accounting for Stock
Issued to Employees," and provide expanded footnote disclosure as to what
the
F-11
<PAGE>
effects of utilizing the option pricing model measurement would have been.
Statement 123 is effective for fiscal years beginning in 1996. The Company
does not plan to use the option pricing model measurement of Statement 123
and will provide the required footnote disclosure.
2. RELATED PARTIES
The related party receivables and payables of the Company consist
primarily of funds loaned to and from the Company by and to shareholders
and related entities.
As described in Note 8, the Company has leased various equipment and
facilities from related parties.
Notes and advances receivable includes notes and related interest due
from officers and stockholders totaling $806,895 and $443,931 at September
30, 1996 and 1995, respectively, at interest rates ranging from 7% to 9.5%.
The notes mature from December 31, 1996 to October 15, 1998. Interest
income from these notes was $88,448 and $30,840 in 1996 and 1995,
respectively.
Notes and accounts payable at September 30, 1995 consist of
reimbursements due officers and accrued and unpaid compensation to an
officer of the Company who is a significant shareholder and director.
The debt was due on demand and carried a 7% interest rate. Related
party interest expense was $1,065 and $17,277 in 1996 and 1995,
respectively.
In October 1996, the Company extended a $100,000 promissary note to an
officer with interest at the prime rate. The note matures on April 13,
1997 with interest payable quarterly.
Subsequent to year end, the Company extended a $135,000 line of credit to an
officer of the Company. The loan accrues interest at the prime rate and is
due on May 11, 1997. This line is secured by common stock.
3. PROPERTY AND EQUIPMENT
SEPTEMBER 30, 1996 1995
------------- ---- ----
Land and improvements $ 2,226,724 $ 2,226,724
Buildings 11,327,492 11,309,549
Leasehold improvements 404,364 404,364
Furniture, fixtures and equipment 3,711,359 3,450,580
----------- -----------
17,669,939 17,391,217
Less accumulated depreciation
and amortization (2,587,033) (1,530,277)
----------- -----------
Net property and equipment $15,082,906 $15,860,940
----------- -----------
----------- -----------
F-12
<PAGE>
4. DEFERRED DEVELOPMENT COSTS
Deferred development costs consist of the following:
SEPTEMBER 30, 1996 1995
------------------------------------------------------------------------
Pokagon Indian Gaming Project (A) $ 1,052,378 $ 645,287
Tunisia Casino Project (B) 682,435 -
Palace Casino Project (C) 466,398 250,071
------------------------------------------------------------------------
$ 2,201,211 $ 895,358
------------------------------------------------------------------------
(A) Monarch Casinos, Inc. sold its rights to the Pokagon Indian gaming
contract to the Company in fiscal 1995 for consideration consisting of
the Company's assumption of certain trade payables of the seller; the
Company's obligation to reimburse certain of the seller's principals for
travel and other new business development costs; the Company's
obligation to loan the seller limited amounts of funding; the execution
of an agreement with the seller for the payment of future new business
development fees; and the issuance of 100,000 of the Company's common
shares plus the contingent issuance of an additional 1.9 million common
shares (to be earned as the Pokagon gaming contract achieves certain
governmental approval levels and upon commencement of operations of the
initial casino).
Also, included in this amount is a $250,000 advance to an officer of
Monarch Casinos, Inc. This advance was made in accordance with the
contract described above. This advance accrues interest at 7% and
is due on demand after June 6, 1995, or will be canceled upon the second
anniversary date of the opening of the first Pokagon casino.
All external costs and costs assigned to the issuance of the Company's
common shares will be capitalized and expensed over five years
commencing with the receipt of initial management fees from the Pokagon
gaming venture.
The Company in turn entered into an agreement with Harrah's
Entertainment, Inc. ("Harrah's") whereby the Company's rights to the
Pokagon gaming contract were assigned to Harrah's in return for a share
of Harrah's future management fee from operations of planned Pokagon
tribal casinos. Harrah's is primarily responsible to fund all costs
attributable to development and operation of the casinos, receiving in
return a management fee, as defined. The Company, while not primarily
responsible to fund any such development or operational costs might, in
certain circumstances, be required to provide reimbursements to
Harrah's. The Company will receive 21.6% of Harrah's fees earned. The
Company has agreed to pay a percentage of the fees it earns from Indian
gaming contracts to certain consultants.
In addition to the agreement above, Harrah's agreed to reimburse the
Company for all the costs associated with the venture related to the
Eastern Band of Cherokee Indians in exchange for the Company renouncing
any rights or claims to any other business ventures of
F-13
<PAGE>
Harrah's and its affiliates. The amount to be reimbursed is $600,000
which is recorded as an other asset. Harrah's will pay CRC $120,000 per
year commencing on the opening of the first Pokagon casino and each year
after for four years. These payments will be reduced by $5,000 each
month for a period of 40 months to cover Harrah's costs for
administering the contract. Harrah's is in the process of obtaining the
necessary regulatory approvals for the project.
B) The Company entered into a lease agreement with Samara Casino
Company in June 1996 for the casino and its surroundings. The annual
rent is $460,000 with a ten percent increase each year plus a variable
percentage of the casino's gross income as defined per the agreement.
In 1996, the Company paid $682,435 for costs related to the lease
agreement. The principal portion of these costs, $480,000, are rent
prepayments for the casino's first year of operation. The casino has a
June 1, 1997 tentative opening date and this amount will be written off
over twelve months of the casino's opening.
The remaining costs incurred of $202,435 are costs associated with
obtaining the agreement including architect and legal fees. These costs
will be amortized overt the initial lease term of three years. The
lease agreement can be renewed for two successive periods of three years.
C) In 1995, the Company attempted to purchase certain assets of the
Palace Casino. In February 1996, the Company did not consummate the
planned purchase and expensed costs totaling approximately $727,000 of
which $250,071 were deferred at September 30, 1995.
In 1996, the Company entered into an operating agreement with two
individuals acting as joint tenants to purchase certain assets of the
Palace Casino. The Company has a 20% interest in the joint venture with
an option to purchase up to 49%.
The Company incurred $466,398 of costs relating to the project. The
costs consist principally of the Company's initial investment of
$400,000 and $46,094 for stock issued and other payments for land
rights. The acquisition is expected to close in the second quarter of
fiscal 1997.
F-14
<PAGE>
5. ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities consist of the following:
SEPTEMBER 30, 1996 1995
------------------------------------------------------------------------
Payroll and payroll taxes $204,888 $142,487
Sales tax 44,612 61,270
Interest 95,136 113,699
Real estate taxes 128,714 82,244
Other 444,020 200,537
------------------------------------------------------------------------
$917,370 $600,237
------------------------------------------------------------------------
6. SUBORDINATED CONVERTIBLE DEBENTURES
In February 1996, the Company completed a private placement of
$1,650,000, 8% subordinated convertible debentures (with net proceeds of
$1,493,000). The debentures have a one year maturity with conversion into
shares of common stock on or prior to the anniversary date at a price equal
to 75% of market value based on the then current trading prices. The
debentures were not registered under the Securities Act of 1933.
Through September 30, 1996, $1,300,000 of principal amount of the
debentures have been converted into 839,851 common shares.
7. LONG-TERM DEBT
Long-term debt consists of the following:
SEPTEMBER 30, 1996 1995
------------------------------------------------------------------------
Mortgage payable, prime plus 1% (9.25% at
September 30, 1996)(7% floor and 10% ceiling),
collateralized by real estate, payable in monthly
installments of $73,035 including interest through
March 1999, with a final payment of $7,077,978
due in April 1999 $7,600,142 $7,756,403
Mortgage payable, prime plus 2% (10.25% at
September 30, 1996)(11% ceiling), guaranteed
by Grand Casinos, Inc. (see Note 11),
collateralized by real estate, payable in monthly
installments of $43,942 including interest through
May 2004 2,771,952 3,000,151
F-15
<PAGE>
Other notes payable, interest at rates ranging from
8.5% to 10%, collateralized by real estate, other
assets and the personal guarantee by a certain
officer, payable in monthly installments of $3,002
through October, 2000. 128,027 126,628
Notes payable, 10.75%, repaid during 1996 0 282,320
-------------------------------------------------------------------------
10,500,121 11,165,502
Less current maturities (547,755) (677,801)
-------------------------------------------------------------------------
$ 9,952,366 $10,487,701
-------------------------------------------------------------------------
Maturities of long-term debt are as follows:
YEAR ENDING SEPTEMBER 30,
-------------------------------------------------------------------------
1998 $ 485,436
1999 7,538,639
2000 352,005
2001 383,969
Thereafter 1,192,317
-------------------------------------------------------------------------
$9,952,366
-------------------------------------------------------------------------
8. LEASE COMMITMENTS
The Company leases various equipment and facilities from related and
unrelated parties. These leases require that the Company pay
maintenance, utilities, insurance and taxes.
Based upon the terms of the leases, they have been classified in the
accompanying consolidated financial statements as operating leases.
Total rent expense under operating leases was $106,272 and $224,527 for
the years ended September 30, 1996 and 1995, respectively.
Related-party rent expense was $45,905 and $60,909 in 1996 and 1995,
respectively.
F-16
<PAGE>
Minimum annual rental commitments of noncancellable operating leases
covering facilities and equipment at September 30, 1996 are
approximately:
RELATED
YEAR ENDING SEPTEMBER 30, PARTY OTHER TOTAL
-------------------------------------------------------------------------
1997 $24,000 $641,979 $665,979
1998 0 880,303 880,303
1999 0 865,319 865,319
2000 - 799,543 799,543
2001 - 672,001 672,001
Thereafter - 280,002 280,002
----------------------------------------
$24,000 $4,139,147 $4,163,147
----------------------------------------
9. TAXES ON INCOME
The provision or income taxes include federal and state income taxes
currently payable and those deferred because of temporary differences
between financial statement and the tax bases of assets and liabilities
and the utilization of net operating loss carryforward.
The Company's provision for income taxes ($0) differs from the federal
statutory rate due to the utilization of net operating loss carryforward.
Deferred income taxes consist of the following:
SEPTEMBER 30, 1996 1995
-------------------------------------------------------------------------
Total deferred tax assets, relating principally
to net operating loss carryforward $ 4,500,000 $ 4,600,000
Deferred tax liabilities - (20,000)
-------------------------------------------------------------------------
4,500,000 4,580,000
Less Valuation allowance (4,500,000) (4,580,000)
-------------------------------------------------------------------------
Total net deferred tax assets $ - $ -
-------------------------------------------------------------------------
Due to the uncertainty of realizing the deferred tax asset in the
future, the Company has recorded a valuation allowance equaling the
deferred tax asset. At September 30, 1996, the Company has federal net
operating loss carryforwards available to offset future taxable income
of approximately $11,000,000, which expire in various years through 2010.
F-17
<PAGE>
10. CAPITAL STOCK
In 1995, a consultant to the Company received 50,000 common shares for
services rendered, and 100,000 shares were issued to Monarch Casinos,
Inc., as consideration for introducing the Company to potential gaming
ventures, including the Pokagon Tribal award (see Note 4).
During fiscal 1995, 71,000 common shares were issued to current and
former employees under the exercise of employee incentive options and
severance agreements.
In September 1995 an investor exercised warrants to acquire 125,000
common shares. (See Warrants)
In November 1995 the Company's former Chairman of the Board exercised
warrants to acquire 1,143,444 shares of common stock for $2,150,000 or
$1.88 per share, by the payment of $650,000 cash and execution of
promissory notes due January 31, 1996 ($500,000) and December 31, 1996
($1.0 million). At September 30, 1996, $1,232,000 is outstanding.
During 1996, 15,000 shares of stock were issued in settlement of
litigation with a former officer of the Company.
In 1996, 17,500 shares of common stock were issued in connection with the
acquisition of leasehold rights for the proposed Palace Casino
acquisition.
Through September 30, 1996, 839,581 shares were issued upon conversion
of subordinated convertible debentures (see Note 6).
WARRANTS
As part of the public offering in September and October 1993 the Company
issued Class A Warrants (the IPO Warrants), expiring, after a one year
extension, on September 15, 1997, for the purchase of 2,760,000 common
shares at $6.75 per share. None of these warrants have been exercised to
date.
In connection with the sale of the Biloxi Star Theater in September
1994, the Company issued warrants for the purchase of 1,018,444 common
shares to Grand Casinos, Inc. ("Grand"). These warrants, originally
priced to exercise at $2.00 per share, were transferred by Grand to the
Company's former Chairman of the Board in exchange for services provided
to Grand. The warrants were exercised in November 1995 at a price of
$1.88 per share.
Options to acquire 35,000 common shares issued to the former owners of
Country Tonite Enterprises expired in March 1996.
F-18
<PAGE>
In April 1994 the Company issued warrants to Grand for the purchase of
250,000 common shares at $4.50 per share, as partial consideration for
Grand's guarantee of Company debt. During 1995 these warrants were
transferred by Grand to an investor and to the Company's former Chairman
of the Board in exchange for services provided to Grand. In September
1995, 125,000 shares were issued to the investor pursuant to a partial
exercise of these warrants for $531,250. The Company escrowed $50,000 of
such funds and paid to the investor his interest and transaction costs
equal to such escrow. The remaining 125,000 warrants were exercised in
November 1995 at $1.88 per share.
The managing underwriter of the public offering received warrants to
acquire 240,000 shares at $8.25 per share (expiring on September 18,
1998) and options to acquire 240,000 IPO warrants at $.41 per warrant
(expired on September 18, 1996). The warrants are exercisable at $6.75
per share. None of these warrants have been exercised to date.
Warrants for the purchase of 200,000 common shares issued in May 1995 to
an investment advisor were cancelled in 1996.
OPTIONS AND AWARDS
Certain financial consultants to the Company received options in
December 1992 and in January 1993 to acquire 87,500 shares of common
stock as consideration for services rendered. These options are fully
vested and are exercisable at $2.375 per share (17,500 shares) and at
$.75 per share (70,000 shares). None of these options have been exercised
to date.
A former Company executive was granted options in September 1995, as
part of an employment termination arrangement, to acquire 50,000 shares
of common stock at $2.50 each (as to 25,000 shares) and $6.80 each (as
to 25,000 shares). The aggregate options expire in September 2003 and
none of the options have been exercised to date.
STOCK INCENTIVE PLAN
In fiscal 1995 the Company's 1993 Long-Term Incentive and Stock Option
Plan was amended (now the Amended and Restated 1993 Long-Term Incentive
and Stock Option Plan) to provide for the issuance of an aggregate
500,000 options/awards of shares. Likewise, all previously outstanding
options or awards were canceled and replacement awards issued at fair
market value.
F-19
<PAGE>
<TABLE>
<CAPTION>
Exercise Price
Shares Per Share
--------------------------------------------------------------------------
<S> <C> <C>
Outstanding, October 1, 1994 188,000 $3.75 - $5.00
Granted 310,000 $1.70 - $4.14
Exercised (29,000) $2.13 - $3.88
Canceled and Expired (188,000) $3.75 - $5.00
--------------------------------------------------------------------------
Outstanding, September 30, 1995 281,000 $1.70 - $4.14
Granted 154,000 $1.94 - $3.13
Exercised - -
Canceled and Expired 53,600 $2.00 - $4.14
--------------------------------------------------------------------------
Outstanding, September 30, 1996 381,400 $1.60 - $4.14
--------------------------------------------------------------------------
Options exercisable at
September 30, 1996 227,500 $1.60 - $4.14
Options available for future grant 89,600
--------------------------------------------------------------------------
</TABLE>
11. TRANSACTIONS WITH GRAND CASINOS, INC.
On September 23, 1994 the Company entered into a term loan agreement
with Grand Casinos, Inc. (Grand). Under the agreement the Company
obtained advances aggregating $1,289,410 through September 30, 1995.
Advances under this agreement bear interest at 10% per annum. Through
July 31, 1996, $600,000 was repaid. Beginning in August, 1996, the
loan is being amortized at a rate of $50,000 principal per month plus
interest.
In connection with provisions of the term loan, the Company granted
Grand a second mortgage on the Grand Hinckley Inn. In addition, the
Company granted to Grand a right of first refusal to purchase the hotel
on the same terms and conditions offered by a prospective purchaser.
This right is exercisable for a period of 30 days after the Company
notifies Grand of a pending offer.
The Company issued common stock warrants in April 1994, which entitles
Grand to acquire 250,000 shares of common stock. The warrants are
exercisable between April 1995 and April 1998 at an exercise price of
$4.25 per share. These warrants were issued as consideration for Grand's
guarantee of the Company's debt (see Note 10).
For the years ended September 30, 1996 and 1995, 21% and 19% of total
revenues and 55% and 54% of hospitality revenues were received through
Grand's marketing department, respectively.
F-20
<PAGE>
12. BUSINESS SEGMENTS
The Company operates principally in two industry segments: (1)
Entertainment Industry includes Country Tonite Enterprises, a production
company, and the Branson Theatre; and (2) Hospitality Industry includes
the Hinckley Hotel.
Specified financial information by business segment is included in the
following summary:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1996 1995
-------------------------------------------------------------------------
<S> <C> <C>
Net Sales
Entertainment $ 8,938,297 $ 6,750,056
Hospitality 3,967,652 3,657,817
-------------------------------------------------------------------------
Consolidated $12,905,949 $10,407,873
-------------------------------------------------------------------------
Operating income (loss)
Entertainment $ 2,723,739 $ 1,006,810
Hospitality 1,307,386 1,625,585
Corporate (2,190,156) (2,006,272)
-------------------------------------------------------------------------
Consolidated $ 1,840,969 $ 626,123
-------------------------------------------------------------------------
Identifiable assets
Entertainment $11,085,112 $11,183,101
Hospitality 5,894,115 6,235,176
Corporate 4,805,317 3,533,171
-------------------------------------------------------------------------
Consolidated $21,784,544 $20,951,448
-------------------------------------------------------------------------
Capital expenditures
Entertainment $ 240,328 $ 29,890
Hospitality 11,602 50,952
Corporate 26,792 4,694
-------------------------------------------------------------------------
Consolidated $ 278,722 $ 85,536
-------------------------------------------------------------------------
Depreciation and amortization
Entertainment $ 705,386 $ 879,483
Hospitality 399,317 380,019
Corporate 98,346 90,407
-------------------------------------------------------------------------
Consolidated $ 1,203,049 $ 1,349,909
-------------------------------------------------------------------------
</TABLE>
F-21
<PAGE>
13. COMMITMENTS AND CONTINGENCIES
A) Under a Marketing Enhancement Agreement, entered into with the Tribal
Commission of the Mille Lacs Band of Ojibwe Indians (owners of the Grand Casino
Hinckley) and Grand, the Company receives a $20 fee per night per occupied room.
The Company recognized approximately $982,000 and $925,000 from the marketing
subsidy in 1996 and 1995, respectively. In return for the marketing enhancement
fee, the hotel has entered into a revenue-sharing plan with the casino which
requires that 50% of all room revenues above a defined cumulative threshold (up
to the amount of marketing subsidy paid to the hotel) be paid to the casino.
The cumulative threshold was exceeded in fiscal 1995. Payments due under the
revenue sharing plan totaled $786,000 and $361,000 in 1996 and 1995,
respectively. Payments to Grand under this windfall profit sharing agreement
for fiscal 1997 will vary based on revenues and the change, if any, in the
operating cost threshold. The Company and the Tribal Commission of the Mille
Lacs Band have entered into an agreement regarding future ownership of the
hotel. The Tribal Commission has the unilateral right to purchase the hotel on
the anniversary date of its initial occupancy (May 1994) in each of years 2001
through 2006 at a cost equivalent to the original development cost of the hotel
plus the depreciated cost of personal property and all inventories. Conversely,
in the event that the Tribal Commission allows the construction of more than 500
hotel or equivalent rooms on property owned by the Tribal Commission or Grand,
the Company has the right to require the Tribal Commission to purchase the hotel
at the cost stated above.
B) The Company has guaranteed rent payments, totaling $360,000 per year
for up to five years, of its 60% owned joint venture, Country Tonite Theatre,
L.L.C., commencing March 1, 1997.
C) The Company commenced an arbitration action in November 1994 with the
Arbitration Association in Minneapolis, Minnesota, against Cuningham Hamilton
Quiter, P.A. (CHQ), the architect it retained in connection with the
construction of the Biloxi theatre. In this action, the Company seeks to
recover the damages it believes it incurred as a result of the architectural
design work on the Biloxi theatre relating to cost overruns in the construction
of the Biloxi theatre. The arbitration demand seeks damages in an amount in
excess of $1,000,000. On December 30, 1994, the architectural firm commenced a
suit in a Mississippi state court seeking, among other things, to foreclose on a
mechanics' lien it filed on the Biloxi theatre project in the amount of
approximately $321,000. The architectural firm has also asserted claims for
breach of contract, tortuous interference with economic advantage and punitive
damages. The Company previously placed $321,000 in escrow to cover such
mechanics' lien claim. The Company and the architectural firm have agreed to,
among other things, resolve all disputes between them with respect to the Biloxi
theatre project in the Minneapolis arbitration action and stay the lawsuit in
Mississippi. The arbitration action was heard by a panel of arbitrators in
November. A decision was rendered on December 26, 1996 (See Note 14).
F-22
<PAGE>
D) In 1995, a suit was brought against the Company in the Federal District
Court of New Jersey in connection with the Company's former ownership of the
Biloxi theatre. The Company sold the Biloxi Star Theatre in September 1994.
Venue was subsequently transferred to the Federal District Court for the
Southern District of Mississippi. The plaintiff asserts it had a contract
with the Company for the promotion of eight professional boxing events at the
Company's former Biloxi theatre. Total claims are for $500,000 in compensatory
damages, punitive damages and attorneys' fees, interest and costs, and other
relief the court may deem just and proper. The Company intends to vigorously
defend itself in this action.
E) In May 1995, the Company was advised by written correspondence that a
Minnesota company claims an interest in certain assets of Monarch,
principally Monarch's interest in Indian gaming ventures. No specific amount
was claimed. On November 13, 1995 Casino Resorts, Inc. commenced an action in
the Hennepin County District Court in Minneapolis, Minnesota against Monarch
and the Company alleging breach of contract against Monarch and tortuous
interference with a contractual or business relationship against the Company.
The plaintiff seeks compensatory damages and has not claimed a specific
amount of damages but claims damages in excess of $50,000. The plaintiff
also seeks reimbursement of its costs and disbursements. Management of the
Company and Monarch each plan to vigorously defend themselves against the
claims.
F) James Barnes and Prudence Barnes, two former officers of a subsidiary
of the Company have brought suit on January 31, 1996 against the Company in the
State District Court, Clark County, Nevada, in connection with their employment
termination in June 1995. No specific amount of damages has been claimed,
however, prior to the filing of the suit the plaintiffs offered to settle the
matter for $500,000. The Company intends to vigorously defend itself in this
matter.
G) In March 1996, PDC, a Minnesota limited liability company, and two of
its officers filed suit against the Company and Harrah's Entertainment, in
Minnesota, the Fourth Judicial District Court of Minnesota, (and Michigan,
which venue has been dropped), alleging tortuous interference with its
business relations and prospective economic advantage, as well as false light
invasion of privacy in connection with the Pokagon Indian Gaming Award. The
plaintiffs seek compensatory damages and have not claimed a specific amount
of damages, but claim such damages exceed $50,000. The plaintiffs also seek
recovery of their attorneys' fees. The Company's general liability carrier
has taken up the defense of the Company. The Company intends to vigorously
defend itself in this matter.
H) The Company is also party to other items of litigation, none of
which, either individually or collectively, are material.
14. SUBSEQUENT EVENT
On December 26, 1996, the arbitrators for the CHQ arbitration case
announced their decision. The Company's recovery was limited to a reduction
of previously escrowed fees of approximately $321,000, on deposit with a
Mississippi state court, to approximately $142,000. The decision which is
subject to appeal, would result in a gain to the Company of approximately
$139,000.
F-23
<PAGE>
EXHIBIT INDEX
- -------------
Sequentially
Exhibit No. Description of Exhibit Numbered Pages
- ----------- --------------------------------------------------- --------------
2.1 Palace Casino Asset Acquisition Agreement(6)
3.1 Restated Articles of Incorporation of the Company,
as amended(2)
3.2 Bylaws of the Company, as amended(3)
10.1 Employment Agreement dated May 20, 1996 between the
Company and John J. Pilger(6)
10.2 Ground Lease dated as of August 11, 1993, as
amended by the Amendment to Ground Lease date as
of April 5, 1995, between Casino Building
Corporation and Grand Casinos, Inc. relating to the
site for the Grand Hinckley Inn.(5)
10.3 Hotel Development Agreement dated July 23, 1993,
between the Company and Grand Casinos, Inc.
relating to the development of the Grand Hinckley
Inn.(1)
10.4 Marketing Enhancement and Purchase/Put Option
Agreement dated as of August 11,1993, between the
Company, the Corporate Commission and Grand
Casinos, Inc. relating to the Grand Hinckley Inn.(1)
10.5 Form of Warrant Agreement between the Company and
Norwest Bank Minnesota, N.A., as Warrant Agent,
dated September 15, 1993(1)
10.6 Promissory Note dated as of September 15, 1993,
made by John J. Pilger in favor of the Company.(3)
10.7 Contract to Produce Show dated December 28, 1995,
between JMJ, Inc., dba Aladdin Hotel & Casino and
Country Tonite Enterprises, Inc. relating to the
Las Vegas production show(2)
10.8 Agreement for Purchase and Sale of Theatre dated
March 11, 1994, among the Company, CRC of Branson,
Inc. and Ahab of the Ozarks, Inc. relating to the
acquisition of the Country Tonite Theatre.(2)
10.9 Construction and Term Loan Agreement dated as of
April 1, 1994, as amended by the Amendment to
Construction and Term Loan Agreement dated as of
May 1, 1994, between the Casino Building
Corporation and Miller & Schroeder Investments
Corporation relating to the construction and
financing of the Grand Hinckley Inn.(5)
10.10 Promissory Note dated April 5, 1994, made by Casino
Building Corporation in favor of Miller & Schroeder
Investments Corporation in the amount of
$3,300,000.(5)
10.11 Mortgage, Security Agreement and Financing
Statement dated as of April 1, 1994, between the
Casino Building Corporation and Miller & Schroeder
Investments Corporation.(5)
10.12 Guaranty Agreement dated April 1, 1994, by the
Company in favor of Miller & Schroeder Investments
Corporation.(5)
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10.13 Assignment of Rents and Leases dated as of April
1, 1994, as amended by the Amendment to Assignment
of Rents and Leases dated as of May 1, 1994,
between Casino Building Corporation and Miller &
Schroeder Investments Corporation.(5)
10.14 Subordination Agreement dated as of April 1, 1994,
among the Company, Casino Building Corporation and
Miller & Schroeder Investments Corporation.(5)
10.15 Loan Purchase Agreement dated April 1, 1994, among
the Company, Casino Building Corporation and
Miller & Schroeder Investments Corporation.(5)
10.16 Assignment dated as of April 1, 1994, between
Casino Building Corporation and Miller & Schroeder
Investments Corporation relating to the assignment
of the Marketing Enhancement and Purchase/Put
Option Agreement.(5)
10.17 Common Stock Purchase Warrant dated April 5, 1994,
granted to Grand Casino, Inc. by the Company with
respect to 98,130 shares.(5)
10.18 Common Stock Purchase Warrant dated April 19,
1994, granted to Grand Casino Inc. by the Company
with respect to 151,870 shares.(5)
10.19 Promissory Note dated March 29, 1994, made by
Casino Building Corporation for $939,739.50 in
favor of PDS Financial Corporation relating to the
financing of furniture, fixtures and equipment for
the Grand Hinckley Hotel.(5)
10.20 Security Agreement dated March 29, 1994, between
Casino Building Corporation and PDS Financial
Corporation.(5)
10.21 Guaranty dated March 29, 1994, made by the Company
in favor of PDS Financial Corporation(5)
10.22 Debt Subordination Agreement date March 29, 1994,
among Casino Building Corporation, the Company and
PDS Financial Corporation(5)
10.23 Assignment dated March 29, 1994, among Casino
Building Corporation, the Company and PDS Financial
Corporation(5)
10.24 Biloxi Star Theater Asset Purchase Agreement dated
August 18, 1994, among Grand Casinos, Inc., Grand
Casinos of Mississippi, Inc., -Biloxi, the Company
and Casino Building Corporation of Mississippi,
Inc.(2)
10.25 Assignment and Assumption of Ground Sublease and
Related Documents dated September 30, 1994,
between Casino Building Corporation of Mississippi,
Inc. and Grand Casinos Biloxi Theater, Inc.(2)
10.26 Bill of Sale date September 30, 1994, between
Casino Building Corporation of Mississippi, Inc.
and Grand Casinos Biloxi Theater, Inc.(2)
10.27 Assignment of Warranties, Permits, Licenses,
Contracts, Service Agreements and other Intangible
Rights dated September 30, 1994, between Casino
Building Corporation of Mississippi, Inc. and
Grand Casinos Biloxi Theater, Inc.(2)
E-2
<PAGE>
10.28 Indemnification Agreement dated September 30,
1994, among the Company, Casino Building
Corporation of Mississippi, Inc., Grand Casinos,
Inc., Grand Casinos, of Mississippi, Inc.-Biloxi
and Grand Casinos Biloxi Theater, Inc.(2)
10.29 Non-Compete Agreement dated September 30, 1994,
among the Company, Casino Building Corporation of
Mississippi, Inc., Grand Casinos, Inc., Grand
Casinos Biloxi Theater, Inc. and John J. Pilger.(2)
10.30 Termination Agreement dated as of September 30,
1994, among the Company, Casino Building
Corporation of Mississippi, Inc., Grand Casinos,
Inc., Grand Casinos of Mississippi, Inc.-Biloxi(2)
10.31 Registration Rights Agreement dated as of
September 30, 1994, between the Company and Grand
Casinos, Inc.(2)
10.32 Term Loan Agreement dated as of August 18, 1894,
between Casino Building Corporation and Grand
Casinos, Inc. relating to the line of credit.(2)
10.33 Term Note dated as of September 23, 1994, between
Casino Building Corporation and Grand Casinos,
Inc.(2)
10.34 Mortgage, Security Agreement, Fixture Financing
Statement and Assignment of Leases and Rents,
dated as of September 23, 1994, made by Casino
Building Corporation to Grand Casinos, Inc.,
securing $1,750,000 Term Note.(2)
10.35 Continuing Guaranty (Unlimited) made by the
Company in favor of Grand Casinos, Inc. dated as
of September 23, 1994, relating to the $1,750,000
Term Note.(2)
10.36 Third Party Pledge Argeement dated as of September
23, 1994, made by the Company in favor of Grand
Casinos, Inc. and relating to the Term Loan.(2)
10.37 Warrant to Purchase Common Stock dated as of
September 27, 1994, granted to Grand Casinos,
Inc.(2)
10.38 Rights of First Refusal Agreement dated as of
September 23, 1994, between the Company and Grand
Casinos, Inc., with respect to the sale of the
Grand Hinckley Inn.(2)
10.39 Stock Purchase Agreement, dated as of December 18,
1992, between Mr. Pilger and Mr. Howarth(1) as
amended by First Amendment dated June 2, 1993(5)
Second Amendment dated July 2, 1993(5), and Third
Amendment dated November 30, 1994.(4)
10.40 Settlement Agreement dated as of September, 1994,
between the Company and Gerald North.(2)
10.41 Settlement Agreement dated December 8, 1994
between the Company and Resource Financial
Services.(2)
10.42 Agreement dated as of October 15, 1993, between
the Company and Kevin Kean Company, Inc.(3) as
amended by the Amendment dated as of December 15,
1994, relating to Cherokee gaming project.(5)
10.43 Management Agreement dated February 1995 between
CRC West, Inc. and Hoh Indian Tribe.(5)
E-3
<PAGE>
10.44 Mutual Release dated August 31, 1995, between CRC
West, Inc. and Hoh Indian Tribe.(5)
10.45 Memorandum of Understanding dated January 10,
1995, between The Promus Companies Incorporated
and the Company with respect to the development of
certain gaming projects.(3)
10.46 Memorandum of Understanding dated January 18,
1995, between Monarch Casinos, Inc. and the
Company with respect to the development of certain
gaming projects.(3)
10.47 Memorandum of Understanding dated March 10, 1995,
between the Company, the Kevin Kean Company, Inc.
and James E. Barnes with respect to the
development of certain gaming projects.(5)
10.48 Agreement dated May 8, 1995, between Monarch
Casinos, Inc. an the Company with respect to the
January 18, 1995, Memorandum of Understanding.(5)
10.49 Lease Modification Agreement dated August 7, 1995,
with respect to the Elkhorn Wisconsin Lease.(3)
10.50 Settlement Agreement dated August 7, 1995, between
the Company, John J. Pilger an Richard A. Howarth,
Jr.(3)
10.51 Letter Agreement dated August 22, 1995, relating
to extension of maturity date for September 23,
1994 Term Note.(3)
10.52 Agreement dated December 1, 1995, between the
Company and Kevin M. Kean.(5)
10.53 Warrant Purchase Agreement and Cherokee Dispute
Resolution dated December 1, 1995, between the
Company and Kevin M. Kean.(5)
10.54 Promissory Notes dated December 1, 1995, made to
Kevin M. Kean in favor of the Company.(5)
10.55 Promissory Note dated December 31, 1994, between
the Company and John J. Pilger.(6)
10.56 Promissory Note dated October 25, 1995, between
the Company and John J. Pilger.(6)
10.57 Promissory Note dated April 8, 1996 between the
Company and John J. Pilger.(6)
10.58 Non-Circumvention and Non-Disclosure Agreement
dated July 26, 1996, between the Company and Huong
"Henry" Le.(6)
10.59 Consulting Agreement dated December 6, 1995,
between the Company and Monarch Casinos.(6)
10.60 Technical Assistance and Consulting Agreement
dated June 10, 1996, between the Company and
Harrah's Southwest Michigan Casino Corporation.(6)
10.61 Lease Agreement dated September 4, 1996, between
J. MacDonald Burkhart M.D. and Country Tonite
Theatre L.L.C.(6)
10.62 Operating Agreement of Country Tonite Theatre
L.L.C. dated September 24, 1996(6).
10.63 Limited Liability Company Operating Agreement of
New Palace Casino, L.L.C(6)
10.64 Lease Contract dated June, 1996 between the
Company and Samara Casino Company.(6)
10.65 Consultanting Agreement between the Company and
Mondhor Ben Hamida.(6)
E-4
<PAGE>
11.1 Statement Re. Computation of Per Share Earnings.(6)
21.1 Subsidiaries of Registrant (6)
23.1 Consent of BDO Seidman, L.L.P.(6)
27.1 Financial Data Schedule.(6)
(1) Incorporated by reference to the Company's Registration
Statement on Form SB-2, File No. 33-66504, declared effective
September 15, 1993.
(2) Incorporated by reference to the Company's Form 10-KSB for
the fiscal year ended September 30, 1994, filed on
January 12, 1995.
(3) Incorporated by reference to the Company's Registration
Statement on Form SB-2, File No. 33-90114, originally
declared effective May 5, 1995.
(4) Incorporated by reference to the Company's Form 10-KSB for
the fiscal year ended September 30, 1995, filed on
January 16, 1996.
(5) Incorporated by reference to the Company's Registration
Form S-3, File No. 33-31534, originally declared effective
February 29, 1996.
(6) Filed herewith.
E-5
<PAGE>
ASSET PURCHASE AGREEMENT
DATED: September 20, 1996
PARTIES: New Palace Casino, L.L.C.
a Mississippi Limited Liability Company "Buyer",
Maritime Group, Ltd.,
a Mississippi corporation "Company"
RECITALS
A. The Company, a wholly owned subsidiary of Palace Casinos, Inc., a
Utah corporation ("Palace"), owns and operates a dockside gaming casino known
as the Palace Casino (the "Casino") in Biloxi, Mississippi.
B. On December 1, 1994, Palace and the Company each filed petitions for
reorganization under Chapter 11 of the United States Bankruptcy Code, 11
U.S.C. Section 101 et seq., as amended, (the "Code") with the United States
Bankruptcy Court for the District of Utah. Venue of the bankruptcy cases was
subsequently transferred to the United States Bankruptcy Court for the
Southern District of Mississippi (the "Bankruptcy Court").
C. The Buyer desires to acquire the Casino and substantially all of the
assets of the Company relating to the Casino, and the Company desires to sell
the Casino and substantially all of the assets of the Company relating to the
Casino to Buyer.
D. The purchase and sale of the Casino will be accomplished by a sale
pursuant to Section 363 of the Code (the "Section 363 Sale") in accordance
with the Bidding Procedures described in Section 9.
<PAGE>
Section I
INDEX TO DEFINITIONS
The definitions of the following terms used In this Agreement can be
found in the following Sections:
<TABLE>
<CAPTION>
DEFINED TERMS SECTION
<S> <C>
Annual Earn Out Payments 3. 1 (iii)(a)
Approval to Participate Period 13.4
Assumed Obligations 2.2
Bankruptcy Court Recital B
Bidding Procedures Motion 9.3
Bidding Procedures Order 9.3
Breakup Fee 9.3 (b) (11)
Business 2.2
Business Records 7.2
Buyer's Deposit 9.2
Cash 3.1
Casino Recital A
Closing Date 13.1
Code Recital B
Contracts 2.2
CRC 3.1(11)
Debenture 3.1(11)
Deposit 9.3(b)
Earn Out Payment 3.1(111)
Escrow Agent 3.3
Escrow Agreement 2.2
Excluded Assets 2.3
Final Order 10.2
Financed Property 2.2
Gross Gaming Revenues 3.1(111)
HSR Act 8.3
IGT Order 10.6
IGT Motion 10.6
Leases 5.5
Liquidated Damages 12.4
Outstanding Chips and Tokens 2.3(e)
Palace Recital A
Permitted Encumbrances 5.2
Purchase Price 3.1
Sale Assets 2.1 & 5.3
Sale Motion 9.1
Section 363 Sale Recital D
2
<PAGE>
Slot Club 2.1 (c)
Software Licenses 2.1 (d)
</TABLE>
Section 2
PURCHASE AND SALE OF ASSETS
2.1 PURCHASE AND Sale. Subject to all the terms and conditions of this
Agreement and for the consideration herein stated, on the Closing Date, the
Company agrees to sell, convey, assign, transfer and deliver to Buyer, and
Buyer agrees to purchase and accept from the Company, the Casino and all its
related assets, properties and rights (other than the Excluded Assets
specified in Section 2.3), tangible and intangible, relating thereto (the
"Sale Assets") free and clear of all liens, claims and encumbrances, except
Permitted Encumbrances, which Sale Assets include but are not limited to, the
following:
(a) the Casino, the barges and all items of tangible personal property
of the Company comprising or relating to the Casino, such as furniture,,
fixtures, equipment, materials, inventory and spare and replacement items
therefor, including without limitation all such items listed on SCHEDULE 2.1
(a), and all such items acquired by the Company after the date September 22,
1995, and on or before the Closing Date, other than to the extent such items
(x) are disposed of by Company prior to the Closing Date without breach of
this Agreement or (y) are Excluded Assets;
(b) the real property described on SCHEDULE 2.1 (b);
(c) all software licenses ("Software Licenses") granted to the Company
with respect to the computer programs used in the operation of the Casino as
a gaming establishment (the "Business") which Buyer elects to assume pursuant
to Section 2.2;
(d) to the extent transferable, all approvals, authorizations, consents,
licenses, permits and other registrations of any federal, state or local
court or other governmental department, commission, board, bureau, agency or
instrumentality held by the Company and related to the Business, which are
listed on SCHEDULE 2.1 (d), other than to the extent such items (x) have
terminated, expired or been disposed of by the Company prior to the Closing
Date without breach of this Agreement or (y) are related to the Excluded
Assets;
(e) all operating data and records relating to the Business other than
to the extent such items relate to the Excluded Assets;
(f) all assignable rights, if any, to all telephone lines and numbers
used in the Business, including without limitation those lines and numbers
listed on SCHEDULE 2.1 (f), other than those lines and numbers that relate
solely to the Excluded Assets;
(g) the Leases which Buyer, in its sole discretion, elects to assume
pursuant to Section 2.2;
3
<PAGE>
(h) the Contracts which Buyer, in its sole discretion, elects to assume
pursuant to Section 2.2;
(i) The Financed Property and related financing agreements which Buyer,
in its sole discretion, elects to purchase and assume pursuant to Section 2.2.
(j) The tradenames Palace and Palace Casino and related logos,
trademarks and servicemarks, if any and. without warranty, to the extent of
Company's ownership of said tradenames and related logos, trademarks and
servicemarks.
2.2 ASSUMPTION OF LEASES AND CONTRACTS. At least two days prior to the
hearing on the Sale Motion (as defined in Section 9.1 below), Buyer will
provide a list of obligations it will assume of the Company, and at least
twenty days prior to closing, Buyer will provide a list of any additional
obligations it-will assume of the Company (together, the "Assumed
Obligations") in respect of (a) the personal property leases relating to the
equipment located at the Casino and any or all land and ground leases listed
on Schedule 2.2(a) (the "Leases"); (b) the contracts, agreements, including
Software Licenses and insurance policies listed on Schedule 2.2(b) (the
"Contracts"); and (c) the items of personal property listed on Schedule
2.2(c) (the "Financed Property"). The Company will secure, prior to the
Closing Date, Bankruptcy Court approval of Company's assumption of the Leases
and Contracts listed by Buyer and the assignment of those Leases and
Contracts to Buyer. If Buyer provides a list of additional Leases and
Contracts after the hearing on the Sale Motion but prior to a date at least
twenty (20) days prior to Closing, the Company will secure Bankruptcy Court
approval of Company's designated Leases and Contracts and assignment thereof
to Buyer. The Company will cooperate with Buyer in seeking necessary
approval for transfer of Financed Property to Buyer. The Company will cure
defaults on the Leases and Contracts except those listed In Section 5.5
below, provided, however,, that if a non-current payment default is in excess
of $50,000, the Company need not cure such a default in excess of said amount
and, in such instance, Buyer can (i) withdraw its request that that Lease or
Contract be assumed by the Company and assigned to Buyer, (ii) cure the
default, in excess of $50,000, or (iii) terminate this Agreement. With
respect to any Financed Property assumed by Buyer, Buyer will use its best
efforts to secure for the Company a release of all of the Company's
obligations and liabilities relating to such Financed Property. Buyer will
not assume any of the Company's Accounts Payable Claims unless specifically
addressed in the Assumed Obligations.
2.3 EXCLUDED ASSETS. The Sale Assets shall not include the following
(the "Excluded Assets"):
(a) all cash (including cage cash), operating accounts and
long-term investments of the Company;
(b) the corporate seal, minute books, charter documents., corporate
stock record books and stock certificates of the Company;
(c) all claims, demands, causes of action and other rights which
the Company has or may have against third parties;
4
<PAGE>
(d) the Leases, Contracts and Financed Property that Buyer does not
assume pursuant to Section 2.2;
(e) all of the Company's obligations with respect to outstanding
Slot Club points and except as provided in Section 2.4(a), the Slot Club.
(f) such of the Company's rights under any insurance policies which
are not assigned to Buyer pursuant to Section 2.2, hereof; and
(g) the Company's rights under this Agreement.
(h) Insurance policies listed on Schedule 2.3(h).
2.4 ASSUMED LIABILITIES. Buyer shall assume ONLY those liabilities
listed below (the "Assumed Liabilities"):
(a) Such of the Company's obligations with respect to the Crown
Jewel Slot Club (the "Slot Club") as are accepted by Buyer at the closing, in
its sole discretion after Buyer's review and audit of the Company's Slot Club
obligations.
(b) Subject to the adjustment provided in Section 3.3(b), the
Company's obligations with respect to outstanding chips and tokens (the
"Outstanding Chips and Tokens").
(c) Those liabilities as specifically agreed to in terms and
conditions with regard to those Leases, Contracts and Financed Property
assumed by Buyer pursuant to Section 2. 1 (g), 2.1(h), 2.1(i) and 2.2 hereof.
Buyer agrees to assume and become responsible for all of the Assumed
Liabilities as specifically detailed and agreed to at Closing. Except for
Permitted Encumbrances, the Buyer will not assume or have any responsibility,
however, with respect to any other obligation, liability or claim against the
Company or Sale Assets. The Purchase Price was determined and agreed to by
Company and Buyer on the basis of Buyer assuming only the Assumed Liabilities
and having no responsibility for any other obligation, liability or claim
against the Company. Company- acknowledges that the Purchase Price would be
substantially reduced in the absence of a Final Order which does not
authorize and direct the sale of the Sale Assets to Buyer free and clear of
all liens, claims and encumbrances (except Permitted Encumbrances).
Company agrees that subsequent to the execution of this Agreement by
Buyer and Company that it will not, without Buyer's prior written approval,.
renegotiate or modify, or attempt to renegotiate any Lease, Contract or
agreement affecting or governing the Financed Property.
Section 3
PURCHASE PRICE
5
<PAGE>
3.1 PURCHASE PRICE. The total consideration (the "Purchase Price") for
the Sale Assets shall be Fourteen Million Two Hundred Fifty Thousand Dollars
($14,250,000), (which sum is an addition to the Assumed Liabilities) payable:
(i) Eleven Million Five Hundred Thousand Dollars ($11,500,000) cash (the
"Cash") at the Closing;
(ii) One Million Five Hundred Thousand Dollars ($1,500,000) in the form
of a convertible debenture of Casino Resource Corporation, a Minnesota
Corporation ("CRC") (the "Debenture"). The Debenture shall bear interest at
the rate of six percent (6%) per annum, with principal and interest being due
and payable upon the earlier to occur of (x) twenty-four months after the
Closing Date, or (y) Buyer's sale of the Casino prior to the expiration of
twenty-four months after the Closing Date, and payable by CRC, in the sole
discretion of CRC, in cash or in the fully registered and freely tradable
common stock of CRC pursuant to the further provisions of this Section 3.1
(II). For the purposes of this Section 3.1 (11) Payment Date means the date
the Debenture becomes due and payable hereunder. If converted to CRC common
stock, CRC must use its best efforts to insure that the stock is fully
registered and tradeable at the Payment Date; however, if the common stock is
not fully registered and tradeable at the payment date through no fault of
CRC, there will be a thirty (30) day grace period after the Payment Date for
the stock to become fully registered and tradeable (the "Grace Period"). If
the common stock is not fully registered and tradeable after the expiration
of the Grace Period, the Debenture must be immediately paid in cash by CRC.
The number of shares into which the Debenture may be converted at the option
of CRC shall be determined by dividing the total amount of unpaid principal
and accrued interest of the Debenture by the average of the per share bid and
asked prices of CRC stock for the ten (10) day period ending on and including
the due date of the Debenture on the exchange where CRC shares are then
listed; and
(iii) One Million Two Hundred Fifty Thousand Dollars ($1,250,000)
subject to and payable pursuant to the further provisions of this Section 3.1
(iii) (the "Earn Out Payment").
The Earn Out Payment (which shall not exceed $1,250,000.00 in total
Annual Earn Out Payments) shall be calculated and paid as follows:
(a)(i) For each of the first through sixth twelve month periods following
the Closing Date, Buyer shall make annual payments ("Annual Earn Out
Payments") to Company of a sum equal to (x) Three Percent (3%) of the excess,
IF ANY, by which an amount equal to the total of Gross Gaming Revenues from
Buyer's operation of the Casino from the Closing Date to the then applicable
Payment Date exceeds the total of $2,666,667 multiplied by the number of
months from the Closing Date to the then applicable Payment Date reduced by
(y) the total of Annual Earn Out Payments previously made to Company by Buyer
hereunder.
(ii) For each of the seventh through twelfth twelve month periods
following the Closing Date, Buyer shall make Annual Earn Out Payments to
Company of a sum equal to (x) Two Percent (2%) of the excess, IF ANY, by
which an amount equal to the total of Gross Gaming Revenues from Buyer's
Operation of the Casino from the Closing Date to the
6
<PAGE>
then applicable payment date exceeds the total of $2,666,667 multiplied by
the number of months from the Closing Date to the then applicable Payment
Date reduced by (y) the total of Annual Earn Out Payments previously made to
Company by Buyer under this Section 3. 1 (iii) (a)(i) and (ii), hereof.
(b) Upon the earlier to occur of (x) the twelfth anniversary of the
Closing Date; or (y) the payment to Company of $1,250,000 in cumulative
Annual Earn Out Payments, Buyer's obligation to make Annual Earn Out Payments
to Company cease and Buyer shall have no further obligation to Company
hereunder.
(c) Company shall have no obligation to repay to Buyer any portion of
the Earn Out Payment previously paid to it by Buyer.
(d) For the purposes of this Section 3.1 (iii), Gross Gaming Revenues
from Buyer's operation of the Casino shall be calculated the same as
calculated for the purpose of the payment of license fees under the
Mississippi Gaming Control Act, as now or hereafter amended., and the
regulations now or hereafter promulgated under such Act.
(e) Each Annual Earn Out Payment required to be made to Company
hereunder shall be made no later than forty-five (45) days after the
applicable Payment Date and shall be accompanied by (x) Buyer's calculation
of the Annual Earn Out Payment required to be made to Company in connection
with the then applicable Payment Date; (y) Buyer's calculation of Gross
Gaming Revenues from the Closing Date to the then applicable Payment Date;
and (z) financial reports and returns filed by Buyer with the Mississippi
Gaming Commission for the applicable Annual Earn Out Payment period.
(F) In the event Buyer sells the Casino prior to the twelfth anniversary
of the Closing Date, or in the event of a Change of Ownership of Buyer, and
at the time of said Change of Ownership or sale (1) the Company has earned at
least one Annual Earn Out Payment, or (11) the total of Gross Gaming Revenues
from Buyer's operation of the Casino from the Closing Date to the date of the
sale of the Casino or Change of Ownership of Buyer exceeds the total of
$2,666,667 multiplied by the number of months from the Closing Date to the
date of the sale of the Casino or Change of Ownership of Buyer, Buyer shall
pay to the Company the then remaining unpaid portion of the Earn Out Payment
equal to $11,250,000 reduced by the total of Annual Earn Out Payments
previously made to Company by Buyer under this Section 3.1 (iii). If at the
time of any sale of the Casino or Change of Ownership of Buyer, (x) Company
has earned no Annual Earn Out Payment, or (y) the total of Gross Gaming
Revenues from Buyer's Operation of the Casino from the Closing Date to the
date of the sale of the Casino or Change of Ownership of Buyer. does not
exceed the total of $2.,666.,667 multiplied by the number of months from the
Closing Date to the date of sale of the Casino or Change of Ownership of
Buyer, Buyer shall have no obligation to pay the Earn Out Payment to Company;
in either case, Buyer shall have no further obligations to Company under this
Section 3.1(iii). For the purposes of this Agreement, Change of Ownership of
Buyer means the sale or transfer, in one or more transactions, of more than
fifty percent (50%) of the membership Interest in Buyer to persons or
entities who, on the date hereof are not related or affiliated with Buyer's
present members. In the event of the sale or transfer, in one or more
transactions, of more than fifty percent (50%) of the membership interest in
Buyer to persons or entities who are related or affiliated with Buyer's
present members, Buyer shall remain obligated to Company for the Earn Out
Payment under the provisions of this Section 3.1(iii).
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3.2 PAYMENT OF PURCHASE PRICE. The Purchase Price shall be paid by the
delivery at closing by Buyer of (a) the cash specified in Section 3.1 (1)
(reduced by any sum deposited by Buyer with Escrow Agent and payable to
Company in accordance with the terms of the Escrow Agreement) by wire
transfer of immediately available funds and (b) delivery of CRC's convertible
debenture as specified in Section 3.1 (11). Company shall instruct Buyer in
writing regarding the wire transfer at least two business days before the
Closing Date.
3.3 REDUCTION OF PURCHASE PRICE.
(a)(i) In the event any of the representations and warranties of the
Company specified in Section 5.3(b) are not true as of the Closing and such
condition is not waived by Buyer, and except for the items listed on Schedule
3.3(a), and as otherwise provided in 3.3(a)(Iv) and (v), the Purchase Price
shall be reduced to the extent the cost to repair or replace any defective,
damaged, malfunctioning or missing items included in the Sale Assets exceeds,
in the aggregate, $50,000. Provided however that in no event shall the
reduction in purchase price hereunder exceed $250,000, unless otherwise
agreed to in writing by Company and Buyer.
(ii) No later than sixty (60) days after the execution of this Agreement
by Company and Buyer, Buyer shall complete its due diligence inspection and
review of the Sale Assets. Upon completion of its due diligence review,
Buyer shall provide Company with its list of defective, damaged
malfunctioning or missing items for the purposes of this Section 3.3
("List"). If within three (3) business days after Buyer provides the List to
Company, Company and Buyer do not agree to the items included on the List and
the cost to repair or replace said items, Company shall immediately provide
said list to Moran & Seymour, Engineers, who shall determine the cost
necessary to repair or, if necessary, replace said items to the extent
necessary to make Company's representations and warranties in Section 5.3(b)
true and correct as of the Closing.
(iii) For the purposes of this Section 3.3, the cost to repair or
replace any such items shall be determined by Moran & Seymour, Engineers, who
may secure and rely on, in its sole discretion, such bids, estimates or
quotes as it deems necessary. The determination of Moran & Seymour as to the
cost to repair or replace any such items, shall be final and binding on the
Buyer and Company. Moran & Seymour, Engineers, shall furnish its detailed
written report to Company and Buyer of the cost to repair or replace the
items fifteen (15) days after its receipt of the list referenced in Section
3.3(a)(ii).
(iv) In the event the cost to repair or replace said items as determined
by Moran & Seymour, Engineers, exceeds .$300,000 and Company and Buyer have
not otherwise agreed to a reduction of purchase price in excess of $250,000,
Buyer may at its option (x) close with the purchase price being reduced by
$250,000, as provided by Section 3.3(a), or (y) terminate this Agreement.
(v) In lieu of the reduction in purchase price provided by Section
3.3(a)(1), Company may, at its option and cost, and prior to the Closing,
repair or replace any such defective, damaged, malfunctioning or missing item
of the Sale Assets. The Company's repair or replacement of any such item
shall be subject to Buyer's approval, which shall not be unreasonably
withheld.
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(vi) Company and Buyer agree that the Purchase Price shall not be reduced
because of the items listed on Schedule 3.3(a).
(b) The Purchase Price shall also be reduced by the sum of (1) one-half
(1/2) of the Outstanding Chips and Tokens assumed by Buyer (pursuant to
2.4(b)) to the extent the total of Outstanding Chips and Tokens does not
exceed $ 72,066.00; (ii) by the amount of Outstanding Chips and Tokens in
excess of $72,066.00 assumed by Buyer (pursuant to Section 2.4(a)); and (iii)
by the amount of any lien or claim which results in a lien against the Sale
Assets after closing and which is not a Permitted Encumbrance and results
from a liability accruing prior to the Closing Date.
3.4 ASSUMED LIABILITIES. Company and Buyer acknowledge that no part of
the Purchase Price is allocable to the Leases, Contracts and Financed
Property assumed by Buyer pursuant to Section 2.2 or to Assumed Liabilities
assumed by Buyer pursuant to Section 2.4.
3.5 ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be allocated
among the Sale Assets as provided on Schedule 3.5.
Section 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Company as follows:
4.1 AUTHORIZATION AND ENFORCEABILITY. Buyer is a limited liability
company, duly organized, validly existing and in good standing under the laws
of the State of Mississippi, and has full power and authority to own, lease
and operate its properties and to carry on its business as now conducted and
as proposed to be conducted. Buyer has taken all action necessary to
authorize its execution, delivery and performance of this Agreement. Buyer
has duly executed and delivered this Agreement, and this Agreement is, and,
upon execution and delivery thereof, will be, the valid and binding
obligation of Buyer enforceable in accordance with its terms, except as
enforceability may be limited by or subject to any bankruptcy, insolvency,
reorganization, moratorium or other similar laws, now or hereafter in effect,
relating to creditors, rights generally or by the availability of equitable
remedies.
4.2 COMPLIANCE. The execution, delivery and performance of this
Agreement by Buyer, the compliance by Buyer with the provisions of this
Agreement, and the consummation of the transactions described herein will not
conflict with or result in the breach of any of the terms or provisions of or
constitute a default under:- (a) the. certificate of formation .or operating
agreement of Buyer; (b) any note, indenture, mortgage,, deed of trust, loan
agreement, lease or other agreement or instrument to which Buyer is a party
or by which Buyer is bound; or (c) any statute or any order, rule or
regulation or any decision of any court or regulatory authority or government
body applicable to Buyer.
4.3 LEGAL PROCEEDINGS. There are no claims, actions, suits, inquiries,
investigations or proceedings pending against Buyer relating to the
transactions contemplated hereby before any federal, state or local court or
other governmental or regulatory body, United States or foreign.
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4.4 BROKERS. Buyer has no obligation to pay any fees or commissions to
any broker, finder, agent or other intermediary in connection with the
negotiation or consummation of the transactions contemplated hereby. Neither
the Company nor Palace shall be responsible for any such obligations of Buyer.
4.5 CONSENTS. No consent, approval, authorization, order, designation
or declaration of any court or regulatory authority or governmental body,
federal or other or third person is required to be obtained by Buyer nor is
any filing or registration required to be made therewith by Buyer for the
consummation of the transactions described in this Agreement and all other
agreements and instruments reasonably necessary to complete the transactions
contemplated by this Agreement.
Section 5
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Buyer as of the date hereof and as
of the Closing Date as follows:
5.1 AUTHORIZATION. The Company is a corporation, duly organized,
validly existing and in good standing under the laws of the State of
Mississippi and has all requisite corporate power and authority to own and
operate its properties and to carry on its business as now conducted. The
Company has taken all corporate action necessary to authorize its execution,,
delivery and performance of this Agreement. The Company is a debtor in
possession under Chapter 11 of the Code and, subject to the provisions of the
Code, has full corporate power and authority to enter into this Agreement and
to carry out the terms hereof. The Company has duly executed and delivered
this Agreement, and by virtue of the Final Order this Agreement will be its
valid and binding obligation enforceable in accordance with its terms.
5.2 NO ENCUMBRANCES. As of the Closing and by virtue of the conveyance
of the Sale Assets to the Buyer pursuant to the Final Order, there will be no
mortgages, pledges, encumbrances or liens (including for real and personal
property taxes) against any of the Sale Assets, except for items listed on
Schedule 5.2 (the "Permitted Encumbrances")..
5.3 SALE ASSETS.
(a) Except for Permitted Encumbrances, the Company will on the Closing
Date have, good and marketable title to all of the Sale Assets free and clear
of all mortgages, pledges, liens, conditional sales agreements, leases or
other encumbrances of any kind or nature, except for Permitted Encumbrances
or liens from which the Sale Assets will be sold free and clear pursuant to
the Final Order.
(b) Except for the items listed on Schedule 3.3 (a) and the damaged,
malfunctioning or missing items of personal property for which the purchase
price may be reduced pursuant to Section 3.3 (a), all of the personal
property included in the Sale Assets, whether owned or leased by Company, is,
and will be on the Closing Date, in good operating condition and repair,
reasonable wear and tear excepted, free from all defect or damage,
functioning in the manner and for the
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purpose intended and located at or on the Casino, including any and all
mechanical and electrical equipment or systems.
(c) The Sale Assets including, but not limited to the Leases, Contracts
and Financed Property, which Buyer elects to assume pursuant to Section 2.2,
are assignable and transferable to Buyer without the consent of any other
person or entity (or, if consent Is required such consent shall be given
prior to entry of the Final Order), except for those items identified on
Schedule 5.3 which Buyer may not assume without the consent of the secured
party.
5.4 BROKERS. The Company has no obligation to pay any fees or
commissions to any broker, finder, agent or other intermediary in connection
with the negotiation or consummation of the transactions contemplated hereby.
Company will hold Buyer harmless from any fees, liabilities, cost or
expenses in connection therewith.
5.5 REAL PROPERTY AND TIDELANDS LEASES. The Company warrants that it is
not in arrears or will become current at closing if in arrears on any real
property leases or on the tidelands lease with the State of Mississippi with
following exceptions:
(a) Tidelands Lease - It is understood by Buyer that Company has been
making monthly payments on lease instead of a yearly payment as designated
therein.
(b) Gollott's Lease - It is understood by Buyer that the six month
payments on Lease for future rent is in arrears in an amount of approximately
$42,000.00.
5.6 EMPLOYMENT CONTRACTS AND BENEFIT Plans. Except as set forth on
Schedule 5.6., the Company is not a party to any employment contract and has
not adopted any employee benefit, retirement, pension, medical insurance,
life insurance or other plan. Buyer shall not assume nor shall it be
responsible for any liability of Company with respect to any employment
contract, employee benefit, retirement, pension, medical insurance, life
insurance or other plan.
5.7 FOOD AND BEVERAGE LICENSES. Company's food and beverage licenses
and permits are current, in good standing and Company is in compliance with
all requirements of said licenses and permits.
5.8 OUTSTANDING CHIPS AND TOKENS. As of September 5, 1996, the
Company's obligations with respect to Outstanding Chips and Tokens did not
exceed $72,066.00.
Section 6
COVENANTS OF THE COMPANY
6.1 BANKRUPTCY COURT ORDER. The Company shall, within five (5) business
days, after the execution of this Agreement by Buyer and the Company, seek
(i) an order by the Bankruptcy Court authorizing a Section 363 Sale of the
Sale Assets to Buyer free and clear of all liens, claims and encumbrances
(except Permitted Encumbrances) in accordance with the terms and provisions
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hereof ("Final Order"); and (ii) an order approving the Bidding Procedures
described in Section 9.3 of this Agreement ("Bidding Procedures Order").
6.2 ACCESS TO SALE ASSETS, PROPERTIES AND DOCUMENTS . Prior to the
Closing Date, the Company shall, at Buyer's request, afford or cause to be
afforded to Buyer and its authorized representatives reasonable access during
normal business hours to the Casino for the purpose of inspecting the Sale
Assets and all of Company's properties, documents, contracts, books and
records pertaining to Company as Buyer may request.
6.3 PRESERVATION OF SALE ASSETS.
(a) Except as otherwise required by law or expressly permitted or
contemplated by this. Agreement, without the prior written consent of Buyer
(which may not be unreasonably withheld), the Company SHALL NOT prior to
Closing:.
(i) mortgage, pledge, otherwise encumber or subject to lien any of the
Sale Assets or commit itself to do any of the foregoing, except for Permitted
Encumbrances;
(ii) Dispose of, or agree to dispose of any of the Sale Assets or lease
or license to others (including officers and directors), or agree so to lease
or license, any of the Sale Assets outside the ordinary course of business; or
(iii) cancel, fall to maintain in force or change any policy of
insurance (including self-insurance) relating to the Sale Assets or any
policy or bond providing substantially the same coverage, unless such
cancellation or change is effective only on or, after the Closing.
(b) Except as otherwise required by law, permitted by this Agreement or
an, order of the Bankruptcy Court, or where Buyer consents in writing to
noncompliance with this subsection (b), the Company SHALL after the date of
this Agreement and until the Closing use reasonable efforts to maintain all
of the tangible Sale Assets in good operating condition, reasonable wear and
tear excepted, consistent with past practices, and take all steps reasonably
necessary to maintain the intangible Sale Assets.
Section 7
JOINT COVENANTS
Buyer and the Company covenant and agree that they will act in accordance
with the following:
7.1 FURTHER ASSURANCES. After the Closing, each of the parties will
take such actions and execute and deliver to the other party such further
documents, instruments of assignment, conveyance and transfer as, in the
reasonable opinion of counsel to the requesting party, may be necessary (a)
to ensure, complete and evidence the full and effective transfer of the Sale
Assets to and assumption of the Assumed Obligations by Buyer pursuant to this
Agreement and (b) to fully and completely consummate the transactions and
agreements contemplated by this Agreement.
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7.2 ACCESS TO BOOKS AND Records. After the closing, Buyer shall make
available to the Company, Palace and Roy Anderson Corp and their respective
attorneys, accountants and agents., during regular business hours, all
business records, books of account, flies, invoices, and other materials
relating to the Business prior to the Closing ("Business Records") that any
such person reasonably requires in connection with any litigation, tax,
insurance, employee, accounts, claims and other business matters relating to
the Business prior to Closing or for the purpose of winding up the business
and affairs of the Company. Buyer and Company agree that Company and Roy
Anderson Corp may make and keep copies of any or all of such Business
Records. Buyer agrees to maintain, or release to the Company or Palace, or
to their respective successors or assigns, all Business Records until all
proceedings in the Bankruptcy Court with respect to the Company and Palace
are final. Buyer agrees that it shall make available to the Company those
former employees of the Company employed by Buyer after the Closing to assist
in the winding up of the business and affairs each of the Company and Palace
and resolving any disputed matters relating to periods prior to the Closing,
so long as the requests made of such persons do not unreasonably interfere
with the performance of the duties of such persons as employees of Buyer.
The Company, Palace and Roy Anderson Corp shall bear all out-of-pocket costs
and expenses associated with their requests under the terms of this Section
7.2.
Section 8
ADDITIONAL AGREEMENTS BETWEEN BUYER AND THE COMPANY
8.1 EMPLOYMENT MATTERS. Company shall prepare and furnish to its
employees any and all notices of the sale of the Sale Assets required by
applicable federal or state law, including but not limited to the Workers
Adjustment and Retraining Notification Act. Company acknowledges that Buyer
is under no obligation to hire as an employee or to offer to hire AS an
employee any of Company's employees after the Closing. Buyer may, in its
sole discretion, after the date hereof, enter into discussions with any
employee of the Company regarding potential employment arrangements between
Buyer and such employee after the Closing Date.
8.2 TAXES, TRANSFER OR SALES TAXES. Company shall pay, or cause to be
paid, all transfer, sales or similar taxes relating to or arising out of the
sale and transfer of the Sale Assets to Buyer. All property taxes shall be
prorated at the time of closing. No tax liability of Company will be assumed
or charged to Buyer.
8.3 REAL AND PERSONAL PROPERTY TAXES.
(a) All 1996 real and personal property taxes shall be prorated as of
the Closing Date. The Final Order shall provide that (x) the Sale Assets are
purchased by Buyer free and clear of any lien or claim for Pre-Closing Date
prorated real and personal property taxes ("Pre-Closing Date Prorated
Taxes"), and (y) that the lien for the Pre-Closing Date prorated taxes shall
attach to the Purchase Price paid by Buyer for the Sale Assets. Company and
Buyer agree that Buyer shall receive the benefit of any refund OR REDUCTION
of 1 996 real and personal property taxes attributable to the period
subsequent to the Closing Date resulting from any reduction in 1996 real and
personal property taxes because of Company's protest or objection to the
appropriate taxing authorities., or
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otherwise, and that Company shall receive the benefit of any refund or
reduction of Pre-Closing Date Prorated Taxes.
(b) Prior to the Closing, Company, to the extent required by the laws of
the State of Mississippi, shall timely file a protest and objection to the
assessed valuation of the Sale Assets as shown by the 1996 and 1997 real and
personal property tax rolls published by Harrison County, Mississippi or
other taxing authorities and/or shall file a motion with the Bankruptcy Court
pursuant to the Code to reduce the 1996 and 1997 real and personal property
taxes. Buyer shall provide reasonable assistance to the Company, prior to
the Closing, in the filing and prosecution of such protest and objection. At
Closing, Company shall execute such documents or assignments as may be
necessary or reasonably requested by Buyer so that Buyer, in its name, may
continue the prosecution of such protest and objection after the Closing.
After the Closing and as Buyer may request, Company shall provide reasonable
assistance to Buyer in the filing and prosecution of such protest and
objection.
8.4 HART-SCOTT-RODINO. Buyer shall prepare and file with the Antitrust
Division of the Federal Trade Commission all reports, if any, required to be
flied in connection with the transactions contemplated hereby pursuant to the
Hart-Scott-Rodino Antitrust Act of 1978 ("HSR Act"). Company shall cooperate
with Buyer in the preparation of any report or filing required by the HSR Act
and to the extent required by the HSR Act shall execute any such report or
filing.
8.5 MISSISSIPPI GAMING CONTROL ACT. Buyer agrees that within fifteen
(15) days after the execution of this Agreement by Buyer and the Company,
Buyer will make application with the Mississippi Gaming Commission for all
necessary approvals and licenses for Buyer's ownership and operation of the
Casino required to consummate the transactions contemplated by this
Agreement. Buyer shall, unless otherwise provided by the terms and
provisions of this Agreement, be obligated to close purchase of the Sale
Assets no later than sixty (60) days after entry of the Final Order. The
time periods set forth in this section may be extended by mutual agreement of
Buyer and Company.
8.6 CONFIDENTIALITY. Until the Closing of the Section 363 Sale, Buyer
and Company shall keep confidential all information obtained from the other
pursuant to this Agreement except that the provision of this Section 8.5
shall not apply in respect of any information which (v) was already known to
either of the parties at the time of receipt thereof from the other or (w)
was readily available to the general public at the time of receipt thereof
from the other or (x) subsequently becomes known to the general public
through no fault or omission on the part of such party or (y) is subsequently
disclosed by a third party, or (z) is required to be disclosed by law or a
governmental agency. Company and Buyer shall require their respective
officers, directors, employees, agents and representatives having access to
confidential information to execute confidentiality agreements in the form
mutually agreed to by the parties.
Section 9
BIDDING/SALE PROCEDURES
9.1 SALE PROCEDURES. No later than five (5) business days after the
execution of this Asset Purchase Agreement by Company, Company shall file a
motion with the Bankruptcy Court to
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approve the sale under this Agreement in accordance with its terms and
provisions, including the Bidding/Sales Procedures described in this Section
9, and shall further provide all notices to parties in interest required by
the Bankruptcy Code and Bankruptcy Rules (the "Sale Motion"). Company shall
also request the Bankruptcy Court to reduce the notice period to parties in
interest to fifteen (15) days.
9.2 BUYER'S DEPOSIT. Upon execution of this Agreement by Buyer and
Company and the Escrow Agreement by Buyer, Company and Escrow Agent, Buyer
shall deposit the sum of $2,000,000.00 with the Escrow Agent ("Buyer's
Deposit"), which sum shall be held by the Escrow Agent pursuant to the terms
of the Escrow Agreement.
9.3 BIDDING PROCEDURES. No later than five (5) business days after the
execution of this Asset Purchase Agreement by Buyer and Company, Company
shall file a motion with the Bankruptcy Court to establish the bidding
procedures set forth in this Section 9.3 and shall further provide all
notices to parties in interest required by the Bankruptcy Code and Bankruptcy
Rules of Court ("Bidding Procedures Motion"). Company shall also request the
Bankruptcy Court to reduce the notice period to parties in interest to
fifteen (15) days. The order of the Bankruptcy Court approving the Bidding
Procedures Motion shall provide ("Bidding Procedures Order"):
(a) Any competing bid must be for the Sale Assets only and must be flied
with the Company, with a copy to Buyer, no later than seven (7) business days
after entry of the Bidding Procedures Order.
(b) (i) Any competing bid ("Competing Bid") must be in the minimum
amount of $14,000,000 and must be accompanied by a cashier's check in no less
than $2,000,000.00 payable to the Escrow Agent (the "Deposit"), which sum
shall be held by the Escrow Agent pursuant to the terms of the Escrow
Agreement. Any party submitting a Competing Bid shall execute the Escrow
Agreement and be bound by its terms. Any Competing Bid shall include a cash
payment in the minimum amount of $14,000,000. The Competing Bid shall be in
writing, and shall be delivered to counsel for the Company with copies to
counsel for the Buyer, along with the Deposit to the Escrow Agent.
(ii) Buyer may, by giving written notice to the Company, match
the Highest Competing Bid ("Highest Competing Bid"). For the purposes of
computing any match by Buyer of the Highest Competing Bid, the Purchase Price
under Section 3.1 shall be considered as having a cash value of $ 1 3,000,000
(the sum of the Cash and the Debenture., which sum shall be included in any
match of the Highest Competing Bid by Buyer. The Earn Out Payment under
Section 3.1 (ill) above shall not be included in any match of the Highest
Competing Bid by Buyer. If the Buyer matches the Highest Competing Bid, the
bidding procedure or process shall be terminated and no additional bids or
offers from any entity, including the entity submitting the Highest Competing
Bid, shall be accepted or considered by the Bankruptcy Court, the Company or
any other party in interest. In such event,.the Purchase Price set forth in
Section 3.1 shall be amended to an amount equal to the Highest Competing Bid
matched by Buyer and the respective rights, obligations and duties of Company
and Buyer for Buyer's purchase of the Sale Assets shall be as otherwise set
forth in this Agreement subject to the amendment of the Purchase Price as
above provided. If the Buyer does not match the Highest Competing Bid (which
must include a minimum cash payment of $14,000.,000),,
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then upon a final order by the Bankruptcy Court approving the sale of the
Sale Assets to the Highest Competing Bidder (x) $500,000 of the Deposit made
by the Highest Competing Bidder shall become non-refundable and shall be
applied by the Escrow Agent to the payment to Buyer of the sum of $500,000 as
a Breakup Fee, and (y) Company shall pay to Buyer the Breakup Fee of
$500,000, which sum shall be paid by the Escrow Agent from the Deposit of the
Highest Competing Bidder as provided by this Section 9.3(b)(ii)(x).
(c) Buyer's Deposit shall be returned to Buyer (i) no later than one
business day after a final order by the Bankruptcy Court denying the Sale
Motion in favor of Buyer or which approves the sale of the Sale Assets to a
competing bidder or (ii) unless waived by Buyer,. by November 4, 1996, if the
Bankruptcy Court has not entered its Final Order approving the Sale Motion in
favor of Buyer.
(d) Any sale of Sale Assets to a competing bidder shall include a
minimum cash payment of $14,000,000.
(e) In the event the Buyer does not match the Highest Competing Bid and
the sale of the Sale Assets to the party submitting the Highest Competing Bid
does not close, this Agreement shall be reinstated, at Buyer's option, upon
written notice to the Company. In such event, no competing bids shall be
accepted by Company and the sale of the Sale Assets to Buyer shall be upon
the terms and conditions hereof with the closing to occur no later than sixty
(60) days after Company's receipt of Buyer's notice hereunder. In such
event, Buyer shall pay the Buyer's Deposit to Escrow Agent to be held and
distributed according to the terms hereof and the Escrow Agreement. In the
event Buyer elects to reinstate this Agreement, Buyer may in its sole
discretion apply the Breakup Fee to the Buyer's Deposit and the Cash portion
of the Purchase Price.
(f) Upon execution of this Agreement, Company and Buyer shall confer
with the Bankruptcy Court for the purposes of scheduling the notice periods
to parties in interest and the hearings in connection with the Bidding
Procedures Motion and Sales Motion.
(g) Within five business days after (x) Buyer determines that the
Bankruptcy Court is unable, in accordance with the provisions of this Section
9, to schedule the notice periods to parties in interest and the hearings in
connection with the Bidding Procedures Motion and Sales Motion ("Notices and
Hearings"), or (y) the Bankruptcy Court does not enter the Bidding Procedures
Order or the Final Order as provided herein, Buyer may, in its sole
discretion, terminate this Agreement upon written notice to the Company. In
either event Buyer's Deposit shall be paid to the Buyer by Escrow Agent
within seventy-two (72) hours of Escrow Agent's receipt of Buyer's written
notice requesting payment of Buyer's Deposit to it. If Buyer does not
terminate this Agreement as provided in this Section 9.3(g), Company and
Buyer shall amend this Agreement in writing to extend the Notices and
Hearings and the dates for entry of the Bidding Procedures Order and Final
Order.
9.4 ENTRY OF BIDDING PROCEDURES ORDER. Unless waived by Buyer, the
Bidding Procedures Order shall be entered by the Bankruptcy Court no later
than two (2) days after the expiration of the fifteen (15) day notice period
to parties in interest described in Section 9.3 of this Agreement.
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9.5 COMPANY SUPPORT OF MOTIONS. Company shall actively support and seek
- -the approval of the Bidding Procedure Motion and Sale Motion by the
Bankruptcy Court and parties in interest to whom notice is required by the
Bankruptcy Code and Bankruptcy Rules.
Section 10
CONDITIONS TO OBLIGATIONS OF BUYER
The obligations of Buyer under Sections 2.1 and 3.1 are, at its option,
subject to satisfaction, at or prior to Closing, of each of the following
conditions:
10.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. All representations and
warranties of the Company made in this Agreement shall in all material
respects be true and correct on and as of the Closing Date with the same
force and effect as if made on and as of that date, except for changes
permitted or required by this Agreement. All of the terms, covenants,
conditions and agreements set forth in this Agreement to be compiled with and
performed by the Company at or prior to the Closing shall in all material
respects have been complied with or performed thereby.
10.2 FINAL ORDER. An order, which has not been stayed, vacated or
materially modified for a period of ten (10) days after its entry, in form
acceptable to Counsel for Buyer, shall have been entered by the Bankruptcy
Court (a) authorizing and directing a Section 363 Sale of the Sale Assets, in
accordance with the terms of this Agreement, to Buyer free and clear, except
for Permitted Encumbrances, of all liens, claims and encumbrances, including
any lien for real and/or personal property taxes assessed or claimed by any
taxing authority against the Sale Assets including, but not limited to, the
City of Biloxi, Mississippi, Harrison County, Mississippi and the State of
Mississippi ("Tax Lien"); (b) providing that an amount equal to the total of
the Tax Liens shall be held separately by the Company and disbursed only by
order of the Bankruptcy Court to the appropriate taxing authorities, in
satisfaction of any such Tax Lien; (c) approving the assignment and
assumption of the Assumed Obligations to be assumed by Buyer, in accordance
with the terms of this Agreement; and (d)(1) finding that the Section 363
Sale would not have been consummated by Buyer if Buyer or the Sale Assets
were to be responsible for, or subject to, any liens, claims or encumbrances
other than Permitted Encumbrances and (ii) that there will be no successor
liability to Buyer or any lien or encumbrance affecting the Sale Assets
(except Permitted Encumbrances) of the Company ("Final Order"). Unless
waived by Buyer, the Final Order shall be entered no later than forty-five
(45) days after the execution of this Agreement by Buyer and the Company.
10.3 INSTRUMENTS OF CONVEYANCE. The Company shall have delivered deeds,
bills of sale, assignments and other instruments of conveyance with respect
to the Sale Assets effecting the sale, transfer, assignment and conveyance of
the Sale Assets, without warranty and without recourse to the Company, to
Buyer or to such other person who is to receive the Sale Assets pursuant to
the Final Order.
10.4 ENVIRONMENTAL REPORT. Company will provide an Environmental Update
Report ("Report") on the Sea Products and Gulf Central Properties and the 4.5
acre fee simple property owned by Company no later than thirty (30) days from
the Company's execution of this Agreement, at the Company's sole cost, which
environmental update report shall be subject to the approval of
17
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the Buyer at its sole discretion. Buyer may, in its sole discretion, require
the Company to cure any environmental exceptions listed in said report to the
extent the cost to cure said exceptions does not exceed $50,000. To the
extent the cost to cure any environmental exceptions listed in the Report
exceeds $50,000, Buyer may, in its sole discretion, cancel its obligations
hereunder or waive such costs in excess of $50,000.
10.5 TITLE INSURANCE. Title to Company's real property (referenced in
2.1 (b)) and Company leasehold interests in the Leases (referenced in Section
2.2(g) conveyed to Buyer hereunder shall be insurable by a title insurance
company licensed in the State of Mississippi and acceptable to Buyer at
standard rates on its standard form of title policy, subject only to such
matters as may be waived in writing by Buyer at or prior to the Closing.
Buyer shall be responsible for the premiums of any such title insurance
policy.
10.6 IGT ORDER. The October 31, 1996, date referenced in Paragraph B of
the Order Approving Partial Agreement of Debtor and IGT North America
Regarding Slot Machines Subject to a Security Interest of IGT North America
entered on August 21, 1 996, shall be extended to the earlier to occur of the
Closing Date or the termination of this Agreement.
Section 11
CONDITIONS TO OBLIGATIONS OF THE COMPANY
The obligations of the Company under Section 2.1 are, at its option,
subject to satisfaction, at or prior to the Closing, of each of the following
conditions:
11.1 REPRESENTATIONS, WARRANTIES AND Covenants. All representations and
warranties of Buyer made in this Agreement shall in all material respects be
true and correct on and as of the Closing Date with the same force and effect
as if made on and as of that date, except for changes contemplated, permitted
or required by this Agreement. All of the terms, covenants, conditions and
agreements to be complied with and performed by Buyer on or prior to the
Closing shall in all material respects have been complied with or performed
thereby.
11.2 ADVERSE PROCEEDINGS. There shall not be in effect any injunction or
restraining order issued by a court of competent jurisdiction against the
consummation of the purchase and sale of the Sale Assets pursuant to this
Agreement.
11.3 FINAL ORDER. A Final Order shall have been entered by the
Bankruptcy Court.
11.4 Purchase Price. The Purchase Price required to be paid by Buyer
under Section 3.1 shall have been delivered to the party or parties entitled
thereto pursuant to the Final Order.
Section 12
TERMINATION
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12.1 RIGHT OF PARTIES TO TERMINATE. In addition to either party's right
to terminate as otherwise provided herein, this Agreement may be terminated:
(a) by Buyer if the Company shall have breached any of its obligations
hereunder in any material respect; or (b) by the Company if Buyer shall have
breached any of its obligations hereunder in any material respect. The Buyer
shall have the right to terminate this Agreement or extend the Closing Date
under this Agreement in the event that any of the Conditions to Obligations
of the Buyer specified in Section 10 have not been fulfilled at or prior to
the Closing Date unless waived by Buyer in its sole discretion.
12.2 EFFECT OF TERMINATION. If either Buyer or the Company decides to
terminate this Agreement pursuant to Section 12. 1, or if Buyer decides to
terminate this Agreement pursuant to Section 3.3 (a) (iv) or Section 9.3 (g),
the terminating party shall promptly give written notice to the other party
to this Agreement of such decision. In the event of a termination pursuant
to Section 1 2. 1, the parties shall be released from all liabilities and
obligations arising under this Agreement (other than pursuant to Sections
12.3 and 12.4 hereto with respect to the matters contemplated by this
Agreement.
12.3 BUYER'S REMEDIES. If the Section 363 Sale falls to close as a
consequence of a breach by the Company of any of its obligations under this
Agreement, or in the event of any of the Conditions to Obligations of the
Buyer specified in Section 10 have not been fulfilled at or prior to the
Closing Date, the Escrow Agent shall deliver to Buyer, no later than seventy
two (72) business hours after Buyer delivers its written request to Escrow
Agent, the Buyer's Deposit and any amounts owing to Buyer pursuant to Section
9.3. Buyer shall be entitled to specific performance by Company of the terms
and provisions of the Agreement and its reasonable attorney fees and court
costs.
12.4 COMPANY'S REMEDIES. In the event the Section 363 Sale falls to
close as a consequence of a breach by the Buyer of its obligations under this
Agreement, or in the event of any of the Conditions to Obligations of the
Company specified in Sections 11.1 and 11.4 have not been fulfilled at the
Closing Date, Buyer shall pay to Company as liquidated damages, and not as a
penalty, the sum of $ 1 00,000 ("Liquidated Damages"). In such case, the
Liquidated Damages shall be paid to Company by the Escrow Agent from the
Buyer's Deposit no later than the tenth day following notice by either Buyer
or Company of the termination of this Agreement resulting from the events
described in this Section 12.4. The remainder of Buyer's Deposit, shall be
paid to Buyer by Escrow Agent within twenty-four hours following such notice
of termination. Company's right to Liquidated Damages hereunder shall be
Company's sole and exclusive remedy against Buyer for and breach or default
by Buyer under this Agreement.
Section 13
CLOSING
13.1 TIME AND PLACE OF CLOSING. Except as may otherwise be provided
herein or mutually agreed to in writing by Buyer and the Company, and
provided this Agreement has not been terminated as provided by Section 12,
the closing of the Section 363 Sale ("The Closing") shall take place at
such time as the parties mutually agrees but in no event earlier than thirty
(30) days nor later than sixty (60) days after entry of the Final Order
("Closing Date"). The Closing shall take place at
19
<PAGE>
the offices of Hopkins, Crawley, Bagwell, Upshaw & Persons, 2701 24th Avenue,
Gulfport, Mississippi 39501 or at such other location agreed to by the
parties.
13.2 OBLIGATIONS OF THE COMPANY AT CLOSING. At the Closing, the Company
shall deliver or cause to be delivered the following documents, and take such
other actions as are identified below:
(a) the instruments of conveyance and transfer contemplated by Section
10.3; and
(b) all other documents and instruments as may be necessary to
consummate the transactions contemplated by this Agreement.
13.3 OBLIGATIONS OF BUYER AT CLOSING. At the Closing, Buyer shall
deliver or cause to be delivered the following documents, and take such other
actions as are identified below:
(a) the Purchase Price pursuant to Section 3.1; and
(b) all other documents and instruments as may be necessary to
consummate the transactions contemplated by this Agreement, including the
Security Agreement.
13.4 APPROVAL TO PARTICIPATE. If at the Closing, Buyer has not secured
the necessary licenses or permits from the Mississippi Gaming Commission
which are necessary to Buyer's ownership and operation of the Casino
subsequent to the Closing Date, Company shall, provided Buyer has received an
Approval to Participate or similar consent or permission from the Mississippi
Gaming Commission, operate the Casino, pursuant to Company's existing gaming
license, for a period not to exceed One Hundred Twenty (120) days after
Closing ("Approval to Participate Period"). During the Approval to
Participate Period, Company shall employ or contract with a general manager
or managers selected from time to time by Buyer and who have been found
suitable by the Mississippi Gaming Commission for such position. Any such
general manager selected by the Buyer shall have and exercise sole and
exclusive management of the Casino and its operations during the Approval to
Participate Period.
During the Approval to Participate Period, Buyer shall be responsible for
operating expenses, taxes, lease payments and losses incurred in the
operation of the Casino. All profits generated by the Casino during the
Approval to Participate Period shall belong to and be the property of the
Buyer.
Section 14
SURVIVAL
Except as provided in the second sentence of this Section 14 all
representations, warranties, covenants and agreements made in this Agreement
or in any exhibit, schedule, certificate or agreement delivered in accordance
with this Agreement shall survive the execution and delivery of this
Agreement and the Closing Date. The representations and warranties of the
Company under
20
<PAGE>
Section 5 and 6 hereof, and of the Buyer under Section 4 hereof, shall be
extinguished and be of no further force or effect after the Closing Date.
Section 15
OTHER PROVISIONS
15.1 SURVEY. No later than thirty (30) days after Company's execution
hereof., Company shall provide an updated survey of the Sea Products, Gulf
Central and Gollott properties and the 4.5 acre fee simple parcel.
15.2 BENEFIT AND ASSIGNMENT; THIRD PARTY BENEFICIARIES. This Agreement
shall be binding upon and shall inure to the benefit of the parties hereto
and their respective successors and assigns. Buyer may not assign its rights
and obligations hereunder without the prior written approval of Company,
which will not be unreasonably withheld.
15.3 ENTIRE AGREEMENT. This Agreement and the Schedules and
Exhibits referred to herein constitute the entire agreement and understanding
of the parties and supersede any and all prior agreements, arrangements and
understandings relating to matters provided for herein.
15.4 RISK OF LOSS. The risk of loss or destruction of or damage of the
Sale Assets, or .any of them, from any cause whatsoever at all times on or
subsequent to execution of this Agreement and prior to the Closing Date shall
be borne by the Company.
15.5 FEES AND EXPENSES. Each party shall be solely responsible for
all costs and expenses incurred by it in connection with the negotiation,
preparation and performance of and compliance with the terms of this
Agreement.
15.6 AMENDMENT, WAIVER. Except in the case of either Company or Buyer
reserving the unilateral right to waive a provision or a right reserved
hereunder, the provisions of this Agreement, or any of them, may be amended
or waived by an instrument in writing signed by the party against which
enforcement of such amendment or waiver is sought. Any waiver of any term or
condition of this Agreement or any breach hereof shall not operate as a
waiver of any other such term, condition or breach, and no failure to enforce
any provision hereof shall operate as a waiver of such provision or of any
other provision hereof.
15.7 HEADINGS. The headings are for convenience only and will not
control or affect the meaning or construction of the provisions of this
Agreement.
15.8 GOVERNING LAW, JURISDICTION. The construction and performance of
this Agreement ill be governed by the laws of the State of Mississippi. The
Bankruptcy Court shall have exclusive jurisdiction with regard to all matters
relating to the interpretation and enforcement of this Agreement for a period
of one year following the Closing. Thereafter, jurisdiction shall fie in any
court of competent jurisdiction.
21
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15.9 NOTICES. Any notice, demand or request required or permitted to be
given under the provisions of this Agreement (a) shall be in writing; (b)
shall be delivered personally, Including by means of facsimile, overnight
express delivery, -or- mailed by registered or certified mail, postage
prepaid, and return receipt requested; (c) shall be deemed given"on the date
of personal delivery, the date sent via facsimile, or on the date set forth
on the return receipt or the overnight express delivery receipt; and (d)
shall be delivered or mailed, to the addresses or facsimile numbers set forth
below or to such other address as any party may from time to time direct:
(a) IF TO BUYER:
New Palace Casino, L.L.C.
Attn: Jack Pilger, President and CEO
Casino Resource Corporation
1719 Beach Blvd., Room 306
Executive Place. Building
Biloxi, Mississippi 39531
with copies to
James B. Persons
Hopkins, Crawley, Bagwell, Upshaw & Persons
Attorneys at Law
Post Office Box 1510
2701 24th Avenue
Gulfport, Mississippi 39501-4941 (601) 864-2200
Arthur Curtis
Greene & Curtis, L.L.P.
Attorneys at Law
1340 East Woodhurst
Springfield, Missouri 65804
(417)883-7678
(b) IF TO THE COMPANY:
Maritime Group, Ltd.
Attn: Dual Cooper
158 Howard Avenue
Biloxi Mississippi 39530
(601) 432-8888
with a copy to:
LeBoeuf, Lamb, Greene & MacRae,, L.L.P.
Attn: Kenneth L. Cannon., 11
22
<PAGE>
1000 Kearns Building
136 South Main Street
Salt Lake City, Utah 84101
Telephone No.: (801) 320-6700
Facsimile No.: (801) 359-8256
15.10 ATTORNEYS' FEES. If suit or action is filed by any party to
enforce the provisions of this Agreement or otherwise with respect to the
subject matter of this Agreement, or otherwise with respect to the subject
matter, of this Agreement the, prevailing party shall be entitled to recover
from the other party reasonable attorneys' fees as fixed by the trial court
and, if any appeal is taken from the decision of the trial court, reasonable
attorneys' fees as fixed by the appellate court. . For purposes of this
Agreement, the term "prevailing party" shall be deemed to include a party
that successfully opposes a petition for review flied with an appellate court.
15.11 ATTORNEYS' FEES. Company and Buyer acknowledge that schedules
2.1 (a), 2.1 (b); 2.2(b) and 2.2(c) attached hereto have been prepared as of
September 22, 1995. Company and Buyer agree to supplement this Agreement to
amend each of the schedules hereto to reflect the current status of the
matters and items listed on each of said schedules. Said amended schedules
shall be subject to the approval of Buyer. The remaining schedules have been
prepared as of the date hereof.
15.2 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original but all of which
together will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Asset Purchase
Agreement as of the day and year first written above.
"Buyer"
New Palace Casino, L.L.C. /s/ John J. Pilger
--------------------------------------------------
Name: JOHN R. PILGER
---------------------------------------------
Title
---------------------------------------------
"Seller"
Maritime Group, Ltd. /s/ Dual B. Cooper, Jr.
--------------------------------------------------
Name DUAL B. COOPER, JR.
----------------------------------------------
Title PRESIDENT & CEO
---------------------------------------------
23
<PAGE>
Form of
ESCROW AGREEMENT
THIS ESCROW AGREEMENT is entered into as of the 20th day of September,
1996, by and among New Palace Casino, L.L.C., a Mississippi Limited Liability
Company (the "Buyer"), Maritime Group, Ltd., a Mississippi Corporation (the
"Company") and Hancock Bank, Gulfport, Mississippi (the "Escrow Agent"),
pursuant to an Asset Purchase Agreement dated September 20th, 1996, (the
"Agreement") between the Buyer and the Company.
WHEREAS, Buyer and Company have entered into the Agreement whereby Buyer
is acquiring substantially all of the assets of Company relating to the
dockside gaming casino known as the Palace Casino; and
WHEREAS, the Agreement contemplates the deposit of certain sums with the
Escrow Agent ("Deposit") by Buyer or by an entity submitting a "Competing
Bid" as provided by Section 9 of the Agreement; and
WHEREAS, Buyer and the Company have agreed to the terms of this Escrow
Agreement for the Escrow Agent to hold any Deposit made pursuant to Section 9
of the Agreement in accordance with the following terms, conditions and
instructions:
1. DEFINITIONS. The capitalized terms in this Escrow Agreement shall
have the same definition ascribed to them in the Agreement unless otherwise
defined herein.
EXHIBIT A
2. ESCROW DEPOSIT. In the even Buyer, pursuant to Section 9.2 of the
Agreement, makes a Deposit (the "Buyer's Escrow Funds") said sum shall be
held by the Escrow Agent in accordance with the terms and provisions of this
Escrow Agreement. Immediately upon the receipt of the Buyer's Escrow Funds,
the Escrow Agent shall deposit the Buyer's Escrow Funds in one or more
1
<PAGE>
federally insured interest bearing accounts at Hancock Bank, Gulfport,
Mississippi, to be held and disbursed by the Escrow Agent pursuant to the
terms hereof.
3. ESCROW DEPOSIT BY OTHERS THAN BUYER. In the event a Competing Bid
is made pursuant to Section 9.3(b) of the Agreement, the deposit made by any
Competing Bidder shall be held by the Escrow Agent pursuant to the terms
hereof ("Overbid Escrow Funds"). Immediately upon receipt of the Overbid
Escrow Funds, the Escrow Agent shall deposit the Overbid Escrow Funds in one
or more federally insured interest bearing accounts at Hancock Bank,
Gulfport, Mississippi. The Overbid Escrow Funds shall be held in account
separate and distinct from those of the Buyer's Escrow Funds, shall be
accounted for separately by the Escrow Agent and shall be disbursed by the
Escrow Agent pursuant to the terms hereof. Any Competing Bidder shall
execute this Escrow Agreement and be bound by its terms.
4. BUYER'S ESCROW FUNDS. Escrow Agent shall disburse the Buyer's
Escrow Funds as follows:
a) If by October 14, 1996, (unless waived by Buyer pursuant to
the Agreement) the Bankruptcy Court does not enter the Bidding Procedures
Order approving the Bidding Procedures set forth in Section 9.3 of the
Agreement, the Escrow Agent shall, upon receipt of written notice from Buyer
requesting payment of Buyer's Escrow Funds to it, pay over and deliver the
Buyer's Escrow Funds to the Buyer within one business day of Escrow Agent's
receipt of Buyer's written notice.
b) If the Bankruptcy Court enters its Final Order approving the
Sale Motion in favor of Buyer, and, at the Closing, Buyer provides Escrow
Agent and Company with written notice that all conditions to obligations of
Buyer provided for in Section 10 of the Agreement have been satisfied or
waived in writing by Buyer, the Escrow Agent shall pay over and deliver the
Buyer's Escrow
2
<PAGE>
Funds to the Company (at the Closing), to be applied to the Purchase Price.
If at the Closing, Buyer provides Escrow Agent and Company with written
notice that all conditions to obligations of the Buyer provided for in
Section 10 of the Agreement have not been satisfied and have not been waived
in writing by Buyer, the Escrow Agent shall pay over and deliver the Buyer's
Escrow Funds to the Buyer within seventy-two (72) hours of Escrow Agent's
receipt of Buyer's written notice.
c) If by November 4, 1996, (unless waived by Buyer pursuant to
the Agreement) the Bankruptcy Court does not enter its Final Order approving
the Sale Motion in favor of Buyer in accordance with the terms of the
Agreement, the Escrow Agent shall, upon receipt of written notice from Buyer
requesting payment of Buyer's Escrow funds to it, pay over and deliver the
Buyer's Escrow Funds to the Buyer within one business day of Escrow Agent's
receipt of Buyer's written notice.
d) Buyer's Escrow Funds shall be returned to Buyer by Escrow
Agent no later than one business day after the entry of an order by the
Bankruptcy Court denying the Section 363 Sale in favor of Buyer or which
approves the sale of the Sale Assets to a competing bidder.
e) Company and Escrow Agent acknowledge that Buyer's right and
entitlement to return of the Buyer's Escrow Funds under paragraphs 4(a), 4(c)
or 4(d), is absolute and that Company has no right to object to the payment
and delivery to Buyer of the Buyer's Escrow Funds by Escrow Agent under
paragraphs 4(a), 4(c) or 4(d), hereof.
f) If the Section 363 Sale does not close and Company is entitled
to recover Liquidated Damages from Buyer as provided in Section 12.4 of the
Agreement, Escrow Agent shall pay and deliver, from Buyer's Deposit, the sum
of $100,000 to Company as to Liquidated Damages. Payment of Liquidated
Damages to company shall be made by the Escrow Agent no later than the tenth
day following notice by either Buyer or Company of the termination of the
Agreement as a
3
<PAGE>
result of any of the events described in Section 12.4 of the Agreement. The
remainder of Buyer's Deposit shall be paid to Buyer by Escrow Agent within
twenty-four (24) hours following such notice of termination.
5. OVERBID ESCROW FUNDS.
a) If the Buyer does not match the Highest Competing Bid, as
provided by Section 9.3(b) of the Agreement, the Escrow Agent shall pay over
and deliver to Buyer from the Overbid Escrow Funds the sum of $500,000
("Breakup Fee") which sum shall be paid to Buyer by Escrow Agent no later
than one business day after a final order by the Bankruptcy Court approving
the sale of the Sale Assets to the Highest Competing Bidder.
b) The Overbid Escrow Funds deposited by any Competing Bidder,
other than the Highest Competing Bidder, shall be paid over and returned to
each such Competing Bidder by the Escrow Agent no later than one business day
after Final Order by the Bankruptcy Court approving the Section 363 Sale in
favor of Buyer or the Highest Competing Bidder, as the case may be.
c) If the Buyer elects to match the Highest Competing Bid, as
provided by Section 9.3(b) of the Agreement, the Escrow Agent shall pay over
and deliver to the Highest Competing Bidder, the Overbid Escrow Funds
deposited by it which sum shall be paid to the said Highest Competing Bidder
no later than one business day after the Final Order by the Bankruptcy Court
approving the Section 363 Sale in favor of Buyer.
6. NON-DISBURSEMENT OF LIQUIDATED DAMAGES. If at any time Escrow Agent
receives written notification or instructions from Buyer to not disburse the
Liquidated Damages ($100,000) portion of Buyer's Escrow Funds to Company,
Escrow Agent shall continue to hold the Liquidated
4
<PAGE>
Damages until Buyer and Company jointly agree to the disbursement of the
Liquidated Damages or unless otherwise ordered by a Court of competent
jurisdiction pursuant to a final order.
7. INTERPLEADER. In the event of a disagreement or presentation of
adverse claims or demands or instructions to the Escrow Agent, the Escrow
Agent may at its option, file a Complaint in the Interpleader for the purpose
of having the respective rights of the Buyer and Company adjudicated, may
deposit with the Court all documents and property held by it pursuant to its
Escrow Agreement and Buyer and Company hereto agree to pay all costs,
expenses and attorney's fees incurred by the Escrow Agent in such action, and
said costs, expenses and fees may be included in any judgment rendered in any
such interpleader action. Any such action shall be filed in a federal or
state court of competent jurisdiction located in Harrison County, Mississippi.
8. NOTICES, ETC. Any notice provided for in this Escrow Agreement
shall be in writing, deemed effective upon receipt and shall be personally
delivered, or mailed registered or certified mail-return receipt requested,
as follows:
(a) To the Escrow Agent:
Hancock Bank
Attn:
One Hancock Plaza
Gulfport, Mississippi 39501
(b) To Buyer:
New Palace Casino, L.L.C.
C/O Casino Resource Corporation
Attn: Jack Pilger, CEO
1719 Beach Boulevard, Suite 306
Biloxi, Mississippi 39531-5396
(601) 435-1976
with copies to:
5
<PAGE>
James B. Persons
Hopkins, Crawley, Bagwell,
Upshaw & Persons
Attorneys at Law
Post Office Box 1510
2710 24th Avenue
Gulfport, Mississippi 39501-4941
(601) 864-2200
Arthur Curtis
Greene & Curtis, L.L.P.
Attorneys at Law
1340 East Woodhurst
Springfield, Missouri 65804
(417) 883-7678
(c) To Company:
Maritime Group, Ltd.
Attn: Dual Cooper
158 Howard Avenue
Biloxi, Mississippi 39530
(601) 432-8888
with a copy to:
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
Attn: Kenneth L. Cannon, II
1000 Kearns Building
136 South Main Street
Salt Lake City, Utah 84101
Telephone No.: (801) 320-6700
Facsimile No.: (801) 359-8256
(d) To Competing Bidder
(as shown on signature page)
or to such other address or to such other persons as any of the parties
hereto shall have last designated to the other parties hereto by like notice.
9. AMENDMENT; BINDING EFFECT; CONSTRUCTION. This Escrow Agreement: (a)
may not be amended or modified except by an instrument in writing signed by
each of Buyer and Company, (b) shall be binding upon and inure to the benefit
of the parties hereto and their respective successors
6
<PAGE>
and assigns, and (c) shall be governed by and construed in accordance with
the laws of the State of Mississippi.
BUYER:
NEW PALACE CASINO, L.L.C.
BY:--------------------------------------------
Its---------------------------------------
COMPANY:
MARITIME GROUP INC.
BY:--------------------------------------------
Its---------------------------------------
ESCROW AGENT:
HANCOCK BANK
BY:--------------------------------------------
Its---------------------------------------
COMPETING BIDDER:
BY:--------------------------------------------
Its---------------------------------------
Address ---------------------------------------
Telephone -------------------------------------
Hancock Bank
Attn: Mr. William A. Abbott
Associate General Counsel
One Hancock Plaza
Gulfport, Mississippi 39501
7
<PAGE>
RE: Escrow Agreement dated as of September 20, 1996, among News Palace
Casino, L.L.C. ("Buyer"), Maritime Group, Ltd. ("Company"), and
Hancock Bank ("Escrow Agent").
Dear Mr. Abbott:
This letter confirms the agreement of New Palace Casino, L.L.C., to pay
the fee of Hancock Bank for its services as Escrow Agent pursuant to the
captioned Escrow Agreement in the amount of $750.00.
At the time of any disbursement required by the terms of the Escrow
Agreement, the Escrow Agent will be provided instructions as to the manner of
payment, e.g., wire or bank check, by the party making the disbursement
instruction.
New Palace Casino, L.L.C.
BY: /s/ John J. Pilger
----------------------------
JOHN J. PILGER
8
<PAGE>
SCHEDULE 2.1(a)
<PAGE>
SCHEDULE 2.1(b)
<PAGE>
BILOXI, MISSISSIPPI
REAL ESTATE OWNED
OWEN LOFTON TRIPLETT
----------------------------------------------------
Purchase Price $300,000 $182,017 $131,942
Outstanding Loan NONE 123,200 NONE
Payment N/A 2,505 N/A
Term N/A 5 YEAR N/A
Interest Rate N/A 8% N/A
Use PARKING LOT RESIDENTIAL RESIDENTIAL
Other OFF-SITE PARKING NEXT TO CASINO NEXT TO CASINO
PARKING PARKING
<PAGE>
SCHEDULE 2.1 (d)
<PAGE>
MISSISSIPPI
STATE TAX COMMISSION
Alcoholic Beverage Control Division
Post Office Box 540
Madison, Mississippi 39130-0540
Ph number (601) 856-1301
Fax Number (601) 856-1300
Ed Buelow, Jr., Chairman William W. Tann, CPA Harvey Johnson, Jr.
and Commissioner of Revenue Associate Commissioner Associate Commissioner
Maritime Group, Ltd. Biloxi, MS Harrison
Your application for a Mississippi Alcoholic Beverage ON PREMISES RETAILER
Permit Located at 158 Howard Avenue and doing business as PALACE CASINO has
been approved by the A.B.C. Division effective April 6, 1994 and will expire
on April, 5, 1995 Permit Number 7319 must appear on all of your
correspondence and orders.
The enclosed permit must at all times be prominently displayed on the
designated premises in order to keep this permit in force. You must file an
application with the A.B.C. Division for renewal before the stated permit
expiration date.
Authorized members of the Alcoholic Beverage Control Division will at
various intervals be inspecting your premises and examining your books and
records. Information concerning the ordering and distribution of beverages
will be obtained from the Warehouse Department of the A.B.C. Division.
Each permittee shall operate under the provisions of the Alcoholic
Beverage Control Laws and the Rules and Regulations of the Commission. It
is, therefore, recommended that eh permittee review all of the Alcoholic
Beverage Control Law and the Rules and Regulations of the Mississippi Code of
1972, which list the causes for which permits must be revoked or suspended.
In addition, you should take special notice of the following Sections of
Mississippi Code 1972, which relate to the operation of retail establishments:
General Sections 67-1-37, 51,59, 71, 77, 81, General Sections 27-71-23
83, 35
Enforcement Sections 67-1-31, 91 Records Sections 27-71-25, 23
Distribution Sections 67-1-31,91 Enforcement Section 27
Package Section 67-1-75 Taxes--27-71-5, 7, 9, 23, 29
Transfer of Permit Section 67-1-67
Permit Display & Renewal Section 67-1-55, 63
<PAGE>
Please call or write the Alcoholic Beverage Control Division office for
further information or advise. We would prefer to help you avoid mistakes
rather than penalize you after you have committed a violation.
Very truly yours,
/s/ JAMES K. SULLIVAN
James K. Sullivan, Director
<PAGE>
UNITED STATES FIDELITY AND GUARANTY COMPANY
BALTIMORE, MARYLAND
(A STOCK COMPANY)
BOND NUMBER: 32-0130-19710-94
KNOW ALL MEN BY THESE PRESENTS: THAT Maritime Group, Ltd. City of Biloxi
State of Mississippi, as Principal and UNITED STATES FIDELITY AND GUARANTY
COMPANY, of Baltimore, Maryland, as Surety, are held and firmly bound unto
City of Biloxi as Obligee in the aggregate sum of One Thousand Dollars and
no/100 Dollars ($1,000.00), lawful money of the United States, for the
payment of which, well and truly to be made, we bind ourselves, our heirs,
executers and administrators, successors and assigns, jointly, severally, and
firmly by these presents.
Signed, sealed and dated March 8, 1994.
WHEREAS, the above bounden Principal has applied for License as General
Contractor for the term beginning March 8, 1994. This Bond is to cover the
term said License.
NOW, THEREFORE, if a license is granted to the said Principal, and if
such LICENSEE shall during the life of said License faithfully observe all
the Ordinances of said Obligee, and faithfully perform the duties required by
Ordinance, rules or regulations and will save and keep harmless and indemnify
said Obligee, form all actions, suits, costs, damages and expenses, including
Attorney's Fees which shall or may at any time happen to come to it or for or
on account of any injury or damage received or sustained by any person, then
the above obligation shall be void; otherwise to be and remain in full force
and effect.
IT IS FURTHER UNDERSTOOD AND AGREED that this bond my be terminated by
either party hereto delivering written notice of termination by Registered or
Certified Mail to the other parities at least 30 days prior to the effective
date of such termination; the surety, however, remaining liable fro any
defaults under this Bond, committed prior to the expiration of such 30 day
period.
(Seal)
-----------------------------------------------------
UNITED STATES FIDELITY AND GUARANTY COMPANY
COUNTERSIGNED /S/ T. HARTLEY MARSHALL
-----------------------------------------------------
Assistant Vice President
By /S/
----------------- By /S/ THOMAS FITZGERALD
Resident Agent ---------------------------------------------------
Assistant Secretary
ACKNOWLEDGMENT OF SURETY
(Corporate Officer)
State of Maryland
On the 1st day of September, 1993, before me the undersigned officers,
personally appeared T. Hartley Marshall and Thomas Fitzgerald, who
acknowledged themselves to be the aforesaid officers of UNITED STATES
FIDELITY AND GUARANTY COMPANY, a corporation, and that they as such officers,
being authorized so to do, executed the foregoing instrument for the purposes
therein contained, by signing the name of the corporation by themselves as
such officers.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
/S/
<PAGE>
MISSISSIPPI
STATE DEPARTMENT OF
HEALTH
Hereby Grants A
Food Service Permit
To
MARITIME GROUP LTD
To Maintain and Operate A Food Service Establishment
Under The Name Of PALACE CASINO
-------------------------------------------------------------
SHOWROOM BAR
Located At 103 HOWARD AVENUE BILOXI, HARRISON
-------------------------------------------------------------------
This permit signifies compliance on the date of issue with the Food
Service Sanitation Regulation of the Mississippi State Department of Health
and is valid for a period of 12 months from the date of issue unless
suspended or revoked.
/S/ March 16, 1994
- ------------------------------ ------------------------------
Issuing Official Date
/S/ 24F-C0894
- ------------------------------ ------------------------------
State Health Officer Permit
Revised 12/92 Display For Public View-Non Transferable Form No. 307
<PAGE>
MISSISSIPPI
STATE DEPARTMENT OF
HEALTH
Hereby Grants A
Food Service Permit
To
MARITIME GROUP LTD
To Maintain and Operate A Food Service Establishment
Under The Name Of PALACE CASINO
-------------------------------------------------------------
RUBY SERVICE BAR
Located At 103 HOWARD AVENUE BILOXI, HARRISON
-------------------------------------------------------------------
This permit signifies compliance on the date of issue with the Food
Service Sanitation Regulation of the Mississippi State Department of Health
and is valid for a period of 12 months from the date of issue unless
suspended or revoked.
/S/ March 16, 1994
- ------------------------------ ------------------------------
Issuing Official Date
/S/ 24F-C0891
- ------------------------------ ------------------------------
State Health Officer Permit
Revised 12/92 Display For Public View-Non Transferable Form No. 307
<PAGE>
MISSISSIPPI
STATE DEPARTMENT OF
HEALTH
Hereby Grants A
Food Service Permit
To
MARITIME GROUP LTD
To Maintain and Operate A Food Service Establishment
Under The Name Of PALACE CASINO
-------------------------------------------------------------
DIAMOND SERVICE BAR
Located At 103 HOWARD AVENUE BILOXI, HARRISON
-------------------------------------------------------------------
This permit signifies compliance on the date of issue with the Food
Service Sanitation Regulation of the Mississippi State Department of Health
and is valid for a period of 12 months from the date of issue unless
suspended or revoked.
/S/ March 16, 1994
- ------------------------------ ------------------------------
Issuing Official Date
/S/ 24F-C0890
- ------------------------------ ------------------------------
State Health Officer Permit
Revised 12/92 Display For Public View-Non Transferable Form No. 307
<PAGE>
MISSISSIPPI
STATE DEPARTMENT OF
HEALTH
Hereby Grants A
Food Service Permit
To
MARITIME GROUP LTD
To Maintain and Operate A Food Service Establishment
Under The Name Of PALACE CASINO
-------------------------------------------------------------
CROWN BAR
Located At 103 HOWARD AVENUE BILOXI, HARRISON
-------------------------------------------------------------------
This permit signifies compliance on the date of issue with the Food
Service Sanitation Regulation of the Mississippi State Department of Health
and is valid for a period of 12 months from the date of issue unless
suspended or revoked.
/S/ March 16, 1994
- ------------------------------ ------------------------------
Issuing Official Date
/S/ 24F-C0893
- ------------------------------ ------------------------------
State Health Officer Permit
Revised 12/92 Display For Public View-Non Transferable Form No. 307
<PAGE>
MISSISSIPPI
STATE DEPARTMENT OF
HEALTH
Hereby Grants A
Food Service Permit
To
MARITIME GROUP LTD
To Maintain and Operate A Food Service Establishment
Under The Name Of PALACE CASINO
-------------------------------------------------------------
GOLDEN WELL BAR
Located At 103 HOWARD AVENUE BILOXI, HARRISON
-------------------------------------------------------------------
This permit signifies compliance on the date of issue with the Food
Service Sanitation Regulation of the Mississippi State Department of Health
and is valid for a period of 12 months from the date of issue unless
suspended or revoked.
/S/ March 16, 1994
- ------------------------------ ------------------------------
Issuing Official Date
/S/ 24F-C0892
- ------------------------------ ------------------------------
State Health Officer Permit
Revised 12/92 Display For Public View-Non Transferable Form No. 307
<PAGE>
MISSISSIPPI
STATE DEPARTMENT OF
HEALTH
Hereby Grants A
Food Service Permit
To
MARITIME GROUP LTD
To Maintain and Operate A Food Service Establishment
Under The Name Of PALACE CASINO
-------------------------------------------------------------
CROWN ROOM
Located At 103 HOWARD AVENUE BILOXI, HARRISON
-------------------------------------------------------------------
This permit signifies compliance on the date of issue with the Food
Service Sanitation Regulation of the Mississippi State Department of Health
and is valid for a period of 12 months from the date of issue unless
suspended or revoked.
/S/ March 16, 1994
- ------------------------------ ------------------------------
Issuing Official Date
/S/ 24F-A0442
- ------------------------------ ------------------------------
State Health Officer Permit
Revised 12/92 Display For Public View-Non Transferable Form No. 307
<PAGE>
ALCOHOLIC BEVERAGE PERMIT
Permit No. 7319 24 122
Date Issued April 6, 1994
Date Expired April 5, 1995
Issue New
Class ON PREMISES RETAILER
Issued To:
Maritime Group, Ltd.
Palace Casino
158 Howard Avenue
Biloxi, MS 39530 Harrison
Issued By:
/S/
- --------------------------------
Director
/S/
- --------------------------------
Commissioner
NO: 2638
<PAGE>
HARRISON COUNTY
WASTEWATER AND SOLID WASTE
MANAGEMENT DISTRICT
14108 AIRPORT ROAD
P.. BOX 2409
GULFPORT, MISSISSIPPI 39505
PERMIT APPLICATION AND REGISTRATION
GREASE WASTE GENERATOR
Date 3-28-94
Applicant's Business Name Maritime Resorts d/b/a Palace Casino
Mailing Address 182 Howard Ave, Biloxi, Mississippi 39530
Physical Address of food
preparation establishment 182 Howard Ave, Biloxi, Mississippi 39530
Number of grease traps 1
Approximate size in Gallons of each 253.2 Compactor #1 Interceptor
This is to certify that the information given above is correct to the best of
my knowledge and belief. By my signature I hereby agree to the conditions
stated n the Harrison County Wastewater and Solid Waste Management District
Grease Trap Waste Regulation, Dated April 2, 1992.
Signature
Printed Name Leonard Pizzetta
Title Chief Engineer
Information verified by /S/
Permit Number T-081
Entered Date 4-6-94
Expiration Date 7-1-94
Fee paid 30.00
Check # 0632
Received by /S/
Approval Signature /S/
<PAGE>
HARRISON COUNTY
WASTEWATER AND SOLID WASTE
MANAGEMENT DISTRICT
14108 AIRPORT ROAD
P.. BOX 2409
GULFPORT, MISSISSIPPI 39505
PERMIT APPLICATION AND REGISTRATION
GREASE WASTE GENERATOR
Date 3-28-94
Applicant's Business Name Maritime Resorts d/b/a Palace Casino
Mailing Address 182 Howard Ave, Biloxi, Mississippi 39530
Physical Address of food
preparation establishment 182 Howard Ave, Biloxi, Mississippi 39530
Number of grease traps 1
Approximate size in Gallons of each 525.2 Main #8 Interceptor
This is to certify that the information given above is correct to the best of
my knowledge and belief. By my signature I hereby agree to the conditions
stated n the Harrison County Wastewater and Solid Waste Management District
Grease Trap Waste Regulation, Dated April 2, 1992.
Signature /S/ LEONARD PIZZETTA
Printed Name Leonard Pizzetta
Title Chief Engineer
Information verified by /S/
Permit Number T-088
Entered Date 4-6-94
Expiration Date 7-1-94
Fee paid 30.00
Check # 06371
Received by /S/
Approval Signature /S/
<PAGE>
HARRISON COUNTY
WASTEWATER AND SOLID WASTE
MANAGEMENT DISTRICT
14108 AIRPORT ROAD
P.. BOX 2409
GULFPORT, MISSISSIPPI 39505
PERMIT APPLICATION AND REGISTRATION
GREASE WASTE GENERATOR
Date 3-28-94
Applicant's Business Name Maritime Resorts d/b/a Palace Casino
Mailing Address 182 Howard Ave, Biloxi, Mississippi 39530
Physical Address of food
preparation establishment 182 Howard Ave, Biloxi, Mississippi 39530
Number of grease traps 1
Approximate size in Gallons of each 17.3 Sink #5 Interceptor
This is to certify that the information given above is correct to the best of
my knowledge and belief. By my signature I hereby agree to the conditions
stated n the Harrison County Wastewater and Solid Waste Management District
Grease Trap Waste Regulation, Dated April 2, 1992.
Signature /S/ LEONARD PIZZETTA
Printed Name Leonard Pizzetta
Title Chief Engineer
Information verified by /S/
Permit Number T-085
Entered Date 4-6-94
Expiration Date 7-1-94
Fee paid 30.00
Check # 06371
Received by /S/
Approval Signature /S/
<PAGE>
HARRISON COUNTY
WASTEWATER AND SOLID WASTE
MANAGEMENT DISTRICT
14108 AIRPORT ROAD
P.. BOX 2409
GULFPORT, MISSISSIPPI 39505
PERMIT APPLICATION AND REGISTRATION
GREASE WASTE GENERATOR
Date 3-28-94
Applicant's Business Name Maritime Resorts d/b/a Palace Casino
Mailing Address 182 Howard Ave, Biloxi, Mississippi 39530
Physical Address of food
preparation establishment 182 Howard Ave, Biloxi, Mississippi 39530
Number of grease traps 1
Approximate size in Gallons of each 17.3 Sink #6 Interceptor
This is to certify that the information given above is correct to the best of
my knowledge and belief. By my signature I hereby agree to the conditions
stated n the Harrison County Wastewater and Solid Waste Management District
Grease Trap Waste Regulation, Dated April 2, 1992.
Signature /S/ LEONARD PIZZETTA
Printed Name Leonard Pizzetta
Title Chief Engineer
Information verified by /S/
Permit Number T-086
Entered Date 4-6-94
Expiration Date 7-1-94
Fee paid 30.00
Check # 06371
Received by /S/
Approval Signature /S/
<PAGE>
HARRISON COUNTY
WASTEWATER AND SOLID WASTE
MANAGEMENT DISTRICT
14108 AIRPORT ROAD
P.. BOX 2409
GULFPORT, MISSISSIPPI 39505
PERMIT APPLICATION AND REGISTRATION
GREASE WASTE GENERATOR
Date 3-28-94
Applicant's Business Name Maritime Resorts d/b/a Palace Casino
Mailing Address 182 Howard Ave, Biloxi, Mississippi 39530
Physical Address of food
preparation establishment 182 Howard Ave, Biloxi, Mississippi 39530
Number of grease traps 1
Approximate size in Gallons of each 168 Diswasher #4 Interceptor
This is to certify that the information given above is correct to the best of
my knowledge and belief. By my signature I hereby agree to the conditions
stated n the Harrison County Wastewater and Solid Waste Management District
Grease Trap Waste Regulation, Dated April 2, 1992.
Signature /S/ LEONARD PIZZETTA
Printed Name Leonard Pizzetta
Title Chief Engineer
Information verified by /S/
Permit Number T-084
Entered Date 4-6-94
Expiration Date 7-1-94
Fee paid 30.00
Check # 06371
Received by /S/
Approval Signature /S/
<PAGE>
HARRISON COUNTY
WASTEWATER AND SOLID WASTE
MANAGEMENT DISTRICT
14108 AIRPORT ROAD
P.. BOX 2409
GULFPORT, MISSISSIPPI 39505
PERMIT APPLICATION AND REGISTRATION
GREASE WASTE GENERATOR
Date 3-28-94
Applicant's Business Name Maritime Resorts d/b/a Palace Casino
Mailing Address 182 Howard Ave, Biloxi, Mississippi 39530
Physical Address of food
preparation establishment 182 Howard Ave, Biloxi, Mississippi 39530
Number of grease traps 1
Approximate size in Gallons of each 168 Dishwasher #2 Interceptor
This is to certify that the information given above is correct to the best of
my knowledge and belief. By my signature I hereby agree to the conditions
stated n the Harrison County Wastewater and Solid Waste Management District
Grease Trap Waste Regulation, Dated April 2, 1992.
Signature /S/ LEONARD PIZZETTA
Printed Name Leonard Pizzetta
Title Chief Engineer
Information verified by /S/
Permit Number T-082
Entered Date 4-6-94
Expiration Date 7-1-94
Fee paid 30.00
Check # 06371
Received by /S/
Approval Signature /S/
<PAGE>
HARRISON COUNTY
WASTEWATER AND SOLID WASTE
MANAGEMENT DISTRICT
14108 AIRPORT ROAD
P.. BOX 2409
GULFPORT, MISSISSIPPI 39505
PERMIT APPLICATION AND REGISTRATION
GREASE WASTE GENERATOR
Date 3-28-94
Applicant's Business Name Maritime Resorts d/b/a Palace Casino
Mailing Address 182 Howard Ave, Biloxi, Mississippi 39530
Physical Address of food
preparation establishment 182 Howard Ave, Biloxi, Mississippi 39530
Number of grease traps 1
Approximate size in Gallons of each 168 Dishwasher #3 Interceptor
This is to certify that the information given above is correct to the best of
my knowledge and belief. By my signature I hereby agree to the conditions
stated n the Harrison County Wastewater and Solid Waste Management District
Grease Trap Waste Regulation, Dated April 2, 1992.
Signature /S/ LEONARD PIZZETTA
Printed Name Leonard Pizzetta
Title Chief Engineer
Information verified by /S/
Permit Number T-083
Entered Date 4-6-94
Expiration Date 7-1-94
Fee paid 30.00
Check # 06371
Received by /S/
Approval Signature /S/
<PAGE>
HARRISON COUNTY
WASTEWATER AND SOLID WASTE
MANAGEMENT DISTRICT
14108 AIRPORT ROAD
P.. BOX 2409
GULFPORT, MISSISSIPPI 39505
PERMIT APPLICATION AND REGISTRATION
GREASE WASTE GENERATOR
Date 3-28-94
Applicant's Business Name Maritime Resorts d/b/a Palace Casino
Mailing Address 182 Howard Ave, Biloxi, Mississippi 39530
Physical Address of food
preparation establishment 182 Howard Ave, Biloxi, Mississippi 39530
Number of grease traps 1
Approximate size in Gallons of each 17.3 Sink #7 Interceptor
This is to certify that the information given above is correct to the best of
my knowledge and belief. By my signature I hereby agree to the conditions
stated n the Harrison County Wastewater and Solid Waste Management District
Grease Trap Waste Regulation, Dated April 2, 1992.
Signature /S/ LEONARD PIZZETTA
Printed Name Leonard Pizzetta
Title Chief Engineer
Information verified by /S/
Permit Number T-087
Entered Date 4-6-94
Expiration Date 7-1-94
Fee paid 30.00
Check # 06371
Received by /S/
Approval Signature /S/
<PAGE>
STATE OF MISSISSIPPI
MISSISSIPPI GAMING COMMISSION
License No. 056
GAMING LICENSE
This Gaming License entitles MARITIME GROUP, LTD., d/b/a PALACE CASINO,
located at Howard Avenue, Biloxi, Mississippi, (Harrison Co.) to engage as
an OPERATOR. This license is subject to the Mississippi Gaming Control Act
and the Rules and Regulations adopted thereunder. This authorizes the holder
of the license to conduct gaming pursuant to the type of license issued by
the Mississippi Gaming Commission. The License is non-transferable or
assignable and must be conspicuously displayed in an area visible to the
public.
/S/ STUART C. IRBY, JR. /S/
- ----------------------------- -----------------------------------
Chairman, Stuart C. Irby, Jr. Executive Director
Mississippi Gaming Commission
Date Issued: March 17, 1994 Expiration Date: March 17, 1996
<PAGE>
STATE OF MISSISSIPPI
BEER PERMIT AND PRIVILEGE LICENSE
STATE TAX COMMISSION NUMBER
JACKSON, MISSISSIPPI
Retailer License Fee: $30.00
$30.00
Issued: 01/06/94
Business
Location: 124 Lameuse Street
Issued To: Maritime Group Ltd
124 Lameuse Street
Biloxi, MS 39530
Effective Date: 09/01/94
Expiration Date: 09/01/95
<PAGE>
CITY OF BILOXI, MISSISSIPPI - PRIVILEGE TAX LICENSE
<TABLE>
<S> <C> <C> <C>
A-15734 A-17171 A-17354
September 13, 1994 September 13, 1994 September 13, 1994 September 13, 1994
Expires: Unreadable Expires: Sept. 30. 1994 Expires: Sept. 30, 1994 Expires: Sept. 30, 1994
Received Of: Received Of: Received Of: Received Of:
Palace Casino Maritime Group, Ltd. Palace Casino Palace Casino/Crown Room
Maritime Group, Ltd. Jack C?? Maritime Group, Ltd. Maritime Group, Ltd.
124 Lameuse St 124 Lameuse St 124 Lameuse St 124 Lameuse St
Biloxi, MN 39530 Biloxi, MN 39530 Biloxi, MN 39530 Biloxi, MN 39530
Business Office Business Office/Investments Business Office/Dockside Restaurants 9696 159
Total Tax $150.00 Total Tax $20.00 Saving (unreadable?) Total Tax $105.00
Deputy Tax Collector /S/ Deputy Tax Collector /S/ Total Tax $30.00 Deputy Tax Collector /S/
Deputy Tax Collector /S/
</TABLE>
<TABLE>
<S> <C>
September, unreadable September, unreadable
Expires: Sept. 30, ??? Expires: Sept. 30,
Received Of: Received Of:
Palace/Emerald Courtyard Palace/Pearl Diver Oyster
Maritime Group, Ltd. Oar/Maritime Group, Ltd.
124 Lameuse St 124 Lameuse St
Biloxi, MN 39530 Biloxi, MN 39530
Restaurants 9696 159 Beer Retail 15.00
Total Tax $150.00 Restaurants 9696 159
Deputy Tax Collector /S/ 42.00
Total Tax $57.00
Deputy Tax Collector /S/
</TABLE>
<PAGE>
SCHEDULE 3.3(a)
Buyer is aware of the following items that may jeopardize the integrity of
the Palace Casino's assets and by signature hereby waive those conditions so
as to eliminate them from consideration relative to Section 3.3(a):
1. Dredging under the barge should be completed to eliminate bottom
touching and the possibility of damage to the hull and interior
components.
2. New hatch covers should be redesigned and installed to further
insure water-tight integrity of the hull compartments.
3. Internal areas of the barge should be further protected with a
rust inhibitor paint which meets Maritime specifications.
4. Interior barge areas should be ventilated to insure removal of
hazardous gases and reduce condensation.
5. Air cooled chillers #1 and #2 should be elevated above the roof
line to insure proper ventilation and eliminating the use of water
as a source of condenser cooling.
6. Additional Pre-heating coils need to be installed in the
Dehumidfiers to further reduce the amount of humidity contained in
the casino guest areas.
7. Environmental control system (Johnson Controls) should be
checked out thoroughly and necessary components replaced as needed.
8. Roofing areas that necessitate repair should be performed to
(Firestone) requirements and work pads need to be installed in
appropriate walk paths to further reduce deterioration.
9. Dome area should be re-sealed and waterproofed to further prevent
water intrusion into guest areas (Emerald Courtyard and Crown
Room).
10. Exterior glass should be re-sealed and waterproofed to further
prevent water intrusion into the exterior wall areas (Palladium
Theater, Executive Offices, Slot Tech Room).
11. Dishwashing area should be reconfigured to meet Health
Department standards on change of ownership.
12. Fire suppression systems in the main kitchen and Pearl Divers areas
should be modernized to meet new fire code standards on change
of ownership.
<PAGE>
13. Interior neon repair on first and second floors.
14. Exterior neon signage needs to be repaired to eliminate burned
out sections including letters illuminating Palace Casino.
<PAGE>
SCHEDULE 3.5
Allocation of a Portion of the Purchase Price as
------------------------------------------------
to Certain Parcels of Real Property
-----------------------------------
Triplett Property: $ 75,000
Off-Site 4.5 Acre Improved Parking Lot $ 300,000
Casino and related personal property $13,875,000
excluding Financed Property
Legal Description of Triplett Property:
THAT CERTAIN PARCEL OF LAND located in the City of Biloxi, Harrison County,
Mississippi, being 74 feet North and South 65 feet East and West, and being
bounded on the South by property now or formerly of Ewing; on the East by
property of Cruso; on the North by property of Toche; and on the West by
Seymour Lane; being part of Lot 4, Block 14, SUMMERVILLE ADDITION to the City
of Biloxi, according to the official map or plat thereof on file and of
record in Copy Plat Book 1, at page 11, in the office of the Chancery Clerk
of Harrison County, Mississippi; said Lot is also described as Parcel No. 24,
Block 14, Page 236 of the official Tax Records of Biloxi, Mississippi.
<PAGE>
SCHEDULE 5.2
<PAGE>
SCHEDULE 5.2
PERMITTED ENCUMBRANCES
1. Loftin property Mortgage in favor of Peoples Bank, $123,000 principal
balance, five year term, 6% annum.
<PAGE>
SCHEDULE 5.6
Employment Contracts and Benefit Plans
--------------------------------------
Employment Contracts:
- ---------------------
Between Maritime Group, Ltd. And Palace Casinos, Inc. and Dual Cooper dated
August 5, 1996.
Vacation Benefits:
- ------------------
Employees are entitled to vacation benefits under Maritime Group, Ltd.'s
vacation policy on the following schedule:
One year of service - five days paid vacation
Two years of service - ten days paid vacation
Three years of service - ten days paid vacation
Four years of service - fifteen days paid vacation
As of September 1996, Maritime Group, Ltd. Has $44,599 in accrued vacation
pay.
Medical Insurance Benefits:
- ---------------------------
(through September 30, 1996)
Blue Cross & Blue Shield covering employees
(from October 1, 1996 on)
Self insured through Pomeroy & Pomeroy
<PAGE>
[Table of Miscellaneous Inventory]
<PAGE>
SCHEDULE 2.1(f)
<PAGE>
EXHIBIT 2(1)(h)
TELEPHONE NUMBERS USED: (601) 432-8888
(601) 436-4200
<PAGE>
SCHEDULE 2.2(a)
<PAGE>
MARITIME GROUP LTD.
SUMMARY OF LEASES
- -------------------------------------------------------------------------------
Thomas, Tyron & Gary Gollott Land Lease - Visitor Center $7,000.00
P.O. Box 468
Biloxi, MS 39533
- -------------------------------------------------------------------------------
Fleuer De Lis Society Building Lease - Support Services $4,000.00
c/o Peoples Bank-Chevi Swetman
P.O. Box Drawer 529
Biloxi, MS 395533
- -------------------------------------------------------------------------------
Gulf Central Seafoods, Inc. Land Lease - Parking Lot $28,500.00
P.O. Box 373
Biloxi, MS 39533
- -------------------------------------------------------------------------------
Sea Products, Inc. Land Lease - Parking Lot $30,000.00
P.O. Box 1419
Biloxi, MS 39533
- -------------------------------------------------------------------------------
Private Mini Storage Storage 289.00
3755 Airport Blvd.
Mobile, AL 36608
- -------------------------------------------------------------------------------
Hancock Bank Copier Lease $370.00
P.O. Box 4019
Gulfport, MS 39502
- -------------------------------------------------------------------------------
Taylor Properties Warehouse $2,000.00
P.O. Box 1206
Biloxi, MS 39533
- -------------------------------------------------------------------------------
Ford Motor Credit Automotive Lease (2) $1.147.72
P.O. Box 830339
Birmingham, AL 35283
- -------------------------------------------------------------------------------
Pitney Bowes Credit Corporation Postage Machine $156.00 (1)
P.O. Box 5151
Norwalk, CT 06856-5151
- -------------------------------------------------------------------------------
Pitney Bowes Credit Corporation Postage Machine $127.50 (1)
8375 Dix Ellis Trail - Ste 301
Jacksonville, FL 32256-1221
- -------------------------------------------------------------------------------
$80,042.22
- -------------------------------------------------------------------------------
(1) PAYMENTS ARE MADE
QUARTERLY
- -------------------------------------------------------------------------------
<PAGE>
SCHEDULE 2.2 (b)
<PAGE>
SOFTWARE INVENTORY
- -------------------------------------------------------------------------------
NAME USERS ??
- -------------------------------------------------------------------------------
DOS 55 8.2
- -------------------------------------------------------------------------------
MSOFFICE NETWORK 4.01
- -------------------------------------------------------------------------------
MSWORD 8
- -------------------------------------------------------------------------------
EXCELL 5
- -------------------------------------------------------------------------------
MSPUB 2 2
- -------------------------------------------------------------------------------
MSWORKS 55
- -------------------------------------------------------------------------------
HARVARD GRAPHICS 1 4
- -------------------------------------------------------------------------------
NOVELL 3.12 50 3.12
- -------------------------------------------------------------------------------
DAVINCHI MAIL 60
- -------------------------------------------------------------------------------
ACCESS 1.1
- -------------------------------------------------------------------------------
FOXPRO 2.8
- -------------------------------------------------------------------------------
DOS IBM 15 8
- -------------------------------------------------------------------------------
IGT NETWORK
- -------------------------------------------------------------------------------
LODGINGS NETWORK
- -------------------------------------------------------------------------------
MSPWRPOINT 55
- -------------------------------------------------------------------------------
MSMONEY 2
- -------------------------------------------------------------------------------
LANTASTIC 15
- -------------------------------------------------------------------------------
INFOGENESIS 1
- -------------------------------------------------------------------------------
ELITE400 30
- -------------------------------------------------------------------------------
BACKUPEXEC 1 4.01
- -------------------------------------------------------------------------------
OMNIPAGE 1
- -------------------------------------------------------------------------------
COMMWORKS 1
- -------------------------------------------------------------------------------
PCTOOLS 1
- -------------------------------------------------------------------------------
FORMTOOL 11.0B
- -------------------------------------------------------------------------------
SMARTLABE 2 3
- -------------------------------------------------------------------------------
PROBAR 1
- -------------------------------------------------------------------------------
SHIVA 23.7.7
- -------------------------------------------------------------------------------
SMARTCOM 1 1
- -------------------------------------------------------------------------------
ADP PC/PAYROLL 2 5.02
- -------------------------------------------------------------------------------
PASSBOOK TICKETING SYSTEMS 1 1
- -------------------------------------------------------------------------------
<PAGE>
EXHIBIT 2(2) (c)
<PAGE>
MARITIME GROUP LTD.
FINANCING ARRANGEMENTS
Name & Address Description
- -------------- -------------
Bally Gaming Inc.
6601 South Bermuda Road
Las Vegas, Nevada 89110-3605 Slot Machines
International Gaming Technology
P.O. Box 10580
Reno, Nevada 89510-0580 Slot Machines
Mikhon Gaming Corporation
1045 Palms Airport Drive
Las Vegas, Nevada 89119 Neon Signs
NEC America, Inc.
365 West Passaic Street
Rochelle Park, NJ 07662 Phone Equipment
IBM Credit Corporation
290 Harbor Drive
Stamford, CT 06904 Point of Sale System
Peoples Bank
P.O. Box Drawer 529
Biloxi, MS 39530 Mortgage on Property Adjacent
to the Casino
Ford Motor Credit Company
P.O. Box 830339
Birmingham, AL 35283-0339 Van
Total Payments
(1) Estimate based upon pro rata number of machines remaining
(2) Includes payment of those machines removed from the floor (approx. 50)
(3) Includes a $1 purchase option at the end of the Agreement
Schedule 2.3(h)
Excluded Insurance Policies
---------------------------
Insurance Type of Policy
Company Coverage Numbers
- --------- -------- --------
Scottsdale Ins. Co. General Liability CGS 012801
CAS 040831
CLS 0367962
Miss. Windstorm
Underwriters Ass'n Wind CPF 757004
USF&G Property CPR 300254460-01
Hartford Steam Boiler &
Inspection Co. EDP CSI 944368301
Fidelity & Deposit Ins. Co. Crime CCP 0007812-01
Westchester Fire Ins. Co. Umbrella CUA 102877-0
Lloyds/St. Paul Hull/Equipment Binder No. AGJ 1010
(includes the following:)
Reliance Ins. Co. Equipment
William H. McGee & Co. Equipment
Navigators Ins. Co. Equipment
John Plumer & Parnter Ltd. Hull and P&I
St. Paul Fire & Marine Ins. Co. Hull and P&I
<PAGE>
EXHIBIT B
EMPLOYMENT AGREEMENT
BY AND BETWEEN
CASINO RESOURCE CORPORATION
AND
JOHN J. PILGER
THIS AGREEMENT, entered into on May 20, 1996, is made by and between Casino
Resource Corporation ("CRC") and John J. Pilger ("Pilger").
WHEREAS, CRC and Pilger have been parties to a written employment agreement
which has governed the parties' relationship; and
WHEREAS, CRC desires the services of Pilger to assist CRC in its operations
as provided herein, and Pilger has agreed to provide such services;
NOW, THEREFORE, CRC and Pilger, in consideration of the mutual promises and
covenants contained herein, agree as follows:
I. EMPLOYMENT. CRC agrees to employ Pilger as its Chairman of the
Board and Chief Executive Officer. Pilger hereby accepts such employment.
Pilger will serve CRC under the direction of its Board of Directors. During the
term of this Agreement, Pilger agrees to devote a majority of his business time,
skill, energy and attention to the services and business of CRC, and shall
perform such services in a diligent, trustworthy, loyal and business-like
manner, all for the purpose of advancing the business of CRC.
II. NON-EXCLUSIVITY OF SERVICES. Pilger will devote his best efforts to
the performance of his duties hereunder. Pilger will not, without the written
consent of the Board of Directors of CRC, engage in any activity which conflicts
with the performance of his duties hereunder during the term of this Employment
Agreement. Pilger warrants that there exist no undisclosed written or oral
arrangements preventing his service to CRC, and that he has not made any
undisclosed commitment or performed any undisclosed act, and will not make any
commitment or perform any act, in conflict with his duties to CRC.
III. TERM. This Employment Agreement shall have a term of three years
and two months ("Initial Term"), beginning on May 20, 1996 and expiring on July
19, 1999. This Employment Agreement will, after expiration of the Initial Term,
automatically extend for consecutive additional one year terms ("Succeeding
Terms") absent sixty (60) days of written notice from either party to the other,
prior to the expiration of either the Initial Term or any Succeeding Term, of
the party's intent not to renew the
<PAGE>
Employment Agreement. Both the Initial Term and any Succeeding Terms shall be
subject to termination before expiration under Section VII hereof.
EXHIBIT B
IV. COMPENSATION. In consideration of Pilger's acceptance of continued
employment and performance of duties under this Employment Agreement, including
but not limited to the provisions of Sections V and VI, CRC shall pay to Pilger
the following:
A. Salary. Pilger shall be paid a salary at an annual rate of Two
Hundred Twenty-five Thousand and no/100 ($225,000.00) Dollars ("Base
Salary"). Base Salary payments hereunder shall be made in the same manner
and number as are the salary payments of other CRC employees. Pilger's base
salary shall increase each year as determined by an increase in the
consumer price index between January 1st of the prior year and January 1st
of the current year.
B. Bonus Compensation. In addition to Base Salary, Pilger shall be
entitled to receive a cash bonus for each fiscal year in which CRC
generates net income in excess of One Million and no/100 ($1,000,000.00)
Dollars, as set forth in CRC's audited consolidated financial statements.
The amount of such bonus, if payable, shall be Twenty-five Thousand and
no/100 ($25,000.00) Dollars per One Million and no/100 ($1,000,000.00)
Dollars in earnings per fiscal year, unless Pilger was not employed by CRC
for the full fiscal year, in which case the bonus amount shall be prorated
for that portion of the fiscal year Pilger was so employed. The foregoing
bonus shall be in addition to any bonus which may be granted to Pilger by
the compensation committee of the Board of Directors pursuant to Section
VIII of the Agreement.
C. BENEFITS.
1. For such time as Pilger is employed under this Employment
Agreement, CRC shall provide for Pilger, at its own expense, life insurance
policies providing coverage in the amount of One Million and no/100
($1,000,000.00) Dollars, subject to availability of such coverage. Pilger
may name the beneficiaries of these policies.
2. For such time as Pilger is employed under this Employment
Agreement, CRC shall provide for Pilger, at its own expense, a long-term
disability policy providing replacement income coverage in the amount of at
least One Hundred Thousand and no/100 ($100,000.00) Dollars per year,
subject to availability of such coverage.
<PAGE>
3. Pilger shall be entitled to four (4) weeks of paid vacation per
calendar year, which vacation shall accrue on January 1st of each year. In
lieu of any vacation time not taken, Pilger shall receive cash compensation
for any vacation which is not used in the calendar year it is accrued.
EXHIBIT B
4. Pilger shall, for each fiscal year this Employment Agreement
remains effective, be entitled to benefits under health plans, pension
plans, stock purchase plans, and any other benefit plans, on the same terms
as such benefits are available generally to other senior executives of CRC,
as well as any benefits which are expressly granted to Pilger by the Board
of Directors of CRC.
5. Pilger shall receive an automobile allowance not to exceed Seven
Hundred Fifty and no/100 ($750.00) Dollars per month.
D. EXPENSE REIMBURSEMENT.
6. CRC will pay or reimburse Pilger for all reasonable and necessary
out-of-pocket expenses incurred by him in the performance of his duties
under this Employment Agreement, subject to the presentation of appropriate
vouchers in accordance with CRC's normal policies for expense verification.
7. The parties acknowledge that under certain circumstances it shall
be to CRC's advantage that Pilger's spouse or significant other accompany
him to out-of-town meetings or functions which involve or affect the
business of CRC. Accordingly, the parties agree that Pilger's spouse or
significant other shall be allowed to accompany him to up to four (4) such
functions per year, and CRC shall reimburse Pilger for all reasonable and
necessary expenses arising from her travel.
V. COVENANT NOT TO SOLICIT. In partial consideration of the
compensation paid under this Employment Agreement, including but not limited to
the company-sponsored insurance policies set forth in Paragraph IV C above,
Pilger agrees that during the term of this Employment Agreement and for one year
following the termination of his employment, whether voluntary or involuntary,
provided that any involuntary termination is in compliance with this Employment
Agreement, including the provisions of Section VII B, he shall not, either
personally, or through an employer, firm, agent, servant, employee, partner,
shareholder, representative, affiliate, or any other entity:
A. Deliver products or services, or attempt to deliver products or
services, which are of the same nature and type as those which Pilger
provided or
<PAGE>
offered during his employment under this Employment Agreement, to any
customer of CRC, as of the date of Pilger's termination and the twelve
(12) months immediately preceding such termination, without the prior
written consent of CRC.
EXHIBIT B
E. Employ or offer to employ any individual employed by CRC within the
four (4) months preceding the termination of Pilger's employment, Of
request, advise or entice any such individual to leave the employment of
CRC, without the prior written consent of CRC, with the exception of
Pilger's personal assistant.
Pilger further agrees that in the event he breaches any of the covenants
contained in this Section V of this Employment Agreement, irreparable injury
will result to CRC, that CRC's remedy at law will be inadequate, and that CRC
will be entitled to an injunction to restrain the continuing breach of this
Employment Agreement by Pilger, his partners, agents, Servants, employees, or
representatives, or any other persons or entities acting for or with him. CRC
shall, without limitation, be entitled to damages, reasonable attorneys' fees,
and all other costs and expenses incurred in connection with the enforcement of
this Section V, in addition to any other rights or remedies which CRC may have
at law or in equity.
VI. NONDISCLOSURE OF INFORMATION.
F. Pilger agrees that any information related to the business of CRC, or
any of its clients or customers, which is acquired by Pilger during his
employment by CRC shall be regarded as confidential and solely for the
benefit of CRC. Pilger shall not, except as is necessary in the ordinary
course of conducting business for CRC, use such information himself or
disclose such information to any other person or entity, directly or
indirectly, either during the term of this Employment Agreement or at any
time thereafter, without the prior written consent of CRC.
G. Pilger shall not remove any records or documents from the premises of
CRC or its clients in original, duplicate, or copied form, except as is
necessary in the ordinary course of conducting business for CRC and subject
to the approval of the CRC management person with authority to act on such
matters. Pilger shall immediate deliver to CRC, upon termination of
employment with CRC, or at any other time upon CRC's request, any and all
such records or documents in Pilger's possession or control.
VII. TERMINATION.
<PAGE>
H. Pilger's employment shall be terminated under any of the following
circumstances:
8. By mutual agreement of Pilger and CRC;
9. Immediately, upon the death of Pilger;
EXHIBIT B
10. CRC may terminate Pilger's employment hereunder, for Cause, at
any time upon written notice to Pilger. For the purposes of this Agreement,
CRC shall have "Cause" to terminate Pilger's employment hereunder in cases
of gross dereliction of duty or other grave misconduct on the part of
Pilger, which is substantially injurious to CRC; or
11. Voluntary termination by Pilger other than for Good Reason or
upon change of control.
I. In the event that Pilger's employment is terminated under this
Paragraph A1 or A2, Pilger's entitlement to compensation under Section IV
hereof shall immediately cease. In termination under A3 Pilger's right to
compensation under the terms of the Agreement shall continue until (i) both
parties agree to cease payments under this Agreement, or (ii) a Court of
competent jurisdiction renders a decision as to the Company's
determinations.
J. In the event that Pilger's employment is terminated by CRC other than
for Cause or by Pilger for Good Reason, Pilger shall be entitled to receive
from CRC a lump-sum payment equal to all compensation payable to him under
Section IV hereof through the end of the Initial Term, or if the Initial
Term has expired, the end of the current one-year term. The foregoing lump-
sum payment shall be made within 10 days of termination. For purposes of
this Agreement, "Good Reason" means (i) the assignment of Pilger of any
duties or responsibilities which in the reasonable judgment of Pilger are
inconsistent in any respect with Pilger's position (including status,
offices, titles and reporting requirements), authority, duties or
responsibilities, or any other action by the Company which in the reasonable
judgment of Pilger results in a substantial diminishment in such position,
authority, duties or responsibilities; (ii) the Company's requiring
relocation of Pilger, without his prior written consent, to a place of
employment other than Biloxi, Mississippi, except for travel reasonably
required in the performance of Pilger's responsibilities; or (iii) the
Company's failure to comply substantially with the provisions of Section IV
of this Agreement.
K. In the event of a Change of Control of CRC, Pilger may elect to
terminate his employment hereunder and receive from CRC the lump-sum
<PAGE>
payment set forth in Paragraph C. For purposes of this Agreement, "Change
of Control" shall mean the dissolution or liquidation of CRC, the
reorganization, merger or consolidation of CRC with one or more
corporations as a result of which CRC is not the surviving corporation, the
sale of substantially all the assets of CRC to another corporation or
entity, or the acquisition by any person or entity of more than (25%) or
the total voting power of CRC's outstanding capital stock.
VIII. BONUS. The compensation committee of the Board of Directors
will determine whether Pilger will receive a bonus in any given year, aside
from the bonus discussed in section IV.
IX. CONSENT TO VENUE AND JURISDICTION. Pilger consents to venue
and jurisdiction in the District Court of Hennepin County, State of
Minnesota, and in the United States District Court for the District of
Minnesota, and to service of process under Minnesota law, in any action
commenced to enforce this Employment Agreement.
X. ENTIRE AGREEMENT. This Employment Agreement constitutes the
entire agreement between the parties, and may not be amended or modified
except by mutual written agreement of CRC and Pilger.
XI. SUCCESSORS AND ASSIGNS. Subject to the provisions herein, the
benefits and obligations of this Employment Agreement shall be binding upon
and inure to the Successors and assigns of CRC.
XII. GOVERNING LAW. This Employment Agreement shall be construed
under, and governed by, the laws of the State of Minnesota.
XIII. NOTICE. Any notice or other communications required or
permitted to be given to the parties hereto shall be deemed to have been
given on the third (3rd) day following deposit in the United States mail,
postage prepaid, and addressed to the appropriate party at the address of
such party as may be, from time to time, provided in writing to the other.
XIV. SEVERABILITY. If any provisions of this Employment Agreement
shall, for any reason, be adjudged to be void, invalid or unenforceable by
a court of law, the remainder of this Employment Agreement shall
nonetheless continue and remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement.
CASINO RESOURCE CORPORATION
<PAGE>
Dated: By
--------------- ---------------------------------
Its
--------------------------------
Dated:
--------------- -----------------------------------
John J. Pilger
<PAGE>
NOTE
$37,078.02 December 31, 1994
FOR VALUE RECEIVED, the undersigned promises to pay to the order of Casino
Resource Corporation of Elkhorn, Wisconsin, the principal amount of
Thirty-Seven-thousand-seventy-eight-and 02/100 (37,078.02) Dollars with
interest thereon at the rate of nine and one-half (9.5%) percent per year.
Principal and interest shall be due in 24 monthly payments of
One-thousand-seven-hundred-two and 42/100(1,702.42) commencing January 31,
1995 and on the last day of each month thereafter and until paid in full. Any
remaining amounts due shall be payable in full on December 31, 1996. If said
amounts are not paid when due, interest on the unpaid portion shall accrue at
the rate of eleven and 1/2% (11.5%) percent per year. Payments will apply
first to interest and then principal.
All makers, endorsers, sureties and guarantors agree to pay all costs of
collection, including reasonable fees to the extent not prohibited by law.
Without affecting my liability or the liability of any endorser, surety or
guarantor, the holder may, without notice, grant renewals or extensions,
accept partial payments, release or impair any collateral security for this
Note or agree not to sue any party liable on it. Presentment, protest,
demands and notice of dishonor are waived.
The maker of this Note reserves the right to prepay principal at any time
in any amounts without penalty.
Maker acknowledges receipt of an exact copy of this Note.
/s/ John J. Pilger
- ----------------------------------
JOHN J. PILGER
<PAGE>
NOTE
$145,028.17 October 25, 1995
FOR VALUE RECEIVED and originally executed on March 31,1993, the
undersigned promises to pay to the order of Casino Resource Corporation of
Biloxi, Mississippi, the principal amount of One Hundred Forty-Five Thousand
Twenty-Eight Dollars and 17/100 ($145,028.17) with interest thereon at the
rate of seven (7%) percent per year. All amounts of principal and interest
shall be due in one payment payable on or before October 1, 1997. If said
amount is not paid when due, interest on the unpaid portion shall accrue at
the rate of twelve (12%) percent per year.
All makers, endorsers, sureties and guarantors agree to pay all costs of
collection, including reasonable attorney's fees to the extent not prohibited
by law.
Without affecting my liability or the liability of any endorser, surety or
guarantor, the holder may, without notice, grant renewals or extensions,
accept partial payments, release or impair any collateral security for this
Note or agree not to sue any party liable on it. Presentment, protest, demand
and notice of dishonor are waived.
The maker of this Note reserves the right to prepay principal at any time
in any amounts without penalty.
Maker acknowledges receipt of an exact copy of this Note.
/s/ John J. Pilger
--------------------------------------
John J. Pilger
<PAGE>
DEMAND NOTE
$35,000 April 8, 1996
FOR VALUE RECEIVED, the undersigned promises to pay to the order of Casino
Resource Corporation, a Minnesota corporation, the principal amount of
Thirty-five Thousand and no/100 ($35,000.00) Dollars with interest thereon at
prime as published from U.S. Banking in the Wall Street Journal this date,
plus one (1%) percent, adjusted annually. Principal and interest shall be due
upon demand. This and other executed notes are secured by One Hundred
Thousand (100,000) shares of Casino Resource Corporation stock.
All makers, endorsers, sureties and guarantors agree to pay all costs of
collection, including reasonable fees to the extent not prohibited by law.
Without affecting my liability or the liability of an endorser, surety or
guarantor, the holder may, without notice, grant renewals or extensions,
accept partial payments, release or impair any collateral security for this
Note or agree not to sue any party liable on it. Presentment, protest,
demands and notice of dishonor are waived.
The maker of this Note reserves the right to prepay principal at any time
in any amounts without penalty.
This note has been executed and delivered in the state of Mississippi and
shall be governed and construed in accordance with the laws of the state of
Mississippi.
Maker acknowledges receipt of an exact copy of this Note.
/s/ John J. Pilger
- ----------------------------------
John J. Pilger
<PAGE>
NON-CIRCUMVENTION
AND
NON-DISCLOSURE AGREEMENT
Casino Resource Corporation (hereinafter "Casino") and Huong "Henry" Le
(hereinafter "Le"), for the considerations and mutual promises contained
herein, agree as follows, to wit:
1. Casino and Le agree that Casino, for the time period set out
hereinbelow, shall have the exclusive right to negotiate a lease
and/or purchase of Le's real property adjacent to the Palace Casino.
Le agrees that he will not enter into any negotiations or discussions
with other prospective lessees or purchasers for his land adjacent to
the Palace Casino until the earlier of either ten (10) days after
another party other than Casino purchases and is awarded the Palace
Casino and its assets, or (ninety (90) days) after the execution of
this agreement. Neither Casino nor Le shall divulge each other's named
sources and shall not circumvent, either directly or indirectly, this
agreement, and shall not disclose any proprietary information obtained
hereby specifically, but not limited to, the lease documents negotiated
by Casino and Le.
It is understood that Casino has presented Le with a draft of a proposed
Lease agreement, the contents of which have not been mutually agreed
upon. This lease agreement, with mutually acceptable changes, shall be
used in conjunction with any agreement reached by Casino and Le
hereunder.
This Agreement shall be governed by the laws of the State of Mississippi.
5. This Agreement shall be binding on the parties hereto, their principals,
employees, representatives, agents, and assigns.
Casino shall, within five (5) days from the execution hereof issue Le
seventeen thousand (17,500) shares of its common stock; appropriate
registration rights shall be granted upon issuance of the stock.
<PAGE>
The term of this agreement shall be the earlier of either ten (10) days
after another party other than Casino purchases and is awarded the Palace
Casino and its assets, or ninety (90) days after the execution of this
agreement by Le.
A $10,000 non-refundable cash payment shall be made by Casino to Le
within five (5) days from the date of execution of this agreement to
help cover costs associated with the completion of the any lease
document.
Agreed this _____ day of July, 1996
Agreed and Accepted: Agreed and Accepted:
BY: /s/ JOHN J. PILGER BY: /s/ HUONG LE
---------------------------------- -------------------------------
JOHN J. PILGER HUONG "HENRY" LE
Casino Resource Corporation
<PAGE>
Exhibit 10.59
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT ("Agreement") is made and entered into this
______ day of December, 1995 by and between Casino Resource Corporation, a
Minnesota corporation with its principal offices at 1719 Beach Boulevard, Suite
306, Biloxi, Mississippi, 39531 ("CRC" or the "Company") and Monarch Casinos,
Inc., an Iowa corporation with its principal offices at 8450 Hickman Road, Suite
14A, Des Moines, Iowa, 50325 ("Monarch"), and acknowledged and agreed to by
Willard E. Smith ("Consultant"), an individual residing at 303 LaSalle Court,
Ocean Springs, Mississippi, 39564.
BACKGROUND
Monarch is engaged in the business of the identification and development of
commercial gaming activities.
The Company is engaged in the business of operating and developing
commercial gaming and related hotel and entertainment activities.
The Company and Monarch entered into a Memorandum of Understanding dated
January 18, 1995 (the "January 18 Agreement"), subsequently amended by a letter
agreement dated May 3, 1995 and by an Amendment and Modification Agreement
entered into on even date herewith (collectively, the "CRC-Monarch Agreement"),
pursuant to which, among other things, the Company acquired the right to develop
certain gaming activities.
The Company is currently finalizing a Technical Assistance and Development
Agreement with Harrah's or an affiliate of Harrah's for the Company and Harrah's
to jointly pursue one such gaming opportunity (the "Potawatomi Project") (the
"CRC-Harrah's Agreement"). In connection with the development of the Potawatomi
Project, Harrah's has entered into or intends to enter into certain "Casino
Agreements" (as defined in the CRC-Harrah's Agreement) with the Pokagon Band of
Potawatomi Indians (the "Pokagons"). The Company has previously delivered to
Monarch a current draft dated November 16,1995 of the CRC-Harrah's Agreement.
From the date of the January 18 Agreement, Monarch has provided certain
consulting services to the Company relating to analyzing potential gaming
ventures. The Company and Monarch have determined that it is in their mutual
best interests to continue that relationship, upon the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the above premises, and the mutual
covenants, agreements and representations herein made, and for other good
<PAGE>
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, CRC and Monarch, intending to be legally bound, hereby agree as
follows:
<PAGE>
1. ENGAGEMENT; CONSULTANT.
(a) CRC hereby engages Monarch as a consultant of CRC and Monarch
hereby accepts such engagement, upon the terms and conditions hereinafter set
forth.
(b) The Company and Monarch agree that the Consulting Services (as
hereafter defined) to be provided hereunder by Monarch shall be rendered by
Monarch's employee, Willard E. Smith ("Consultant").
2. TERM This agreement shall be deemed effective as of January 18, 1995,
and shall continue until the termination of the CRC-Harrah's Agreement
(including any extensions thereof),
unless sooner terminated under Paragraph 12.
1. SERVICES.
(a) During the term of this Agreement, Monarch shall cause Consultant
to render to the Company such services of an advisory nature as the Company
reasonably and in good faith may request from time to time so that the Company
may have the benefit of Consultant's knowledge, expertise, skills and experience
in the gaming industry (subject to the limitation described in (d) below, the
"Consulting Services").
(b) Monarch shall cause Consultant to be available for advice and
counsel to the officers of the Company and other employees designated by the
Company by telephone, letter, facsimile, or in person, as may be required by the
Company. Consultant shall consider all directions and instructions given by the
Company, but consultant shall independently determine the time and manner of the
performance of his responsibilities and duties hereunder. All communications
made by the Consultant concerning the Consulting Services shall be made to the
Chairman of the company, or to the employee or officer of the Company deemed
appropriate by the Consultant in dealing with the matter involved.
(c) The Consulting Services shall include but not be limited to site
selection, acquisition and planning, permitting and licensing, local, state and
federal government affairs, tribal affairs, feasibility, design and
construction, design and construction budgeting, capital and operating
budgeting, and marketing, planning and analysis.
(d) Notwithstanding the above, the Consulting Services to be provided
hereunder shall relate only to the Potawatomi Project and the next two
succeeding Indian gaming projects brought to the Company by Monarch under the
CRC-Monarch Agreement, and which the Company, in its sole discretion, agrees to
pursue (the Potawatomi Project, together with such two additional projects, the
"Initial Projects").
<PAGE>
(e) The Company recognizes the consultant shall not devote his full
business time to the Consulting Services and that the Consultant may continue to
participate in his business interests, other consulting services, and those of
Monarch, other than as may be prohibited by or contrary to this Agreement or the
CRC-Monarch Agreement (including any future amendments thereto).
(f) The Company and Monarch may, in their respective sole discretion,
agree to enter into additional consulting agreements in connection with projects
other than the Initial Projects (such other projects, "Additional Projects"), on
terms and conditions upon which the Company and Monarch may mutually agree.
4. COMPENSATION. As full compensation for all services rendered
hereunder, the Company agrees to pay Monarch as follows:
(a) $3,000, upon execution of this Agreement.
<PAGE>
(b) $6,000 per month from January 1995, through the end of the month
in which all "Casino Agreements" with respect to the Potawatomi Project are
executed and delivered (the "Execution Date").
(c) $9,000 per month beginning the next month immediately following
the month in which the Execution Date occurs, until the end of the month in
which the Company receives its first full "Management Fee" under the
CRC-Harrah's Agreement (the "Commencement Date").
(d) $14,750 per month from the Commencement Date until the
Termination Date (as defined below).
(e) The Company shall also loan to Monarch the amount of $250,000,
upon and subject to the receipt by the Company of a one-time payment in such
amount from Harrah's under the CRC-Harrah's Agreement (the "Loan"). The Loan
shall be advanced only if; and when within ten (10) days after, the receipt by
the Company of the one-time $250,000 payment from Harrah's under the
CRC-Harrah's Agreement. The Loan shall accrue interest at the rate of 7% and
shall be due on demand at any time after three years and six months from the
execution date of this Agreement; provided however, the Loan shall be deemed
fully paid (including accrued interest) upon the second anniversary of the
opening of the first casino related to the Potawatomi Project.
5. REIMBURSEMENT OF EXPENSES: CERTAIN BENEFITS.
(a) The Company shall reimburse Monarch or Consultant for all
reasonable and necessary expenses incurred by Consultant in connection with his
provision of consulting services hereunder; provided, (i) that such expenses
were either approved in advance by the Company (if such expenses were in excess
of $1,000 or related to business travel), or such expenses were incurred and
submitted for reimbursement in accordance with the expense reimbursement policy
of the Company then in effect, including if required, the submission of
vouchers, receipts or other records in support of the amount and nature of such
expenses, and further provided (ii) that such expenses were in an amount and of
a nature to permit the Company to include such reimbursement as a permissible
expense in accordance with Internal Revenue Code of 1986, as amended, and
Internal Revenue Service guidelines.
(b) Provided that the Company's insurance carriers permit
non-employees of the Company such as Consultant to participate in the group
insurance benefits provided by the Company to its employees and further provided
that any such participation shall not increase the cost to the Company (or its
employees) of providing such benefits to its employees, the Company shall permit
Consultant to participate in such group insurance benefits as Consultant shall
choose, and the Company shall pay one-half of the costs for such benefits, with
the Consultant paying the remaining one-half.
(c) Notwithstanding (a) above, Monarch (and not the company) shall
pay all costs associated with Consultant's moving expenses to Mississippi
<PAGE>
if consultant in his sole discretion determines to provide the Consulting
Services from Mississippi. If the provision of the Consulting Services require
relocation by Consultant (other than to Mississippi) as determined by Consultant
in his sole discretion and agreed to by the Company, the Company shall pay for
such expenses as provided in (a) above. If Consultant does move to Mississippi,
the Company agrees to rent to the Consultant the Company's LaSalle Street
Residence in Ocean Springs, Mississippi, for a period of up to ten months from
the date of execution of this Agreement for a rental of $500 per month, plus
utilities and minor repairs which together shall not exceed an additional $200
per month. If Consultant in his sole discretion determines to maintain a
residence in Mississippi, at the request of Consultant, the Company shall use
its best efforts to assist Consultant in obtaining mortgage financing for a
permanent residence in Mississippi, provided this shall not obligate the Company
to provide any financial assistance or guaranty to Consultant or any company
which may finance Consultant's mortgage.
<PAGE>
6. INDEPENDENT CONTRACTOR. Monarch's and Consultant's relationship to
the Company under this Agreement is one of an independent contractor only and
nothing herein shall be deemed to make Monarch or Consultant an employee,
partner, co-venturer or other ownership participant in the business or
activities of the Company. Furthermore, it is understood that the Company shall
not withhold any amount from the compensation payable to Monarch or Consultant
but shall file a form 1099 with the Internal Revenue Service of the United
States of America if required to indicate all compensation paid to Consultant.
7. CONFIDENTIAL INFORMATION. In the course of consulting for Company,
Company may provide Consultant with certain financial and other information
concerning its business. Consultant acknowledges that such information, whether
furnished before or after the date of this Agreement, whether written or oral,
together with any analysis, compilations, studies or other documents prepared by
Company or its agents, representatives, or employees regarding such information,
is the sole property of and is confidential to Company (hereinafter referred to
as "Confidential Information"). As used in this paragraph 7, the term Consultant
shall include Monarch.
8. LIMITATION ON SOLICITATION BY CONSULTANT. Consultant agrees that,
except in good faith compliance with his duties hereunder as requested by the
Company, Consultant shall not, without the prior written approval of the
Chairman of the Company.
(a) Solicit additional information regarding the Company or its
business from or otherwise contact any employees, agents, or representatives of
Company;
(b) Contact any customers, visitors, funding sources or employees of
Company or any governmental agencies, as they concern Company, or any of their
respective representatives, regarding the business of Company, the existence of
this Agreement or the subject matter hereof; or
(c) During the term of and for a period of three (3) years following
the execution date of this Agreement, solicit for employment or employ or
otherwise contract for the services of any person who is now employed by Company
in an executive or supervisory position.
As used in this Paragraph 8, the term Consultant shall include Monarch.
9. NONDISCLOSURE. Consultant agrees to hold the Confidential Information
in strictest confidence and to use the Confidential Information only for
purposes of rendering his services to Company as set forth in Paragraph 3 above.
Without limiting the generality of the foregoing, Consultant agrees as follows:
(a) Consultant will not, without the prior written consent of the
Chairman of the Company, disclose the Confidential Information to any person,
firm or corporation;
<PAGE>
(b) Consultant shall obligate all persons who receive, directly or
indirectly, any Confidential Information Thorn Consultant to abide by the terms
and conditions of this Agreement as if they were parties hereto;
(c) Consultant shall, at Company's request, return to Company or
destroy all copies of documents within Consultant's possession or control
containing any of the Confidential Information; and
(d) Consultant will not use any of the Confidential Information for
any commercial purposes or for any purpose which might be competitively
disadvantageous to Company.
As used in this Paragraph 9, the term consultant shall include Monarch.
10. EXCEPTIONS TO NONDISCLOSURE. The nondisclosure obligations of
Consultant set forth under Paragraph 9 of this Agreement shall not be deemed to
restrict the use and/or disclosure by Consultant or Monarch of any Confidential
Information which:
(a) Is or becomes publicly known or within the public domain without
the breach of this Agreement by consultant or Monarch or persons permitted to
receive such information pursuant to Paragraph 9 above; or
(b) Is disclosed to Consultant by a third person who is not under an
obligation of confidence to Company.
11. NON-COMPETITION; RIGHT OF FIRST REFUSAL.
(a) Consultant shall not, during the term of this Agreement, unless
acting with the prior written consent of the Board of Directors of the Company,
directly or indirectly:
(i) Own, manage, operate, finance, join, control or participate
in the ownership, management, operation, financing or control of; or be
connected as an officer, director, employee, partner, principal, agent,
representative, consultant or otherwise with any business or enterprise engaged
in any business engaged in by Company or any of its affiliates in all those
geographic areas in which Company or any of its affiliates does business or has
indicated an interest to do business; or
(ii) Use or permit his name to be used in connection with, any
business or enterprise engaged in the business engaged in by Company or any of
its affiliates in all those geographic areas in which Company or any of its
affiliates does business or has indicated an interest to do business; or
(iii) Use the name of Company or any name similar thereto.
(b) In no event shall the covenant not to compete described in this
Paragraph 11 apply to Consultant's activities with or on behalf of Monarch,
provided that such activities are consistent with the CRC-Monarch Agreement
<PAGE>
and any subsequent amendments thereto, including but not limited to the
Company's right of first refusal on subsequent Monarch gaming ventures, as set
forth in the CRC-Monarch Agreement.
(c) The Company shall have a right of first refusal to participate in
any gaming, entertainment or hotel venture which the Consultant or Monarch may
develop or have the right to participate in during the term of this Agreement.
The Company shall exercise its right of first refusal promptly after it has
received sufficient information to competently assess the opportunity.
12. TERMINATION. This Agreement shall terminate upon the earlier of:
(a) sixty days from the execution date of this Agreement if the
"Casino Agreements" between Harrah's and the Pokagons are not each executed by
such date;
(b) two years after the date of execution of the "Casino Agreements"
between Harrah's and the Pokagons if the first casino is not opened for business
or under construction within such period;
(c) expiration of the term set forth in Paragraph 2 above;
(d) mutual agreement of CRC and Monarch, on such terms as Monarch and
the Company may agree;
(e) this agreement will continue upon the death of Monarch's assign,
Willard B. Smith, the same as if the Consultant were living, only payments shall
enure to the estate of the Consultant.
<PAGE>
(f) notice by the Company of termination "for cause", which shall
consist only of: (i) theft, dishonesty, fraudulent misconduct, gross dereliction
of duty or other grave misconduct by Consultant or Monarch, which conduct is
injurious to the Company; (ii) repeated, demonstrated failure to perform
material duties in a competent and efficient manner; (iii) failure to perform
material duties in a competent and efficient manner in any instance if such
failure is not cured within thirty (30) days after written notice by Company, or
if such cure is not initiated within thirty (30) days of such notice and
continually maintained until cured if such failure cannot be remedied within
thirty days; (iv) material breach of this Agreement by Monarch or consultant, or
of the CRC-Monarch Agreement by Monarch; or (v) if the Consultant or Monarch is
required by applicable law, regulation or requirement to be licensed, permitted
or determined suitable (in any case "Qualified") pursuant to any tribal, local,
state or federal law or regulation, or by any partner or venturer in an Initial
Project or related agreement with the Company, and Consultant or Monarch is
deemed for any reason to be other than fully Qualified. Consultant may be
terminated, but the fees due consultant shall remain in full force and effect so
long as CRC or its assigns are receiving funds from the Pokagon contract;
(g) upon receipt by the Company of written notice from consultant or
Monarch of Consultant's or Monarch's voluntary termination of this Agreement.
Upon termination of this Agreement as provided above (the "Termination
Date"), the Company shall pay to Monarch any amounts due hereunder up to such
Termination Date, and shall reimburse Consultant for his expenses up to such
Termination Date in accordance with Paragraph 5.
13. EQUITABLE RELIEF; SURVIVAL.
(a) Monarch and the Consultant acknowledge that the restrictions
contained in paragraphs 7, 8, 9, 10 and 11 hereof are, in view of the nature of
the business of the Company, reasonable and necessary to protect the legitimate
interests of the Company, and that any violation of any provisions of those
Paragraphs will result in irreparable injury to the Company. Monarch and
Consultant also acknowledge that the Company shall be entitled to temporary and
permanent injunctive relief, without the necessity of proving actual damages,
and to an equitable accounting of all earnings, profits and other benefits
arising from any such violation, which rights shall be cumulative and in
addition to any other rights or remedies to which the Company may be entitled.
In the event of any such violation, the Company shall be entitled to commence an
action for temporary and permanent injunctive relief and other equitable relief
in any court of competent jurisdiction and Consultant and Monarch further
irrevocably submits to the jurisdiction of any Mississippi court or Federal
court sitting in the Southern District of Mississippi over any suit, action or
proceeding arising out of or relating to paragraphs 7, 8, 9,10 or 11. Monarch
and the Consultant each hereby waives, to the fullest extent permitted by law,
any objection that he or it may now or hereafter have to such
<PAGE>
jurisdiction or to the venue of any such suit action or proceeding brought in
such a court and any claim that such suit, action or proceeding brought in such
a court and any claim that such suit, action or proceeding has been brought in
any inconvenient forum. Effective service of process may be made upon the
Consultant and Monarch by mail under the notice provisions contained in
paragraph 15 hereof
(b) The provisions of paragraphs 7, 8, 9, 10 and 11 shall survive the
termination of this Agreement.
14. REMEDIES CUMULATIVE; NO WAIVER. No remedy conferred upon the Company
by this Agreement is intended to be exclusive of any other remedy, and each and
every such remedy shall be cumulative and shall be in addition to any other
remedy given hereunder or now or hereafter existing at law or in equity. No
delay or omission by the Company in exercising any right remedy or power
hereunder or existing at law or in equity shall be construed as a waiver
thereof, and any such right, remedy or power may be exercised by the Company
from time to time and as often as may be deemed expedient or necessary by the
Company in its sole discretion.
<PAGE>
15. ENFORCEABILITY. If any provision of this Agreement shall be invalid
or unenforceable, in whole or in part, then such provision shall be deemed to be
modified or restricted to the extent and in the manner necessary to render the
same valid and enforceable, or shall be deemed excised from this Agreement, as
the case may require, and this Agreement shall be construed and enforced to the
maximum extent permitted by law, as if such provision has been originally
incorporated herein as so modified or restricted, or as if such provision had
not been originally incorporated herein, as the case maybe.
16. NOTICES. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
in the first paragraph of this Agreement. Any party hereto may also give notice,
request, demand, claim or other communication hereunder using any other means
(including personal delivery, expedited courier, messenger service, telecopy,
telex, ordinary mail, or electronic mail), but such notice, request, demand,
claim, or other communication shall be deemed to have been duly given only if it
is actually received (or if receipt is refused) by the party for whom it is
intended. Any party hereto may change
17. CONTENTS OF AGREEMENT; AMENDMENT AND ASSIGNMENT. This Agreement sets
forth the entire understanding between the parties hereto with respect to the
subject matter hereof and supersedes and is instead of all other prior or
contemporaneous, written or oral, arrangements regarding the same subject matter
between the Consultant or Monarch and the Company. This Agreement cannot be
changed, modified or terminated except upon written amendment duly executed by
the parties hereto. All of the terms and provisions of this Agreement shall be
binding upon and inure to the benefit of and be enforceable by the respective
heirs, representatives, successors and assigns of the parties hereto, including
any successor to the business of the Company (whether by merger, consolidation,
sale of stock or assets or otherwise) or of any or all of the Company's interest
in any of the Initial Projects; except that the duties and responsibilities of
the Consultant hereunder are of a personal nature and shall not be assignable in
whole or in part by the Consultant. This Agreement is not, however, intended to
restrict, limit or otherwise change or modify the rights of any party which are
governed by the CRC-Monarch Agreement.
18. INDEMNIFICATION. Each of Monarch and Consultant agree to jointly and
severally indemnify and hold Company and its affiliates, control persons,
directors, officers, employees and agents harmless from and against all losses,
claims, damages, liabilities, costs or expenses, including those resulting from
any threatened or pending investigation, action, proceeding or dispute caused by
an action of Consultant or Monarch. This indemnity shall also include Company's
reasonable attorney's and accountant's fees and out-of-pocket expenses incurred
in defending any such action or threatened action.
<PAGE>
19. APPLICABLE LAW. This Agreement shall be interpreted and construed
under the internal laws of the State of Mississippi without regard to the
conflict of laws provision of any state.
20. HEADINGS. The various headings used in this Agreement are inserted
for convenience only and will not in any way affect the meaning or construction
of this Agreement or any provision hereof .
21. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all such
counterparts together will constitute but one agreement.
22. COSTS AND EXPENSES. Each party shall bear their own respective costs
and expenses in connection with this Agreement, including any costs or expenses
as to the enforcement of any provision hereof.
<PAGE>
23. ARBITRATION. Any dispute between the company and Monarch or the
Consultant under this Agreement, other than a dispute relating to paragraphs 7,
8, 9 10 or 11, will be submitted to arbitration in Mississippi and such
arbitration will be commenced, conducted and concluded in accordance with the
rules, and under the auspices, of the American Arbitration Association then in
effect. The arbitration panel shall consist of three arbitrators: one selected
by company, one by Monarch, and the third pursuant to the rules of the
Association. All fees and expenses of the arbitration will be borne equally by
Monarch and the Company. The decision of the arbitrators will be final and
binding and both parties hereby forever waive and renounce any right either
party may have to seek review of such decision in any tribunal.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first written above.
CASINO RESOURCE CORPORATION
By:_________________________________
John J. Pilger, Chief Executive
Officer
MONARCH CASINOS, INC.
By:____________________________________
Kent A. Williams, Chief
Executive Officer
The undersigned hereby acknowledges, agrees and accepts the terms of this
Agreement to the extent such terms relate to the undersigned, including as to
paragraphs 7, 8, 9, 10 and 11.
Executed and delivered this _____ day of December, 1995.
_______________________________________________
Willard E. Smith, individually, and as a shareholder of
Monarch
<PAGE>
Exhibit 10.60
TECHNICAL ASSISTANCE AND CONSULTING AGREEMENT
This Development Funding and Technical Assistance Agreement ("Agreement")
is entered into by and between HARRAH'S SOUTHWEST MICHIGAN CASINO CORPORATION
("Harrah's"), a Nevada corporation whose address is 206 North Virginia Street,
Re no, Nevada 89501, and CASINO RESOURCE CORPORATION, a Minnesota corporation
("CRC"), whose address is 1719 Beach Boulevard, Suite 306, Biloxi, Mississippi
39531.
1. RECITALS.
1.1 Over the last several months, CRC and Harrah's have cooperated
with respect to a proposal involving the development of casino gaming and
related facilities (the " Enterprise") to be owned by the Pokagon Band of
Potawatomi Indians, a federally recognized Indian Tribe pursuant to the Indian
Reorganization Act of 1934 (the "Band"), with service areas in Michigan and
Indiana.
1.2 By informal agreement, CRC and Harrah's paid the pre-development
costs related to the Enterprise and the parties have submitted a joint proposal
to the Band in response to the Band's RFP.
1.3 It is anticipated that a number of costs will be incurred in
connection with the development of and on behalf of the Enterprise prior to
the effective dates of the various definitive agreements between the Band and
Harrah's including, but not limited to, a Development and Construction
Agreement, Management Agreement, and all collateral agreements, as that term
is defined by the NIGC, (collectively, the "Casino Agreements"), including
without limitation, all payments to the Band which are not repaid to Harrah's
pursuant to the Casino Agreements, option costs, real estate costs, surveying
costs, testing costs, legal fees, consultants' fees, the costs of
environmental and other studies and surveys, appraisal costs, real estate
commissions and costs, insurance costs, accounting costs, and other
incidental and related costs, but excluding those which are personal to
Harrah's or any internal or overhead allocations to Harrah's or any of its
Affiliates (collectively, the "Submission Costs"). It is further anticipated
that a number of other third-party costs will be incurred in connection with
securing the approval by the National Indian Gaming Commission ("NIGC") of
the Casino Agreements including, without limitation, the continuing
Submission Costs and additional legal fees, consultants' fees, the costs of
other studies and surveys, appropriate lobbying costs and fees, and other
incidental and related costs, for which Harrah's is not reimbursed by the
Band (collectively, the "Contract Approval Costs").
1.4 It is anticipated that Harrah's will become obligated, pursuant
to certain agreements between it and the Band, to provide all the financing
needed for the development, design, construction, furnishing, and start-up of
the Enterprise, including, but not limited to, the Submission Costs and the
Contract Approval Costs.
1.5 CRC has been instrumental in the efforts to submit and present
the response to the Band's RFP, has expended considerable effort toward the
pre-development activities related to the response to the RFP, and wishes to
formalize its relationship with Harrah's regarding CRC's ongoing role in the
development of the proposed Enterprise.
2. DEVELOPMENT FUNDING.
2.1 CRC is not obligated to fund any obligation of Harrah's to the
Band as may be set forth in the Casino Agreements, and Harrah's will be solely
responsible for all funding requirements thereunder.
<PAGE>
2.2 Some of the advance cash payments to the Band by Harrah's may be
recouped by Harrah's from the development funding or subsequent revenues of the
Enterprise in accordance with the Management Agreement with the Band and some
will not. CRC will pay Harrah's its share (as determined by using the same
percentage applicable in determining CRC's fees as described in Exhibit "A"} of
such Submission Costs, Contract Approval Costs, and other payments which are not
recouped from the Band in accordance with the Casino Agreements. Such repayment
to Harrah's will be made in 24 equal monthly installments without interest, and
will be withheld from any payments otherwise due to CRC.
2.3 CRC acknowledges that it is not a beneficiary of any of the
Casino Agreements. Further, any right of CRC to receive its compensation
pursuant to Section 5.1 b, 51(c), or 5.3 is specifically conditioned on
Management Fees being paid to Harrah's. If for any reason the Enterprise is not
developed, does not open, or if opened, does not perform up to the projections
as submitted in Harrah's response to the Band's request for proposal, performs
in a manner that results in no Management Fee paid to Harrah's, or the
termination of the Casino Agreements or any of them, then CRC shall have no
claim against Harrah's for damages, whether in contract or in tort.
2.4 The relationship of CRC to Harrah's created under this Agreement
shall be as a general contractor. Neither CRC nor Harrah's shall be construed
as joint venturers or partners of each other by reason of this Agreement and
neither shall have the power to bind or obligate the other.
3. TECHNICAL SERVICES.
3.1 CRC has provided and will continue, during the term of the Casino
Agreements, any renewal and any extension thereof, to provide, within a
reasonable time upon written request from Harrah's, technical services related
to the development of the proposed Enterprise in the form of advice and
consultation including, but not limited to, the following:
Site selection, acquisition, and planning;
Permitting and licensing;
Governmental affairs, Tribal, local, state, and federal;
Feasibility, design, and construction;
Design and construction budgeting;
Capital and operating budgeting; and
Marketing planning and analysis.
3.1.1 CRC agrees that it shall provide such services directly to
Harrah's and shall have no right to affect the management decisions made by
Harrah's in its negotiations for, or the performance of, the Casino Agreements.
Further, CRC shall not interfere in any way or involve itself directly nor will
it encourage or in any way involve others to interfere or involve themselves
with the operation of the Enterprise unless requested by Harrah's CRC shall not
be deemed to violate this Section 3.1.1 in the event that it shall respond in
good faith to an inquiry from the Band which was not initiated by CRC, provided
that CRC shall notify Harrah's of such inquiry and its response thereto within
two (2) business days of the receipt or delivery thereof, as the case may be.
3.2 Any failure on the part of CRC to provide the technical services
set forth in Section 3.1a-g shall not be deemed a default or breach of this
Agreement, but any breach of 3.1.1 or 9.20 shall be a material breach of this
Agreement, if not cured within ninety (90) days of receipt of written notice by
Harrah's setting forth with particularity the failure alleged to have caused
such breach; provided, however, that any breach of Section 9.20 by CRC shall not
be cause to terminate this Agreement, but shall obligate CRC to pay liquidated
damages to Harrah's on account of each such breach in the amount of $25,000.
<PAGE>
4. HOTEL DEVELOPMENT
4.1 If a hotel is to be developed as part of the Enterprise, then
CRC and Harrah's shall cooperate in and Harrah's will strongly advocate a
proposal to the Band whereby CRC shall develop, finance, and own the Hotel
with same to be managed by Harrah's or CRC, at Harrah's sole discretion, on
such terms as may be mutually agreed upon based on general industry standards
for such agreements. In addition, the approval of the terms, plans, and
specifications of any such development is subject to the approval of the Band
and Harrah's as well as that of CRC.
5. COMPENSATION.
5.1 The compensation to CRC under this Agreement shall be as follows:
$250,000 upon execution of this Agreement by the parties; and
If the Casino Agreements are approved by the NIGC and any other
regulatory authority whose approval is required, and one or more casinos are
actually built and opened, then in consideration of the foregoing, CRC
shall, except as provided at Section 5.3, be paid a fee (the "Fee"}, which
shall be based on a percentage of the money actually paid to Harrah's and
received by Harrah's as its Management Fee pursuant to Section 6 of the
Management Agreement, said Fee shall be as set forth in Exhibit "A" hereto;
and
If all the conditions set forth at (b) above have occurred, then
Harrah's shall pay CRC $10,000 per month commencing on the twenty-first
(21st) day of the first calendar month after the opening of the first
Pokagon casino managed by Harrah's and continuing each successive month
during the term of the Management Agreement referred to at 1 .3 above. CRC
agrees that Harrah's shall deduct from each of the first forty (40) of such
payments the sum of $5,000 as reasonable reimbursement for its costs in
administering the contracts between the parties hereto. In any event, the
obligation to make these payments by either party shall cease upon the
payment to CRC of $600,000 less $200,000 paid to Harrah's.
5.2 Harrah's will, beginning upon the satisfaction of the conditions
set forth at 5.1b above, cause to be provided 30 complimentary nights (room and
room tax only) per year in any Harrah's casino located in the state of Nevada to
Bud Smith of Monarch Casinos, Inc., during his lifetime, upon Mr. Smith's
request to the Harrah's Indian Gaming Division. Such request must be at least
thirty (30) days prior to the date(s) of intended stay. Mr. Smith shall have the
right to use the complimentary rooms himself or he may reserve them for members
of his immediate family, which shall mean his spouse and his children, but he
may not reserve them for other people.
5.3 Should the Band and Harrah's develop and open a casino in Indiana
outside the Band's service area in Indiana, which are LaPorte, St. Joseph,
Elkhart, Starke, Marshall, and Kosciusko Counties (the "Out-of-Area-Casino"t),
and Harrah's does not provide the financing for the development so that its
Management Fee is 15 percent (15%) of Net Revenues of the Out-of-Area-Casino,
then CRC shall be paid 20 percent (20%) of the money actually received by
Harrah's as its Management Fee related to the Out-of-Area-Casino.
5.4 CRC shall be paid its fee pursuant to Sections 5.1(b) and (c),
and 5.3 should it become applicable, monthly within five (5) business days of
the receipt by Harrah's of its Management Fee.
5.5 Harrah's obligation to pay the fee set forth at Section 5.1(b)
shall continue during the term of the Management Agreement, any renewal and any
extension thereof, and, subject to the provisions of Section 5.8, shall end upon
the termination of the Management Agreement for whatever
<PAGE>
reason. Likewise, this provision will control should the possibility set
forth at Section 5.3 actually occur. Regardless of the Management Fee
percentage negotiated for any renewal term or extension of the initial term
of the Casino Agreements, CRC shall be paid in accordance with the terms set
forth in this Agreement, the same percent of Harrah's Management Fee as paid
pursuant to 5.lb and 5.3. For example, if the Management Fee for the initial
term is 30 percent (30%), CRC would receive 28 percent (28%) of the
Management Fee. CRC would also receive 28 percent (28%) of any Management
Fee negotiated for any subsequent term regardless of the Management Fee
percentage negotiated for such subsequent term.
5.6 Harrah's shall provide CRC monthly reports on the operation of
the Enterprise, including operating and balance statements and proof of the
Management Fee received. Subject to the prior written approval of the Band, CRC
shall be provided, on a monthly basis, with the same financial reports as are
provided to the Band. CRC agrees to maintain the confidentiality of such
reports.
5.7 CRC shall have the right, at its own expense, to audit, or cause
to be audited, the records of Harrah's related to the Enterprise on an annual
basis at a reasonable time and in a manner which will not interfere with either
Harrah's business operations or with the operation of the Enterprise.
5.8 In the event the Band exercises its option pursuant to Section
9.22 of the Management Agreement or the Casino Agreements terminate or are
canceled in any other manner, then CRC shall be paid its Fee based on Exhibit A
concurrently with Harrah's receipt of any payment from the Band in satisfaction
of its Management Fee under the Casino Agreements. If Harrah's is required to
litigate or otherwise engage attorney(s} concerning the recovery of any
Management Fee, then CRC shall pay its pro-rata share of any cost of recovery
which shall be deducted from any such recovery. For the purposes of this
Section, the cost of recovery shall include all outside legal and other
professional fees and costs along with all other court costs, investigations,
depositions, and any other related costs paid to third parties reasonably
incurred by Harrah's in the pursuit of such claim.
6. REGULATORY APPROVALS.
6.1 The parties acknowledge that for the Casino Agreements to be
valid, they must have the approval of the NIGC and perhaps other governmental
authorities; that the NIGC regulations also require the disclosure of any
agreements which are related to the aforementioned agreements ("Collateral
Agreements"); that this Agreement is a Collateral Agreement and that it must be
and will be disclosed to the Band and the NIGC.
6.2 The parties acknowledge that any loan made to the Band directly
by the parties to this Agreement or any loan to the Band which is guaranteed by
the parties related to the development of the proposed Enterprise may likewise
be a Collateral Agreement which must be submitted to the NIGC and/or may require
approval by the Bureau of Indian Affairs (BIA) pursuant to 25 USC 81 in order to
be valid.
6.3 The parties acknowledge that any party with a financial interest
in the funding or the Management Fee is subject to background investigation by
the NIGC as well as possibly other interested tribal, state, and federal
regulatory agencies (the "Regulatory Agencies").
6.4 In the event that any Regulatory Agency with the authority to
review any of the contracts related to the proposed Enterprise finds the terms
of this Agreement unacceptable. Harrah's and CRC shall negotiate in good faith
to modify this Agreement in such manner as to satisfy the objections of such
Regulatory Agency(s). Such negotiations shall include, but not be limited to,
the issue of the acceptance by the parties of changes required to satisfy such
objections that do not result in a material increase in cost, risk or obligation
to either of the parties or which does not have a materially adverse impact on
Harrah's ability to manage the Enterprise. If the parties are unable to reach an
agreement acceptable to such Regulatory Agency(s) within ninety (90) days of
notice of objection from
<PAGE>
any Regulatory Agency(s), then this Agreement shall terminate and, subject to
the provisions of Section 7.1.2 hereof, CRC shall have no further rights
herein, except, to the extent allowed by any relevant Regulatory Authority,
for the right of CRC to receive payment from Harrah's, as provided below, of
a sum of money equal to the then present value of CRC's right to receive
payments pursuant to this Agreement (the "Present Value Payment") in full
satisfaction of CRC's rights hereunder and its full and unconditional release
of any further claims related to the Casino Agreements. Such valuation shall
be as determined by a nationally or regionally recognized investment banking
firm with experience in the valuation of gaming businesses selected by
Harrah's with the consent of CRC, which consent shall not be unreasonably
withheld; provided, however, that Harrah's may not select any firm that has
provided any services to Harrah's, directly or through any Affiliate, within
the prior two years and for which it had received fees or other compensation,
including underwriting discounts, in excess of $25,000, in the aggregate. The
fees of such investment banking firm shall be split equally between CRC and
Harrah's. The Present Value Payment shall be paid in thirty-six (36) equal
monthly installments of principal plus interest calculated at the same rate
used to calculate the Present Value Payment.
6.5 The parties hereto agree to cooperate fully with any
investigation of their suitability or that of any of their officers, directors,
employees, Affiliates, stockholders, or agents by any tribal, state, or federal
regulatory agency charged with that responsibility related to the parties'
financial involvement with the Band's proposed Enterprise.
6.6 CRC and Harrah's agree to provide to the other complete copies of
any contracts or agreements with any Person(s) or entity(ies) related in any way
with the Enterprise including, but not limited to, CRC's agreement with Monarch
Casinos, Inc.
9. GAMING QUALIFICATION
7.1 Gaming Qualifications
7.1.1 All officers, employees, or partners of either of the
parties hereto, and all Persons owning directly or indirectly any ownership
interest, security interest, other legal or beneficial interests in Harrah's,
CRC, Affiliates and their successors and assigns, who are required to be
licensed, permitted or determined suitable pursuant to any tribal, state or
federal law or regulation shall be so licensed, permitted or determined suitable
as and when required, and at all times during the term of this Agreement.
7.1.2 If CRC or a corporation, partnership, trust, limited
liability company, limited partnership or other entity or Person that, directly
or indirectly, holds any interest in CRC or any beneficial interest in CRC
(generally, a "Holding Entity" and specifically with respect to CRC, a "CRC
Holding Entity ") is determined by any regulatory authority to be unsuitable, or
has an application for a license or permit (including any gaming or alcoholic
beverage license, permit, approval, or other entitlement) rejected, or has a
previously issued license or permit rescinded, suspended, revoked or not
renewed, as the case may be (collectively, an "Unsuitability Determination") as
to CRC or a CRC Holding Entity, and the basis for such finding is not resolved
within thirty (30) days of the Unsuitability Determination, then CRC agrees that
this Agreement shall terminate. However, if CRC or the CRC Holding Entity
contest and are successful in curing or reversing such Unsuitability
Determination within a period of one (1) year from the date of such
Unsuitability Determination, then (i) the termination of this Agreement shall be
revoked and CRC restored to its rights and obligations under this Agreement and
(ii), to the extent allowed by the regulatory authority involved, CRC shall be
paid any Fees which, but for the Unsuitability Determination, would have
otherwise been paid to it during such period of termination. The one (1) year
period set forth above shall be extended until the conclusion of any relevant
proceeding initiated during such period. In the event of a termination of this
Agreement pursuant to this Section 7.1.2, to the extent allowed by any relevant
Regulatory Authority, CRC shall receive from Harrah's, as set forth in Section
6.4, the payment of a sum of money equal to the then present value of CRC's
right to
<PAGE>
receive payments pursuant to this Agreement in full satisfaction of CRC's
rights hereunder and its full and unconditional release of any further claims
related to the Casino Agreements. Such valuation shall be determined and
paid as provided in Section 6.4.
8. REPRESENTATIONS AND WARRANTIES. Each party represents and warrants to
the other party that:
8.1 Neither it nor its Affiliates is a party to any other agreement
or any other arrangement which would interfere with the development or operation
of the proposed Enterprise; and
8.2 Its performance under this Agreement will not violate any other
material agreement or other arrangement to which it or its Affiliates is a
party; and
8.3 It and its Affiliates have not received notice of any claim which
would materially interfere with its performance under this Agreement; and
8.4 To the best of its knowledge, no condition exists which would
cause it to be found unsuitable under (a) the gaming or liquor laws or
regulations of the state of Michigan and/or Indiana (as such gaming and liquor
laws or regulations may be applicable to the proposed Enterprise or any other
casino gaming project that the parties may determine, by mutual written
agreement, to undertake, either jointly or
independently of each other}; (b) the Indian Gaming Regulatory Act or
regulations of the NIGC; (c) the gaming laws or regulations of any tribal gaming
authority or similar regulatory body which may be created by the Band or any
tribe; or (d) the gaming laws or regulations of any other gaming jurisdiction.
9. MISCELLANEOUS.
9.1 This Agreement and the rights of the parties shall be governed by
and interpreted in accordance with the laws of the state of Michigan.
9.2 Any Person acquiring or claiming an interest in this Agreement,
in any manner whatsoever, shall be subject to and bound by all terms,
conditions, and obligations of this Agreement to which that Person or that
Person's predecessor in interest was subject or bound, without regard to whether
such a Person has executed a counterpart hereof or any other document
contemplated hereby. No such Person shall have any rights or obligations
greater than those set forth in this Agreement. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their permitted
successors and assigns.
9.3 Whenever from the context it appears appropriate, each term
stated in either the singular or the plural shall include the singular and the
plural, and pronouns stated in either the masculine, the feminine, or the neuter
gender shall include the masculine, feminine, and neuter gender as the
circumstances require.
9.4 Captions contained in this Agreement are inserted only as a
matter of convenience and in no way define, limit or extend the scope or intent
of this Agreement or any provision hereof.
9.5 If any provision of this Agreement, or the application of such
provision to any Person or circumstance, shall be held invalid, the remainder of
this Agreement, or the application of such provision to Persons or circumstances
other than those to which it is held invalid, shall not be affected thereby, and
the parties shall attempt to reformulate such invalid provision to give effect
to such portions thereof as may be valid without defeating the intent of such
provision.
<PAGE>
9.6 This Agreement, or any amendment hereto, may be executed in
multiple counterparts, each of which shall be deemed an original but all of
which shall constitute one and the same instrument, notwithstanding that all of
the parties are not signatories to the original or the same counterpart. In
addition, this Agreement, or any amendment hereto, may be executed by the
affixing of the signatures of each of the parties to one of such counterpart
signature pages; all of such counterpart signature pages shall be read as though
one, and they shall have the same force and effect as though all of the signers
had signed a single signature page.
<PAGE>
9.7 If either party brings any judicial action or proceeding to
enforce its rights under this Agreement, the prevailing party shall be
entitled, in addition to any other remedy, to recover from the other,
regardless of whether such action or proceeding is prosecuted to judgment,
all costs and expenses including, without limitation, reasonable attorneys'
fees incurred therein by the prevailing party.
9.8 The parties agree as follows:
9.8.1 With the exception of, and subject to, any restrictions
contained in the Casino Agreements, either party may engage and possess an
interest in any other business venture of any nature, kind or description,
including, without limitation, any business venture engaged in the same type of
business as that contemplated under this Agreement, even if such other business
is competitive with the business venture contemplated under this Agreement.
9.8.2 Except as otherwise agreed in writing by the parties:
No party shall have any right in and to any business venture
of the other party permitted under Section 9.8.1 nor to income or profits
derived therefrom;
As a natural part of the consideration for the execution of
this Agreement by Harrah's, CRC hereby waives, relinquishes, and renounces
any right or claim of participation in any other business venture of
Harrah's and its Affiliates, including, but not limited to, the venture
related to the Eastern Band of Cherokee.
9.9 Each party agrees that it will conduct its activities, and will cause
any activities conducted on its behalf to be conducted, in a lawful manner and
specifically will not engage in the following transactions:
9.9.1 Pay or offer to pay, directly or indirectly, anything of
value to any domestic or foreign government official or employee in order to
obtain business, retain business or direct business to others, or for the
purpose of inducing such government official or employee to fail to perform or
to perform improperly his official functions. This provision shall not be
construed to prohibit lobbying or other lawful activities under Michigan or
Indiana law, including, without limitation, the Michigan Lobbying Act, 1978 PA
472, as amended, MCLA 4.411 et seq; or
9.9.2 Receive, pay, or offer anything of value, directly or
indirectly, from or to any private party in the form of a commercial bribe,
influence payment or kickback for any such purpose; or
9.9.3 Use, directly or indirectly, any funds or other assets held
under this Agreement for any unlawful purpose including, without limitation,
political contributions in violation of applicable law.
9.10 Harrah's, in the performance of its obligations under the Casino
Agreements and this Agreement, and CRC, in the performance of its obligations
under this Agreement, shall comply fully with all applicable laws, ordinances,
rules, and regulations governing such services as well as Harrah's Compliance
Policies as set forth at Exhibit "B" hereto, which CRC acknowledges it has read
and understands, as same may be amended from time to time.
9.11 To the fullest extent permitted by law, each party shall
indemnify and hold harmless the other party and its Affiliates from and against
any and all loss, costs, damage, expense or liability, including, without
limitation, fees and expenses of attorneys and other experts and advisors, any
and all court costs relating to any breach by such party of its representations
and warranties set forth in
<PAGE>
Section 8; and CRC does indemnify in the same manner Harrah's and its
Affiliates against any claims relating to the
<PAGE>
proposed Enterprise by any Person with which or whom CRC or its Affiliates has
had any business relationship, association, or dealing prior to January 10,
1995, including, but not limited to, Monarch Casinos, Inc. and its officers,
employees, shareholders, and Affiliates. This indemnification shall survive the
termination of this Agreement for a period of three (3) years.
9.12 Any amendments to this Agreement may only be made and shall only
be effective upon the written consent of each party.
9.13 This Agreement is for the sole and exclusive benefit of the
parties and no other Person or entity (including any creditors of the parties)
shall, under any circumstances, be deemed to be a beneficiary of any of the
rights, remedies, terms, and provisions of this Agreement.
9.14 The parties acknowledge that each is or is owned by a publicly
held corporation and that trading in the securities of such corporation based on
non-public information or unauthorized disclosure or other use of material
developments could expose Harrah's and its Affiliates and CRC to significant
penalties. The parties shall take appropriate precautions to inform its
employees and agents that trading in the securities of CRC, Harrah's
Entertainment, Inc., or their Affiliates based on non-public information or
unauthorized disclosure or other use of material developments could expose CRC
and Harrah's to significant penalties.
9.15 Each party shall provide all information pertaining to its
officers, directors, shareholders, financial sources and associations as shall
be required by any Regulatory Authority with jurisdiction over such party or
over the proposed Enterprise.
9.16 The parties shall execute and deliver such further instruments
and do such further acts and things as may be required to carry out the intent
and the purpose of this Agreement.
9.17 All representations, warranties, and agreements herein shall
survive until the expiration or termination of this Agreement except to the
extent that a representation, warranty, or agreement expressly provides
otherwise.
9.18 The Exhibits referred to in this Agreement and attached hereto
are incorporated into this Agreement by reference.
9.19 One or more waivers of any provision, covenant, conditions, or
warranty of this Agreement shall not be construed as a waiver of a subsequent
breach of this same provision, covenant, condition, or warranty or of another or
subsequent breach of other provisions, covenants, conditions, or warranties. The
consent or approval to or for any act shall not be deemed to render unnecessary
the consent or approval to or for any other or subsequent similar act.
9.20 Neither CRC nor Harrah's shall make any public statement
regarding the arrangements in this Agreement without the prior written consent
of the other, which consent shall not be unreasonably withheld or delayed.
Further, CRC will not issue any news release with respect to the Band and the
Enterprise without prior approval of Harrah's, unless a party is compelled to
make such statements by judicial or administrative process or, in the opinion of
its counsel, by the requirements of law or applicable regulations of any
relevant stock exchange or other governmental authority, including disclosure
requirements of the federal securities laws. Approval shall be deemed given
upon Harrah's failure to notify CRC of any disapproval within twenty-four (24)
hours (excluding weekends and holidays) of a receipt of a draft release.
9.21 The provisions of this Agreement having been negotiated, it shall
be presumed to have been mutually drafted.
<PAGE>
9.22 This Agreement shall become effective upon the date of the last
signature hereto.
9.23 The parties represent that each has the authority to execute this
Agreement and that the same shall be binding by its terms.
9.24 This Agreement shall not be construed to create a partnership or
other association or joint venture between the parties; the relationship created
by this Agreement is purely contractual and the parties agree that no joint
liability to third parties is created hereby. Except as provided in Section
9.11, each party shall continue to be individually liable to third parties for
that party's acts or omissions and shall not seek indemnification or
contribution from the other party for such third party liability.
9.25 The parties shall undertake, within a reasonable time after the
approval of the Casino Agreements by the NIGC, an accounting and reconciliation
of the expenses incurred in connection with the proposed Enterprise.
9.26 "Affiliate," as used in this Agreement, means any corporation,
partnership, limited liability company, joint venture, trust, department or
agency or individual controlled by, under common control with, or which
controls, directly or indirectly, Harrah's or CRC.
9.27 "Person," as used in this Agreement, means any natural person,
partnership, joint venture, corporation, limited liability company, trust, or
other legally recognizable entity.
9.28 "Management Agreement," as used in this Agreement, means the
agreement by that name executed by and between Harrah's Southwest Michigan
Casino Corporation and the Pokagon Band of Potawatomi Indians on September 15,
1995.
9.29 "Development and Construction Agreement," as used in this
Agreement, means the agreement by that name executed by and between Harrah's
Southwest Michigan Casino Corporation, Harrah's Operating Company, Inc., and the
Pokagon Band of Potawatomi Indians on September 15, 1995.
10. Non-Assignability
10.1 The rights granted CRC by this Agreement are personal to it and
may not be assigned, transferred, pledged, hypothecated, or sold by it without
the prior written approval of Harrah's, which approval shall not be unreasonably
withheld or delayed.
HARRAH'S SOUTHWEST MICHIGAN
CASINO CORPORATION, a Nevada
corporation
Dated: _______________ By: ____________________________
Its: ____________________________
CASINO RESOURCE CORPORATION,
a Minnesota corporation
Dated:________________ By: ____________________________
<PAGE>
Its: ____________________________
<PAGE>
EXHIBIT A
Harrah's will pay to CRC the percentage of management fees actually received by
Harrah's pursuant to the Management Agreement described as "CRC Fee" below:
MANAGEMENT FEE CRC FEE AS A
AS A % OF NET REVENUES % OF THE MONEY PAID
(AS DEFINED IN CASINO AGTS.) HARRAH'S AS A MANAGEMENT FEE
30.0% 28.0%
29.5% 27.2%
29.0% 26.4%
28.5% 25.6%
28.0% 24.8%
27.5% 24.0%
27.0% 23.2%
26.5% 22.4%
26.0% 21.6%
25.5% 20.8%
25.0% 20.0%
24.5% 19.2%
24.0% 18.4%
23.5% 17.6%
23.0% 16.8%
22.5% 16.0%
22.0% 15.2%
21.5% 14.4%
21.0% 13.6%
20.5% 12.8%
20.0% 12.0%
20.0% or less 12.0%
<PAGE>
EXHIBIT B
Harrah's Entertainment, Inc.
Compliance Policies
(Attached)
<PAGE>
LEASE AGREEMENT
THIS LEASE AGREEMENT entered into this ______ day of __________, 19__, by
and between J. MACDONALD BURKHART, M.D. ("Lessor"), and COUNTRY TONITE THEATRE,
L.L.C., a Tennessee limited liability company ("Lessee").
W I T N E S S E T H:
THAT IN CONSIDERATION of the payment of the rents set forth below, and of
the keeping of the mutual terms and covenants set forth herein, the parties
hereby enter into this Lease Agreement (the "Lease"), by which Lessor leases to
Lessee, and Lessee takes as a tenant, the property described on EXHIBIT A hereto
which has been improved for use as a theater and parking therefor (the
"Premises"), which exhibit is incorporated fully herein by reference, and all of
the furniture, equipment, and fixtures which are owned by Lessor and currently
used on the Premises, as more particularly described on EXHIBIT B, which exhibit
is incorporated fully herein by reference (the "Equipment"), for a term
beginning on the 15th day January, 1997 (the "Starting Date"), and ending on the
31st day of December, 2001, unless sooner terminated or extended in accord with
the provisions herein. The "Premises" and the "Equipment" are collectively
referred to herein as the "Leased Property".
TO HAVE AND TO HOLD the Leased Property, with all rights, privileges and
appurtenances thereto belonging, unto Lessee for and during the term as above
provided; and Lessor covenants with Lessee to keep Lessee in quiet possession of
the Leased Property during the term of the Lease, unless sooner terminated
pursuant to any provision of the Lease, provided that Lessee shall promptly pay
the rent and keep and perform the covenants and agreements of this Lease.
1. POSSESSION OF LEASED PROPERTY: Lessee acknowledges that it has
conducted an inspection of the Leased Property, and the acceptance of possession
by Lessee shall be conclusive
<PAGE>
evidence that the Leased Property is in acceptable condition and fit for
Lessee's purposes. Lessee shall have the right of possession of the Leased
Property as of the Starting Date and Lessor shall not permit the condition of
the Leased Property to deteriorate between the date hereof and the Starting
date, ordinary wear and tear excepted. In addition, upon the prior, written
consent of Lessor, which shall not be unreasonably withheld and subject to the
rights of third-parties, Lessee shall have the right of access to and entry on
the Leased Property prior to the Starting Date, if and to the extent necessary
to allow Lessee to prepare for the performance of its obligations as stated
herein and consistent with Lessor's rights and obligations to the current tenant
and other third parties.
2. USE OF LEASED PROPERTY: Lessee shall use the Leased Property solely
for the purpose of operating theatrical and musical productions including the
"Country Tonite Show" solely for the exclusive benefit of the Lessee, and also
including complimentary morning and afternoon musical and theatrical shows, and
celebrity shows, and for no other purposes without the prior, written consent of
Lessor. The parties acknowledge and agree that Lessee has entered into or will
enter into a contract with Country Tonite Enterprises providing for performance
of the "Country Tonite Show" on the Premises throughout the term of this Lease
Agreement, as provided in such contract, a copy of which is attached hereto as
Exhibit C (the "CTE Contract"). Lessee shall comply, at its own expense, with
all present and future federal, state, and local laws, rules, regulations,
ordinances, and/or orders concerning the use of the Leased Property, provided,
however, Lessor shall be responsible for correcting any existing violations of
such laws existing as of the Starting Date. Lessee shall do nothing, and shall
permit nothing to be done, on or about the Leased Property which constitutes
waste, nuisance, or interference with the peaceful, quiet enjoyment or use of
adjoining or neighboring property. Lessee shall do nothing which would make
void or voidable any insurance on the Leased Property. Lessee shall not damage
the Leased Property and Lessee shall exercise due
2
<PAGE>
care in and around the Leased Property. Lessee shall preserve and protect the
Leased Property and shall be responsible for keeping the Premises clean.
Notwithstanding anything herein, Lessee shall not be liable for the cost of any
damage actually reimbursed by insurance or any damages that Lessor is required
to insure hereunder.
3. RENT: Lessee shall pay Lessor rent on the first day of each month
during the term of this Lease, beginning on March 1, 1997 and on the first day
of each succeeding month. The amount of such rental shall be as follows:
(a) for the period beginning March 1, 1997 and ending on February 28,
1998, the total sum of Three Hundred Sixty Thousand Dollars
($360,000.00) payable in twelve (12) equal installments of Thirty
Thousand Dollars ($30,000.00) each;
(b) for the period beginning on March 1, 1998 and ending on February 28,
1999, the total sum of Four Hundred Eighty Thousand Dollars
($480,000.00) payable in twelve (12) equal installments of Forty
Thousand Dollars ($40,000.00) each;
(c) for the period beginning on March 1, 1999 and ending on February 28,
2000, the total sum of Eight Hundred Forty Thousand Dollars
($840,000.00) payable in twelve (12) equal installments of Seventy
Thousand Dollars ($70,000.00) each; and
(d) for each subsequent year during the term of this Lease (beginning on
each successive March 1 and ending on the following February 28,
unless terminated sooner in accordance with the terms of this Lease),
the total sum of Eight Hundred Forty Thousand Dollars ($840,000.00)
per year, payable in equal monthly installments of Seventy Thousand
Dollars ($70,000.00) each.
Rent shall be due and payable on the first day of each month without
further notice as to the due date and without set-off or deduction except as
otherwise expressly provided herein, at the address of Lessor specified on the
signature page of this Lease, or at such other address as the Lessor may from
time to time specify by written notice to Lessee.
4. TAXES, UTILITIES, MORTGAGE PAYMENTS, PROPERTY INSURANCE, AND
ASSESSMENTS: Lessor shall be responsible for all mortgage payments (if any),
property taxes, and assessments (if applicable), and commercial property
insurance and his own commercial general liability insurance,
3
<PAGE>
if any, as to the Leased Premises. Lessee shall be responsible for all other
costs and expenses, including utilities and all other insurance, including its
own commercial general liability insurance, connected with or relating to the
Leased Property during the term of this Lease Agreement, beginning on the
Starting Date, except to the extent expressly provided herein, as additional
rent.
5. REPAIRS AND MAINTENANCE: Lessor warrants that as of the Starting
Date, the Equipment will be in good operating condition, and Lessee's acceptance
of possession shall be conclusive evidence of such good condition. Lessor
assumes responsibility for major repairs that are essential and required as to
the roof and structure of the building located on the Premises and for major
repairs (not maintenance or minor repairs) as to the HVAC system utilized in
such theater building. Lessee shall be responsible for all other repairs,
maintenance, upkeep, and cleaning as to the Leased Property. It shall be the
responsibility of Lessee to maintain the Leased Property and any and all
improvements thereto in good condition, repair, and working order, ordinary wear
and tear excepted, and except to the extent Lessor is obligated to make a major
repair as required above.
6. INSURANCE: Lessor shall purchase and maintain, at its expense, during
the term of the Lease, commercial property insurance covering the Leased
Property against at least those risks covered by the Insurance Services Office
Special Cause of Loss Form or its equivalent for the full replacement value
thereof with an agreed amount endorsement so as to avoid any coinsurance
penalty, with a deductible of not more than Twenty-five Thousand Dollars
($25,000.00). The risks of flood and earthquake shall also be insured against
either by endorsement to said commercial property policy or by a separate policy
specifically insuring against those risks.
Lessee shall purchase and maintain, at its expense, during the term of the
Lease commercial general liability insurance covering Lessee's legal liability
as respects the Leased Property and any adjacent property which serves the
Leased Property. Said insurance shall have limits of not less than
4
<PAGE>
Ten Million Dollars ($10,000,000.00) per occurrence for bodily injury including
death, property damage and personal injury. Lessee agrees to name Lessor as an
Additional Insured -- Lessee of Premises.
In the event that both Lessor and Lessee agree, the commercial property and
commercial general liability required to be carried hereunder by both parties
pursuant to this PARAGRAPH 6 may be provided by one or more policies insuring
both Lessor, Lessee and their respective owners. In such event, the total limit
of the commercial property policy shall be equal to the sum of the limit
required to be carried by Lessor and Lessee and the policy shall carry a
deductible not to exceed Twenty-Five Thousand Dollars ($25,000.00). The limits
of the commercial general liability policy shall not be less than Ten Million
Dollars ($10,000,000.00) per occurrence and general aggregate. The premiums for
said policy(ies) shall be paid by Lessor and Lessee based on the respective
charges made by the insurance company(ies) providing such coverage, with Lessor
paying the premiums related to the commercial property insurance on the Leased
Property and loss of rental income and landlord's liability if Lessor decides to
carry such insurance and with Lessee paying the premiums related to the
commercial general liability policy (other than landlord's liability), loss of
income insurance and commercial property insurance on Lessee's own property. In
the event of a loss under the commercial property policy that is subject to a
deductible, Lessor and Lessee shall each bear that portion of the deductible
that is equal to a fraction of which the numerator is the amount of their
respective insured loss and the denominator of which is equal to the total
insured loss incurred. If either party elects to maintain their individual
policies for any policy period, they shall notify the other party at least
ninety (90) days prior to the expiration of the current policy(ies) period.
Both Lessor and Lessee will be named insureds on all said insurance policies.
5
<PAGE>
All insurance required to be maintained by either Lessor or Lessee shall be
written by insurance companies licensed to do business in the State of Tennessee
and that have A.M. Best Ratings of A-VII or better and such companies must be
reasonably acceptable to Lessor. Lessor and Lessee shall each provide the other
with certificates of insurance evidencing the insurance required by this
PARAGRAPH 6 which must contain provisions that require the insurer to give the
certificate holder at least thirty (30) days notice of cancellation or renewal.
7. WAIVER OF SUBROGATION: Lessor and Lessee hereby release the other from
any and all liability or responsibility to the other or anyone claiming through
or under them by way of subrogation or otherwise for any loss or damage to
property caused by fire or any other covered casualties, even if such fire or
other casualty shall have been caused by the fault or negligence of the other
party, or anyone for whom such party may be responsible, PROVIDED, HOWEVER, that
this release shall be applicable and in force and effect only with respect to
loss or damage fully covered by insurance and occurring during such time as the
releasor's insurance policies shall contain a clause or endorsement to the
effect that any such release shall not adversely affect or impair said policies
or prejudice the right of the releasor to recover thereunder.
Lessor and Lessee each agrees that they will request their insurance
carriers to include in their policies a waiver of subrogation clause or
endorsement. If extra cost shall be charged therefor, each party shall advise
the other thereof and of the amount of the extra cost, and the other party, at
its election, may pay the same, but shall not be obligated to do so.
8. DAMAGE TO LEASED PROPERTY: In case of damage to the Leased Property or
any subsequent improvements by fire or other casualty, Lessee shall give
immediate written notice to Lessor, who shall elect to cause the damage to be
repaired with reasonable speed (unless the Lease is terminated as provided
below), subject to delays beyond the reasonable control of Lessor, and to
6
<PAGE>
the extent the Premises are rendered unfit for Lessee's purpose, the rent shall
proportionately abate beginning on the date of such damage. In the event that
the damage shall be so extensive that in the written opinion of an independent
architect selected by Lessor and reasonably acceptable to Lessee that it is not
reasonable for Lessor to repair or rebuild within one (1) year from the date of
such damages, this Lease shall be terminated as of the date of such damage by
written notice from Lessor to Lessee, given within ninety (90) days after the
date of such damage, and the rent shall be adjusted to the date of such damage
and Lessee shall promptly vacate the Premises. In the event that the Lease is
not terminated in accordance with the terms of this Agreement, and if Lessee
reasonably ceases its use of the Premises as a direct result of damage caused by
fire or other casualty, then rent shall be abated from the date of the damage
until Lessee reasonably may resume use of the Leased Property.
9. CONDEMNATION: If the whole or substantially whole of the Premises
shall be lawfully condemned or taken in any manner for any public or quasi-
public use or purpose, this Lease shall terminate as of the date of the taking.
If less than the whole or substantially the whole of the Premises shall be so
condemned or taken, then Lessor or Lessee may, at its option, terminate this
Lease as of the date of the taking if such taking materially interferes with
Lessee's operations on the Premises. Upon any such condemnation or taking and
the continuation of this Lease as to any part of the Premises, the base rental
shall be diminished by an amount representing the part of the said rent properly
applicable to the portion of the Premises which may be so condemned or taken.
Lessor shall be entitled to receive the entire award in any condemnation
proceeding, except as provided below, and Lessee shall have no claim against
Lessor or against the proceeds of the condemnation. However, Lessee shall not
be prohibited from making an appropriate claim against the condemning
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<PAGE>
authority for the value of the unexpired term of the Lease and/or for any
displacement award to which Lessee may be entitled.
10. ALTERATIONS, ADDITIONS, AND IMPROVEMENTS: Lessor shall not be
responsible for the making of any decorations, alterations, additions, or
improvements to the Leased Property. Lessee may not make decorations,
alterations, additions, or improvements (except required repairs, maintenance,
and cleaning and except for initial decorations, signs, marquees, and additions
deemed reasonably necessary by Lessee to make the Premises operable as a County
Tonite Theatre and which shall not cause any structural, permanent or
significant damage to the Leased Property or require any cost or expense to
Lessor upon termination of this Lease) on or to the Leased Property without the
prior consent of Lessor in writing. All permitted decorations, alterations,
additions, and improvements shall become the property of Lessor and shall remain
with the Leased Property as a part thereof upon the termination of this Lease
(except that Lessee may remove its trade fixtures and personal property upon
such termination). Further, Lessor, at his option, may require Lessee to remove
any decorations, signs, marquees, trade fixtures, personal property and/or
additions, at Lessee's sole expense, and require Lessee to promptly and fully
repair any damages caused by the removal of any such item(s).
11. SIGNS: Lessor consents to Lessee's use of the stone sign and
electronic message reader currently used on the Premises (the "Message Reader")
subject to the following terms and conditions:
(a) Lessee shall not display any additional signs or any other outdoor
advertising materials on the Premises (except to the extent permitted
by PARAGRAPH 10 above) or relocate the existing stone sign, without
the prior, written consent of Lessor as to location, size, design, and
content. Lessee shall provide Lessor with reasonable specifications,
drawings, and descriptions when seeking such consent. Such consent
shall not be unreasonably withheld. Lessee shall bear all expenses
associated with any signs except for lease payments due in connection
with the Message Reader. Any such sign(s) placed upon the Premises in
accordance with this provision, shall:
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<PAGE>
(i) be in compliance with all federal, state, and local laws,
regulations, and ordinances;
(ii) not cause any damage to the Premises; and
(iii) promptly be removed by Lessee upon termination of the Lease;
(b) Lessee's use of the stone sign and Message Reader, and any permitted
modifications, shall not result in any damage to such sign or Message
Reader;
(c) Lessee may acquire an electronic sign or message reader for its use in
lieu of the existing Message Reader. In such event, Lessor shall have
the right to remove the existing Message Reader and Lessor shall have
no further obligation to provide an electronic sign or Message Reader
to Lessee. Lessee shall use its best efforts to assist Lessor in
selling, trading, or exchanging the Message Reader on terms
financially advantageous to Lessor. In that regard, Lessee shall
negotiate in good faith with Don Bell Industries, Inc. regarding the
acquisition of a replacement electronic sign or message reader,
including a possible trade of the existing Message Reader, but
notwithstanding the foregoing, Lessee shall not be required to
purchase a replacement electronic sign or message reader from Don Bell
Industries, Inc. if Lessee determines that it is in its best interests
to purchase a replacement electronic sign or message reader from
another vendor;
(d) If Lessee acquires a replacement electronic sign or message reader for
its use, Lessor shall have the option to acquire such sign and related
equipment from Lessee upon termination of this Lease for an amount
equal to the lower of:
(i) Lessee's adjusted tax basis in such equipment; or
(ii) sixty percent (60%) of the fair market value of such equipment.
Lessor shall have ninety (90) days following the termination of this
Lease to exercise any option provided hereunder and thirty (30) days
thereafter to pay the purchase price as computed above.
12. ACCESS BY LESSOR: Lessor and/or its authorized agents shall have the
right to enter the Premises at all reasonable times for inspection. Lessor
and/or its authorized agents shall have the right to enter the Premises to show
the Leased Property to prospective purchasers, tenants, or for any other
reasonable purpose upon twenty-four (24) hours advance notice.
13. ASSIGMMENT AND SUBLETTING: Lessee shall not assign, sell, mortgage, or
otherwise transfer this Lease, in whole or in part, or sublet all or part of the
Premises (except for limited
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licenses to third-parties for the purposes of entertainment activities and
vendors of items such as souvenirs, refreshments and similar items that
compliment the authorized uses of the Premises, that provide revenue solely for
the benefit of Lessee, and provided such licenses have terms that are consistent
with the terms of this Lease), without the prior, written consent of Lessor,
which consent may be withheld for any reason, reasonable or unreasonable, in
Lessor's sole discretion.
14. PARKING: Lessor agrees and covenants that throughout the term of the
Lease it shall provide on or adjacent to the Premises one (1) parking space for
every three (3) theater seats, together with reasonably sufficient tour bus
spaces. Lessee agrees that a total of three hundred fifty (350) parking spaces
now exist; provided, however, that Lessor shall correct any drainage problems
that prevent the reasonable use of existing parking spaces prior to the Starting
Date. Lessor shall provide and gravel a total of one hundred fifty (150)
additional such parking spaces prior to March 1, 1997 in an unpaved area until
such time as Lessor and Lessee mutually agree that additional paved parking
spaces are reasonably required. Such parking spaces need not be on the Premises
but shall be located on the property currently owned by the Lessor which adjoins
the Premises; the location of such spaces within that adjoining property shall
be at the discretion of Lessor but such parking area shall be adjacent to the
Premises or connected to the boundary of the Premises by a walkway not to exceed
twenty-five (25) feet in length. Such parking spaces shall be in an area
reasonably accessible to the theater and the utilities, security, and
maintenance of such spaces shall be the duty of Lessee. Such parking, as
located from time to time, shall become a part of the Premises for purposes of
this Lease Agreement. In the event Lessor fails to construct and gravel such
additional parking spaces on or before March 1, 1997, Lessee may construct and
gravel such parking spaces and may deduct the cost thereof, with interest
thereon at the prime rate published in the WALL STREET JOURNAL (the "Prime
Raten), from the rents payable hereunder.
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15. ASSUMPTION OF EQUIPMENT LEASES: As of March 1, 1997, Lessee shall
assume all of Lessor's obligations under the equipment leases attached hereto as
COLLECTIVE EXHIBIT D which is incorporated herein by reference (the "Leased
Equipment"). During the term of this Lease, Lessee shall have the right to use
the Leased Equipment.
Upon termination of this Lease, regardless of the cause of such
termination, all rights associated with the lease of sound and light equipment
(Pearson Leasing & Financial Corporation d/b/a Citizens National Leasing),
including title to such equipment if the Lease and any purchase option has been
paid in full, shall be the sole and exclusive property of Lessor. Lessee shall
use its best faith efforts to facilitate and arrange for a reasonable sale of
the video equipment currently leased by Pro Lease Funding Group, Inc. to
Burkhart Farms, LLC.
Lessee is not assuming any obligations under a lease between Don Bell
Industries, Inc. and Burkhart Farms, LLC in connection with the Message Reader.
Provided, however, Lessee shall have the right to use the Message Reader in
accordance with the terms set forth in PARAGRAGH 11 hereof, and Lessor shall
cause Burkhart Farms, LLC to make such Message Reader available to Lessee.
16. EXTENSION AND TERMINATION OF TERM: Provided Lessee is not then in
default, and provided that the term of this Lease has not otherwise terminated,
and provided that the existence of Lessee has not been dissolved as a result of
the wrongful action of either member, Lessee shall have the right, at the
expiration of the initial five (5) year term of this Lease, to a series of four
(4) consecutive renewal options, each for a term of two (2) years, and each
beginning upon the date of expiration of the preceding term. Lessee shall
exercise such option by written notice to Lessor, given in accord with the
notice provisions of this Lease, not less than one hundred eighty (180) days
prior to the expiration of the initial term and not less than ninety (90) days
prior to the expiration of any renewal term. In the event the Lessee is
dissolved in violation of Lessee's Operating Agreement, this
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Lease shall terminate at the option of Lessor if Casino Resource Corporation of
Tennessee, Inc. caused such dissolution or by Lessee if Burkhart Ventures, LLC
caused such dissolution. Otherwise, if Lessee terminates as a limited liability
company in accordance with the terms of its Operating Agreement and such
termination is not wrongful, then this Lease shall terminate.
17. DEFAULT: Any of the following shall constitute an event of default by
Lessee:
(a) Failure by Lessee to pay, in full, on the dates due, any rental or
other sums payable hereunder, including Lessee's obligation to pay for
insurance. TIME IS OF THE ESSENCE. Provided, however, Lessee shall
have five (5) days following written notice from Lessor to cure such
default.
(b) Failure by Lessee to observe or perform any of the terms, covenants,
agreements, or conditions contained in this Lease, other than payment
of rental, additional rental, or other sums due, for a period of
thirty (30) days after written notice from Lessor specifying such
default, provided, if any such default cannot be completely cured
within such thirty (30) day period, despite Lessee's diligent, best
faith effort, commenced immediately, then Lessee shall have a
reasonable time to complete the cure of such default, for a period not
to exceed ninety (90) days.
(c) The filing by Lessee of a voluntary petition in bankruptcy or a
voluntary petition or answer seeking reorganization, arrangement,
readjustment of debts, or any other relief under the bankruptcy act,
or any other insolvency act, or any action by Lessee indicating
consent, approval, or acquiescence in any such proceeding; the making
by Lessee of any general assignment for the benefit of its creditors;
or the inability of Lessee, or the admission by Lessee of the
inability to pay its debts.
(d) The filing of any involuntary petition in bankruptcy or similar
proceeding against Lessee, and the continuation of such proceeding for
a period of ninety (90) days undismissed, unbonded, or undischarged.
(e) The insolvency of Lessee.
(f) The desertion or abandonment, or failure to use the Leased Property as
the "Country Tonite Theatre" for any period (during the contemplated
annual operating season) exceeding seven (7) consecutive days,
regardless of whether Lessee continues to pay all stipulated rental,
unless Lessor provides written consent, which shall not be
unreasonably withheld, or unless caused by damage or destruction of
the Leased Property.
(g) The occurrence of any unlawful activity on the Premises permitted or
tolerated by the Lessee.
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(h) Attachment of the Leased Property or Lessee's interest therein, if not
satisfied or dissolved within ten (10) days.
(i) The attempted assignment, subletting, or mortgaging of the Leased
Property without the prior, written consent of Lessor.
(j) Any construction, change, or alteration to the Leased Property by
Lessee or Lessee's agent without the prior, written consent of Lessor
unless permitted by this Lease.
The following shall constitute an event of default by Lessor under this Lease:
(a) Failure by Lessor to observe or perform any of the terms, covenants,
agreements, or conditions contained in this Lease for a period of
thirty (30) days after written notice from Lessee specifying such
default. Provided, however, if Lessor has a repair obligation
pursuant to PARAGRAPH 5, such repair shall be commenced within ten
(10) days after written notice from Lessee and shall be completed as
promptly as possible.
18. REMEDIES: Lessor, to the extent permitted by law, may
take any one or more of the remedial steps set forth below, when there exists an
event of default by Lessee:
(a) Lessor may, at its option, declare the present value of all
installments of rent as determined at the time of default for the
remainder of the Lease term to be immediately due and payable, less
the present value of the reasonably foreseeable rental income from the
Leased Property for the remainder of the term.
(b) Lessor may re-enter and take possession of the Leased Property without
terminating this Lease, and re-lease the Leased Property in its
entirety for the account of Lessee, holding Lessee liable for the
difference in rent and other amounts actually paid by the new tenant,
and the rents and other amounts payable by Lessee hereunder.
(c) Lessor may terminate the Lease, exclude Lessee from possession of the
Leased Property, and use its best efforts to lease the same to another
for the account of Lessee, holding Lessee liable for all rent and
other amounts payable by Lessee hereunder.
(d) Lessor may take whatever action at law or in equity it may deem
necessary or desirable to collect the rent and other amounts then due
and thereafter to become due, or to enforce performance of any
obligation, agreement, or covenant of the Lease, and in connection
with such action, may recover all damages to Lessor for Lessee's
violation or breach of the Lease.
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(e) No remedy reserved to Lessor hereunder is intended to be exclusive,
and each and every remedy shall be cumulative. No delay or omission
to exercise any right or power accruing to Lessor upon any default by
Lessee shall impair any such right or shall be construed to be a
waiver thereof.
(f) Lessee shall pay Lessor as additional damages in the event of breach
the reasonable fees of any attorneys employed by Lessor for the
collection of rent or the enforcement or performance of the Lease, and
all other expenses incurred by Lessor in connection therewith,
including but not limited to litigation expenses, court costs, and
court reporter's fees.
If an event of default by Lessor shall occur hereunder, in addition to any
other remedies granted or permitted by law, Lessee may cure such default and may
deduct the cost of such cure, plus interest thereon at the Prime Rate, from the
rents payable hereunder, provided, however, Lessee has first provided written
notice of such alleged default and Lessor has not commenced to cure such alleged
default within thirty (30) days following such notice. Provided, if any such
default cannot be completely cured within such thirty (30) day period, despite
Lessor's diligent, best faith effort, commenced immediately, then Lessor shall
have a reasonable time to complete the cure of such default for a period not to
exceed ninety (90) days.
19. NOTICES: All notices required or permitted hereunder shall be given
in writing and shall either be personally delivered, sent by facsimile or mailed
to the addresses/ facsimile numbers of the parties set forth on the signature
page of this Lease, or to such other addresses/facsimile numbers as may be
designated from time to time by either party, by notice given pursuant to this
paragraph. When notice is by mail, it shall be sent certified with postage pre-
paid and shall be complete upon its deposit in the U.S. mail. Notices
personally delivered or sent by facsimile shall be effective upon delivery or
transmission. If notices are sent by facsimile, a copy shall also be mailed.
Copies of any notices required or permitted hereunder shall also be sent to the
following:
If to Lessor: Timothy M. McLemore, Esq.
Gentry, Tipton, Kizer & McLemore, P.C.
800 S. Gay Street, Suite 2610
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P.O. Box 1990
Knoxville, Tennessee 37901
If to Lessee: G. Mark Mamantov, Esq.
Bass, Berry & Sims, PLC
900 S. Gay Street, Suite 1700
P.O. Box 1509
Knoxville, Tennessee 37901-1509
20. SUBORDINATION: This Lease shall be subordinate to any mortgage now or
hereafter placed upon the Leased Property and to any and all renewals,
replacements, and extensions of any such mortgage, but only if Lessor shall
deliver to Lessee within ninety (90) days of the date any such mortgage is
executed a nondisturbance agreement from any such mortgagee of the Leased
Property in a form reasonably satisfactory to Lessee. Lessor also covenants to
provide Lessee within thirty (30) days of the date hereof a nondisturbance
agreement from any existing mortgagees in a form reasonably satisfactory to
Lessee. In the event of foreclosure of any such mortgage, exercise of power of
sale thereunder, or deed in lieu of foreclosure, Lessee shall attorn to the
purchaser under such foreclosure, exercise of power of sale, or deed in lieu of
foreclosure, and recognize such purchaser as the Lessor, provided that such
purchaser does not disturb Lessee's right to possession as long as Lessee
observes and performs all of the terms and conditions of this Lease.
21. WAIVER: No waiver by Lessor at any time of the breach of any covenant
by Lessee shall impair Lessor's rights for any subsequent breach, and acceptance
by Lessor of a portion of all rent past due shall not constitute a waiver of the
breach of any covenant or condition, or of any damages due to Lessor by Lessee.
No waiver of any provision of this Lease shall be binding upon Lessor unless in
writing signed by Lessor. This provision may not be orally waived.
22. CERTIFICATE OF GOOD STANDING: Lessor and Lessee agree, at any
reasonable time, and from time to time, upon not less than five (5) days notice
by the other party, to execute, acknowledge, and deliver to the other party a
statement in writing certifying that the Lease is
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unmodified and in full force and effect, and certifying the dates to which the
rent, rent adjustments, and other charges have been paid, and stating whether or
not to the best knowledge of the signers of such certificate, that the other
party is in default in performance of any obligation under this Lease, and if
so, specifying such default, it being intended that such statement be delivered
to and relied upon by any prospective purchaser, tenant, mortgagee of the
Premises or any lender to or investor in Lessee. If the other party fails or
refuses to provide such certificate within the time allowed, it will be
conclusively presumed that the Lease is in full force and effect in accord with
its terms and that the other party is not in default.
23. AMENDMENT OF LEASE: This Lease may not be altered, changed, or
amended, except by a document in writing, signed by Lessor and Lessee. This
Lease contains the entire agreement between the parties as to the Leased
Property.
24. RECORDING: Upon the request of either party, the parties will execute
a memorandum of lease which may be recorded by either party, at the expense of
the party desiring such recordation.
25. GOVERNING LAW: This Lease shall be governed by the substantive,
internal laws of the State of Tennessee.
26. SEVERABILITY: If any provision of this Lease be invalid or
unenforceable in law, it shall not affect the validity of any other provisions
hereof.
27. CAPTIONS: The captions in this Lease are for convenience only, and
shall not be construed as a part of the Lease.
28. COUNTERPARTS: This Lease may be executed in several counterparts,
each having the full force and effect of an original.
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29. SUCCESSORS AND ASSIGNS: This Lease shall be binding upon Lessor's
successors and assigns, and upon Lessee's successors and assigns, in the event
of any permitted assignment by Lessee.
30. MODIFICATIONS REQUIRED BY MORTGAGEE: Lessee agrees that in the event
that Lessor's mortgagee requires modifications or amendments to this Lease
(exclusive of economic modifications or amendments), Lessee shall execute such
changes and amendments which may be reasonably required.
31. UTILITY EASEMENTS: Lessor shall be entitled to enter into such
easements or agreements with utility companies which are required in order to
provide service to any portion of the Premises. Lessee hereby consents to the
execution of such easements by Lessor, and agrees to execute any necessary
documents and to take such action necessary in order to consummate same.
32. ALL GENDERS AND NUMBERS INCLUDED: Whenever the singular or plural, or
masculine, feminine, or neuter is used in this Lease, it shall equally apply to,
extend to and include the other.
33. NO PARTNERSHIP: Nothing contained herein shall be deemed or construed
by the parties or by any third party as creating the relationship of principal
and agent or a partnership or of a joint venture between the parties hereto, it
being understood and agreed that the sole relationship between the parties
hereto is that of Lessor and Lessee. Lessee shall be solely responsible for all
taxes and expenses arising out of the use and occupancy of the theater except as
expressly provided herein.
34. ESTATE OF LESSOR: Lessor represents and warrants to Lessee that it
has full right and lawful authority to enter into this Lease; that the Leased
Property is free and clear of all liens, exceptions, restrictions and
encumbrances except those shown on EXHIBIT E attached hereto; and that
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Lessor will defend the title to the Leased Property against the claims of all
persons. The mechanic's lien filed by Creative Structures, Inc. will be removed
by Lessor on or before December 31, 1996.
35. QUIET POSSESSION: Lessor covenants that Lessee, upon performing and
observing the covenants to be observed and performed by Lessee under this Lease,
shall peaceably hold, occupy and enjoy the Leased Property during the term of
this Lease without interference by Lessor or by any other person claiming by,
through or under Lessor.
36. HAZARDOUS SUBSTANCES: Lessor represents and warrants that it has not
placed or disposed of any Hazardous Substances on the Premises and furthermore
represents and warrants that, to the best of its knowledge, no such Hazardous
Substances have been placed or disposed of by any other person on the Premises.
"Hazardous Substance" means gasoline, motor oil, fuel oil, waste oil, other
petroleum or petroleum-based products, asbestos, polychlorinated biphenyls
("PCBs") and any chemical, material or substance to which exposure is
prohibited, limited or regulated by any federal, state, country, local or
regional authority or which, even if not so regulated, is known to pose a hazard
to health and safety, including but not limited to substances and materials
defined or designated as "hazardous substances", "hazardous materials" or "toxic
substances" under applicable law.
37. NO LIENS: Lessee shall not attempt to encumber the Leased Property in
any manner and Lessee shall not permit any mechanics', materialmen's, or other
lien to be placed upon the Leased Property in connection with any permitted
improvements, additions, or any required repairs and maintenance by Lessee.
IN WITNESS WHEREOF, the parties hereto have executed this Lease Agreement
as of the day and year first written above.
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LESSOR:
/s/ J. MACDONALD BURKHART, M.D.
---------------------------------
J. MACDONALD BURKHART, M.D.
ADDRESS:
601 Newland Professional Building
2001 Laurel Avenue
Knoxville, Tennessee 37916
Telecopy: (423) 546-2625
LESSEE:
COUNTRY TONITE THEATRE, L.L.C.,
a Tennessee Limited Liability
Company
By:/s/ JOHN J. PILGER
------------------------------
Its: Chief Manager
ADDRESS:
c/o Casino Resource Corporation
1719 Beach Blvd., Suite 306
Biloxi, Mississippi 39531-5396
Telecopy: (601) 374-5935
STATE OF TENNESSEE
COUNTY OF KNOX
Personally appeared before me, Notary Public of said County, J. MacDONALD
BURKHART, M.D., the within named bargainer, with whom I am personally acquainted
(or proved to me on the basis of satisfactory evidence), and who acknowledged
that he executed the within instrument for the purposes therein contained.
Witness my hand, at office, this 25 day of September, 1996.
/s/ CATHERINE A. NUINE
---------------------------------
Notary Public
My Commission Expires: 3/3/99
-----------------------
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20
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STATE OF MISSISSIPPI
----------------------
COUNTY OF HARRISON
---------------------
Before me, a Notary Public of the state and county aforesaid, personally
appeared John J. Pilger with whom I am personally acquainted (or proved to me
on the basis of satisfactory evidence), and who, upon oath, acknowledged
himself to be President (or other officer authorized to execute the
instrument) of COUNTRY TONITE THEATRE, L.L.C., the within named bargainor, a
Tennessee limited liability company, and that he as such President, executed
the foregoing instrument for the purpose therein contained, by signing the
name of the limited liability company by himself as President.
Witness my hand, at office, this 24 day of September, 1996.
/s/ ANDREA R. GARCIA
---------------------------------
Notary Public
My Comission Expires: 6/6/2000
--------------------------------------
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UNCONDITIONAL GUARANTY OF LEASE
Casino Resource Corporation ("CRC"), a Minnesota corporation, is the sole
owner of CRC of Tennessee, Inc., a Tennessee corporation ("CRCT"). CRCT is a
Member of Country Tonite Theatre, L.L.C., a Tennessee limited liability company
("Lessee"), and CRCT owns sixty percent (60%) of the membership interests of the
Lessee. As an inducement for the execution of the foregoing Lease Agreement
(the "Lease"), and as an additional consideration to J. MacDonald Burkhart, M.D.
("Lessor"), CRC covenants and agrees as follows:
1. CRC hereby unconditionally and absolutely guarantees the prompt and
full payment of Lessee's rental obligations described in paragraph 3
of the Lease Agreement but only to the extent of Thirty Thousand
Dollars ($30,000.00) per month and only through the initial five (5)
year term of the Lease.
2. CRC agrees that this Guaranty may be enforced by Lessor without first
resorting to or exhausting any other remedy, security, or collateral.
Lessor shall provide notice to CRC of any nonpayment of rent and
within five (5) days, CRC shall pay to Lessor Thirty Thousand Dollars
($30,000.00) for such month less any partial rental payments for such
month timely paid by Lessee. CRC agrees that its obligations pursuant
to this Guaranty shall not be impaired, modified, changed, released or
limited in any manner whatsoever by any impairment, modification,
change, release, or limitation of the liability of Lessee or its
estate in bankruptcy (including without limitation any rejection of
the Lease by Lessee or by any trustee or receiver in bankruptcy
resulting from the operation of any present or future provisions of
the United States Bankruptcy Code or any similar statute or decision
of any court.) The liability of CRC shall not be affected by any
repossession of the Leased Property by Lessor.
3. CRC agrees that in the event this Guaranty is placed in the hands of
an attorney for enforcement, CRC shall reimburse Lessor for any and
all expenses incurred, including reasonable attorney's fees and
litigation expenses.
4. CRC agrees that this Guaranty shall inure to the benefit of and may be
enforced by Lessor, his successors and assigns, and any mortgagee(s)
of the Leased Property, and shall be binding and enforceable against
CRC and CRC's successors, and assigns.
5. The execution of this Guaranty by John J. Pilger, President of CRC,
has been duly authorized by an appropriate action of the Board of
Directors of CRC but no director, officer, or employee of CRC shall
have any personal liability for this Guaranty. A copy of the
corporate resolution authorizing the execution of this Guaranty shall
be promptly delivered to Lessee.
6. This Guaranty contains the entire agreement between the parties hereto
with respect to the transactions contemplated by this Guaranty and
supersedes all prior written or unwritten arrangements or
understandings with respect thereto. This Guaranty shall be governed
by and in accordance with the substantive, internal laws of the State
of
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Tennessee. CRC hereby submits to the jurisdiction and venue of the
state and federal courts located in Knox County, Tennessee. The
parties agree they have jointly prepared this Guaranty. This Guaranty
may not be modified, amended or revoked, except in a writing signed by
all parties. This provision may not be orally waived.
IN WITNESS WHEREOF, CRC has executed this Guaranty this day 24 of
September, 1996.
CASINO RESOURCE CORPORATION,
a Minnesota corporation
By /s/ JOHN J. PILGER
------------------------------
John J. Pilger
Its: President
STATE OF MISSISSIPPI )
-------------
COUNTY OF HARRISON )
-------------
Before me, a Notary Public of the state and county aforesaid, personally
appeared JOHN J. PILGER, with whom I am personally acquainted (or proved to me
on the basis of satisfactory evidence), and who, upon oath, acknowledged himself
to be President (or other officer authorized to execute the instrument) of
CASINO RESOURCE CORPORATION, the within named bargainer, a corporation, and that
he as such President, executed the foregoing instrument for the purpose therein
contained, by signing the name of the corporation by himself as President.
Witness my hand and seal, at office, this 24 day of
September, 1996.
/s/ ANDREA R. GARCIA
---------------------
Notary Public
My Commission Expires: 6/6/2000
----------------------------------
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EXHIBIT A
The Premises is a portion of the real property owned by Lessor. The entire
tract owned by Lessor is more particularly described on EXHIBIT A-1 attached
hereto. The "Premises" is that portion improved as a theater building and the
parking therefor. The shaded area on the map attached hereto as EXHIBIT A-2 is
an approximate depiction of the Premises.
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EXHIBIT A-1
SITUATED in the Fifth (5th) Civil District of Sevier County, Tennessee, and
within the corporate limits of the City of Pigeon Forge, Tennessee, and being a
10.165 acre tract located on the eastern side of U. S. Highway 441, and being
more particularly bounded and described as follows:
BEGINNING at an iron pin set in the eastern right-of-way of U. S. Highway 441,
said iron pin being 300 feet, more or less, in a northerly direction from the
intersection of the eastern right-of-way of U. S. Highway 441 with the northern
right-of-way of Sugar Hollow Road; thence with the right-of-way of U. S. Highway
441 North 00 deg. 42 min. 48 sec. East passing an iron pin at 55.38 feet, a
total distance of 178.16 feet to an iron pin marking the southwestern corner of
Lot 7 of Pine Grove Plaza (Map Book 21, Page 173); thence leaving the right-of-
way of U. S. Highway 441 and with the line of Pine Grove Plaza the following two
calls and distances: North 67 deg. 32 min. 43 sec. East 829.56 feet to an iron
pin; North 48 deg. 13 min. 38 sec. East 169.07 feet to an iron pin, corner to
Laurel Manor, Inc. (Deed Book 282, Page 15) ; thence with the line of Laurel
Manor, Inc. the following two calls and distances: South 54 deg. 40 min. 24 sec.
East 349.54 feet to an iron pin; North 43 deg. 24 min. 19 sec. East 247.69 feet
to an iron pin, corner to John and Lisa Rauhuff (Deed Book 132, Page 88); thence
with the line of Rauhuff and a fence the following two calls and distances:
South 56 deg. 20 min. 12 sec. East 136.66 feet to an iron pin; South 51 deg. 15
min. 57 sec. East 21.10 feet to an iron pin, corner to R. DeWitt Shelton, et
al. (Deed Book 522, Page 642); thence with the line of R. DeWitt Shelton, et
al., the following six calls and distances: South 40 deg. 26 min. 51 sec. West
621.24 feet to an iron pin; thence running with the arc in a curve to the left
in a circle having a radius of 332.34 feet, a tangent of 60.39 feet, a chord
call and distance of North 83 deg. 26 min. 38 sec. West 118.84 feet to an iron
pin; thence South 86 deg. 15 min. 24 sec. West 97.00 feet to an iron pin;
thence running with the arc in a curve to the right in a circle having a radius
of 184.40 feet, a tangent of 76.99 feet, a chord call and distance of North 71
deg, 04 min. 59 sec. West 142.09 feet to an iron pin; thence North 48 deg. 25
min. 23 sec. West 20.64 feet to an iron pin; thence running with the arc in a
curve to the left in a circle having a radius of 75.13 feet, a tangent of 28.51
feet, a chord call and distance of North 69 deg. 12 min. 15 sec. West 53 31 feet
to an iron pin, corner to BGA Associates (Deed Book 485, Page 177); thence with
the line of BGA Associates the following two calls and distances: North 89 deg.
59 min. 25 sec. West 425.32 feet to an iron pin; South 65 deg. 12 min. 05 sec.
West 261.88 feet to an iron pin in the right-of-way of U. S. Highway 441, the
POINT OF BEGINNING, as shown by survey of Dean A. Orr, RLS #780, ETE Consulting
Engineering, Inc., 311 Oak Ridge Turnpike, Oak Ridge, Tennessee 37830, dated
April 28, 1995, bearing Job No. 94-398-11.
THERE IS SPECIFICALLY RESERVED from the above-described property an
exclusive sign easement which is reserved by the First Parties named herein
for the use and benefit of the First Parties, their heirs, devisees and
assigns over the following described parcel of property:
SITUATED in the Fifth (5th) Civil District of Sevier County, Tennessee, and
within the corporate limits of the city of Pigeon Forge, Tennessee, being
located on the eastern side of U. S. Highway 441, and being more
particularly described as follows:
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<PAGE>
To FIND THE POINT OF BEGINNING start at an iron pin set in the eastern
right-of-way of U. S. Highway 441, said iron pin being 300 feet, more or
less, in a northerly direction from the intersection of the eastern
rightof-way of U. S. Highway 441 with the northern right-ofway of Sugar
Hollow Road; thence running with the eastern right-of-way of U. S. Highway
441 and the western terminus of a 50 foot joint permanent non-exclusive
easement North 00 deg. 42 min. 48 sec. East 55.38 feet to an iron pin
lying in the northern line of said 50 foot joint permanent non-exclusive
easement, said iron pin marking the place of beginning of the sign easement
area; thence leaving the right-of-way of U. S. Highway 441 and with
northern line of a 50 foot joint permanent nonexclusive easement North 65
deg. 12 min. 05 sec. East 20.00 feet, more or less, to a point; thence
leaving the right-of-way of a 50 foot joint permanent non-exclusive
easement North 00 deg. 42 min. 48 sec. East 20.00 feet, more or less, to a
point; thence South 65 deg. 12 min. 05 sec. West 20.00 feet, more or less,
to a point in the eastern right-of-way of U. S. Highway 441; thence with
the eastern right-of-way of U. S. Highway 441 South 00 deg. 42 min. 48 sec.
West 20.00 feet, more or less, to an iron pin, the POINT OF BEGINNING, as
shown on survey of Dean A. Orr, RLS #780, ETE Consulting Engineering, Inc.,
311 Oak Ridge Turnpike, Oak Ridge, Tennessee 37830, dated April 28, 1995,
bearing Job No. 94-398-11.
The Second Party by joining in the execution of this Correction Warranty
Deed, does hereby grant, bargain, sell and convey unto First Parties the
exclusive sign easement aforementioned, which sign easement was erroneously
omitted from that prior deed of record in Deed Book 522, Page 646, in the
Sevier County Register's Office. The spouse of Second Party, Mary N.
Burkhart, joins in the execution of this Correction Warranty Deed for the
sole purpose of conveying any marital interest which she may have in the
above-described property, to First Parties for the purpose of said sign
easement.
THERE IS SPECIFICALLY RESERVED by the First Parties named herein a 50 foot
wide joint permanent non-exclusive easement for ingress, egress and utilities
running over, across and under the above-described 10.165 acre tract of
property, said 50 foot wide joint permanent nonexclusive easement being more
particularly bounded and described as follows:
SITUATED in the Fifth (5th) Civil District of Sevier County, Tennessee, and
within the corporate limits of the City of Pigeon Forge, Tennessee, and being
more particularly bounded and described as follows:
BEGINNING at an iron pin in the eastern right-of-way of U. S. Highway 441, said
iron pin being located 300 feet, more or less, in a northerly direction from the
intersection of the eastern right-of-way of U. S. Highway 441 with the northern
right-of-way of Sugar Hollow Road; thence with the right-of-way of U. S. Highway
441 North 00 deg. 42 min. 48 sec. East 55.38 feet to an iron pin; thence
leaving the right-of-way of U. S. Highway 441 and running along the northern
right-of-way line of the 50 foot wide joint permanent non-exclusive easement the
following calls and distances: North 65 deg. 12 min. 05 sec. East 249.02 feet
to an iron pin; thence South 89 deg. 59 min. 25 sec. East 436.32 feet to an
iron pin; thence running with an arc in a curve to the right in a circle having
a radius of 125.13 feet, a tangent of 47.49 feet, a chord call and distance of
South 69 deg. 12 min. 15 sec. East 88.79 feet to an iron pin; thence South 48
deg. 25 min. 23 sec. East 20.64 feet to an
26
<PAGE>
iron pin; thence running with an arc in a curve to the left in a circle having a
radius of 134.40 feet, a tangent of 56.11 feet, a chord call and distance of
South 71 deg. 04 min. 59 sec. East 103.56 feet to an iron pin; thence North 86
deg. 15 min. 24 sec. East 97.00 feet to an iron pin; thence running with the
arc in a curve to the right in a circle having a radius of 382.34 feet, a
tangent of 80.69 feet, a chord call and distance of South 81 deg. 49 min. 36
sec. East 157.90 feet to an iron pin in the line of R. DeWitt Shelton, et al.
(Deed Book 522, Page 642); thence with the line of R. DeWitt Shelton, et al. the
following six calls and distances: South 40 deg. 26 min. 51 sec. West 53.90
feet to an iron pin; thence running with the arc in a curve to the left in a
circle having a radius of 332.34 feet, a tangent of 60.39 feet, a chord call and
distance of North 83 deg. 26 min. 38 sec. West 118 84 feet to an iron pin;
thence South 86 deg. 15 min. 24 sec. West 97.00 feet to an iron pin; thence
running with an arc in a curve to the right in a circle having a radius of
184.40 feet, a tangent of 76.99 feet, a chord call and distance of North 71 deg.
04 min. 59 sec. West 142.09 feet to an iron pin; thence North 48 deg. 25 min.
23 sec. West 20.64 feet to an iron pin; thence running with an arc in a curve
to the left in a circle having a radius of 75.13 feet, a tangent of 28.51 feet,
a chord call and distance of North 69 deg. 12 min. 15 sec. West 53.31 feet to
an iron pin, corner to BGA Associates (Deed Book 485, Page 177); thence with the
line of BGA Associates the following two calls and distances: North 89 deg. 59
min. 25 sec. West 425.32 feet to an iron pin; thence South 65 deg. 12 min. 05
sec. West 261.88 feet to an iron pin in the eastern right-of-way line of U. S.
Highway 441, the POINT AND PLACE OF BEGINNING, as shown by survey of Dean A.
Orr, RLS #780, ETE Consulting Engineering, Inc., 311 Oak Ridge Turnpike, Oak
Ridge, Tennessee 37830, dated April 28, 1995, bearing Job No. 94-398-11.
The Second Party named herein joins in the execution of this deed to grant,
bargain, sell and convey to First Parties, their heirs, devisees and assigns, a
joint permanent non-exclusive easement for ingress, egress and utilities over,
across and under the aforedescribed easement area so as to correct the
description of the easement area previously described in Deed Book 522, Page
646, in the Sevier County Register's Office. The easement rights reserved to
First Parties named herein are non-exclusive rights and the Second Party, his
heirs, devisees and assigns shall have the joint use of said easement area for
the purpose of ingress, egress and utilities.
There is further conveyed with the 10.165 acre tract property described above
and there is specifically reserved herein an additional joint permanent
nonexclusive easement for ingress, egress and utilities running over, across and
under the following described property:
SITUATED in the Fifth (5th) Civil District of Sevier County, Tennessee, and
within the corporate limits of the City of Pigeon Forge, Tennessee, and being a
50 foot wide right-of-way immediately north of and running parallel with the
following described line, which line marks the southern right-of-way line for
said 50 foot wide joint permanent non-exclusive easement for ingress, egress and
utilities:
TO FIND THE POINT OF BEGINNING start at an iron pin set in the eastern right-of-
way line of U. S. Highway 441, said iron pin being 300 feet, more or less, in a
northerly direction from the intersection of the eastern right-of-way of U. S.
Highway 441 with the northern right-of-way of Sugar Hollow Road and said iron
pin being corner to BGA Associates (Deed Book 485, Page 177); thence running
with the line of BGA Associates the following two calls and distances: North 65
deg. 12 min. 05 sec. East 261-88 feet to an iron pin; thence South 89 deg. 59
min. 25 sec. East 425.32
27
<PAGE>
feet to an iron pin, corner to R. DeWitt Shelton, et al.; thence with the line
of Shelton, et al. the following five calls and distances: Running with the arc
in a curve to the right in article having a radius of 75.131 feet, a tangent of
28.513 feet, a chord call and distance of South 69 deg. 12 min. 18 sec. East
53.315 feet to an iron pin; thence South 48 deg. 25 min. 23 sec. East 20.64
feet to an iron pin; thence running with the arc in a curve to the left in a
circle having a radius of 184-400 feet, a tangent of 76.985 feet, a chord call
and distance of South 71 deg. 05 min. 00 sec. East 142.085 feet to an iron pin;
thence North 86 deg. 15 min. 24 sec. East 97.00 feet to an iron pin; thence
running with the arc in a curve to the right in a circle having a radius of
332.340 feet, a tangent of 67.162 feet, a chord call and distance of South 82
deg. 19 min. 07 sec. East 131.662 feet to an iron pin, the POINT OF BEGINNING;
thence running with the arc in a curve to the right in a circle having a radius
of 345.332 feet, a tangent of 96.499 feet, a chord call and distance of South 55
deg. 16 min. 53 sec. East 185.877 feet to an iron pin; thence South 39 deg. 40
min. 08 sec. East 193-90 feet to an iron pin, being corner to property of
Barbara Mockus, said iron pin marking the terminus of the easement area and
being according to the survey of Ronnie L. Sims, Tennessee Registered Land
Surveyor No. 683, 1020 Topside Drive, Sevierville, Tennessee 37862, dated
December 20, 1994 and last revised on April 19, 1995.
There is further conveyed with the 10.165 acre tract described above and
specifically reserved a joint permanent non-exclusive easement for ingress,
egress and utilities running over, across and under the following described
parcel of property:
SITUATED in the Fifth (5th) Civil District of Sevier County, Tennessee, and
within the corporate limits of the City of Pigeon Forge, Tennessee, beginning at
an iron pin marking the southeastern terminus of the aforementioned easement
described above, and which iron pin lies in the southwestern right-of-way line
of the 50 foot wide joint permanent non-exclusive easement area; thence leaving
said point and place of beginning and running with the southern terminus of the
50 foot wide joint permanent non-exclusive easement for ingress, egress and
utilities aforedescribed, North 50 deg. 19 min. 51 sec. East 50.00 feet to an
iron pin; thence South 39 deg. 40 min. 08 sec. East 132.93 feet to an iron pin;
thence North 79 deg. 28 min. 09 sec. East 110.87 feet to an iron pin; thence
running with the arc in a curve to the right in a circle having a radius of
50.01 feet, a tangent of 39.94 feet, an arc distance of 67.40 feet to an iron
pin lying in the northern right-of-way line of Sugar Hollow Road; thence running
with the northern right-of-way line of Sugar Hollow Road and running with the
arc in a curve to the left in a circle having a radius of 498.40 feet, a tangent
of 25.03 feet, an arc distance of 50.03 feet to an iron pin, being corner to
property of C. B. McCarter (Plat Book 5, Page 72); thence running with the line
of McCarter South 79 deg. 28 min. 09 sec. West 140.25 feet to an iron pin,
being corner to property of Barbara Mockus; thence running with the line of
Barbara Mockus North 39 deg. 40 min. 08 sec. West 162.30 feet to an iron pin,
marking the POINT AND PLACE OF BEGINNING, and being according to the survey of
Ronnie L. Sims, Tennessee Registered Land Surveyor No. 683, 1020 Topside Drive,
Sevierville, Tennessee 37862, dated December 20, 1994 and last revised on April
19, 1995.
BEING part of the same property conveyed to R. DeWitt Shelton and Lela Evelyn
Ogle by Quit Claim Deed from R. DeWitt Shelton, Trustee, dated June 16, 1994, of
record in Deed Book 522, Page 642, in the Sevier County Register's Office.
28
<PAGE>
EXHIBIT A-2
Diagram of property boundary
29
<PAGE>
EXHIBIT C
Copy of contract with Country Tonite Enterprises providing for
performance of the "Country Tonite Show" on the Premises throughout the term
of this Lease Agreement
30
<PAGE>
EXHIBIT 2
- --------------------------------------------------------------------------------
CONTRACT TO PRODUCE SHOW
BETWEEN
COUNTRY TONITE ENTERPRISES, INC.
AND
COUNTRY TONITE THEATRE, L.L.C.
- --------------------------------------------------------------------------------
This contract to Produce Show ("Contract") is by and between Country Tonite
Theatre, L.L.C., hereinafter referred to as "Theater," and Country Tonite
Enterprises, Inc., hereinafter referred to as "Producer." Producer agrees to
produce and present for Theater a show known as "Country Tonite" hereinafter
referred to as "Show," in the Country Tonite Theatre located at 2249 Parkway in
Pigeon Forge, Tennessee. Said show will be produced and presented under the
terms and conditions of this Contract.
RECITALS
1. CONTRACT TERM. Producer agrees to produce and present the Show for a
term that is coextensive with the existence of Country Tonite Theatre, L.L.C., a
Tennessee limited liability company, pursuant to its Operating Agreement, dated
as of September 24th, 1996 (the "Operating Agreement").
2. THE "SHOW" DEFINED. The Show will have a running time of one-and-one-
half to two hours. It will consist of at least five singers, eight dancers and
one or two specialty acts performing in a structured Country & Western music
variety show. The Show will also consist of live music with a seven to a
twelve-piece band. In addition to performers and artists, CTE will provide one
(1) administrative person and one (1) wardrobe attendant to facilitate the
production of the show (collectively "Producer Personnel.") The Show shall be a
first rate production consistent with the quality of other variety shows
currently being performed by CTE. Producer may vary the format from time to
time in the best interest of the Show and the Theater.
3. WEEK DEFINED. A "week" is herein defined as a six-day period of a
calendar week (Sunday through Saturday) plus one nonperformance dark night to be
designated by Theater. It is hereby acknowledged that a week will include up to
twelve (12) performances per week. The Show times and days will be designated
in writing by Theater, provided that Producer shall not be required to present
the show between January 1 and March 1 of each year. Producer shall not be
required to present the show a minimum number of times per week, but Producer
shall be required to present the show an average eight (8) times per week for
the period from March 15 through December 31 in each year. Theatre agrees not
to do over twelve (12) shows per week without Burkhart Ventures, LLC's consent,
which shall not be unreasonably withheld. If show is presented more than twelve
(12) times in one week, Producer shall be paid $3,750.00 for each show in a week
over twelve (12).
4. RIGHTS IN THE PRODUCTION. Producer will own and retain all rights in
and to the title, format, logo, script continuity, choreography, and all other
elements of the Show.
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<PAGE>
EXHIBIT 2
Notwithstanding the foregoing, Producer grants to Theater a license for the Term
of this Contract, including any extensions thereof to utilize the Show's title,
logo, video, or audio excerpts or any other reference to or description of the
Show in the Theater, promotion, marketing or public relations materials.
5. EXCLUSIVITY. Producer agrees that during the Term of this contract,
and any extensions thereof, Producer shall not compete with the Theater directly
or indirectly within Sevier County, Tennessee or any adjoining county. However,
from time to time, it is hereby understood that Producer may be airing certain
excerpts from the Show for the purpose of marketing, merchandising and
advertising the Show. If a taped excerpt of the Show is utilized on television,
for purposes other than marketing and advertising, for profit, Producer shall
pay a fee of $5,000.00 to Theater.
6. CONSIDERATION AND METHOD OF PAYMENT.
a. Theater shall pay Producer a fee of $42,500 per week during the
term, provided that if less than six (6) shows are presented in any week,
subject to the next sentence, the amount paid to Producer for such week shall be
reduced by $7,083.33 for each show less than six (6) that is presented. If the
show is presented for any partial week at the beginning or end of a performance
season, such fee shall be pro-rated based on days performed, but in no event
shall any payment be made between January 1 and March 1 of any year. Payment
shall be made on a weekly basis to Producer and made available to Producer each
Monday morning before 10:00 a.m., Knoxville time, following the week's
performance. Theater will be in default if payment is not made in full within
ten (10) days of written notice of such nonpayment as provided herein.
b. The fee provided for in subparagraph (a) of this paragraph shall
be adjusted as of March 1 of each year, beginning March 1, 1998, for "cost of
living" changes in accord with the Consumer Price Index for Urban Wage Earners
and Clerical Workers (all items) for the Southern United States published by the
Southern Office of the United States Department of Labor, Bureau of Labor
Statistics (the "index"). Each adjustment shall be made by multiplying the
weekly payment for the last full week of the prior calendar year by a fraction,
the numerator which shall be the most recent index in effect at the time of such
adjustment, and the denominator of which shall be the index for January, 1997.
The product shall be the adjusted weekly payment until the next adjustment
occurs. If the index changes so that the base (denominator) differs from that
originally used, the index shall be converted in accordance with the conversion
factor published by the United States Department of Labor, Bureau of Labor
Statistics. If the index is discontinued or revised during the term hereof,
such other government index or computation with which it is replaced shall be
used in order to obtain substantially the same result as would have been
obtained if the index had not been discontinued or revised.
c. As further consideration hereunder, Producer shall have the
exclusive right to film and/or video tape the Show or excerpts thereof and shall
make such film and/or video tape available to Theatre at Producer's actual cost.
All income from sales or rental of such film or video tape sold in Sevier County
shall inure to the benefit of the Theater.
32
<PAGE>
7. PRICE AND REVENUE. Theater shall establish the admission price for
the Show and the cost to the audience of any and all beverage and food service
and shall retain all revenues therefrom. Theater agrees to pay all taxes on
admissions to Show, plus cabaret taxes and sales taxes as well as ASCAP, SESAC
and BMI licensing fees.
8. CERTAIN PRODUCTION COSTS.
a. Theater shall provide, at its expense, lighting and sound
systems, stage sets, house equipment, related equipment, wardrobe maintenance
including storage for same for Show's performers, stage configuration, dressing
rooms, and projection system and screen. Theater shall provide the necessary
personnel to handle stage functions, including but not limited to stage manager,
assistant stage manager, spotlight operators, and lighting and sound
technicians. Producer acknowledges that the facilities and equipment located at
2249 Parkway in Pigeon Forge, Tennessee are suitable for the production of the
show in accordance with the terms of this Agreement.
b. Producer shall provide, at its sole expense:
(1) All props required for the Show;
(2) All costumes for the Show's performers;
(3) All special effects for the Show which are not standard and
ordinarily existent in the Theater's showroom.
9. REHEARSAL AND AUDITIONS.
a. Theater shall make the showroom available to Producer for
rehearsals and auditions upon reasonable notice by Producer and shall make such
stage lighting and sound personnel as may be reasonably necessary thereto
available in connection therewith.
b. The Theater reserves the right to utilize the showroom for
entertainment and other purposes during all daytime hours and during any
evenings or other times the Show is not presented or when the auditorium is not
in use during mutually agreed rehearsal and audition times described in the
preceding subparagraph.
c. Theater agrees to make the auditorium available for rehearsal and
taping of television commercials.
10. TERMINATION. The Producer may terminate this Agreement if any of the
following events shall occur.
a. Failure by Theatre to pay, in full, on the dates due, any payment
due hereunder, provided, however, that Theatre shall have ten (10) days
following written notice from Producer to cure such default.
33
<PAGE>
b. Failure by Theatre to observe or perform any of the other terms,
covenants, agreements or conditions contained in this Agreement for a period of
thirty (30) days after written notice from Producer specifying such default,
provided, if any such default cannot be completely cured within such 30-day
period, despite Theatre's diligent, best-faith effort, commenced immediately,
then Theatre shall have a reasonable time to complete the cure of such default,
for a period not to exceed ninety (90) days.
c. Either the Lease dated as of the date hereof between J. MacDonald
Burkhart, M.D., and the Theatre or the Operating Agreement of the Theatre is
terminated.
The Producer's right to terminate this Agreement under this paragraph
is in addition to such other rights that the Producer may have at law or equity.
The Theatre may terminate this Agreement if any of the following
events shall occur.
a. Failure by Producer to observe or perform any of the other terms,
covenants, agreements or conditions contained in this Agreement for a period of
thirty (30) days after written notice from Theatre specifying such default,
provided, if any such default cannot be completely cured within such 30-day
period, despite Producer's diligent, best-faith effort, commenced immediately,
then Producer shall have a reasonable time to complete the cure of such default,
for a period not to exceed ninety (90) days.
b. Either the Lease dated as of the date hereof between J. MacDonald
Burkhart, M.D., and the Theatre or the Operating Agreement of the Theatre is
terminated.
The Theater's right to terminate this Agreement under this paragraph is in
addition to such other rights that the Theater may have at law or equity.
Any notices given hereunder shall also be given to Burkhart Ventures, LLC,
in the manner and at the address provided in the Operating Agreement.
10. CERTAIN PROHIBITIONS. Upon the termination of this Agreement Theatre
agrees not to:
a. for a period of one (1) year after termination of this Agreement,
produce either directly or indirectly or rent its property to any person or
entity producing, a country and eastern rock music variety shown which uses the
word "County" in its name or in any trade name or trademark.
b. for a period of one (1) year after termination of this Agreement,
hire any person who was an employee of the Producer or any affiliated entity
within the one-year period prior to the termination of this Agreement; or
c. violate any copyright, trademark or common law intellectual
property rights of CTE or any affiliated entity.
34
<PAGE>
The provisions of this paragraph shall survive the termination of this
Agreement.
12. PRODUCER PERSONNEL. Producer shall require and assure that all
Producer Personnel shall at all times perform his/her services in a highly
professional manner. While on the premises of the Theatre, Producer Personnel
shall conduct themselves in an appropriate and dignified manner, using
professional discretion at all times. Producer is responsible for assuring that
Producer Personnel and all persons performing services for Producer in
connection with this agreement are subject to, and comply fully with, all terms
and conditions of this Agreement.
13. CANCELLATION OF PERFORMANCE BY THEATRE. Theatre shall have the right
to cancel any performance of the Show, or any portion thereof, should
extraordinary conditions exist which include, but are not limited to: riot,
civil disorder, act(s) of God, strike, act of any federal, state or local
instruments, rebellions, bomb threats, or any natural disaster.
14. PUBLICITY. Producer shall require all performers in the Show to be
available to Theater when requested from time to tome, for, among other things,
publicity photographs and interview . All such services shall be rendered
without any kind of cost or charge to Theater except that the Theater shall
reimburse for travel, as required by the Theater or may pay the entertainer a
fair market hourly rate for any material time. Producer agrees, for itself and
on behalf of all performers in the Show, that such photographs and interview
material may be used by Theater for any promotional and publicity purposes as
Theater shall determine for the term of this agreement in its sole and absolute
discretion; and Producer, for itself and on behalf of its performers, completely
releases, Theater from any liability resulting from the use of such material.
All promotional and publicity materials created at the expense or through the
effort of Theater and approved by the Producer shall be the sole property of
Theater, and Producer agrees to sign and to require its performers to sign, as
may be reasonably determined, any and all releases, acknowledgements or such
other documentations as Theater may request from time to time in connection
with.
15. TAXES AND INSURANCE. Producer shall be solely responsible for and
shall pay when due all federal income tax withholding, FICA, social security,
payment of workers' compensation where required by law and payroll taxes on
behalf of Producer Personnel. Producer shall provide evidence satisfactory to
Theater that worker's compensation insurance coverage is being carried by
Producer and, when requested by Theater, evidence satisfactory to Theater that
payment of all the foregoing payroll burden has been made. Each party to this
contract hereby waives its right to subrogation.
16. INDEPENDENT CONTRACTOR. Producer is and shall be in the performance
of all work, services and activities under this Agreement an independent
contractor. No term or condition under this Agreement nor any method or manner
of payment hereunder shall create any relationship between Theater and Producer
other than as expressed in this paragraph. Producer personnel shall not in any
way, at any time, or under any circumstances, be or be construed to be
employees, agents, representatives or personnel of Theater.
35
<PAGE>
17. INDEMNIFICATION. Producer shall defend, indemnity, and hold Theater
completely free and harmless from and against any and all claims, demands, suits
and actions which are the result of negligence by anyone not a party to this
Agreement for loss, injury, damage, or liability from bodily injury and property
damage arising directly or indirectly out of Producer's negligence with respect
to performance of the Show or of this Agreement. Producer shall carry
commercial liability insurance to insure against such risks.
18. PARKING. Theatre shall make parking available for the show to the
full extent that parking is available to the Theatre under its lease of the
property under which the Show will be permitted.
19. MISCELLANEOUS PROVISIONS
a. Time is of the essence of this Agreement and the performance of
each and every provisions hereof.
b. Except as otherwise provided herein, this Agreement shall be
binding upon and shall inure to the benefit of the parties, their permitted
successors and assigns.
c. Whenever the context so requires, the use of any gender shall be
applicable to all genders, the singular number shall include the plural and the
plural gender.
d. The law of the State of Tennessee shall govern the validity,
performance and enforcement of this Agreement.
e. If either party to this Agreement shall institute any action or
proceeding under the provisions of this Agreement, the prevailing party in such
action or proceeding shall be entitled to recover all of its costs and
reasonable attorney's fees.
f. The failure of Theater to insist upon performance of any of the
provisions of this Agreement in any one or more instances shall not be a waiver
thereafter of its right to full performance of all the provisions of this
Agreement when any performance is due. No waiver of a breach of any of the
covenants, conditions, terms of provisions of this Agreement shall be construed
to be a waiver of any succeeding breach of the same of any other covenant,
condition, term or provisions. All rights and remedies created by this
Agreement are cumulative and the use of one remedy shall not be taken to exclude
or waive the right to the use of another.
g. In case provision contained in this Agreement shall be held to be
illegal, invalid or unenforceable, the legality, validity and enforceability of
all remaining provisions shall not be in any way affected of impaired thereby.
h. Captions and/or headings have been inserted for convenience of
reference only and are not to be construed or considered to be a part hereof and
shall not in any way modify, restrict or amend any of the terms or provisions
hereof.
36
<PAGE>
EXHIBIT 2
Executed this 24th day of September, 1996.
COUNTY TONITE THEATRE, LLC. COUNTY TONITE ENTERPRISES, INC.
/s/ John J. Pilger /s/ John J. Pilger
- ----------------------------- -------------------------------
John J. Pilger, Chief Manager John J. Pilger, Chief Manager
37
<PAGE>
EXHIBIT 2
EXHIBIT D
LIST OF ASSUMED EQUIPMENT LEASES AND MONTHLY AMOUNTS DUE
<TABLE>
LESSOR PURPOSE AMOUNTS DUE
------ ------- ------- DATE
----
<S> <C> <C> <C>
Citizens National Sound & lighting $16,620.17 20th of month
Bank equipment
Citizens National Computers $ 510.16 27th of month
Bank
Associates Leasing Walkie-talkies $ 320.99 27th of month
AT&T Capital Fax/Copier $ 240.35 28th of month
Leasing Services, Inc.
AT&T Credit Telephone $ 616.18 27th of month
Corporation
</TABLE>
_____________________
* Lessee shall have no rights in the video equipment (recorders, cameras,
screens, and any and all related equipment) currently used in the theater.
38
<PAGE>
EXHIBIT 2
EXHIBIT E
Encumbrances
1. All encumbrances listed in Lessor's title insurance policy issued by
Lawyers Title Insurance Corporation (Policy #113-00-997074) attached
hereto as EXHIBIT E-1.
2. A disputed lien asserted by Creative Structures, Inc. filed in the
Sevier County Register of Deeds Office on July 2, 1996. Lessor
covenants that this item will be released or removed by bond by
January 15, 1997.
3. A deed of trust in favor of SunTrust National Bank of East Tennessee
and a deed of trust in favor of Union Planters Bank.
39
<PAGE>
EXHIBIT E
Lawyers Title
Insurance Corporation
National Headquarters
Richmond, Virginia
________________________________
Owner's Policy Number
113 - 00 - 997074
________________________________
SUBJECT TO THE EXCLUSIONS FROM COVERAGE, THE EXCEPTIONS FROM COVERAGE
CONTAINED IN SCHEDULE B AND THE CONDITIONS AND STIPULATIONS, LAWYERS TITLE
INSURANCE CORPORATION, a Virginia corporation, herein called the Company,
insures, as of Date of Policy shown in Schedule A, against loss or damage,
not exceeding the Amount of Insurance stated in Schedule A, sustained or
incurred by the insured by reason of:
1. Title to the estate or interest described in Schedule A being vested
other than as stated therein;
2. Any defect in or lien or encumbrance on the title;
3. Unmarketability of the title;
4. Lack of a right of access to and from the land.
The Company will also pay the costs, attorneys' fees and expenses incurred in
defense of the title, as insured, but only to the extent provided in the
Conditions and Stipulations.
IN WITNESS WHEREOF the Company has caused this policy to be signed and sealed,
to be valid when Schedule A is countersigned by an authorized officer or agent
of the Company, all in accordance with its By-Laws.
LAWYERS TITLE INSURANCE CORPORATION
Attest: By: Janet A. Alpert
Secretary President
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EXCLUSIONS FROM COVERAGE
The following matters are expressly excluded from the coverage of this
policy and the Company will not pay loss or damage, costs, attorneys' fees or
penses which arises by reason of:
(a) Any law, ordinance or governmental regulation (including but not limited to
building and zoning laws, ordinances, or regulations) restricting,
regulating, prohibiting or relating to (i) the occupancy, use, or enjoyment
of the land; (ii) the character, dimensions or location of any improvement
now or hereafter erected on the land; (iii) a separation in ownership or a
change in the dimensions or area of the land or any parcel of which the
land is or was a part; or (iv) environmental protection, or the effect of
any violation of these laws, ordinances or governmental regulations, except
to the extent that a notice of the enforcement thereof or a notice of a
defect, lien or encumbrances resulting from a violation or alleged
violation affecting the land has been recorded in the public records at
Date of Policy.
(b) Any governmental police power not excluded by (a) above, except to the
extent that a notice of the exercise thereof or a notice of a defect, lien
or encumbrances resulting from a violation or alleged violation affecting
the land has been recorded in the public records at Date of Policy.
Rights of eminent domain unless notice of the exercise thereof has been recorded
in the public records at Date of Policy, but not excluding from coverage any
taking which has occurred prior to Date of Policy which would be binding on the
rights of a purchaser for value without knowledge.
Defects, liens, encumbrances, adverse claims or other matter:
(a) created, suffered, assumed or agreed to by the insured claimant;
(b) not known to the Company, not recorded in the public records at Date of
Policy, but known to the insured claimant and disclosed in writing to the
Company by the insured claimant prior to the date the insured claimant
became an insured under this policy;
(c) resulting in no loss or damage to the insured claimant;
(d) attaching or created subsequent to Date of Policy; or
(e) resulting in loss or damage which would not have been sustained if the
insured claimant had paid value for the estate or interest insured by this
policy.
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Any claim, which arises out of the transaction vesting in the insured the estate
or interest insured by this policy, by reason of the operation of federal
bankruptcy, state insolvency, or similar creditors' rights laws.
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CONDITIONS AND STIPULATIONS
1. DEFINITIONS OF TERMS
The following terms when used in this policy mean:
(a) "insured": the insured name in Schedule A, and, subject to any rights
or defenses the Company would have had against the named insured, those who
succeed to the interest of the named insured by, operation of law as
distinguished from purchase including, but not limited to, heirs, distributees,
devisees, survivors, personal representatives, next of kin, or corporate or
fiduciary successors.
(b) "insured claimant": an insured claiming loss or damage.
(c) "knowledge" or "known": actual knowledge, not constructive knowledge or
notice which may be imputed to an insured by reason of the public records as
defined in this policy or any other records which impart constructive notice of
matters affecting the land.
(d) "land": the land described or referred to in Schedule A, and
improvements affixed thereto which by law constitute real property. The term
"land" does not include any proerty beyond the lines of the area described or
referred to in Schedule A, nor any right, title, interest, estate or easement in
abutting streets, roads, avenues, alleys, lanes, ways or waterways, but nothing
herein shall modify or limit the extent to which a right of access to and from
the land is insured by this policy.
(e) "mortgage": mortgage, deed of trust, trust deed, or the other security
instrument.
(f) "public records": records established under state statutes at Date of
Policy for the purpose of imparting constructive notice of matters relating to
real property to purchasers for value and without knowledge. With respect to
Section 1(a)(iv) of the Exclusions From Coverage, "public records" shall also
include environmental protection liens filed in the records of the clerk of the
United States district court for the district in which the land is located.
(g) "unmarketability of the title": an alleged or apparent matter affecting
the title to the land, not excluded or excepted from coverage, which would
entitle a purchaser of the estate or interest described in Schedule A to be
released from the obligation to purchase by virtue of a contractual condition
requiring the delivery of marketable title.
2. CONTINUATION OF INSURANCE AFTER CONVEYANCE OF TITLE.
The coverage of this policy shall continue in force as of Date of Policy
in favor of an insured only so long as the insured retains an estate or
interest in the land, or holds an indebtedness secured by a purchase money
mortgage given by a purchaser from the insured, or only so long as the
insured shall have liability by reason of convenants of warranty made by the
insured in any transfer or conveyance of the estate or interest. This policy
shall not continue in force in favor of any purchaser from the insured of
either (i) an estate or interest in the land, or (ii) an indebtedness secured
by a purchase money mortgage given to the insured.
3. NOTICE OF CLAIM TO BE GIVEN BY INSURED CLAIMANT.
The insured shall notify the Company promptly in writing (i) in case of any
litigation as set forth in Section 4(a) below, (ii) in case knowledge shall come
to an insured hereunder of any claim of title or interest which is adverse to
the title to the estate or interest, as insured, and which might cause loss or
damage for which the Company may be liable by virtue of this policy, or (iii) if
title to the estate or interest, as insured, is rejected as unmarketable. If
prompt notice shall not be given to the Company, then as to the insured all
liability of the Company shall terminate with regard to the matter or matters
for which prompt notice is required; provided, however, that failure to notify
the Company shall in no case prejudice the rights of any insured under this
policy unless the Company shall be prejudiced by the failure and then only to
the extent of the prejudice.
4. DEFENSE AND PROSECUTION OF ACTIONS; DUTY OF INSURED CLAIMANT TO COOPERATE.
(a) Upon written request by the insured and subject to the options
contained in Section 6 of these Conditions and Stipulations, the Company, at its
own cost and without unreasonable delay, shall provide for the defense of an
insured in litigation in which any third party asserts a claim adverse to the
title or interest as insured, but only as to those stated causes of action
alleging a defect, lien or encumbrance or other matter insured against by this
policy. The Company shall have the right to select counsel of its choice
(subject to the right of the insured to object for reasonable cause) to
represent the insured as to those stated causes of action and shall not be
liable for and will not pay the fees of any other counsel. The Company will not
pay any fees, costs or expenses incurred by the insured in the defense of those
causes of action which allege matters not insured against by this policy.
(b) The Company shall have the right, at its own cost, to institute
and prosecute any action or proceeding or to do any other act which in its
opinion may be necessary or desirable to establish the title to the estate or
interest as insured, or to prevent or reduce loss or damage to the insured.
The Company may take any appropriate action under the terms of this policy,
whether or not it shall be liable hereunder, and shall not thereby concede
liability or waive any provision of this policy. If the Company shall
exercise its rights under this paragraph, it shall do so diligently.
(c) Whenever, the Company shall have brought an action or interposed
a defense as required or permitted by the provisions of this policy, the
Company may pursue any litigation to final determination by a court of
competent jurisdiction and expressly reserves the right, it its sole
discretion, to appeal from any adverse judgment or order.
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(d) In all cases where this policy permits or requires the Company to
prosecute or provide for the defense of any action or proceeding, the insured
shall secure to the Company the right to so prosecute or provide defense in the
action or proceeding, and all appeals therein, and permit the Company to use, at
its option, the name of the insured for this purpose. Whenever requested by the
Company, the insured, at the Company's expense, shall give the Company all
reasonable aid (i) in any action or proceeding, securing evidence, obtaining
witnesses, prosecuting or defending the action or proceeding, or effecting
settlement, and (ii) in any other lawful act which in the opinion of the Company
may be necessary or desirable to establish the title to the estate or interest
as insured. If the Company is prejudiced by the failure of the insured to
furnish the required cooperation, the Company's obligations to the insured under
the policy shall terminate, including any liability or obligation to defend,
prosecute, or continue any litigation, with regard to the matter or matters
requiring such cooperation.
5. PROOF OF LOSS OR DAMAGE.
In addition to and after the notices required under Section 3 of these
Conditions and Stipulations have been provided the Company, a proof of loss or
damage signed and sworn to by the insured claimant shall be furnished to the
Company within 90 days after the insured claimant shall ascertain the facts
giving rise to the loss or damage. The proof of loss or damage shall describe
the defect in, or lien or encumbrance on the title, or other matter insured
against by this policy which constitutes the basis of loss or damage and shall
state, to the extent possible, the basis of calculating the amount of the loss
or damage. If the Company is prejudiced by the failure of the insured claimant
to provide the required proof of loss or damage, the Company's obligations to
the insured under the policy shall terminate, including any liability or
obligation to defend, prosecute, or continue any litigation, with regard to the
matter or matters requiring such proof of loss or damage.
In addition, the insured claimant may reasonably be required to submit
to examination under oath by an authorized representative of the Company and
shall produce for examination, inspection and copying, at such reasonable times
and places as may be designated by any authorized representative of the Company,
all records, books, ledgers, checks, correspondence and memoranda, whether
bearing a date before or after Date of Policy, which reasonably pertain to the
loss or damage. Further, if requested by any authorized representative of the
Company, the insured claimant shall grant its permission, in writing, for any
authorized representative of the Company to examine, inspect and copy all
records, books, ledgers, checks, correspondence and memoranda in the custody or
control of a third party, which reasonably pertain to the loss or damage. All
information designated as confidential by the insured claimant provided to the
Company pursuant to this Section shall not be disclosed to others unless, in the
reasonable judgment of the Company, it is neccessary in the administration of
the claim. Failure of the insured claimant to submit for examination under
oath, produce other reasonably requested information or grant permission to
secure reasonably necessary information from third parties as required in this
paragraph shall terminate any liability of the Company under this policy as to
that claim.
6. OPTIONS TO PAY OR OTHERWISE SETTLE CLAIMS; TERMINATION OF LIABILITY
In case of a claim under this policy, the Company shall have the following
additional options:
(a) TO PAY OR TENDER PAYMENT OF THE AMOUNT OF INSURANCE.
To pay or tender payment of the amount of insurance under this policy
together with any costs, attorneys' fees and expenses incurred by the insured
claimant, which were authorized by the Company, up to the time of payment or
tender of payment and which the Company is obligated to pay.
Upon the exercise by the Company of this option, all liability
and obligations to the insured under this policy, other than to make the payment
required, shall terminate, including any liability or obligation to defend,
prosecute, or continue any litigation, and the policy shall be surrendered to
the Company for cancellation.
(b) TO PAY OR OTHERWISE SETTLE WITH PARTIES OTHER THAN THE INSURED OR
WITH THE INSURED CLAIMANT.
(i) to pay or otherwise settle with other parties for or in the
name or an insured claimant any claim insured against under this policy,
together with any costs, attorneys' fees and expenses incurred by the insured
claimant which were authorized by the Company up to the time of payment and
which the Company is obligated to pay; or
(ii) to pay or otherwise settle with the insured claimant the
loss or damage provided for under this policy, together with any costs,
attorneys' fees and expenses incurred by the insured claimant which were
authorized by the Company up to the time of payment and which the Company is
obligated to pay.
Upon the exercise by the Company of either of the options provided for
in paragraphs (b)(i) or (ii), the Company's obligations to the insured under
this policy for the claimed loss or damage, other than the payments required to
be made, shall terminate, including any liability or obligation to defend,
prosecute or continue any litigation.
7. DETERMINATION, EXTENT OF LIABILITY AND COINSURANCE.
This policy is a contract of indemnity against actual monetary loss or
damage sustained or incurred by the insured claimant who has suffered loss or
damage by reason of matters insured against by this policy and only to the
extent herein described.
(a) The liability of the Company under this policy shall
not exceed the least of:
(i) the Amount of Insurance stated in Schedule A; or,
(ii) the difference between the value of the insured estate or
interest as insured and the value of the insured estate or
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interest subject to the defect, lien or encumbrance insured against by this
policy.
(b) In the event the Amount of Insurance stated in Schedule A at the
Date of Policy is less than 80 percent of the value of the insured estate or
interest or the full consideration paid for the land, whichever is less, or if
subsequent to the Date of Policy an improvement is erected on the land which
increases the value of the insured estate or interest by at least 20 percent
over the Amount of Insurance stated in Schedule A, then this Policy is subject
to the following:
(i) where no subsequent improvement has been made, as to any
partial loss, the Company shall only pay the loss pro rata in the proportion
that the amount of insurance at Date of Policy bears to the total value of the
insured estate or interest at Date of Policy; or
(ii) where a subsequent improvement has been made, as to any
partial loss, the Company shall only pay the loss pro rata in the proportion
that 120 percent of the Amount of Insurance stated in Schedule A bears to the
sum of the Amount of Insurance stated in Schedule A and the amount expended for
the improvement.
The provisions of this paragraph shall not apply to costs, attorneys'
fees and expenses for which the Company is liable under this policy, and shall
only apply to that portion of any loss which exceeds, in the aggregate, 10
percent of the Amount of Insurance stated in Schedule A.
(c) The Company will pay only those costs, attorneys' fees and
expenses incurred in accordance with Section 4 of these Conditions and
Stipulations.
8. APPORTIONMENT.
If the land described in Schedule A consists of two or more parcels
which are not used as a single site, and a loss is established affecting one or
more of the parcels but not all, the loss shall be computed and settled on a pro
rata basis as if the amount of insurance under this policy was divided pro rata
as to the value on Date of Policy of each separate parcel to the whole,
exclusive of any improvements made subsequent to Date of Policy, unless a
liability or value has otherwise been agreed upon as to each parcel by the
Company and the insured at the time of the issuance of this policy and shown by
an express statement or by an endorsement attached to this policy.
9. LIMITATION OF LIABILITY.
(a) If the Company establishes the title, or removes the alleged defect,
lien or encumbrances, or cures the lack of a right of access to or from the
land, or cures the claim of unmarketability of title, all as insured, in a
reasonably diligent manner by any method, including litigation and the
completion of any appeals therefrom, it shall have fully performed its
obligations with respect to that matter and shall not be liable for any loss or
damage caused thereby.
(b) In the event of any litigation, including litigation by
the Company or with the Company's consent, the Company shall have no liability
for loss or damage until there has been a final determination by a court of
competent jurisdiction, and disposition of all appeals therefrom, adverse to the
title as insured.
(c) The Company shall not be liable for loss or damage to any insured or
liability voluntarily assumed by the insured in settling any claim or suit
without the prior written consent of the Company.
10. REDUCTION OF INSURANCE; REDUCTION OR TERMINATION OF LIABILITY.
All payments under this policy, except payments made for costs, attorneys'
fees and expenses, shall reduce the amount of the insurance pro rata.
11. LIABILITY NONCUMULATIVE.
It is expressly understood that the amount of insurance under this policy
shall be reduced by any amount the Company may pay under any policy insuring a
mortgage to which exception is taken in Schedule BV or to which the insured has
agreed, assumed, or taken subject, or which is hereafter executed by an insured
and which is a charge or lien on the estate or interest described or referred to
in Schedule A, and the amount so paid shall be deemed a payment under this
policy to the insured owner.
12. PAYMENT OF LOSS.
(a) No payment shall be made without producing this policy for endorsement
of the payment unless the policy has been loss or destroyed, in which case proof
of loss or destruction shall be furnished to the satisfaction of the Company.
(b) When liability and the extent of loss or damaged has been definitely
fixed in accordance with these Conditions and Stipulations, the loss or damage
shall be payable within 30 days thereafter.
13. SUBROGATION UPON PAYMENT OR SETTLEMENT.
(a) THE COMPANY'S RIGHT OF SUBROGATION.
Whenever the Company shall have settled and paid a claim under this policy,
all right of subrogation shall vest in the Company unaffected by any act of the
insured claimant.
The Company shall be subrogated to and be entitled to all rights and
remedies which the insured claimant would have had against any person or
property in respect to the claim had this policy not been issued. If requested
by the Company, the insured claimant shall transfer to the Company all rights
and remedies against any person or property necessary in order to perfect this
right of subrogation. The insured claimant shall permit the Company to sue,
compromise or settle in the name of the insured claimant and to use the name of
the insured claimant in any transaction or litigation involving these rights or
remedies.
If a payment on account of a claim does not fully cover the loss of
the insured claimant, the Company shall be subrogated to these rights and
remedies in the proportion which the Company's payment bears to the whole
amount of the loss.
If loss should result from any act of the insured claimant, as stated
above, that act shall not void this policy, but the Company,
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in that event, shall be required to pay only that part of any losses insured
against by this policy which shall exceed the amount, if any, lost to the
Company by reason of the impairment by the insured claimant of the Company's
right of subrogation.
(b) THE COMPANY'S RIGHTS AGAINST NON-INSURED OBLIGORS.
The Company's right of subrogation against non-insured obligors shall
exist and shall include, without limitation, the rights of the insured to
indemnities, guaranties, other policies of insurance or bonds, notwithstanding
any terms or conditions contained in those instruments which provide for
subrogation rights by reason of this policy.
14. ARBITRATION.
Unless prohibited by applicable law, either the Company or the insured may
demand arbitration pursuant to the Title Insurance Arbitration Rules of the
American Arbitration Association. Arbitrable matters may include, but are not
limited to, any controversy or claim between the Company and the insured arising
out of or relating to this policy, any service of the Company in connection with
its issuance or the breach of a policy provisiono r other obligation. All
arbitrable matters when the Amount of Insurance is $1,000,000 or less shall be
arbitrated at the option of either the Company or the insured. All arbitrable
matter when the Amount of Insurance is in excess of $1,000,000 shall be
arbitrated only when agreed to by both the Company and the insured. Arbitration
pursuant to this policy and under the Rules in effect on the date the demand for
arbitration ismade or, at the option of the insured, the Rules in effect at Date
of Policy shall be binding upon the parties. The award may include attorneys'
fees only if the laws of the state in which the land is located permit a court
ot award attorneys' fees to a prevailing party. Judgment upon the award
rendered by the Arbitrator(s) may be entered in any court having jurisdiction
thereof.
The law of the situs of the land shall apply to an arbitration under the Title
Insurance Arbitration Rules.
A copy of the Rules may be obtained from the Company upon request.
15. LIABILITY LIMITED TO THIS POLICY; POLICY ENTIRE CONTRACT.
(a) This policy together with all endorsements, if any, attached hereto by
the Company is the entire policy and contract, between the insured and the
Company. In interpreting any provision of this policy, this policy shall be
construed as a whole.
(b) Any claim of loss or damage, whether or not based on negligence, and
which arises out of the status of the title to the estate or interest covered
hereby or by any action asserting such claim, shall be restricted to this
policy.
(c) No amendment of or endorsement to this policy can be made except by a
writing endorsed hereon or attached hereto signed by either the President, a
Vice President, the Secretary, an Assistant Secretary, or validating officer or
authorized signatory of the Company.
16. SEVERABILITY.
In the event any provision of the policy is held invalid or unenforceable
under applicable law, the policy shall be deemed not to include that provision
and all other provisions shall remain in full force and effect.
17. NOTICES, WHERE SENT.
All notices required to be given the Company and any statement in writing
required to be furnished the Company shall include the number of this policy and
shall be addressed to its Corporate-Headquarters, 6630 West Broad Street,
Richmond, Virginia 23230. Mailing address: P.O. Box 27567, Richmond, Virginia
23261.
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POLICY OF TITLE INSURANCE
A WORD OF THANKS . . .
As we make your policy a part of our permanent records, we want to express our
appreciation of this evidence of your faith in Lawyers Title
Insurance Corporation.
There is no recurring premium.
This policy provides valuable title protection and we suggest you keep it in a
safe place where it will be readily available for future reference.
If you have any questions about the protection provided by this policy, contact
the office that issued your policy or you may write to:
Consumer Affairs Department
LAWYERS TITLE INSURANCE CORPORATION
P.O. BOX 27567
RICHMOND, VIRGINIA 23261
TOLL FREE NUMBER 1-800-446-7086
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LAWYERS TITLE
INSURANCE CORPORATION
NATIONAL HEADQUARTERS
RICHMOND, VIRGINIA
OWNER'S POLICY
SCHEDULE A
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ENDORSEMENTS:
********************************************************************************
CASE DATE OF AMOUNT OF POLICY
NUMBER POLICY POLICY NUMBER
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June 17, 1994 $2,950,000.00 113-00-997074
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Name of Insured:
J. MacDonald Burkhart
The estate or interest in the land which is covered by this policy is;
fee simple
Title to the estate or interest in the land is vested in:
J. MacDonald Burkhart
The land referred to in this policy is described as follows:
SEE ATTACHED DESCRIPTION
NOTE: This property was conveyed to J. MacDonald Burkhart by warranty deed
of R. DeWitt Shelton, a 3/4ths undivided interest as tenant in common and
Lela Ogle, a 1/4th undivided interest as tenant in common, dated June 16,
1994, filed for record on June 17, 1994, in Warranty Deed Book 522, Page
646, in the Register's Office for Sevier County, Tennessee. Said warranty
deed was corrected by Correction Warranty Deed dated May 10, 1995, filed
for record on May 10, 1995, in Warranty Deed Book 544, Page 607, in the
Register's Office for Sevier County, Tennessee.
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DOUGLAS S. YATES
BY: /s/ Douglas S. Yates SEVIERVILLE, TENNESSEE
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COUNTERSIGNATURE AUTHORIZED Issued At (Location
OFFICER OR AGENT
Policy 136 - Form No. 035-0136-0000 -- This Policy is invalid unless the cover
sheet and Schedule B are attached. --- ALTA Owners Policy (10-17-92)
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Lawyers Title
Insurance Corporation
NATIONAL HEADQUARTERS
Richmond, Virginia
OWNER'S POLICY
SCHEDULE B
****************************************************************************
CASE NUMBER: POLICY NUMBER: 113-00-997-074
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EXCEPTIONS FROM COVERAGE
This policy does not insure against loss or damage (and the Company will not pay
costs, attorneys fees or expenses) which arise by reason of:
1. Special Exceptions:
(a) Taxes for the year 1995 and subsequent years.
2. The officials of the City of Pigeon Forge have represented that the 1993
City of Pigeon Forge Taxes have been paid in the amount of $3338.63, #2322,
and that there are no taxes owing for prior years. However, no opinion is
expressed and no liability is assumed with regard to these representations
since similar representations by officials of the City of Pigeon Forge have
proved unreiliable in the past.
3. This property may be subject to an easement in respect to the old abandoned
roadbed adjoining Pine Grove Plaza along the northern boundary of the
property as shown on map of Ronnie L. Sims, RLS, dated June 8, 1994.
4. Subject to an existing asphalt encroachment along the northern boundary of
the property adjoining Pine Grove Plaza and Highway 441, as shown on map of
Ronnie L. Sims, RLS, dated Jun 8, 1994.
5. This property is subject to a deed of trust in favor of Third National Bank
of East Tennessee, dated June 16, 1994, of record in Trust Deed Book 523,
Page 220, in the said Register's Office. Said deed of trust was corrected
by Correction Tennessee Deed of Trust dated May 10, 1995, of record in
Trust Deed Book 557, Page 322, in the said Register's Office.
Policy 136 Litho in U.S.A. - Form No. 035-0-136-0001 ---
ALTA Owners Policy (10-17-92)
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EXHIBIT A
TRACT I:
SITUATED in the Fifth (5th) Civil District of Sevier County, Tennessee, and
within the corporate limits of the City of Pigeon Forge, Tennessee, and being a
10.165 acre tract located on the eastern side of U.S. Highway 441, and being
more particularly bounded and described as follows:
BEGINNING at an iron pin set in the eastern right-of-way of U.S. Highway 441,
said iron pin being 300 feet, more or less, in a northerly direction from the
intersection of the eastern right-of-way of U.S. Highway 441 with the northern
right-of-way of Sugar Hollow Road; thence with the right-of-way of U.S. Highway
441 North 00 deg. 42 min. 48 sec. East passing an iron pin at 55.38 feet, a
total distance of 178.16 feet to an iron pin marking the southwestern corner of
Lot 7 of Pine Grove Plaza (Map Book 21, Page 173); thence leaving the right-of-
way of U.S. Highway 441 and with the line of Pine Grove Plaza the following two
calls and distances: North 67 deg. 32 min. 43 sec. East 829.56 feet to an iron
pin; North 48 deg. 13 min. 38 sec. East 169.07 feet to an iron pin, corner to
Laurel Manor, Inc. (Deed Book 282, Page 15); thence with the line of Laurel
Manor, Inc. the following two calls and distances: South 54 deg. 40 min. 24 sec.
East 349.54 feet to an iron pin; North 43 deg. 24 min. 19 sec. East 247.69 feet
to an iron pin, corner to John and Lisa Rauhuff (Deed Book 132, Page 88); thence
with the line of Rauhuff and a fence the following two calls and distances:
South 56 deg. 20 min. 12 sec. East 136.66 feet to an iron pin; South 51 deg. 15
min. 57 sec. East 21.10 feet to an iron pin, corner to R. DeWitt Shelton, et al.
(Deed Book 522, Page 642); thence with the line of R. DeWitt Shelton, et al.,
the following six calls and distances: South 40 deg. 26 min. 51 sec. West 621.24
feet to an iron pin; thence running with the arc in a curve to the left in a
circle having a radius of 332.34 feet, a tangent of 60.39 feet, a chord call and
distance of North 83 deg. 26 min. 38 sec. West 118.84 feet to an iron pin;
thence South 86 deg. 15 min. 24 sec. West 97.00 feet, a tangent of 76.99 feet, a
chord call and distance of North 71 deg. 04 min. 59 sec. West 142.09 feet to an
iron pin; thence North 48 deg. 25 min. 23 sec. West 20.64 feet to an iron pin;
thence running with the arc in a curve to the left in a circle having a radius
of 75.13 feet, a tangent of 28.51 feet, a chord call and distance of North 69
deg. 12 min. 15 sec. West 53.31 feet to an iron pin, corner to BGA Associates
(Deed Book 485, Page 177); thence with the line of BGA Associates the following
two calls and distances: North 89 deg. 59 min. 25 sec. West 425.32 feet to an
iron pin; South 65 deg. 12 min. 05 sec. West 261.88 feet to an iron pin in the
right-of-way of U.S. Highway 441, the POINT OF BEGINNING, as shown by survey of
Dean A. Orr, RLS #780. ETE Consulting Engineering, Inc., 311 Oak Ridge Turnpike,
Oak Ridge, Tennessee 37830, dated April 28, 1995, bearing Job No. 94-398-11.
THIS CONVEYANCE IS SUBJECT TO an exclusive sign easement as reserved in
Correction Warranty Deed dated May 10, 1995, of record in Deed Book 544, Page
607, in the Sevier County Register's Office, said easement encumbering the
following described parcel of property:
SITUATED in the Fifth (5th) Civil District of Sevier County, Tennessee, and
within the corporate limits of the City of Pigeon Forge, Tennessee, being
located on the eastern side of U.S. Highway 441, and being more particularly
described as follows:
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TO FIND THE POINT OF BEGINNING start at an iron pin set in the eastern right-of-
way of U.S. Highway 441, said iron pin being 300 feet, more or less, in a
northerly direction from the intersection of the eastern right-of-way of U.S.
Highway 441 with the northern right-of-way of Sugar Hollow Road; thence running
with the eastern right-of-way of U.S. Highway 441 and the western terminus of a
50 foot joint permanent non-exclusive easement North 00 deg. 42 min. 48 sec.
East 55.38 feet to an iron pin lying in the northern line of said 50 foot joint
permanent non-exclusive easement, said iron pin marking the place of beginning
of the sign easement area; thence leaving the right-of-way of U.S. Highway 441
and with the northern line of a 50 foot joint permanent non-exclusive easement
North 65 deg. 12 min. 05 sec. East 20.00 feet, more or less, to a point; thence
leaving the right-of-way of a 50 foot joint permanent non-exclusive easement
North 00 deg. 42 min. 48 sec. East 20.00 feet, more or less, to a point; thence
South 65 deg. 12 min. 05 sec. West 20.00 feet, more or less, to a point in the
eastern right-of-way of U.S. Highway 441; thence with the eastern right-of-way
of U.S. Highway 441 South 00 deg. 42 min. 48 sec. West 20.00 feet, more or less,
to an iron pin, the POINT OF BEGINNING, as shown on survey of Dean A. Orr, RLS
#780, ETE Consulting Engineering, Inc., 311 Oak Ridge Turnpike, Oak Ridge,
Tennessee 37830, dated April 28, 1995, bearing Job. No. 94-398-11.
THIS CONVEYANCE IS FURTHER SUBJECT TO a 50 foot wide joint permanent non-
exclusive easement for ingress, egress and utilities running over, across and
under the above-described 10.165 acre tract of property, as reserved in
Correction Warranty Deed dated May 10, 1995, of record in Deed Book 544, Page
607, in the Sevier County Register's Office, said 50 foot wide joint permanent
non-exclusive easement being more particularly bounded and described as follows:
SITUATED in the Fifth (5th) Civil District of Sevier County, Tennessee, and
within the corporate limits of the City of Pigeon Forge, Tennessee, and being
more particularly bounded and described as follows:
BEGINNING at an iron pin in the eastern right-of-way of U.S. Highway 441, said
iron pin being located 300 feet, more or less, in a northerly direction from the
intersection of the eastern right-of-way of U.S. Highway 441 with the northern
right-of-way of Sugar Hollow Road; thence with the right-of-way of U.S. Highway
441 North 00 deg. 42 min. 48 sec. East 55.38 feet to an iron pin; thence leaving
the right-of-way of U.S. Highway 441 and running along the northern right-of-way
line of the 50 foot wide joint permanent non-exclusive easement the following
calls and distances: North 65 deg. 12 min. 05 sec. East 249.02 feet to an iron
pin; thence South 89 deg. 59 min. 24 sec. East 436.32 feet to an iron pin;
thence running with an arc in a curve to the right in a circle having a radius
of 125.13 feet, a tangent of 47.49 feet, a chord call and distance of South 69
deg. 12 min. 15 sec. East 88.79 feet to an iron pin; thence South 48 deg. 25
min. 23 sec. East 20.64 feet to an iron pin; thence running with an arc in a
curve to the left in a circle having a radius of 134.40 feet, a tangent of 56.11
feet, a chord call and distance of South 71 deg. 04 min. 59 sec. East 103.56
feet to an iron pin; thence North 86 deg. 15 min. 24 sec. East 97.00 feet to an
iron pin; thence running with the arc in a curve to the right in a circle having
a radius of 382.34 feet, a tangent of 49 min. 36 sec. East 157.90 feet to an
iron pin in the line of R. DeWitt Shelton, et al. (Deed Book 522, Page 642);
thence with the line of R. DeWitt Shelton, et al. The following six calls and
distances: South 40 deg. 26 min. 51 sec. West 53.90 feet to an iron pin; thence
running with the arc in a curve to the left in a circle having a radius of
332.34 feet, a tangent of 60.39 feet, a chord call and distance of North 83 deg.
26 min. 38 sec. West 118.84 feet to an iron pin; thence South 86 deg. 15 min. 24
sec. West 97.00 feet to an iron pin; thence running with an arc in a curve to
the right in a circle having a radius of 184.40 feet, a tangent of 76.99 feet, a
chord call and distance of North 71 deg. 04 min. 59 sec. West 142.09 feet to an
iron pin; thence North 48 deg. 25 min. 23 sec. West 20.64 feet to an iron pin;
thence running with an arc in a curve to the
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left in a circle having a radius of 75.13 feet, a tangent of 28.51 feet, a chord
call and distance of North 69 deg. 12 min. 15 sec. West 53.31 feet to an iron
pin, corner to BGA Associates (Deed Book 485, PGE 177); thence with the line of
BGA Associates the following two calls and distances: North 89 deg. 59 min. 25
sec. West 425.32 feet to an iron pin; thence South 65 deg. 12 min. 05 sec. West
261.88 feet to an iron pin in the eastern right-of-way line of U.S. Highway 441,
the POINT AND PLACE OF BEGINNING, as shown by survey of Dean A. Orr, RLS #780,
ETE Consulting Engineering, Inc., 311 Oak Ridge Turnpike, Oak Ridge, Tennessee
37830, dated April 28, 1995, bearing Job No. 94-398-11.
TRACT II:
PARCEL A:
SITUATED in the Fifth (5th) Civil District of Sevier County, Tennessee, and
within the corporate limits of the City of Pigeon Forge, Tennessee, and being a
50 foot wide right-of-way immediately north of and running parallel with the
following described line, which line marks the southern right-of-way line for
said 50 foot wide joint permanent non-exclusive easement for ingress, egress and
utilities:
TO FIND THE POINT OF BEGINNING start at an iron pin set in the eastern right-of-
way line of U.S. Highway 441, said iron pin being 300 feet, more or less, in a
northerly direction from the intersection of the eastern right-of-way of U.S.
Highway 441 with the northern right-of-way of Sugar Hollow Road and said iron
pin being corner to BGA Associates (Deed Book 485, Page 177); thence running
with the line of BGA Associates the following two calls and distances: North 65
deg. 12 min. 05 sec. East 261.88 feet to an iron pin; thence South 89 deg. 59
min. 25 sec. East 425.32 feet to an iron pin, corner to R. DeWitt Shelton, et
al.; thence with the line of Shelton, et al. the following five calls and
distances: Running with the arc in a curve to the right in a circle having a
radius of 75.131 feet, a tangent of 28.513 feet, a chord call and distance of
South 69 deg. 12 min. 18 sec. East 53.315 feet to an iron pin; thence South 48
deg. 25 min. 23 sec. East 20.64 feet to an iron pin; thence running with the arc
in a curve to the left in a circle having a radius of 184.400 feet, a tangent of
76.985 feet, a chord call and distance of South 71 deg. 05 min. 00 sec. East
142.085 feet to an iron pin; thence North 86 deg. 15 min. 24 sec. East 97.00
feet to an iron pin; thence running with the arc in a curve to the right in a
circle having a radius of 332.340 feet, a tangent of 67.162 feet, a chord call
and distance of South 82 deg. 19 min. 07 sec. East 131.662 feet to an iron pin,
the POINT OF BEGINNING; thence running with the arc in a curve to the right in a
circle having a radius of 345.332 feet, a tangent of 96.499 feet, a chord call
and distance of South 55 deg. 16 min. 53 sec. East 185.877 feet to an iron pin;
thence South 39 deg. 40 min. 08 sec. East 193.90 feet to an iron pin, being
corner to property of Barbara Mockus, said iron pin marking the terminus of the
easement area and being according to the survey of Ronnie L. Sims, Tennessee
Registered Land Survey No. 683, 1020 Topside Drive, Sevierville, Tennessee
37862, dated December 20, 1994 and the last revised on April 19, 1995.
PARCEL B
SITUATED in the Fifth (5th) Civil District of Sevier County, Tennessee, and
within the corporate limits of the City of Pigeon Forge, Tennessee, beginning at
an iron pin marking the southeastern terminus of the aforementioned easement
described above, and which iron pin lies in the southwestern right-of-way line
of the 50 foot wide joint permanent non-exclusive easement area; thence leaving
said point and place of beginning and running with the southern terminus of the
50 foot wide joint permanent non-exclusive easement for ingress,
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egress and utilities afore described, North 50 deg. 19 min. 51 sec. East 50.00
feet to an iron pin; thence South 39 deg. 40 min. 08 sec. East 132.93 feet to an
iron pin; thence North 79 deg. 28 min. 09 sec. East 110.87 feet to an iron pin;
thence running with the arc in a curve to the right in a circle having a radius
of 50.01 feet, a tangent of 39.94 feet, an arc distance of 67.40 feet to an iron
pin lying in the northern right-of-way line of Sugar Hollow Road; thence running
with the northern right-of-way line of Sugar Hollow Road and running with the
arc in a curve to the left in a circle having a radius of 498.40 feet, a tangent
of 25.03 feet, an arc distance of 50.03 feet to an iron pin, being corner to
property of C.B. McCarter (Plat Book 5, Page 72); thence running with the line
of McCarter South 79 deg. 28 min. 09 sec. West 140.25 feet to an iron pin, being
corner to property of Barbara Mockus; thence running with the line of Barbara
Mockus North 39 deg. 40 min. 08 sec. West 162.30 feet to an iron pin, marking
the POINT AND PLACE OF BEGINNING, and being according to the survey of Ronnie L.
Sims, Tennessee Registered Land Surveyor No. 683, 1020 Topside Drive,
Sevierville, Tennessee 37862, dated December 20, 1994 and last revised on April
19, 1995.
BEING the same property conveyed to J. MacDonald Burkhart from R. DeWitt Shelton
and Lela Evelyn Ogle by Deed dated June 16, 1994, of record in Deed Book 522,
Page 646, as corrected by Deed dated May 10, 1995, of record in Deed Book 544,
Page 607, both in the Sevier County Register's Office.
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OPERATING AGREEMENT
OF
COUNTRY TONITE THEATRE, L.L.C.
THIS OPERATING AGREEMENT (the "Agreement") among CRC OF TENNESSEE, INC., a
Tennessee corporation ("CRCT"), and BURKHART VENTURES, LLC, a Tennessee
limited liability company ("BV"; CRCT and BV are collectively referred to
herein as the "Members"), is made and entered into as of the 24 day of
September, 1996.
ARTICLE I
FORMATION
1.1 FORMATION. The Members hereby form a limited liability company pursuant
to the Tennessee Limited Liability Company Act (the "Act").
1.2 NAME. The name of the limited liability company shall be Country Tonite
Theatre, L.L.C. (the "Company").
1.3 ARTICLES OF ORGANIZATION. The Articles of Organization (the "Articles")
dated as of September 19, 1996, hereof are hereby adopted and ratified by the
Members. In the event of a conflict between the terms of this Agreement and
the terms of the Articles, the terms of the Articles shall prevail.
1.4 DEFINITIONS. Capitalized terms not otherwise defined herein shall have
the meaning set forth in the Act.
1.5 PLACE OF BUSINESS. The principal place of business of the Company shall
be at 2249 Parkway, Pigeon Forge, Tennessee 37868, or at such other place(s)
as all Members shall from time to time select.
1.6 PERCENTAGE INTERESTS. The Percentage Interest of each Member shall be
as follows:
BV 40%
CRCT 60%
The term "Percentage Interest" with respect to each Member shall mean the
percentage interest of such partner in the profits, losses, distributions,
capital, and assets of the Company. The term "Membership Interest" means a
Member's entire interest in the Company, which when expressed as a percentage
of all Membership Interests in the Company shall be equal to such Member's
Percentage Interest. Membership Interests shall not be altered by any
subsequent changes in the capital account(s) of any Member, and
notwithstanding any other provision of this Agreement to the
<PAGE>
contrary, all distributions (except as specifically provided herein) shall be
based upon each member's Percentage Interest and not the relative capital
accounts at any given time.
ARTICLE II
PURPOSE AND POWERS
2.1 PURPOSE. The purpose of the Company is to engage in the business of
contracting for, producing, managing, and marketing a country music show and
related activities to be presented at the music theater building owned by J.
MacDonald Burkhart, M.D. located at 2249 Parkway, Pigeon Forge, Tennessee
37868.
2.2 POWERS. In furtherance of the foregoing purpose, the Company shall have
the full power and authority to conduct its business as provided by the Act
and applicable law.
2.3 INITIAL CONTRACTS, COMMENCEMENT OF OPERATIONS. The Company shall enter
into a certain Lease Agreement with J. McDonald Burkhart, M.D., a copy of
which is attached hereto as EXHIBIT 1 (the "Lease"), to lease the theater
location for the proposed country music show referred to above, and shall
enter into a contract with Country Tonite Enterprises ("CTE"), an affiliate
of CRCT, to acquire the performance artists and proprietary interests
required to present the show, a copy of which is attached hereto as EXHIBIT 2
(the "Contract"). The Members agree to use their good faith best efforts to
cause the Company to initiate 1997 marketing efforts in September 1996; to
assume pre-opening operation of the theater on or before January 15, 1997;
and to open the theater to the public on such date as CRCT deems appropriate
in the best interests of the Company, which date is expected to be in the
first half of March, 1997.
2.4 ASSUMPTION OF EQUIPMENT LEASES. The Company shall also assume and
acquire all interest in certain leases for equipment as provided in Section
15 of the Lease.
ARTICLE III
CAPITAL
3.1 CAPITAL ACCOUNTS. A capital account shall be established on the books
of the Company for each Member. Each such capital account shall be credited
with the amount of the respective Member's capital contributions as and when
they are made and with the respective Member's share of Company income,
gains, and profits allocated in accordance with the Member's proportionate
Percentage Interest. Each Member's capital account shall be debited with the
Member's respective share of losses and distributions in accordance with the
Member's proportionate Percentage Interest. Such capital accounts shall be
maintained in accordance with the requirements of Section 704 of the Internal
Revenue Code of 1986, as amended (the "IRC"), and the regulations promulgated
thereunder.
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<PAGE>
3.2 CAPITAL CONTRIBUTIONS.
(a) As their initial capital contributions, CRCT shall contribute $300,000
to the Company and BV shall contribute $200,000 to the Company, the total of
which capital contributions shall be used to establish an operating account
for the use of the Company in facilitating the operations of the Company,
including the pre-opening activities, management, and marketing of the
theater. Such capital contributions shall be made in accordance with and at
the times provided in the promissory notes of CRCT and BV to the Company
dated as of the date of this Agreement.
(b) By January 1, 1997, each of the Members hereby agree to arrange for
and guarantee a line of credit for the use and benefit of the Company, if
needed, in an amount up to $300,000 with regard to CRCT and $200,000 with
regard to BV. If it is necessary for the Company to use such credit lines,
the respective credit lines of both Members shall be drawn upon pro rata in
proportion to their Percentage Interests and simultaneously to meet such need.
3.3 ADDITIONAL CAPITAL CONTRIBUTIONS. Neither Member shall be required to
make any further capital contributions or loans to the Company except as
permitted herein, and any such contributions or loans shall be subject to the
prior written approval of all Members except as permitted herein.
3.4 NO RIGHT TO WITHDRAW CAPITAL. No Member shall have the right to demand
the return of, or otherwise withdraw his capital or to receive any specific
property of the Company, except as specifically provided in this Agreement.
No Member shall have the right to demand and receive property other than cash
in return for his capital. Provided, however, BV shall have an option to
acquire certain equipment related to the stone sign in accordance with
paragraph 11 of the Lease, and BV may elect to receive such equipment towards
any capital or other distribution to which BV is otherwise entitled.
3.5 RETURN OF CAPITAL. All capital contributions and loans made by the
Members shall be repaid as provided in ARTICLE XI hereof. Other than as
stated in ARTICLE XI, no interest shall be paid on capital contributions or
on balances in capital accounts.
ARTICLE IV
ALLOCATION OF PROFITS AND LOSSES
4.1 ALLOCATIONS OF PROFITS AND LOSSES.
(a) All Company net profits and net losses, and each item of income and
expense related thereto, from whatever source derived (except such items with
respect to property contributed to the Company by a Member, which shall be
allocated pursuant to IRC Section 704(c) and the regulations thereunder),
shall be allocated to the Members pro rata based upon their respective
Percentage Interests as set forth in SECTION 1.6 above.
(b) Notwithstanding the above or any other term or condition contained in
this Agreement to the contrary, the capital accounts of the Members shall, in
all events, be maintained
3
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in accordance with IRC Section 704(b) and the regulations promulgated
thereunder, now existing or hereafter enacted, including, without limitation,
the regulations set forth in Treasury Regulations Section 1.704-1(b)(20(iv)
as well as the requirements set forth in IRC Section 704(c) and regulations
promulgated thereunder, as to the allocation of the Company's income, loss,
gain, deductions and other items to be allocated between the Members.
4.2 REVENUES CALCULATED IN DETERMINING NET PROFITS. In calculating net
profits, all revenues of the Company from ticket sales, gift shop sales,
concessions sales, sale of videos, tapes and compact discs, entertainer's
sundries for resale, and any other revenues from theater operations shall be
included, provided, however, that revenues shall not include sales and use
taxes, insurance proceeds relating to the assets of the Company, promotional
non-cash revenues (such as complimentary tickets) and uncollectible
receivables. Pre-paid revenues and costs associated with the same shall be
acknowledged by the Company when earned.
ARTICLE V
MANAGEMENT
5.1 MANAGEMENT BY MEMBERS. The Company shall be a "member-managed" limited
liability company as such term is defined in the Act. The business and
affairs of the Company shall be managed by the Members. All powers of the
Company as a limited liability company under the Act shall be exercised by or
under the direction of the Members.
5.2 MANAGEMENT OF DAY-TO-DAY OPERATIONS. The Members hereby agree, in the
mutual exercise of their right of control, that CRCT shall have the
responsibility for day-to-day management of the Company, including
responsibility for the operation, management and marketing of the theater and
for paying from the Company's assets all sales and use taxes, payroll taxes,
state and federal income taxes, worker's compensation insurance, liability
and business interruption insurance, and all other operating expenses arising
in the course of the Company's business. CRCT acknowledges that its
affiliate, CTE, is a party to the contract with the Company attached hereto
as EXHIBIT 2, and CRCT shall arrange for the use (but not the ownership) by
the Company of the "Country Tonite Show" and all proprietary and intellectual
material associated with the same. Furthermore, CRCT covenants and agrees
with BV as follows:
(a) CRCT agrees to use its best efforts to operate the Company and manage
the theater in a profitable manner through the use of its expertise and
experience in the music theater industry.
(b) CRCT will operate the Company and the theater in substantially the
same manner as it operates other theaters presenting the "Country Tonite"
concept and shall cause CTE, subject to the limitations of the Contract, to
present such number of shows as will maximize the net profit of the Company.
(c) CRCT shall use its best efforts to operate the Company and make
Company expenditures in each fiscal year in accordance with the budget with
respect to such fiscal year provided to the Members pursuant to SECTION 8.3
below.
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(d) CRCT shall at all times operate in a manner with respect to the
Company and its assets and property which is for the sole benefit of the
Company, and shall refrain from any activity contrary to the best interest of
the Company, including among other things, the utilization of Company funds
or assets for the sole benefit of CRCT or its affiliates;
(e) (i) CRCT shall not make or approve any transfer of any type of
property from the Company to CRCT or any of its affiliates at other than fair
market value and only after the prior written consent of BV; (ii) CRCT shall
not permit the Company to enter into a loan, lease, purchase, sale or
contract with Casino Resource Corporation ("CRC") or any subsidiary, parent
or related person or entity of CRC, other than the Contract, without the
written consent of BV; (iii) CRCT shall not permit the Company to make any
payment or loan for the benefit of CRC or any subsidiary, parent or related
person or entity of CRC directly or indirectly without BV's written consent
other than the Contract; or (iv) CRCT shall not permit the Company to modify,
alter or amend the Contract without BV's written consent; provided that
notwithstanding the foregoing, CRCT may in the course of managing the Company
make payments to CTE to the extent permitted in the Contract;
(f) no loans may be made by the Company to CRCT or any of its affiliates
nor is CRCT authorized to incur indebtedness, nonrecourse or otherwise, on
behalf of the Company except as otherwise permitted herein; and
(g) advance payments to CRCT or any of its affiliates are prohibited.
5.3 NO MUTUAL AGENCY OF THE MEMBERS. Neither Member is authorized or
empowered to obligate the other, or to incur any costs on behalf of the
other, except that CRCT may obligate the Company and incur costs on behalf of
the Company as necessary to operate the theater. The employees or agents of a
Member are not, and shall not be considered as, the employees or agents of
the other Member.
5.4 ACTIONS REQUIRING THE APPROVAL OF ALL OF THE MEMBERS. Unless authorized
by all of the Members, no single Member or group of less than all of the
Members shall have authority in the name of or on behalf of the Company to:
(a) dispose of the goodwill of all the business;
(b) do any other act which would make it impossible to carry on the
ordinary business of the Company;
(c) confess a judgment on behalf of the Company;
(d) submit a claim or liability to arbitration or reference;
(e) sell, lease, exchange or otherwise dispose of any of the assets of the
Company or enter into any agreement to do the same, except for sales of
assets in the ordinary course of business in an amount less than 10% of the
Company's net assets (as shown on the Company's balance sheet as of the end
of its most recently completed fiscal year) in any single transaction or
series of related transactions;
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(f) purchase, lease or otherwise acquire any assets, or enter into any
agreement to do the same, except for the acquisitions of assets in the
ordinary course of business in an amount less than 10% of the Company's net
assets (as shown on the Company's balance sheet as of the end of its most
recently completed fiscal year) in any single transaction or series of
related transactions;
(g) borrow money or incur indebtedness or other liabilities or pledge the
assets of the Company to secure such borrowing, except that if at any time
the amounts available from the initial capital contributions of $500,000 and
the lines of credit described in SECTION 3.2 have been expended, the Members
may, by unanimous consent, make loans to the Company in increments of
$200,000, with CRCT contributing $120,000 and BV contributing $80,000 per
increment. If CRCT votes to make such loans and BV votes not to, then CRCT
may at its option make the entire additional $200,000 loan. If BV votes to
make such loan and CRCT votes not to, then BV may at its option make the
entire additional $200,000 loan. If one of the Members, but not both, makes
the additional $200,000 loan, the Member making the loan shall be entitled to
interest on such loan at the prime rate of interest in effect from time to
time as published in the WALL STREET JOURNAL. The principal and interest on
any such loan(s) shall be payable as provided in SECTION 11(d) hereof. Such
loan shall be unsecured and nonrecourse as to the other Member(s).
(h) declare or make any distribution to Members except pursuant to ARTICLE
XI of this Agreement;
(i) enter into or agree to enter into any other transaction outside of the
ordinary course of business of the Company;
(j) take any other action that would require the consent of all of the
Members pursuant to this Agreement or the Articles; or
(k) amend, modify, or alter this Agreement.
5.5 LIMITATION ON LIABILITY. A Member shall not be liable for any action
taken as a Member, or any failure to take action as a Member, except to the
extent that such Member's conduct fails to comply with its obligations under
this Agreement or the standards set forth in Section 48-240-102 of the Act or
to the extent that such Member may be liable for wrongful distributions under
Section 48-237-101 of the Act no later than three years after the
distribution.
5.6 COMPENSATION AND REIMBURSEMENT. Except as specifically provided herein,
no Member nor any affiliate of any Member shall have any right to
compensation for any services performed on behalf of the Company except the
following: (a) payments of the Company to CTE under the Contract; (b)
documented reasonable expenses of officers of CRC and its affiliates, which
may include travel, meals and lodging expenses, incurred directly in
connection with the business of the Company, but not wages or compensation;
(c) reasonable wages and documented reasonable expenses of non-officer
employees of CRC and its affiliates (including employees in the production
staff, marketing department, reservations management, giftware purchasing and
other operating personnel who will hire and train the staff at the Theater)
incurred while such employees are in Pigeon Forge, Tennessee for a purpose
directly related to the business of the Company and a proportionate share of
reasonable wages and documented reasonable expenses for such persons when
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attending trade shows or sales meetings that directly benefit the Company.
Certain persons may be employees of both the Company or CRCT and CRC or an
affiliate of CRC if it is cost efficient to do so and such employees' duties
relate directly to the business of the Company, and in such event such
employees' wages shall be allocated proportionately to the Company based upon
the percentage of time that such employees' devote to the business of the
Company. CRCT shall report to BV in its monthly operating statements the
rate, amount and purpose of all wages paid and expenses reimbursed pursuant
to this section. Any wages charged to the Company shall be reasonable and at
a rate not greater than the rate paid by CRC or its affiliates. CRCT shall
cause any such employees to account for all time and expenses charged to the
Company, and such records and receipts shall be provided to BV at its
request. All professional entertainment staff, as described in the Contract,
including the producer, director, performers and choreographers of CTE's
production, shall be the entire financial responsibility of CTE.
5.7 MANAGERS. The Company shall at all times have at least two officers,
those being the Chief Manager and the Secretary. The Company may have
additional officers who shall perform such duties as may be prescribed by the
Members upon their election. Any other officer elected by the Members need
not be a Member. The initial Chief Manager of the Company shall be John J.
Pilger and the initial Secretary of the Company shall be Noreen Pollman. The
Company, and each of the Members, will use their best efforts to place Mr.
Ted Burkhart in a suitable position of employment with the Company, if he so
desires.
5.8 DUTIES OF THE PERSON HOLDING THE OFFICE OF CHIEF MANAGER. The Chief
Manager shall have the duty to manage the day-to-day operations of the
Company and to perform other duties customarily performed by a chief
executive officer.
5.9 DUTIES OF THE PERSON HOLDING THE OFFICE OF SECRETARY. The Secretary
shall have the duty to maintain the records of all proceedings of the Members
and to perform other duties customarily performed by a secretary.
5.10 ELECTION OF MANAGERS. All Managers, including the Chief Manager and
the Secretary, shall be elected by the Members.
5.11 COMPENSATION OF OFFICERS. No officer, manager, or any Member of the
Company or any affiliate shall receive any compensation from the Company
without the prior approval of all Members except as provided herein.
5.12 REMOVAL AND RESIGNATION OF OFFICERS. The Members may remove any
officer, including the Chief Manager and the Secretary, with or without
cause. The Members may eliminate any officer position other than that of the
Chief Manager and the Secretary. Any officer may resign upon thirty (30) days
prior written notice to the Members. Upon the death, resignation or removal
of the Chief Manager, the Members shall immediately vote to appoint another
Chief Manager. Upon the death, resignation or removal of the Secretary, the
Members shall immediately vote to appoint a substitute Secretary.
5.13 NO EXCLUSIVE DUTY; OTHER ACTIVITIES.
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(a) The Members shall devote such time and attention to the business and
affairs of the Company as may be necessary for the proper performance of
their duties and the conduct of the business and affairs of the Company. It
is recognized that each of the Members is otherwise engaged in commercial and
business activities which require a substantial part of their time,
expertise, talent and efforts.
(b) The Members may engage and hold interests in other business ventures
of every kind and description for their own account including, but without
limitation, ventures such as those undertaken by the Company. No Member shall
incur any liability to the other Member or the Company as a result of
engaging in any other business or venture. Neither the Company nor either of
the Members shall have any right, by virtue of this Agreement, in and to any
of such independent business ventures or the income or profits derived
therefrom. Notwithstanding the foregoing, during the term of this Agreement,
neither Member shall compete with the Company, directly or indirectly, within
Sevier County, Tennessee or any adjoining county. Operation of a restaurant
or hotel facility (that does not have a show which charges admission) shall
not be considered to be competing with the Company.
ARTICLE VI
MEMBERS AND VOTING RIGHTS
6.1 MEMBERSHIP VOTING POWER. Each Member shall have voting power equal to
such Member's Percentage Interest. At any meeting of the Members, each Member
present (in person or by proxy) and entitled to vote shall have a number of
votes equal to such Member's Percentage Interest. At any meeting of the
Members at which a quorum is present (in person or by proxy), a majority of
the Membership voting power present (in person or by proxy) at the time the
vote is taken is required to take action on a matter unless a vote of greater
proportion is otherwise required by this Agreement, the Articles or the Act.
6.2 MEETINGS. Meetings of all Members may be called by the Chief Manager,
Secretary or any Member by mailing notice to all Members no fewer than ten
(10) days nor more than two (2) months before the meeting date, stating the
purpose or purposes of such meeting. Any such meetings shall be held at the
principal place of business of the Company or such other place as may be
designated in the notice. When any notice is required to be given to any
Member, a waiver thereof in writing signed by the person entitled to such
notice, whether before, at, or after the time stated therein, shall be
equivalent to the giving of such notice. Attendance by a Member at a meeting
is a waiver of notice of such meeting, except if the Member objects at the
beginning of the meeting to the transaction of business because the meeting
is not lawfully called or convened and does not otherwise participate in the
consideration of any matter at the meeting. A meeting may take place by
telephone conference call or any other form of electronic communication
through which the Members may simultaneously hear each other. Such meeting
shall be deemed to be held at the principal executive office of the Company
or at the place properly named in the notice calling the meeting.
6.3 QUORUM REQUIREMENTS FOR MEETINGS. The Members present (in person or by
proxy) and holding a majority of the Membership voting power at any meeting
shall constitute a quorum for the transaction of business. Once a Member is
represented at any meeting, such Member is
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deemed to be present for the remainder of that meeting and for any
adjournment. A meeting may be adjourned, and notice of an adjourned meeting
is not necessary if the date, time and place to which the meeting is
adjourned are announced at the meeting at which the adjournment is taken.
6.4 ACTION WITHOUT A MEETING. Action required or permitted to be taken at a
meeting of the Members may be taken without a meeting if the action is
evidenced by written consents describing the action taken, signed by all
Members and delivered to the Secretary of the Company for filing with the
Company records.
6.5 ADMISSION OF NEW MEMBERS. No other person shall be made a Member
without the written approval of all of the Members.
ARTICLE VII
INDEMNIFICATION
Except for acts of malfeasance, gross negligence or misrepresentation, the
Company shall indemnify all Responsible Persons (as that term is defined in
Section 48-243-101(7) of the Act) to the fullest extent of the Act as now in
effect or hereafter amended; provided that any indemnification under this
Article shall be paid only out of and to the extent of Company assets.
ARTICLE VIII
FISCAL MATTERS
8.1 BOOKS AND RECORDS. At all times during the existence of the Company,
CRCT shall keep, or cause to be kept, full and true books of account on a
fiscal year basis (such fiscal year ending on September 30 of each year) in
which all transactions of the Company shall be entered fully and accurately,
using generally accepted accounting principles ("GAAP"), consistently
applied. As soon as practical after the end of each fiscal year of the
Company (but in no event later than sixty (60) days after the end of such
fiscal year), a general accounting and review shall be taken and made by an
independent accounting firm selected by CRCT, covering the assets,
properties, liabilities, and net worth of the Company, and its dealings,
transactions, and operations during the preceding fiscal year, and a copy of
such accountant's report shall be promptly provided to both Members. Such
books and records shall contain sufficient. information to permit calculation
of the amounts distributable to the Members pursuant to this Agreement.
8.2 RIGHT TO INSPECTION. Each Member shall have the right to examine and
inspect, at any and all reasonable times, the books, records, and accounts of
the Company, and the Company shall provide monthly operating statements to
both Members, which shall show revenues and expenditures of the Company for
such month within twenty (20) days after the end of such month. BV shall have
the right to have the books and records audited by an independent certified
public accountant with the cost of such audit being an expense of BV unless
such audit reveals appropriate adjustments in excess of $5,000 in BV's favor,
in which case, CRCT shall be solely responsible for such costs, including
reasonable travel expenses, or for reimbursing BV therefore. Such books of
account, together with this Agreement and any amendments hereto, shall at all
times be maintained
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at the principal office of the Company or CRCT and shall be open to
reasonable inspection and examination by the Members or their duly authorized
representatives.
8.3 REPORTS TO BV. Each of the following reports shall be prepared by CRCT
at the Company's expense, and shall be delivered to the Members:
(a) at least thirty (30) days prior to the commencement of each fiscal
year, an annual operating budget for such fiscal year;
(b) within forty-five (45) days after the end of each fiscal quarter, an
operating statement showing revenues and expenditures of the Company for such
fiscal quarter;
(c) within one hundred twenty (120) days after the end of each fiscal
year, an annual report of the activities of the Company, including a balance
sheet, income statement and a statement of cash flow; and
(d) within ninety (90) days after the close of the taxable year or period
of the Company for which such return is prepared, income tax returns for the
Company and a report indicating each respective Member's share of the net
profits or losses and capital gains or losses and other items required by
federal tax law to be separately allocated to each Member, all as defined and
reflected on said Company income tax return.
It is a acknowledged and understood that the Company, through CRCT, will be
sharing certain confidential financial, organizational, and administrative
records, trade secrets, and other materials pursuant to this SECTION 8.3.
During the term of this Agreement, each Member agrees to keep all such
information and materials in the strictest confidence and shall refrain from
disclosing such information or any portion thereof to any third party except
to any lender or professional advisor to the Company or either Member.
8.4 COMMENT PERIOD REGARDING BUDGET. After reviewing the budget provided
pursuant to SECTION 8.3(a), BV shall have twenty (20) days to provide CRCT
with any objections or comments to such budget or individual line entries
which are a part of such budget. CRCT must either revise the budget to
correspond with BV's objections and comments or provide BV with a written
response to such objections and comments within five (5) days of CRCT's
receipt thereof. After providing such response, CRCT may adopt such budget as
the budget for the Company.
8.5 FISCAL YEAR. The fiscal year of the Company shall end on September 30
of each year.
8.6 TAX STATUS. Solely for purposes of the United States federal income tax
laws, each of the Members hereby recognizes that the Company will be subject
to all provisions of Subchapter K of Chapter 1 of Subtitle A of the IRC.
However, the filing of U.S. Partnership Returns of Income shall not be
construed to extend the purposes of the Company or expand the obligations of
liabilities of the Members.
8.7 ACCOUNTING SERVICES. The selection of an accountant or accounting firm
for the purposes of preparation of income tax returns, financial statements,
or similar financial services to
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the Company shall require the mutual agreement of the Members. Until further
agreement, the Members shall use the services of B.D.O. Seidman.
8.8 TAX MATTERS MEMBER. CRCT shall be the initial Tax Matters Member
("TMM"). The TMM shall promptly give notice to all Members of any
administrative or judicial proceeding pending before the Internal Revenue
Service involving any Company item and the progress of any such proceeding.
The TMM shall have all the powers provided to a tax matters partner in
Sections 6221 through 6233 of the IRC, including the specific power to extend
the statute of limitations with respect to any matter which is attributable
to any Company item or affecting any item pending before the Internal Revenue
Service and to select the forum to litigate any tax issue or liability
arising from Company items. The TMM may resign its position by giving thirty
(30) days written notice to all Members, whereupon the Members shall promptly
vote to designate a new TMM. The Members may, without cause, remove the TMM,
whereupon the Members shall promptly vote to designate a new TMM. The TMM
shall be entitled to reimbursement for any and all reason able expenses
incurred with respect to any administrative and/or judicial proceedings
affecting the Company.
8.9 ELECTIONS. All elections required or permitted to be made by the
Company under any applicable tax laws shall be made by Members as directed by
the Company's auditors.
ARTICLE IX
TERMINATION OF MEMBERSHIP INTEREST
9.1 TERMINATION OF INTEREST. A Member's Membership in the Company shall
terminate upon the:
(a) withdrawal of the Member;
(b) acquisition of the Member's complete Membership Interest by the
Company;
(c) assignment of the Member's Governance Rights which leaves the Member
with no Governance Rights.
(d) bankruptcy of the Member;
(e) dissolution of the Member; or
(f) a merger in which the Company is not the surviving organization.
9.2 WITHDRAWAL OF A MEMBER. Notwithstanding the foregoing, a Member shall
not have the right to withdraw from the Company, to assign its Governance
Rights except as provided in ARTICLE X hereof, to dissolve, or to otherwise
terminate its Membership Interest by any means, including by declaring or
allowing itself to be declared bankrupt, other than in the manner provided in
SECTION 11.4 and 12.2(B) and (D) hereof, though it does have the power under
the Act to terminate its membership by withdrawing at any time.
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9.3 GENERAL EFFECT OF TERMINATION OF INTEREST. The termination of a
Member's interest causes dissolution and termination of the Company unless,
in cases where the termination is wrongful, the existence and business of the
Company is continued by the unanimous consent of the remaining Members
provided that such consent is obtained no later than ninety (90) days after
the termination of the continued membership. If the termination of a Member's
interest is not wrongful, the Company shall be dissolved, terminated and
wound up in accordance with Article XII hereof.
9.4 EFFECT OF TERMINATION OF MEMBERSHIP ON GOVERNANCE RIGHTS. If for any
reason the Membership Interest of a Member is terminated, unless such
termination is wrongful under this Agreement at, then:
(a) if the business of the Company is continued pursuant to SECTION 12.2,
the Member whose Membership is terminated loses any and all Governance Rights
and will be considered merely an assignee of the Financial Rights owned
before the termination; and
(b) if the business of the Company is not continued pursuant to SECTION
12.2, the Member whose Membership terminated retains all Governance Rights
owned before such termination and may exercise these through the dissolution
and winding up of the Company.
9.5 ADDITIONAL EFFECTS IF TERMINATION OF MEMBERSHIP IS WRONGFUL. If a
Member withdraws in violation of this Agreement, in particular SECTION 9.2
above, then such withdrawal has the following additional effects:
(a) The Member who has wrongfully withdrawn forfeits Governance Rights in
the winding up and termination process or in the continued business.
(b) The Member who has wrongfully withdrawn is liable to all the other
Members and to the Company to the extent damaged, including the loss of
foregone profits, by the wrongful withdrawal.
(c) In lieu of establishing damages for lost profits, those Members who
have not wrongfully withdrawn may, by the affirmative vote of all of such
Members, elect to reduce the value of the interest of the Member who
wrongfully withdrew by the goodwill and going concern value attributable to
such interest.
(d) If the existence and business of the Company is not continued, the
Member that wrongfully Withdrew is entitled to that Member's distribution
provided for with respect to dissolution and termination of the Company under
ARTICLE XII hereof, provided that the Company may offset against such
distribution the amount of damages caused to the Company, including the loss
of foregone profits caused by the wrongful withdrawal or, if the Members who
have not wrongfully withdrawn have made the election contemplated by
subsection (c) above, the Company may reduce such distribution by the
goodwill and going concern value attributable to the Member who has
wrongfully withdrawn.
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(e) If the existence and business of the Company is continued, the Member
who has wrongfully withdrawn has the right against the Company to have paid
in cash, at the option of the Company, (i) the value of such Member's
Membership Interest less any damages caused to the other Members and the
Company, or (ii) the value of the Membership Interest less good will and
going concern value. The value of such Member's Membership Interest shall be
an amount equal to the fair market value of the Company multiplied by the
withdrawing Member's Percentage Interest, and such amount shall be paid to
the withdrawing Member in equal quarterly installments over a period of three
(3) years. The portion of such price remaining unpaid shall accrue interest
at the prime rate published in THE WALL STREET JOURNAL. Interest accrued
since the previous payment date shall be paid with each quarterly installment
payment.
ARTICLE X
ASSIGNMENT OF MEMBERSHIP INTEREST
10.1 RESTRICTIONS ON ASSIGNMENT. No Member shall assign its Membership
Interest, Financial Rights, or Governance Rights except as expressly
permitted in this Article.
10.2 DEFINITION OF "ASSIGNMENT". For purposes of this Article, the words
"assign" or "assignment" shall include any transfer, alienation, sale,
assignment, pledge or other encumbrance or other disposition of a Membership
Interest, Financial Rights, or Governance Rights, whether voluntarily or by
operation of law.
10.3 PERMITTED ASSIGNMENTS. The following assignments are permitted under
this Article: (a) any Member may transfer all or any part of its Membership
Interest in the Company to or for the benefit of the other Member of the
Company, (b) CRCT may convey all or a portion of its interest to Casino
Resource Corporation or any entity that acquires a majority of the stock or
substantially all of the assets of Casino Resource Corporation or any entity
controlled by either of the foregoing or (c) BV may transfer all or any
portion of its Membership Interest to any of the Members of BV, any family
member of J. MacDonald Burkhart, to his personal representative, to a trust
created by him, or to any entity which he controls directly or indirectly. BV
may also pledge its interest as collateral or security for a loan. A
conveyance of a portion of CRCT's Membership Interest pursuant to this
SECTION 10.3(B) above may be for any purpose, including, but not limited to,
the creation of an additional member of the Company immediately prior to an
acquisition by CRCT of the Membership Interest of BV or the wrongful
termination of the Membership Interest of BV pursuant to ARTICLE IX hereof in
order to preserve any tax or organizational benefits belonging to the Company
and its members. Transfers permitted under this SECTION 10.3 are subject to
the requirement that such transferee signs this Agreement and agrees to be
bound by the terms hereof.
10.4 OTHER TRANSFERS - RIGHT OF FIRST REFUSAL. Except as provided in
SECTION 10.3 above, in the event that a Member desires to assign, directly or
indirectly (during life or at death), any of its Membership Interest, whether
now owned or hereafter acquired, the transferring Member must first offer to
sell the Membership Interest involved to the other Member in accordance with
the following provisions:
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(a) RIGHT OF FIRST REFUSAL. The transferring Member shall first offer to
sell the Membership interest to the other Member for an amount stated in the
offer to sell, and the other Member shall have the right to accept such offer
under the terms provided in this section. The right to accept such offer,
which shall constitute the right of first refusal referenced in this section,
shall be exercisable at any time prior to the expiration of thirty (30) days
following the receipt of the offer and the purchase price shall be paid
either in cash at the closing or in quarterly installment payments as
provided below.
(b) MANNER OF EXERCISE OF RIGHT OF FIRST REFUSAL. The right of first
refusal described in this SECTION 10.5 shall be exercised by mailing by
certified mail written acceptance by the purchaser of the offer to the
transferring Member within the particular period involved.
(c) PAYMENT OF PURCHASE PRICE. Unless the Members agree otherwise, payment
shall be made in twelve (12) equal, successive quarterly installments
containing principal and interest on the unpaid balance computed at a rate
equal to the Applicable Federal Rate with respect to such installment
obligation under Section 1274(d) of the IRC at the time the right of first
refusal is exercised, said indebtedness to be evidenced by a promissory note
signed by the purchaser and secured by either a mortgage or deed of trust
lien on all of the Company's real property (except where the creation of such
lien or mortgage would result in the acceleration of Company indebtedness
secured by prior mortgages or deeds of trust on such properties) or by a lien
on all of the Membership Interests in the Company owned by the purchasing
Member, as the case may be. The purchaser shall have the right to prepay the
whole or any part of the amount that it owes to the transferring Member at
any time or times, and no penalty for the early payment will be imposed.
(d) CLOSING. The purchase of any Membership interest pursuant to the
exercise of the right of first refusal described in this SECTION 10.4 shall
be closed within thirty (30) days after expiration of the 30 day period
described in SECTIONS 1O.4(A) above.
(e) PERMITTED TRANSFERS IF RIGHT FIRST REFUSAL NOT EXERCISED. In the event
the non-transferring Member elects not to purchase the Membership Interest
offered by the transferring Member, then the transferring Member may transfer
the Membership interest to such transferees and on such terms as he or she
sees fit; provided that the transfer must be made only at a price and on
terms which are not more favorable to the transferee than the price and terms
at which the Membership Interest was offered to the non-transferring Member.
The transfer shall constitute only an assignment of the transferring Member's
Financial Rights in the Company unless: (i) the admission of the transferee
as a Member is approved by the other Member; and (ii) the transferee signs
this Agreement and agrees to be bound by the terms hereof.
10.5 VALUATION OF PROPERTIES. When it is necessary under this Article to
determine the fair market value of any properties in which the Company has an
interest, whether directly or indirectly, the provisions of this Section
shall be controlling. In the event the parties are unable to agree upon the
fair market values of such properties, such values shall be as determined by
a competent appraiser mutually selected by the Members. The appraised value
so determined shall be deemed to be the fair market value of the properties
in question. All costs incurred shall be treated as an expense of the Company
and shall be borne by the Members according to their respective Percentage
Interests.
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ARTICLE XI
DISTRIBUTION OF CASH FLOW;
RIGHT OF MEMBERS TO TERMINATE ON FAILURE OF
COMPANY TO PAY CERTAIN AMOUNTS
11.1 DISTRIBUTION OF CASH FLOW. Subject to the payment of the expenses of
the Company, including payments to CTE under the Contract and to the Lessor
under the Lease, and retention of any amount of cash operating reserves which
CRCT reasonably deems necessary to be retained for tie benefit of the
Company, all cash flow from the operations of the Company shall be allocated
and paid to the Members in the following order of priority:
(a) REPAYMENT OF LINE OF CREDIT OBLIGATIONS. To reduce the principal
amount of the lines of credit described in SECTION 3.2(B) above, unless CRCT
determines that such reduction is rot in the best interests of the Company.
(b) PAYMENT OF INTEREST ON INITIAL CAPITAL CONTRIBUTIONS. To each of the
Members, interest on their initial capital contributions made under SECTION
3.2(A) above, accruing from the date of this Agreement, at the prime rate of
interest in effect from time to time as published in the WALL STREET JOURNAL,
payable quarterly, in arrears. If cash flow is not available to the Company
to make a payment or payments in accordance with the above schedule, such
unpaid amounts shall be paid as funds become available and prior to the
payment of items subsequently listed in this SECTION 11.1.
(c) RETURN OF INITIAL CAPITAL CONTRIBUTIONS. To each of the Members, their
initial capital contributions made under SECTION 3.2(A) above.
(d) REPAYMENT OF LOANS UNDER SECTION 5.4(G). To pay accrued interest and
principal due under any loans made to the Company by a Member or Members
pursuant to SECTION 5.4(G) above.
(e) DISTRIBUTION OF REMAINDER TO MEMBERS. To the Members in proportion to
their Percentage Interests; provided, however, that any rent received by BV
under the Lease which is in excess of $30,000 per month shall be deemed to be
a distribution of cash flow under this Agreement (except for purposes of
Section 11.2 hereof) and any distributions to the Members under this Section
11.1(e) shall be adjusted to reflect the treatment of such rent payments as
distributions of cash flow.
In any event, and notwithstanding any other provision of this Article to
the contrary, the Company shall distribute cash to each Member in an amount
equal to such Member's distributive share of the Company's taxable income (as
shown on IRS Form 1065) multiplied by the highest federal income tax rate
applicable to such income as received by the Company or any of the Members.
For example, if BV's distributive share of the Company's taxable income for
1997 is $40,000.00, and the highest federal income tax rate is 39.6% (35% for
CRCT and 39.6% for the owners of BV), then the Company shall distribute
$15,840 to BV (40,000 x 39.6 % = $15,840). Such amount shall be payable on or
before March 15 of each year based on the income for the preceding fiscal
year.
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11.2 RIGHT OF BV TO TERMINATE.
(a) Notwithstanding any provision herein to the contrary, BV shall have
the option, in its sole discretion, to terminate the Company upon written
notice to CRCT, between January 15, 1999 and January 25, 1999, if the
distributions of cash flow with respect to the period ending December 31,
1998 have not resulted in BV receiving the following on or before January 15,
1999: (i) return of $100,000 of BV's initial capital contribution of $200,000
together with all accrued interest on BV's entire initial capital
contribution, (ii) full and final payment of the principal amount and all
accrued interest on BV's line of credit described in SECTION 3.2(B) and
termination thereof, and (iii) payment of all rent due through such date
under the Lease.
(b) Notwithstanding any provision herein to the contrary, BV shall have
the option, in its sole discretion, to terminate the Company upon written
notice to CRCT, between January 15, 2000 and January 25, 2000, if the
distributions of cash flow with respect to the period ending December 31,
1999 have not resulted in BV receiving the following on or before January 15,
2000: (i) return of the remaining $100,000 of BV's initial $200,000 capital
contribution together with all accrued interest thereon, (ii) payment of all
rent due through such date under the Lease, and (iii) the amount of $540,000
through distributions under SECTION 11.1(E) above.
(c) BV shall have the option, in its sole discretion, to terminate the
Company upon written notice to CRCT, between the January 15 and January 25
that follows the end of the initial five year term of the Company or the end
of any Renewal Term (as defined in SECTION 12.1 below), if it has not
received all rent due during such Renewal Term under the Lease (regardless of
whether such rent is deemed to be a distribution of cash flow for purposes of
SECTION 11.1(E) above), and, in addition to such rent payments, BV has not
received distributions of cash flow under SECTIONS 11.1(E) above in the
amounts set forth below for the term or Renewal Term specified:
YEAR DISTRIBUTION
1/1/2000 through 12/31/2001 $480,000
1/1/2002 through 12/31/2003 $960,000
1/1/2004 through 12/31/2005 $1,440,000
1/1/2006 through 12/31/2007 $1,920,000
1/1/2008 through 12/31/2009 $2,400,000
All distributions of cash flow with respect to any period ending on a
December 31 shall be made no later than the following January 15.
(d) If BV does not terminate the Company pursuant to and during the time
periods allowed by either SECTIONS 11.2(A), (B) OR (C) above, then such right
to terminate shall lapse and the Company shall continue in existence until
BV's next option to terminate or until the expiration of, in the case of BV's
right to terminate under SECTIONS 11.2(A) AND (B), its initial five year term
as set forth in SECTION 12.1 below, or, in the case of BV's right to
terminate under SECTION 11.2(C), until expiration of the applicable Renewal
Term.
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(e) Notwithstanding any other provision herein to the contrary, either
Member shall have the option, in its sole discretion, to terminate the
Company in the event the other Member breaches its obligations hereunder and
such breach is not cured within thirty (30) days after written notice of such
breach is given to the breaching Member.
11.3 RIGHT OF CRCT TO TERMINATE.
(a) Subject to SECTION 11.3(B) below, CRCT shall have the option, in its
sole discretion, to terminate the Company upon one hundred eighty (180) days
written notice, given prior to the expiration of the initial five year term,
or upon ninety (90) days written notice given prior to the expiration of any
Renewal Term. If CRCT does not terminate the Company pursuant to and during
the time periods allowed by this SECTION 11.3(A), then such right to
terminate shall lapse and the Company shall continue in existence until
expiration of the succeeding Renewal Term.
(b) Notwithstanding, the provisions of SECTION 11.3(A) above, upon the end
of the initial five year term, CRCT shall be obligated, at the option of BV,
to extend the term of the Company for an additional three year period, and to
renew the term of the Lease for such three year period, which extension the
lessor shall agree to under the Lease, on the condition that BV's Percentage
Interest shall decrease from 40% to 33.33% effective as of the first day of
such three year period. If the term of the Company is extended under this
SECTION 11.3(b), BV shall not have the right to terminate the Company as
provided in Section 11.2(c), but instead shall have the right to terminate
the Company only upon the end of any of the Renewal Terms set forth below, or
for thirty days thereafter, and only if it has not received all rent due
during such Renewal Term under the Lease (regardless of whether such rent is
deemed to be a distribution of cash flow for purposes of SECTION 11.1(E)
above) and, in addition to such rent payments, has not received distributions
of cash flow under SECTION 11.1(E) above in the amounts set forth below for
the Renewal Terms specified:
YEAR DISTRIBUTION
1/1/2004 through 12/31/2005 $1,040,000
1/l/2006 through 12/31/2007 $1,440,000
1/l/2008 through 12/31/2009 $1,840,000
ARTICLE XII
TERM, TERMINATION, WINDING UP
12.1 TERM. The initial term of the Company shall be a period of five (5)
years, beginning March 1, 1997. Provided that the Lease and the Contract
shall remain in effect throughout such time and subject to the rights of the
parties to terminate the Company under SECTIONS 11.2 and 11.3 above, either
Member shall have the option to extend the term of the Company for four (4)
consecutive two (2) year periods (each a "Renewal Term"), beginning with the
expiration date of the initial term. Such renewal option(s) may be exercised
by written notice from one Member to the other Member not less than one
hundred eighty (180) days prior to the expiration of the preceding term.
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12.2 EVENTS CAUSING DISSOLUTION. The Company shall be dissolved and its
affairs wound up upon:
(a) any event that terminates the continued membership of any Member
(unless the remaining Member continues the Company as provided in SECTION
9.3);
(b) an election to dissolve the Company made in writing by all Members;
(c) the bulk sale, exchange, or other disposition of all or substantially
all of the assets of the Company and the distribution of the net proceeds
therefrom;
(d) the election of either Member to terminate the Company pursuant to
SECTION 11.2 OR 11.3 hereof;
(e) the termination of the Lease;
(f) the termination of the Contract; or
(g) as may be otherwise provided by law.
12.3 PROCEDURE UPON THE OCCURRENCE OF AN EVENT OF DISSOLUTION. Upon the
occurrence of an event of dissolution as set forth in SECTION 12.2, the
provisions of SECTION 12.4 hereof shall apply. Such consent must be obtained
no later than thirty (30) days after the occurrence of the event of
dissolution.
12.4 WINDING UP AFFAIRS UPON DISSOLUTION. Upon a termination of the
Company, the remaining Member(s) shall promptly wind up the business and
affairs of the Company. The assets of the Company shall be applied as follows:
(a) To the setting up of any reserves which the Members deem reasonable
for any contingent or unforeseen liabilities or obligations of the Company
arising out of or in connection with the conduct of the Company's business or
the termination thereof. Any such reserves may be paid over to a bank or to
an attorney at law as escrow agent, to be held for the purposes of disbursing
such reserves in payment of the aforementioned contingencies and, at the
expiration of such period as shall have been deemed advisable, to distribute
the balance thereof in the manner provided in this Section;
(b) To the repayment of Company obligations as provided in ARTICLE XI
hereof;
(c) To the repayment of the Members' capital accounts.
(d) The remainder shall be distributed based upon each Member's Percentage
Interest.
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(e) In the event the assets of the Company are insufficient upon
termination to return to the members all or any part of their respective
capital contributions, neither Member shall have any claim or recourse
against the other Member, except for losses caused by the intentional or
negligent actions or the bad faith of such Member.
12.5 TERMINATION. When a winding up of the Company is required, a
reasonable time, but not to exceed two (2) months, shall be allowed for the
orderly liquidation of such of the assets of the Company as are to be
liquidated and the discharge of all liabilities to its creditors, all so as
to enable the Company to minimize any losses attendant upon liquidation. The
Company shall be terminated when its affairs have been wound up and the
distribution of its assets has been completed.
12.6 LIQUIDATION STATEMENT. Each of the Members shall be furnished with a
statement which shall set forth the assets and liabilities of the Company as
of the date of complete liquidation an in the manner in which the assets of
the Company are to be or have been distributed.
12.7 VALUATION OF PROPERTIES. In the event of a liquidating distribution of
any of the Company's property in kind, the fair market value of such Property
shall be determined by an independent appraiser, approved by the Members,
engaged in appraisal work in the immediate vicinity of the Property, selected
by the Members, and each Member shall receive an undivided interest in such
assets or assets of the Company, as determined by agreement of the Members,
equal in value to the portion of the proceeds to which it would be entitled
if such asset or assets were sold or otherwise converted to cash at such
appraisal price and the cash were then distributed.
12.8 WAIVER OF RIGHT TO PARTITION. As a material inducement to each Member
to execute this Agreement, each Member covenants and represents to each other
Member that, during the existence of the Company, no Member, nor his heirs,
representatives, successors, transferees or assigns, shall attempt to make
any partition of any Company assets, whether now owned or hereafter acquired,
and each Member waives all rights of partition provided by statute or
principles of law or equity, including partition in kind or partition by sale.
12.9 CERTAIN PROHIBITIONS. BV agrees not to (a) during the term hereof or
for one year thereafter, produce at the theater, either directly or
indirectly, or rent the theater to any person or entity producing a country
and western music variety show which uses the word "Country" in its name or
in any trade name or trademark; (b) during the term hereof or for one year
thereafter, hire any person who was an employee of the Company, CRCT, CTE or
any affiliated entity within the one-year period prior to the termination of
the Company; or (c) at any time, violate any copyright, trademark or common
law intellectual property rights of CRCT, CTE or any affiliated entity.
ARTICLE XIII
MISCELLANEOUS
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13.1 NOTICES. The address for each Member for all purposes shall be the
address set forth on the signature page to this Agreement, or such other
address of which the Company and other Members shall have received written
notice. Any notice, demand or request required or permitted to be given shall
be considered made when personally delivered or when deposited, postage
prepaid, by certified mail or registered mail, return receipt requested, to
such Member at such address or sent by facsimile transmission to such Member
at such address. If any notice is sent by facsimile transmission, a copy of
such notice shall also be mailed. Copies of any notices required or permitted
hereunder shall also be sent to the following addresses:
If to the Lessor: Timothy M. McLemore, Esq.
Gentry, Tipton, Kizer & McLemore, P.C.
800 S. Gay Street, Suite 2610
P.O. Box 1990
Knoxville, Tennessee 37901
Telecopy Number: 423-523-7315
If to the Lessee: G. Mark Mamantov, Esq.
Bass, Berry & Sims PLC
900 S. Gay Street, Suite 1700
P.O. Box 1509
Knoxville, Tennessee 37901-1509
Telecopy Number: 423-521-6234
13.2 INTEGRATION. This Agreement embodies the entire agreement and
understanding among the Members and supersedes all prior agreements and
understandings, if any, among and between the members relating to the subject
matter hereof.
13.3 APPLICABLE LAW. This Agreement and the rights of the Members shall be
governed by and construed and enforced in accordance with the laws of the
State of Tennessee.
13.4 SEVERABILITY. In case any one or more of the provisions contained in
this Agreement or any application thereof shall be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of
the remaining provisions contained herein and any other application thereof
shall i lot in any way be affected or impaired thereby.
13.5 BINDING EFFECT. Except as herein otherwise provided to the contrary,
this Agreement shall be binding upon, and inure to the benefit of, the
Members and their respective heirs, executors, administrators, successors,
transferees and assigns.
13.6 LITIGATION COSTS. The Members agree that in the event of litigation
between them with respect to any alleged breach of this Agreement, the
prevailing party shall be entitled to recover its costs of such litigation,
including reasonable attorneys' fees, in addition to any damages for such
breach.
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13.7 ARBITRATION. The Members agree that any dispute between them arising
under or with respect to this Agreement shall be settled, if possible, by
mutual consultation and negotiation within thirty (30) days after written
notice of such dispute or claim has been given by the complaining Member to
the other Member. Should the Members fail to resolve the dispute within such
period of time, they hereby agree to submit the matter for arbitration in
Knoxville, Tennessee, under the then prevailing rules of the American
Arbitration Association, before a panel of three arbitrators, one appointed
by each Member, and the third appointed by the American Arbitration
Association. The decision or award of a majority of the arbitrators shall be
final and binding upon the parties, and may be entered as a judgment or order
in any court of competent jurisdiction.
13.8 SPECIFIC PERFORMANCE. Notwithstanding any provision herein to the
contrary, either Member may be irreparably damaged if this Agreement is not
specifically performed. Therefore, if any dispute should arise concerning the
obligations of a party to this Agreement, an injunction may be issued
restraining such action that is in contravention of this Agreement pending
the termination a of such controversy, and the obligations of any party shall
be enforceable in a court of equity by a decree of specific performance;
provided, however, such remedy shall be cumulative and not exclusive and
shall be in addition to any other remedy which the Members may have.
13.9 TERMINOLOGY. As the context may require, all personal pronouns used in
this Agreement, whether used in the masculine, feminine, or neuter gender,
shall include all other genders, and the singular shall include the plural,
as appropriate. Titles of Articles and Sections are for convenience only and
neither limit nor amplify the provisions of this Agreement itself.
13.10 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original agreement, and all of
which shall constitute but one agreement. Any Member may record a memorandum
of agreement of this Agreement and each Member agrees to sign a memorandum of
agreement evidencing this Agreement.
13.11 AMENDMENT. This Agreement may be amended, modified or supplemented
only by a writing execited by all Members.
IN WITNESS WHEREOF, this Agreement is executed effective as of the date
first set forth above.
CRC OF TENNESSEE, INC.,
A TENNESSEE CORPORATION
By: /s/ JOHN J. PILGER
-----------------------------------
Its: PRES.
-----------------------------------
ADDRESS:
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1719 Beach Blvd., Suite 306
Biloxi, Mississippi 39531-5396
(Telecopy number: 601/374-5935)
BURKHART VENTURES, LLC.,
A TENNESSEE LIMITED LIABILITY COMPANY
By: /s/ J. MACDONALD BURKHART
-----------------------------------
Its: CHIEF MANAGER
-----------------------------------
ADDRESS:
2001 Laurel Avenue
601 Newland Professional Building
Knoxville, Tennessee 37916
(Telecopy number: 423/546-2625)
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EXHIBIT 1
LEASE AGREEMENT
<PAGE>
LEASE AGREEMENT
THIS LEASE AGREEMENT entered into this 24th day of September, 1996, by and
between J. MACDONALD BURKHART, M.D. ("Lessor"), and COUNTRY TONITE THEATRE,
L.L.C., a Tennessee limited liability company ("Lessee").
W I T N E S S E T H:
THAT IN CONSIDERATION of the payment of the rents set forth below, and of
the keeping of the mutual terms and covenants set forth herein, the parties
hereby enter into this Lease Agreement (the "Lease"), by which Lessor leases
to Lessee, and Lessee takes as a tenant, the property described on EXHIBIT A
hereto which has been improved for use as a theater and parking therefor (the
"Premises"), which exhibit is incorporated fully herein by reference, and all
of the furniture, equipment, and fixtures which are owned by Lessor and
currently used on the Premises, as more particularly described on EXHIBIT B,
which exhibit is incorporated fully herein by reference (the "Equipment"),
for a term beginning on the 15th day January, 1997 (the "Starting Date"), and
ending on the 31st day of December, 2001, unless sooner terminated or
extended in accord with the provisions herein. The "Premises" and the
"Equipment" are collectively referred to herein as the "Leased Property".
TO HAVE AND TO HOLD the Leased Property, with all rights, privileges and
appurtenances thereto belonging, unto Lessee for and during the term as above
provided; and Lessor covenants with Lessee to keep Lessee in quiet possession
of the Leased Property during the term of the Lease, unless sooner terminated
pursuant to any provision of the Lease, provided that Lessee shall promptly
pay the rent and keep and perform the covenants and agreements of this Lease.
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1. POSSESSION OF LEASED PROPERTY: Lessee acknowledges that it has conducted
an inspection of the Leased Property, and the acceptance of possession by
Lessee shall be conclusive evidence that the Leased Property is in acceptable
condition and fit for Lessee's purposes. Lessee shall have the right of
possession of the Leased Property as of the Starting Date and Lessor shall
not permit the condition of the Leased Property to deteriorate between the
date hereof and the Starting date, ordinary wear and tear excepted. In
addition, upon the prior, written consent of Lessor, which shall not be
unreasonably withheld and subject to the rights of third parties, Lessee
shall have the right of access to and entry on the Leased Property prior to
the Starting Date, if and to the extent necessary to allow Lessee to prepare
for the performance of its obligations as stated herein and consistent with
Lessor's rights and obligations to the current tenant and other third parties.
2. USE OF LEASED PROPERTY: Lessee shall use the Leased Property solely for
the purpose of operating theatrical and musical productions including the
"Country Tonite Show" solely for the exclusive benefit of the Lessee, and
also including complimentary morning and afternoon musical and theatrical
shows, and celebrity shows, and for no other purposes without the prior,
written consent of Lessor. The parties acknowledge and agree that Lessee has
entered into or will enter into a contract with Country Tonite Enterprises
providing for performance of the "Country Tonite Show" on the Premises
throughout the term of this Lease Agreement, as provided in such contract, a
copy of which is attached hereto as EXHIBIT C (the "CTE Contract"). Lessee
shall comply, at its own expense, with all present and future federal, state,
and local laws, rules, regulations, ordinances, and/or orders concerning the
use of the Leased Property, provided, however, Lessor shall be responsible
for correcting any existing violations of such laws existing as of the
Starting Date. Lessee shall do nothing, and shall permit nothing to be done,
on or about
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the Leased Property which constitutes waste, nuisance, or interference with
the peaceful, quiet enjoyment or use of adjoining or neighboring property.
Lessee shall do nothing which would make void or voidable any insurance on
the Leased Property. Lessee shall not damage the Leased Property and Lessee
shall exercise due care in and around the Leased Property. Lessee shall
preserve and protect the Leased Property and shall be responsible for keeping
the Premises clean. Notwithstanding anything herein, Lessee shall not be
liable for the cost of any damage actually reimbursed by insurance or any
damages that Lessor is required to insure hereunder.
3. RENT: Lessee shall pay Lessor rent on the first day of each month during
the term of this Lease, beginning on March 1, 1997 and on the first day of
each succeeding month. The amount of such rental shall be as follows:
(a) for the period beginning March 1, 1997 and ending on February 28,
1998, the total sum of Three Hundred Sixty Thousand Dollars
($360,000.00) payable in twelve (12) equal installments of Thirty
Thousand Dollars ($30,000.00) each;
(b) for the period beginning on March 1, 1998 and ending on February 28,
1999, the total sum of Four Hundred Eighty Thousand Dollars
($480,000.00) payable in twelve (12) equal installments of Forty
Thousand Dollars ($40,000.00) each;
(c) for the period beginning on March 1, 1999 and ending on February 28,
2000, the total sum of Eight Hundred Forty Thousand Dollars
($840,000.00) payable in twelve (12) equal installments of Seventy
Thousand Dollars ($70,000.00) each; and
(d) for each subsequent year during the term of this Lease (beginning on
each successive March 1 and ending on the following February 28,
unless terminated sooner in accordance with the terms of this Lease),
the total sum of Eight Hundred Forty Thousand Dollars ($840,000.00)
per year, payable in equal monthly installments of Seventy Thousand
Dollars ($70,000.00) each.
Rent shall be due and payable on the first day of each month without
further notice as to the due date and without set-off or deduction except as
otherwise expressly provided herein, at the address of Lessor specified on the
signature page of this Lease, or at such other address as the Lessor may from
time to time specify by written notice to Lessee.
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4. TAXES, UTILITIES, MORTGAGE PAYMENTS, PROPERTY INSURANCE, AND
ASSESSMENTS: Lessor shall be responsible for all mortgage paymerts (if any),
property taxes, and assessments (if applicable), and commercial property
insurance and his own commercial general liability insurance, if any, as to
the Leased Premises. Lessee shall be responsible for all other costs and
expenses, including utilities and all other insurance, including its own
commercial general liability insurance, connected with or relating to the
Leased Property during the term of this Lease Agreement, beginning on the
Starting Date, except to the extent expressly provided herein, as additional
rent.
5. REPAIRS AND MAINTENANCE: Lessor warrants that as of the Starting Date,
the Equipment will be in good operating condition, and Lessee's acceptance of
possession shall be conclusive evidence of such good condition. Lessor
assumes responsibility for major repairs that are essential and required as
to the roof and structure of the building located on the Premises and for
major repairs (not maintenance or minor repairs) as to the HVAC system
utilized in such theater building. Lessee shall be responsible for all other
repairs, maintenance, upkeep, and Cleaning as to the Leased Property. It
shall be the responsibility of Lessee to maintain the Leased Property and any
and all improvements thereto in good condition, repair, and working order,
ordinary wear and tear excepted, and except to the extent Lessor is obligated
to make a major repair as required above.
6. INSURANCE: Lessor shall purchase and maintain, at its expense, during
the term of the Lease, commercial property insurance covering the Leased
Property against at least those risks covered by the Insurance Services
Office Special Cause of Loss Form or its equivalent for the full replacement
value thereof with an agreed amount endorsement so as to avoid any
coinsurance penalty, with a deductible of not more than Twenty-five Thousand
Dollars
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<PAGE>
($25,000.00). The risks of flood and earthquake shall also be insured against
either by endorsement to said commercial property policy or by a separate
policy specifically insuring against those risks.
Lessee shall purchase and maintain, at its expense, during the term of the
Lease commercial general liability insurance covering Lessee's legal
liability as respects the Leased Property and any adjacent property which
serves the Leased Property. Said insurance shall have limits of not less than
Ten Million Dollars ($10,000,000.00) per occurrence for bodily injury
including death, property damage and personal injury. Lessee agrees to name
Lessor as an Additional Insured -- Lessee of Premises.
In the event that both Lessor and Lessee agree, the commercial property and
commercial general liability required to be carried hereunder by both parties
pursuant to this PARAGRAPH 6 may be provided by one or more policies insuring
both Lessor, Lessee, and their respective owners. In such event, the total
limit of the commercial property policy shall be equal to the sum of the
limit required to be carried by Lessor and Lessee and the policy shall carry
a deductible not to exceed Twenty-Five Thousand Dollars ($25,000.00). The
limits of the commercial general liability policy shall not be less than Ten
Million Dollars ($10,000,000.00) per occurrence and general aggregate. The
premiums for said policy(ies) shall be paid by Lessor and Lessee based on the
respective charges made by the insurance company(ies) providing such
coverage, with Lessor paying the premiums related to the commercial property
insurance on the Leased Property and loss of rental income and landlord's
liability if Lessor decides to carry such insurance and with Lessee paying
the premiums related to the commercial general liabibility policy (other than
landlord's liability), loss of income insurance and commercial property
insurance on Lessee's own property. In the event of a loss under the
commercial property policy that is subject to a
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<PAGE>
deductible, Lessor and Lessee shall each bear that portion of the deductible
that is equal to a fraction of which the numerator is the amount of their
respective insured loss and the denominator of which is equal to the total
insured loss incurred. If either party elects to maintain their individual
policies for any policy period, they shall notify the other party at least
ninety (90) days prior to the expiration of the current policy(ies) period.
Both Lessor and Lessee will be named insureds on all said insurance policies.
All insurance required to be maintained by either Lessor or Lessee shall be
written by insurance companies licensed to do business in the State of
Tennessee and that have A.M. Best Ratings of A-VII or better and such
companies must be reasonably acceptable to Lessor. Lessor and Lessee shall
each provide the other with certificates of insurance evidencing the
insurance required by this PARAGRAPH 6 which must contain provisions that
require the insurer to give the certificate holder at least thirty (30) days
notice of cancellation or renewal.
7. WAIVER OF SUBROGATION: Lessor and Lessee hereby release the other from
any and all liability or responsibility to the other or anyone claiming
through or under them by way of subrogation or otherwise for any loss or
damage to property caused by fire or any other covered casualties, even if
such fire or other casualty shall have been caused by the fault or negligence
of the other party, or anyone for whom such party may be responsible,
PROVIDED, HOWEVER, that this release shall be applicable and in force and
effect only with respect to loss or damage fully covered by insurance and
occurring during such time as the releasor's insurance policies shall contain
a clause or endorsement to the effect that any such release shall not
adversely affect or impair said policies or prejudice the right of the
releasor to recover thereunder.
Lessor and Lessee each agrees that they will request their insurance
carriers to include in their policies a waiver of subrogation clause or
endorsement. If extra cost shall be charged
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<PAGE>
therefor, each party shall advise the other thereof and of the amount of the
extra cost, and the other party, at its election, may pay the same, but shall
not be obligated to do so.
8. DAMAGE TO LEASED PROPERTY: In case of damage to the Leased Property or
any subsequent improvements by fire or other casualty, Lessee shall give
immediate written notice to Lessor, who shall elect to cause the damage to be
repaired with reasonable speed (unless the Lease is terminated as provided
below, subject to delays beyond the reasonable control of Lessor, and to the
extent the Premises are rendered unfit for Lessee's purpose, the rent shall
proportionately abate beginning on the date of such damage. In the event that
the damage shall be so extensive that in the written opinion of an
independent architect selected by Lessor and reasonably acceptable to Lessee
that it is not reasonable for Lessor to repair or rebuild within one (1) year
from the date of such damages, this Lease shall be terminated as of the date
of such damage by written notice from Lessor to Lessee, given within ninety
(90) days after the date of such damage, and the rent shall be adjusted to
the date of such damaged and Lessee shall promptly vacate the Premises. In
the event that the Lease is not terminated in accordance with the terms of
this Agreement, and if Lessee reasonably ceases its use of the Premises as a
direct result of damage caused by fire or other casualty, then rent shall be
abated from the date of the damage until Lessee reasonably may resume use of
the Leased Property.
9. CONDEMNATION: If the whole or substantially whole of the Premises
shall be lawfully condemned or taken in any manner for any public or quasi-
public use or purpose, this Lease shall terminate as of the date of the taking.
If less than the whole or substantially the whole of the Premises shall be so
condemned or taken, then Lessor or Lessee may, at its option, terminate this
Lease as of the date of the taking if such taking materially interferes with
Lessee's
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operations on the Premises. Upon any such condemnation or taking and the
continuation of this Lease as to any part of the Premises, the base rental
shall be diminished by an amount representing the part of the said rent
properly applicable to the portion of the Premises which may be so condemned
or taken. Lessor shall be entitled to receive the entire award in any
condemnation proceeding, except as provided below, and Lessee shall have no
claim against Lessor or against the proceeds of the condemnation. However,
Lessee shall not be prohibited from making an appropriate claim against the
condemning authority for the value of the unexpired term of the Lease and/or
for any displacement award to which Lessee may be entitled.
10. ALTERATIONS, ADDITIONS, AND IMPROVEMENTS: Lessor shall not be
responsible for the making of any decorations, alterations, additions, or
improvements to the Leased Property. Lessee may not make decorations,
alterations, additions, or improvements (except required repairs,
maintenance, and cleaning and except for initial decorations, signs,
marquees, and additions deemed reasonably necessary by Lessee to make the
Premises operable as a County Tonite Theatre and which shall not cause any
structural, permanent or significant damage to the Leased Property or require
any cost or expense to Lessor upon termination of this Lease) on or to the
Leased Property without the prior consent of Lessor in writing. All permitted
decorations, alterations, additions, and improvements shall become the
property of Lessor and shall remain with the Leased Property as a part
thereof upon the termination of this Lease (except that Lessee may remove its
trade fixtures and personal property upon such termination). Further, Lessor,
at his option, may require Lessee to remove any decorations, signs, marquees,
trade fixtures, personal property and/or additions, at Lessee's sole expense,
and require Lessee to promptly and fully repair any damages caused by the
removal of any such item(s).
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11. SIGNS: Lessor consents to Lessee's use of the stone sign aid electronic
message reader currently used on the Premises (the "Message Reader") subject
to the following terms and conditions:
(a) Lessee shall not display any additional signs or any other outdoor
advertising materials on the Premises (except to the extent permitted
by PARAGRAPH 10 above) or relocate the existing stone sign, without
the prior, written consent of Lessor as to location, size, design,
and content. Lessee shall provide Lessor with reasonable
specifications, drawings, and descriptions when seeking such consent.
Such consent shall not be unreasonably withheld. Lessee shall bear all
expenses associated with any signs except for lease payments due in
connection with the Message Reader. Any such sign(s) placed upon the
Premises in accordance with this provision, shall:
(i) be in compliance with all federal, state, and local laws,
regulations, and ordinances;
(ii) not cause any damage to the Premises; and
(iii) promptly be removed by Lessee upon termination of the Lease;
(b) Lessee's use of the stone sign and Message Reader, and any permitted
modifications, shall not result in any damage to such sign or Message
Reader;
(c) Lessee may acquire an electronic sign or message reader for its use in
lieu of the existing Message Reader. In such event, Lessor shall have
the right to remove the existing Message Reader and Lessor shall have
no further obligation to provide an electronic sign or Message Reader
to Lessee. Lessee shall use its best efforts to assist Lessor in
selling, trading, or exchanging the Message Reader on terms
financially advantageous to Lessor. In that regard, Lessee shall
negotiate in good faith with Don Bell Industries, Inc. regarding the
acquisition of a replacement electronic sign or message reader,
including a possible trade of the existing Message Reader, but
notwithstanding the foregoing, Lessee shall not be required to
purchase a replacement electronic sign or message reader from Don Bell
Industries, Inc. if Lessee determines that it is in its best interests
to purchase a replacement electronic sign or message reader from
another vendor;
(d) If Lessee acquires a replacement electronic sign or message reader for
its use, Lessor shall have the option to acquire such sign and related
equipment from Lessee upon termination of this Lease for an amount
equal to the lower of:
(i) Lessee's adjusted tax basis in such equipment; or
(ii) sixty percent (60%) of the fair market value of such equipment.
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Lessor shall have ninety (90) days following the termination of this
Lease to exercise any option provided hereunder and thirty (30) days
thereafter to pay the purchase price as computed above.
12. ACCESS BY LESSOR: Lessor and/or its authorized agents shall have the
right to enter the Premises at all reasonable times for inspection. Lessor
and/or its authorized agents shall have the right to enter the Premises to
show the Leased Property to prospective purchasers, tenants, or for any other
reasonable purpose upon twenty-four (24) hours advance notice.
13. ASSIGNMENT AND SUBLETTING: Lessee shall not assign, sell, mortgage, or
otherwise transfer this Lease, in whole or in part, or sublet all or part of
the Premises (except for limited licenses to third-parties for the purposes
of entertainment activities and vendors of items such as souvenirs,
refreshments and similar items that compliment the authorized uses of the
Premises, that provide revenue solely for the benefit of Lessee, and provided
such licenses have terms that are consistent with the terms of this Lease),
without the prior, written consent of Lessor, which consent may be withheld
for any reason, reasonable or unreasonable, in Lessor's sole discretion.
14. PARKING: Lessor agrees and covenants that throughout the term of the
Lease it shall provide on or adjacent to the Premises one (1) parking space
for every three (3) theater seats, togethr with reasonably sufficient tour
bus spaces. Lessee agree that a total of three hundred fifty (350) parking
spaces now exist; provided, however, that Lessor shall correct any drainage
problems that prevent the reasonable use of existing parking spaces prior to
the Starting Date. Lessor shall provide and gravel a total of one hundred
fifty (150) additional such parking spaces prior to March 1, 1997 in an
unpaved area until such time as Lessor and Lessee mutually agree that
additional paved parking spaces are reasonably required. Such parking spaces
need not be on the Premises but shall be located on the property currently
owned by the Lessor which
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adjoins the Premises; the location of such spaces within that adjoining
property shall be at the discretion of Lessor but such parking area shall be
adjacent to the Premises or connected to the boundary of the Premises by a
walkway not to exceed twenty-five (25) feet in length. Such parking spaces
shall be in an area reasonably accessible to the theater and the utilities,
security, and maintenance of such spaces shall be the duty of Lessee. Such
parking, as located from time to time, shall become a part of the Premises
for purposes of this Lease Agreement. In the event Lessor fails to construct
and gravel such additional parking spaces on or before March 1, 1997, Lessee
may construct and gravel such parking spaces and may deduct the cost thereof,
with interest ther eon at the prime rate published in the WALL STREET JOURNAL
(the "Prime Rate"), from the rents payable hereunder.
15. ASSUMPTION OF EQUIPMENT LEASES: As of March 1, 1997, Lessee shall
assume all of Lessor's obligations under the equipment leases attached hereto
as COLLECTIVE EXHIBIT D which is incorporated herein by reference (the
"Leased Equipment"). Durinc the term of this Lease, Lessee shall have the
right to use the Leased Equipment.
Upon termination of this Lease, regardless of the cause of such
termination, all rights associated with the lease of sound and light
equipment (Pearson Leasing & Financial Corporation d/b/a Citizens National
Leasing), including title to such equipment if the Lease and any purchase
option has been paid in full, shall be the sole and exclusive property of
Lessor. Lessee shall use its best faith efforts to facilitate and arrange for
a reasonable sale of the video equipment currently leased by Pro Lease
Funding Group, Inc. to Burkhart Farms, LLC.
Lessee is not assuming any obligations under a lease between Don Bell
Industries, Inc. and Burkhart Farms, LLC in connection with the Message Reader.
Provided, however, Lessee shall have the right to use the Message Reader in
accordance with the terms set forth in
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PARAGRAPH 11 hereof, and Lessor shall cause Burkhart Farms, LLC to make such
Message Reader available to Lessee.
16. EXTENSION AND TERMINATION OF TERM: Provided Lessee is not then in
default, and provided that the term of this Lease has not otherwise
terminated, and provided that the existence of Lessee has not been dissolved
as a result of the wrongful action of eitier member, Lessee shall have the
right, at the expiration of the initial five (5) year term of this Lease, to
a series of four (4) consecutive renewal options, each for a term of two (2)
years, and each beginning upon the date of expiration of the proceeding term.
Lessee shall exercise such option by written notice to Lessor, given in
accord with the notice provisions of this Lease, not less than one hundred
eighty (180) days prior to the expiration of the initial term and not less
than ninety (90) days prior to the expiration of any renewal term. In the
event the Lessee is dissolved in violation of Lessee's Operating Agreement,
this Lease shall terminate at the option of Lessor if Casino Resource
Corporation of Tennessee, Inc. caused such dissolution or by Lessee if
Burkhart Ventures, LLC caused such dissolution. Otherwise, if Lessee
terminates as a limited liability company in accordance with the terms of its
Operating Agreement and such termination is not wrongful, then this Lease
shall terminate.
17. DEFAULT: Any of the following shall constitute an event of default by
Lessee:
(a) Failure by Lessee to pay, in full, on the dates due, any rental or
other sums payable hereunder, including Lessee's obligation to pay for
insurance. TIME IS OF THE ESSENCE. Provided, however, Lessee shall
have five (5) days following written notice from Lessor to cure such
default.
(b) Failure by Lessee to observe or perform any of the terms, covenants,
agreements, or conditions contained in this Lease, other than payment
of rental, additional rental, or other sums due, for a period of
thirty (30) days after written notice from Lessor specifying such
default, provided, if any such default cannot be completely cured
within such thirty (30) day period, despite Lessee's diligent, best
faith effort, commenced immediately, then Lessee shall have a
reasonable time to complete the cure of such default, for a period not
to exceed ninety (90) days.
12
<PAGE>
(c) The filing by Lessee of a voluntary petition in bankruptcy or a
voluntary petition or answer seeking reorganization, arrangement,
readjustment of debts, or any other relief under the bankruptcy act,
or any other insolvency act, or any action by Lessee indicating
consent, approval, or acquiescence in any such proceeding; the making
by Lessee of any general assignment for the benefit of its creditors;
or the inability of Lessee, or the admission by Lessee of the
inability to pay its debts.
(d) The filing of any involuntary petition in bankruptcy or similar
proceeding against Lessee, and the continuation of such proceeding for
a period of ninety (90) days undismissed, unbonded, or undischarged.
(e) The insolvency of Lessee.
(f) The desertion or abandonment, or failure to use the Leased Property as
the "Country Tonite Theatre" for any period (during the contemplated
annual operating season) exceeding seven (7) consecutive days,
regardless of whether Lessee continues to pay all stipulated rental,
unless Lessor provides written consent, which shall not be
unreasonably withheld, or unless caused by damage or destruction of
the Leased Property.
(g) The occurrence of any unlawful activity on the Premises permitted or
tolerated by the Lessee.
(h) Attachment of the Leased Property or Lessee's interest therein, if not
satisfied or dissolved within ten (10) days.
(i) The attempted assignment, subletting, or mortgaging of the Leased
Property without the prior, written consent of Lessor.
(j) Any construction, change, or alteration to the Leased Property by
Lessee or Lessee's agent without the prior, written consent of Lessor
unless permitted by this Lease.
The following shall constitute an event of default by Lessor under this
Lease:
(a) Failure by Lessor to observe or perform any of the terms, covenants,
agreements, or conditions contained in this Lease for a period of
thirty (30) days after written notice from Lessee specifying such
default. Provided, however, if Lessor has a repair obligation
pursuant to PARAGRAPH 5, such repair shall be commenced within ten
(10) days after written notice from Lessee and shall be completed as
promptly as possible.
18. REMEDIES: Lessor, to the extent permitted by law, may take any one or
more of the remedial steps set forth below, when there exists an event of
default by Lessee:
13
<PAGE>
(a) Lessor may, at its option, declare the present value of all
installments of rent as determined at the time of default for the
remainder of the Lease term to be immediately due and payable, less
the present value of the reasonably foreseeable rental income from the
Leased Property for the remainder of the term.
(b) Lessor may re-enter and take possession of the Leased Property without
terminating this Lease, and re-lease the Leased Property in its
entirety for the account of Lessee, holding Lessee liable for the
difference in rent and other amounts actually paid by the new tenant,
and the rents and other amounts payable by Lessee hereunder.
(c) Lessor may terminate the Lease, exclude Lessee from possession of the
Leased Property, and use its best efforts to lease the same to another
for the account of Lessee, holding Lessee liable for all rent and
other amounts payable by Lessee hereunder.
(d) Lessor may take whatever action at law or in equity it may deem
necessary or desirable to collect the rent and other amounts then due
and thereafter to become due, or to enforce performance of any
obligation, agreement, or covenant of the Lease, and in connection
with such action, may recover all damages to Lessor for Lessee's
violation or breach of the Lease.
(e) No remedy reserved to Lessor hereunder is intended to be exclusive,
and each and every remedy shall be cumulative. No delay or omission
to exercise any right or power accruing to Lessor upon any default by
Lessee shall impair any such right or shall be construed to be a
waiver thereof.
(f) Lessee shall pay Lessor as additional damages in the event of breach
the reasonable fees of any attorneys employed by Lessor for the
collection of rent or the enforcement or performance of the Lease, and
all other expenses incurred by Lessor in connection therewith,
including but not limited to litigation expenses, court costs, and
court reporter's fees.
If an event of default by Lessor shall occur hereunder, in addition to any
other remedies granted or permitted by law, Lessee may cure such default and
may deduct the cost of such cure, plus interest thereon at the Prime Rate,
from the rents payable hereunder, provided, however, Lessee has first
provided written notice of such alleged default and Lessor has not commenced
to cure such alleged default within thirty (30) days following such notice.
Provided, if any such default cannot be completely cured within such thirty
(30) day period, despite Lessor's diligent,
14
<PAGE>
best faith effort, commenced immediately, then Lessor shall have a reasonable
time to complete the cure of such default for a period not to exceed ninety
(90) days.
19. NOTICES: All notices required or permitted hereunder shall be given in
writing and shall either be personally delivered, sent by facsimile or mailed
to the addresses/facsimile numbers of the parties set forth on the signature
page of this Lease, or to such other addresses/facsimile numbers as may be
designated from time to time by either party, by notice given pursuant to
this paragraph. When notice is by mail, it shall be sent certified with
postage pre-paid and shall be complete upon its deposit in the U.S. mail.
Notices personally delivered or sent by facsimile shall be effective upon
delivery or transmission. If notices are sent by facsimile, a copy shall also
be mailed. Copies of any notices required or permitted hereunder shall also
be sent to the following:
If to Lessor: Timothy M. McLemore, Esq.
Gentry, Tipton, Kizer & McLemore, P.C.
800 S. Gay Street, Suite 2610
P.O. Box 1990
Knoxville, Tennessee 37901
If to Lessee: G. Mark Mamantov, Esq.
Bass, Berry & Sims, PLC
900 S. Gay Street, Suite 1700
P.O. Box 1509
Knoxville, Tennessee 37901-1509
20. SUBORDINATION: This Lease shall be subordinate to any mortgage now or
hereafter placed upon the Leased Property and to any and all renewals,
replacements, and extensions of any such mortgage, but only if Lessor shall
deliver to Lessee within ninety (90) days of the date any such mortgage is
executed a nondisturbance agreement from any such mortgagee of the Leased
Property in a form reasonably satisfactory to Lessee. Lessor also covenants to
provide Lessee within thirty (30) days of the date hereof a nondisturbance
15
<PAGE>
agreement from any existing mortgagees in a form reasonably satisfactory to
Lessee. In the event of foreclosure of any such mortgage, exercise of power
of sale thereunder, or deed in lieu of foreclosure, Lessee shall attorr to
the purchaser under such foreclosure, exercise of power of sale, or deed in
lieu of foreclosure, and recognize such purchaser as the Lessor, provided
that such purchaser does not disturb Lessee's right to possession as long as
Lessee observes and performs all of the terms and conditions of this Lease.
21. WAIVER: No waiver by Lessor at any time of the breach of any covenant
by Lessee shall impair Lessor's rights for any subsequent breach, and
acceptance by Lessor of a portion of all rent last due shall not constitute a
waiver of the breach of any covenant or condition, or of any damages due to
Lessor by Lessee. No waiver of any provision of this Lease shall be binding
upon Lessoi unless in writing signed by Lessor. This provision may not be
orally waived.
22. CERTIFICATE OF GOOD STANDING: Lessor and Lessee agree, at any
reasonable time, and from time to time, upon not less than five (5) days
notice by the other party, to execute, acknowledge, and deliver to the other
party a statement in writing certifying that the Lease is unmodified and in
full force and effect, and certifying the dates to which the rent, rent
adjustments, and other charges have been paid, and stating whether or not to
the best knowledge of the signers of such certificate, that the other party
is in default in performance of any obligation under this Lease, and if so,
specifying such default, it being intended that such Statement be delivered
to and relied upon by any prospective purchaser, tenant, mortgagee of the
Premises or any lender to or investor in Lessee. If the other party fails or
refuses to provide such certificate within the time allowed, it will be
conclusively presumed that the Lease is in full force and effect in accord
with its terms and that the other party is not in default.
16
<PAGE>
23. AMENDMENT OF LEASE: This Lease may not be altered, changed, or amended,
except by a document in writing, signed by Lessor and Lessee. This Lease
contains the entire agreement between the parties as to the Leased Property.
24. RECORDING: Upon the request of either party, the parties will execute a
memorandum of lease which may be recorded by either party, at the expense of
the party desiring such recordation.
25. GOVERNING LAW: This Lease shall be governed by the substantive,
internal laws of the State of Tennessee.
26. SEVERABILITY: If any provision of this Lease be invalid or
unenforceable in law, it shall not affect the validity of any other
provisions hereof.
27. CAPTIONS: The captions in this Lease are for convenience only, and
shall not be construed as a part of the Lease.
28. COUNTERPARTS: This Lease may be executed in several counterparts, each
having the full force and effect of an original.
29. SUCCESSORS AND ASSIGNS: This Lease shall be binding upon Lessor's
successors and assigns, and upon Lessee's successors and assigns, in the
event of any permitted assignment by Lessee.
30. MODIFICATIONS REQUIRED BY MORTGAGEE: Lessee agrees that in the event
that Lessor's mortgagee requires modifications or amendments to this Lease
(exclusive of economic modifications or amendments), Lessee shall execute
such changes and amendments which may be reasonably required.
31. UTILITY EASEMENTS: Lessor shall be entitled to enter into such
easements or agreements with utility companies which are required in order to
provide service to any portion
17
<PAGE>
of the Premises. Lessee hereby consents to the execution of such easements by
Lessor, and agrees to execute any necessary documents and to take such action
necessary in order to consummate same.
32. ALL GENDERS AND NUMBERS INCLUDED: Whenever the singular or plural, or
masculine, feminine, or neuter is used in this Lease it shall equally apply
to, extend to and include the other.
33. NO PARTNERSHIP: Nothing contained herein shall be deemed or construed
by the parties or by any third party as creating the relationship of
principal and agent or a partnership or of a joint venture between the
parties hereto, it being understood and agreed that the sole relationship
between the parties hereto is that of Lessor and Lessee. Lessee shall be
solely responsible for all taxes and expenses arising out of the use and
occupancy of the theater except as expressly provided herein.
34. ESTATE OF LESSOR: Lessor represents and warrants to Lessee that it has
full right and lawful authority to enter into this Lease; that the Leased
Property is free and clear of all liens, exceptions, restrictions and
encumbrances except those shown on EXHIBIT E attached hereto; and that Lessor
will defend the title to the Leased Property against the claims of all
persons. The mechanic's lien filed by Creative Structures, Inc. will be
removed by Lessor on or before December 31, 1996.
35. QUIET POSSESSION: Lessor covenants that Lessee, upon performing and
observing the covenants to be observed and performed by Lessee under this
Lease, shall peaceably hold, occupy and enjoy the Leased Property during the
term of this Lease without interference by Lessor or by any other person
claiming by, through or under Lessor.
18
<PAGE>
36. HAZARDOUS SUBSTANCES: Lessor represents and warrants that it has not
placed or disposed of any Hazardous Substances on the Premises and
furthermore represents and warrants that, to the best of its knowledge, no
such Hazardous Substances have been placed or disposed of by any other person
on the Premises.
"Hazardous Substance" means gasoline, motor oil, fuel oil, waste oil, other
petroleum or petroleum-based products, asbestos, polychlorinated biphenyls
("PCBs") and any chemical, material or substance to which exposure is
prohibited, limited or regulated by any federal, state, country, local or
regional authority or which, even if no so regulated, is known to pose a
hazard to health and safety, including but not limited to substances and
materials defined or designated as "hazardous substances", "hazardous
materials" or "toxic substances" under applicable law.
37. NO LIENS: Lessee shall not attempt to encumber the Leased Property in
any manner and Lessee shall not permit any mechanics', materialmen's, or other
lien to be placed upon the Leased Property in connection with any permitted
improvements, additions, or any required repairs and maintenance by Lessee.
IN WITNESS WHEREOF, the parties hereto have executed this Lease Agreement
as of the day and year first written above.
LESSOR:
J. MacDONALD BURKHART, M.D.
ADDRESS:
601 Newland Professional Building
2001 Laurel Avenue
Knoxville, Tennessee 37916
Telecopy: (423) 546-2625
LESSEE:
COUNTRY TONITE THEATRE, L.L.C., A
TENNESSEE LIMITED LIABILITY COMPANY
19
<PAGE>
By: /s/ JOHN J. PILGER
Its: Chief Manager
ADDRESS:
c/o Casino Resource Corporation
1719 Beach Blvd., Suite 306
Biloxi, Mississippi 39531-5396
Telecopy: (601) 374-5935
20
<PAGE>
STATE OF TENNESSEE
COUNTY OF KNOX
Personally appeared before me, Notary Public of said County, J. MacDONALD
BURKHART, M.D., the within named bargainor, with whom I am personally
acquainted (or proved to me on the basis of satisfactory evidence), and who
acknowledged that he executed the within instrument for the purposes therein
contained.
Witness my hand, at office, this day of , 1996.
------------------------------
Notary Public
My Commission Expires:
---------------
STATE OF MISSISSIPPI
---------------
COUNTY OF HARRISON
--------------
Before me, a Notary Public of the state and county aforesaid, personally
appeared John J. Pilger with whom I am personally acquainted (or proved to me
on the basis of satisfactory evidence), and who, upon oath, acknowledged
himself to be President (or other officer authorized to execute the
instrument) COURTRY TONITE THEATRE, L.L.C., the within named bargainor, a
Tennessee limited liability company, and that he as such President executed
the foregoing instrument for the purpose therein contained, by signing the
name of the limited liability company by himself as President.
Witness my hand, at office, this 24 day of September, 1996.
/s/ ANDREA R. GARCIA
------------------------------
Notary Public
My Commission Expires: 6/6/2000
-------------------------
21
<PAGE>
UNCONDITIONAL GUARANTY OF LEASE
Casino Resource Corporation ("CRC"), a Minnesota corporation, is the sole
owner of CRC of Tennessee, Inc., a Tennessee corporation ("CRCT"). CRCT is a
Member of Country Tonite Theatre, L.L.C., a Tennessee limited liability
company ("Lessee"), and CRCT owns sixty percent (60%) of the membership
interests of the Lessee. As an inducement for the execution of the foregoing
Lease Agreement (the "Lease"), and as an additional consideration to J.
MacDonald Burkhart, M.D. ("Lessor"), CRC covenants and agrees as follows:
1. CRC hereby unconditionally and absolutely guarantees the prompt and
full payment of Lessee's rental obligations described in paragraph 3
of the Lease Agreement but only to the extent of Thirty Thousand
Dollars ($30,000.00) per month and only through the initial five (5)
year term of the Lease.
2. CRC agrees that this Guaranty may be enforced by Lessor without first
resorting to or exhausting any other remedy, security, or collateral.
Lessor shall provide notice to CRC of any nonpayment of rent and
within five (5) days, CRC shall pay to Lessor Thirty Thousand Dollars
($30,000.00) for such month less any partial rental payments for such
month timely paid by Lessee. CRC agrees that its obligations pursuant
to this Guaranty shall not be impaired, modified, changed, released or
limited in any manner whatsoever by any impairment, modification,
change, release, or limitation of the liability of Lessee or its
estate in bankruptcy (including without limitation any rejection of
the Lease by Lessee or by any trustee or receiver in bankruptcy
resulting from the operation of any present or future provisions of
the United States Bankruptcy Code or any similar statute or decision
of any court.) The liability of CRC shall not be affected by any
repossession of the Leased Property by Lessor.
3. CRC agrees that in the event this Guaranty is placed in the hands of
an attorney for enforcement, CRC shall reimburse Lessor for any and
all expenses incurred, including reasonable attorney's fees and
litigation expenses.
4. CRC agrees that this Guaranty shall inure to the benefit of and may be
enforced by Lessor, his successors and assigns, and any mortgagee(s)
of the Leased Property, and shall be binding and enforceable against
CRC and CRC's successors, and assigns.
5. The execution of this Guaranty by John J. Pilger, President of CRC,
has been duly authorized by an appropriate action of the Board of
Directors of CRC but no director, officer, or employee of CRC shall
have any personal liability for this Guaranty. A copy of the
corporate resolution authorizing the execution of this Guaranty shall
be promptly delivered to Lessee.
6. This Guaranty contains the entire agreement between the parties hereto
with respect to the transactions contemplated by this Guaranty and
supersedes all prior written or unwritten arrangements or
understandings with respect thereto. This Guaranty shall be governed
by and in accordance with the substantive, internal laws of the State
of Tennessee. CRC hereby submits to the jurisdiction and venue
<PAGE>
of the state and federal courts located in Knox County, Tennessee. The
parties agree they have jointly prepared this Guaranty. This Guaranty
may not be modified, amended or revoked, except in a writing signed by
all parties. This provision may not be orally waived.
IN WITNESS WHEREOF, CRC has executed this Guaranty this 24 day of September,
1996.
CASINO RESOURCE CORPORATION, a
Minnesota corporation
By:/s/ JOHN J. PILGER
---------------------------------
John J. Pilger
Its: President
STATE OF MISSISSIPPI
----------------
COUNTY OF HARRISON
---------------
Before me, a Notary Public of the state and county aforesaid, personally
appeared JOHN J. PILGER, with whom I am personally acquainted (or proved to
me on the basis of satisfactory evidence), and who, upon oath, acknowledged
himself to be President (or other officer authorized to execute the
instrument) of CASINO RESOURCE CORPORATION, the within named bargainor, a
corporation, and that he as such President, executed the foregoing instrument
for the purpose therein contained, by signing the name of the corporation by
himself as President.
Witness my hand and seal, at office, this 24 day of September, 1996.
/s/ ANDREA R. GARCIA
--------------------------------------
Notary Public
My Commission Expires: 6/6/2000
----------------------
<PAGE>
EXHIBIT A
The "Premises" is a portion of the real property owned by Lessor. The entire
tract owned by Lessor is more particularly described on EXHIBIT A-1 attached
hereto. The "Premises" is that portion improved as a theater building and the
parking therefor. The shaded area on the map attached hereto as EXHIBIT A-2
is an approximate depiction of the Premises.
<PAGE>
EXHIBIT A-1
Diagram of Property Boundary
<PAGE>
SITUATED in the Fifth (5th) Civil District of Sevier County, Tennessee, and
within the corporate limits of the City of Pigeon Forge, Tennessee, and being
a 10.165 acre tract located on the eastern side of U. S. Highway 441, and
being more particularly bounded and described as follows:
BEGINNING at an iron pin set in the eastern right-of-way of U. S. Highway
441, said iron pin being 300 feet, more or less, in a northerly direction
from the intersection of the eastern right-of-way of U. S. Highway 441 with
the northern right-of-way of Sugar Hollow Road; thence with the right-of-way
of U. S. Highway 441 North 00 deg. 42 min. 48 sec. East passing an iron pin
at 55.38 feet, a total distance of 178.16 feet to an iron pin marking the
southwestern corner of Lot 7 of Pine Grove Plaza (Map Book 21, Page 173);
thence leaving the right-of-way of U. S. Highway 441 and with the line of
Pine Grove Plaza the following two calls and distances: North 67 deg. 32 min.
43 sec. East 829.56 feet to an iron pin; North 48 deg. 13 min. 38 sec. East
169.07 feet to an iron pin, corner to Laurel Manor, Inc. (Deed Book 282, Page
15); thence with the line of Laurel Manor, Inc. the following two calls and
distances: South 54 deg. 40 min. 24 sec. East 349.54 feet to an iron pin;
North 43 deg. 24 min. 19 sec. East 247.69 feet to an iron pin, corner to John
and Lisa Rauhuff (Deed Book 132, Page 88); thence with the line of Rauhuff
and a fence the following two calls and distances: South 56 deg. 20 min. 12
sec. East 136.66 feet to an iron pin; South 51 deg. 15 min. 57 sec. East
21.10 feet to an iron pin, corner to R. DeWitt Shelton, et al. (Deed Book
522, Page 642); thence with the line of R. DeWitt Shelton, et al., the
following six calls and distances: South 40 deg. 26 min. 51 sec. West 621.24
feet to an iron pin; thence running with the arc in a curve to the left in a
circle having a radius of 332.34 feet, a tangent of 60.39 feet, a chord call
and distance of North 83 deg. 26 min. 38 sec. West 118.84 feet to an iron
pin; thence South 86 deg. 15 min. 24 sec. West 97.00 feet to an iron pin;
thence running with the arc in a curve to the right in a circle having a
radius of 184.40 feet, a tangent of 76.99 feet, a chord call and distance of
North 71 deg. 04 min. 59 sec. West 142.09 feet to an iron pin; thence North
48 deg. 25 min. 23 sec. West 20.64 feet to an iron pin; thence running with
the arc in a curve to the left in a circle having a radius of 75.13 feet, a
tangent of 28.51 feet, a chord call and distance of North 69 deg. 12 min. 15
sec. West 53.31 feet to an iron pin, corner to BGA Associates (Deed Book 485,
Page 177) ; thence with the line of BGA Associates the following two calls
and distances: North 89 deg. 59 min. 25 sec. West 425.32 feet to an iron pin;
South 65 deg. 12 min. 05 sec. West 261.88 feet to an iron pin in the
right-of-way of U. S. Highway 441, the POINT OF BEGINNING, as shown by survey
of Dean A. Orr, RLS #78O, ETE Consulting Engineering, Inc., 311 Oak Ridge
Turnpike, Oak Ridge, Tennessee 37830, dated April 28, 1995, bearing Job No.
94-398-11.
THERE IS SPECIFICALLY RESERVED from the above-described property an exclusive
sign easement which is reserved by the First Parties named herein for the use
and benefit of the First Parties, their heirs, devisees and assigns over the
following described parcel of property:
SITUATED in the Fifth (5th) Civil District of Sevier County, Tennessee, and
within the corporate limits of the City of Pigeon Forge, Tennessee, being
located on the eastern side of U. S. Highway 441, and being more particularly
described as follows:
TO FIND THE POINT OF BEGINNING start at an iron pin set in the eastern
right-of-way of U. S. Highway 441, said iron pin being 300 feet, more or
less, in a northerly direction from the intersection of the eastern
right-of-way of U. S. Highway 441 with the northern right-of-way of Sugar
Hollow Road; thence running with the eastern right-of-way of U. S. Highway
441 and the
<PAGE>
western terminus of a 50 foot joint permanent non-exclusive easement North 00
deg. 42 min. 48 sec. East 55.38 feet to an iron pin lying in the northern
line of said 50 foot joint permanent non-exclusive easement, said iron pin
marking the place of beginning of the sign easement area; thence leaving the
right-of-way of U. S. Highway 441 and with the northern line of a 50 foot
joint permanent nonexclusive easement North 65 deg. 12 min. 05 sec. East
20.00 feet, more or less, to a point; thence leaving the rigbt-of-way of a 50
foot joint permanent non-exclusive easement North 00 deg. 42 min. 48 sec.
East 20.00 feet, more or less, to a point; thence South 65 deg. 12 min. 05
sec. West 20.00 feet, more or less, to a point in the eastern right-of-way of
U. S. Highway 441; thence with the eastern right-of-way of U. S. Highway 441
South 00 deg. 42 min. 48 sec. West 20.00 feet, more or less, to an iron pin,
the POINT OF BEGINNING, as shown on survey of Dean A. Orr, RLS #780, ETE
Consulting Engineering, Inc., 311 Oak Ridge Turnpike, Oak Ridge, Tennessee
37830, dated April 28, 1995, bearing Job No. 94-398-11.
The Second Party by joining in the execution of this Correction Warranty
Deed, does hereby grant, bargain, sell and convey unto First Parties the
exclusive sign easement aforementioned, which sign easement was erroneously
omitted from that prior deed of record in Deed Book 522, Page 646, in the
Sevier County Register's office. The spouse of Second Party, Mary N.
Burkhart, joins in the execution of this Correction Warranty Deed for the
sole purpose of conveying any marital interest which she may have in the
above-described property, to First Parties for the purpose of said sign
easement.
THERE IS SPECIFICALLY RESERVED by the First Parties named herein a 50 foot
wide joint permanent non-exclusive easement for ingress, egress and utilities
running over, across and under the above-described 10.165 acre tract of
property, said 50 foot wide joint permanent nonexclusive easement being more
particularly bounded and described as follows:
SITUATED in the Fifth (5th) Civil District of Sevier County, Tennessee, and
within the corporate limits of the City of Pigeon Forge, Tennessee, and being
more particularly bounded and described as follows:
BEGINNING at an iron pin in the eastern right-of-way of U. S. Highway 441,
said iron pin being located 300 feet, more or less, in a northerly direction
from the intersection of the eastern right-of-way of U. S. Highway 441 with
the northern right-of-way of Sugar Hollow Road; thence with the right-of-way
of U. S. Highway 441 North 00 deg. 42 min. 48 sec. East 55.38 feet to an iron
pin; thence leaving the right-of-way of U. S. Highway 441 and running along
the northern right-of-way line of the 50 foot wide joint permanent
non-exclusive easement the following calls and distances: North 65 deg. 12
min. 05 sec. East 249.02 feet to an iron pin; thence South 89 deg. 59 min. 25
sec. East 436.32 feet to an iron pin; thence running with an arc in a curve
to the right in a circle having a radius of 125.13 feet, a tangent of 47.49
feet, a chord call and distance of South 69 deg. 12 min. 15 sec. East 88.79
feet to an iron pin; thence South 48 deg. 25 min. 23 sec. East 20.64 feet to
an iron pin; thence running with an arc in a curve to the left in a circle
having a radius of 134.40 feet, a tangent of 56.11 feet, a chord call and
distance of South 71 deg. 04 min. 59 sec. East 103.56 feet to an iron pin;
thence North 86 deg. 15 min. 24 sec. East 97.00 feet to an iron pin; thence
running with the arc in a curve to the right in a circle having a radius of
382.34 feet, a tangent of 80.69 feet, a chord call and distance of South 81
deg. 49 min. 36 sec. East 157.90 feet to an iron pin in the line of R. DeWitt
Shelton, et al. (Deed Book 522, Page 642); thence with the line of R. DeWitt
Shelton, et al. the following six calls and distances: South 40 deg. 26 min.
51 sec. West 53.90 feet to an iron pin; thence running with the arc in a
curve to
<PAGE>
the left in a circle having a radius of 332.34 feet, a tangent of
60.39 feet, a chord call and distance of North 83 deg. 26 min. 38 sec. West
118.84 feet to an iron pin; thence South 86 deg. 15 min. 24 sec. West 97.00
feet to an iron pin; thence running with an arc in a curve to the right in a
circle having a radius of 184.40 feet, a tangent of 76.99 feet, a chord call
and distance of North 71 deg. 04 min. 59 sec. West 142.09 feet to an iron
pin; thence North 48 deg. 25 min. 23 sec. West 20.64 feet to an iron pin;
thence running with an arc in a curve to the left in a circle having a radius
of 75.13 feet, a tangent of 28.51 feet, a chord call and distance of North 69
deg. 12 min. 15 sec. West 53.31 feet to an iron pin, corner to BGA Associates
(Deed Book 485, Page 177); thence with the line of BGA Associates the
following two calls and distances: North 89 deg. 59 min. 25 sec. West 425.32
feet to an iron pin; thence South 65 deg. 12 min. 05 sec. West 261.88 feet to
an iron pin in the eastern right-of-way line of U. S. Highway 441, the POINT
AND PLACE OF BEGINNING, as shown by survey of Dean A. Orr, RLS #780, ETE
Consulting Engineering, Inc., 311 Oak Ridge Turnpike, Oak Ridge, Tennessee
37830, dated April 28, 1995, bearing Job No. 94-398-11.
The Second Party named herein joins in the execution of this deed to grant,
bargain, sell and convey to First Parties, their heirs, devisees and assigns,
a joint permanent non-exclusive easement for ingress, egress and utilities
over, across and under the aforedescribed easement area so as to correct the
description of the easement area previously described in Deed Book 522, Page
646, in the Sevier County Register's Office. The easement rights reserved to
First Parties named herein are non-exclusive rights and the Second Party, his
heirs, devisees and assigns shall have the joint use of said easement area
for the purpose of ingress, egress and utilities.
There is further conveyed with the 10.165 acre tract property described above
and there is specifically reserved herein an additional joint permanent
non-exclusive easement for ingress, egress and utilities running over, across
and under the following described property:
SITUATED in the Fifth (5th) Civil District of Sevier County, Tennessee, and
within the corporate limits of the City of Pigeon Forge, Tennessee, and being
a 50 foot wide right-of-way immediately north of and running parallel with
the following described line, which line marks the southern right-of-way line
for said 50 foot wide joint permanent non-exclusive easement for ingress,
egress and utilities:
TO FIND THE POINT OF BEGINNING start at an iron pin set in the eastern
right-of-way line of U. S. Highway 441, said iron pin being 300 feet, more or
less, in a northerly direction from the intersection of the eastern
right-of-way of U. S. Highway 441 with the northern right-of-way of Sugar
Hollow Road and said iron pin being corner to BGA Associates (Deed Book 485,
Page 177); thence running with the line of BGA Associates the following two
calls and distances: North 65 deg. 12 min. 05 sec. East 261.88 feet to an
iron pin; thence South 89 deg. 59 min. 25 sec. East 425.32 feet to an iron
pin, corner to R. DeWitt Shelton, et al.; thence with the line of Shelton, et
al. the following five calls and distances: Running with the arc in a curve
to the right in a circle having a radius of 75.131 feet, a tangent of 28.513
feet, a chord call and distance of South 69 deg. 12 min. 18 sec. East 53.315
feet to an iron pin; thence South 48 deg. 25 min. 23 sec. East 20.64 feet to
an iron pin; thence running with the arc in a curve to the left in a circle
having a radius of 184.400 feet, a tangent of 76.985 feet, a chord call and
distance of South 71 deg. 05 min. 00 sec. East 142.085 feet to an iron pin;
thence North 86 deg. 15 min. 24 sec. East 97.00 feet to an iron pin; thence
running with the arc in a curve to the right in a circle having a radius of
332.340 feet, a tangent of 67.162 feet, a chord call and distance of South 82
deg. 19
<PAGE>
min. 07 sec. East 131.662 feet to an iron pin, the POINT OF BEGINNING; thence
running with the arc in a curve to the right in a circle having a radius of
345.332 feet, a tangent of 96.499 feet, a chord call and distance of South 55
deg. 16 min. 53 sec. East 185.877 feet to an iron pin; thence South 39 deg.
40 min. 08 sec. East 193.90 feet to an iron pin, being corner to property of
Barbara Mockus, said iron pin marking the terminus of the easement area and
being according to the survey of Ronnie L. Sims, Tennessee Registered Land
Surveyor No. 683, 1020 Topside Drive, Sevierville, Tennessee 37862, dated
December 20, 1994 and last revised on April 19, 1995.
There is further conveyed with the 10.165 acre tract described above and
specifically reserved a joint permanent non-exclusive easement for ingress,
egress and utilities running over, across and under the following described
parcel of property:
SITUATED in the Fifth (5th) Civil District of Sevier County, Tennessee, and
within the corporate limits of the city of Pigeon Forge, Tennessee, beginning
at an iron pin marking the southeastern terminus of the aforementioned
easement described above, and which iron pin lies in the southwestern
right-of-way line of the 50 foot wide joint permanent non-exclusive easement
area; thence leaving said point and place of beginning and running with the
southern terminus of the 50 foot wide joint permanent non-exclusive easement
for ingress, egress and utilities aforedescribed, North 50 deg. 19 min. 51
sec. East 50.00 feet to an iron pin; thence South 39 deg. 40 min. 08 sec.
East 132.93 feet to an iron pin; thence North 79 deg. 28 min. 09 sec. East
110.87 feet to an iron pin; thence running with the arc in a curve to the
right in a circle having a radius of 50.01 feet, a tangent of 39.94 feet, an
arc distance of 67.40 feet to an iron pin lying in the northern right-of-way
line of Sugar Hollow Road; thence running with the northern right-of-way line
of Sugar Hollow Road and running with the arc in a curve to the left in a
circle having a radius of 498.40 feet, a tangent of 25.03 feet, an arc
distance of 50.03 feet to an iron pin, being corner to property of C. B.
McCarter (Plat Book 5, Page 72); thence running with the line of MCCarter
South 79 deg. 28 min. 09 sec. West 140.25 feet to an iron pin, being corner
to property of Barbara Mockus; thence running with the line of Barbara Mockus
North 39 deg. 40 min. 08 sec. West 162.30 feet to an iron pin, marking the
POINT AND PLACE OF BEGINNING, and being according to the survey of Ronnie L.
Sims, Tennessee Registered Land Surveyor No. 683, 1020 Topside Drive,
Sevierville, Tennessee 37862, dated December 20, 1994 and last revised on
April 19, 1995.
BEING part of the same property conveyed to R. DeWitt Shelton and Lela Evelyn
Ogle by Quit Claim Deed from R. DeWitt Shelton, Trustee, dated June 16, 1994,
of record in Deed Book 522, Page 642, in the Sevier County Register's Office.
<PAGE>
EXHIBIT A-2
Diagram of Property Boundary
<PAGE>
EXHIBIT B
Furniture, equipment, and fixtures
<PAGE>
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------
TAKEN BY: Brad Hinchey TITLE Con. Manager
DEPARTMENT: Concessions DATE: 2-26-96
- --------------------------------------------------------------------------------------------
ITEM DESCRIPTION UNITS COST TOTAL UNIT
PER COST RETAIL
UNIT PRICE
- --------------------------------------------------------------------------------------------
Popcorn Popper Serial # 1
EP-1412781A
- --------------------------------------------------------------------------------------------
Popcorn Popper Serial # 1
EP-1412768A
- --------------------------------------------------------------------------------------------
Popcorn Warmer Serial # 1
CW-3265
- --------------------------------------------------------------------------------------------
TEC Cash Register Serial # 1
5D201659
- --------------------------------------------------------------------------------------------
TEC Cash Register Serial # 1
5D201700
- --------------------------------------------------------------------------------------------
TEC Cash Register Serial # 1
5D201645
- --------------------------------------------------------------------------------------------
TEC Cash Register Serial # 1
5H200668
- --------------------------------------------------------------------------------------------
TEC Cash Register Serial # 1
4S200153
- --------------------------------------------------------------------------------------------
Pretzel Cooker Serial # 1
PWH-00271
- --------------------------------------------------------------------------------------------
Prestzel Cooker Serial # 1
PWH-00287
- --------------------------------------------------------------------------------------------
Hot Dog Cooker Serial # 1
9505010389
- --------------------------------------------------------------------------------------------
Hot Dog Cooker Serial # 1
9505010390
- --------------------------------------------------------------------------------------------
Microwave Serial # 1
139972
- --------------------------------------------------------------------------------------------
Cookie Oven Serial # 1
3915
- --------------------------------------------------------------------------------------------
Bread Warmer Serial # 1
45903654
- --------------------------------------------------------------------------------------------
Bread Warmer Serial # 1
45903655
- --------------------------------------------------------------------------------------------
Standing Freezer Serial # 1
951070088
- --------------------------------------------------------------------------------------------
Standing Freezer Serial # 1
951070488
- --------------------------------------------------------------------------------------------
3-Tub Sink Serial # 1
94-3-54
- --------------------------------------------------------------------------------------------
Prep Table Stainless Steel 1
- --------------------------------------------------------------------------------------------
Shelves Shelving Units 7 Steel
Shelves
- --------------------------------------------------------------------------------------------
Tables Concession Area 15
- --------------------------------------------------------------------------------------------
??? Steam-Brown 4
???
- --------------------------------------------------------------------------------------------
Small Chopper Onion Chopper 1
- --------------------------------------------------------------------------------------------
Bun ??? Coffee maker 1
- --------------------------------------------------------------------------------------------
??? Cholate Choc-o-jet 1
Maker
- --------------------------------------------------------------------------------------------
Cappaccino Maker ???/Cappaccino 1
- --------------------------------------------------------------------------------------------
Coca Cola Clock Quartz Pewndulum 1
- --------------------------------------------------------------------------------------------
*NOTE: Most of the items listed herein are served by vendors (i.e. Cola)
<PAGE>
- --------------------------------------------------------------------------------------------
TAKEN BY: Ted Burkhart TITLE
DEPARTMENT: Concessions DATE:
- --------------------------------------------------------------------------------------------
ITEM DESCRIPTION UNITS COST TOTAL UNIT
PER COST RETAIL
UNIT PRICE
- --------------------------------------------------------------------------------------------
Desk ??? 90 degree 1
- --------------------------------------------------------------------------------------------
Computer Monitor 1 #14516
Harddrive 1 #BCS1066
Keyboard 1
#59522202931
- --------------------------------------------------------------------------------------------
Chair APC ??? 1
Roll-maroon 1
gray-desk
- --------------------------------------------------------------------------------------------
Calculator Sharp 1
EL-71926
- --------------------------------------------------------------------------------------------
ATT Phone MLS-18D 1
- --------------------------------------------------------------------------------------------
Refrigerator 1 Coke Cola 1
sld door (glass)
- --------------------------------------------------------------------------------------------
Self Serve System 64 nit. stack 1
sugar-creamer
stirs & ***
- --------------------------------------------------------------------------------------------
Rack Potato Chip 2
- --------------------------------------------------------------------------------------------
Dispenser Stainless- 1
Mustard Catsup 3 center onion-
pepper-relish
- --------------------------------------------------------------------------------------------
??? Audio Central S/N 3050 1
???
- --------------------------------------------------------------------------------------------
??? ??? DN514 2
- --------------------------------------------------------------------------------------------
Composer Audio Module 5
Interactive MDX 2100
Dynamics ???
- --------------------------------------------------------------------------------------------
??? Equalizer YDC 2006 2
Yamaha
- --------------------------------------------------------------------------------------------
Sonic Maximizer BBE-862 2
<PAGE>
- --------------------------------------------------------------------------------------------
ITEM DESCRIPTION UNITS COST TOTAL UNIT
PER COST RETAIL
UNIT PRICE
- --------------------------------------------------------------------------------------------
Clock Spartus 1
Battery/plug
- --------------------------------------------------------------------------------------------
Chairs High/gray ??? 3
- --------------------------------------------------------------------------------------------
5280 - Wearer
Metal Scoops - 4
<PAGE>
- --------------------------------------------------------------------------------------------
TAKEN BY: Joy Presley TITLE:
DEPARTMENT: Mail Center/??? DATE:
- --------------------------------------------------------------------------------------------
ITEM DESCRIPTION UNITS COST TOTAL UNIT
PER COST RETAIL
UNIT PRICE
- --------------------------------------------------------------------------------------------
1 UPS Scale
- --------------------------------------------------------------------------------------------
1 Tom ???
T1-5022
Calculator
- --------------------------------------------------------------------------------------------
1 8510 Postage
Weight Machine
- --------------------------------------------------------------------------------------------
1 Neopost mail meter
- --------------------------------------------------------------------------------------------
1 mail box system
- --------------------------------------------------------------------------------------------
1 letter tray
- --------------------------------------------------------------------------------------------
1 postage meter
carrier
- --------------------------------------------------------------------------------------------
wood/??? chairs maroon chairs w/ 7 maroon/ 2
pattern, wheels wood office
door
- --------------------------------------------------------------------------------------------
desk chairs swivel maroon and 3
gray, adjustable
- --------------------------------------------------------------------------------------------
cabinet 4 drawer file 1
cabinet
- --------------------------------------------------------------------------------------------
??? white ??? 5' tall 1
w/paper
- --------------------------------------------------------------------------------------------
pc 486, monitor, ??? 1 #J9509?234 #RCS1064-
printer, keyboard, harddrive
APC 280 hookup #USFB168196-
- --------------------------------------------------------------------------------------------
Desk/wall Wood (maroon) 1
system desk/credenza
w/shelves
- --------------------------------------------------------------------------------------------
Side table table for ??? (used 1
ok'd printer)
- --------------------------------------------------------------------------------------------
??? ??? 1
- --------------------------------------------------------------------------------------------
PC monitor- 1 ???
keyboard- 1 ???
harddrive 1 ???
APC280 1 ???
Printer 1 ???
- --------------------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------------------
INVENTORY SHEET
PAGE OF
--- ---
TAKEN BY JOHN TAYLOR TITLE
----------------------------- -----------------------------------------
DEPARTMENT DATE
---------------------------- -----------------------------------------
- --------------------------------------------------------------------------------------------
ITEM DESCRIPTION UNITS COST TOTAL UNIT
PER COST RETAIL
UNIT PRICE
- --------------------------------------------------------------------------------------------
Equalizer sraphic klark 2
teknik dh360
- --------------------------------------------------------------------------------------------
Remote Controller 1
Lexicon HRC HiDi
Remote 1838/
- --------------------------------------------------------------------------------------------
Receiver Constream 1
Audio DR200 Digital
- --------------------------------------------------------------------------------------------
Casset JVCTDW217 1
Deck Double
- --------------------------------------------------------------------------------------------
Furman Power 2
PL8 Conditioners,
Light Module
- --------------------------------------------------------------------------------------------
PROCO PM 148 3
- --------------------------------------------------------------------------------------------
Auto JVCXLF108 1
Changer Compact Disc
- --------------------------------------------------------------------------------------------
Converter A7-Hi Density 2
Sony Linear A/B B/A
- --------------------------------------------------------------------------------------------
Pro Audio Alesis Adat 2
Receiver 8 Tract
- --------------------------------------------------------------------------------------------
Remote Alesis-BRC 1
Control ADAT Hasters
- --------------------------------------------------------------------------------------------
Furman Conditioner AC
Power Line Reg
- --------------------------------------------------------------------------------------------
Furman Power Model RA 117 1
- --------------------------------------------------------------------------------------------
Hi-Current 1
Linear Power
Supply JBL
SSG1
- --------------------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------------------
INVENTORY SHEET
PAGE OF
--- ---
TAKEN BY JOHN TAYLOR TITLE
----------------------------- -----------------------------------------
DEPARTMENT DATE
---------------------------- -----------------------------------------
- --------------------------------------------------------------------------------------------
Sound Craft 1 (w/one
Vienna II power
supply)
- --------------------------------------------------------------------------------------------
Avolites 1
Diamond II
- --------------------------------------------------------------------------------------------
Fusinon Robotics for 3
EPT-SE Camera
10D
- --------------------------------------------------------------------------------------------
Cameras JVC - 3CCD KY 3
27B
- --------------------------------------------------------------------------------------------
TOTAL COST OF PAGE OF $
--- ---
- --------------------------------------------------------------------------------------------
Yammaha Professional multi effect processor SPX990 (4)
Lexicon LXP-15II Digital effects processor (1)
<PAGE>
- --------------------------------------------------------------------------------------------
INVENTORY SHEET
PAGE OF
--- ---
TAKEN BY JOHN TAYLOR TITLE
----------------------------- -----------------------------------------
DEPARTMENT DATE
---------------------------- -----------------------------------------
- --------------------------------------------------------------------------------------------
ITEM DESCRIPTION UNITS COST TOTAL UNIT
PER COST RETAIL
UNIT PRICE
- --------------------------------------------------------------------------------------------
YELLOW WET flax 1
- --------------------------------------------------------------------------------------------
red/black shop vac 1.25 h.p. 1
- --------------------------------------------------------------------------------------------
white hand towels 20
- --------------------------------------------------------------------------------------------
blue/red Ryobi model IDZ21R 1
SS 95332
- --------------------------------------------------------------------------------------------
Emergency lint system 1
Quantum Powered
- --------------------------------------------------------------------------------------------
Safco-Red Dolly 1
- --------------------------------------------------------------------------------------------
Dust scop black 1
- --------------------------------------------------------------------------------------------
Philips reflector 1 case 300
light sign
- --------------------------------------------------------------------------------------------
philips-fluorescent 2 cases
long bulbs
- --------------------------------------------------------------------------------------------
150 watts hako-reflector 8 bulbs
lamps
- --------------------------------------------------------------------------------------------
88009 sylvania 6 bulbs
reflector lights
- --------------------------------------------------------------------------------------------
25 watt hako 8 bulbs
incandescent
lamps
- --------------------------------------------------------------------------------------------
sylvania par lamps 1 bulb
- --------------------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------------------
INVENTORY SHEET
PAGE OF
--- ---
TAKEN BY JOHN TAYLOR TITLE
----------------------------- -----------------------------------------
DEPARTMENT DATE
---------------------------- -----------------------------------------
- --------------------------------------------------------------------------------------------
ITEM DESCRIPTION UNITS COST TOTAL UNIT
PER COST RETAIL
UNIT PRICE
- --------------------------------------------------------------------------------------------
chiller juice 3 4 liter 1 20 lter
molecular fluid water base
hass fluid
- --------------------------------------------------------------------------------------------
TOTAL COST OF PAGE OF $
--- ---
- --------------------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------------------
INVENTORY SHEET
PAGE OF
--- ---
TAKEN BY JOHN TAYLOR TITLE
----------------------------- -----------------------------------------
DEPARTMENT STAGE CLOSET DATE
---------------------------- -----------------------------------------
- --------------------------------------------------------------------------------------------
ITEM DESCRIPTION UNITS COST TOTAL UNIT
PER COST RETAIL
UNIT PRICE
- --------------------------------------------------------------------------------------------
concrete stone 5 cans
- --------------------------------------------------------------------------------------------
floor lamp 1
adjustable neck
yellow
- --------------------------------------------------------------------------------------------
11 gallon air 1
compressor
- --------------------------------------------------------------------------------------------
tornado-buffer 1
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------------------
INVENTORY SHEET
PAGE OF
--- ---
TAKEN BY JOHN TAYLOR TITLE
----------------------------- -----------------------------------------
DEPARTMENT DATE
---------------------------- -----------------------------------------
- --------------------------------------------------------------------------------------------
ITEM DESCRIPTION UNITS COST TOTAL UNIT
PER COST RETAIL
UNIT PRICE
- --------------------------------------------------------------------------------------------
Shure SM91
Indirect
condensed MK
- --------------------------------------------------------------------------------------------
Shure 1
- --------------------------------------------------------------------------------------------
Shure LP-1 4 (Sm98
Codenser Preamps)
Microphone
preamp
- --------------------------------------------------------------------------------------------
PAR 64Q FFP 12
- --------------------------------------------------------------------------------------------
PAR 64Q NSP 6
- --------------------------------------------------------------------------------------------
Pyropak I
#24350
- --------------------------------------------------------------------------------------------
Pyropak II
#3265
- --------------------------------------------------------------------------------------------
Stage Gerb 10x12 Gold 6 cans
- --------------------------------------------------------------------------------------------
Stage Gerb 10x12 Silver 8 cans
- --------------------------------------------------------------------------------------------
Air Burst Flash Power As 2.5 Box
- --------------------------------------------------------------------------------------------
Air Burst Flash Power Bs 2.5 Box
- --------------------------------------------------------------------------------------------
Gerb Fan 3 Prong Fan
- --------------------------------------------------------------------------------------------
New 4
Used 4
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------------------
INVENTORY SHEET
PAGE OF
--- ---
TAKEN BY JOHN TAYLOR TITLE
----------------------------- -----------------------------------------
DEPARTMENT DATE
---------------------------- -----------------------------------------
- --------------------------------------------------------------------------------------------
ITEM DESCRIPTION UNITS COST TOTAL UNIT
PER COST RETAIL
UNIT PRICE
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------------------
INVENTORY SHEET
PAGE OF
--- ---
TAKEN BY JOHN TAYLOR TITLE
----------------------------- -----------------------------------------
DEPARTMENT DATE
---------------------------- -----------------------------------------
- --------------------------------------------------------------------------------------------
ITEM DESCRIPTION UNITS COST TOTAL UNIT
PER COST RETAIL
UNIT PRICE
- --------------------------------------------------------------------------------------------
White back 65' 1
drop
- --------------------------------------------------------------------------------------------
Flag American 1
- --------------------------------------------------------------------------------------------
Wood White Slats 5 multi
- --------------------------------------------------------------------------------------------
Curtains Black legs 10
- --------------------------------------------------------------------------------------------
65' Border Black 3
- --------------------------------------------------------------------------------------------
65' Main-Red 1
- --------------------------------------------------------------------------------------------
65' Main-Red 1
- --------------------------------------------------------------------------------------------
Misc folding gray 5
Chairs
- --------------------------------------------------------------------------------------------
chairs folding brown 2
- --------------------------------------------------------------------------------------------
folding 5
- --------------------------------------------------------------------------------------------
white plastic 3
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
TOTAL COST OF PAGE OF $
--- ---
- --------------------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------------------
INVENTORY SHEET
PAGE OF
--- ---
TAKEN BY JOHN TAYLOR TITLE
----------------------------- -----------------------------------------
DEPARTMENT DATE
---------------------------- -----------------------------------------
- --------------------------------------------------------------------------------------------
ITEM DESCRIPTION UNITS COST TOTAL UNIT
PER COST RETAIL
UNIT PRICE
- --------------------------------------------------------------------------------------------
Equalizer Klark Tenik 4
Graphic
- --------------------------------------------------------------------------------------------
DN 3601 16646
DN 3601 16645
- --------------------------------------------------------------------------------------------
DN 3601 161
DN 3601
- --------------------------------------------------------------------------------------------
FURMAN Power 1
Coditioner and
Light Module
- --------------------------------------------------------------------------------------------
Composer Dynamic
Processor
- --------------------------------------------------------------------------------------------
T80740004 1
Model
- --------------------------------------------------------------------------------------------
Shore SC4 Receiver 1
86DD45G4
- --------------------------------------------------------------------------------------------
Shore WA 404
Antenna Power
- --------------------------------------------------------------------------------------------
Distributor 2
System
- --------------------------------------------------------------------------------------------
Multigate 1400 Interactive 1
Module Guad 51186510
- --------------------------------------------------------------------------------------------
Crown Macro Tech 1
36x12
352566
- --------------------------------------------------------------------------------------------
Crossover TDM24CX2 1
Stireo
- --------------------------------------------------------------------------------------------
Pigtail TOA Processor 5
- --------------------------------------------------------------------------------------------
Crown Macro 19
Tech 2400
- --------------------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------------------
INVENTORY SHEET
PAGE OF
--- ---
TAKEN BY JOHN TAYLOR TITLE
----------------------------- -----------------------------------------
DEPARTMENT DATE
---------------------------- -----------------------------------------
- --------------------------------------------------------------------------------------------
ITEM DESCRIPTION UNITS COST TOTAL UNIT
PER COST RETAIL
UNIT PRICE
- --------------------------------------------------------------------------------------------
TDM Quad 2
Crossover 2
- --------------------------------------------------------------------------------------------
Horizon Microphone 1
in put Box
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
TOTAL COST OF PAGE OF $
--- ---
- --------------------------------------------------------------------------------------------
AWP 300 Personnel Lift1
<PAGE>
- --------------------------------------------------------------------------------------------
INVENTORY SHEET
PAGE OF
--- ---
TAKEN BY JOHN TAYLOR TITLE
----------------------------- -----------------------------------------
DEPARTMENT DATE
---------------------------- -----------------------------------------
- --------------------------------------------------------------------------------------------
ITEM DESCRIPTION UNITS COST TOTAL UNIT
PER COST RETAIL
UNIT PRICE
- --------------------------------------------------------------------------------------------
Sound Sound 10'
Cord
- --------------------------------------------------------------------------------------------
Sound 50'
- --------------------------------------------------------------------------------------------
1 Con-Cord 100'
- --------------------------------------------------------------------------------------------
1 electric Con 47
Lights
- --------------------------------------------------------------------------------------------
2 Elec-can 36
lights
- --------------------------------------------------------------------------------------------
Cybers 4
- --------------------------------------------------------------------------------------------
3 Elec Can 33
- --------------------------------------------------------------------------------------------
Cyber 2
- --------------------------------------------------------------------------------------------
4 Elec-can 44
- --------------------------------------------------------------------------------------------
Cyber 2
- --------------------------------------------------------------------------------------------
5 Elec-Can 32 8 Lekos
6 cyc-lights
(4 each)
- --------------------------------------------------------------------------------------------
Floor Cyber 4
- --------------------------------------------------------------------------------------------
Floorcans 24
- --------------------------------------------------------------------------------------------
floor 4-light 6
clusters
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
TOTAL COST OF PAGE OF $
--- ---
- --------------------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------------------
INVENTORY SHEET
PAGE OF
--- ---
TAKEN BY JOHN TAYLOR TITLE
----------------------------- -----------------------------------------
DEPARTMENT DATE
---------------------------- -----------------------------------------
- --------------------------------------------------------------------------------------------
ITEM DESCRIPTION UNITS COST TOTAL UNIT
PER COST RETAIL
UNIT PRICE
- --------------------------------------------------------------------------------------------
Misc. Gray Camera 3
- --------------------------------------------------------------------------------------------
Yellow 25'
Extension cord
- --------------------------------------------------------------------------------------------
WYB-Con 100'
Auto Pilot
- --------------------------------------------------------------------------------------------
Orange Traffice 18
Cones
- --------------------------------------------------------------------------------------------
Furman Power
Conditioner
- --------------------------------------------------------------------------------------------
AR-117 1
- --------------------------------------------------------------------------------------------
Yamaha LHO-1135
PX 990 LHO-1525
- --------------------------------------------------------------------------------------------
Effect Processor 2
- --------------------------------------------------------------------------------------------
Stage Lights
EAW 200
- --------------------------------------------------------------------------------------------
Stage Monitor 4
- --------------------------------------------------------------------------------------------
149
1478
3591
3595
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
TOTAL COST OF PAGE OF $
--- ---
- --------------------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------------------
INVENTORY SHEET
PAGE OF
--- ---
TAKEN BY JOHN TAYLOR TITLE
----------------------------- -----------------------------------------
DEPARTMENT DATE
---------------------------- -----------------------------------------
- --------------------------------------------------------------------------------------------
ITEM DESCRIPTION UNITS COST TOTAL UNIT
PER COST RETAIL
UNIT PRICE
- --------------------------------------------------------------------------------------------
Fall wreaths RSAFS 26
- --------------------------------------------------------------------------------------------
Fall Tree's 5
- --------------------------------------------------------------------------------------------
Xmas Tree Stand 2
- --------------------------------------------------------------------------------------------
Water Trough 1
- --------------------------------------------------------------------------------------------
Mike Stands 16
- --------------------------------------------------------------------------------------------
Antenna 4
- --------------------------------------------------------------------------------------------
Yamaha Mixer 1
MC3210M
Console
- --------------------------------------------------------------------------------------------
Table White 6' 1
- --------------------------------------------------------------------------------------------
Fan 16" Lasio 2
- --------------------------------------------------------------------------------------------
Fog Machine 2
Lamattie G3000
0507
0589
- --------------------------------------------------------------------------------------------
Clear Com with 4
Headset
Ad51560
AD5156
Ad51572
Ad5171
- --------------------------------------------------------------------------------------------
Clear Com 1
Phone AD51557
- --------------------------------------------------------------------------------------------
Stage Monitor 2
EAW
- --------------------------------------------------------------------------------------------
1486
1480
- --------------------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------------------
INVENTORY SHEET
PAGE OF
--- ---
TAKEN BY JOHN TAYLOR TITLE
----------------------------- -----------------------------------------
DEPARTMENT DATE
---------------------------- -----------------------------------------
- --------------------------------------------------------------------------------------------
ITEM DESCRIPTION UNITS COST TOTAL UNIT
PER COST RETAIL
UNIT PRICE
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
TOTAL COST OF PAGE OF $
--- ---
- --------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------
INVENTORY SHEET
PAGE OF
--- ---
TAKEN BY TITLE
----------------------------- -----------------------------------------
DEPARTMENT DATE
---------------------------- -----------------------------------------
- --------------------------------------------------------------------------------------------
ITEM DESCRIPTION UNITS COST TOTAL UNIT
PER COST RETAIL
UNIT PRICE
- --------------------------------------------------------------------------------------------
Stage EAW 6
Monitor 1489
1489
1477
1484
3593
3596
- --------------------------------------------------------------------------------------------
Side Fill PX 1560B 1601-1
- --------------------------------------------------------------------------------------------
PX1560B 1062(1)
- --------------------------------------------------------------------------------------------
Cable To stagecart 32 (input
Auto pilot and snake
console
- --------------------------------------------------------------------------------------------
Clear Com 577241
SB412A
Switch Board
- --------------------------------------------------------------------------------------------
Avolites
DMX 512 -
D1058
- --------------------------------------------------------------------------------------------
DFT Xmas 2
Tree's
- --------------------------------------------------------------------------------------------
Flowers Poinsettas 11
- --------------------------------------------------------------------------------------------
Microphones N/D 757B 3
- --------------------------------------------------------------------------------------------
Sure Shore Beta 87 1
- --------------------------------------------------------------------------------------------
Sm 58-L32 2
- --------------------------------------------------------------------------------------------
Electrovoice 1
RC 20
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------------------
INVENTORY SHEET
PAGE OF
--- ---
TAKEN BY TITLE
----------------------------- -----------------------------------------
DEPARTMENT DATE
---------------------------- -----------------------------------------
- --------------------------------------------------------------------------------------------
ITEM DESCRIPTION UNITS COST TOTAL UNIT
PER COST RETAIL
UNIT PRICE
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
TOTAL COST OF PAGE OF $
--- ---
- --------------------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------------------
INVENTORY SHEET
PAGE OF
--- ---
TAKEN BY TITLE
----------------------------- -----------------------------------------
DEPARTMENT DATE
---------------------------- -----------------------------------------
- --------------------------------------------------------------------------------------------
ITEM DESCRIPTION UNITS COST TOTAL UNIT
PER COST RETAIL
UNIT PRICE
- --------------------------------------------------------------------------------------------
Microphone shore A98MK 1
- --------------------------------------------------------------------------------------------
Microphone Stand 25900-57755 5
- --------------------------------------------------------------------------------------------
21020-57755 4
- --------------------------------------------------------------------------------------------
Direct Boxes Countryman 5
Associates
- --------------------------------------------------------------------------------------------
EV ND757B 3
- --------------------------------------------------------------------------------------------
Shore SM 87 1
- --------------------------------------------------------------------------------------------
SM91A 1
- --------------------------------------------------------------------------------------------
ADLS 12
- --------------------------------------------------------------------------------------------
MicroP 1000
Par G4Q
- --------------------------------------------------------------------------------------------
NSP Par Can Bulbs 38
- --------------------------------------------------------------------------------------------
MFL Bulbs 5
- --------------------------------------------------------------------------------------------
WFL 5
- --------------------------------------------------------------------------------------------
TG Microphone 1
Beta 87 Wireless
- --------------------------------------------------------------------------------------------
Sherry 1
Beta 57 Wireless
- --------------------------------------------------------------------------------------------
Spare Beta 87 2
Wireless
- --------------------------------------------------------------------------------------------
Spare Beta 87 2
Wiureless
- --------------------------------------------------------------------------------------------
Microphone 5
Mikropfon Stat IV
- --------------------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------------------
INVENTORY SHEET
PAGE OF
--- ---
TAKEN BY TITLE
----------------------------- -----------------------------------------
DEPARTMENT DATE
---------------------------- -----------------------------------------
- --------------------------------------------------------------------------------------------
ITEM DESCRIPTION UNITS COST TOTAL UNIT
PER COST RETAIL
UNIT PRICE
- --------------------------------------------------------------------------------------------
TOTAL COST OF PAGE OF $
--- ---
- --------------------------------------------------------------------------------------------
AIC Adaptor by Shure PS30-6
Mic-Antenna-Wireless Systems - 16 units
PRSII Power Pack
<PAGE>
- --------------------------------------------------------------------------------------------
INVENTORY SHEET
PAGE OF
--- ---
TAKEN BY JOHN TAYLOR TITLE
----------------------------- -----------------------------------------
DEPARTMENT DATE
---------------------------- -----------------------------------------
- --------------------------------------------------------------------------------------------
ITEM DESCRIPTION UNITS COST TOTAL UNIT
PER COST RETAIL
UNIT PRICE
- --------------------------------------------------------------------------------------------
Cable #44 Super 25'
- --------------------------------------------------------------------------------------------
14x13 Type
Sow A 90 o/c
- --------------------------------------------------------------------------------------------
Triangle PWC-1LC 25'
- --------------------------------------------------------------------------------------------
12/3 Type So 25'
P123
Msh2Q #51
- --------------------------------------------------------------------------------------------
Cable #40 100'
- --------------------------------------------------------------------------------------------
#41 100'
- --------------------------------------------------------------------------------------------
#48 10'
- --------------------------------------------------------------------------------------------
#61 6'
- --------------------------------------------------------------------------------------------
#52 6'
- --------------------------------------------------------------------------------------------
#44 6'
- --------------------------------------------------------------------------------------------
#54 6'
- --------------------------------------------------------------------------------------------
Pigtail Cable 5Q 1
- --------------------------------------------------------------------------------------------
#63 1
#44 1
- --------------------------------------------------------------------------------------------
#62 1
#45 1
- --------------------------------------------------------------------------------------------
#47 1
#48 1
- --------------------------------------------------------------------------------------------
#61 1
#60 1
- --------------------------------------------------------------------------------------------
Cable Horizon Y 125'
Conductor cord
snake
- --------------------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------------------
INVENTORY SHEET
PAGE OF
--- ---
TAKEN BY JOHN TAYLOR TITLE
----------------------------- -----------------------------------------
DEPARTMENT DATE
---------------------------- -----------------------------------------
- --------------------------------------------------------------------------------------------
ITEM DESCRIPTION UNITS COST TOTAL UNIT
PER COST RETAIL
UNIT PRICE
- --------------------------------------------------------------------------------------------
TOTAL COST OF PAGE OF $
--- ---
- --------------------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------------------
INVENTORY SHEET
PAGE OF
--- ---
TAKEN BY JOHN TAYLOR TITLE
----------------------------- -----------------------------------------
DEPARTMENT DATE
---------------------------- -----------------------------------------
- --------------------------------------------------------------------------------------------
ITEM DESCRIPTION UNITS COST TOTAL UNIT
PER COST RETAIL
UNIT PRICE
- --------------------------------------------------------------------------------------------
Snake Cable Horizon 4 1-50'
Conductor
Speaker
- --------------------------------------------------------------------------------------------
1 Horizon 4 1-50'
Conductor
Speaker
- --------------------------------------------------------------------------------------------
1 - sam Horizon 1-50'
Conductor -
speaker
- --------------------------------------------------------------------------------------------
Horizon 4 1-10'
Conductor
Speaker
- --------------------------------------------------------------------------------------------
Horizon 4 1-30'
Conductor
Speaker
- --------------------------------------------------------------------------------------------
2 - Horizon 1-30'
Conductor
Speaker
- --------------------------------------------------------------------------------------------
1213 Type So 1-9'
P-123-Msha
- --------------------------------------------------------------------------------------------
#53 Type Ms-HQ 1-10'
- --------------------------------------------------------------------------------------------
#61 S-L 1-25'
Floor Acc
- --------------------------------------------------------------------------------------------
#56 Type 1213 1-25'
Slow A-90C
- --------------------------------------------------------------------------------------------
P123-70HS 1-25
HQ #61
- --------------------------------------------------------------------------------------------
PigTail #58 1
- --------------------------------------------------------------------------------------------
#57 1
- --------------------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------------------
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DEPARTMENT DATE
---------------------------- -----------------------------------------
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ITEM DESCRIPTION UNITS COST TOTAL UNIT
PER COST RETAIL
UNIT PRICE
- --------------------------------------------------------------------------------------------
#59 1
- --------------------------------------------------------------------------------------------
Cable 2 Ken-Horizon 1-25' 6
Y conductor chanel
snake
- --------------------------------------------------------------------------------------------
Rapco OL Dea +4 1-10'
conductor
- --------------------------------------------------------------------------------------------
Horizon Guitar 1-7'
Instrument
- --------------------------------------------------------------------------------------------
TOTAL COST OF PAGE OF $
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---------------------------- -----------------------------------------
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ITEM DESCRIPTION UNITS COST TOTAL UNIT
PER COST RETAIL
UNIT PRICE
- --------------------------------------------------------------------------------------------
Cable Cable sound flex red-yellow-
by rapco blue
- --------------------------------------------------------------------------------------------
3-6' 18'
- --------------------------------------------------------------------------------------------
Pro-plex
PC22G1
- --------------------------------------------------------------------------------------------
22-Ang 125'
Low Cap
- --------------------------------------------------------------------------------------------
#43 Tree 25'
- --------------------------------------------------------------------------------------------
#63 10'
- --------------------------------------------------------------------------------------------
#50 10'
- --------------------------------------------------------------------------------------------
#52 10'
- --------------------------------------------------------------------------------------------
#49 ACL - N.C. 10'
- --------------------------------------------------------------------------------------------
#47 10'
- --------------------------------------------------------------------------------------------
#45 Toner 10'
- --------------------------------------------------------------------------------------------
#62 10'
- --------------------------------------------------------------------------------------------
Horizon 4 100'
conductor
speaker
- --------------------------------------------------------------------------------------------
#45 4'
- --------------------------------------------------------------------------------------------
#60 4'
- --------------------------------------------------------------------------------------------
Horizon 4 25'
Conductor
speaker
- --------------------------------------------------------------------------------------------
Horizon 4 60'
conductor
speaker
- --------------------------------------------------------------------------------------------
TOTAL COST OF PAGE OF $
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---------------------------- -----------------------------------------
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ITEM DESCRIPTION UNITS COST TOTAL UNIT
PER COST RETAIL
UNIT PRICE
- --------------------------------------------------------------------------------------------
Cable Rapco Quad
RG-Plus
- --------------------------------------------------------------------------------------------
Four Conductor 33' 20 pieces
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
UP Stage Left F1 63'
Cybex1
- --------------------------------------------------------------------------------------------
Stage rights - DW 50'
- --------------------------------------------------------------------------------------------
PSR Floor Cybeer
- --------------------------------------------------------------------------------------------
TO AFL Cyber EX 150'
- --------------------------------------------------------------------------------------------
Floor Cyber ASL 150'
- --------------------------------------------------------------------------------------------
1273 25'
Type So
- --------------------------------------------------------------------------------------------
DSR Cyber 50'
12/3 Pype So
NCOPERME
- --------------------------------------------------------------------------------------------
#1-upstage L. 69'
Flcyber Ex
- --------------------------------------------------------------------------------------------
#63 50'
PE, So, 90 o/c
- --------------------------------------------------------------------------------------------
Dyna Peeme
3 Conn-12
- --------------------------------------------------------------------------------------------
Type 50'
So #62
- --------------------------------------------------------------------------------------------
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---------------------------- -----------------------------------------
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ITEM DESCRIPTION UNITS COST TOTAL UNIT
PER COST RETAIL
UNIT PRICE
- --------------------------------------------------------------------------------------------
#54 12/3 Type 10'
SoP123-HSH
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
TOTAL COST OF PAGE OF $
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DEPARTMENT DATE
---------------------------- -----------------------------------------
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ITEM DESCRIPTION UNITS COST TOTAL UNIT
PER COST RETAIL
UNIT PRICE
- --------------------------------------------------------------------------------------------
15 A250V
20GA-W1
- --------------------------------------------------------------------------------------------
Plug-125V 50'
- --------------------------------------------------------------------------------------------
#47-500V 7'
Supercord
- --------------------------------------------------------------------------------------------
#48 Type-So 10'
P123-MSHA
- --------------------------------------------------------------------------------------------
Carol 1413 50
Type-Sow
A-Cul7
- --------------------------------------------------------------------------------------------
Carol 12/3 2 7' 14'
Type Sow
90% PL127
70 MSHA
- --------------------------------------------------------------------------------------------
Pigtail 1
F20 P Conn
2420
- --------------------------------------------------------------------------------------------
12/3 25'
Type S1
- --------------------------------------------------------------------------------------------
Pro-Plex
Pg 22512
- --------------------------------------------------------------------------------------------
22 Aw7 125'
3 Pair
- --------------------------------------------------------------------------------------------
WY Bon 50'
Auto-Pilot
- --------------------------------------------------------------------------------------------
Cord Mil-12-3ST 50'
Style-Ext
- --------------------------------------------------------------------------------------------
CSA Type
20-90E
- --------------------------------------------------------------------------------------------
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---------------------------- -----------------------------------------
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ITEM DESCRIPTION UNITS COST TOTAL UNIT
PER COST RETAIL
UNIT PRICE
- --------------------------------------------------------------------------------------------
FT 2 Carol 30'
12/3
- --------------------------------------------------------------------------------------------
Sound Cords Sound 7'
- --------------------------------------------------------------------------------------------
" 7'
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
TOTAL COST OF PAGE OF $
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- --------------------------------------------------------------------------------------------
*Miscellaneous, Assorted Microphone Cables
<PAGE>
- --------------------------------------------------------------------------------------------
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----------------------------- -----------------------------------------
DEPARTMENT DATE
---------------------------- -----------------------------------------
- --------------------------------------------------------------------------------------------
ITEM DESCRIPTION UNITS COST TOTAL UNIT
PER COST RETAIL
UNIT PRICE
- --------------------------------------------------------------------------------------------
Sony A-7 Density 1
QX0040 A/DD/A
76 Conductor #
- --------------------------------------------------------------------------------------------
Furman Power Conditioner 1
PL8 Conditioner and
Light Module
- --------------------------------------------------------------------------------------------
Klark Teknik 2
DN 514 Quad
Auto Gate
- --------------------------------------------------------------------------------------------
Behringer Composer 5 House
Audio 1 Monitor
Interactive
- --------------------------------------------------------------------------------------------
Dynamic Pro 5
MDX 2000
- --------------------------------------------------------------------------------------------
Yamaha Parametric (2)
Equalizer
YOP2006
- --------------------------------------------------------------------------------------------
862 Sonic 2
Maximizer BBF
- --------------------------------------------------------------------------------------------
Furman PL8 Poner 1
Conditoner
and Light Module
- --------------------------------------------------------------------------------------------
Furman Regulation AC LINE 1
Module AR-117
- --------------------------------------------------------------------------------------------
Eventide Harmonizer Model 1
Ultra H3000-Disk
- --------------------------------------------------------------------------------------------
Yamaha Multi-Effect 4
SPX990 Processor
- --------------------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------------------
INVENTORY SHEET
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----------------------------- -----------------------------------------
DEPARTMENT DATE
---------------------------- -----------------------------------------
- --------------------------------------------------------------------------------------------
ITEM DESCRIPTION UNITS COST TOTAL UNIT
PER COST RETAIL
UNIT PRICE
- --------------------------------------------------------------------------------------------
Lexicon Pigtail Effect 1
LXP15 Processor
- --------------------------------------------------------------------------------------------
Audio Control 1
Industrial SA-3050
Real Time Analyzer
- --------------------------------------------------------------------------------------------
Hackie CR 1604 16
Design Channel
- --------------------------------------------------------------------------------------------
Micline 1
Mixer
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
TOTAL COST OF PAGE OF $
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----------------------------- -----------------------------------------
DEPARTMENT DATE
---------------------------- -----------------------------------------
- --------------------------------------------------------------------------------------------
ITEM DESCRIPTION UNITS COST TOTAL UNIT
PER COST RETAIL
UNIT PRICE
- --------------------------------------------------------------------------------------------
Desk Organizer Dark Plastic Desk 2
Organizer
- --------------------------------------------------------------------------------------------
PaperClip Holder Plastic Paper Clip 1
Holder
- --------------------------------------------------------------------------------------------
paperclip holder Dark Plastic Pencil 1
Holder
- --------------------------------------------------------------------------------------------
tape dispenser Scotch Tap Tan 2
Dispenser
- --------------------------------------------------------------------------------------------
wastebasket Ivory Plastic 5
Wastebasket
- --------------------------------------------------------------------------------------------
36x48 cork Bulletin Board 1
- --------------------------------------------------------------------------------------------
24x36 cork Bulletin Board 1
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
TOTAL COST OF PAGE OF $
--- ---
- --------------------------------------------------------------------------------------------
<PAGE>
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INVENTORY SHEET
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----------------------------- -----------------------------------------
DEPARTMENT DATE
---------------------------- -----------------------------------------
- --------------------------------------------------------------------------------------------
ITEM DESCRIPTION UNITS COST TOTAL UNIT
PER COST RETAIL
UNIT PRICE
- --------------------------------------------------------------------------------------------
KeyTranc VeryBoard 1
V950900231
- --------------------------------------------------------------------------------------------
computer and ATT 1
keyboard JVP71341
- --------------------------------------------------------------------------------------------
3099-K440 8004 1
ATT keyboard
- --------------------------------------------------------------------------------------------
hardrive 480 Globalyst 1
ATT 515
- --------------------------------------------------------------------------------------------
desk gray/90 degree 2
- --------------------------------------------------------------------------------------------
filing 2 drawer file 2
cabinets cabinets
- --------------------------------------------------------------------------------------------
refrig. bar style 3.5 foot 1
white
- --------------------------------------------------------------------------------------------
back up for APC 280 1
computer
- --------------------------------------------------------------------------------------------
power stick Multi plug unit 1
surge
- --------------------------------------------------------------------------------------------
surge arrest 1
- --------------------------------------------------------------------------------------------
shelf standing metal 1
(2 shelf) unit
- --------------------------------------------------------------------------------------------
garbage can 2.5 feet square 1
metal creme plastic 1
- --------------------------------------------------------------------------------------------
chair adjustable office 1
chair
- -------------------------------------------------------------------------------------------
grey metal padded 1
seats
- --------------------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------------------
INVENTORY SHEET
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----------------------------- -----------------------------------------
DEPARTMENT DATE
---------------------------- -----------------------------------------
- --------------------------------------------------------------------------------------------
ITEM DESCRIPTION UNITS COST TOTAL UNIT
PER COST RETAIL
UNIT PRICE
- --------------------------------------------------------------------------------------------
phone MT multi line 2
information
center mls-18D
- --------------------------------------------------------------------------------------------
paper trays plastic/desk top 9
desk plastic organizer 1
directory
- --------------------------------------------------------------------------------------------
file holder metal/black 9
coffee maker westbend 10 cup 1
- --------------------------------------------------------------------------------------------
intercom clear com (model 1
system 500)
2/headset
- --------------------------------------------------------------------------------------------
SLIK Typed for 1
Extension cord autolights
6ft brown 1
- --------------------------------------------------------------------------------------------
TOTAL COST OF PAGE OF $
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DEPARTMENT DATE
---------------------------- -----------------------------------------
- --------------------------------------------------------------------------------------------
ITEM DESCRIPTION UNITS COST TOTAL UNIT
PER COST RETAIL
UNIT PRICE
- --------------------------------------------------------------------------------------------
Chair Maroon Fabric 2
Grey Charco
frame
- --------------------------------------------------------------------------------------------
Chair Maroon fabric 1
Gray Frame
- --------------------------------------------------------------------------------------------
Chair Gray Plastic 2
Stack Chair
- --------------------------------------------------------------------------------------------
Phone AT&T 1
- --------------------------------------------------------------------------------------------
Waste yellow basket 1
- ------------------------------------------------------------------------------------------
10 foot white cabinet 1
- --------------------------------------------------------------------------------------------
6 fold chair padded 6 3 grey
3 brown
- --------------------------------------------------------------------------------------------
gray stack chair 1
- -----------------------------------------------------------------------------------------
Gibbson Ref. Freezer 1
LA3402584
- --------------------------------------------------------------------------------------------
Soapdispenser 1
- --------------------------------------------------------------------------------------------
Towel holder 1
- --------------------------------------------------------------------------------------------
Coffee Maker Yellow 1
- --------------------------------------------------------------------------------------------
Yellow waste basket 2
- --------------------------------------------------------------------------------------------
48x48 bulletin board 1
- --------------------------------------------------------------------------------------------
First Aid 1
Blue/Red Wall Kits
- --------------------------------------------------------------------------------------------
<PAGE>
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DEPARTMENT DATE
---------------------------- -----------------------------------------
- --------------------------------------------------------------------------------------------
ITEM DESCRIPTION UNITS COST TOTAL UNIT
PER COST RETAIL
UNIT PRICE
- --------------------------------------------------------------------------------------------
Lasko-Fan 16 inches 1
oscillating fan
- --------------------------------------------------------------------------------------------
<PAGE>
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DEPARTMENT DATE
---------------------------- -----------------------------------------
- --------------------------------------------------------------------------------------------
ITEM DESCRIPTION UNITS COST TOTAL UNIT
PER COST RETAIL
UNIT PRICE
- --------------------------------------------------------------------------------------------
land carts for 1
moving
- --------------------------------------------------------------------------------------------
TOTAL COST OF PAGE OF $
--- ---
- --------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------
INVENTORY SHEET
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----------------------------- -----------------------------------------
DEPARTMENT DATE
---------------------------- -----------------------------------------
- --------------------------------------------------------------------------------------------
ITEM DESCRIPTION UNITS COST TOTAL UNIT
PER COST RETAIL
UNIT PRICE
- --------------------------------------------------------------------------------------------
wood benches oak four leg 17
3 m
cryroom
- --------------------------------------------------------------------------------------------
brown steel aggregate panels 7
- --------------------------------------------------------------------------------------------
KF 776 wood 15
- --------------------------------------------------------------------------------------------
cherry wood with rod 60
- --------------------------------------------------------------------------------------------
custom made formica 1
- --------------------------------------------------------------------------------------------
lower 310 side chairs 25
- --------------------------------------------------------------------------------------------
burgundy velvet ropes 16
- --------------------------------------------------------------------------------------------
gas logs 6' 1 set
- --------------------------------------------------------------------------------------------
cherry wood ticket/door 2
- --------------------------------------------------------------------------------------------
plants and large 17 inch 12
containers med 14 inch 5
- --------------------------------------------------------------------------------------------
small 10 inch 18
4
- --------------------------------------------------------------------------------------------
utility lobby) wet floor yellow 7
- --------------------------------------------------------------------------------------------
mops mop bucket mops 2
1
- --------------------------------------------------------------------------------------------
dust pale dust pale and small broom 1
- --------------------------------------------------------------------------------------------
?? 1
- --------------------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------------------
INVENTORY SHEET
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DEPARTMENT DATE
---------------------------- -----------------------------------------
- --------------------------------------------------------------------------------------------
ITEM DESCRIPTION UNITS COST TOTAL UNIT
PER COST RETAIL
UNIT PRICE
- --------------------------------------------------------------------------------------------
?? 2
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
TOTAL COST OF PAGE OF $
--- ---
- --------------------------------------------------------------------------------------------
<PAGE>
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DEPARTMENT DATE
---------------------------- -----------------------------------------
- --------------------------------------------------------------------------------------------
ITEM DESCRIPTION UNITS COST TOTAL UNIT
PER COST RETAIL
UNIT PRICE
- --------------------------------------------------------------------------------------------
Shampoo Tornado carpet shampoo 1
- --------------------------------------------------------------------------------------------
Husuoina 1
140B
- --------------------------------------------------------------------------------------------
gas container red plastic gas tank 1
- --------------------------------------------------------------------------------------------
shampoo machine Thermas 1
large shampoo
- --------------------------------------------------------------------------------------------
vacuum cleaner sharp-EC-12 TXC 1
Sharp-EX-12-TXC 1
Sharp-EC-12TXT7 1
- --------------------------------------------------------------------------------------------
dolly red/two wheel metal 1
- --------------------------------------------------------------------------------------------
paper towel prefile #56700 5 (1 uncased)
dispenser
- --------------------------------------------------------------------------------------------
toilet seat profile 7
dispenser #74250 1 cover
#74250 1 case low
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
<PAGE>
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INVENTORY SHEET
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---------------------------- -----------------------------------------
- --------------------------------------------------------------------------------------------
ITEM DESCRIPTION UNITS COST TOTAL UNIT
PER COST RETAIL
UNIT PRICE
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
TOTAL COST OF PAGE OF $
--- ---
- --------------------------------------------------------------------------------------------
<PAGE>
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----------------------------- -----------------------------------------
DEPARTMENT DATE
---------------------------- -----------------------------------------
- --------------------------------------------------------------------------------------------
ITEM DESCRIPTION UNITS COST TOTAL UNIT
PER COST RETAIL
UNIT PRICE
- --------------------------------------------------------------------------------------------
stove VB503GV 1
- --------------------------------------------------------------------------------------------
refrig. GE GM759104 1
- --------------------------------------------------------------------------------------------
Couch Tan Leather 1
3 pillow 2 dec. pillow
- --------------------------------------------------------------------------------------------
chair oversize floral green-pink 1
leaf
- --------------------------------------------------------------------------------------------
chair straight purple back chair 1
- --------------------------------------------------------------------------------------------
table oval glasstop iron legs 1
- --------------------------------------------------------------------------------------------
table side table made of iron 1
- --------------------------------------------------------------------------------------------
rug oriental rug pink floral 1
- --------------------------------------------------------------------------------------------
table Inntadf 1
1 draw maple
- --------------------------------------------------------------------------------------------
table 4 foot x 1 foot 1
maple table wood
- --------------------------------------------------------------------------------------------
lamps table lamps 3
black/gold, green/white;
rust/white
- --------------------------------------------------------------------------------------------
lamp floor lamp gold and navy 1
- --------------------------------------------------------------------------------------------
table iron/glass wall table 1
- --------------------------------------------------------------------------------------------
stool bar stool leather/gold 2
- --------------------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------------------
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----------------------------- -----------------------------------------
DEPARTMENT DATE
---------------------------- -----------------------------------------
- --------------------------------------------------------------------------------------------
ITEM DESCRIPTION UNITS COST TOTAL UNIT
PER COST RETAIL
UNIT PRICE
- --------------------------------------------------------------------------------------------
tv magnavox color 20" 44168723 1
- --------------------------------------------------------------------------------------------
DSS Satelite RCA #527353228 1
- --------------------------------------------------------------------------------------------
TV Magnavox with remote 1
30008717
- --------------------------------------------------------------------------------------------
DMX Com stream DR200 Digital Audio 1
Receiver
- --------------------------------------------------------------------------------------------
Couch Green with Oak wood 1
Chair 1
- --------------------------------------------------------------------------------------------
Table Inntable Oak 1
- --------------------------------------------------------------------------------------------
Table Coffee Table Oak 1
- --------------------------------------------------------------------------------------------
Chair maroon/Black 2
- --------------------------------------------------------------------------------------------
Lamp Green/yellow 1
- --------------------------------------------------------------------------------------------
wastebasket 1
- --------------------------------------------------------------------------------------------
towel 1
dispenser
- --------------------------------------------------------------------------------------------
Bulletin 24x24 1
Board cork
- --------------------------------------------------------------------------------------------
TOTAL COST OF PAGE OF $
--- ---
- --------------------------------------------------------------------------------------------
<PAGE>
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----------------------------- -----------------------------------------
DEPARTMENT DATE
---------------------------- -----------------------------------------
- --------------------------------------------------------------------------------------------
ITEM DESCRIPTION UNITS COST TOTAL UNIT
PER COST RETAIL
UNIT PRICE
- --------------------------------------------------------------------------------------------
Desk Gray wall unit desk with shelf 2
- --------------------------------------------------------------------------------------------
smith corona XE 1950 #2127397 1
- --------------------------------------------------------------------------------------------
2 drawer letter size cabinets 2
- --------------------------------------------------------------------------------------------
jiffy steamer J39450 1
- --------------------------------------------------------------------------------------------
double wall shelf 2
metal and press board
- --------------------------------------------------------------------------------------------
two step-stool 1
#1001 kickstep
- --------------------------------------------------------------------------------------------
sharp (2 color) 1
#50014815
- --------------------------------------------------------------------------------------------
CTX 14516 1
BCS computer (keybaord, monitor,
APC 280, surge protector
- --------------------------------------------------------------------------------------------
Rubbermaid M70-4212-00 1
- --------------------------------------------------------------------------------------------
Formica/wood 8
2 door wallcases
- --------------------------------------------------------------------------------------------
woodstone base
glass cube display cases
- --------------------------------------------------------------------------------------------
12 cube large 2
12 cube small 2
- --------------------------------------------------------------------------------------------
<PAGE>
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DEPARTMENT DATE
---------------------------- -----------------------------------------
- --------------------------------------------------------------------------------------------
ITEM DESCRIPTION UNITS COST TOTAL UNIT
PER COST RETAIL
UNIT PRICE
- --------------------------------------------------------------------------------------------
30 cube small 2
8 cube small 2
- --------------------------------------------------------------------------------------------
40 cube small oval 2
40 cube glass display 1
- --------------------------------------------------------------------------------------------
circular glass display 2
4 cubes high
- --------------------------------------------------------------------------------------------
vertical glass display 6 cubes 2
- --------------------------------------------------------------------------------------------
formica wood display cases 13
(diff. sizes) 2 back case
- --------------------------------------------------------------------------------------------
TOTAL COST OF PAGE OF $
--- ---
- --------------------------------------------------------------------------------------------
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---------------------------- -----------------------------------------
- --------------------------------------------------------------------------------------------
ITEM DESCRIPTION UNITS COST TOTAL UNIT
PER COST RETAIL
UNIT PRICE
- --------------------------------------------------------------------------------------------
Tables Pressboard top metal base 35
- --------------------------------------------------------------------------------------------
Chairs material (maroon) 29
grey (metal)
- --------------------------------------------------------------------------------------------
Christmas supplies
- --------------------------------------------------------------------------------------------
Gian Christmas Green Christmas Wreath Ribbons 10
Wreaths
- --------------------------------------------------------------------------------------------
Small Tree and stands Green 4 kg stand 3
- --------------------------------------------------------------------------------------------
Candle candle arrangement 2
- --------------------------------------------------------------------------------------------
New Year's party favors 13
- --------------------------------------------------------------------------------------------
boxes of decoration 6
- --------------------------------------------------------------------------------------------
ribbons for tree toppers 2
- --------------------------------------------------------------------------------------------
country garden plow with dec. 4
- --------------------------------------------------------------------------------------------
bags of tree ornaments 8
- --------------------------------------------------------------------------------------------
shepherd boys and chimney 2
- --------------------------------------------------------------------------------------------
lights 1
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
<PAGE>
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DEPARTMENT DATE
---------------------------- -----------------------------------------
- --------------------------------------------------------------------------------------------
ITEM DESCRIPTION UNITS COST TOTAL UNIT
PER COST RETAIL
UNIT PRICE
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
TOTAL COST OF PAGE OF $
--- ---
- --------------------------------------------------------------------------------------------
<PAGE>
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---------------------------- -----------------------------------------
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ITEM DESCRIPTION UNITS COST TOTAL UNIT
PER COST RETAIL
UNIT PRICE
- --------------------------------------------------------------------------------------------
M/M E03600QL 2
CTX color 2
- --------------------------------------------------------------------------------------------
APC 280 3.5 and tape
250mm (BES) 1
- --------------------------------------------------------------------------------------------
plug and power supply 2
- --------------------------------------------------------------------------------------------
65 robotics 2
fax modem
- --------------------------------------------------------------------------------------------
HP Laser Jet 4L 1
- --------------------------------------------------------------------------------------------
USCC 659254
serial #
- --------------------------------------------------------------------------------------------
computer DCS 280 1
Colorado 350
3.5 dish/cd drive
- --------------------------------------------------------------------------------------------
calculator sharp 2 color 1
E1-26306II
- --------------------------------------------------------------------------------------------
calculator Victor 1560 1
- --------------------------------------------------------------------------------------------
back machine paymaster hand crank 1
- --------------------------------------------------------------------------------------------
speakers computer lab tec LCS-150 2
- --------------------------------------------------------------------------------------------
speakers Bose wall speakers (black) 2
- --------------------------------------------------------------------------------------------
Infotran. Universal Communications 1
Interface
- --------------------------------------------------------------------------------------------
File cabinet 4 draws 1
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------------------
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DEPARTMENT DATE
---------------------------- -----------------------------------------
- --------------------------------------------------------------------------------------------
ITEM DESCRIPTION UNITS COST TOTAL UNIT
PER COST RETAIL
UNIT PRICE
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
TOTAL COST OF PAGE OF $
--- ---
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<PAGE>
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INVENTORY SHEET
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----------------------------- -----------------------------------------
DEPARTMENT DATE
---------------------------- -----------------------------------------
- --------------------------------------------------------------------------------------------
ITEM DESCRIPTION UNITS COST TOTAL UNIT
PER COST RETAIL
UNIT PRICE
- --------------------------------------------------------------------------------------------
Computer Model E447AU 1
KeyGuard 4225A001200306 1
930055107
- --------------------------------------------------------------------------------------------
Computer Keyboard 4225A00121893 1
930037040 1
- --------------------------------------------------------------------------------------------
Computer Keyboard 422A001200295 1
930036326 1
- --------------------------------------------------------------------------------------------
Computer Keyboard 422A001200295 1
93003626 1
- --------------------------------------------------------------------------------------------
1BM Lexmark Pr.Nier FCC:Bj1 1
2380-001
- --------------------------------------------------------------------------------------------
1BM Lexmark Printer FRR: BJ1 1
2380-001
- --------------------------------------------------------------------------------------------
1BM Lexmark Printer FCC-BJ1 1
2380-001
- --------------------------------------------------------------------------------------------
1BM FCC BJ1 1
Lexmark 2380001
Printer
- --------------------------------------------------------------------------------------------
Chair adjustable rust/material 3
grey frame
- --------------------------------------------------------------------------------------------
stands ticket stands for printers 4
- --------------------------------------------------------------------------------------------
easy computer to operate ticket
systems computers
- --------------------------------------------------------------------------------------------
<PAGE>
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DEPARTMENT DATE
---------------------------- -----------------------------------------
- --------------------------------------------------------------------------------------------
ITEM DESCRIPTION UNITS COST TOTAL UNIT
PER COST RETAIL
UNIT PRICE
- --------------------------------------------------------------------------------------------
4 5010073
3 5010072
- --------------------------------------------------------------------------------------------
2 5010071
1 5010074
- --------------------------------------------------------------------------------------------
Pencil electric 9781647 1
sharpner
- --------------------------------------------------------------------------------------------
4 phones white mls 1bd att 4
4 headgear black KS 23529-L10 4
- --------------------------------------------------------------------------------------------
Quick card machine check 67000190 680001898 (2)
printer 250 veriphone 56 6 (2)
011510357 017125230
- --------------------------------------------------------------------------------------------
Texas Instruments T15032 1
0395C
- --------------------------------------------------------------------------------------------
TOTAL COST OF PAGE OF $
--- ---
- --------------------------------------------------------------------------------------------
Trash canscreme plastic (3)
<PAGE>
- --------------------------------------------------------------------------------------------
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----------------------------- -----------------------------------------
DEPARTMENT DATE
---------------------------- -----------------------------------------
- --------------------------------------------------------------------------------------------
ITEM DESCRIPTION UNITS COST TOTAL UNIT
PER COST RETAIL
UNIT PRICE
- --------------------------------------------------------------------------------------------
Desk Freestanding workstation desk 3
(phone booths)
- --------------------------------------------------------------------------------------------
chair task chair 790166 3
maroon fabric/gray frame
- --------------------------------------------------------------------------------------------
chair vinyl upholstered stacking 1
chairs/brown
- --------------------------------------------------------------------------------------------
phone A77 telephone 3
- --------------------------------------------------------------------------------------------
headset walk and talk portable headset ATT 3
- --------------------------------------------------------------------------------------------
computers monitors CTX color 3
Keyboards - C168036004 3
harddrive 486/60 3.5 drive 3
APC 286 Backups 3
- --------------------------------------------------------------------------------------------
mouse 3
- --------------------------------------------------------------------------------------------
headset multiline 3
- --------------------------------------------------------------------------------------------
word processor 1
XE 1950
- --------------------------------------------------------------------------------------------
Boards cork oak bulletin boards 2
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
<PAGE>
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DEPARTMENT DATE
---------------------------- -----------------------------------------
- --------------------------------------------------------------------------------------------
ITEM DESCRIPTION UNITS COST TOTAL UNIT
PER COST RETAIL
UNIT PRICE
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
TOTAL COST OF PAGE OF $
--- ---
- --------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------
INVENTORY SHEET
PAGE OF
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----------------------------- -----------------------------------------
DEPARTMENT DATE
---------------------------- -----------------------------------------
- --------------------------------------------------------------------------------------------
ITEM DESCRIPTION UNITS COST TOTAL UNIT
PER COST RETAIL
UNIT PRICE
- --------------------------------------------------------------------------------------------
safe brown/tan floor 1
safe 2x2x3.5
- --------------------------------------------------------------------------------------------
free standing 2
desk with
cabinets at top
and the drawer
at bottom
- --------------------------------------------------------------------------------------------
desk chair 1
material wood
- --------------------------------------------------------------------------------------------
straight chair 1
brown material
back and seat
- --------------------------------------------------------------------------------------------
2 drawer file 1
cabinet (grey)
- --------------------------------------------------------------------------------------------
monitor (CTX 1
color
- --------------------------------------------------------------------------------------------
keyboard 1
411019024
- --------------------------------------------------------------------------------------------
hard drive 1
424190275
- --------------------------------------------------------------------------------------------
printer lexmark 1
item 2380
- --------------------------------------------------------------------------------------------
quick check 1
verfione printer
250 1
- --------------------------------------------------------------------------------------------
sharp E1-21026 2
EL-263OGII
- --------------------------------------------------------------------------------------------
ATI MLS 8D 1
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------------------
INVENTORY SHEET
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---------------------------- -----------------------------------------
- --------------------------------------------------------------------------------------------
ITEM DESCRIPTION UNITS COST TOTAL UNIT
PER COST RETAIL
UNIT PRICE
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
TOTAL COST OF PAGE OF $
--- ---
- --------------------------------------------------------------------------------------------
<PAGE>
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INVENTORY SHEET
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----------------------------- -----------------------------------------
DEPARTMENT DATE
---------------------------- -----------------------------------------
- --------------------------------------------------------------------------------------------
ITEM DESCRIPTION UNITS COST TOTAL UNIT
PER COST RETAIL
UNIT PRICE
- --------------------------------------------------------------------------------------------
display chrome glass 4
racks circular display
racks
- --------------------------------------------------------------------------------------------
glass 4 shelf enclosed 1
display case
case
- --------------------------------------------------------------------------------------------
postcard black 2
stand creme
- --------------------------------------------------------------------------------------------
display large 2
shelf shelf/drawers
cubes behind
counter
- --------------------------------------------------------------------------------------------
large shelf 1
behind counter
- --------------------------------------------------------------------------------------------
jewelry cases 3
formica counters 2
- --------------------------------------------------------------------------------------------
cash TEC MA 1300 2
register 5D201634
5D201696
- --------------------------------------------------------------------------------------------
storage shelves 1 double
room metal/wood 2 single
shelves
- --------------------------------------------------------------------------------------------
chair chair with boot 1
rest gray maroon
917AC
- --------------------------------------------------------------------------------------------
chair office chair in 1
office
gray/maroon
11335
- --------------------------------------------------------------------------------------------
<PAGE>
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INVENTORY SHEET
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DEPARTMENT DATE
---------------------------- -----------------------------------------
- --------------------------------------------------------------------------------------------
ITEM DESCRIPTION UNITS COST TOTAL UNIT
PER COST RETAIL
UNIT PRICE
- --------------------------------------------------------------------------------------------
TV JVC mts 1
(surround code
TIN 208450)
- --------------------------------------------------------------------------------------------
logs gas logs 6' 1 set
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
TOTAL COST OF PAGE OF $
--- ---
- --------------------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------------------
INVENTORY SHEET
PAGE OF
--- ---
TAKEN BY TED B. TITLE
----------------------------- -----------------------------------------
DEPARTMENT DATE
---------------------------- -----------------------------------------
- --------------------------------------------------------------------------------------------
ITEM DESCRIPTION UNITS COST TOTAL UNIT
PER COST RETAIL
UNIT PRICE
- --------------------------------------------------------------------------------------------
Headphones ATT KS23529- 3 Joys office
L10
#KS23822-L7
#KS23529-L10
- --------------------------------------------------------------------------------------------
Calculator Sharp EL21926 1
- --------------------------------------------------------------------------------------------
Desk module 38852 1
grey/laminated
cherry
- --------------------------------------------------------------------------------------------
speaker clear com 1
speaker station
KB112
- --------------------------------------------------------------------------------------------
desk module 38080 1
grey
metal/laminated
cherry top
- --------------------------------------------------------------------------------------------
phone ATT MLS 18D 1
- --------------------------------------------------------------------------------------------
footstool black/wheels 2
- --------------------------------------------------------------------------------------------
microphones shore sm87 3
- --------------------------------------------------------------------------------------------
beta 87 1
sm81 2
- --------------------------------------------------------------------------------------------
sm57 3
sm58 2
- --------------------------------------------------------------------------------------------
sennheiser/black 2
md4210/nr1156
85
md
4210/nr115936
- --------------------------------------------------------------------------------------------
EV n/o 757B 3
shore sm91 1
- --------------------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------------------
INVENTORY SHEET
PAGE OF
--- ---
TAKEN BY TED B. TITLE
----------------------------- -----------------------------------------
DEPARTMENT DATE
---------------------------- -----------------------------------------
- --------------------------------------------------------------------------------------------
ITEM DESCRIPTION UNITS COST TOTAL UNIT
PER COST RETAIL
UNIT PRICE
- --------------------------------------------------------------------------------------------
shure A98SPM 4
Shure Beta 87 4
wireless
- --------------------------------------------------------------------------------------------
sCrown CM 4
312E
- --------------------------------------------------------------------------------------------
Direct Count Type 85 Fet 4
Boxes Associates
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
TOTAL COST OF PAGE OF $
--- ---
- --------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT C
Copy of contract with Country Tonite Enterprises providing for
performance of the "Country Tonite Show" on the Premises throughout
the term of this Lease Agreement.
<PAGE>
EXHIBIT 2
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
CONTRACT TO PRODUCE SHOW
BETWEEN
COUNTRY TONITE ENTERPRISES, INC.
AND
COUNTRY TONITE THEATRE, L.L.C.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
This contract to Produce Show ("Contract") is by and between Country
Tonite Theatre, L.L.C., hereinafter referred to as "Theater," and Country
Tonite Enterprises, Inc., hereinafter referred to as "Producer." Producer
agrees to produce and present for Theater a show known as "Country Tonite"
hereinafter referred to as "Show" in the Country Tonite Theatre located at
2249 Parkway in Pigeon Forge, Tennessee. Said show will be produced and
presented under the terms and conditions of this Contract.
RECITALS
1. CONTRACT TERM. Producer agrees to produce and present the Show for
a term that is coextensive with the existence of Country Tonite Theatre,
L.L.C., a Tennessee limited liability company, pursuant to its Operating
Agreement, dated as of September 24th, 1996 (the "Operating Agreement").
2. THE "SHOW" DEFINED. The Show will have a running time of
one-and-one-half to two hours. It will consist of at least five singers,
eight dancers and one or two specialty acts performing in a structured
Country & Western music variety show. The Show will also consist of live
music with a seven to a twelve-piece band. In addition to performers and
artists, CTE will provide one (1) administrative person and one (1) wardrobe
attendant to facilitate the production of the show (collectively "Producer
Personnel.") The Show shall be a first rate production consistent with the
quality of other variety shows currently being performed by CTE. Producer
may vary the format from time to time in the best interest of the Show and
the Theater.
3. WEEK DEFINED. A "week" is herein defined as a six-day period of a
calendar week (Sunday through Saturday) plus one nonperformance dark night to
be designated by Theater. It is hereby acknowledged that a week will include
up to twelve (12) performances per week. The Show times and days will be
designated in writing by Theater, provided that Producer shall not be
required to present the show between January 1 and March 1 of each year.
Producer shall not be required to present the show a minimum number of times
per week, but Producer shall be required to present the show an average eight
(8) times per week for the period from March 15 through December 31 in each
year. Theatre agrees not to do over twelve (12) shows per week without
Burkhart Ventures, LLC's consent, which shall not be unreasonably withheld.
If show is presented more than twelve (12) times in one week, Producer shall
be paid $3,750.00 for each show in a week over twelve (12).
4. RIGHTS IN THE PRODUCTION. Producer will own and retain all rights
in and to the title, format, logo, script continuity, choreography, and all
other elements of the Show. Notwithstanding the foregoing, Producer grants
to Theater a license for the Term of this
<PAGE>
Contract, including any extensions thereof to utilize the Show's title, logo,
video, or audio excerpts or any other reference to or description of the Show
in the Theater, promotion, marketing or public relations materials.
5. EXCLUSIVITY. Producer agrees that during the Term of this
contract, and any extensions thereof, Producer shall not compete with the
Theater directly or indirectly within Sevier County, Tennessee or any
adjoining county. However, from time to time, it is hereby understood that
Producer may be airing certain excerpts from the Show for the purpose of
marketing, merchandising and advertising the Show. If a taped excerpt of the
Show is utilized on television, for purposes other than marketing and
advertising, for profit, Producer shall pay a fee of $5,000.00 to Theater.
6. CONSIDERATION AND METHOD OF PAYMENT.
a. Theater shall pay Producer a fee of $42,500 per week during
the term, provided that if less than six (6) shows are presented in any week,
subject to the next sentence, the amount paid to Producer for such week shall
be reduced by $7,083.33 for each show less than six (6) that is presented.
If the show is presented for any partial week at the beginning or end of a
performance season, such fee shall be pro-rated based on days performed, but
in no event shall any payment be made between January 1 and March 1 of any
year. Payment shall be made on a weekly basis to Producer and made available
to Producer each Monday morning before 10:00 a.m., Knoxville time, following
the week's performance. Theater will be in default if payment is not made in
full within ten (10) days of written notice of such nonpayment as provided
herein.
b. The fee provided for in subparagraph (a) of this paragraph
shall be adjusted as of March 1 of each year, beginning March 1, 1998, for
"cost of living" changes in accord with the Consumer Price Index for Urban
Wage Earners and Clerical Workers (all items) for the Southern United States
published by the Southern Office of the United States Department of Labor,
Bureau of Labor Statistics (the "index"). Each adjustment shall be made by
multiplying the weekly payment for the last full week of the prior calendar
year by a fraction, the numerator which shall be the most recent index in
effect at the time of such adjustment, and the denominator of which shall be
the index for January, 1997. The product shall be the adjusted weekly payment
until the next adjustment occurs. If the index changes so that the base
(denominator) differs from that originally used, the index shall be converted
in accordance with the conversion factor published by the United States
Department of Labor, Bureau of Labor Statistics. If the index is
discontinued or revised during the term hereof, such other government index
or computation with which it is replaced shall be used in order to obtain
substantially the same result as would have been obtained if the index had
not been discontinued or revised.
c. As further consideration hereunder, Producer shall have the
exclusive right to film and/or video tape the Show or excerpts thereof and
shall make such film and/or video tape available to Theatre at Producer's
actual cost. All income from sales or rental of such film or video tape sold
in Sevier County shall inure to the benefit of the Theater.
7. PRICE AND REVENUE. Theater shall establish the admission price for
the Show and the cost to the audience of any and all beverage and food
service and shall retain all revenues therefrom. Theater agrees to pay all
taxes on admissions to Show, plus cabaret taxes and sales taxes as well as
ASCAP, SESAC and BMI licensing fees.
<PAGE>
8. CERTAIN PRODUCTION COSTS.
a. Theater shall provide, at its expense, lighting and sound
systems, stage sets, house equipment, related equipment, wardrobe maintenance
including storage for same for Show's performers, stage configuration,
dressing rooms, and projection system and screen. Theater shall provide the
necessary personnel to handle stage functions, including but not limited to
stage manager, assistant stage manager, spotlight operators, and lighting and
sound technicians. Producer acknowledges that the facilities and equipment
located at 2249 Parkway in Pigeon Forge, Tennessee are suitable for the
production of the show in accordance with the terms of this Agreement.
b. Producer shall provide, at its sole expense:
(1) All props required for the Show;
(2) All costumes for the Show's performers;
(3) All special effects for the Show which are not standard and
ordinarily existent in the Theater's showroom.
9. REHEARSAL AND AUDITIONS.
a. Theater shall make the showroom available to Producer for
rehearsals and auditions upon reasonable notice by Producer and shall make such
stage lighting and sound personnel as may be reasonably necessary thereto
available in connection therewith.
b. The Theater reserves the right to utilize the showroom for
entertainment and other purposes during all daytime hours and during any
evenings or other times the Show is not presented or when the auditorium is not
in use during mutually agreed rehearsal and audition times described in the
preceding subparagraph.
c. Theater agrees to make the auditorium available for rehearsal and
taping of television commercials.
10. TERMINATION. The Producer may terminate this Agreement if any of the
following events shall occur.
a. Failure by Theatre to pay, in full, on the dates due, any
payment due hereunder, provided, however, that Theatre shall have ten (10)
days following written notice from Producer to cure such default.
b. Failure by Theatre to observe or perform any of the other
terms, covenants, agreements or conditions contained in this Agreement for a
period of thirty (30) days after written notice from Producer specifying such
default, provided, if any such default cannot be completely cured within such
30-day period, despite Theatre's diligent, best-faith effort, commenced
immediately, then Theatre shall have a reasonable time to complete the cure
of such default, for a period not to exceed ninety (90) days.
c. Either the Lease dated as of the date hereof between J.
MacDonald Burkhart, M.D., and the Theatre or the Operating Agreement of the
Theatre is terminated.
<PAGE>
The Producer's right to terminate this Agreement under this
paragraph is in addition to such other rights that the Producer may have at
law or equity.
The Theatre may terminate this Agreement if any of the following
events shall occur.
a. Failure by Producer to observe or perform any of the other
terms, covenants, agreements or conditions contained in this Agreement for a
period of thirty (30) days after written notice from Theatre specifying such
default, provided, if any such default cannot be completely cured within
such 30-day period, despite Producer's diligent, best-faith effort, commenced
immediately, then Producer shall have a reasonable time to complete the cure
of such default, for a period not to exceed ninety (90) days.
b. Either the Lease dated as of the date hereof between J.
MacDonald Burkhart, M.D., and the Theatre or the Operating Agreement of the
Theatre is terminated.
The Theater's right to terminate this Agreement under this paragraph is
in addition to such other rights that the Theater may have at law or equity.
Any notices given hereunder shall also be given to Burkhart Ventures,
LLC, in the manner and at the address provided in the Operating Agreement.
10. CERTAIN PROHIBITIONS. Upon the termination of this Agreement
Theatre agrees not to:
a. for a period of one (1) year after termination of this
Agreement, produce either directly or indirectly or rent its property to any
person or entity producing, a country and eastern rock music variety shown
which uses the word "County" in its name or in any trade name or trademark.
b. for a period of one (1) year after termination of this
Agreement, hire any person who was an employee of the Producer or any
affiliated entity within the one-year period prior to the termination of this
Agreement; or
c. violate any copyright, trademark or common law intellectual
property rights of CTE or any affiliated entity.
The provisions of this paragraph shall survive the termination of this
Agreement.
12. PRODUCER PERSONNEL. Producer shall require and assure that all
Producer Personnel shall at all times perform his/her services in a highly
professional manner. While on the premises of the Theatre, Producer
Personnel shall conduct themselves in an appropriate and dignified manner,
using professional discretion at all times. Producer is responsible for
assuring that Producer Personnel and all persons performing services for
Producer in connection with this agreement are subject to, and comply fully
with, all terms and conditions of this Agreement.
13. CANCELLATION OF PERFORMANCE BY THEATRE. Theatre shall have the
right to cancel any performance of the Show, or any portion thereof, should
extraordinary
<PAGE>
conditions exist which include, but are not limited to: riot, civil disorder,
act(s) of God, strike, act of any federal, state or local instruments,
rebellions, bomb threats, or any natural disaster.
14. PUBLICITY. Producer shall require all performers in the Show to be
available to Theater when requested from time to tome, for, among other
things, publicity photographs and interview . All such services shall be
rendered without any kind of cost or charge to Theater except that the
Theater shall reimburse for travel, as required by the Theater or may pay the
entertainer a fair market hourly rate for any material time. Producer
agrees, for itself and on behalf of all performers in the Show, that such
photographs and interview material may be used by Theater for any promotional
and publicity purposes as Theater shall determine for the term of this
agreement in its sole and absolute discretion; and Producer, for itself and
on behalf of its performers, completely releases, Theater from any liability
resulting from the use of such material. All promotional and publicity
materials created at the expense or through the effort of Theater and
approved by the Producer shall be the sole property of Theater, and Producer
agrees to sign and to require its performers to sign, as may be reasonably
determined, any and all releases, acknowledgements or such other
documentations as Theater may request from time to time in connection with.
15. TAXES AND INSURANCE. Producer shall be solely responsible for and
shall pay when due all federal income tax withholding, FICA, social security,
payment of workers' compensation where required by law and payroll taxes on
behalf of Producerj Personnel. Producer shall provide evidence satisfactory
to Theater that worker's compensation insurance coverage is being carried by
Producer and, when requested by Theater, evidence satisfactory to Theater
that payment of all the foregoing payroll burden has been made. Each party
to this contract hereby waives its right to subrogation.
16. INDEPENDENT CONTRACTOR. Producer is and shall be in the
performance of all work, services and activities under this Agreement an
independent contractor. No term or condition under this Agreement nor any
method or manner of payment hereunder shall create any relationship between
Theater and Producer other than as expressed in this paragraph. Producer
personnel shall not in any way, at any time, or under any circumstances, be
or be construed to be employees, agents, representatives or personnel of
Theater.
17. INDEMNIFICATION. Producer shall defend, indemnity, and hold
Theater completely free and harmless from and against any and all claims,
demands, suits and actions which are the result of negligence by anyone not a
party to this Agreement for loss, injury, damage, or liability from bodily
injury and property damage arising directly or indirectly out of Producer's
negligence with respect to performance of the Show or of this Agreement.
Producer shall carry commercial liability insurance to insure against such
risks.
18. PARKING. Theatre shall make parking available for the show to the
full extent that parking is available to the Theatre under its lease of the
property under which the Show will be permitted.
19. MISCELLANEOUS PROVISIONS
a. Time is of the essence of this Agreement and the performance
of each and every provisions hereof.
<PAGE>
b. Except as otherwise provided herein, this Agreement shall be
binding upon and shall inure to the benefit of the parties, their permitted
successors and assigns.
c. Whenever the context so requires, the use of any gender shall
be applicable to all genders, the singular number shall include the plural
and the plural gender.
d. The law of the State of Tennessee shall govern the validity,
performance and enforcement of this Agreement.
e. If either party to this Agreement shall institute any action
or proceeding under the provisions of this Agreement, the prevailing party in
such action or proceeding shall be entitled to recover all of its costs and
reasonable attorney's fees.
f. The failure of Theater to insist upon performance of any of
the provisions of this Agreement in any one or more instances shall not be a
waiver thereafter of its right to full performance of all the provisions of
this Agreement when any performance is due. No waiver of a breach of any of
the covenants, conditions, terms of provisions of this Agreement shall be
construed to be a waiver of any succeeding breach of the same of any other
covenant, condition, term or provisions. All rights and remedies created by
this Agreement are cumulative and the use of one remedy shall not be taken to
exclude or waive the right to the use of another.
g. In case provision contained in this Agreement shall be held to
be illegal, invalid or unenforceable, the legality, validity and
enforceability of all remaining provisions shall not be in any way affected
of impaired thereby.
h. Captions and/or headings have been inserted for convenience of
reference only and are not to be construed or considered to be a part hereof
and shall not in any way modify, restrict or amend any of the terms or
provisions hereof.
Executed this 24th day of September, 1996.
COUNTY TONITE THEATRE, LLC. COUNTY TONITE ENTERPRISES, INC.
/s/ JOHN J. PILGER /s/ JOHN J. PILGER
- -------------------------------- --------------------------------
John J. Pilger, Chief Manager John J. Pilger, Chief Manager
<PAGE>
EXHIBIT D
LIST OF ASSUMED EQUIPMENT LEASES AND MONTHLY AMOUNTS DUE
LESSOR PURPOSE AMOUNTS DUE DATE
------ ------- ------- --------
Citizens National Sound & lighting $16,620.17 20th of month
Bank equipment
Citizens National Computers $ 510.16 27th of month
Bank
Associates Leasing Walkie-talkies $ 320.99 27th of month
AT&T Capital Fax/Copier $ 240.35 28th of month
Leasing Services,
Inc.
AT&T Credit Telephone $ 616.18 27th of month
Corporation
- -----------------
* Lessee shall have no rights in the video equipment (recorders, cameras,
screens, and any and all related equipment) currently used in the theater.
<PAGE>
EXHIBIT E
Encumbrances
1. All encumbrances listed in Lessor's title insurance policy issued by
Lawyers Title Insurance Corporation (Policy #113-00-997074) attached
hereto as EXHIBIT E-1.
2. A disputed lien asserted by Creative Structures, Inc. filed in the Sevier
County Register of Deeds Office on July 2, 1996. Lessor covenants that
this item will be released or removed by bond by January 15, 1997.
3. A deed of trust in favor of SunTrust National Bank of East Tennessee and
a deed of trust in favor of Union Planters Bank.
<PAGE>
EXHIBIT E-1
Lawyers Title
Insurance Corporation
National Headquarters
Richmond, Virginia
________________________________
Owner's Policy Number
113 - 00 - 997074
________________________________
SUBJECT TO THE EXCLUSIONS FROM COVERAGE, THE EXCEPTIONS FROM COVERAGE CONTAINED
IN SCHEDULE B AND THE CONDITIONS AND STIPULATIONS, LAWYERS TITLE INSURANCE
CORPORATION, a Virginia corporation, herein called the Company, insures, as of
Date of Policy shown in Schedule A, against loss or damage, not exceeding the
Amount of Insurance stated in Schedule A, sustained or incurred by the insured
by reason of:
1. Title to the estate or interest described in Schedule A being vested
other than as stated therein;
2. Any defect in or lien or encumbrance on the title;
3. Unmarketability of the title;
4. Lack of a right of access to and from the land.
The Company will also pay the costs, attorneys' fees and expenses incurred in
defense of the title, as insured, but only to the extent provided in the
Conditions and Stipulations.
IN WITNESS WHEREOF the Company has caused this policy to be signed and sealed,
to be valid when Schedule A is countersigned by an authorized officer or agent
of the Company, all in accordance with its By-Laws.
LAWYERS TITLE INSURANCE CORPORATION
Attest: By: /s/ Janet A. Alpert
Secretary President
<PAGE>
EXCLUSIONS FROM COVERAGE
The following matters are expressly excluded from the coverage of this
policy and the Company will not pay loss or damage, costs, attorneys' fees or
expenses which arises by reason of:
(a) Any law, ordinance or governmental regulation (including but not limited to
building and zoning laws, ordinances, or regulations) restricting,
regulating, prohibiting or relating to (i) the occupancy, use, or enjoyment
of the land; (ii) the character, dimensions or location of any improvement
now or hereafter erected on the land; (iii) a separation in ownership or a
change in the dimensions or area of the land or any parcel of which the
land is or was a part; or (iv) environmental protection, or the effect of
any violation of these laws, ordinances or governmental regulations, except
to the extent that a notice of the enforcement thereof or a notice of a
defect, lien or encumbrances resulting from a violation or alleged
violation affecting the land has been recorded in the public records at
Date of Policy.
(b) Any governmental police power not excluded by (a) above, except to the
extent that a notice of the exercise thereof or a notice of a defect, lien
or encumbrances resulting from a violation or alleged violation affecting
the land has been recorded in the public records at Date of Policy.
Rights of eminent domain unless notice of the exercise thereof has been recorded
in the public records at Date of Policy, but not excluding from coverage any
taking which has occurred prior to Date of Policy which would be binding on the
rights of a purchaser for value without knowledge.
Defects, liens, encumbrances, adverse claims or other matter:
(a) created, suffered, assumed or agreed to by the insured claimant;
(b) not known to the Company, not recorded in the public records at Date of
Policy, but known to the insured claimant and disclosed in writing to the
Company by the insured claimant prior to the date the insured claimant
became an insured under this policy;
(c) resulting in no loss or damage to the insured claimant;
(d) attaching or created subsequent to Date of Policy; or
(e) resulting in loss or damage which would not have been sustained if the
insured claimant had paid value for the estate or interest insured by this
policy.
Any claim, which arises out of the transaction vesting in the insured the estate
or interest insured by this policy, by reason of the operation of federal
bankruptcy, state insolvency, or similar creditors' rights laws.
<PAGE>
CONDITIONS AND STIPULATIONS
1. DEFINITIONS OF TERMS
The following terms when used in this policy mean: (a) "insured": the
insured name in Schedule A, and, subject to any rights or defenses the
Company would have had against the named insured, those who succeed to the
interest of the named insured by, operation of law as distinguished from
purchase including, but not limited to, heirs, distributees, devisees,
survivors, personal representatives, next of kin, or corporate or fiduciary
successors.
(b) "insured claimant": an insured claiming loss or damage.
(c) "knowledge" or "known": actual knowledge, not constructive knowledge
or notice which may be imputed to an insured by reason of the public records
as defined in this policy or any other records which impart constructive
notice of matters affecting the land.
(d) "land": the land described or referred to in Schedule A, and
improvements affixed thereto which by law constitute real property. The term
"land" does not include any property beyond the lines of the area described or
referred to in Schedule A, nor any right, title, interest, estate or easement
in abutting streets, roads, avenues, alleys, lanes, ways or waterways, but
nothing herein shall modify or limit the extent to which a right of access to
and from the land is insured by this policy.
(e) "mortgage": mortgage, deed of trust, trust deed, or the other
security instrument.
(f) "public records": records established under state statutes at Date of
Policy for the purpose of imparting constructive notice of matters relating
to real property to purchasers for value and without knowledge. With respect
to Section 1(a)(iv) of the Exclusions From Coverage, "public records" shall
also include environmental protection liens filed in the records of the clerk
of the United States district court for the district in which the land is
located.
(g) "unmarketability of the title": an alleged or apparent matter
affecting the title to the land, not excluded or excepted from coverage,
which would entitle a purchaser of the estate or interest described in
Schedule A to be released from the obligation to purchase by virtue of a
contractual condition requiring the delivery of marketable title.
2. CONTINUATION OF INSURANCE AFTER CONVEYANCE OF TITLE.
The coverage of this policy shall continue in force as of Date of Policy
in favor of an insured only so long as the insured retains an estate or
interest in the land, or holds an indebtedness secured by a purchase money
mortgage given by a purchaser from the insured, or only so long as the
insured shall have liability by reason of covenants of warranty made by the
insured in any transfer or conveyance of the estate or interest. This policy
shall not continue in force in favor of any purchaser from the insured of
either (i) an estate or interest in the land, or (ii) an indebtedness secured
by a purchase money mortgage given to the insured.
3. NOTICE OF CLAIM TO BE GIVEN BY INSURED CLAIMANT.
The insured shall notify the Company promptly in writing (i) in case of
any litigation as set forth in Section 4(a) below, (ii) in case knowledge
shall come to an insured hereunder of any claim of tittle or interest which is
adverse to the title to the estate or interest, as insured, and which might
cause loss or damage for which the Company may be liable by virtue of this
policy, or (iii) if title to the estate or interest, as insured, is rejected
as unmarketable. If prompt notice shall not be given to the Company, then as
to the insured all liability of the Company shall terminate with regard to
the matter or matters for which prompt notice is required; provided, however,
that failure to notify the Company shall in no case prejudice the rights of
any insured under this policy unless the Company shall be prejudiced by the
failure and then only to the extent of the prejudice.
4. DEFENSE AND PROSECUTION OF ACTIONS; DUTY OF INSURED CLAIMANT TO COOPERATE.
(a) Upon written request by the insured and subject to the options
contained in Section 6 of these Conditions and Stipulations, the Company, at
its own cost and without unreasonable delay, shall provide for the defense of
an insured in litigation in which any third party asserts a claim adverse to
the title or interest as insured, but only as to those stated causes of
action alleging a defect, lien or encumbrance or other matter insured against
by this policy. The Company shall have the right to select counsel of its
choice (subject to the right of the insured to object for reasonable cause)
to represent the insured as to those stated causes of action and shall not be
liable for and will not pay the fees of any other counsel. The Company will
not pay any fees, costs or expenses incurred by the insured in the defense of
those causes of action which allege matters not insured against by this
policy.
(b) The Company shall have the right, at its own cost, to institute and
prosecute any action or proceeding or to do any other act which in its
opinion may be necessary or desirable to establish the title to the estate or
interest as insured, or to prevent or reduce loss or damage to the insured.
The Company may take any appropriate action under the terms of this policy,
whether or not it shall be liable hereunder, and shall not thereby concede
liability or waive any provision of this policy. If the Company shall
exercise its rights under this paragraph, it shall do so diligently.
(c) Whenever, the Company shall have brought an action or interposed a
defense as required or permitted by the provisions of this policy, the
Company may pursue any litigation to final determination by a court of
competent jurisdiction and expressly reserves the right, it its sole
discretion, to appeal from any adverse judgment or order.
(d) In all cases where this policy permits or requires the Company to
prosecute or provide for the defense of any action or proceeding, the insured
shall secure to the Company the right to so prosecute or provide defense in
the action or proceeding, and all appeals therein, and permit the Company to
use, at its option, the name of the insured for this purpose. Whenever
requested by the Company, the insured, at the Company's expense, shall give
<PAGE>
the Company all reasonable aid (i) in any action or proceeding, securing
evidence, obtaining witnesses, prosecuting or defending the action or
proceeding, or effecting settlement, and (ii) in any other lawful act which
in the opinion of the Company may be necessary or desirable to establish the
title to the estate or interest as insured. If the Company is prejudiced by
the failure of the insured to furnish the required cooperation, the Company's
obligations to the insured under the policy shall terminate, including any
liability or obligation to defend, prosecute, or continue any litigation,
with regard to the matter or matters requiring such cooperation.
5. PROOF OF LOSS OR DAMAGE.
In addition to and after the notices required under Section 3 of these
Conditions and Stipulations have been provided the Company, a proof of loss
or damage signed and sworn to by the insured claimant shall be furnished to
the Company within 90 days after the insured claimant shall ascertain the
facts giving rise to the loss or damage. The proof of loss or damage shall
describe the defect in, or lien or encumbrance on the title, or other matter
insured against by this policy which constitutes the basis of loss or damage
and shall state, to the extent possible, the basis of calculating the amount
of the loss or damage. If the Company is prejudiced by the failure of the
insured claimant to provide the required proof of loss or damage, the
Company's obligations to the insured under the policy shall terminate,
including any liability or obligation to defend, prosecute, or continue any
litigation, with regard to the matter or matters requiring such proof of loss
or damage.
In addition, the insured claimant may reasonably be required to submit
to examination under oath by an authorized representative of the Company and
shall produce for examination, inspection and copying, at such reasonable
times and places as may be designated by any authorized representative of the
Company, all records, books, ledgers, checks, correspondence and memoranda,
whether bearing a date before or after Date of Policy, which reasonably
pertain to the loss or damage. Further, if requested by any authorized
representative of the Company, the insured claimant shall grant its
permission, in writing, for any authorized representative of the Company to
examine, inspect and copy all records, books, ledgers, checks, correspondence
and memoranda in the custody or control of a third party, which reasonably
pertain to the loss or damage. All information designated as confidential by
the insured claimant provided to the Company pursuant to this Section shall
not be disclosed to others unless, in the reasonable judgment of the Company,
it is necessary in the administration of the claim. Failure of the insured
claimant to submit for examination under oath, produce other reasonably
requested information or grant permission to secure reasonably necessary
information from third parties as required in this paragraph shall terminate
any liability of the Company under this policy as to that claim.
6. OPTIONS TO PAY OR OTHERWISE SETTLE CLAIMS; TERMINATION OF LIABILITY
In case of a claim under this policy, the Company shall have the
following additional options:
(a) TO PAY OR TENDER PAYMENT OF THE AMOUNT OF INSURANCE.
To pay or tender payment of the amount of insurance under this policy
together with any costs, attorneys' fees and expenses incurred by the insured
claimant, which were authorized by the Company, up to the time of payment or
tender of payment and which the Company is obligated to pay.
Upon the exercise the Company of this option, all liability and
obligations to the insured under this policy, other than to make the payment
required, shall terminate, including any liability or obligation to defend,
prosecute, or continue any litigation, and the policy shall be surrendered to
the Company for cancellation.
(b) TO PAY OR OTHERWISE SETTLE WITH PARTIES OTHER THAN THE INSURED OR
WITH THE INSURED CLAIMANT.
(i) to pay or otherwise settle with other parties for or in the name
or an insured claimant any claim insured against under this policy, together
with any costs, attorneys' fees and expenses incurred by the insured claimant
which were authorized by the Company up to the time of payment and which the
Company is obligated to pay; or
(ii) to pay or otherwise settle with the insured claimant the loss or
damage provided for under this policy, together with any costs, attorneys'
fees and expenses incurred by the insured claimant which were authorized by
the Company up to the time of payment and which the Company is obligated to
pay.
Upon the exercise by the Company of either of the options provided for in
paragraphs (b)(i) or (ii), the Company's obligations to the insured under
this policy for the claimed loss or damage, other than the payments required
to be made, shall terminate, including any liability or obligation to defend,
prosecute or continue any litigation.
7. DETERMINATION, EXTENT OF LIABILITY AND COINSURANCE.
This policy is a contract of indemnity against actual monetary loss or
damage sustained or incurred by the insured claimant who has suffered loss or
damage by reason of matters insured against by this policy and only to the
extent herein described.
(a) The liability of the Company under this policy shall not exceed the
least of:
(i) the Amount of Insurance stated in Schedule A; or,
(ii) the difference between the value of the insured estate or
interest as insured and the value of the insured estate or interest subject
to the defect, lien or encumbrance insured against by this policy.
(b) In the event the Amount of Insurance stated in Schedule A at the Date
of Policy is less than 80 percent of the value of the insured estate or
interest or the full consideration paid for the land, whichever is less, or
if subsequent to the Date of Policy an improvement is erected on the land
which increases the value of the insured estate or interest by at least 20
percent over the Amount of Insurance stated in Schedule A, then this Policy
is subject to the following:
(i) where no subsequent improvement has been made, as to any partial
loss, the Company shall only pay the loss pro rata in the proportion that the
amount of insurance at Date of Policy bears to the total value of the insured
estate or interest at Date of Policy; or
<PAGE>
(ii) where a subsequent improvement has been made, as to any partial
loss, the Company shall only pay the loss pro rata in the proportion that 120
percent of the Amount of Insurance stated in Schedule A bears to the sum of
the Amount of Insurance stated in Schedule A and the amount expended for the
improvement.
The provisions of this paragraph shall not apply to costs, attorneys'
fees and expenses for which the Company is liable under this policy, and
shall only apply to that portion of any loss which exceeds, in the aggregate,
10 percent of the Amount of Insurance stated in Schedule A.
(c) The Company will pay only those costs, attorneys' fees and expenses
incurred in accordance with Section 4 of these Conditions and Stipulations.
8. APPORTIONMENT.
If the land described in Schedule A consists of two or more parcels which are
not used as a single site, and a loss is established affecting one or more of
the parcels but not all, the loss shall be computed and settled on a pro rata
basis as if the amount of insurance under this policy was divided pro rata as
to the value on Date of Policy of each separate parcel to the whole,
exclusive of any improvements made subsequent to Date of Policy, unless a
liability or value has otherwise been agreed upon as to each parcel by the
Company and the insured at the time of the issuance of this policy and shown
by an express statement or by an endorsement attached to this policy.
9. LIMITATION OF LIABILITY.
(a) If the Company establishes the title, or removes the alleged defect,
lien or encumbrances, or cures the lack of a right of access to or from the
land, or cures the claim of of unmarketability of title, all as insured, in a
reasonably diligent manner by any method, including litigation and the
completion of any appeals therefrom, it shall have fully performed its
obligations with respect to that matter and shall not be liable for any loss
or damage caused thereby.
(b) In the event of any litigation, including litigation by the Company
or with the Company's consent, the Company shall have no liability for loss
or damage until there has been a final determination by a court of competent
jurisdiction, and disposition of all appeals therefrom, adverse to the title
as insured.
(c) The Company shall not be liable for loss or damage to any insured or
liability voluntarily assumed by the insured in settling any claim or suit
without the prior written consent of the Company.
10. REDUCTION OF INSURANCE; REDUCTION OR TERMINATION OF LIABILITY.
All payments under this policy, except payments made for costs,
attorneys' fees and expenses, shall reduce the amount of the insurance pro
rata.
11. LIABILITY NONCUMULATIVE.
It is expressly understood that the amount of insurance under this policy
shall be reduced by any amount the Company may pay under any policy insuring
a mortgage to which exception is taken in Schedule BV or to which the insured
has agreed, assumed, or taken subject, or which is hereafter executed by an
insured and which is a charge or lien on the estate or interest described or
referred to in Schedule A, and the amount so paid shall be deemed a payment
under this policy to the insured owner.
12. PAYMENT OF LOSS.
(a) No payment shall be made without producing this policy for
endorsement of the payment unless the policy has been loss or destroyed, in
which case proof of loss or destruction shall be furnished to the
satisfaction of the Company.
(b) When liability and the extent of loss or damaged has been definitely
fixed in accordance with these Conditions and Stipulations, the loss or
damage shall be payable within 30 days thereafter.
13. SUBROGATION UPON PAYMENT OR SETTLEMENT.
(a) THE COMPANY'S RIGHT OF SUBROGATION.
Whenever the Company shall have settled and paid a claim under this policy,
all right of subrogation shall vest in the Company unaffected by any act of
the insured claimant.
The Company shall be subrogated to and be entitled to all rights and
remedies which the insured claimant would have had against any person or
property in respect to the claim had this policy not been issued. If
requested by the Company, the insured claimant shall transfer to the Company
all rights and remedies against any person or property necessary in order to
perfect this right of subrogation. The insured claimant shall permit the
Company to sue, compromise or settle in the name of the insured claimant and
to use the name of the insured claimant in any transaction or litigation
involving these rights or remedies.
If a payment on account of a claim does not fully cover the loss of the
insured claimant, the Company shall be subrogated to these rights and
remedies in the proportion which the Company's payment bears to the whole
amount of the loss.
If loss should result from any act of the insured claimant, as stated
above, that act shall not void this policy, but the Company, in that event,
shall be required to pay only that part of any losses insured against by this
policy which shall exceed the amount, if any, lost to the Company by reason
of the impairment by the insured claimant of the Company's right of
subrogation.
(b) THE COMPANY'S RIGHTS AGAINST NON-INSURED OBLIGORS.
The Company's right of subrogation against non-insured obligors shall
exist and shall include, without limitation, the rights of the insured to
indemnities, guaranties, other policies of insurance or bonds,
notwithstanding any terms or conditions contained in those instruments which
provide for subrogation rights by reason of this policy.
14. ARBITRATION.
Unless prohibited by applicable law, either the Company or the insured
may demand arbitration pursuant to the Title Insurance Arbitration Rules of
the American Arbitration Association. Arbitrable matters may include, but are
not limited to, any controversy or claim between the Company and the insured
arising out of or relating to this policy, any service of the Company in
connection with its issuance or the breach of a policy provision or other
obligation. All arbitrable matters when he Amount of Insurance is $1,000,000
or less shall be arbitrated at the option of either the Company or the
insured. All arbitratable matter when the Amount of Insurance is in excess of
$1,000,000 shall be arbitrated
<PAGE>
only when agreed to by both the Company and the insured. Arbitration pursuant
to this policy and under the Rules in effect on the date the demand for
arbitration is made or, at the option of the insured, the Rules in effect at
Date of Policy shall be binding upon the parties. The award may include
attorneys' fees only if the laws of the state in which the land is located
permit a court to award attorneys' fees to a prevailing party. Judgment upon
the award rendered by the Arbitrator(s) may be entered into any court having
jurisdiction thereof.
The law of the situs of the land shall apply to an arbitration under the
Title Insurance Arbitration Rules.
A copy of the Rules may be obtained from the Company upon request.
15. LIABILITY LIMITED TO THIS POLICY; POLICY ENTIRE CONTRACT.
(a) This policy together with all endorsements, if any, attached hereto by
the Company is the entire policy and contract, between the insured and the
Company. In interpreting any provision of this policy, this policy shall be
construed as a whole.
(b) Any claim of loss or damage, whether or not based on negligence, and
which arises out of the status of the title to the estate or interest covered
hereby or by any action asserting such claim, shall be restricted to this
policy.
(c) No amendment of or endorsement to this policy can be made except by a
writing endorsed hereon or attached hereto signed by either the President, a
Vice President, the Secretary, an Assistant Secretary, or validating officer
or authorized signatory of the Company.
16. SEVERABILITY.
In the event any provision of the policy is held invalid or unenforceable
under applicable law, the policy shall be deemed not to include that
provision and all other provisions shall remain in full force and effect.
17. NOTICES, WHERE SENT.
All notices required to be given the Company and any statement in writing
required to be furnished the Company shall include the number of this policy
and shall be addressed to its Corporate-Headquarters, 6630 West Broad Street,
Richmond, Virginia 23230. Mailing address: P.O. Box 27567, Richmond, Virginia
23261.
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POLICY OF TITLE INSURANCE
A WORD OF THANKS . . .
As we make your policy a part of our permanent records, we want to express
our appreciation of this evidence of your faith in Lawyers Title Insurance
Corporation.
There is no recurring premium.
This policy provides valuable title protection and we suggest you keep it in a
safe place where it will be readily available for future reference.
If you have any questions about the protection provided by this policy, contact
the office that issued your policy or you may write to:
<PAGE>
Consumer Affairs Department
LAWYERS TITLE INSURANCE CORPORATION
P.O. BOX 27567
RICHMOND, VIRGINIA 23261
TOLL FREE NUMBER 1-800-446-7086
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
LAWYERS TITLE
INSURANCE CORPORATION
NATIONAL HEADQUARTERS
RICHMOND, VIRGINIA
OWNER'S POLICY
SCHEDULE A
*******************
ENDORSEMENTS:
********************************************************************************
CASE DATE OF AMOUNT OF POLICY
NUMBER POLICY POLICY NUMBER
________________________________________________________________________________
June 17, 1994 $2,950,000.00 113-00-997074
________________________________________________________________________________
1. Name of Insured:
J. MacDonald Burkhart
2. The estate or interest in the land which is covered by this policy is;
fee simple
3. Title to the estate or interest in the land is vested in:
J. MacDonald Burkhart
4. The land referred to in this policy is described as follows:
SEE ATTACHED DESCRIPTION
NOTE: This property was conveyed to J. MacDonald Burkhart by warranty
deed of R. DeWitt Shelton, a 3/4ths undivided interest as tenant in
common and Lela Ogle, a 1/4th undivided interest as tenant in common,
dated June 16, 1994, filed for record on June 17, 1994, in Warranty
Deed Book 522, Page 646, in the Register's Office for Sevier County,
Tennessee. Said warranty deed was corrected by Correction Warranty
Deed dated May 10, 1995, filed for record on May 10, 1995, in Warranty
Deed Book 544, Page 607, in the Register's Office for Sevier County,
Tennessee.
<PAGE>
DOUGLAS S. YATES
By: /s/ DOUGLAS S. YATES Sevierville, Tennessee
------------------------------ -------------------------
COUNTERSIGNATURE AUTHORIZED Issued At (Location)
OFFICER OR AGENT
Policy 136 - Form No. 035-0136-0000 -- This Policy is invalid unless the
cover sheet and Schedule B are attached. --- ALTA Owners Policy (10-17-92)
<PAGE>
Lawyers Title
Insurance Corporation
NATIONAL HEADQUARTERS
Richmond, Virginia
OWNER'S POLICY
SCHEDULE B
********************************************************************************
CASE NUMBER: POLICY NUMBER: 113-00-997-074
********************************************************************************
EXCEPTIONS FROM COVERAGE
This policy does not insure against loss or damage (and the Company will not pay
costs, attorneys fees or expenses) which arise by reason of:
1. Special Exceptions:
(a) Taxes for the year 1995 and subsequent years.
2. The officials of the City of Pigeon Forge have represented that the 1993
City of Pigeon Forge Taxes have been paid in the amount of $3338.63, #2322,
and that there are no taxes owing for prior years. However, no opinion is
expressed and no liability is assumed with regard to these representations
since similar representations by officials of the City of Pigeon Forge have
proved unreliable in the past.
3. This property may be subject to an easement in respect to the old abandoned
roadbed adjoining Pine Grove Plaza along the northern boundary of the
property as shown on map of Ronnie L. Sims, RLS, dated June 8, 1994.
4. Subject to an existing asphalt encroachment along the northern boundary of
the property adjoining Pine Grove Plaza and Highway 441, as shown on map of
Ronnie L. Sims, RLS, dated Jun 8, 1994.
5. This property is subject to a deed of trust in favor of Third National Bank
of East Tennessee, dated June 16, 1994, of record in Trust Deed Book 523,
Page 220, in the said Register's Office. Said deed of trust was corrected
by Correction Tennessee Deed of Trust dated May 10, 1995, of record in
Trust Deed Book 557, Page 322, in the said Register's Office.
Policy 136 Litho in U.S.A. - Form No. 035-0-136-0001 --- ALTA Owners Policy
(10-17-92)
<PAGE>
EXHIBIT A
TRACT I:
SITUATED in the Fifth (5th) Civil District of Sevier County, Tennessee, and
within the corporate limits of the City of Pigeon Forge, Tennessee, and being a
10.165 acre tract located on the eastern side of U.S. Highway 441, and being
more particularly bounded and described as follows:
BEGINNING at an iron pin set in the eastern right-of-way of U.S. Highway 441,
said iron pin being 300 feet, more or less, in a northerly direction from the
intersection of the eastern right-of-way of U.S. Highway 441 with the northern
right-of-way of Sugar Hollow Road; thence with the right-of-way of U.S. Highway
441 North 00 deg. 42 min. 48 sec. East passing an iron pin at 55.38 feet, a
total distance of 178.16 feet to an iron pin marking the southwestern corner of
Lot 7 of Pine Grove Plaza (Map Book 21, Page 173); thence leaving the right-of-
way of U.S. Highway 441 and with the line of Pine Grove Plaza the following two
calls and distances: North 67 deg. 32 min. 43 sec. East 829.56 feet to an iron
pin; North 48 deg. 13 min. 38 sec. East 169.07 feet to an iron pin, corner to
Laurel Manor, Inc. (Deed Book 282, Page 15); thence with the line of Laurel
Manor, Inc. the following two calls and distances: South 54 deg. 40 min. 24 sec.
East 349.54 feet to an iron pin; North 43 deg. 24 min. 19 sec. East 247.69 feet
to an iron pin, corner to John and Lisa Rauhuff (Deed Book 132, Page 88); thence
with the line of Rauhuff and a fence the following two calls and distances:
South 56 deg. 20 min. 12 sec. East 136.66 feet to an iron pin; South 51 deg. 15
min. 57 sec. East 21.10 feet to an iron pin, corner to R. DeWitt Shelton, et al.
(Deed Book 522, Page 642); thence with the line of R. DeWitt Shelton, et al.,
the following six calls and distances: South 40 deg. 26 min. 51 sec. West 621.24
feet to an iron pin; thence running with the arc in a curve to the left in a
circle having a radius of 332.34 feet, a tangent of 60.39 feet, a chord call and
distance of North 83 deg. 26 min. 38 sec. West 118.84 feet to an iron pin;
thence South 86 deg. 15 min. 24 sec. West 97.00 feet, a tangent of 76.99 feet, a
chord call and distance of North 71 deg. 04 min. 59 sec. West 142.09 feet to an
iron pin; thence North 48 deg. 25 min. 23 sec. West 20.64 feet to an iron pin;
thence running with the arc in a curve to the left in a circle having a radius
of 75.13 feet, a tangent of 28.51 feet, a chord call and distance of North 69
deg. 12 min. 15 sec. West 53.31 feet to an iron pin, corner to BGA Associates
(Deed Book 485, Page 177); thence with the line of BGA Associates the following
two calls and distances: North 89 deg. 59 min. 25 sec. West 425.32 feet to an
iron pin; South 65 deg. 12 min. 05 sec. West 261.88 feet to an iron pin in the
right-of-way of U.S. Highway 441, the POINT OF BEGINNING, as shown by survey of
Dean A. Orr, RLS #780. ETE Consulting Engineering, Inc., 311 Oak Ridge Turnpike,
Oak Ridge, Tennessee 37830, dated April 28, 1995, bearing Job No. 94-398-11.
THIS CONVEYANCE IS SUBJECT TO an exclusive sign easement as reserved in
Correction Warranty Deed dated May 10, 1995, of record in Deed Book 544, Page
607, in the Sevier County Register's Office, said easement encumbering the
following described parcel of property:
SITUATED in the Fifth (5th) Civil District of Sevier County, Tennessee, and
within the corporate limits of the City of Pigeon Forge, Tennessee, being
located on the eastern side of U.S. Highway 441, and being more particularly
described as follows:
TO FIND THE POINT OF BEGINNING start at an iron pin set in the eastern right-of-
way of U.S. Highway 441, said iron pin being 300 feet, more or less, in a
northerly direction from the intersection of the eastern right-of-way of U.S.
Highway 441 with the northern right-of-way of Sugar Hollow Road; thence running
with the eastern right-of-way of U.S. Highway 441 and the western terminus of a
50 foot joint permanent non-exclusive easement North 00 deg. 42 min. 48 sec.
East 55.38 feet to an iron pin lying in the northern line of said 50 foot
<PAGE>
joint permanent non-exclusive easement, said iron pin marking the place of
beginning of the sign easement area; thence leaving the right-of-way of U.S.
Highway 441 and with the northern line of a 50 foot joint permanent
non-exclusive easement North 65 deg. 12 min. 05 sec. East 20.00 feet, more or
less, to a point; thence leaving the right-of-way of a 50 foot joint
permanent non-exclusive easement North 00 deg. 42 min. 48 sec. East 20.00
feet, more or less, to a point; thence South 65 deg. 12 min. 05 sec. West
20.00 feet, more or less, to a point in the eastern right-of-way of U.S.
Highway 441; thence with the eastern right-of-way of U.S. Highway 441 South
00 deg. 42 min. 48 sec. West 20.00 feet, more or less, to an iron pin, the
POINT OF BEGINNING, as shown on survey of Dean A. Orr, RLS #780, ETE
Consulting Engineering, Inc., 311 Oak Ridge Turnpike, Oak Ridge, Tennessee
37830, dated April 28, 1995, bearing Job. No. 94-398-11.
THIS CONVEYANCE IS FURTHER SUBJECT TO a 50 foot wide joint permanent non-
exclusive easement for ingress, egress and utilities running over, across and
under the above-described 10.165 acre tract of property, as reserved in
Correction Warranty Deed dated May 10, 1995, of record in Deed Book 544, Page
607, in the Sevier County Register's Office, said 50 foot wide joint permanent
non-exclusive easement being more particularly bounded and described as follows:
SITUATED in the Fifth (5th) Civil District of Sevier County, Tennessee, and
within the corporate limits of the City of Pigeon Forge, Tennessee, and being
more particularly bounded and described as follows:
BEGINNING at an iron pin in the eastern right-of-way of U.S. Highway 441, said
iron pin being located 300 feet, more or less, in a northerly direction from the
intersection of the eastern right-of-way of U.S. Highway 441 with the northern
right-of-way of Sugar Hollow Road; thence with the right-of-way of U.S. Highway
441 North 00 deg. 42 min. 48 sec. East 55.38 feet to an iron pin; thence leaving
the right-of-way of U.S. Highway 441 and running along the northern right-of-way
line of the 50 foot wide joint permanent non-exclusive easement the following
calls and distances: North 65 deg. 12 min. 05 sec. East 249.02 feet to an iron
pin; thence South 89 deg. 59 min. 24 sec. East 436.32 feet to an iron pin;
thence running with an arc in a curve to the right in a circle having a radius
of 125.13 feet, a tangent of 47.49 feet, a chord call and distance of South 69
deg. 12 min. 15 sec. East 88.79 feet to an iron pin; thence South 48 deg. 25
min. 23 sec. East 20.64 feet to an iron pin; thence running with an arc in a
curve to the left in a circle having a radius of 134.40 feet, a tangent of 56.11
feet, a chord call and distance of South 71 deg. 04 min. 59 sec. East 103.56
feet to an iron pin; thence North 86 deg. 15 min. 24 sec. East 97.00 feet to an
iron pin; thence running with the arc in a curve to the right in a circle having
a radius of 382.34 feet, a tangent of 49 min. 36 sec. East 157.90 feet to an
iron pin in the line of R. DeWitt Shelton, et al. (Deed Book 522, Page 642);
thence with the line of R. DeWitt Shelton, et al. The following six calls and
distances: South 40 deg. 26 min. 51 sec. West 53.90 feet to an iron pin; thence
running with the arc in a curve to the left in a circle having a radius of
332.34 feet, a tangent of 60.39 feet, a chord call and distance of North 83 deg.
26 min. 38 sec. West 118.84 feet to an iron pin; thence South 86 deg. 15 min. 24
sec. West 97.00 feet to an iron pin; thence running with an arc in a curve to
the right in a circle having a radius of 184.40 feet, a tangent of 76.99 feet, a
chord call and distance of North 71 deg. 04 min. 59 sec. West 142.09 feet to an
iron pin; thence North 48 deg. 25 min. 23 sec. West 20.64 feet to an iron pin;
thence running with an arc in a curve to the left in a circle having a radius of
75.13 feet, a tangent of 28.51 feet, a chord call and distance of North 69 deg.
12 min. 15 sec. West 53.31 feet to an iron pin, corner to BGA Associates (Deed
Book 485, PGE 177); thence with the line of BGA Associates the following two
calls and distances: North 89 deg. 59 min. 25 sec. West 425.32 feet to an iron
pin; thence South 65 deg. 12 min. 05 sec. West 261.88 feet to an iron pin in the
eastern right-of-way line of U.S. Highway 441, the POINT AND PLACE OF BEGINNING,
as shown by survey of Dean A. Orr, RLS #780, ETE Consulting Engineering, Inc.,
311 Oak Ridge Turnpike, Oak Ridge, Tennessee 37830, dated April 28, 1995,
bearing Job No. 94-398-11.
<PAGE>
TRACT II:
PARCEL A:
SITUATED in the Fifth (5th) Civil District of Sevier County, Tennessee, and
within the corporate limits of the City of Pigeon Forge, Tennessee, and being a
50 foot wide right-of-way immediately north of and running parallel with the
following described line, which line marks the southern right-of-way line for
said 50 foot wide joint permanent non-exclusive easement for ingress, egress and
utilities:
TO FIND THE POINT OF BEGINNING start at an iron pin set in the eastern right-of-
way line of U.S. Highway 441, said iron pin being 300 feet, more or less, in a
northerly direction from the intersection of the eastern right-of-way of U.S.
Highway 441 with the northern right-of-way of Sugar Hollow Road and said iron
pin being corner to BGA Associates (Deed Book 485, Page 177); thence running
with the line of BGA Associates the following two calls and distances: North 65
deg. 12 min. 05 sec. East 261.88 feet to an iron pin; thence South 89 deg. 59
min. 25 sec. East 425.32 feet to an iron pin, corner to R. DeWitt Shelton, et
al.; thence with the line of Shelton, et al. the following five calls and
distances: Running with the arc in a curve to the right in a circle having a
radius of 75.131 feet, a tangent of 28.513 feet, a chord call and distance of
South 69 deg. 12 min. 18 sec. East 53.315 feet to an iron pin; thence South 48
deg. 25 min. 23 sec. East 20.64 feet to an iron pin; thence running with the arc
in a curve to the left in a circle having a radius of 184.400 feet, a tangent of
76.985 feet, a chord call and distance of South 71 deg. 05 min. 00 sec. East
142.085 feet to an iron pin; thence North 86 deg. 15 min. 24 sec. East 97.00
feet to an iron pin; thence running with the arc in a curve to the right in a
circle having a radius of 332.340 feet, a tangent of 67.162 feet, a chord call
and distance of South 82 deg. 19 min. 07 sec. East 131.662 feet to an iron pin,
the POINT OF BEGINNING; thence running with the arc in a curve to the right in a
circle having a radius of 345.332 feet, a tangent of 96.499 feet, a chord call
and distance of South 55 deg. 16 min. 53 sec. East 185.877 feet to an iron pin;
thence South 39 deg. 40 min. 08 sec. East 193.90 feet to an iron pin, being
corner to property of Barbara Mockus, said iron pin marking the terminus of the
easement area and being according to the survey of Ronnie L. Sims, Tennessee
Registered Land Survey No. 683, 1020 Topside Drive, Sevierville, Tennessee
37862, dated December 20, 1994 and the last revised on April 19, 1995.
PARCEL B
SITUATED in the Fifth (5th) Civil District of Sevier County, Tennessee, and
within the corporate limits of the City of Pigeon Forge, Tennessee, beginning at
an iron pin marking the southeastern terminus of the aforementioned easement
described above, and which iron pin lies in the southwestern right-of-way line
of the 50 foot wide joint permanent non-exclusive easement area; thence leaving
said point and place of beginning and running with the southern terminus of the
50 foot wide joint permanent non-exclusive easement for ingress, egress and
utilities afore described, North 50 deg. 19 min. 51 sec. East 50.00 feet to an
iron pin; thence South 39 deg. 40 min. 08 sec. East 132.93 feet to an iron pin;
thence North 79 deg. 28 min. 09 sec. East 110.87 feet to an iron pin; thence
running with the arc in a curve to the right in a circle having a radius of
50.01 feet, a tangent of 39.94 feet, an arc distance of 67.40 feet to an iron
pin lying in the northern right-of-way line of Sugar Hollow Road; thence running
with the northern right-of-way line of Sugar Hollow Road and running with the
arc in a curve to the left in a circle having a radius of 498.40 feet, a tangent
of 25.03 feet, an arc distance of 50.03 feet to an iron pin, being corner to
property of C.B. McCarter (Plat Book 5, Page 72); thence running with the line
of McCarter South 79 deg. 28 min. 09 sec. West 140.25 feet to an iron pin, being
corner to property of Barbara Mockus; thence running with the line of Barbara
Mockus North 39 deg. 40 min. 08 sec. West 162.30 feet to an iron pin, marking
the POINT AND PLACE OF BEGINNING, and being according to the survey of Ronnie L.
Sims, Tennessee Registered Land Surveyor No. 683, 1020 Topside Drive,
Sevierville, Tennessee 37862, dated December 20, 1994 and last revised on
April 19, 1995.
<PAGE>
BEING the same property conveyed to J. MacDonald Burkhart from R. DeWitt Shelton
and Lela Evelyn Ogle by Deed dated June 16, 1994, of record in Deed Book 522,
Page 646, as corrected by Deed dated May 10, 1995, of record in Deed Book 544,
Page 607, both in the Sevier County Register's Office.
<PAGE>
EXHIBIT 2
CTE CONTRACT
<PAGE>
EXHIBIT 2
CONTRACT TO PRODUCE SHOW
BETWEEN
COUNTRY TONITE ENTERPRISES, INC.
AND
COUNTRY TONITE THEATRE, L.L.C.
This contract to Produce Show ("Contract") is by and between Country Tonite
Theatre, L.L.C, hereinafter referred to as "Theater," and Country Tonite
Enterprises, Inc., hereinafter referred to as "Producer." Producer agrees to
produce and present for Theater a show known as "Country Tonite" hereinafter
referred to as "Show" in the Country Tonite Theatre located at 2249 Parkway in
Pigeon Forge, Tennessee. Said show will be produced and presented under the
terms and conditions of this Contract.
RECITALS
1. CONTRACT TERM. Producer agrees to produce and present the Show for a
term that is coextensive with the existence of Country Tonite Theatre, L.L.C., a
Tennessee limited liability company, pursuant to its Operating Agreement, dated
as of September 24th, 1996 (the "Operating Agreement").
2. THE "SHOW" DEFINED. The Show will have a running time of one-and-one-
half to two hours. It will consist of at least five singers, eight dancers and
one or two specialty acts performing in a structured Country & Western music
variety show. The Show will also consist of live music with a seven to a
twelve-piece band. In addition to performers and artists, CTE will provide one
(1) administrative person and one (1) wardrobe attendant to facilitate the
production of the show (collectively "Producer Personnel.") The Show shall be a
first rate production consistent with the quality of other variety shows
currently being performed by CTE. Producer may vary the format from time to
time in the best interest of the Show and the Theater.
3. WEEK DEFINED. A "week" is herein defined as a six-day period of a
calendar week (Sunday through Saturday) plus one nonperformance dark night to be
designated by Theater. It is hereby acknowledged that a week will include up to
twelve (12) performances per week. The Show times and days will be designated
in writing by Theater, provided that Producer shall not be required to present
the show between January 1 and March 1 of each year. Producer shall not be
required to present the show a minimum number of times per week, but Producer
shall be required to present the show an average eight (8) times per week for
the period from March 15 through December 31 in each year. Theatre agrees not
to do over twelve (12) shows per week without Burkhart Ventures, LLC's consent,
which shall not be unreasonably withheld. If show is presented more than twelve
(12) times in one week, Producer shall be paid $3,750.00 for each show in a week
over twelve (12).
4. RIGHTS IN THE PRODUCTION. Producer will own and retain all rights in
and to the title, format, logo, script continuity, choreography, and all other
elements of the Show. Notwithstanding the foregoing, Producer grants to Theater
a license for the Term of this Contract, including any extensions thereof to
utilize the Show's title, logo, video, or audio excerpts or any other reference
to or description of the Show in the Theater, promotion, marketing or public
relations materials.
5. EXCLUSIVITY. Producer agrees that during the Term of this contract,
and any extensions thereof, Producer shall not compete with the Theater directly
or indirectly within Sevier County, Tennessee or any
<PAGE>
adjoining county. However, from time to time, it is hereby understood that
Producer may be airing certain excerpts from the Show for the purpose of
marketing, merchandising and advertising the Show. If a taped excerpt of the
Show is utilized on television, for purposes other than marketing and
advertising, for profit, Producer shall pay a fee of $5,000.00 to Theater.
6. CONSIDERATION AND METHOD OF PAYMENT.
a. Theater shall pay Producer a fee of $42,500 per week during the
term, provided that if less than six (6) shows are presented in any week,
subject to the next sentence, the amount paid to Producer for such week shall be
reduced by $7,083.33 for each show less than six (6) that is presented. If the
show is presented for any partial week at the beginning or end of a performance
season, such fee shall be pro-rated based on days performed, but in no event
shall any payment be made between January 1 and March 1 of any year. Payment
shall be made on a weekly basis to Producer and made available to Producer each
Monday morning before 10:00 a.m., Knoxville time, following the week's
performance. Theater will be in default if payment is not made in full within
ten (10) days of written notice of such nonpayment as provided herein.
b. The fee provided for in subparagraph (a) of this paragraph shall
be adjusted as of March 1 of each year, beginning March 1, 1998, for "cost of
living" changes in accord with the Consumer Price Index for Urban Wage Earners
and Clerical Workers (all items) for the Southern United States published by the
Southern Office of the United States Department of Labor, Bureau of Labor
Statistics (the "index"). Each adjustment shall be made by multiplying the
weekly payment for the last full week of the prior calendar year by a fraction,
the numerator which shall be the most recent index in effect at the time of such
adjustment, and the denominator of which shall be the index for January, 1997.
The product shall be the adjusted weekly payment until the next adjustment
occurs. If the index changes so that the base (denominator) differs from that
originally used, the index shall be converted in accordance with the conversion
factor published by the United States Department of Labor, Bureau of Labor
Statistics. If the index is discontinued or revised during the term hereof,
such other government index or computation with which it is replaced shall be
used in order to obtain substantially the same result as would have been
obtained if the index had not been discontinued or revised.
c. As further consideration hereunder, Producer shall have the
exclusive right to film and/or video tape the Show or excerpts thereof and shall
make such film and/or video tape available to Theatre at Producer's actual cost.
All income from sales or rental of such film or video tape sold in Sevier County
shall inure to the benefit of the Theater.
7. PRICE AND REVENUE. Theater shall establish the admission price for
the Show and the cost to the audience of any and all beverage and food service
and shall retain all revenues therefrom. Theater agrees to pay all taxes on
admissions to Show, plus cabaret taxes and sales taxes as well as ASCAP, SESAC
and BMI licensing fees.
8. CERTAIN PRODUCTION COSTS.
a. Theater shall provide, at its expense, lighting and sound
systems, stage sets, house equipment, related equipment, wardrobe maintenance
including storage for same for Show's performers, stage configuration, dressing
rooms, and projection system and screen. Theater shall provide the necessary
personnel to handle stage functions, including but not limited to stage manager,
assistant stage manager, spotlight operators, and lighting and sound
technicians. Producer acknowledges that the facilities and equipment located at
2249 Parkway in Pigeon Forge, Tennessee are suitable for the production of the
show in accordance with the terms of this Agreement.
<PAGE>
b. Producer shall provide, at its sole expense:
(1) All props required for the Show;
(2) All costumes for the Show's performers;
(3) All special effects for the Show which are not standard and
ordinarily existent in the Theater's showroom.
9. REHEARSAL AND AUDITIONS.
a. Theater shall make the showroom available to Producer for
rehearsals and auditions upon reasonable notice by Producer and shall make such
stage lighting and sound personnel as may be reasonably necessary thereto
available in connection therewith.
b. The Theater reserves the right to utilize the showroom for
entertainment and other purposes during all daytime hours and during any
evenings or other times the Show is not presented or when the auditorium is not
in use during mutually agreed rehearsal and audition times described in the
preceding subparagraph.
c. Theater agrees to make the auditorium available for rehearsal and
taping of television commercials.
10. TERMINATION. The Producer may terminate this Agreement if any of the
following events shall occur.
a. Failure by Theatre to pay, in full, on the dates due, any payment
due hereunder, provided, however, that Theatre shall have ten (10) days
following written notice from Producer to cure such default.
b. Failure by Theatre to observe or perform any of the other terms,
covenants, agreements or conditions contained in this Agreement for a period of
thirty (30) days after written notice from Producer specifying such default,
provided, if any such default cannot be completely cured within such 30-day
period, despite Theatre's diligent, best-faith effort, commenced immediately,
then Theatre shall have a reasonable time to complete the cure of such default,
for a period not to exceed ninety (90) days.
c. Either the Lease dated as of the date hereof between J. MacDonald
Burkhart, M.D., and the Theatre or the Operating Agreement of the Theatre is
terminated.
The Producer's right to terminate this Agreement under this paragraph
is in addition to such other rights that the Producer may have at law or equity.
The Theatre may terminate this Agreement if any of the following
events shall occur.
a. Failure by Producer to observe or perform any of the other terms,
covenants, agreements or conditions contained in this Agreement for a period of
thirty (30) days after written notice from Theatre specifying such default,
provided, if any such default cannot be completely cured within such 30-day
period, despite Producer's diligent, best-faith effort, commenced immediately,
then Producer shall have a reasonable time to complete the cure of such default,
for a period not to exceed ninety (90) days.
b. Either the Lease dated as of the date hereof between J. MacDonald
Burkhart, M.D., and the Theatre or the Operating Agreement of the Theatre is
terminated.
<PAGE>
The Theater's right to terminate this Agreement under this paragraph is in
addition to such other rights that the Theater may have at law or equity.
Any notices given hereunder shall also be given to Burkhart Ventures, LLC,
in the manner and at the address provided in the Operating Agreement.
10. CERTAIN PROHIBITIONS. Upon the termination of this Agreement Theatre
agrees not to:
a. for a period of one (1) year after termination of this Agreement,
produce either directly or indirectly or rent its property to any person or
entity producing, a country and eastern rock music variety shown which uses the
word "County" in its name or in any trade name or trademark.
b. for a period of one (1) year after termination of this Agreement,
hire any person who was an employee of the Producer or any affiliated entity
within the one-year period prior to the termination of this Agreement; or
c. violate any copyright, trademark or common law intellectual
property rights of CTE or any affiliated entity.
The provisions of this paragraph shall survive the termination of this
Agreement.
12. PRODUCER PERSONNEL. Producer shall require and assure that all
Producer Personnel shall at all times perform his/her services in a highly
professional manner. While on the premises of the Theatre, Producer Personnel
shall conduct themselves in an appropriate and dignified manner, using
professional discretion at all times. Producer is responsible for assuring that
Producer Personnel and all persons performing services for Producer in
connection with this agreement are subject to, and comply fully with, all terms
and conditions of this Agreement.
13. CANCELLATION OF PERFORMANCE BY THEATRE. Theatre shall have the right
to cancel any performance of the Show, or any portion thereof, should
extraordinary conditions exist which include, but are not limited to: riot,
civil disorder, act(s) of God, strike, act of any federal, state or local
instruments, rebellions, bomb threats, or any natural disaster.
14. PUBLICITY. Producer shall require all performers in the Show to be
available to Theater when requested from time to tome, for, among other things,
publicity photographs and interview . All such services shall be rendered
without any kind of cost or charge to Theater except that the Theater shall
reimburse for travel, as required by the Theater or may pay the entertainer a
fair market hourly rate for any material time. Producer agrees, for itself and
on behalf of all performers in the Show, that such photographs and interview
material may be used by Theater for any promotional and publicity purposes as
Theater shall determine for the term of this agreement in its sole and absolute
discretion; and Producer, for itself and on behalf of its performers, completely
releases, Theater from any liability resulting from the use of such material.
All promotional and publicity materials created at the expense or through the
effort of Theater and approved by the Producer shall be the sole property of
Theater, and Producer agrees to sign and to require its performers to sign, as
may be reasonably determined, any and all releases, acknowledgements or such
other documentations as Theater may request from time to time in connection
with.
15. TAXES AND INSURANCE. Producer shall be solely responsible for and
shall pay when due all federal income tax withholding, FICA, social security,
payment of workers' compensation where required by law and payroll taxes on
behalf of Producerj Personnel. Producer shall provide evidence satisfactory to
Theater that
<PAGE>
worker's compensation insurance coverage is being carried by Producer and,
when requested by Theater, evidence satisfactory to Theater that payment of
all the foregoing payroll burden has been made. Each party to this contract
hereby waives its right to subrogation.
16. INDEPENDENT CONTRACTOR. Producer is and shall be in the performance
of all work, services and activities under this Agreement an independent
contractor. No term or condition under this Agreement nor any method or manner
of payment hereunder shall create any relationship between Theater and Producer
other than as expressed in this paragraph. Producer personnel shall not in any
way, at any time, or under any circumstances, be or be construed to be
employees, agents, representatives or personnel of Theater.
17. INDEMNIFICATION. Producer shall defend, indemnity, and hold Theater
completely free and harmless from and against any and all claims, demands, suits
and actions which are the result of negligence by anyone not a party to this
Agreement for loss, injury, damage, or liability from bodily injury and property
damage arising directly or indirectly out of Producer's negligence with respect
to performance of the Show or of this Agreement. Producer shall carry
commercial liability insurance to insure against such risks.<PAGE>
18. PARKING. Theatre shall make parking available for the show to the
full extent that parking is available to the Theatre under its lease of the
property under which the Show will be permitted.
19. MISCELLANEOUS PROVISIONS
a. Time is of the essence of this Agreement and the performance of
each and every provisions hereof.
b. Except as otherwise provided herein, this Agreement shall be
binding upon and shall inure to the benefit of the parties, their permitted
successors and assigns.
c. Whenever the context so requires, the use of any gender shall be
applicable to all genders, the singular number shall include the plural and the
plural gender.
d. The law of the State of Tennessee shall govern the validity,
performance and enforcement of this Agreement.
e. If either party to this Agreement shall institute any action or
proceeding under the provisions of this Agreement, the prevailing party in such
action or proceeding shall be entitled to recover all of its costs and
reasonable attorney's fees.
f. The failure of Theater to insist upon performance of any of the
provisions of this Agreement in any one or more instances shall not be a waiver
thereafter of its right to full performance of all the provisions of this
Agreement when any performance is due. No waiver of a breach of any of the
covenants, conditions, terms of provisions of this Agreement shall be construed
to be a waiver of any succeeding breach of the same of any other covenant,
condition, term or provisions. All rights and remedies created by this
Agreement are cumulative and the use of one remedy shall not be taken to exclude
or waive the right to the use of another.
g. In case provision contained in this Agreement shall be held to be
illegal, invalid or unenforceable, the legality, validity and enforceability of
all remaining provisions shall not be in any way affected of impaired thereby.
<PAGE>
h. Captions and/or headings have been inserted for convenience of
reference only and are not to be construed or considered to be a part hereof and
shall not in any way modify, restrict or amend any of the terms or provisions
hereof.
Executed this 24th day of September, 1996.
COUNTY TONITE THEATRE, LLC. COUNTY TONITE ENTERPRISES, INC.
/s/ JOHN J. PILGER /s/ JOHN J. PILGER
- ------------------------------ -----------------------------------
John J. Pilger, Chief Manager John J. Pilger, Chief Manager
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LIMITED LIABILITY COMPANY OPERATING AGREEMENT
OF
NEW PALACE CASINO, LLC
A MISSISSIPPI LIMITED LIABILITY COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
NEW PALACE CASINO, LLC
A MISSISSIPPI LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
This Operating Agreement (the "Agreement") is made and entered into,
effective as of , _______ 1996, by and between Robert Low and Lawana Low, as
joint tenants, and not as tenants-in-common ("Low"), and Casino Resource
Corporation, a Mississippi corporation ("CRC").
RECITALS
New Palace Casino, LLC (hereinafter called "Palace", or "Company") was
formed pursuant to the provisions of the Mississippi Limited Liability Company
Act as set forth in Section 79-29-101 et. seq. of the Mississippi Code Annotated
(the "Statute").
In consideration of the covenants and the promises made herein, the parties
hereto hereby agree as follows:
ARTICLE I
INTRODUCTORY MATTERS
1.1 FORMATION OF PALACE. The parties have formed Palace pursuant to the
provisions of the Statute by filing the Certificate of Formation(1) with the
Secretary of State.
1.2 NAME. The name of the company is "New Palace Casino, LLC." The
Members shall operate the Business of Palace under such name or use such other
or additional names as the Members may deem necessary or desirable provided
that: (1) no such name shall contain the words "bank," "insurance," "trust,"
"trustee," "incorporated," "inc.," "corporation," "corp.," or any similar name
or variation thereof; (ii) the Members shall have reasonably determined, before
use of any such name, that Palace is entitled to use such name and will not by
reason of such use infringe upon any rights of any other Person, or violate any
applicable laws or governmental regulations; and (iii) the Members shall
register such name under assumed or fictitious name statutes or similar laws of
the states in which Palace operates.
1.3 PRINCIPAL OFFICE. Palace shall maintain its principal place of
business at a location to be designated by Vote of the Members, or at any other
location agreed upon by Vote of the Members.
1.4 AGENT FOR SERVICE OF PROCESS. The name and address of Palace's agent
- ---------------------
(1) See ARTICLE 14 for definitions of capitalized items not otherwise
defined in this Agreement.
1
<PAGE>
for service of process shall be Palace's general legal counsel at his business
address.
1.5 PERIOD OF DURATION. The period of duration of Palace ("Period of
Duration") shall be thirty (30) years, commencing on the date of the filing of
the Certificate of Formation with the Mississippi Secretary of State, unless
Palace is terminated or dissolved sooner or extended in accordance with the
provisions of this Agreement.
1.6 BUSINESS AND PURPOSE OF PALACE. The purpose of Palace is to engage in
any lawful activities for which a limited liability company may be organized
under the Statute including, but not limited to, the ownership and operation of
a casino, provided that Palace shall not conduct any banking, insurance or trust
company business. The control and management of the business of the Company is
vested in the Members and except as otherwise provided in this Agreement, all
determinations affecting the conduct of the affairs of the Company shall be by a
Vote of the Members.
1.7 AGREEMENT WITH CRC. The Company shall enter into an Agreement with
CRC in a form to be attached hereto as Exhibit B and incorporated herein by
reference.
1.8 PREFORMATION EXPENSES. In the event that the Company is successful in
purchasing the assets of the Palace Casino, the following expenses, incurred
prior to execution of this Agreement, shall be reimbursed by the Company:
1. Payments of cash and/or stock to Henry Lee not to exceed Forty Five
Thousand No/100 Dollars ($45,000).
2 Legal expenses incurred in drafting this Agreement.
3. Legal expenses incurred in drafting and reviewing the Asset Purchase
Agreement.
ARTICLE 2
MEMBERS AND CAPITAL CONTRIBUTIONS
2.1 NAMES AND ADDRESSES OF INITIAL MEMBERS. The names and addresses of
the Members are as follows:
Robert Low or Lawana Low as Joint Tenants
c/o Arthur E. Curtis, Esquire
1340 East Woodhurst
Springfield, Missouri 65804
Casino Resource Corporation
Attn: Jack Pilger
1719 Beach Boulevard
Biloxi, Mississippi 39530
2.2 ADDITIONAL CONTRIBUTIONS. Except upon a Vote of the Members and as
expressly set forth herein, no Member shall be required to (a) make any
additional Capital
2
<PAGE>
Contributions, (b) make or guarantee any loan or (c) cause to be loaned any
money or other assets to Palace.
2.3 RIGHTS WITH RESPECT TO CAPITAL.
2.3.1 CAPITAL. No Member shall have the right to withdraw, or
receive any return of his Capital Contribution, and no Capital Contribution
may be returned in the form of property other than cash except as
specifically provided herein.
2.3.2 NO INTEREST ON CAPITAL CONTRIBUTIONS. Except as expressly
provided in this Agreement, no Capital Contribution of any Member shall
bear any interest or otherwise entitle the contributing Member to any
compensation for use of the contributed capital.
2.4 CAPITAL ACCOUNTS. A separate "Capital Account" (herein so called)
shall be maintained for each Member for the full term of the Agreement in
accordance with the capital accounting rules of section 1.704-1(b)(2)(iv) of the
Regulations. Each Member shall have only one Capital Account, regardless of the
number or classes of units or other interests in Palace owned by such Member and
regardless of the time or manner in which such units or other interests were
acquired by such Member. Pursuant to the basic rules of section
1.704-1(b)(2)(iv) of the Regulations, the balance of each Member's Capital
Account shall be:
2.4.1 Increased by the amount of money contributed by such Member
(or such Member's predecessor in interest) to the capital of Palace
pursuant to this Agreement and decreased by the amount of money distributed
to such Member (or such Member's predecessor in interest) pursuant hereto;
2.4.2 Increased by the fair market value of each property
(determined without regard to section 7701(g) of the Code (i.e., determined
without regard to the amount of Nonrecourse Liabilities to which such
property is subject)) contributed by such Member (or such Member's
predecessor in interest) to the capital of Palace pursuant to ARTICLE 2
(net of all liabilities secured by such property that Palace is considered
to assume or take subject to under section 752 of the Code) and decreased
by the fair market value of each property (determined without regard to
section 7701(g) of the Code (i.e., determined without regard to the amount
of Nonrecourse Liabilities to which such property is subject)) distributed
to such member (or such Member's predecessor in interest) by Palace
pursuant hereto (net of all liabilities secured by such property that such
Member is considered to assume or take subject to under section 752 of the
Code);
2.4.3 Increased by the amount of each item of Palace profit
allocated to such Member (or such Member's predecessor in interest)
pursuant hereto;
2.4.4. Decreased by the amount of each item of Palace loss
allocated to such Member (or such Member's predecessor in interest)
pursuant hereto; and
2.4.5. Otherwise adjusted in accordance with the other capital
account
3
<PAGE>
maintenance rules of section 1.704-1(b)(2)(iv) of the Regulations.
The foregoing provisions of SECTION 2.4, and the other provisions of this
Agreement relating to the maintenance of Capital Accounts are intended to comply
with section 1.704-I(b) of the Regulations, and shall be interpreted and applied
in a manner consistent, with such Regulations. To the extent such provisions
are inconsistent with the Regulation; or are incomplete with respect thereto,
Capital Accounts shall be maintained in accordance with the Regulations.
2.5 ADDITIONAL PROVISIONS REGARDING CAPITAL ACCOUNTS.
2.5.1 Except as expressly otherwise provided in this Agreement, if
a Member pays any Palace indebtedness, such payment shall be treated as a
contribution by that Member to the capital of Palace, and the Capital
Account of such Member shall be increased by the amount so paid by such
Member.
2.5.2 Except as otherwise provided herein, no Member may
contribute capital to, or withdraw capital from, Palace. To the extent any
monies that any Member is entitled to receive pursuant to this Agreement
would constitute a return of capital, each of the Members consents to the
withdrawal of such capital.
2.5.3 A loan by a Member to Palace shall not be considered a
contribution of money to the capital of Palace, and the balance of such
Member's Capital Account shall not be increased by the amount so loaned.
No repayment of principal or interest on any such loan, reimbursement made
to a Member with respect to advances or other payments made by such Member
on behalf of Palace or payments of fees to a Member or Related Person to
such Member that are made by Palace shall be considered a return of capital
or in any manner affect the balance of such Member's Capital Account. No
Member shall make a loan to Palace unless such loan is authorized pursuant
to the provisions of the Agreement.
2.5.4 Except as may be otherwise provided in this Agreement, and
subject to the provisions of ARTICLE 6, no Member with a deficit balance in
its Capital Account shall have any obligation to Palace or any other Member
to restore said deficit balance. Furthermore, subject to those same
exceptions, a deficit Capital Account balance of a Member (or a capital
account of a partner or venturer in a Member) shall not be deemed to be a
liability of such Member (or of such venturer or partner in such Member) or
a Palace asset or property. The provisions of SECTION 2.5.4 shall not
affect any Member's obligation to make capital contributions to Palace that
are required to be made by such Member pursuant to the Agreement.
2.5.5 Except as otherwise provided herein, no interest will be
paid on any capital contributed to Palace or the balance in any Member's
Capital Account.
2.5.6 In the event a Member transfers all or a portion of its
Interest in accordance with the terms of this Agreement, the transferee
shall succeed to the Capital
4
<PAGE>
Account of the Member to the extent that it relates to the transferred
Interest.
2.6 CAPITAL CONTRIBUTIONS BY MEMBERS
2.6.1 INITIAL CONTRIBUTION. The initial contribution of capital
by the Members to the Palace shall be as follows:
Low shall contribute Eight Hundred Dollars ($800.00);
Casino Resource Corporation shall contribute Two Hundred
Dollars ($200.00).
2.6.2 ADDITIONAL CONTRIBUTIONS. The Members shall make additional
contributions to capital as follows:
A. FIRST ADDITIONAL CONTRIBUTION. At such time as it is
determined that additional capital is needed to
purchase the assets of or operate the casino operation
in Biloxi, Mississippi, known as the "Palace Casino,"
CRC shall contribute a debenture in the amount of One
Million Five Hundred Thousand and No/100 Dollars
($1,500,000.00) towards the purchase price of the
Palace Casino assets (the "Debenture"). The Debenture
shall bear interest at the rate of six percent (6%) per
annum, shall be payable by CRC at the end of two years
from the date of closing of the Palace Casino assets in
either cash or CRC common stock at the then prevailing
price, and shall be substantially in the form attached
hereto as Exhibit "C". CRC shall provide to LLC a
certified copy of a corporate resolution authorizing
and approving the Debenture. The Capital Account of
CRC shall be credited in the amount of Two Hundred
Fifty Thousand and No/100 Dollars ($250,000.00) in
consideration of the giving of said Debenture. Low
shall contribute capital to the Company in an amount
equal to eighty percent (80%) of the unfinanced
purchase price of the casino operation and in addition,
shall contribute capital to the Company in an amount
not less than Three Million and No/100 Dollars
($3,000,000.00) to be used by the Company as working
capital, and CRC shall contribute capital for such
purposes in an amount equal to twenty-five percent
(25%) of the amount contributed by Low. These
contributions made for the purpose of purchasing the
Palace Casino assets shall be referred to herein as the
First Additional Contribution. In the event the
contribution by Low toward the First Additional
Contribution exceeds four million four hundred thousand
dollars, CRC shall contribute one million one hundred
thousand dollars of its obligation toward the First
Additional Contribution in cash, and CRC may, at its
option, contribute the balance of such obligation in
its own cash, or in cash
5
<PAGE>
borrowed from Low. In the event CRC chooses to borrow
cash from Low to make such contribution, CRC shall give
to Low a convertible debenture (the "First Debenture")
the principal and interest of which may, at the option
of CRC, be repaid at any time on or before one year
next following the contribution by Low, with interest
to be calculated as follows:
If repaid within sixty days from the date Low makes his
contribution, interest to be calculated at eight
percent (8%);
If repaid sixty-one (61) to one hundred twenty (120)
days, interest to be calculated at 9% from the date Low
makes his contribution;
If repaid one hundred twenty one (121) to one hundred
eighty (180) days, interest to be calculated at 10%
from the date Low makes his contribution;
If repaid one hundred eighty one (181) to two hundred
forty (240) days, interest to be calculated at 11% from
the date Low makes his contribution;
If repaid two hundred forty one (241) to three hundred
(300) days, interest to be calculated at 12% from the
date Low makes his contribution;
If repaid three hundred one (301) to three hundred
sixty (360) days, interest to be calculated at 13% from
the date Low makes his contribution;
Each First Debenture shall further provide that, at any time
after one year following issuance, there is an outstanding
balance due thereunder, Low may, at his option, convert such
balance due, or any portion thereof, to common stock in CRC.
At any time after one year following issuance, CRC may at
its sole option, give notice to Low of its intent to prepay
any First Debenture. Upon the receipt of such notice, Low
may, at his option, accept the prepayment or convert such
balance due, or any portion thereof, to common stock in CRC.
The price of such stock, to be paid by offset of the amount
due pursuant to each First Debenture (or portion thereof),
shall be eighty percent (80%) of the market price of such
stock as determined by the average market price for the
three business days next preceding the demand for delivery
of such stock pursuant to the provisions hereof. Each First
Debenture shall be paid in full and/or converted no later
than four years next following issuance.
B. SUBSEQUENT ADDITIONAL FIRST YEAR CONTRIBUTIONS. If, during
the first year next following the First Additional
Contribution, the Company determines
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from time to time that additional capital must be
contributed by the Members, such amount or amounts so
determined shall be contributed as follows. In each such
instance, Low shall contribute his/her membership percentage
of the Second Additional Contribution. CRC shall contribute
the percentage of capital equal to its membership
percentage, either in its own cash, or cash borrowed from
Low. In the event CRC chooses to borrow cash from Low to
make such contribution or contributions toward the
Subsequent Additional First Year Contribution, in each such
instance CRC shall give to Low a convertible debenture (the
"First Year Debenture" or "First Year Debentures") the
principal and interest of which may, at the option of CRC,
be repaid at any time on or before one year next following
the issuance of each such debenture. Interest on each such
debenture shall be calculated as follows:
If repaid within sixty days from the date Low makes his
contribution toward the Second Additional Contribution,
interest to be calculated at eight percent (8%);
If repaid sixty-one (61) to one hundred twenty (120)
days, interest to be calculated at 9% from the date Low
makes his contribution;
If repaid one hundred twenty one (121) to one hundred
eighty (180) days, interest to be calculated at 10%
from the date Low makes his contribution;
If repaid one hundred eighty one (181) to two hundred
forty (240) days, interest to be calculated at 11% from
the date Low makes his contribution;
If repaid two hundred forty one (241) to three hundred
(300) days, interest to be calculated at 12% from the
date Low makes his contribution;
If repaid three hundred one (301) to three hundred
sixty (360) days, interest to be calculated at 13% from
the date Low makes his contribution;
Each First Year Debenture shall further provide that, at any
time after one year following issuance, there is an
outstanding balance due thereunder, Low may, at his option,
convert such balance due, or any portion thereof, to common
stock in CRC. At any time after one year following
issuance, CRC may at its sole option, give notice to Low of
its intent to prepay any First Year Debenture. Upon the
receipt of such notice, Low may, at his option, accept the
prepayment or convert such balance due, or any portion
thereof, to common stock in CRC. The price of such stock,
to be paid by offset of the amount due pursuant to each
First Year Debenture (or portion
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thereof), shall be eighty percent (80%) of the market price
of such stock as determined by the average market price for
the three business days next preceding the demand for
delivery of such stock pursuant to the provisions hereof.
Each First Year Debenture shall be paid in full and/or
converted no later than four years next following issuance.
C. SUBSEQUENT ADDITIONAL SECOND-YEAR CONTRIBUTIONS. During the
second year next following the First Additional
Contribution, the Company may, from time to time, require
additional capital contributions from the Members. In each
such instance, Low shall contribute his/her membership
percentage of the capital call, and CRC shall contribute the
percentage of capital equal to its membership percentage,
either in its own cash, or cash borrowed from Low. In the
event CRC chooses to borrow cash from Low to make such
contribution or contributions toward the Subsequent
Additional Second-Year Contribution, in each such instance
CRC shall give to Low common stock of CRC valued at
eighty-percent (80%) of the market price of such stock as
determined by the average market price for the three
business days next preceding the demand for delivery of such
stock. Such stock shall be delivered immediately upon
demand.
D. SUBSEQUENT CONTRIBUTIONS. At any time following the two
years next following the First Additional Contribution, the
Company may, from time to time, require additional capital
contributions from the Members. In each such instance, Low
shall contribute his/her membership percentage of the
capital call, and CRC shall contribute the percentage of the
capital equal to its membership percentage. In the event
CRC is unable or unwilling to provide its portion of a
capital call hereunder, and CRC and Low are unable to
negotiate an acceptable substitute, Low may contribute the
twenty-percent attributable to CRC, and obtain dilution
pursuant to the following provisions.
E. Dilution. In the event, and each time, Low provides cash to
the Company on behalf of CRC as provided above, and CRC does
not repay or collateralize such amount or amounts to Low
pursuant to the provisions herein, the equity interest in
the Company held by CRC shall be diluted pursuant to the
following provisions:
1. A fraction (the "Dilution Fraction" shall be
determined, the numerator of which shall be the
amount contributed by Low on behalf of CRC, and
the denominator of which shall be the total amount
of capital contributed to the Company by all
parties, including the current capital call;
2. The Dilution Fraction shall then be converted to a
percentage which shall be multiplied by 1.15
resulting in the "Dilution Percentage;"
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3. The Dilution Percentage shall be added to the
equity ownership of the Company held by Low, and
subtracted from the equity ownership in the
Company held by CRC.
2.6.3 GUARANTY FEE. In the event the Company shall borrow funds
from a lender, and the lender shall require guaranties from the
members, the parties shall attempt to persuade the lender to allow the
members to guarantee repayment only of the portion of the debt
represented by the proportionate share of each Member's capital
account. In the event, and each time, a lender requires Low to
guarantee the portion of debt represented by CRC's proportion of
capital, but does not require CRC to guarantee the portion of debt
represented by Low's proportion of capital, CRC shall pay to Low a
guaranty fee in the amount of four percent (4%) (the "Guaranty
Percentage") of the greater of (1) amount of the loan represented by
CRC's proportion of capital, or (2) twenty percent (20%). The
Guaranty Fee shall be paid annually, but shall be reduced each year in
proportion to any reduction in the outstanding balance of the loan.
However, if Low and CRC both agree, CRC may eliminate all future
Guaranty Fees related to a specific loan by dilution of its equity
interest in the Company on a proportionate basis. For instance, and
only by way of example, if the Guaranty Fee is calculated to be
one-hundred thousand dollars ($100,000.00), which amount represents
one percent (1%) of the total capital of the Company, CRC may
eliminate the Guaranty Fee for the current year, and all future years,
by transferring one-percent (1%) of the Company to Low.
2.6.4 REGISTRATION RIGHTS. The Members agree that, for any and
all stock in CRC obtained by Low pursuant to the provisions
hereinabove, the following provisions shall apply:
A. FIRST REGISTRATION. With respect to each debenture
issued by CRC to Low, the first request by Low that
stock in CRC be registered with the Securities Exchange
Commission ("SEC") shall be accomplished at the sole
expense of CRC;
B. SECOND REGISTRATION. With respect to each debenture
issued by CRC to Low, the second request by Low that
stock in CRC be registered with the SEC shall be
accomplished at the expense of CRC, with Low to
reimburse CRC for one-half of such expense, up to a
maximum reimbursement of forty-thousand dollars
($40,000.00), with the balance of expenses which exceed
such amount to be paid in full by CRC;
C. THIRD AND SUBSEQUENT REGISTRATIONS. With respect to
each
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debenture issued by CRC to Low, the third and all
subsequent requests by Low that stock in CRC be
registered with the SEC shall be accomplished at the
sole expense of Low.
D. "PIGGY-BACK PROVISIONS". CRC shall assist Low, at his
request, in each such registration or registrations
referenced above by "piggybacking" or including the
stock held by Low in any registration sought by CRC.
2.6.5 RIGHT TO PURCHASE EQUITY. CRC shall have the right to
purchase from Low additional equity in the Company pursuant to the
following provisions:
A. During the first year next following the First
Additional Contribution, CRC shall have the option to
purchase in cash upon ten (10) days notice from Low
sufficient equity ownership in the Company such that
the interest purchased by CRC, when combined with the
interest held by CRC at the time of purchase, will
equal up to forty-nine percent (49%) of the outstanding
equity interest in the Company. The price for such
equity shall be the pro rata amount paid for such
equity by Low.
B. After the retirement and/or conversion of all
outstanding debentures and during the second year next
following the First Additional Contribution, CRC shall
have the option to purchase in cash from Low upon ten
(10) days notice up to an additional nineteen percent
(19%) of the equity ownership in the Company; however,
such interest purchased by CRC, when combined with the
interest held by CRC at the time of purchase, shall not
exceed forty-nine percent (49%) of the outstanding
equity interest in the Company. The price for such
equity shall be one-hundred and fifteen percent (115%)
of the pro rata amount paid for such equity by Low.
C. After the retirement and/or conversion of all
outstanding debentures and during the third year next
following the First Additional Contribution, CRC shall
have the option to purchase in cash from Low upon ten
(10) days notice up to an additional nine percent (9%)
equity ownership in the Company; however, such interest
purchased by CRC, when combined with the interest held
by CRC at the time of purchase, shall not exceed
forty-nine percent (49%) of the outstanding equity
interest in the Company. The price for
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such equity shall be one-hundred and thirty percent
(130%) of the pro rata amount paid for such equity by
Low.
ARTICLE 3
DISTRIBUTIONS
3.1 DISTRIBUTION OF ASSETS BY PALACE. Subject to applicable law and any
limitations contained elsewhere in this Agreement, distributions of cash or
property to the Members shall be made by Vote of the Members.
3.2 AGREEMENT REGARDING TAX DISTRIBUTIONS. Unless such distribution would
not be permitted under SECTION 3.1, not later than April 1 of each calendar year
(or if not permitted, as soon as practicable after the limitation is removed),
Palace shall declare and pay aggregate distributions for the period commencing
on January 1 of the prior year (but excluding dividends mandated under SECTION
3.2 with respect to prior years) to each Member at least equal to that Member's
share of Palace's taxable income for the prior year multiplied by the maximum
combined federal and Mississippi state tax rates for individuals for that year
(with appropriate adjustments for the federal tax benefits from Mississippi
taxes).
3.3 ALLOCATIONS OF DISTRIBUTIONS. Any distribution shall be made to the
Members in proportion to their Percentage Interests, provided that if there are
multiple classes of LLC Interests outstanding at any time, the distribution
shall be made based on Percentage Interests within each class after allocation
among the classes as provided in the definitions of Palace Interests involved.
3.4 FORM OF DISTRIBUTION. A Member, regardless of the nature of the
Member's Capital Contribution, has no right to demand and receive any
distribution from Palace in any form other than money. Except as otherwise
provided in this Agreement no Member may be compelled to accept from Palace a
distribution of any asset in kind in lieu of a proportionate distribution of
money being made to other Members.
3.5 RETURN OF DISTRIBUTIONS. Except for distributions made in violation
of the Statute or this Agreement, no Member shall be obligated to return any
distribution to Palace or pay the amount of any distribution for the account of
Palace or to any creditor of Palace. The amount of any distribution returned to
Palace by a Member or paid by a Member for the account of Palace or to a
creditor of Palace shall be added to the account or accounts from which it was
subtracted when it was distributed to the Member.
3.6 DISTRIBUTION OF NET PROCEEDS FROM TERMINATING CAPITAL TRANSACTION.
Provisions of this Agreement to the contrary notwithstanding, the Net Proceeds
of the Capital Transaction that is entered into in connection with, or results
in, the Liquidation of Palace, after payment of Palace's debts and liabilities
and the expenses of liquidation and/or the establishment of a reasonable reserve
for Palace's debts and liabilities (contingent or otherwise) if deemed
necessary, shall be distributed among all the Members having positive Capital
Account balances (as determined after giving effect to all adjustments
attributable to allocations of items of profit and loss realized by Palace
during the Fiscal Year in
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question (including items of profit and loss realized from such Capital
Transaction) and all adjustments attributable to contributions and distributions
of money and property effected prior to such distribution), in accordance with
such positive Capital Account balances. This distribution shall be made no
later than the end of the Fiscal Year during which Palace is liquidated unless
there are less than ninety (90) days remaining in such Fiscal Year, then ninety
(90) days after the date on which Palace is liquidated.
ARTICLE 4
ALLOCATIONS OF PROFIT AND LOSS
4.1 ALLOCATION OF BOOK ITEMS. Subject to the provisions of Section 4.2,
all items of profit and loss realized by Palace during each Fiscal Year shall be
allocated among the Members (after giving effect to all adjustments attributable
to all contributions and distributions of money and property effected during
such Fiscal Year) in the manner prescribed in SECTION 4.1.
4.1.1 Pursuant to section 1.704-2(f) of the Regulations
(relating to minimum gain charge backs), if there is a net decrease in
Nonrecourse Minimum Gain of Palace for such Fiscal Year (or if there
was a net decrease in Nonrecourse Minimum Gain for a prior Fiscal Year
and Palace did not have sufficient amounts of income during prior
Fiscal Years to allocate to the Members under SECTION 4.1.1), then
items of Palace income shall be allocated, before any other allocation
is made pursuant to the succeeding provisions of SECTION 4.1 for such
Fiscal Year, to each Member in proportion to, and to the extent of, an
amount equal to the product of (a) the total net decrease and (b) such
partner's percentage share of the Nonrecourse Minimum Gain determined
as of the end of the immediately preceding Fiscal Year (determined and
adjusted in accordance with the provisions of section 1.704-2(g) of
the Regulations); provided, however, that the provisions of this
clause shall not apply to any Member to the extent described in
section 1.704-2(f) of the Regulations.
As provided in section 1.704-2 of the Regulations, income of
Palace allocated for any Fiscal Year under SECTION 4.1.1 shall consist
first of items of Book Gain recognized from the disposition of Palace
property subject to Nonrecourse Liabilities to the extent of the
decrease in Nonrecourse Minimum Gain that is attributable to such
disposition, with any remaining allocated income deemed to be made up
of a pro rata portion of each of Palace's other items of Gross Income
from Operations and items of Book Gain from Capital Transactions for
such Fiscal Year (provided that gain from a Capital Transaction
comprising the disposition of property that is subject to Member Risk
Nonrecourse Debt shall be allocated under SECTION 4.1.1 only to the
extent not allocated under SECTION 4.1.2).
4.1.2 Pursuant to section 1.704-2(j)(4) of the Regulations
(relating to partner risk minimum gain charge backs), if there is a
net decrease in Member Risk Minimum Gain of Palace for such Fiscal
Year (or if there was a net decrease
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in Member Risk Minimum Gain for a prior Fiscal Year and Palace did not
have sufficient amounts of income during prior Fiscal Years to
allocate to the Members under SECTION 4.1.2),then items of Palace
income shall be allocated, before any other allocation is made
pursuant to the succeeding provisions of SECTION 4.1 for such Fiscal
Year, to the Members with shares of such minimum gain as of the first
day of such Fiscal Year in proportion to, and to the extent of, such
Member's share of the net decrease in such minimum gain (determined in
a manner and subject to exceptions consistent with those referred to
in SECTION 4.1.1, all as provided under section 1.704-2(j)(4) of the
Regulations).
As provided in section 1.704-(j) of the Regulations, income of
Palace allocated for any Fiscal Year under SECTION 4.1.2 shall consist
first of items of Book Gain recognized from the disposition of Palace
property subject to Member Risk Nonrecourse Debt to the extent of the
decrease in Member Risk Minimum Gain that is attributable to such
disposition, with any remaining allocated income deemed to be made up
of a pro rata portion of each of Palace's other items of Gross Income
from Operations and other items of Book Gain from Capital Transactions
for such Fiscal Year (provided that items of Book Gain from a Capital
Transaction comprising the disposition of property that is subject to
a Nonrecourse Liability shall be allocated under SECTION 4.1.2 only to
the extent not allocated under SECTION 4.1.1).
4.1.3 Any special allocations of items of Net Profits
pursuant to SECTIONS 4.1.1 OR 4.1.2 shall be taken into account in
computing subsequent allocations of Net Profits and Net Losses
pursuant to ARTICLE 4, so that the net amount of any items so
allocated and the gain, loss and any other item allocated to each
Member pursuant to ARTICLE 4 shall, to the extent possible, be equal
to the net amount that would have been allocated to each such Member
pursuant to the provisions of ARTICLE 4 if such special allocations
had not occurred.
4.1.4 Pursuant to section 1.704-1(b)(2)(ii)(d) of the
Regulations (relating to "qualified income offsets"), Palace profit
shall be allocated, before any other allocation is made pursuant to
the succeeding provisions of SECTION 4.1 for such Fiscal Year, among
the Members with deficit balances in their Section 704 Capital
Accounts (as determined after giving effect to all adjustments
attributable to the allocations provided for in SECTION 4.1.1 AND
SECTION 4.1.2 but before giving effect to any adjustment attributable
to other allocations provided for in succeeding provisions of SECTION
4.1) in amounts and the manner sufficient to eliminate such deficit
balances as quickly as possible; as provided in section
1.704-1(b)(2)(ii)(d) of the Regulations, Palace profit allocated
hereunder for such Fiscal Year shall consist of a portion of each item
of Gross Income for such Fiscal Year and Book Gain from Capital
Transactions during such Fiscal Year.
4.1.5 All Member Risk Nonrecourse Deductions attributable to
a Member Risk Nonrecourse Debt shall be allocated to the Member
bearing the Economic Risk Of Loss for such debt; provided, however,
that if more than one
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(1) Member bears the Economic Risk Of Loss for such debt, the Member
Risk Nonrecourse Deductions attributable to such debt shall be
allocated to and among such Members, pro rata in the same proportion
that their Economic Risk Of Loss bear to one another. Consistent with
the principles of section 1.704-2(j) of the Regulations, Member Risk
Nonrecourse Deductions allocated hereunder shall consist first of
depreciation or cost recovery deductions with respect to property
subject to Member Risk Nonrecourse Debt, with any remaining Member
Risk Nonrecourse Deductions deemed to be made up of a pro rata portion
of Palace's other Deductible Expenses (provided that depreciation or
cost recovery deductions with respect to property that is subject to
Nonrecourse Debt shall be allocated under SECTION 4.1.5 only to the
extent not allocated under SECTION 4.1.6).
4.1.6 All Nonrecourse Deductions shall be allocated among the
Members, pro rata in accordance with their respective Percentage
Interests. As provided in section 1.704-(j) of the Regulations,
Nonrecourse Deductions allocated hereunder for a Fiscal Year shall
consist first of depreciation or cost recovery deductions with respect
to property that is subject to Nonrecourse Debt for such Fiscal Year
with any remaining Nonrecourse Deductions deemed to be made up of a
pro rata portion of Palace's other Deductible Expenses for such Fiscal
Year (provided that depreciation or cost recovery deductions with
respect to property that is subject to Member Risk Nonrecourse Debt
shall be allocated under SECTION 4.1.6 only to the extent not
allocated under SECTION 4.1.5).
4.1.7 Any Adjusted Net Income realized by Palace for such
Fiscal Year and, except as otherwise provided in SECTION 4.1.9, any
Book Gain derived from a Capital Transaction occurring during such
Fiscal Year and not allocated pursuant to SECTIONS 4.1.1, 4.1.2 AND
4.1.4 shall be allocated among the Members as follows and in the
following order of priority:
(a) First: Adjusted Net Income and Book Gain shall be
allocated among those Members having deficit Adjusted Capital Account
balances to the least extent necessary to cause their deficit Adjusted
Capital Account balances to be in the same proportion to one another
as are their respective Percentage Interests;
(b) Second: Adjusted Net Income and Book Gain shall be
allocated among those Members having deficit Adjusted Capital Account
balances, in accordance with their Percentage Interests, to the least
extent necessary to cause their Adjusted Capital Account balances to
equal zero;
(c) Third: All remaining Adjusted Net Income and Book
Gain shall be allocated among all Members, in accordance with their
Percentage Interests.
4.1.8 Any Adjusted Net Loss realized by Palace for such
Fiscal Year and, except as otherwise provided in SECTION 4.1.9, any
Book Loss derived from a Capital Transaction occurring during such
Fiscal Year and not allocated pursuant to SECTIONS 4.1.1. 4.1.2 AND
4.1.4 shall be allocated among the Members as follows and in the
following order of priority:
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(a) First: Adjusted Net Loss and Book Loss shall be
allocated among the Members, in the same proportion that Adjusted Net
Income and Book Gain has been previously allocated to them pursuant to
SECTION 4.1.7(c), until the cumulative amount of Adjusted Net Loss and
Book Loss allocated pursuant TO SECTION 4.1.8(a) shall be equal to the
excess of (i) the cumulative amount of such previously-allocated
Adjusted Net Income and Book Gain, over (ii) the Available Cash and
Net Proceeds previously distributed pursuant to Section 3.1;
(b) Second: All remaining Adjusted Net Loss and Book
Loss shall be allocated among the Members, in accordance with their
respective Percentage Interests; provided, however, that no Adjusted
Net Loss or Book Loss shall be allocated to any Member that has a
deficit Section 704 Capital Account balance or would have a deficit
Section 704 Capital Account balance as a result of any such allocation
while any other Member has a positive balance in its Section 704
Capital Account, it being the intention of the Members that such
Adjusted Net Loss and Book Loss shall be allocated in those
circumstances solely to the Member(s) with positive Section 704
Capital Account(s).
4.1.9 Book Gain or Loss derived from a Capital Transaction
that is entered into in connection with, or results in, the
Liquidation of Palace shall be allocated among the Members as follows
in the following order of priority (after giving effect to all
adjustments attributable to allocations of items of LLC profit and
loss made pursuant to the preceding provisions of SECTION 4.1 for such
Fiscal Year and after giving effect to all adjustments attributable to
contributions and distributions of money and property effected prior
to such determination):
(a) Book Gain remaining after the allocations provided
for in SECTIONS 4.1.1, 4.1.2 AND 4.1.4 shall be allocated as follows
and in the following order of priority:
(i) First: Book Gain equal to the deficit
balance (if any) in each Member's Capital Account
shall be allocated to such Member; provided that
if, at the time of such allocations, more than one
Member has a deficit balance in its Capital
Account, Book Gain shall be allocated first to
cause the deficit balances in the Capital Accounts
of the Members to be in the same proportion to one
another as are their respective Percentage
Interests, thereafter, Book Gain shall be
allocated among the Members, in accordance with
their respective Percentage Interests until each
Member's Capital Account has a zero balance; and
(ii) Second: All remaining Book Gain shall
be allocated next among the Members (as necessary)
so as to cause their positive Capital Account
balances to be in the same proportion to one
another as are their respective Percentage
Interests and, thereafter, among the Members, in
accordance with their respective Percentage
Interests.
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(b) Book Loss (if any) shall be allocated as follows
and in the following order of priority:
(i) First: Book Loss shall be allocated to
each Member to the least extent necessary to cause
his Capital Account balance to equal zero;
provided that if, at the time of such allocation,
there is not a sufficient amount of Book Loss to
cause each of the Members' positive Capital
Account balances to equal zero, Book Loss shall be
allocated first among the Members (as necessary)
so as to cause their positive Capital Account
balances to be in the same proportion to one
another as are their respective Percentage
Interests and, thereafter, among the Members, in
accordance with their Percentage Interests; and
(ii) Second: All remaining Book Loss shall be
allocated among all of the Members, in accordance
with their respective Percentage Interests.
For purposes of determining the nature (as ordinary or capital) of any Palace
profit allocated among the Members for federal income tax purposes pursuant to
Section 4.1, the portion of such profit required to be recognized as ordinary
income pursuant to sections 1245 and/or 1250 of the Code shall be deemed to be
allocated among the Members in the same proportion that they were allocated and
claimed the Book Depreciation deductions, or basis reductions, directly or
indirectly giving rise to such treatment under sections 1245 and/or 1250 of the
Code.
4.2 ALLOCATION OF TAX ITEMS.
4.2.1 Except as otherwise provided in the succeeding
provisions of SECTION 4.2, each Tax Item shall be allocated among the
Members in the same manner as each correlative item of profit or loss,
as calculated for book purposes, is allocated pursuant to the
provisions of Section 4.1.
4.2.2 The Members hereby acknowledge that all Tax Items in
respect of Book/Tax Disparity Property are required to be allocated
among the Members in the same manner as under section 704(c) of the
Code (as specified in sections 1.704-1(b)(2)(iv)(f) and
1.704-1(b)(2)(iv)(g) of the Regulations) and that the principles of
section 704(c) of the Code require that such Tax Items must be shared
among the Members so as to take account of the variation between the
adjusted tax basis and Book Basis of each such Book/Tax Disparity
Property. Thus, notwithstanding anything in SECTION 4.1 OR SECTION
4.2.1 to the contrary, the Members' distributive shares of Tax Items
in respect of each Book/Tax Disparity Property shall be separately
determined and allocated among the Members in accordance with the
principles of section 704(c) of the Code.
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ARTICLE 5
SPECIAL RULES
5.1 ALLOCATIONS OF PROFIT AND LOSS AND DISTRIBUTIONS IN RESPECT OF INTERESTS
TRANSFERRED.
5.1.1 If any Interest is transferred, or is increased or decreased
by reason of the admission of a new Member or otherwise, during any Fiscal
year, each item of Adjusted Net Income or Loss, Book Gain or Loss and other
Palace profit and loss for such Fiscal Year shall be divided and allocated
among the Members in question by taking account of their varying Interests
during such Fiscal Year on a daily, monthly or other basis, as determined
by the Members using any permissible method under section 706 of the Code
and the Regulations thereunder.
5.1.2 Distributions of Palace properties shall be made only to the
persons or entities who, according to Palace's books and records, are the
Members in respect of which such distributions are made on the actual date
of distribution. Palace shall not incur any liability for making
distributions in accordance with the provisions of the preceding sentence,
whether or not Palace has knowledge or notice of any transfer or purported
transfer of ownership of any Interest.
5.1.3 Notwithstanding any provision above to the contrary, Book
Gain or Loss realized in connection with a sale or other disposition of any
Palace properties shall be allocated solely among those Persons who as of
the date such sale or other disposition occurs were Members.
ARTICLE 6
OTHER TAX MATTERS
6.1 TAX ELECTIONS.
6.1.1 For tax purposes, Palace shall elect to use the Fiscal Year
as its taxable year, and to report profit and loss under the accrual method
of accounting.
6.1.2 For tax purposes, Palace shall elect to deduct expenses
incurred in organizing Palace ratably over a 60-month period as provided in
section 709 of the Code.
6.1.3 For tax purposes, Palace shall elect to treat all start-up
expenditures as deferred expenses and to deduct such expenses over a
60-month period as provided in section 195 of the Code.
6.1.4 Palace may file an election under section 754 of the Code.
6.1.5 Without obtaining the consent of all Members, Palace shall
not
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file any election pursuant to section 761 of the Code or otherwise, the
effect of which would cause Palace not to be treated as a partnership for
federal income tax purposes.
6.1.6 Palace shall make the election under section 168(g) of the
Code with respect to all depreciable property owned by Palace, and shall
cause any partnership or other entity in which Palace obtains a controlling
interest to so elect.
6.1.7 Except as otherwise specifically provided herein, no other
available election under the Code shall be made on behalf of Palace unless
unanimously approved by the Members.
6.2 TAX MATTERS PARTNER.
6.2.1 A Member shall be designated as "Tax Matters Partner" (as
defined in section 6231 of the Code), to represent Palace (at Palace's
expense) in connection with all examinations of Palace's affairs by tax
authorities, including resulting judicial and administrative proceedings,
and to expend Palace funds for professional services and costs associated
therewith. In his capacity as "Tax Matters Partner", the designated Person
shall oversee Palace tax affairs in the overall best interests of Palace.
Robert Low is hereby designated as the initial Tax Matters Partner.
6.2.2 The Tax Matters Partner shall take no action in such
capacity without the authorization or consent of the other Members, other
than such action as the Tax Matters Partner may be required to take by law.
The Tax Matters Partner shall use his best efforts to comply with the
responsibilities outlined in sections 6222 through 6232 of the Code and in
doing so shall incur no liability to the other Members. Notwithstanding
the Tax Matters Partner's obligation to use its best efforts in the
fulfillment of its responsibilities, the Tax Matters Partner shall not be
required to incur any expenses for the preparation for or pursuance of
administrative or judicial proceedings unless the Members agree on a method
for sharing such expenses.
6.2.3 The Tax Matters Partner shall not enter into any extension
of the period of limitations for making assessments on behalf of the other
Members without first obtaining the written consent of the other Members.
6.2.4 No Member shall file, pursuant to section 6227 of the Code,
a request for an administrative adjustment of items for any Palace taxable
year without first notifying the other Members. If the other Members agree
with the requested adjustment, then the Tax Matters Partner shall file the
request for administrative adjustment on behalf of the Member. If
unanimous consent is not obtained within thirty (30) calendar days from
such notice, or within the period required to timely file the request for
administrative adjustment, if shorter, any Member, including the Tax
Matters Partner, may file a request for administrative adjustment on its
own behalf.
6.2.5 Any Member intending to file a petition under sections 6226,
6228 or other section of the Code with respect to any item or other matter
involving Palace shall
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notify the other Members of such intention and the nature of the
contemplated proceeding. In the case where the Tax Matters Partner is the
Member intending to file such petition on behalf of Palace, such notice
shall be given within a reasonable period of time to allow the other
Members to participate in the choosing of the forum in which such petition
will be filed. If the Members do not agree on the appropriate forum, then
the appropriate forum shall be decided by Vote of the Members. If the
Members cannot so agree, then the Tax Matters Partner shall choose the
forum. If any Member intends to seek review of any court decision rendered
as a result of a proceeding instituted under the preceding provisions of
SECTION 6.3-5, then such Member shall notify the other Members of such
intended action.
6.2.6 The Tax Matters Partner shall not bind any Member to a
settlement agreement without obtaining the written concurrence of such
Member. For purposes of SECTION 6.3.6, the term "settlement agreement"
shall include a settlement agreement at either an administrative or
judicial level. Any Member who enters into a settlement agreement with
respect to any Palace item (within the meaning of section 6231(a)(3) of the
Code) shall notify the other Members of such settlement agreement and its
terms within ninety (90) calendar days from the date of settlement.
6.2.7 The provisions of SECTION 6.3 shall survive the termination
of Palace or the termination of any Member's Interest in Palace and shall
remain binding on the Members for a period of time necessary to resolve
with the IRS or the United States Department of the Treasury any and all
matters regarding the federal income taxation of Palace.
6.3 INCONSISTENT TREATMENT OF LLC ITEMS. If any Member intends to file a
notice of inconsistent treatment under section 6222(b) of the Code, then such
Member shall give reasonable notice under the circumstances to the other Members
of such intent and the manner in which the Member's intended treatment of an
item is (or may be) inconsistent with the treatment of that item by the other
Members.
ARTICLE 7
MEMBERS' MEETINGS
7.1 PLACE OF MEETINGS. Meetings of the Members shall be held at the
principal office of Palace, unless some other appropriate and convenient
location, either within or without the state where the Certificate of Formation
were filed, shall be designated for that purpose from time to time by the
Members.
7.2 MEETINGS OF MEMBERS. The annual meeting of the Members shall be held
at the principal place of business of the company on the second Monday of August
of each year, commencing in the year 1996. If the day fixed for the annual
meeting shall be a legal holiday, such meeting shall be held on the next
succeeding business day. Special meetings of the Members, for any purpose or
purposes described in the meeting notice, may be called by any Member. Unless
waived, as herein provided and allowed, written or printed notice stating the
date, place, and hour of the meeting, and, in case of a special meeting, the
purpose or purposes
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for which the meeting is called, shall be delivered to each Member not less than
ten (10) nor more than sixty (60) days before the date of the meeting.
7.3 NOTICE OF MEETINGS. Notices for meetings shall be given personally,
by mail, or by facsimile, and shall be sent to each Member's last known business
address appearing on the books of Palace. Such notice shall be deemed given at
the time it is delivered personally, or deposited in the mail, or sent by
facsimile. Notice of any meeting of Members shall specify the place, the day
and the hour of the meeting, and the general nature of the business to be
transacted.
7.4 VALIDATION OF MEMBERS' MEETINGS. The transactions of a meeting of
Members that was not called or noticed pursuant to the provisions of Section 7.2
OR 7.3 shall be valid as though transacted at a meeting duly held after regular
call and notice, if all Members are present, and if, either before or after the
meeting, each of the Members entitled to vote at the meeting signs a written
waiver of notice, or a consent to the holding of such meeting, or an approval of
the minutes thereof. All such waivers, consents or approvals shall be filed
with the records of Palace. Attendance alone shall not constitute a waiver of
notice by that Member.
7.5 ACTIONS WITHOUT A MEETING.
7.5.1 Any action that may be taken at any meeting of Members
may be taken without a meeting and without prior notice if a consent
in writing, setting forth the action so taken, shall be signed by all
of the Members.
7.5.2 Any Member giving a written consent may revoke the
consent by a writing received by Palace prior to the time that written
consents of Members required to authorize the proposed action have
been filed with Palace. Such revocation is effective upon its receipt
by Palace.
7.6 QUORUM AND EFFECT OF VOTE. Except as and to the extent set forth in
Section 7.4 a majority of interest must be present to have a quorum at any
meeting of the Members for the transaction of business, and the Vote of the
majority of Interest shall be required to approve any action except where a
unanimous vote is required under other sections of this Agreement.
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ARTICLE 8
RESTRICTIONS ON TRANSFER OR CONVERSION OF LLC INTERESTS:
ADDITIONAL CAPITAL CONTRIBUTIONS:
ADMISSION OF NEW MEMBERS
8.1 TRANSFER OR ASSIGNMENT OF MEMBERS INTEREST. The Interest of each
Member constitutes personal property of the Member. No Member has by reason of
such Interest an interest in the Property.
8.1.1 A Member's Interest may be transferred or assigned only
as provided in this Agreement.
8.1.2 Except as specifically set forth herein, no transfer,
hypothecation, encumbrance or assignment ("Transfer") of a Member's
Interest, or any part thereof, in Palace will be valid without the
consent of the other Members.
8.2 RIGHT OF FIRST NEGOTIATION. If any Member desires to transfer all or
any part of such Member's Interests, such Member shall notify the other Members
in writing of such desire and, for a period of twenty (20) days thereafter, the
Members shall negotiate in good faith with respect to the purchase of such
Interests. If the Members are unable to agree upon the purchase terms, the
Member desiring to transfer such Interests may solicit and negotiate with other
potential purchasers or other transferees without further obligation to the
other Members.
8.3 VOID TRANSFERS. Any Transfer of an Interest with respect to which the
Member transferring such Interest has not complied with SECTION 8.1 OR 8.2 shall
be void (unless the non-transferring Members agree in writing to the transfer)
and provided that any involuntary Transfer ordered by legal process that does
not comply with Section 8.1 OR 8.2 shall effect a Transfer of only an economic
interest, unless the transferee receives its interest by will upon the death of
a Member or through intestate succession, in which case such transferee shall be
admitted as a Member upon agreeing in writing to be bound by the terms of this
Agreement. Absent such agreement in writing, such transferee shall receive only
an economic interest in the Company.
8.4 ADMISSION OF NEW MEMBERS. Except as set forth hereinabove, a new
Member may be admitted into Palace only upon the written consent of the other
Members.
8.4.1 The amount of Capital Contribution that must be made by
a new Member (other than a transferee admitted pursuant to SECTION
8.2) shall be determined by a Vote of the Members (other than the new
Member).
8.4.2 A new Member shall not be deemed admitted into Palace
until the Capital Contribution required of such Person shall have been
made (other than a transferee admitted pursuant to SECTION 8.2.) and
such Person shall have become a party to this Agreement.
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8.5 TRANSFER OF INTEREST TO A TRUST. Any provision contained herein to
the contrary notwithstanding, any Member may, for estate planning purposes, at
any time, transfer its Interest in the Company to a trust or other similar
entity, provided that such Interest so transferred shall not be transferred by
any such trust or entity to others without the consent of the Members.
ARTICLE 9
BOOKS RECORDS, REPORTS AND BANK ACCOUNTS
9.1 MAINTENANCE OF BOOKS AND RECORDS. Palace shall cause books and
record, of Palace to be maintained in accordance with generally accepted
accounting principles consistently applied, and shall give reports to the
Members in accordance with prudent business practices and the Statute. There
shall be kept at the principal office of Palace, as well as at the office of
record of Palace specified in SECTION 1.3, if different, the following LLC
documents:
9.1.1 A current list of the full name and last known business
or residence address of each Member in Palace set forth in
alphabetical order, together with the Capital Contributions and
Percentage Interest of each Member;
9.1.2 A copy of the Certificate of Formation and any
amendments thereto, together with any powers of attorney pursuant to
which the Certificate of Formation and any amendments thereto were
executed;
9.1.3 Copies of Palace's federal, state and local income tax
or information returns and reports, if any, for the six (6) most
recent Fiscal Years;
9.1.4 A copy of this Agreement and any amendments hereto,
together with any powers of attorney pursuant to which this Agreement
and any amendments hereto were executed;
9.1.5 Copies of the financial statements of Palace, if any,
for the six most recent Fiscal Years;
9.1.6 Palace's books and records as they relate to the
internal affairs of Palace for at least the current and past four
Fiscal Years;
9.1.7 Originals or copies of all minutes, actions by written
consent, consents to action and waivers of notice to Members and
Member votes, actions and consents; and
9.1.8 Any other information required to be maintained by
Palace pursuant to the Statute.
9.2 ANNUAL ACCOUNTING. Within ninety (90) days after the close of each
Fiscal Year of Palace, Palace shall (a) cause to be prepared and submitted to
each Member a balance
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sheet and income statement for the preceding Fiscal Year of Palace (or portion
thereof) in conformity with generally accepted accounting principles applied on
a consistent basis and (b) provide to the Members all information reasonably
necessary with respect to Palace for them to complete federal and state tax
returns.
9.3 INSPECTION AND AUDIT RIGHTS. Each Member has the right upon
reasonable request, for purposes reasonably related to the interest of that
Person, to inspect and copy during normal business hours any of Palace books and
records required to be maintained in accordance with SECTION 9.1. Such right may
be exercised by the Person or by that Person's agent or attorney. Any Member
may require a review and/or audit of the books, records and reports of Palace.
9.4 BANK ACCOUNTS. The bank accounts of Palace shall be maintained in
such federally insured banking institutions as the Members shall determine.
ARTICLE 10
TERMINATION AND DISSOLUTION
10.1 DISSOLUTION. Palace shall be dissolved upon the occurrence of any of
the Following events:
10.1.1 The expiration of the Period of Duration of Palace;
10.1.2 The written approval by a Unanimity In Interest of the
Members to dissolve Palace; or
10.1.3 The withdrawal, resignation, expulsion, bankruptcy,
death or dissolution of a Member or the occurrence of any other event
that terminates the Member's continued membership in Palace, provided
that in such event Palace shall be reconstituted and the business of
Palace shall be continued upon the unanimous vote of all remaining
Members taken within ninety (90) days of the happening of that event.
10.2 STATEMENT OF INTENT TO DISSOLVE. As soon as possible after the
occurrence of any of the events specified in SECTION 10.1, Palace shall execute
a Statement of Intent to Dissolve in such form as prescribed by the Secretary of
State.
10.3 CONDUCT OF BUSINESS. Upon the filing of the Statement of Intent to
Dissolve with the Secretary of State pursuant to Section 10.2, Palace shall
cease to carry on its business, except insofar as may be necessary for the
winding up of its business, but Palace's separate existence shall continue until
the Articles of Dissolution have been filed with the Secretary of State or until
a decree dissolving Palace has been entered by a court of competent
jurisdiction.
10.4 DISTRIBUTION OF NET PROCEEDS. The Members shall continue to allocate
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Net Profits and Losses and Available Cash Flow during the winding-up period in
the same manner and the same priorities as provided in ARTICLES 3. The proceeds
from the Liquidation shall be applied in the following order:
10.4.1 To the repayment of creditors, in the order of priority
as provided by law, except to Members on account of their
contributions;
10.4.2 To the repayment of loans or advances that may have
been made by any of the Members or their Principals for working
capital or other requirements of Palace;
10.4.3 For the first three years of operation only, to the
repayment to Low of all sums in his capital account;
10.4.4 For the first three years of operation only, to the
repayment to CRC of all sums in its capital account;
10.4.5 To the Members in accordance with the positive balances
in their Capital Accounts after adjustments for all allocations of
Net Profits and Net Loss.
Where the distribution pursuant to SECTION 10.4 consists both of cash (or
cash equivalents) and non-cash assets, the cash (or cash equivalents) shall
first be distributed, in a descending order, to fully satisfy each category
starting with the most preferred category above. In the case of noncash assets,
the distribution values are to be based on the fair market value thereof as
determined in good faith by the liquidator, and the shortest maturity portion of
such non-cash assets (e.g., notes or other indebtedness) shall, to the extent
such non-cash assets (e.g., sets are readily divisible, be distributed, in a
descending order, to fully satisfy each category above, starting with the most
preferred category.
ARTICLE 11
INDEMNIFICATION OF MEMBERS
11.1 INDEMNIFICATION OF THE MEMBERS. To the fullest extent permitted by
the Statute and all other applicable laws, Palace shall indemnity and hold
harmless the Members, and holders of economic interests in Palace and their
respective officers, directors, employees, agents and Principals (individually,
an "Indemnitee") from and against any and all losses, claims, demands, costs,
damages, liabilities, joint and several, expenses of any nature (including,
without limitation, reasonable attorneys' fees and disbursements), judgments,
fines, settlements and other amounts arising from any and all claims, demands,
actions, suits or proceedings, whether civil, criminal, administrative or
investigative, in which the Indemnitee was involved or may be involved, or
threatened to be involved, as a party or otherwise, arising out of or incidental
to the Business of Palace, excluding liabilities to any Member, regardless of
whether the Indemnitee continues to be a Member, a holder of an economic
interest, or an officer, director, employee, agent or Principal of the Member at
the time any such liability or expense is paid or incurred.
11.2 EXPENSES. Expenses incurred by an Indemnitee in defending any claim,
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demand, action, suit or proceeding subject to SECTION 11.1 shall, from time to
time, be advanced by Palace prior to the final disposition of such claim,
demand, action, suit or proceeding upon receipt by Palace of an undertaking by
or on behalf of the Indemnitee to repay such amount if it shall be determined
that such Person is not entitled to be indemnified as authorized in SECTION
11.1.
11.3 INDEMNIFICATION RIGHTS NON-EXCLUSIVE. The indemnification provided
by SECTION 11.1 shall be in addition to any other rights to which those
indemnified may be entitled under any agreement, Vote of the Members, as a
matter of law or equity or otherwise, and shall inure to the benefit of the
heirs, successors, assigns and administrators of the Indemnitee.
11.4 ERRORS AND OMISSIONS INSURANCE. Palace may purchase and maintain
insurance, at Palace's expense, on behalf of the Members, and such other Persons
as the Members shall determine, against any liability that may be asserted
against, or any expense that may be incurred by, such Person in connection with
the activities of Palace and/or the Members' acts or omissions with respect to
Palace regardless of whether Palace would have the power to indemnify such
Person against such liability under the provisions of this Agreement.
11.5 ASSETS OF PALACE. Any indemnification under Section 11.1 shall be
satisfied solely out of the assets of Palace. No Member shall be subject to
personal liability or required to fund or to cause to be funded any obligation
by reason of these indemnification provisions.
ARTICLE 12
ISSUANCE OF LLC CERTIFICATES
12.1 ISSUANCE OF LLC CERTIFICATES. The Interest of each Member shall be
represented by an LLC Certificate. Upon the execution of this Agreement, Palace
shall issue one or more LLC Certificates in the name of each Member certifying
that the Person named therein is the record holder of the Interests set forth
therein. For purposes of this Agreement, the term "record holder" shall mean
the person whose name appears in the books and records of Palace as owning the
LLC Interests at issue.
12.2 TRANSFER OF LLC CERTIFICATES. An LLC Interest that is transferred in
accordance with the terms of Article 8 shall be transferable on the books of
Palace by the record holder thereof in person or by such record holder's duly
authorized attorney, but, except as provided in SECTION 12.3 with respect to
lost, stolen or destroyed certificates, no transfer of an LLC Interest shall be
entered until the previously issued LLC Certificate representing such LLC
Interest shall have been surrendered to Palace and canceled and a replacement
LLC Certificate issued to the assignee of such LLC Interest in accordance with
such procedures as the Members may establish. The Palace shall issue to the
transferring Member a new LLC Certificate representing the LLC Interests not
being transferred by the Member, in the event such Member only transferred some,
but not all, of the LLC Interests represented by the original LLC Certificate.
Except as otherwise required by law, Palace shall be entitled to treat the
record
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holder of an LLC Certificate on its books as the owner thereof for all purposes
regardless of any notice or knowledge to the contrary.
12.3 LOST, STOLEN OR DESTROYED CERTIFICATES. Palace shall issue a new LLC
Certificate in place of any LLC Certificate previously issued if the record
holder of the LLC Certificate:
12.3.1 makes proof by affidavit, in form and substance
satisfactory to the Members, that a previously issued LLC Certificate
has been lost, destroyed or stolen;
12.3.2 requests the issuance of a new LLC Certificate before
Palace has notice that the LLC Certificate has been acquired by a
purchaser for value in good faith and without notice of an adverse
claim;
12.3.3 if requested by the Members, delivers to Palace a bond,
in form and substance reasonably satisfactory to the Members, with
such surety or sureties and with fixed or open penalty as the Members
may direct, in the Members' reasonable discretion, to indemnity
Palace against any claim that may be made on account of the alleged
loss, destruction or theft of the LLC Certificate; and
12.3.4 satisfies any other reasonable requirements imposed by
the Members.
If a member fails to notify Palace within a reasonable time after it has
notice of the loss, destruction or theft of an LLC Certificate, and a transfer
of the LLC Interest represented by the LLC Certificate is registered before
receiving such notification, Palace shall have no liability with respect to any
claim against Palace for such transfer or for a new LLC Certificate.
ARTICLE 13
AMENDMENTS
13.1 AMENDMENT, ETC., OF OPERATING AGREEMENT. This Agreement may be
adopted, altered, amended or repealed and a new operating agreement may be
adopted by a Vote of a Unanimity of Interest of the Members.
13.2 AMENDMENT, ETC., OF CERTIFICATE OF FORMATION. Notwithstanding any
provision to the contrary in the Certificate of Formation or this Agreement, in
no event shall the Certificate of Formation be amended without the Vote of a
Unanimity of Interest of the Members.
ARTICLE 14
DEFINITIONS
14.1 ADJUSTED CAPITAL ACCOUNT. "Adjusted Capital Account" shall mean, as
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to any Member, a special account maintained for such Member, the balance of
which shall equal such Member's Capital Account balance (determined by giving
effect to all adjustments attributable to allocations of items of profit and
loss realized by Palace, and all adjustments attributable to contributions and
distributions of money and property effected, on or before the effective date of
such determination), modified as follows:
14.1.1 Decreased by the items (if any) of Palace's loss that
reasonably are expected to be allocated to such Member pursuant to
section 704(e)(2) or 706(d) of the Code or section 1.751-1(b)(2)(ii)
of the Regulations (as determined under section 1.704-1(b)(2)(ii)(d)
of the Regulations);
14.1.2 Increased by the amount (if any) of such Member's share
of Nonrecourse Minimum Gain; and
14.1.3 Increased by the amount (if any) of such Member's share
of Member Risk Minimum Gain.
For purposes of applying the provisions of SECTION 4.1, the Adjusted Capital
Accounts shall be recalculated after the application of each allocation
provision before application of a provision with a lower order of priority.
14.2 ADJUSTED NET INCOME OR LOSS. "Adjusted Net Income Or Loss" for
any Fiscal Year (or portion thereof shall mean the excess (or deficit) of (a)
the Gross Income for such period (not including Gross Income (if any) allocated
during such period pursuant to SECTIONS 4.1.1. 4.1.2 4.1.4.) over (b) the
Deductible Expenses for such period (not including Deductible Expenses (if any)
allocated during such period pursuant to SECTIONS 4.1.5 OR 4.1.6) with the
following modifications:
14.2.1 Any item of LLC profit that is exempt from Federal
income tax and not otherwise taken into account in computing Adjusted
Net Income or Loss shall be treated as additional Gross Income and,
if not otherwise allocated pursuant to SECTIONS 4.1.1. 4.1.2 OR
4.1.4, added to the amount otherwise calculated as Adjusted Net
Income or Loss;
14.2.2 Any LLC expenditure that is described in section
705(a)(2)(B) of the Code (relating to LLC expenditures that are not
deductible for Federal income tax purposes in computing taxable
income and not properly chargeable to capital), or treated as so
described pursuant to section 1.704-1(b)(2)(iv)(i) of the
Regulations, and not otherwise taken into account in computing
Adjusted Net Income or Loss shall be treated as an additional
Deductible Expense and, if not otherwise allocated pursuant to
SECTIONS 4.1.5 OR 4.1.6, subtracted from the amount otherwise
calculated as Adjusted Net Income or Loss; and
14.2.3 Gain or loss resulting from any disposition of Property
with respect to which gain or loss is recognized for federal income
tax purposes shall be computed by reference to the fair market value
of the Property disposed of, notwithstanding that the adjusted tax
basis of such Property differs from its fair
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market value.
14.3 AFFILIATE. "Affiliate" means, when used with reference to a
specified Person, (a) the Principal of the Person, (b) any Person directly or
indirectly controlling, controlled by or under common control with such Person,
(c) any Person owning or controlling 10% or more of the outstanding voting
interests of such Person, and (d) any relative or spouse of such Person.
14.4 AGREED VALUE. "Agreed Value" of any property contributed to the
capital of Palace shall mean the fair market value of such property at the time
of contribution (as agreed to in writing by the Members determined without
regard to section 7701(g) of the Code (i.e., determined without regard to the
amount of Nonrecourse Liabilities to which such property is subject)).
14.5 AGREEMENT. "Agreement" means this Operating Agreement, as originally
executed and as amended from time to time, as the context requires. Words such
as "herein", hereinafter, "hereto", "hereby" and "hereunder", when used with
reference to this Agreement, refer to this Agreement as a whole, unless the
context otherwise requires.
14.6 AVAILABLE CASH FLOW. "Available Cash Flow" means, with respect to
any Fiscal Year or other period, the sum of all cash receipts of Palace from any
and all sources, less all cash disbursements (including loan repayments, capital
improvements and replacements) and a reasonable allowance for Reserves,
contingencies and anticipated obligations as determined by the Manager.
14.7 BOOK BASIS. The initial "Book Basis" of any LLC property shall be
equal initially Palace's initial adjusted tax basis in such property; provided,
however, that the initial "Book Basis" of any LLC property (or portion thereto
contributed to the capital of Palace shall be equal to the Agreed Value of such
property. Effective immediately after giving effect to the allocations of
profit and loss, as computed for book purposes, for each Fiscal Year under
SECTION 4.1, the Book Basis of each LLC property shall be adjusted downward by
the amount of Book Depreciation allowable to Palace for such Fiscal Year with
respect to such property. In addition, effective immediately prior to any
Revaluation Event, the Book Basis of each LLC property shall be further adjusted
upward or downward, as necessary, so as to equal the fair market value of such
property at the time of such Revaluation Event (as agreed to in writing by the
Members taking section 7701(g) of the Code into account (i.e., such value shall
not be agreed to be less than the amount of Nonrecourse Liabilities to which
such property is subject)).
14.7.1 BOOK DEPRECIATION. "Book Depreciation" allowable to
Palace for any Fiscal Year with respect to any LLC property shall be
equal to the product of (a) the amount of Tax Depreciation allowable
to Palace for such Fiscal Year with respect to such property,
multiplied by (b) a fraction, the numerator of which is the
property's Book Basis as of the beginning of such Fiscal Year (or the
date of acquisition if the property is acquired during such year) and
the denominator of which is the property's adjusted tax basis as of
the beginning of such Fiscal Year (or the date of acquisition if the
property is acquired during such Fiscal Year). If the denominator of
the fraction described in clause (b) above is
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equal to zero, the amount of "Book Depreciation" allowable to Palace
for any Fiscal Year with respect to Palace property in question
shall be determined under any reasonable method selected by the
Manager.
14.7.2 BOOK GAIN OR LOSS. "Book Gain or Loss" realized by
Palace in connection with the disposition of any Palace property
shall mean the excess (or deficit) of (A) the amount realized by
Palace in connection with such disposition (as determined under
section 1001 of the Code) over (B) the Book Basis of such property
at the time of the disposition.
14.7.3 BOOK/TAX DISPARITY PROPERTY. "Book/Tax Disparity
Property" shall mean any Palace property that has a Book Basis that
is different from its adjusted tax basis to Palace. Thus, any
property that is contributed to the capital of Palace by a Member
shall be a "Book/Tax Disparity Property" if its Agreed Value is not
equal to Palace's initial tax basis in the property. In addition,
once the Book Basis of a Palace property is adjusted in connection
with a Revaluation Event to an amount other than its adjusted tax
basis to Palace, the property shall thereafter be a "Book/Tax
Disparity Property".
14.8 BUSINESS OF PALACE. "Business of Palace" shall have the meaning set
forth in SECTION 1.6.
14.9 CAPITAL ACCOUNT. "Capital Account" shall have the meaning assigned
to such term in SECTION 2.4.
14.10 CAPITAL CONTRIBUTION. "Capital Contribution" shall have the meaning
set forth in ARTICLE 2.
14.11 CAPITAL TRANSACTION. "Capital Transaction"shall mean any
transaction pursuant to, which (a) Palace borrows funds, (b) all or part of
Palace's properties are sold, condemned, exchanged, abandoned or otherwise
disposed of, (c) insurance proceeds or other damages are recovered by Palace, or
(d) any other transaction that, in accordance with generally accepted accounting
principles consistently applied, is considered capital in nature (including,
without limitation, any transaction that is entered into in connection with, or
results in, the Liquidation of Palace).
14.12 CERTIFICATE OF FORMATION. "Certificate of Formation" means the
certificate filled with the Secretary of State for the purpose of forming
Palace.
14.13 CODE. "Code" shall mean the United States Internal Revenue Code of
1986, as amended from time to time. All references herein to sections of the
Code shall include any corresponding provision or provisions of any succeeding
law.
14.14 DEDUCTIBLE EXPENSES. "Deductible Expenses" for any Fiscal Year (or
portion thereof shall mean all items, as calculated for book purposes, that are
allowable as deductions to Palace for such period under Federal income tax
accounting principles (including Book Depreciation but excluding any expense or
deduction attributable to a Capital Transaction).
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14.15 DEPRECIATION. "Depreciation" means, for each Fiscal Year or other
period, an amount equal to the depreciation, amortization or other cost recovery
reduction allowable with respect to an asset for such Fiscal Year or other
period.
14.16 DISSOLUTION. "Dissolution" means (a) when used with reference to
Palace, the earlier of (1) the date upon which Palace is terminated under the
Statute, or any similar provision enacted in lieu thereof, or (ii) the date upon
which Palace ceases to be a going concern, and (b) when used with reference to
any Member, the earlier of (I) the date upon which there is a Dissolution of
Palace or (ii) the date upon which such Member's entire interest in Palace is
terminated by means of a distribution or series of distributions by Palace to
such Member.
14.17 ECONOMIC RISK OF LOSS. "Economic Risk of Loss" borne by any Member
for any Palace liability shall mean the aggregate amount of economic risk of
loss that such Member and all Related Persons to such Member are treated as
bearing with respect to such liability pursuant to section 1.752-2 of the
Regulations.
14.18 FISCAL YEAR. "Fiscal Year" shall mean the calendar year. The
initial Fiscal Year shall commence on the date hereof and end on December 31,
1996;
14.19 GROSS INCOME. "Gross Income" for any Fiscal Year (or portion
thereof shall mean the gross income derived by Palace from all sources (other
than from capital contributions and loans to Palace and other than from Capital
Transactions) during such period, as calculated for book purposes in accordance
with Federal income tax accounting principles.
14.20 IRS. "IRS" shall mean the United States Internal Revenue Service.
14.21 LIQUIDATION. "Liquidation" of a Member's Interest shall mean and be
deemed to occur upon the earlier of (a) the date upon which Palace is terminated
under section 708(b)(1) of the Code, (b) the date upon which Palace ceases to be
a going concern (even though it may continue in existence for the limited
purpose of winding up its affairs, paying its debts and distributing any
remaining LLC properties to the Members) or the date upon which there is a
liquidation of the Member's Interest (but Palace is not terminated) under
section 1.761-1(d) of the Regulations. "Liquidation" of Palace shall mean and
be deemed to occur upon the earlier of (a) the date upon which Palace is
terminated under section 708(b)(1) of the Code or (b) the date upon which Palace
ceases to be a going concern (even though it may continue in existence for the
limited purpose of winding up its affairs, paying its debts and distributing any
remaining LLC properties to the Members).
14.22 LLC. "LLC" means New Palace, LLC.
14.23 LLC INTEREST. "LLC Interest" or "Interest" means an ownership
interest of a Member in Palace, which includes the economic interest, the right
to vote or participate in the management of Palace and the right to information
concerning the business and affairs of Palace, as provided in this Agreement and
under the Statute. Each Member shall have one vote for each percentage point of
Interest as set forth in Exhibit "A" hereto and as modified from time to time.
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14.24 LLC MINIMUM GAIN. "LLC Minimum Gain" means the amount determined by
computing with respect to each nonrecourse liability of Palace, the amount of
gain (of whatever character), if any, that would be realized by Palace if it
disposed (in a taxable transaction) of the Property subject to such liability in
full satisfaction thereof, and by then aggregating the amounts so computed as
set forth in Section 1.704-2(d) of the regulations.
14.25 MEMBER. "Member" means a Person who:
14.25.1 has been admitted to Palace as a member in accordance
with the Certificate of Formation or this Agreement, and
14.25.2 has not resigned, withdrawn or been expelled as a Member
or, if other than an individual, been dissolved.
Reference to a "Member" shall be to any one of the Members. Reference to an
"Initial Member" shall be to any one of the Members listed in SECTION 2.1.
14.26 MEMBER RISK MINIMUM GAIN. "Member Risk Minimum Gain" of Palace
shall mean the amount of "minimum gain" of Palace that is attributable to Member
Risk Nonrecourse Debt (as determined under section 1.704-2(I)(3) of the
Regulations). A Member's share of such "Member Risk Minimum Gain" shall be
calculated in accordance with the provisions of section 1.704-2(l)(5) of the
Regulations.
14.27 MEMBER RISK NONRECOURSE DEBT. "Member Risk Nonrecourse Debt" shall
mean any liability (or portion thereof) of Palace that constitutes nonrecourse
debt for which a Member (or a Related Person to such Member) bears the Economic
Risk of Loss. For this purpose, "nonrecourse debt" shall mean any Palace
liability (or portion thereof that is considered nonrecourse for purposes of
section 1.1001-2 of the Regulations and any Palace liability for which the
creditor's right to repayment is limited to one or more Palace properties. It
is understood that, as a general matter, any liability that, by its own terms,
is nonrecourse to Palace and the Members (and Related Persons to the Members) is
a "Member Risk Nonrecourse Debt" if either (a) it is owed to a Member (or
Related Person to such Member) or (b) it is owed to a third-party but at least
one Member (or Related Person to such Member) bears the Economic Risk of Loss
for such liability. It is also understood that, as a general matter, any
liability that is owed to a Member (or Related Person to such Member) but that,
by its own terms, is recourse to Palace is a "Member Risk Nonrecourse Debt" to
the extent that no other Member (or Related Person to such other Member) bears
the Economic Risk of Loss for such liability.
14.28 MEMBER RISK NONRECOURSE DEDUCTIONS. "Member Risk Nonrecourse
Deductions" of Palace for a Fiscal Year shall mean any and all items of Book
Depreciation and of Deductible Expenses that are attributable to Member Risk
Nonrecourse Debt of Palace (as determined under section 1.704-2(l)(2) of the
Regulations). Subject to the previous sentence, "Member Risk Nonrecourse
Deductions" with respect to a Member Risk Nonrecourse Debt for a Fiscal Year
shall mean the excess (if any) of
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14.28.1 the next increase in Member Risk Minimum Gain
attributable to such debt during such year, over
14.28.2 the aggregate amount of any distributions, during such
year to the Member bearing the Economic Risk of Loss for such debt,
of proceeds of such debt that are allocable to an increase in Member
Risk Minimum Gain attributable to such debt.
The determination of which items of Book Depreciation and other Deductible
Expenses constitute Member Risk Nonrecourse Deductions for a Fiscal Year shall
be made before the determination of which items of Book Depreciation and other
Deductible Expenses constitute Nonrecourse Deductions. If the aggregate amount
of Member Risk Nonrecourse Deductions with respect to a Member Risk Nonrecourse
Debt for a Fiscal Year exceeds the total amount of items of Book Depreciation
and other Deductible Expenses for such year that are treated as Member Risk
Nonrecourse Deductions with respect to such debt, then that excess shall carry
forward and be treated as an increase in Member Risk Minimum Gain attributable
to such debt for the immediately succeeding Fiscal Year for purposes of
determining whether there is a net increase or decrease in Member Risk Minimum
Gain (and Member Risk Nonrecourse Deductions) during such succeeding year.
14.29 MODIFIED 752 SHARE OF RECOURSE DEBT. "Modified 752 Share of
Recourse Debt" of any Member shall mean, as of any date, the amount (if any) of
Economic Risk of Loss that such Member is treated, as of such date, as bearing
with respect to Recourse Debt under section 1.752-2 of the Regulations (assuming
Palace constructively liquidates on such date within the meaning of section
1.752-2(b) of the Regulations except that, for purposes of such section
1.752-2(b), all of the assets of Palace will be deemed thereunder to be
transferred in fully taxable exchanges for an aggregate amount of cash
consideration equal to their respective Book Bases and such consideration will
be deemed thereunder to be used, in the appropriate order of priority, in full
or partial satisfaction of the liabilities of Palace).
14.30 NET PROCEEDS OF A CAPITAL TRANSACTION. "Net Proceeds of a Capital
Transaction" shall mean the net proceeds received by Palace in connection with a
Capital Transaction after payment of all costs and expenses incurred by Palace
in connection with such Capital Transaction (including, without limitation,
brokers' commissions, loan fees, loan payments, other closing costs and the Cost
of any alteration, improvement, restoration or repair of Palace properties
necessitated by or incurred in connection with such Capital Transaction) and, if
the Capital Transaction is a financing or refinancing, after the payment of any
Palace liability that is repaid in connection with such financing or
refinancing.
14.31 NONRECOURSE DEDUCTIONS. "Nonrecourse Deductions" of Palace for a
Fiscal Year shall mean any and all items of Deductible Expenses that are
attributable to Nonrecourse Liabilities of Palace (as determined under section
1.70420 of the Regulations). Subject to the foregoing sentence, the aggregate
amount of "Nonrecourse Deductions" for any Fiscal Year shall equal the excess
(if any) of:
14.31.1 the net increase in the amount of Nonrecourse Minimum
Gain
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during such Fiscal Year, over
14.31.2 the aggregate amount of any distributions during such
Fiscal Year of proceeds of a Nonrecourse Liability that are
allocable to an increase in LLC Minimum Gain.
If the aggregate amount of "Nonrecourse Deductions" for a Fiscal Year exceeds
the total amount of items of Book Depreciation and other Deductible Expenses for
such Fiscal Year, then that excess shall carry forward and be treated as an
increase in Nonrecourse Minimum Gain for the immediately succeeding Fiscal Year
for purposes of determining whether there is a net increase or decrease in
Nonrecourse Minimum Gain (and "Nonrecourse Deductions") during such succeeding
Fiscal Year.
14.32 NONRECOURSE LIABILITY. "Nonrecourse Liability" of Palace shall mean
any liability (or portion thereof of Palace for which no Member (and no Related
Person to any Member) bears the Economic Risk of Loss. It is understood that,
as a general matter, any liability of Palace that, by its own terms, is
nonrecourse to Palace and the Members (and Related Persons to the Members) is a
"Nonrecourse Liability" if (a) it is not owed to any Member (or Related Person
to such Member) and (b) no Member (or Related Person to such Member) bears the
Economic Risk of Loss for such liability.
14.33 NONRECOURSE MINIMUM GAIN. "Nonrecourse Minimum Gain" of Palace
shall mean the amount of "minimum gain" of Palace that is attributable to
Nonrecourse Liabilities (as determined under section 1.704-2(d) of the
Regulations). A Member's share of such "Nonrecourse Minimum Gain" shall be
calculated in accordance with the provisions of section 1.704-2(g) of the
Regulations. Subject to the previous sentence, "Nonrecourse Minimum Gain" shall
mean the amount determined as follows: (a) first, compute, with respect to each
Nonrecourse Liability, the amount of Book Gain or Gross Income that would be
realized by Palace if Palace disposed of (in a taxable transaction) Palace
property subject to such debt in full satisfaction of such debt (and for no
other consideration); and (b) then, add together the amounts so computed for all
Nonrecourse Liabilities. The resulting sum is the "Nonrecourse Minimum Gain".
Where any Palace property is subject to multiple secured liabilities of unequal
priority, the property's Book Basis shall be allocated among the liabilities in
order of priority from most senior first to least senior last. Where two or
more secured liabilities are of equal priority, Book Basis shall be allocated
among the liabilities in accordance with the outstanding balances of such
liabilities. For purpose of determining the net increase or decrease in
Nonrecourse Minimum Gain during any Fiscal Year in which the Members' Capital
Accounts are increased pursuant to section 1.704-1(b)(2)(iv)(f) or (r) of the
Regulations to reflect a revaluation of Palace property subject to one or more
Nonrecourse Liabilities, any decrease in Nonrecourse Minimum Gain attributable
to this revaluation shall be added back to the net decrease or increase
otherwise determined. A Member's share of such "Nonrecourse Minimum Gain" shall
be calculated in accordance with the provisions of section 1.704-2(g) of the
Regulations.
14.34 OPERATING EXPENSES. "Operating Expenses" shall mean all ordinary
and necessary costs, expenses or charges with respect to the ownership,
improvement, operation, maintenance, financing and upkeep of Palace properties,
including, without limitation, ad
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valorem taxes, advertising expenses, professional fees, insurance premiums,
maintenance costs and wages.
14.35 OPERATIONS. "Operations" shall mean all Palace revenue producing
activities other than activities constituting or relating to Capital
Transactions.
14.36 PERCENTAGE INTEREST. The Members' "Percentage Interests" shall be
in the percentages set forth on EXHIBIT A attached hereto and incorporated
herein by reference, as amended from time to time.
14.37 PERIOD OF DURATION. "Period of Duration" shall have the meaning set
forth in SECTION 1.5.
14.38 PERSON. "Person" means an individual, partnership, limited
partnership, corporation, trust, estate, association, limited liability company
or other entity, whether domestic or foreign.
14.39 PRINCIPAL. "Principal" means the natural Person who owns an
interest in a Member.
14.40 PROPERTY. "Property" means all assets of Palace, both tangible and
intangible, or any portion thereof.
14.41 RECOURSE DEBT. "Recourse Debt" of Palace shall mean any liability
(or portion thereof of Palace that is neither a Nonrecourse Liability nor a
Member Risk Nonrecourse Debt. It is understood that, as a general matter, any
liability that, by its own terms, is recourse to Palace or any Member (or
Related Person to such Member) is a "Recourse Debt"; provided, however, that any
such liability that is owed to a Member (or Related Person to such Member) is a
"Member Risk Nonrecourse Debt" rather than a "Recourse Debt" to the extent that
no other Member (or Related Person to such other Member) bears the Economic Risk
of Loss for such liability.
14.42 RELATED PERSON. "Related Person" shall mean, as to any Member, any
person who is related to such Member (within the meaning of section 1.752-4(b)
of the Regulations).
14.43 REGULATIONS. "Regulations" shall mean the regulations promulgated
by the United States Department of the Treasury pursuant to and in respect of
provisions of the Code. All references herein to sections of the Regulations
shall any corresponding provision or provisions of succeeding, similar or
substitute proposed, temporary or final Regulations.
14.44 RESERVES. "Reserves" means funds set aside from Capital
Contributions or gross cash revenues as reserves. Such Reserves shall be
maintained in amounts reasonably deemed sufficient by the Manager for working
capital and the payment of taxes, insurance, debt service, repairs,
replacements, renewals or other costs or expenses incident to the Business of
Palace, or in the alternative, the Dissolution of Palace.
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14.45 REVALUATION EVENT. "Revaluation Event" shall mean any of the
following occurrences: (a) the contribution of money or other property (other
than a DE MINIMIS amount) by a new or existing Member to the capital of Palace
as consideration for the issuance of an Interest and/or increase in Percentage
Interest; (b) the distribution of money or other property (other than a DE
MINIMIS amount) by Palace to a retiring or continuing Member as consideration
for an Interest and/or decrease in Percentage Interest; or the termination of
Palace for federal income tax purposes under section 70(b)(1)(B) of the Code.
14.46 SECRETARY OF STATE. "Secretary of State" shall mean the Secretary
of State of the State of Mississippi.
14.47 SECTION 704 CAPITAL ACCOUNT. "Section 704 Capital Account" shall
mean an account, determined and maintained for each Member throughout the full
term of the Agreement, the balance of which shall be equal to such Member's
Capital Account balance (as determined after giving effect to all adjustments
attributable to allocations of items of profit and loss realized by Palace, and
all adjustments attributable to contributions and distributions of money and
property effected, on or before the effective date of such determination),
modified as follows:
14.47.1 Increased by the amount (if any) that such Member is
treated as being obligated to contribute subsequently to the capital
of Palace (as determined under section 1.704-I(b)(2)(ii)(c) of the
Regulations);
14.47.2 Decreased by the amount (if any) of Available Cash and
Net Proceeds of Capital Transactions that reasonably are expected to
be distributed to such Member, but only to the extent that the
amount thereof exceeds any offsetting increase to such Member's
Section 704 Capital Account that reasonably is expected to occur
during (or prior to) the Fiscal Year during which such distributions
reasonably are expected to be made (as determined under section
1.7041(b)(2)(ii)(d) of the Regulations);
14.47.3 Decreased by the items (if any) of Palace's loss that
reasonably are expected to be allocated to such Member pursuant to
section 704(e)(2) or 706(d) of the Code or section 1.751-1(b)(2)(ii)
of the Regulations (as determined under section 1.704-1(b)(2)(ii)(d)
of the Regulations):
14.47.4 Increased by the amount (if any) of such Member's share
of Nonrecourse Minimum Gain;
14.47.5 Increased by the amount (if any) of such Member's share
of Member Risk Minimum Gain; and
14.47.6 Increased by the amount (if any) of such Member's
Modified 752 Share of Recourse Debt.
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14.48 STATUTE. "Statute" shall mean the Mississippi Limited Liability
Company Act.
14.49 TAX DEPRECIATION. "Tax Depreciation" for any Fiscal Year shall mean
the amount of depreciation, cost recovery or other amortization deductions
allowable to Palace for Federal income tax purposes for such year.
14.50 TAX ITEMS. "Tax Items" shall mean, with respect to any property,
all items of profit and loss (including Tax Depreciation) recognized by or
allowable to Palace with respect to such property, as computed for federal
income tax purposes.
14.51 TAX MATTERS PARTNER. "Tax Matters Partner" shall mean the Manager
or any other Member designated in SECTION 6.2 as the "tax matters partner".
14.52 TAXABLE GAIN OR LOSS. "Taxable Gain Or Loss" shall mean profit or
loss recognized by Palace on the sale, exchange or other disposition of any LLC
property, as computed for federal income tax purposes.
14.53 UNANIMITY IN INTEREST OF THE MEMBERS. "Unanimity in Interest of the
Members," means unanimous consent of the Members, irrespective of their
Percentage Interest in Palace.
14.54 UNREALIZED BOOK GAIN OR LOSS. "Unrealized Book Gain or Loss" with
respect to any Palace property shall mean the excess (or deficit) of (a) the
fair market value of such property (as agreed to in writing by the Members
taking section 7701(g) of the Code into account (i.e., such value shall not be
agreed to be less than the amount of Nonrecourse Liabilities to which such
property is subject)), over (b) the Book Basis of such property.
14.55 UNREALIZED TAX GAIN OR LOSS. The amount of any Member's "Unrealized
Tax Gain or Loss" with respect to any Book/Tax Disparity Property shall be
determined the manner prescribed in this paragraph. Any resulting amount that
is greater than zero shall be deemed to be the Member's "Unrealized Tax Gain"
with respect to the property, and any resulting amount that is less than zero
shall be deemed to be the Member's "Unrealized Tax Loss" with respect to the
property.
14.55.1 First, if the Member contributed the Book/Tax Disparity
Property to the capital of Palace, the Member's adjusted tax basis
in the property immediately prior to such contribution shall be
subtracted from the property's Agreed Value. Otherwise, the
provisions of this subparagraph shall not apply to the Member.
14.55.2 Second, to the amount (if any) calculated in the
foregoing provision of this paragraph, there shall be added the
aggregate amount of all upward adjustments to the balance of the
Member's Capital Account previously made in connection with a
Revaluation Event to reflect the manner in which items of profit
with respect to such property, as computed for book purposes, equal
to the Unrealized Book Gain then existing with respect to the
property, would have
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been allocated among the Members pursuant to SECTION 4 IF there had
been a taxable disposition of the property immediately prior to such
Revaluation Event for its fair market value.
14.55.3 Third, from the amount (if any) calculated in the two
foregoing provisions of this paragraph, there shall be subtracted
the aggregate amount of all downward adjustments to the balance of
the Member's Capital Account previously made in connection with a
Revaluation Event to reflect the manner in which items of loss with
respect to such property, as computed for book purposes, equal to
the Unrealized Book Loss then existing with respect to the property,
would have been allocated among the Members pursuant to SECTION 4.1
if there had been a taxable disposition of the property immediately
prior to such Revaluation Event for its fair market value.
14.55.4 Fourth, to the amount (if any) calculated in the three
foregoing provisions of this paragraph, there shall be added the
aggregate amount of Tax Depreciation with respect to the property
previously allocated to the Member pursuant to SECTION 4.2.
14.55.5 Fifth, from the amount (if any) calculated in the four
foregoing provisions of this paragraph, there shall be subtracted
the aggregate amount of Book Depreciation with respect to the
property previously allocated to the Member pursuant to SECTION 4.
14.56 VOTE OF THE MEMBERS. "Vote of the Members" shall mean a vote by a
majority of Interest in the Company.
ARTICLE 15
MISCELLANEOUS PROVISIONS
15.1 COUNTERPARTS. This Agreement may be executed in several
counterparts, and all counterparts so executed shall constitute one Agreement,
binding on all of the parties hereto, notwithstanding that all of the parties
are not signatory to the original or the same counterparts
15.2 SURVIVAL OF RIGHTS. This Agreement shall be binding upon, and, as
to permitted or accepted successors, transferees and assigns, inure to the
benefit of the Members and Palace and their respective heirs, legatees, legal
representatives, successors, transferees and assigns, in all cases whether by
the laws of descent and distribution, merger, reverse merger, consolidation,
sale of assets, other sale, operation of law or otherwise.
15.3 SEVERABILITY. If any provision in this Agreement is declared by a
court of competent jurisdiction to be void or unenforceable, such provision
shall be deemed severed from the remainder of this Agreement and the balance of
this Agreement shall remain in full force and effect.
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15.4 NOTIFICATION OR NOTICES. Except for notices to be given under
ARTICLES 7 for purposes of meetings of Members, notice or other communication
required or permitted hereunder shall be in writing and shall be deemed to have
been given if personally delivered, transmitted by facsimile (with mechanical
confirmation of transmission), or deposited in the United States mail,
registered or certified, postage prepaid, addressed to the parties' addresses
set forth in SECTION 2.1, unless the same shall have been changed by notice in
accordance herewith. Notices given in the manner provided for in Section 15.4
shall be deemed effective on the fourth day following deposit in the mail or on
the day of transmission or delivery if given by facsimile or by hand.
15.5 CONSTRUCTION. The language in all parts of this Agreement shall be
in all cases construed simply according to its fair meaning and not for or
against any of the Members.
15.6 SECTION HEADINGS. The captions of the Articles or Sections in this
Agreement are for convenience only and in no way define, limit, extend or
describe the scope or intent of any of the provisions hereof, shall not be
deemed part of this Agreement and shall not be used in construing or
interpreting this Agreement. All references to Sections, Subsections and
Articles shall refer to Sections, Subsections and Articles of this Agreement.
15.7 GOVERNING LAW. This Agreement shall be construed according to the
internal laws of the State of Mississippi.
15.8 GOOD FAITH. The Members hereof recognize that they owe a duty of
good faith and fair dealing to each other and agree to act in accordance with
such duty.
15.9 FURTHER ACTIONS; ADDITIONAL DOCUMENTS. Each Member agrees to
perform all further acts and execute, acknowledge and deliver all documents that
may be reasonably necessary, appropriate or desirable to carry out the
provisions and intent of this Agreement and every agreement or document relating
hereto or entered in connection herewith, including, without limitation,
acknowledging before a notary public any signature heretofore or hereafter made
by a Member.
15.10 PRONOUNS AND PLURALS. Whenever the context may require, any pronoun
used in this Agreement shall include the corresponding masculine, feminine and
neuter forms, and the singular form of nouns, pronouns and verbs shall include
the plural and vice versa.
15.11 TIME OF THE ESSENCE. Except as otherwise provided herein, time is
of the essence in connection with each and every provision of this Agreement.
15.12 THIRD PARTY BENEFICIARIES. There are no third party beneficiaries
of this Agreement except (a) Affiliates and Principals of the Members and (b)
any other Persons as may be entitled to the benefits of ARTICLE 11.
15.13 PARTITION. The Members agree that the Property that Palace may own
or have an interest in is not suitable for partition. Each of the Members
hereby irrevocably waives any and all rights that it may have to maintain any
action for partition of any Property in which
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Palace may at any time have an interest.
15.14 ENTIRE AGREEMENT. This Agreement and the Certificate of Formation
constitute the entire agreement of the Members, and supersede all prior written
and oral agreements, understandings and negotiations, with respect to the
subject matter hereof.
15.15 WAIVER. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof shall
constitute a waiver of any such breach or any other covenant, duty, agreement or
condition. 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.
15.16 ATTORNEYS' FEES. In the event of any litigation, arbitration or
other dispute arising as a result of or by reason of this Agreement, the
prevailing party in any such litigation, arbitration or other dispute shall be
entitled to, in addition to any other damages assessed, its reasonable
attorneys' fees, and all other costs and expenses incurred in connection with
settling or resolving such dispute. The attorneys' fees that the prevailing
party is entitled to recover shall include fees for prosecuting or defending any
appeal and shall be awarded for any supplemental proceedings until the final
judgment is satisfied in full. In addition to the foregoing award of attorneys'
fees to the prevailing party, the prevailing party in any lawsuit or arbitration
procedure on this Agreement shall be entitled to its reasonable attorneys' fees
incurred in any post judgment proceedings to collect or enforce the judgment.
This attorneys' fees provision is separate and several and shall survive the
merger of this Agreement into any judgment.
15.17 CONFIDENTIALITY AND PRESS RELEASES. The Members and their
respective Affiliates and Principals hereby agree that it is in all of their
best interests to keep this Agreement and the Business of Palace and all
information concerning such business confidential except as may be required by
law or to any governmental agencies or units in furtherance of the Business of
Palace. Such parties each agree that they will not take any action nor conduct
themselves in any fashion, including giving press releases or granting
interviews, that would disclose to third parties unrelated to Palace or the
Business of Palace any aspect of Palace or the Business of Palace without the
prior written approval of the Members. To the extent such prior approval is
given, it may be conditioned upon approval of the text of any press release or
the scope of any intended interview.
15.18 CORPORATE OPPORTUNITY. Except as and to the extent set forth in
SECTION 15.21, the Members and their respective managers, members, Principals,
Affiliates, officers, directors, employees and agents may engage or invest in
any business activity of any type, including, but not limited to, a business
that might be in direct or indirect competition with Palace and neither Palace
nor any Member shall have any right to participate in such business or to the
income or proceeds from such business. Further, none of such parties shall be
obligated to present any opportunity to invest in any such business to Palace or
any Member of Palace, even if the opportunity would otherwise be required to be
presented to Palace under the corporate opportunity doctrine and even if such
opportunity could be taken by Palace. Except as and to the
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extent set forth in SECTION 15.21, the Members acknowledge that each of them and
the foregoing parties own, invest in or have other interests or relationships
with businesses that may compete with Palace and the Members hereby waive any
and all rights and claims which they might otherwise have against each other and
such parties as a result of any such activities.
15.19 CONFLICTS OF INTEREST. Notwithstanding any other provision in this
Agreement, the parties may engage in any business transaction with Palace
notwithstanding that it might otherwise constitute a conflict of interest so
long as the, terms and conditions of such transaction are fair and reasonable to
Palace, are fully disclosed to the Members and is approved by all of the Members
not engaging in such transaction. Such approval may be withheld in the sole
discretion of all of the Members not engaging in such transaction and the
refusal to give such approval shall not be subject to arbitration.
15.20 NO LIABILITY. Except as expressly required by law, or as otherwise
set forth in this Agreement, no Member shall be personally liable for any
obligation or liability of Palace, solely by reason of such party being a Member
of Palace.
15.21 NON COMPETE. During the term of the Agreement the Members and their
respective Principals agree not to operate or own, directly or indirectly, any
gaming interest in any venture located within a 25-mile radius of the Palace
Casino.
15.22 PROHIBITED PAYMENTS. The Members agree that all of them, as the
case may be, and their respective Affiliates will conduct their respective
activities, and will cause any activities conducted on their respective behalf
to be conducted, in a lawful manner and specifically will not engage in the
following transactions:
(a) payments or offers of payment, directly or indirectly, to
any domestic or foreign government official or employee in order to
obtain business, retain business or direct business to others, or
for the purpose of inducing such government official or employee to
fail to perform or to perform improperly his official functions.
(b) receive, pay or offer anything of value, directly or
indirectly, from or to any private party in the form of a commercial
bribe, influence payment or kickback for any such purpose; or
(c) use, directly or indirectly, any funds or other assets of
the Business for any unlawful purpose including, without limitation,
political contributions in violation of applicable law.
IN WITNESS WHEREOF, the parties hereto have hereunto executed this
Agreement as of the date first written above.
--------------------------------------
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Robert Low
--------------------------------------
Lawana Low
CASINO RESOURCE CORPORATION
By:
-----------------------------------
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EXHIBIT A
MEMBERS' OWNERSHIP INTERESTS
ROBERT LOW or LAWANA LOW 80%
CASINO RESOURCE CORPORATION 20%
-------
100%
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LEASE CONTRACT
THE UNDERSIGNED:
- - the Samara Casino Company, duly represented by its President and CEO, Mr.
Slim MAHDOUI, residing at Hotel Samara, Boulevard du 7 Novembre at Sousse,
hereinafter designated as "the lessor"
PARTY OF THE FIRST PART
AND
- - the Casino Resource Corporation company, duly represented by its Chief
Executive Officer, Mr. Jack PILGER, residing at 1719 Beach Boulevard "Suite
306" - Executive Place - Biloxi - MISSISSIPPI - UNITED STATES OF AMERICA,
hereinafter designated as "the lessee"
PARTY OF THE SECOND PART.
HEREBY SET FORTH THE FOLLOWING PREMISES:
It being understood that Samara Casino Company plans to carry out an
international-class tourism activity project with a casino.
It being understood that Samara Casino Company has obtained an authorization
from the legal government of Tunisia to create a "Casino Samara" activity center
pursuant to the letter from the Minister of Tourism with reference FB/GA DSG 579
dated February 8, 1996.
It being understood that the Samara Casino Company declares that the said
authorization entitles it to obtain, from the Tunisian State, a gambling
authorization for the casino.
It being understood that the gambling authorization is granted for operating
gambling tables, slot machines and video games.
<PAGE>
It being understood that the Samara Casino Company declares that the said
authorization cannot be withdrawn from it or be revoked except in accordance
with legislation in force.
It being understood that the Samara Casino Company plans the opening of the
casino not later than July, first 1997.
It being understood that the Casino Resource Corporation company is a
professional operator in the field of gambling.
It being understood that the two parties agree to act within the framework of
strict legality and of observance of the regulations in force in Tunisia.
The two companies have agreed to conclude the present lease contract.
NOW THEREFORE THE PARTIES HEREBY ENTER INTO THE FOLLOWING AGREEMENT:
1. Relationships between the parties
The relationships between the parties to the present contract are solely
relationships between lessor and tenant.
2. Object
The object of the present contract is lease of a casino and of its surroundings,
which the lessor will build in Sousse, Boulevard du 7 Novembre, in compliance
with the final plans approved by the Ministry of Tourism which are attached to
the present contract and constitute an integral part of it.
For the execution of the present contract, the term "casino" designates the
gambling room located at the building's ground level only. The term
"surroundings" designates offices, lavatories, surveillance room, relax room,
training room and depository ... located at the building's
-2-
<PAGE>
underground in according with detailed description on architectural drawings
signed by both parties and which hold as an integral part of this contract.
Regarding the underground surroundings devoted to the ordinary operation of the
casino, the lessor undertakes to supply to the lessee at least fifty percent of
the casino square foot.
3. Legal framework of the casino.
The lessor authorizes the lessee to operate the Casino in accordance with the
laws and regulations in effect in Tunisia and all later documents, and pursuant
to the stipulations of the gambling authorization, as well as the terms of the
present contract.
4. Gambling authorization
The lessor shall make every effort to help the lessee obtain the gambling
authorization. The lessee shall act, for the entire duration of the present
contract, in such fashion as to maintain the validity of the gambling
authorization.
5. Casino management
The lessee shall operate the Casino competently, efficiently and professionally,
to make it an international-class casino.
It shall exercise entire and total direction of casino management. It alone
decides on the Casino's needs for gambling. It alone is responsible for Casino
management, which it undertakes to carry out with due observance for the laws
and regulations in force in Tunisia and all subsequent documents, and in
accordance with the stipulations of the gambling authorization as well as the
terms of the present contract. The lessor has no inspections rights of any kind
whatsoever with respect to the lessee's management of the Casino. It agrees not
to intervene in any way whatsoever in the lessee's management.
-3-
<PAGE>
6. Activities
The lessee shall be entitled to install and keep only Casino games and bar
service for its customers and personnel on the premises object of the present
contract pursuant to the stipulations of the gambling authorization, to the laws
and regulations in force in Tunisia and to all subsequent documents, as well as
pursuant to the terms of the present contract.
7. Duration
The present lease agreement is granted for an irrevocable period of three years,
starting sixty days after delivery to the lessee.
8. Renewal
The present contract is renewable for two successive periods of three years each
by tacit extension unless one year's notice is given by the lessee alone by
registered mail with receipt or by means of a notification served by a process
server-notary.
9. Delivery
The lessor shall deliver the Casino with its surroundings to the lessee on the
basis of the work completion attestation and the compliance certificate issued
by the design office.
The delivery shall be recorded in a document drawn up in the parties' presence
and duly signed and dated by the two parties.
10. Equipment
The lessee shall equip the Casino and its surroundings, at its own expense, with
all elements required for normal operation.
The equipment shall include and the list is not exhaustive: false ceiling,
carpets, curtains, drapes and all inside decorations and illuminated outside
signs.
-4-
<PAGE>
The lessee shall provide also all gambling equipments as gambling tables, slot
machines, video games, tokens, cards, computer systems and hardware, equipment
and surveillance.
11. Possession
The lessee shall have to occupy the premises properly and not do anything that
could cause any disturbance of possession whatsoever because of its doing or the
doing of the persons employed in its service.
It may not undertake any construction or modification or demolition or drillings
or install partitions or floors without the lessor's advance and explicit
authorization.
At the end of the contract, all improvements that have been undertaken and
carried out remain the lessor's property, without the lessee being entitled to
claim any indemnity whatsoever in general.
The lessee shall be responsible for all deterioration occurring due to improper
use, either of its own doing or of the doing of third parties. It shall
maintain the rented premises in good condition and shall keep them in a perfect
state of cleanness and operation.
12. Rental
The rental consists of a fixed part and of a variable part, the latter
determined as a function of the gross income from the Casino games.
13. Rental amount
The rental per year is set as the counter value in Tunisian dinars of four
hundred et sixty thousand dollars tax free with a yearly increase of ten percent
(10%).
To this rental shall be added a variable percentage of the casino's gross income
which shall be paid as detailed hereafter:
- - on the portion of the casino's gross income up to 3.5 Million dinars: TEN
PERCENT (10%)
-5-
<PAGE>
- - on the portion of the casino's gross income greater than 3.5 Million dinars
and up to 7 Million dinars: EIGHT PERCENT (8%)
- - on the portion of the casino's gross income greater than 7.0 Million
dinars: FIVE PERCENT (5%)
14. Payment of the rental
The fixed part of rental shall be paid every six months and in advance.
However, the fixed part of the first year rental shall be two hundred and fifty
thousand dollars (250.000) paid upon signature of the present contract and two
hundred and fifty thousand dollars (250.000) paid ninety days after signature of
the present contract.
The variable part of the rental, calculated as a function of the casino's gross
income shall be determined upon lessee's fiscal declaration each six months and
paid not later than thirty days after.
15. Tax allowance
In the case, the lessee obtains a tax allowance on casino's gross income because
of advertising or animation activities, this allowance will be wholly paid to
the lessor.
16. Maintenance - Repairs
The lessee shall support all charges of common maintenance of the Casino and its
surroundings. The lessor shall support all charges of major repairs related to
the building structure, electrical, plumbing, heating, and air conditioning
installations and all equipments provided by the lessor.
17. Insurance
The lessee undertakes to insure, at its sole expense, the Casino and its
surroundings covered by the present contract against the Professional public
liability risk.
-6-
<PAGE>
18. Accounting books
The lessee is responsible for keeping accounting books, which must reflect
Casino operation. It must keep all accounting elements for the entire duration
of the present contract.
19. Inspection
The lessor is entitled to inspect the Casino and its surroundings at any time,
and access thereto must be granted to it in reasonable fashion. However, it
shall have to see to disturbing Casino operation as little as possible and must
always be accompanied by a representative of the lessee.
20. Contract expiration
At the end of the present contract, the lessee shall return, to the lessor, the
premises covered by the present contract in the condition in which it has
received them, allowing for obsolescence and normal wear and tear.
21. Force majeure
In case of occurrence of force majeure making it impossible to operate the
Casino, the effects of the present contract are suspended, and particularly with
respect to payment of the rental. The rental to be paid will be calculated pro
rata temporis. If the case of force majeure should persist after six months,
the present contract may be canceled immediately at the initiative of a single
one of the parties to the present agreement.
The term force majeure means the liability exemption clause for any event
unforeseeable, insurmountable, and independent of the will of both parties
having as a consequence making impossible the casino's operation.
Cancellation of the present contract due to force majeure does not create any
entitlement to indemnitities.
-7-
<PAGE>
22. Modification of circumstances
In case where the admission of Tunisian people inside casino shall be authorized
by later regulations, the parties shall then consult each other with a view to
revising the contract on a fair basis in order to avoid excessive prejudice to
one or the other of the parties.
Failing agreement between the parties concerning revision of the contract within
a period of ninety days after the written request of the lessor, each of the
parties may take the question of revision to the Arbitration Panel provided for
in the present contract.
23. Language
The present contract is drawn up in the French and English languages. In case
of conflict, the French version shall prevail.
24. Notifications
Relationships and communications between the parties shall always be in writing
and be as direct as possible at the level of the senior managers of the
contracting parties, at their respective domiciles as mentioned in these
presents, to which all official or legal notifications shall be sent.
25. Disputes
Any disputes stemming from the present contract shall be definitively settled
pursuant to the conciliation and arbitration rules of the International Chamber
of Commerce by one or several arbitrators appointed pursuant to the said
regulations.
The arbitration shall be in Paris, France, in the French language, the
arbitrator or arbitrators acting as "amiable(s) compositeur(s)".
26. Applicable law
The present contract is governed, construed and performed in accordance with the
laws in effect in Tunisia and any subsequent documents.
-8-
<PAGE>
27. Election of domicile
The parties elect domicile at the following addresses for performance of these
presents:
- - the lessor at the registered office of the Samara Casino Company, Hotel
Samara, Boulevard du 7 Novembre in Sousse,
- - the lessee at its registered office, c/o Maitre Mondhor BEN HAMIDA, 35
Avenue de Paris, 1000. Tunis.
28. Change of address
Each party may change its address as long as it informs the other party of the
new address in writing with a definite date. The change of address shall become
effective upon receipt of the notification.
29. Taxes
For performance of the present contract, the lessee shall pay all of the
expenses, fees and taxes for which it is made responsible by law.
30. Stamp and recording fees
The stamp and recording fees, as well as the expenses relating to giving notice
of the present document shall be paid by the lessee.
31. Condition precedents
The present contract goes into effect between the parties upon signature. It is
accepted and signed by the contracting parties subject to the explicit condition
precedent of obtaining all required authorizations from the Tunisian
authorities, particularly the gambling authorization.
The owner shall make every effort to help the lessee obtain the legal
authorizations required before January 1, 1997.
-9-
<PAGE>
If the said approvals and authorizations are not obtained within the indicated
periods, the undersigned parties shall meet to take all useful steps.
In case the lessee does not obtain, within a reasonable period, from the
Tunisian authorities, the gambling authorization required for operation of the
Casino and its surroundings, all amounts advanced by it as rental for the first
year shall be returned to it within thirty days starting with the date of a
warning with a definite date.
M. Slim MAHDOUI M. Jack PILGER
President and Chief Executive Office Chief Executive Office of the Casino
of the Samara Casino Company Resource Corporation company
Hotel Samara, Boulevard du 7 Novembre 117-199 Beach Boulevard - Suite 306
Sousse, TUNISIA Executive Place - BILOXI
MISSISSIPPI - UNITED STATES of AMERICA
-10-
<PAGE>
TERM SHEET
THE UNDERSIGNED:
- - the Samara Casino Company, duly represented by its President and CEO, Mr.
Slim MAHDOUI, residing at Hotel Samara, Boulevard du 7 Novembre at Sousse,
hereinafter designated as "the lessor"
PARTY OF THE FIRST PART
AND
- - the Casino Resource Corporation company, duly represented by its Chief
Executive Officer, Mr. Jack PILGER, residing at 1719 Beach Boulevard "Suite
306" - Executive Place - Biloxi - MISSISSIPPI - UNITED STATES OF AMERICA,
hereinafter designated as "the lessee"
PARTY OF THE SECOND PART,
HEREBY SET FORTH THE FOLLOWING PREMISES:
It being understood that Samara Casino Company plans to carry out an
international-class tourism activity project with a casino and a theater.
It being understood that Samara Casino Company has obtained an authorization
from the legal government of Tunisia to create a "Casino Samara" activity center
pursuant to the letter from the Minister of Tourism with reference FB/GA DSG 579
dated February 8, 1996.
It being understood that societe Samara Casino has signed a lease contract of
the casino with CRC.
It being understood that the operating of the theater is completary to the
gambling activity.
It being understood that the Casino Resource Corporation company is a
professional operator as well as in the field of the shows and entertainment
management than the field of gambling management.
It being understood that the two parties agree to act within the framework of
strict legality and of observance of the regulations in force in Tunisia.
The two companies have agreed to conclude the present term sheet.
NOW THEREFORE THE PARTIES HEREBY ENTER INTO THE FOLLOWING AGREEMENT:
1. Samara Casino decides to entrust to CRC the operation of its theater in
compliance with a formula which shall be determined by their lawyers.
2. Samara Casino shall supply the premises wholly equipped except stage; play
of light & sound system which shall be all furnished by CRC.
3. CRC is responsible of the operating of the show.
-11-
<PAGE>
4. CRC will pay to Samara Casino 2$ on each show ticket sold.
5. CRC will subcontract the operating of catering of the theater to Samara
Casino in compliance with conditions which shall be determined in the final
contract.
6. CRC will subcontract its transportation needs to Samara Casino according to
competition tariffs.
7. The duration of the contract shall be linked to the duration of the casino
lease contract.
8. The premises shall be delivered in the same time than the casino object of
a distinct contract.
9. This documents undertakes both parties in waiting the signature of the
final contract.
Sousse June ____, 1996
_________________________________ ___________________________________
M. Slim MAHDOUI M. Jack PILGER
President and Chief Executive Office Chief Executive Office of the Casino
of the Samara Casino Company Resource Corporation company
Hotel Samara, Boulevard du 7 Novembre 117-199 Beach Boulevard - Suite 306
Sousse, TUNISIA Executive Place - BILOXI
MISSISSIPPI - UNITED STATES of AMERICA
-12-
<PAGE>
July 3, 1996
Maitre Mondor BEN HAMIDA
35
Avenue de Paris
1000 Tunis
Dear Ben,
There are still three outstanding issues that need to be completed in regards to
the contract between CRC and Samara.
You need to get an amendment approved by Slim that states that the second
deposit payment due is for $210,000 and not for $250,000. Also, you should get
Slim to acknowledge the casino will be fully under construction by the time the
second payment is due.
In Section 15, which refers to the tax allowance, it still states that Slim is
to receive any tax refunds for advertising activities. You need to get an
amendment that states that whomever operates the showroom gets any and all tax
rebates and refunds for the entire facility.
You need to draft a separate agreement on the complementaries issue. This
agreement needs to state that we are to receive a 50% discount on all food,
drinks and other services that Slim may provide to us and our customers on a
complimentary basis. In other words, if we give a free meal or comp slip to
someone, then Slim will only charge us 50% of the retail price. The total
amount owed to Slim will be calculated on a monthly basis and payable at the end
of that month.
I also have not received a response from you on the letter that I have twice
sent to you, both last week and this week.
If you need further clarification, please call or fax.
Best regards,
Rian Rathwick
Vice President
New Development
-13-
<PAGE>
CONSULTANT AGREEMENT
BETWEEN
Casino Resource Corporation, represented by their legal representative M Jack
PILGER located at 1719 Beach Boulevard - Suite 306 - Executive Place - BILOXI
- - MISSISSIPPI - UNITED STATES
AND
Mondhor BEN HAMIDA, located at 35, Avenue de Paris- Tunis
WHEREAS, Casino Resource Corporation wishes to operate in Tunisia (-left
angle- -left angle- the territory -right angle- -right angle-)) activities of
gambling
WHEREAS, Consultant may provide advises and assistance to allow Casino
Resource Corporation to conclude Agreement of lease for operating casino
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOW:
I. SERVICES
A. Consultant agrees to provide services to Casino Resource
Corporation, that are designated to achieve Casino Resource Corporation's
goals in Tunisia. In this connection, the consultant will be expected to
perform the following services (-left angle- -left angle- the services -right
angle- -right angle-):
1. Inform Casino Resource Corporation at the earliest possible moment
of all gambling casino projects and any developments and prepare reports for
Casino Resource Corporation regarding such developments.
2. Provide all necessary consultancy services in relation to Casino
Resource Corporation's contract of lease in the territory.
3. Upon request and authorization from Casino Resource Corporation,
arrange meetings and appointments with the appropriate persons and
participate in such meetings, if required.
4. In addition to verbal reports and conferences submit written
spot reports where appropriate.
5. Act so as to permit Casino Resource Corporation conclude contract
of lease with Societe SAMARA CASINO represented by its legal representative,
M Slim MAHDOUI for operating Sousse Casino
<PAGE>
B. COMMITMENTS
1. Consultant agrees to allocate sufficient time, management attention
and resources to perform the services.
2. Casino Resource Corporation agrees to provide Consultant with
regular briefings and updates on its operations in the territory
II. COMPENSATION
In full compensation for the services rendered hereunder during the
validity of this Agreement, Casino Resource Corporation shall pay to the
consultant, after signature of final agreement by Societe SAMARA CASINO:
1. a fixed fee of US$ 250.000 to be paid:
*US$ 50.000 at the signature of the contract of lease with Samara
Casino
*US$ 100.000 at the beginning of operating Samara Casino
*US$ 100.000 six months after beginning operating Samara Casino
2 - a various fee of % on gaming, net revenue Samara Casino to be paid
quarterly at the beginning of each quarter
III. TERM
This agreement will commence as of February 15th, 1996 and will
terminate with the termination of the contract of lease between Societe
Samara Casino and Casino Resource Corporation or any third corporation to
which Casino Resource Corporation should assign or transfer its rights
resulting from the contract of lease with Societe Samara Casino. The term
above includes renewal periods of lease.
IV. GENERAL
A. In the event of the death of the consultant , the agreed fees will
continue to be paid to Mrs Mylene Soraya Sihem SLIM BEN HAMIDA until
the termination date of the contract between Casino Resource
Corporation and Societe Samara Casino.
B. This agreement does not constitute the Consultant as the agent or
legal representative of Casino Resource Corporation for any purpose
whatsoever. Consultant is not granted any right or authority to
assume or create any obligation or responsibility, express or
implied, on behalf of or in the name of Casino Resource Corporation
in any manner whatsoever.
C. Consultant shall not make any public use of or release to third
parties any information or material provided by Casino Resource
Corporation that is confidential or proprietary. In addition,
Consultant shall continue to hold secret after the termination of
this agreement, all information and material of a
2
<PAGE>
proprietary or confidential nature previously disclosed to Consultant
by Casino Resource Corporation.
D. This agreement contains the full agreement of the parties and any
previous agreements, whether written or oral, are hereby canceled.
Any changes or modifications to this agreement shall be subject to
the written agreement of the parties.
E. All notices, demands or others communications, required or desired
to be given hereunder, shall be made in writing in the English
language and delivered personally or sent by telefax duly confirmed,
or by registered post with recorded delivery to the intendeds
recipient thereof at its address set out below:
To Casino Resource Corporation
1719 Beach Boulevard
Suite 306 - Executive Place
BILOXI - MISSISSIPPI
UNITED STATES
Tel: 601 435 1976
Fax: 601 374 8732
Attn: Casino Resource Corporation
To: Consultant
Mondhor BEN HAMIDA
35, Avenue de Paris
1000 - Tunis
Tel 346 141
Fax 345 741
Any party may change the address to which notices must be sent by giving
written notice to the other party.
F. Neither party may transfer this agreement nor any of the rights
hereunder to any person or corporation without the prior written
consent of the other party.
G. Neither party shall be deemed to have waived any right or to have
been released from any duty under this agreement unless such waiver
or release shall be in writing duly executed by the party granting
such waiver or release.
H. This agreement shall be governed by the laws of MISSISSIPPI and all
disputes arising in connection with the present contract shall be
finally settled under the rules of Conciliation and Arbitration of
the International Chamber of Commerce by one arbitrator appointed
in accordance with the said rules. Casino Resource Corporation shall
support all fees of disputes.
3
<PAGE>
I. While this Agreement is in force, Consultant agrees not to act as a
consultant, independent contractor or in any other capacity for any
other operating casino corporation.
J. Both parties undertake to perform the obligations set forth in this
agreement in such a manner so as to comply with all applicable
laws and regulations and will indemnify the other party for any
and all claims, demands, actions or liabilities whatsoever which
may arise out of or result from its failure to comply with any such
applicable laws or regulations.
K. Consultant hereby represents and warrants that he is able to and
has the full capacity to enter into this agreement with Casino
Resource Corporation, and specifically, the Consultant has no
prior arrangement with any other party that would prevent him from
entering this arrangement with Casino Resource Corporation.
L. The effective date of this agreement will be February 15, 1996.
In witness whereof the parties have entered into this agreement through
their authorized representatives.
Made this 11th day of June 1996
/s/ JACK PILGER /s/ MONDHOR BEN HAMIDA
- --------------------------- -------------------------
Jack PILGER Mondhor BEN HAMIDA
Chief Executive Officer 35, Avenue de Paris-
Casino Resource Corporation 1000 - Tunis
1719 Beach Boulevard TUNISIE
Suite 306 - Executive Place
BILOXI - MISSISSIPPI
UNITED STATES
4
<PAGE>
EXHIBIT 11.1
NET INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE
Net income (loss) per share data are computed using the weighted average
number of common stock outstanding during each period. Common equivalent
shares from stock options and warrants have been included in the
computation using the treasury stock method only when their effect would
be dilutive. Fully dilutive net income per share has not been presented
as the difference is not significant.
<PAGE>
Exhibit 21.1
SUBSIDIARIES OF REGISTRANT
CRC of Branson, Inc.
Country Tonite Enterprises, Inc.
Casino Building Corporation
CRC of Tennessee, Inc.
CRC Palace, Inc.
Recreation Property Consultants, Inc.
Casino Entertainment Corporation of America
Country Tonite Theatre, LLC
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Casino Resource Corporation
Biloxi, Mississippi
We hereby consent to the incorporation by reference in the Company's previously
filed Registration Statements (file no. 33-31534) of our report dated
November 5, 1996 except for Note 14 as to which the date is December 26, 1996
relating to the consolidated financial statements of Casino Resource
Corporation appearing in the Company's Annual Report on Form 10-KSB for the
year ended September 30, 1996.
Chicago, Illinois BDO SEIDMAN, LLP
December 30, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CASINO
RESOURCE CORPORATION'S ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED
SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<CASH> 1,546,422
<SECURITIES> 0
<RECEIVABLES> 310,247
<ALLOWANCES> (3,043)
<INVENTORY> 0
<CURRENT-ASSETS> 2,630,270
<PP&E> 17,669,939
<DEPRECIATION> (2,587,033)
<TOTAL-ASSETS> 21,784,544
<CURRENT-LIABILITIES> 3,257,631
<BONDS> 0
0
0
<COMMON> 97,618
<OTHER-SE> 8,126,929
<TOTAL-LIABILITY-AND-EQUITY> 21,784,544
<SALES> 0
<TOTAL-REVENUES> 12,905,949
<CGS> 0
<TOTAL-COSTS> 12,883,338
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,278,052
<INCOME-PRETAX> 22,611
<INCOME-TAX> 0
<INCOME-CONTINUING> 22,611
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,611
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
