<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10 - Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from_________________to___________________
Commission file number 0-21732
PRIMADONNA RESORTS, INC.
(Exact name of registrant as specified in its charter)
Nevada 88-0297563
(State or other jurisdiction of (IRS employer identification
incorporation or organization) number)
P.O. Box 95997 , Las Vegas, Nevada 89193-5997
(address of principal executive offices)
(702) 382 - 1212
(Registrant's telephone number, including area code)
__________________________________________________
(Former name, former address and former fiscal year,
if change since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
Yes X No______
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at August 7, 1998
Common Stock, $.01 par value 28,919,100 Shares
Total No. of Pages 54 Exhibit Index on page 24
1
<PAGE>
PRIMADONNA RESORTS, INC. AND SUBSIDIARIES
Form 10 - Q
INDEX
Page No.
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets at June 30, 1998
(Unaudited) and December 31, 1997..................... 3 - 4
Consolidated Statements of Income (Unaudited) for the
Three and Six Months Ended June 30, 1998 and 1997..... 5 - 6
Condensed Consolidated Statements of Cash Flows (Unaudited)
for the Six Months Ended June 30, 1998 and 1997. ......... 7
Notes to Condensed Consolidated Financial
Statements (Unaudited)................................ 8 - 14
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................... 15 - 20
Part II. OTHER INFORMATION 21 - 23
2
<PAGE>
PRIMADONNA RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(Amounts in Thousands)
<TABLE>
<CAPTION>
At June 30, At December 31,
1998 1997
_________ ___________
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 6,595 $ 9,973
Accounts and notes receivable 835 988
Income tax refund receivable - 1,664
Inventories 1,281 1,687
Prepaid expenses and other 6,080 6,647
________ ________
Total current assets 14,791 20,959
________ ________
PROPERTY AND EQUIPMENT:
Buildings and improvements 227,324 212,396
Land improvements 107,152 95,364
Furniture, fixtures and equipment 150,843 144,371
________ ________
485,319 452,131
Less: accumulated depreciation
and amortization (160,875) (144,653)
________ ________
324,444 307,478
Land 5,654 5,654
Construction in progress 8,431 19,495
________ ________
338,529 332,627
________ ________
INVESTMENT IN JOINT VENTURE 117,689 104,436
________ _______
NOTES RECEIVABLE, net of current portion 1,998 2,718
________ ________
OTHER ASSETS, net 10,873 9,955
________ ________
$483,880 $470,695
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
PRIMADONNA RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
(Amounts in Thousands Except Share Data)
<TABLE>
<CAPTION>
At June 30, At December 31,
1998 1997
_________ __________
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Accounts and construction payables $ 4,709 $ 10,265
Accrued expenses 11,246 10,432
Current portion of long-term debt 1,639 1,639
________ ________
Total current liabilities 17,594 22,336
________ ________
LONG-TERM DEBT 224,706 220,765
________ ________
DEFERRED INCOME TAXES PAYABLE 16,403 15,961
________ ________
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value;
10,000,000 shares authorized; no
shares issued and outstanding
Common stock, $.01 par value;
100,000,000 shares authorized;
28,919,100 and 28,858,000 shares
issued and outstanding in 1998
and 1997, respectively 309 309
Additional paid - in capital 129,738 128,817
Retained earnings 130,792 118,169
Less: treasury stock, at cost (35,662) (35,662)
________ ________
225,177 211,633
________ ________
$483,880 $470,695
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
PRIMADONNA RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in Thousands Except Share Data)
<TABLE>
<CAPTION>
Three Months Ended June 30,
____________________________
1998 1997
_________ ___________
(Unaudited)
<S> <C> <C>
REVENUES:
Casino $ 42,527 $ 42,282
Food and beverage 7,643 7,744
Hotel 4,859 5,806
Entertainment 3,860 3,846
Service station 4,500 4,219
Other 1,602 1,783
Operating income from New York-New York 9,466 14,786
________ ________
74,457 80,466
Less: promotional allowances (3,123) (4,840)
________ ________
Net revenues 71,334 75,626
________ ________
COSTS AND EXPENSES:
Casino 12,429 13,598
Food and beverage 6,725 6,761
Hotel 2,853 2,689
Entertainment 2,466 1,890
Service station 3,995 3,823
Other 759 616
Selling, general and administrative 12,270 12,047
Property costs 4,556 4,421
Depreciation and amortization 8,288 7,078
________ ________
54,341 52,923
________ ________
Income from operations 16,993 22,703
OTHER INCOME (EXPENSE)
Interest expense, net (4,230) (3,153)
Interest expense, net from New York-New York (2,185) (2,543)
________ ________
Income before taxes 10,578 17,007
INCOME TAX PROVISION (3,738) (6,089)
________ ________
Income before extraordinary item: 6,840 10,918
EXTRAORDINARY ITEM-loss on early retirement
of debt, net of income tax benefit - (964)
________ ________
NET INCOME $ 6,840 $ 9,954
======== ========
Earnings per share
Basic and Diluted earnings from income
before extraordinary item $0.24 $0.37
======== ========
Basic and Diluted earnings from net income $0.24 $0.34
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
PRIMADONNA RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in Thousands Except Share Data)
<TABLE>
<CAPTION>
Six Months Ended June 30,
____________________________
1998 1997
_________ ___________
(Unaudited)
<S> <C> <C>
REVENUES:
Casino $ 82,265 $ 82,806
Food and beverage 14,976 14,814
Hotel 9,598 10,936
Entertainment 6,637 6,261
Service station 8,450 7,960
Other 3,313 3,369
Operating income from New York-New York 19,669 29,417
________ ________
144,908 155,563
Less: promotional allowances (6,929) (8,441)
________ ________
Net revenues 137,979 147,122
________ ________
COSTS AND EXPENSES:
Casino 25,337 26,626
Food and beverage 13,038 12,953
Hotel 5,248 5,370
Entertainment 4,344 3,364
Service station 7,484 7,289
Other 1,393 1,327
Selling, general and administrative 23,942 23,241
Property costs 9,257 8,721
Depreciation and amortization 16,105 14,239
________ ________
106,148 103,130
________ ________
Income from operations 31,831 43,992
OTHER INCOME (EXPENSE)
Interest expense, net (7,946) (6,227)
Interest expense, net from New York-New York (4,356) (5,008)
________ ________
Income before taxes 19,529 32,757
INCOME TAX PROVISION (6,907) (11,728)
________ ________
Income before extraordinary item: 12,622 21,029
EXTRAORDINARY ITEM-loss on early retirement
of debt, net of income tax benefit - (964)
________ ________
NET INCOME $ 12,622 $ 20,065
======== ========
Earnings per share
Basic and Diluted earnings from income
before extraordinary item $0.44 $0.70
======== ========
Basic and Diluted earnings from net income $0.44 $0.67
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
PRIMADONNA RESORTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
____________________________
1998 1997
_________ __________
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 12,622 $ 20,065
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 16,177 14,400
Equity income from New York-New York
in excess of distributions (13,253) (17,689)
Extraordinary loss - 1,483
Other adjustments to reconcile net income
to net cash, provided by operating
activities (1,606) 4,656
________ ________
Total adjustments 1,318 2,850
________ ________
Net cash provided by operating activities 13,940 22,915
________ ________
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (21,982) (26,227)
Investment in joint venture - (7,000)
Increase in other assets, net (199) (1,792)
________ ________
Net cash used in investing activities (22,181) (35,019)
________ ________
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from exercise of options $ 921 $ 511
Purchase of treasury stock - (16,517)
Proceeds from issuance of long-term debt 109,480 267,500
Principal payments on long-term debt (105,538) (241,036)
________ ________
Net cash provided by
financing activities 4,863 10,458
________ ________
Net decrease in cash and
cash equivalents (3,378) (1,646)
Cash and cash equivalents, beginning of year 9,973 10,027
________ ________
Cash and cash equivalents, end of period $ 6,595 $ 8,381
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
PRIMADONNA RESORTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Organizational Structure and Basis of Presentation
Primadonna Resorts, Inc., a Nevada corporation, and subsidiaries
("the Company"),owns and operates three hotel-resort/casinos: Buffalo Bill's
Resort & Casino, Primm Valley Resort & Casino, and Whiskey Pete's Hotel &
Casino, all located at the California/Nevada border in Primm, Nevada. The
Company also owns and operates the Primm Valley Golf Club, located
approximately four miles south of Primm, in California. In addition, the
Company owns a 50% interest in the joint venture which owns and operates the
New York-New York Hotel & Casino, located on the "Strip" in Las Vegas, Nevada.
Information as of December 31, 1997 included in the accompanying condensed
consolidated financial statements and the notes thereto, has been audited.
Information with respect to the three and six month periods ended June 30, 1998
and 1997, included in these condensed consolidated financial statements and
notes thereto, is unaudited. These unaudited condensed consolidated financial
statements have been prepared in accordance with the rules and regulations of
the Securities and Exchange Commission, and do not contain all of the
information and disclosures required by generally accepted accounting
principles. However, the accompanying unaudited consolidated financial
statements do contain all adjustments which, in the opinion of management, are
necessary to fairly present the financial position and results of operations
for the three and six month periods presented. Interim results are not
necessarily indicative of results to be expected for any future interim
period or for the entire fiscal year.
The accompanying condensed consolidated financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1997.
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, liabilities, revenues and expenses.
Actual results may differ from those estimates. Significant intercompany and
interdivision accounts and transactions have been eliminated.
8
<PAGE>
2. Statements of Cash Flows
The following supplemental disclosures are provided as part of the
accompanying consolidated statements of cash flows:
<TABLE>
<CAPTION>
Six Months Ended
June 30,
________________________
1998 1997
_____ _____
(In thousands)
<S> <C> <C>
Cash payments made for interest
(net of amounts capitalized) $ 7,297 $ 6,143
======== ========
Cash payments made for income taxes $ 5,200 $ 8,900
======== ========
Assets acquired through
capitalized leases $ - $ 437
======== ========
</TABLE>
3. EARNINGS PER SHARE
Earnings per share for the three months ended June 30, 1998 and 1997 consist
of the following:
<TABLE>
<CAPTION>
Three Months Ended June 30
1998 1997
________________ _______________
(In thousands, except per share amounts)
Income Shares Income Shares
_______ ______ ______ ______
<S> <C> <C> <C> <C>
Basic EPS:
Income before
extraordinary item $ 6,840 28,919 $10,918 29,407
Extraordinary Item - - (964) -
_______ ______ _______ ______
Net income available to
common shareholders $ 6,840 28,919 $ 9,954 29,407
======= ====== ======= ======
Per share amounts:
Income before
extraordinary item $ 0.24 $ 0.37
Extraordinary Item - (.03)
______ ______
Net income available to
common shareholders $ 0.24 $ 0.34
====== ======
</TABLE>
9
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Diluted EPS:
Income before
extraordinary item $ 6,840 28,919 $10,918 29,407
Effect of dilutive
stock options - 55 - 192
_______ ______ _______ ______
Income before
Extraordinary Item 6,840 28,974 10,918 29,599
Extraordinary Item - - (964) -
_______ ______ _______ ______
Net income available to
common shareholders and
assumed conversion $ 6,840 28,974 $ 9,954 29,599
======= ====== ======= ======
Per share amounts:
Income before
extraordinary item $ 0.24 $ 0.37
Effective of Dilutive
Securities Stock Option - -
Extraordinary Item - (.03)
______ ______
Net income available to
common shareholders and
assumed conversion $ 0.24 $ 0.34
====== ======
</TABLE>
Options to purchase 1,299,000 and 358,000 shares of common stock at June 30,
1998 and 1997, respectively, at prices of $17.00-$31.25 and $21.75-$31.25,
respectively, were outstanding at the end of the period but not included in the
computation of diluted earnings per share because their exercise price was in
excess of the average market price of the common shares for the periods
presented.
Earnings per share for the six months ended June 30, 1998 and 1997 consist
of the following:
<TABLE>
<CAPTION>
Six Months Ended June 30
1998 1997
________________ _______________
(In thousands, except per share amounts)
Income Shares Income Shares
_______ ______ ______ ______
<S> <C> <C> <C> <C>
Basic EPS:
Income before
extraordinary item $12,622 28,900 $21,029 29,675
Extraordinary Item - - (964) -
_______ ______ _______ ______
Net income available to
common shareholders $12,622 28,900 $20,065 29,675
======= ====== ======= ======
Per share amounts:
Income before
extraordinary item $ 0.44 $ 0.71
Extraordinary Item - (.03)
______ ______
Net income available to
common shareholders $ 0.44 $ 0.68
====== ======
</TABLE>
10
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Diluted EPS:
Income before
extraordinary item $12,622 28,900 $21,029 29,675
Effect of dilutive
stock options - 51 - 168
_______ ______ _______ ______
Income before
extraordinary item 12,622 28,951 $21,029 29,843
Extraordinary item - - (964) -
_______ ______ _______ ______
Net income available to
common shareholders $12,622 28,951 $20,065 29,843
======= ====== ======= ======
Per share amounts:
Income before extraordinary
item and dilutive option $ 0.44 $ 0.71
Effect of Dilutive
Securities Stock Option - (.01)
______ ______
Income before
extraordinary item 0.44 0.70
Extraordinary item - (.03)
______ ______
Net income available to
common shareholders $ 0.44 $ 0.67
====== ======
</TABLE>
Options to purchase 1,299,000 and 358,000 shares of common stock at June 30,
1998 and 1997, respectively, at prices of $17.00-$31.25 and $21.75-$31.25,
respectively, were outstanding at the end of the period but not included in the
computation of diluted earnings per share because their exercise price was in
excess of the average market price of the common shares for the periods
presented.
4. Investment in Joint Venture
On December 28, 1994 the Company and MGM Grand, Inc.("MGM"), formed a joint
venture to own and operate the New York-New York Hotel & Casino. The hotel/
casino opened on January 3, 1997. The Company holds a 50% interest in the joint
venture. The Company has contributed cash of $69.5 million and certain rights
to the New York theme acquired from a third party licensor. MGM has contributed
land (valued at $41.2 million) on which the property is located and cash of
$29.5 million. The joint venture has secured limited recourse bank financing of
$285 million, and term loan financing of $20 million. The joint venture
partners have executed Keep-Well Agreements in conjunction with the bank
financing. Should New York-New York fail to meet certain minimum financial
ratios, then the partners would be required to make additional equity
contributions, to the extent needed, to bring the ratios into compliance.
11
<PAGE>
Summary condensed financial information for the joint venture is as
follows (000's):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1998 1997 1998 1997
_____________________ __________________
Condensed Statement of Income Data
__________________________________
<S> <C> <C> <C> <C>
Net revenues $54,698 $ 67,401 $108,733 $135,269
Operating income 18,931 29,573 39,337 58,834
Interest expense, net 4,369 5,086 8,711 10,016
Net income 14,561 24,487 30,626 48,818
</TABLE>
<TABLE>
<CAPTION>
At June 30, 1998 At December 31, 1997
________________ ____________________
Condensed Balance Sheet Data
____________________________
<S> <C> <C>
Total assets $460,761 $470,252
Long-term debt 225,025 246,403
Member equity 205,736 183,350
</TABLE>
5. Long-Term Debt
On June 5, 1997 the Company entered into a Credit Agreement (" Agreement")
with a sixteen bank consortium led by Wells Fargo Bank as agent, for a
$250,000,000 revolving loan. The maximum balance under the loan was increased
to $300,000,000 on December 19, 1997 and to $350,000,000 on June 4, 1998.
This loan replaced the existing Reducing Revolving Bank Credit Agreement.
The Agreement provides for interest payments at least quarterly, at the prime
rate or LIBOR, plus a sliding margin, based upon the Company's debt to earnings
before interest, taxes, depreciation and amortization ("EBITDA") ratio. The
margin for the prime rate ranges between 0% and 1.125%, while the margin for
LIBOR ranges between 0.5% and 2.375%. The weighted average interest rate was
6.8% at June 30, 1998 and 7.0% at December 31, 1997. The Company incurs
commitment fees of .20% to .50% for the unused portion of the Agreement, also
dependent upon the debt to EBITDA ratio. The obligation is secured by a deed of
trust on all real property, leasehold interests in real property, and personal
property of the Company, excluding the Primm Valley Golf Club. The Agreement
contains certain restrictive covenants relating to the use of proceeds, sale or
transfer of assets, the incurrence of additional debt over a specified level,
capital expenditures, and maintenance of certain minimum financial ratios.
The Reducing Revolving Bank Credit Agreement ("Prior Agreement") entered
into on December 28, 1993, as amended, was terminated on June 5, 1997. The
Prior Agreement provided for a maximum principal balance of $250,000,000,
with scheduled reductions in the maximum permitted beginning August 18, 1997,
and continuing thereafter through maturity on July 18, 2000. The Prior
Agreement provided for EBITDA ratios, interest payments, security interests,
and covenants that were substantially similar to the Agreement which replaced
the Prior Agreement.
12
<PAGE>
The Company incurred a liability in connection with the acquisition of the New
York-New York theme rights of $1,100,000, due January 6, 1997, and $400,000 due
January 7, 1998. At both June 30, 1998 and December 31, 1997, $1,500,000 due
for the theme rights was reflected as a current obligation. This liability was
paid in full in July 1998.
Long-term debt consists of the follows:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
_________ __________
(Unaudited)
(In thousands)
<S> <C> <C>
Credit Agreement $350,000,000, June 5, 1997,
5 year term, LIBOR plus applicable margin $224,600 $220,600
NEW YORK-NEW YORK theme rights due January
6, 1997 and January 7, 1998 1,500 1,500
Other 245 304
________ ________
226,345 222,404
Less: current portion 1,639 1,639
________ ________
Total long-term debt $224,706 $220,765
======== ========
</TABLE>
6. Commitments and Contingencies
a. Southwest Investment
The Company has advanced a total of $3.8 million to Southwest Casino and Hotel
Corp. ("Southwest"), a developer and manager of Native American gaming
enterprises. Southwest managed a Class II Indian gaming facility in Eagle Pass,
Texas for the Kickapoo Traditional Tribe of Texas under a management contract
which was terminated on December 31, 1997. Southwest currently manages a
Class II Indian gaming facility just outside Oklahoma City, Oklahoma for the
Cheyenne and Arapaho Tribes.
The Company holds a $1.6 million Convertible Term Promissory Note which is
convertible into preferred stock of Southwest. No payments have been made on
this note, and in 1996, based upon the financial condition of Southwest, the
Company fully reserved the $1.6 million and related interest. The Company also
holds a $2.2 million Demand Promissory Note which was secured by the management
contract on the Kickapoo gaming facility. Southwest made $100,000 in interest
payments on these notes between October 1997 and January 1998. As a result
of a termination settlement of the Southwest management contract with the
Kickapoo Tribe, effective December 31, 1997, Southwest assigned the Company two
notes, aggregating $2.2 million, due Southwest from the Kickapoo Tribe and
secured by the assets of the Kickapoo gaming facility. The Company has
received $575,000 in payments on these notes through June 1998. No
reserve has been established for this note due to its collateralization.
13
<PAGE>
b. Litigation
Currently, there are lawsuits pending against the Company arising in the normal
course of business. In management's opinion, the ultimate outcome of these
matters will not have a material adverse effect on the results of operations or
the financial position of the Company.
14
<PAGE>
Item 2, Management's Discussion and Analysis of Financial Condition and Results
of Operations (Unaudited)
SUMMARY OF OPERATIONS
For the second quarter of 1998, net income before extraordinary items declined
37.4% to $6.8 million, or $.24 per share, compared to $10.9 million, or $.37
per share in the prior year period. For the six month period ended June 30,
1998, net income decreased 40.0% to $12.6 million, or $.44 per share before
extraordinary items, from $21.0 million, or $.70 per share in the prior year
period.
The decreases in net income and earnings per share, as well as declines in
revenue and operating income, were primarily attributable to a decline in
operating income of New York-New York Hotel and Casino, the Company's 50% owned
joint venture. The Company's operations at Primm, Nevada realized revenue
improvements of 1.7% and 0.5% during the respective three and six month periods
of 1998. Operating income from the Primm properties declined during the
periods, primarily due to higher depreciation expense.
New York-New York Hotel & Casino in Las Vegas opened on January 3, 1997. The
softening in New York-New York's performance is a function of favorable results
in its inaugural year and recent overall declines in the southern Nevada gaming
market. Although the opening year results are not expected to be repeated,
New York-New York continues to be one of the most successful properties in Las
Vegas from the standpoint of operating margins and return on invested capital.
The increase in available hotel rooms in the Las Vegas market over the last
year, coupled with a decline in Las Vegas airline passengers and relatively
flat California automobile traffic counts, continues to cause competitive
pressures in southern Nevada. In response to these conditions, the Company has
focused extensively on its cost structure, operating efficiencies and marketing
programs at Primm during the first half of the year.
An extraordinary charge of $964 thousand (net of taxes), or $.03 per share, was
recorded in the second quarter of 1997. The extraordinary charge resulted from
the early termination of the Company's prior bank credit facility.
Following is an analysis of the results of operations for the three and six
month periods ended June 30, 1998 versus the comparable periods of 1997.
THREE MONTHS ENDED JUNE 30, 1998 COMPARED WITH THE THREE MONTHS ENDED
JUNE 30, 1997
Revenues
Net revenues for the second quarter decreased 5.7% or $4.3 million to $71.3
million. This decrease is due to the Company's share of earnings from NY-NY,
which were off $5.3 million or 36.0% for the quarter. Operations at Primm,
Nevada experienced an increase in net revenues which totaled $1.0 million or
1.7% for the same period.
Casino revenue increased $245 thousand due primarily to a higher table win
percentage. This improved win percentage is the result of the elimination of a
match play coupon program which lowered the win percentage in the prior year
period.
15
<PAGE>
Hotel revenue declined $947 thousand or 16.3% in the quarter due to a 3.6%
decline in occupied rooms coupled with a 14.9% decrease in the average room
rate. This decline in occupied rooms was experienced in the complimentary
segment, as cash room nights sold increased 13.3%. The softening in the room
rate is primarily due to the competitive conditions in southern Nevada.
Entertainment revenue in the second quarter was flat with the prior year. The
opening of a second golf course at Primm Valley, during the second quarter of
1998, helped generate an additional $878 thousand in cash green fees. This
offset a decline in complimentary amusement and arena revenue.
Service station revenues increased $281 thousand or 6.7% for the three month
period. The number of gallons sold increased 13.1%, more than offsetting
declines in retail gas prices.
Operating income from New York-New York, which represents the Company's 50%
share of the pre-tax, pre-interest earnings of the joint venture, was $9.5
million, a decline of $5.3 million from the $14.8 million posted in the second
quarter of last year. Net revenues at New York-New York totaled $54.7 million,
down from $67.4 million in the prior year quarter. Casino revenues were down
$8.4 million, or 22.8% for the quarter, primarily due to lower volume.
COSTS AND EXPENSES
Casino expenses decreased $1.2 million for the three month period. This
decrease is primarily the result of a decrease in promotional allowances due
to management efforts to improve the profitability of marketing programs. In
addition, payroll costs were reduced by $355 thousand or 6.8%.
Hotel expenses increased $164 thousand or 6.1% for the second quarter,
primarily due to a decrease in the amount of hotel costs transferred to casino
expense. This reflects a decline in complimentary rooms given to casino
customers.
Entertainment costs increased $576 thousand for the three month period due
mostly to decreased transfer of promotional allowance costs to the casino of
$436 thousand. Additionally, operating expenses of the Primm Valley Golf Club
increased $366 thousand for the quarter due to the opening of a second course
in the second quarter of 1998. These increases were partially offset by lower
amusement and arcade operating costs.
Service station costs increased $172 thousand or 4.5% for the three month
period, the result of the increase in gallons sold, partially offset by a
decline in product cost.
Selling, general and administrative expenses increased $223 thousand or 1.9% in
the quarter. The increase is primarily due to higher bus tour marketing
subsidies and additional bus customers. This increase is partially offset
by lower development, administrative, and advertising costs.
Property costs increased $135 thousand, or 3.1% for the quarter, due primarily
to increased costs for life safety, parking lot maintenance, and grounds
maintenance.
Depreciation increased $1.2 million for the three month period due to
completion of the expanded and remodeled casino space, public space and parking
garage at Primm Valley Resort and Casino, and the addition of the second golf
course.
16
<PAGE>
INTEREST EXPENSE
Interest expense, net, increased $1.1 million for the quarter. The higher
interest expense was primarily due to an increase in the amounts outstanding
under the credit facility, which were used to fund capital expenditures.
Interest expense, net, from New York-New York decreased $358 thousand for the
three months due to decreases in the amounts outstanding under that credit
facility.
INCOME TAXES
Income taxes decreased to $3.7 million for the quarter ended June 1998 compared
to $6.1 million in the comparable prior year period. The decrease in taxes is
due to lower earnings before taxes, as tax rates were substantially unchanged.
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1997
REVENUES
For the six months ended June 30, 1998, net revenues decreased 6.2% or $9.1
million to $138.0 million from the same period last year. This decrease is
due to the Company's share of earnings from New York-New York, which were
off $9.7 million or 33.1% for the six months. In the period, net revenue
from the operations at Primm, Nevada, increased $605 thousand or 0.5%.
Casino revenue was $541 thousand, or 0.7% less than last year, primarily due to
decreased slot volume. Slot revenues declined $678 thousand and were only
partially offset by an increase in table games revenue of $139 thousand. The
higher table game win resulted from an improved win percentage. This improved
win percentage was the result of the elimination of a match play coupon program
which lowered the win percentage in the prior year period.
For the six months ended June 30, 1998, Hotel revenue was $1.3 million below
prior year levels due to a 4.6% reduction in occupied rooms and an 8.8% decline
in the average rate. The decrease in occupied rooms was entirely in the
complimentary segment as cash rooms occupied increased slightly. The room rate
decline is primarily due to the competitive conditions in southern Nevada.
Entertainment revenues were $376 thousand or 6.0% greater than last year due to
increased revenues from the Primm Valley Golf Club. The first course opened in
the first quarter of 1997, while the second course opened in the second quarter
of 1998.
Service station revenues increased $490 thousand or 6.2% for the six month
period. The number of gallons sold increased 16.3%, and more than offset a
decline in retail gas prices.
Operating income from New York-New York, which represents the Company's 50%
share of the pre-tax, pre-interest earnings of the joint venture, was $9.7
million or 33.1% less than the grand opening year. Net revenues at
New York-New York declined to $108.7 million from $135.3 million in the prior
year six month period. Casino revenues were down $19.6 million or 25.1% in
the first half of the year, primarily due to lower volume.
17
<PAGE>
COSTS AND EXPENSES
Casino expenses decreased $1.3 million for the six month period. This decrease
is partially the result of a decrease in promotional allowances reflective of
changes in marketing programs. In addition, payroll costs were reduced by $536
thousand or 5.2%.
Hotel expenses declined $122 thousand for the six months ended June 30, 1998.
The decline is due to lower payroll costs associated with an overall decrease
in occupied rooms of 4.6%, partially offset by a decrease in the amount of
complimentary room costs transferred to casino expense.
Entertainment costs increased $980 thousand for the six month period due
primarily to increased operating expenses of the Primm Valley Golf Club, which
were $758 thousand higher due to the opening of the second course.
Additionally, Entertainment expenses transferred to the casino related to
promotional allowances were $673 thousand less than last year. These factors
were partially offset by lower amusement and arcade operating costs.
Service station costs increased $195 thousand or 2.7% for the six month period,
the result of the increase in gallons sold, partially offset by a decline in
product cost.
Selling, general and administrative expenses increased $701 thousand or 3.0% in
the six month period. The increases are primarily due to an increase in bus
tour marketing subsidies, partially offset by lower development,
administrative, and advertising costs.
Property costs increased $536 thousand or 6.1% for the six month period, due
primarily to increased costs for life safety, signage, parking lot maintenance,
lighting systems, and property grounds service.
Depreciation increased $1.9 million for the six month period due to completion
of the expanded and remodeled casino, public spaces and parking garage at Primm
Valley, and the addition of the second golf course.
INTEREST EXPENSE
Interest expense, net, increased $1.7 million for the six months. The higher
interest expense was primarily due to an increase in the amount outstanding
under the credit facility, used to fund capital expenditures.
Interest expense, net from New York-New York decreased $652 thousand for the
six month period due to decreases in the amounts outstanding under its credit
facility.
INCOME TAXES
Income taxes declined to $6.9 million for the six months ended June 30, 1998
compared to $11.7 million in the prior year period. The decrease in taxes is
due to lower earnings before taxes, as tax rates were substantially unchanged.
18
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company held cash and cash equivalents of $6.6 million as of June 30, 1998.
Net cash provided by operations during the six months ended June 30, 1998 was
$13.9 million as compared to $22.9 million in the prior year. The Company
funds its daily operations through cash flow from operations, and borrows funds
for significant capital expenditures and investments, such as a portion of its
equity investment in New York-New York.
The Company has a $350 million Credit Agreement. ("Agreement", see Note 5 of
the Notes to Condensed Consolidated Financial Statements). At June 30, 1998,
the amount outstanding under the Agreement was $224.6 million at an average
all-in rate of 6.8%. During the second quarter, the Company completed the
process of increasing this facility by $50 million to its full $350 million
availability, pursuant to its initial terms.
The Company is a 50% joint venture partner with MGM Grand, Inc. ("MGM") in the
New York-New York Hotel & Casino, LLC. The joint venture secured a $285 million
construction/reducing revolving loan from a consortium of banks. At June 30,
1998, $218.1 million was outstanding under this loan. Additionally, term loan
financing was obtained in January 1997, with a balance of $15.0 million at
June 30, 1998. The Company and MGM executed Keep-Well Agreements in
conjunction with the bank loan. The Keep-Well provisions require that certain
financial ratios be maintained and stipulate that the partners make equity
contributions if these ratios are not met. Operating performance to date at
New York-New York has exceeded these provisions.
The Board of Directors has approved a stock repurchase program authorizing the
Company to acquire up to $50 million worth of its outstanding shares. The
Company had acquired 2,014,500 shares for $35.7 million at June 30, 1998.
The first phase of the 525,000 square foot Fashion Outlet of Las Vegas ("Mall")
opened July 16, 1998. The facility was built and financed by developers. The
Company expects to benefit from the increase in visitors to Primm, Nevada
caused by the Mall. In addition, the Company will be able to place slot
machines in the facility's transition area from the Primm Valley Resort &
Casino and expects to be able to place slot machines in the Mall itself. For
its part, the Company expects to incur approximately $1.5 million and has
incurred approximately $1 million through June 30, 1998 for the infrastructure
improvements necessary to accommodate this development. The Company has no
other financial interest in the Mall project.
The Company has expanded the Primm Valley property by the addition of 34,000
square feet of casino, restaurant and retail space that is connected to the
Mall. This expansion (with the exception of the restaurant space) was also
opened on July 16, 1998. Additionally, the current coffee shop has been
renovated and a new piano bar has been added in the casino area.
Capital expenditures for the six months ended June 30, 1998 were $22.0 million,
as compared to $33.2 million for the six months ended June 30, 1997. In
addition to the above mentioned projects, the Company has completed the
construction of a second golf course at the Primm Valley Golf Club, expanded
and upgraded the monorail from Buffalo Bills to Primm Valley, and remodeled
and upgraded the casino and selected guest rooms at Primm Valley. Normal
expenditures for the maintenance of existing facilities and equipment were also
incurred.
19
<PAGE>
The Company expects some continuing difficult year-ago comparisons for
New York - New York, due to its extremely successful opening in 1997, and
continuing competitive pressures in the Las Vegas market. Additionally,
performance at Primm may continue to be impacted during the third quarter of
1998 by the competitive pressures in the Las Vegas Market.
The Company believes that its current cash flow, coupled with its bank
facility, provides both the resources and flexibility to meet existing
obligations and to fund its commitments on the projects discussed above. The
Company continues to pursue other gaming opportunities and, if successful in
securing another location, depending upon the amount of funding required, may
need to obtain additional bank or vendor financing, or issue public or private
debt or equity, or a combination thereof.
IMPACT OF THE YEAR 2000 ISSUE
Efficient operation of the Company's business is dependent in part on its
computer software programs and operating systems. These programs and systems
are used in several key areas of the Company's business including operations,
marketing and administration. The Company has been evaluating its internal
systems and determined that one of its critical systems is not year 2000
compliant. The Company has commenced a project, in conjunction with the system
vendor, to implement a compliant version of the system prior to this system
causing any material disruption in the Company's operation. The cost of this
project is not expected to have a material adverse effect on the results of
operations or financial position of the Company. The Company has also
identified several non-critical systems which are not year 2000 compliant, but
which will be made compliant via minor expenditures for software upgrades.
Certain of the systems on which the Company relies are completely maintained
by outside vendors. In addition, certain equipment used in the daily
operations of the Company relies on software programs and operating systems
over which the Company has no direct control. The Company continues to review
with its vendors of software, equipment, products and services any possible
exposures from the year 2000 issue. In the event that any of the Company's
significant vendors does not successfully and timely achieve year 2000
compliance, the Company's business could be adversely affected.
FORWARD LOOKING INFORMATION
Information contained in this Form 10-Q contains "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995,
which can be identified by the use of forward-looking terminology such as
"believes", "may", "expect", or "continue," or the negative thereof, or other
variations thereon, or comparable terminology. As with any construction
projects, the Primm Valley expansion and upgrade and the outlet mall,
involve many risks and uncertainties, including but not limited to material
and labor shortages, work stoppages, design changes, and weather disruptions.
Further, engineering, environmental, or geological problems and governmental
regulations and approvals could give rise to delays or cost overruns. For
additional factors which could cause forward looking statements to be
materially different than actual results, see "Business Risks" section of
Annual Report Form 10-K at December 31, 1997.
20
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
In May 1998, defendants filed their response to plaintiffs discovery
requests in the purported class action lawsuit by Paulos, Ahern, Schreirer
as discussed in the Annual Report Form 10-K Legal Proceeding, including
objections to certain questions. In June 1998, plaintiffs filed their motion
to compel response for documents and other information to which defendants
objected. On August 3, 1998, defendants filed its opposition to compel
providing certain documents and other documents, no decision has been made. On
August 7, 1998, defendants responded under an extension to defendants motion
for class certification, plaintiffs reply is due before August 25, 1998.
Discovery has been stayed pending class certification.
On May 12, 1998, Yolanda Manuel, the non-custodial parent of Sherrice Iverson,
filed a demand for jury trial, in the lawsuit discussed in the Company's Annual
Report on Form 10-K. On April 23, 1998 Leroy Iverson and Harold Jordon, the
custodial parent and brother of Sherrice Iverson, respectively, filed an
out-of-state security bond with the Nevada Court. On August 5, 1998
plaintiffs filed an amended complaint stating that Mr. Iverson is the
"personal representative" of Ms. Iverson's estate, and alleging additional
damages from false imprisonment and defamation, seeking compensating and
punitive damages.
Items 2 through 3. Are not applicable.
21
<PAGE>
Item 4. Submission of Matter to a Vote of Security Holders
The following matters were submitted to a vote of security holders
during the Company's Annual meeting of Stockholders held June 2, 1998:
No. of votes Withheld
Description of Matter Cast for Authority
_________________________ ____________ _________
1. Election of directors
Robert E. Armstrong 28,133,672 144,961
H. Martin Rosa 28,125,522 153,111
No. of votes cast No. of
_________________
For Against Abstentions
_______ _______ ___________
2. Ratification of appointment
of independent auditors 28,218,327 27,774 32,532
Item 5. None
Item 6. Exhibits and Reports on Form 8 - K.
(a) Exhibits.
10.33 Assumption and Consent Agreement, dated June 3, 1998, by and among
Primadonna Resorts, Inc. and The Primadonna Corporation as
"Borrowers", and Wells Fargo Bank as "Agent Bank" for a consortium
of participating banks listed therein as "Assuming Lenders"
(without exhibit or schedules).
10.34 Change in Control and Salary Continuation Agreement by and among
Michael Villamor and Primadonna Resorts, Inc. dated as of July 13,
1998.
10.35 Change in Control and Salary Continuation Agreement by and among
John L. Shigley and Primadonna Resorts, Inc. dated as of July ,3
1998.
10.36 Change in Control and Salary Continuation Agreement by and among
Gregg Schatzman and Primadonna Resorts, Inc. dated as of July 11,
1998.
27. Financial Data Schedule as of June 30, 1998.
See exhibit index on page 22 for exhibits filed with this report
(b) Reports on Form 8 - K. No report of Form 8 - K was filed during the
quarter for which this report is filed.
22
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the under-
signed thereunto duly authorized.
PRIMADONNA RESORTS, INC.
________________________
(Registrant)
Date: August 11, 1998 By /s/John L. Shigley
__________________________
John L. Shigley
Chief Financial Officer
23
<PAGE>
EXHIBIT INDEX
Exhibit Sequentially
No. Description Numbered
Pages
_______ ___________________________________________ ____________
10.33 Assumption and Consent Agreement, dated June 3,
1998, by and among Primadonna Resorts, Inc. and The
Primadonna Corporation as "Borrowers", and Wells
Fargo Bank as "Agent Bank" for a consortium of
participating banks listed therein as "Assuming
Lenders" (without exhibit or schedules). 25 - 32
10.34 Change in Control and Salary Continuation Agreement
by and among Michael Villamor and Primadonna Resorts,
Inc. dated as of July 13,1998. 33 - 39
10.35 Change in Control and Salary Continuation Agreement
by and among John L. Shigley and Primadonna Resorts,
Inc. dated as of July 3, 1998. 40 - 46
10.36 Change in Control and Salary Continuation Agreement
by and among Gregg Schatzman and Primadonna Resorts,
Inc. dated as of July 11, 1998. 47 - 53
27 Financial Data Schedule as of June 30, 1998 54
24
2525vnot.amd/prim98 0
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Quarterly Form 10-Q as of June 30, 1998, and Annual Report Form 10-K as of
December 31, 1997, Condensed Consolidated Financial Statements, and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998
<PERIOD-START> JAN-01-1998 JAN-01-1998
<PERIOD-END> JUN-30-1998 JUN-30-1998
<CASH> 6,595 6,595
<SECURITIES> 0 0
<RECEIVABLES> 835 835
<ALLOWANCES> 0 0
<INVENTORY> 1,281 1,281
<CURRENT-ASSETS> 6,080 6,080
<PP&E> 499,404 499,404
<DEPRECIATION> 160,875 160,875
<TOTAL-ASSETS> 483,880 483,880
<CURRENT-LIABILITIES> 17,594 17,594
<BONDS> 224,706 224,706
0 0
0 0
<COMMON> 309 309
<OTHER-SE> 224,868 224,868
<TOTAL-LIABILITY-AND-EQUITY> 483,880 483,880
<SALES> 74,457 144,908
<TOTAL-REVENUES> 71,334 137,979
<CGS> 29,227 56,844
<TOTAL-COSTS> 54,341 106,148
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 6,415 12,302
<INCOME-PRETAX> 10,578 19,529
<INCOME-TAX> 3,738 6,907
<INCOME-CONTINUING> 6,840 12,622
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 6,840 12,622
<EPS-PRIMARY> .24 .44
<EPS-DILUTED> .34 .67
</TABLE>
<PAGE>
ASSUMPTION AND CONSENT AGREEMENT
THIS ASSUMPTION AND CONSENT AGREEMENT ("Assumption Agreement") is made as of
the 3rd day of June, 1998, by and among WELLS FARGO BANK, National Association
("WFB"), U.S. BANK NATIONAL ASSOCIATION ("USBNA"), FIRST HAWAIIAN BANK ("FHB"),
ABN AMRO BANK ("ABN"), BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
("BofA"), THE BANK OF NOVA SCOTIA ("BONS") and KEYBANK NATIONAL ASSOCIATION
("Key" and together with WFB, USBNA, FHB, ABN, BofA and BONS collectively
referred to as the "Assuming Lenders" and each individually as an "Assuming
Lender"), PRIMADONNA RESORTS, INC., a Nevada corporation and THE PRIMADONNA
CORPORATION, a Nevada corporation (collectively the "Borrowers") and WELLS
FARGO BANK, National Association, in its capacity as Agent Bank as described
hereinbelow.
RECITALS:
A. Reference is made to that certain Credit Agreement, dated as of June 5,
1997 (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"), by and among Borrowers, the Lenders therein named (herein
together with their respective successors and assigns collectively the
"Lenders"), the Co-Agents and Lead Managers therein named, Wells Fargo Bank,
National Association, as the swingline lender (herein in such capacity,
together with its successors and assigns, the "Swingline Lender"), Wells Fargo
Bank, National Association, as the issuer of letters of credit hereunder
(herein in such capacity, together with its successors and assigns, the "L/C
Issuer"), and Wells Fargo Bank, National Association, as administrative and
collateral agent for the Lenders, Swingline Lender and L/C Issuer (herein, in
such capacity, called the "Agent Bank" and, together with the Lenders,
Swingline Lender and L/C Issuer, collectively referred to as the "Banks").
B. In this Assumption Agreement, all capitalized words and terms not
otherwise defined herein shall have the respective meanings to be construed
herein as provided in Section 1.01 of the Credit Agreement and any reference to
a provision of the Credit Agreement shall be deemed to incorporate such
provision as a part hereof in the same manner and with the same effect as if
the same were fully set forth herein.
C. Pursuant to Section 2.01(d) of the Credit Agreement, the Aggregate
Commitment was increased from Two Hundred Fifty Million Dollars
($250,000,000.00) to Three Hundred Million Dollars ($300,000,000.00) by
Assumption and Consent Agreement dated December 19, 1997, executed by and
among Borrowers, Agent Bank and the Lenders party thereto that committed to
fund the increase to the Aggregate Commitment.
D. Pursuant to the Assignment, Assumption and Consent Agreement dated as
of February 9, 1998, The Long Term Credit Bank of Japan, Ltd. assigned an
additional undivided one percent (1%) Syndication Interest to each of Societe
Generale, ABN and USBNA. Pursuant to the Assignment, Assumption and Consent
Agreement dated as of April 9, 1998, The Sumitomo Bank, Limited assigned an
additional 2.66666% Syndication Interest to Bank of Scotland.
E. Assuming Lenders, together with the other Lenders set forth thereon,
presently hold the respective Syndication Interests in the Credit Facility set
forth on the Schedule of Lenders' Proportions in Credit Facility as of
February 9, 1998, marked "Exhibit A", affixed hereto and by this reference
incorporated herein and made a part hereof.
25
<PAGE>
F. Pursuant to Section 2.01(d) of the Credit Agreement, Borrowers desire
to further increase the Aggregate Commitment from Three Hundred Million Dollars
($300,000,000.00) to Three Fifty Hundred Million Dollars ($350,000,000.00), an
increase of Fifty Million Dollars ($50,000,000.00) (the "Commitment Increase").
G. Each Assuming Lender is willing to commit to advance the portion of the
Commitment Increase set forth below, so that as of the Effective Date, as
hereinafter defined, Assuming Lenders shall hold the respective Pro Rata Shares
of the Aggregate Commitment as increased by the Commitment Increase and the
respective Syndication Interests in the Credit Facility set forth below (each
individually an "Assumed Interest" and collectively the "Assumed Interests"):
NAME OF ASSUMING LENDER
PORTION OF COMMITMENT INCREASE PRO RATA SHARE OF AGGREGATE COMMITMENT AFTER
COMMITMENT INCREASEPROPORTIONATE SYNDICATION INTERESTS AFTER COMMITMENT
INCREASE
WFB $ 4,000,000.00 $44,000,000.00
12.57144%
USBNA 10,000,000.00 28,000,000.00
8.00000%
FHB 5,000,000.00 15,000,000.00
4.28571%
ABN 4,000,000.00 20,000,000.00
5.71429%
BofA 3,000,000.00 25,000,000.00
7.14286%
BONS 3,000,000.00 15,000,000.00
4.28571%
KEY 21,000,000.00 21,000,000.00
6.00000%
H. This Assumption Agreement is made, executed and delivered pursuant to
Section 2.01(d) of the Credit Agreement and shall also constitute the
assumption by and delegation to Assuming Lenders of the Syndication Interests
particularly described hereinbelow.
NOW, THEREFORE, in consideration of the foregoing and other good and valuable
considerations, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto do agree as follows:
1. From and after the Effective Date, each Assuming Lender shall and does
hereby assume and agree to perform all of the promises and covenants of a
Lender as to its respective Assumed Interest arising or performable from and
after the Effective Date and does further agree to assume and be bound by each
and every term, condition, provision and covenant contained in the Credit
Agreement and each of the Loan Documents, effective as of the Effective Date,
to the same extent and manner as if such Assuming Lender had originally been
named in the Credit Agreement as a Lender holding the Assumed Interest therein
and Assuming Lender shall be deemed to be a Lender party to the Credit
Agreement for all purposes thereof.
26
<PAGE>
2. The "Effective Date" as used herein shall mean June 4, 1998, provided
that each of the following conditions precedent have been satisfied on or
before the Effective Date: (a) Assuming Lenders, Borrowers and Agent Bank have
executed twelve (12) duplicate originals of this Assumption Agreement and each
of such originals has been delivered to Agent Bank, (b) Borrowers have executed
and delivered to Agent Bank, on behalf of the Lenders, a restatement of the
Revolving Credit Note payable to the order of Agent Bank on behalf of the
Lenders, in the principal amount of Three Hundred Fifty Million Dollars
($350,000,000.00), (c) The Primadonna Corporation has executed and delivered to
Agent Bank a Third Amendment to Leasehold, Fee and Water Rights Deed of Trust,
Fixture Filing and Security Agreement with Assignment of Rents (H/C) in a form
and content acceptable to Agent Bank, for the purpose of securing repayment of
the Commitment Increase and the restated Revolving Credit Note, (d) Title
Company has committed to issue, at Borrowers' expense, its modified 110.10
endorsement to the Title Insurance Policy increasing coverage thereunder by an
additional Fifty Million Dollars ($50,000,000.00), (e) each Lender realizing a
decrease in its respective Syndication Interest has received from Agent Bank
such amount as is necessary to adjust such Lender's Pro Rata Share of the
Funded Outstandings as of the Effective Date equal to such Lender's Syndication
Interest as set forth on the Schedule of Lenders' Proportions in Credit
Facility as of June 4, 1998 attached hereto, and (f) each Assuming Lender
realizing an increase in its respective Syndication Interest has delivered to
Agent Bank an amount representing its Pro Rata Share of the Funded Outstandings
as of the Effective Date, less Assuming Lenders' Pro Rata Share of the Funded
Outstandings immediately prior to the Effective Date, for distribution to the
Lenders in such amounts as are necessary to adjust each such Lenders' Pro Rata
Share of the Funded Outstandings as of the Effective Date to a percentage equal
to the Syndication Interests set forth on the Schedule of Lenders' Proportions
in Credit Facility as of June 4, 1998 attached hereto. Interest accrued but
remaining unpaid on the portion of the outstanding principal balance under the
Credit Facility shall be prorated to the Effective Date and disbursed by Agent
Bank to Lenders from the next payment of accrued interest under the Note.
3. On the Effective Date, the respective aggregate Syndication Interests
of the Lenders in the Credit Facility shall be as set forth on the Schedule of
Lenders' Proportions in Credit Facility as of June 4, 1998, a copy of which is
marked "Schedule 2.01(a)" affixed hereto and by this reference incorporated
herein and made a part hereof, which shall restate the Schedule of Lenders'
Proportions in Credit Facility attached as Schedule 2.01(a) to the Credit
Agreement, and all previous amendments and restatements thereof, for the
purpose of showing the Commitment Increase, the adjustment of the respective
Syndication Interests held by each of the Lenders and evidencing each Assuming
Lender's applicable Syndication Interest in the Credit Facility on and after
the Effective Date.
4. Agent Bank, on behalf of itself and each of the Lenders, makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made by Borrowers in or in connection
with the Credit Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Credit Agreement, the Loan Documents
or any other instrument or document furnished pursuant thereto. Agent Bank, on
behalf of itself and each of the Lenders, makes no representation or warranty
in connection with, and assumes no responsibility with respect to, the
solvency, financial condition or statements of the Borrowers or the performance
or observance by the Borrowers of any of their respective obligations under
the Credit Agreement, the Loan Documents or any other instrument or document
furnished in connection therewith.
27
<PAGE>
5. Each Assuming Lender represents and warrants on behalf of itself that:
a. (i) it is duly organized and existing and it has full power and authority
to take, and has taken, all action necessary to execute and deliver this
Assumption Agreement and any other documents required to be executed or
delivered by it in connection with this Assumption Agreement, and to fulfill
its obligations hereunder; (ii) no notices to, or consents, authorizations or
approvals of, any person are required (other than any already given or
obtained) for its due execution, delivery and performance of this Assumption
Agreement; and apart from any agreements or undertakings or filings required by
the Credit Agreement, no further action by, or notice to, or filing with, any
person is required of it for such execution, delivery or performance; (iii)
this Assumption Agreement has been fully executed and delivered by it and
constitutes its legal, valid and binding obligations, enforceable against it in
accordance with the terms hereof, subject, as to enforcement, to bankruptcy,
insolvency, moratorium, reorganization and other laws of general application
relating to or affecting creditors' rights and to general equitable principles;
and (iv) it is eligible under the Credit Agreement to be a Lender in accordance
with the terms hereof.
b. (i) under applicable law and treaties no tax will be required to be
withheld by Borrowers or any Bank with respect to any payments to be made to
such Assuming Lender under the Credit Agreement, (ii) it agrees to furnish (if
it is organized under the laws of any jurisdiction other than the United States
or any State thereof) to the Agent Bank and the Borrowers prior to the time
that the Agent Bank or Borrowers are required to make any payment of principal,
interest or fees hereunder, duplicate executed original of either U.S. Internal
Revenue Service Form 4224 or U.S. Internal Revenue Service Form 1001 (wherein
the Assuming Lender claims entitlement to the benefits of a tax treaty that
provides for a complete exemption from U.S. federal income withholding tax on
all payments hereunder) and agrees to provide new Forms 4224 or 1001 upon the
expiration of any previously delivered form or comparable statements in
accordance with applicable U.S. law and regulations and amendments thereto,
duly executed and completed by the Assuming Lender, and (iii) it agrees to
comply with all applicable U.S. laws and regulations with regard to such
withholding tax exemption.
6. Borrowers represent and warrant as of the Effective Date that:
a. the representations and warranties contained in Article IV of the Credit
Agreement and contained in each of the other Loan Documents (other than
representations and warranties which expressly speak only as of a different
date, which shall be true and correct in all material respects as of such date)
are true and correct on and as of the Effective Date in all material respects
as though such representations and warranties had been made on and as of the
Effective Date, except to the extent that such representations and warranties
are not true and correct as a result of a change which is permitted by the
Credit Agreement or by any other Loan Document or which has been otherwise
consented to by Agent Bank;
b. Since the date of the most recent financial statements referred to in
Section 5.08(a)(iii) of the Credit Agreement, no Material Adverse Change has
occurred and no event or circumstance which could reasonably be expected to
result in a Material Adverse Change or Material Adverse Effect has occurred;
and
c. no event has occurred and is continuing which constitutes a Default or
Event of Default under the terms of the Credit Agreement.
28
<PAGE>
7. Each Assuming Lender (a) acknowledges that it has received a copy of
the Credit Agreement and the Loan Documents, together with copies of the most
recent financial statements referred to in Section 5.08 of the Credit
Agreement, and such other documents and information as it has deemed
appropriate to make its own credit and legal analysis and decision to enter
into this Assumption Agreement; (b) agrees that it will, independently and
without reliance upon the Agent Bank or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit and legal decisions in taking or not taking action under
the Credit Agreement; and (c) appoints and authorizes the Agent Bank to take
such action as agent on its behalf and to exercise such powers under the Credit
Agreement as are delegated to the Agent Bank by the terms thereof, together
with such powers as are reasonably incidental thereto.
8. KeyBank hereby advises Borrower and Agent Bank of the following
administrative details:
a. Credit/Business Matters:
Mary Young, Commercial Banking
700 Fifth Avenue, 46th Floor
Seattle, WA 98104
Telephone: (206) 684-6085
Facsimile: (206) 684-6035
b. Operations/Administration:
Specialty Services Team
431 Parkcenter Blvd.
Boise, ID 83704
Telephone: (800) 297-5518
Facsimile: (800) 297-5495
c. Payment Instructions:
KeyBank National Association
Seattle, WA
ABA No. 125000574
Cr: 01500163
Attn: Specialty Services
Ref: Primadonna
9. This Assumption Agreement may be signed in any number of counterparts,
and signatures to all counterparts thereto, when assembled together, shall
constitute signatures to this entire agreement with the same effect as if all
signatures were on the same document.
10. This Assumption Agreement shall be governed by and construed in
accordance with the internal laws of the State of Nevada without regard to
principles of conflicts of law. Borrowers further agree that the full and
exclusive forum for the determination of any action relating to this
Assumption Agreement, the Loan Documents, or any other document or instrument
delivered in favor of Banks pursuant to the terms hereof shall be either an
appropriate Court of the State of Nevada or the United States District Court or
United States Bankruptcy Court for the District of Nevada, except that an
action to foreclose the Water Rights Deed of Trust (California) may be
brought in any state or federal court in San Bernardino County, California,
and the Borrowers hereby irrevocably submit to the jurisdiction thereof.
29
<PAGE>
11. Any amendment or waiver of any provision of this Assumption Agreement
shall be in writing and signed by the parties hereto. No failure or delay by
either party hereto in exercising any right, power or privilege hereunder shall
operate as a waiver thereof and any waiver of any breach of the provisions of
this Assumption Agreement shall be without prejudice to any rights with respect
to any other or further breach thereof.
IN WITNESS WHEREOF, the parties hereto have executed the foregoing
Assumption Agreement as of the day and year first above written.
BORROWERS:
PRIMADONNA RESORTS, INC.,
a Nevada corporation
By__________________________
Name________________________
Title_______________________
THE PRIMADONNA CORPORATION, a Nevada corporation
By__________________________
Name________________________
Title_______________________
AGENT BANK:
WELLS FARGO BANK,
National Association
By__________________________
Name________________________
Title_______________________
ASSUMING LENDERS:
WELLS FARGO BANK,
National Association
By__________________________
Name________________________
Title_______________________
30
<PAGE>
U.S. BANK NATIONAL
ASSOCIATION
By__________________________
Name________________________
Title_______________________
FIRST HAWAIIAN BANK
By__________________________
Name________________________
Title_______________________
ABN AMRO BANK
By__________________________
Name________________________
Title_______________________
By__________________________
Name________________________
Title_______________________
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS
ASSOCIATION
By__________________________
Name________________________
Title_______________________
31
<PAGE>
THE BANK OF NOVA SCOTIA
By__________________________
Name________________________
Title_______________________
KEYBANK NATIONAL ASSOCIATION
By__________________________
Name________________________
Title_______________________
32
8assump.ag/prim98060298dsh7assump.ag/prim98060298dsh
<PAGE>
CHANGE IN CONTROL
AND
SALARY CONTINUATION AGREEMENT
This Change in Control and Salary Continuation Agreement (this "Agreement") is
made as of this 13th day of July, 1998, by and between Michael Villamor, a
married man, (the "Executive") and Primadonna Resorts, Inc., a Nevada
corporation (the "Company").
R E C I T A L S:
This Agreement is made with reference to the following facts and objectives:
A. The Executive is an officer of the Company; and
B. The Company desires to provide for the financial security of its officers
in the event of a Change In Control of the Company (as hereinafter defined).
A G R E E M E N T:
For and in consideration of the sum of $10.00, in hand paid, receipt of which
is acknowledged, and for and in consideration of their respective covenants
herein made, the parties agree as follows:
1. Definitions. As used in this Agreement, the following capitalized terms
shall have the meanings set forth below:
(a) "Beneficiary" shall mean any Person or Persons designated, from time to
time, by the Executive pursuant to Section 5 on forms prescribed by the
Company.
(b) "Business Combination" shall mean a complete liquidation or dissolution of
the Company or a merger, consolidation, or sale of all or substantially all of
the Company's assets.
(c) "Cause" shall mean the willful and continued failure of the Executive to
perform his duties or the engaging by the Executive in illegal conduct,
misconduct or gross negligence any of which is materially injurious to the
Company.
(d) A "Change In Control" shall mean: (i) any acquisition (other than directly
from the Company) by an individual, entity or a group (excluding the Company,
an employee benefit plan of the Company, the Primm Family, the Gary Primm
Group, or a corporation controlled by either the Gary Primm Group or the Primm
Family) of thirty percent (30%) or more of the Company's common stock or voting
securities; (ii) a change in a majority of the Incumbent Board (excluding any
persons approved by a vote of at least a majority of the Incumbent Board other
than in connection with an actual or threatened proxy contest); (iii)
consummation of a Business Combination other than a Business Combination in
which all or substantially all of the stockholders of the Company receive fifty
percent (50%) or more of the stock of the company resulting from the Business
Combination or its parent entity, at least one-half (1/2) of the board of
directors of the resulting corporation or its parent entity thereof were
members of the Incumbent Board, and after which no Person owns fifteen percent
(15%) or more of the voting stock of the resulting corporation or its parent
entity, who did not own voting stock of at least that amount in a constituent
corporation or its parent entity, immediately before the Business Combination.
33
<PAGE>
(e) "Change In Control Period" shall mean the period from the date of this
Agreement until the third (3rd) anniversary of date of this Agreement, and
unless terminated in writing by the Company sixty (60) days prior to the third
(3rd) anniversary of this Agreement, this Agreement shall automatically renew
for one (1) additional three (3) year period.
(f) "Compensation and Benefits" shall mean: (i) a monthly base salary equal to
the highest monthly base salary paid to the Executive by the Company during the
twenty-four (24) months immediately prior to the Effective Date; (ii) an annual
bonus in cash equal to the average bonuses paid to the Executive during the
twenty-four (24) month period immediately prior to the Effective Date; (iii)
incentive, savings, welfare benefit, fringe benefit, medical, dental, vision,
disability, and retirement plan participation at least equal to the most
favorable coverage and options in effect for senior executives of the Company
during the twelve (12) month period immediately prior to the Effective Date;
and (iv) the obligations accrued at the Effective Date with respect to salary,
bonuses, deferred compensation, vacation pay, death and disability benefits
(if any).
(g) "Compensation Obligation" shall mean the absolute and unconditional
obligation of the Company, its successors and assigns, to pay the Executive,
the Beneficiary, or the Executive's estate, whichever the case may be, the
Compensation and Benefits throughout the Protected Period in accordance with
Section 3 of this Agreement directly offset by any other severance or
termination payments and benefits otherwise paid or payable to the
Executive by the Company.
(h) "Effective Date" shall mean the date upon which the obligations hereunder
becomes effective, that is when a Change In Control occurs during the Change In
Control Period.
(I) "Gary Primm Group" shall mean Gary E. Primm, his spouse, issue, in-laws,
guardian, executors, administrators, testamentary trustees, heirs, legatees or
beneficiaries, or any entity or entities controlled by, or under the common
control of, any one or more of the foregoing parties.
(j) "Good Reason" shall mean the material diminution of responsibilities,
assignment to inappropriate duties, failure of the Company to comply with
Compensation and Benefits provisions, transfer more than fifty (50) miles, a
purported termination of the Agreement by the Company other than in accordance
with the Agreement.
(k) "Incumbent Board" shall mean the current board of directors of the
Company.
(l) "Person" shall mean any legal entity, including but not limited to any
individual, corporation, group or assemblage, partnership, limited partnership,
joint venture, association, joint stock company, limited liability company,
limited liability partnership, or trust.
(m) "Primm Family" shall mean any one or more of the following: Gary E. Primm,
Janet Primm Rosa, Judith Primm Clemetson, Joyce Primm Schweickert, Roger B.
Primm and Gregory B. Primm, their respective spouses, issues, and in-laws,
guardians, executors, administrators, testamentary trustees, heirs, legatees
and beneficiaries, or any entity or entities controlled by, or under common
control of, any one or more of the foregoing individuals.
34
<PAGE>
(n) "Protected Period" shall mean the time period commencing on the date the
Change In Control occurs until the second (2nd) year anniversary of that date.
2. Rights and Obligations Upon A Change of Control. Upon the Effective Date,
the following rights and obligations shall arise and become fully enforceable:
(a) The Executive s employment with the Company may be terminated either by
the Company without Cause, or by the Executive for Good Reason at anytime
during the Protected Period by written notice to the other;
(b) In the event of either such termination set forth in paragraph (a) above,
the Executive's death, or the Executive's disability during the Protected
Period, the Executive shall be entitled to the Compensation and Benefits
during the Protected Period and the Compensation Obligation shall become due
and payable by the Company in accordance with Section 3; and
(c) If the Executive is employed by the Company at any time during the
Protected Period, the Executive shall be entitled to receive, at a minimum,
the Compensation and Benefits.
Nothing contained in this Agreement constitutes an employment commitment by the
Company, affects the Executive s status as an employee at will who is subject
to termination without cause, confers upon the Executive any right to remain
employed by the Company or any subsidiary, interferes in any way with the right
of the Company or of any subsidiary at any time to terminate the Executive s
employment, or affects the Company s right to increase or decrease the
Executive s compensation except for the Compensation and Benefits payable
during the Protected Period. In the event the Executive s employment with the
Company is terminated after a public announcement of an impending Change In
Control, but before consummation of the Change In Control and absent a
severance agreement between the parties which nullifies this Agreement, such
termination shall be deemed to be in connection with, or in anticipation of the
Change In Control. In such event, the Executive shall be entitled to the
payment of the Compensation and Benefits in accordance with Section 3 less any
amounts previously paid by the Company to the Employee in the form of severance
or termination compensation (offset proportionally against the Compensation
and Benefits over the remaining portion of the Protected Period).
3. Payment of Compensation and Benefits. Upon the Effective Date, Company
shall pay, and continue to pay, the Compensation and Benefits to the
Executive at the regular and customary intervals in effect prior to the
Change in Control, throughout the Protected Period subject to customary
federal and state withholding requirements. For each month the Executive
remains employed by the Company during the Protected Period, the Compensation
Obligation of the Company is correspondingly reduced. The payment of
Compensation Obligation by the Company shall not preclude any rights the
Executive may have under COBRA to elect continued health insurance at the
Executive s cost and expense.
4. Spendthrift Provision. Prior to actual receipt by the Executive, the
Beneficiary, or the Executive's estate, as the case may be, no right or benefit
under this Agreement and without limitation, no interest in any payment
hereunder shall be:
(a) anticipated, assigned, or encumbered or subject to any creditor's claim or
subject to execution, attachment or similar legal process; or
35
<PAGE>
(b) applied on behalf of or subject to the debts, contracts, liabilities or
torts of the Person entitled or who might become entitled to such benefits or
subject to the claims of any creditor of any such Person.
5. Recipients of Payments and Designation of Beneficiary. Compensation and
Benefits payable by Company pursuant this Agreement shall be made only to the
Executive during the Protected Period, or, in the event of his death, to the
Beneficiary designated by the Executive during the Protected Period on forms
prescribed by the Company . If the Executive has not designated the
Beneficiary, then the payments shall be made to the Executive's estate. The
Company shall have no obligation to make payments to any Person not designated
by the Executive as the Beneficiary, or the Executive's estate. If the
Executive is married, the written consent of the Executive's spouse will be
required to be delivered to the Company before such designation is binding on
the Company. Furthermore, Company shall have no obligation to make any
payments to the Beneficiary until and unless the Beneficiary has agreed in
writing to be bound by the provisions of this Section 5. The Executive, the
Executive's estate, or the Beneficiary, as the case may be, shall discharge,
defend and hold the Company harmless from any liability for payments actually
made to such Beneficiary or to the Executive's estate if no Beneficiary has
been designated. The Executive may designate and, from time to time, change
the Beneficiary only through a written, signed, and notarized designation by
the Executive and, if married, by his spouse, which is delivered to the
Company's corporate secretary, and disburse in accordance with such conditions
and procedures as the Company may, from time to time, proscribe.
6. Elections. Whenever the Compensation and Benefits provide for any election
exercisable by the Executive, the Beneficiary, or the Executive's estate,
whichever the case may be, that election shall be made solely by the person or
persons receiving payments pursuant to this Agreement at that time and shall be
made in that Person's sole discretion and without regard to the effect of such
decision on subsequent payment recipients. Such decision shall be final and
binding on all subsequent recipients of payments.
7. Arbitration. Any and all disputes, controversies or claims arising under or
in connection with this Agreement, including without limitation, the general
validity or enforceability of this Agreement, shall be governed by the laws of
the State of Nevada, without giving effect to its conflict of laws provisions
and shall be submitted to binding arbitration before one arbitrator and in
accordance with the voluntary labor arbitration rules of the American
Arbitration Association conducted in Clark County, Nevada. All expenses of
any arbitration shall be borne equally by the Company and the Executive.
All fees, including legal fees shall be borne by the party who incurred said
fees. The award of the arbitrator shall be final and enforceable in the courts
of Nevada. All costs of enforcement are to be borne by the losing party. In
reaching his or her decision, the arbitrator shall have no authority to change
or modify any provision of this Agreement. The parties shall be entitle to
avail themselves of all discovery procedures available in civil actions in the
State of Nevada under the Nevada Rules of Civil Procedure. The parties have
not agreed to arbitrate any dispute except for those disputes arising out of or
relating to the construction, application or enforcement of this Agreement.
For example, and without limitation, the parties have not agreed to arbitrate
wage-hour, workers' compensation, defamation, or public policy discharge
claims, parties expressly reserve all rights and remedies available to them,
at law in equity, to resolve any dispute which they have not expressly agreed
in this Agreement to arbitrate.
36
<PAGE>
8. Modification. This Agreement shall not be modified, amended, supplemented
or extended except by written consent executed by both parties hereto, except
as expressly provided herein to the contrary.
9. Assignment. In the event of a Change In Control, the successor in interest
to the Company, or to the Company's operating businesses, shall expressly
assume as guarantor of the obligations of the Company under this Agreement.
An assumption shall serve as a novation and release of the Company's
obligations hereunder and the Company, its successors and assigns, shall have
no further liability with respect to such obligations in such event. The
Company shall not otherwise voluntarily subcontract or assign any of its
rights, duties or obligations hereunder without first obtaining the
Executive's written consent. The Executive shall not subcontract or assign
any of his rights, duties or obligations hereunder under any circumstances
other than upon his death, consistent with the terms hereof.
10. Notice. Notices or other communications required, permitted, or made
necessary by the terms of this Agreement shall be given in writing to the
respective representatives of the Company and the Executive. Written notices
shall be personally delivered to the either party's representative, as
appropriate or sent by the United States registered or certified mail, postage
prepaid, return requested, addressed to the Company to its regular business
mailing address and to the Executive, at the Executive's resident address,
respectively set forth below. Notices sent by mail shall be deemed made,
delivered and received on the date of the United States postmark thereon.
Either party may change its address for notice by giving notice of such change
to the other party in the manner specified in this section.
11. No Waiver. No waiver of any breach or default in any of the terms and
provisions set forth herein shall be deemed to constitute or be construed as a
waiver of the subsequent breach or default of the same, similar or dissimilar
nature.
12. Choice of Law and Invalidity. The validity, construction, performance and
effect of this Agreement shall be governed by the laws of the State of Nevada.
In case any one or more of the provisions contained herein shall for any reason
be held to be invalid, illegal, or unenforceable in any respect, such
invalidity, illegality, or unenforceability shall not affect any other
provisions of this Agreement, but this Agreement shall be construed as if such
invalid, illegal, or unenforceable provision had never been contained herein.
If any one or more provisions contained herein shall, for any reason, be held
to be excessively broad as to time, duration, geographical scope, activity or
subject, said provision shall be construed by limiting and reducing it so as to
be enforceable to the extent compatible with the then applicable law, it being
the intent of the parties hereto to give the maximum permitted effect to the
restrictions set forth herein.
13. Gender and Number. If necessary to give effect to the terms and provisions
hereof, the masculine, feminine, and neuter gender and the singular and plural
number shall each be deemed to included the other whenever the context so
indicates.
14. Headings. Headings in this Agreement are inserted for convenience and
identification only and are in no way intended to describe, interpret, define
or limit the scope, extent or intent of this Agreement or any provision hereof.
37
<PAGE>
15. Counterparts. This Agreement may be executed in any number of
counterparts, any of which may be constituted in this Agreement between the
parties hereto.
16. Time. Time is of the essence for all obligations contemplated in this
Agreement.
17. Sole Understanding. This Agreement contains and sets forth the entire
understanding between the parties with respect to the subject matter hereof.
All prior negotiations and agreements between the parties with respect to the
intent and scope of this Agreement are mutually rescinded, replaced and
superseded hereby.
18. Authority. The Company warrants and represents that it is a corporation
duly organized and validly existing under the laws of the State of Nevada, has
the corporate power and authority to enter into and execute this Agreement, has
taken all necessary action with respect to this Agreement, and that the
undersigned is authorized to execute this Agreement on behalf of the Company.
The wife of the Executive, by her execution of this Agreement, agrees to be
bound by all its terms and conditions as it affects any community property
interest she may now or hereafter possess.
19. Inurement. Each covenant and condition in this Agreement shall be binding
on, inure solely to the benefit of and enforceable by the parties to it, their
respective heirs, legal representatives, successors and assigns. If the
Executive should die while any amounts are still payable to him hereunder, all
such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms hereof to the Beneficiary or, if there are no such designee, to
the Executive's estate.
20. Legal Representation and No Reliance. The Executive and the Company each
represents and agrees to the other that each has had the opportunity to discuss
all aspects of this Agreement hereof with their respective legal counsel and
that each carefully read and understands the terms hereof and that each is
voluntarily entering into this Agreement. Neither party is relying upon any
representations or agreement of the party not otherwise contained in this
Agreement in entering into this Agreement.
21. Neither Party is Drafter. The parties agree that neither party shall be
deemed the drafter of this Agreement and that in the event this Agreement is
ever construed by an arbitrator, a court of law or equity, such arbitrator or
court shall not construe this Agreement or any provision against either party
as drafter of this Agreement, the parties acknowledging that each of the
parties hereto has contributed substantially and materially to the preparation
hereof.
22. Term. The term of this Agreement shall be the Change In Control Period, as
renewed pursuant to Section 1(e) and if a Change In Control occurs during the
Change In Control Period, the Protected Period.
23. Confidential Information. The Executive agrees to hold for the benefit of
the Company all confidential information concerning the Company obtained over
the course of the Executive's employment strictly confidential and agrees not
at anytime, without the Company s prior written consent, to disclose to any
other person or business entities any trade secret as defined by Nevada law,
proprietary or other confidential information concerning the Company as defined
by the Company s policies, procedures, and practices, including, without
limitation, the Company s customers, and its casino, hotel and marketing
38
<PAGE>
practices, procedures and management policies, development plans, mergers,
acquisitions, sales of assets or stock, and labor relations which is not
generally and already known to the public.
IN WITNESS WHEREOF, the parties to this Agreement have duly executed it on the
day and year first above written.
Company:
Primadonna Resorts, Inc.,
a Nevada corporation
By: ________________________________
Its: _____________________________
whose regular office address is:
P.O. Box 95997
Las Vegas, Nevada 89193-5997
Executive:
____________________________________MICHAEL VILLAMOR
whose residence address is:
3003 Regency Hill
Henderson, Nevada 89014
39
A:\VILLAMOR.AGR
August 7, 19986A:\VILLAMOR.AGR August 7, 1998
<PAGE>
CHANGE IN CONTROL
AND
SALARY CONTINUATION AGREEMENT
This Change in Control and Salary Continuation Agreement (this "Agreement") is
made as of this 3rd day of July, 1998, by and between John L. Shigley, a
married man, (the "Executive") and Primadonna Resorts, Inc., a Nevada
corporation (the "Company").
R E C I T A L S:
This Agreement is made with reference to the following facts and objectives:
A. The Executive is an officer of the Company; and
B. The Company desires to provide for the financial security of its officers in
the event of a Change In Control of the Company (as hereinafter defined).
A G R E E M E N T:
For and in consideration of the sum of $10.00, in hand paid, receipt of which
is acknowledged, and for and in consideration of their respective covenants
herein made, the parties agree as follows:
1. Definitions. As used in this Agreement, the following capitalized terms
shall have the meanings set forth below:
(a) "Beneficiary" shall mean any Person or Persons designated, from time to
time, by the Executive pursuant to Section 5 on forms prescribed by the
Company.
(b) "Business Combination" shall mean a complete liquidation or dissolution of
the Company or a merger, consolidation, or sale of all or substantially all of
the Company's assets.
(c) "Cause" shall mean the willful and continued failure of the Executive to
perform his duties or the engaging by the Executive in illegal conduct,
misconduct or gross negligence any of which is materially injurious to the
Company.
(d) A "Change In Control" shall mean: (i) any acquisition (other than directly
from the Company) by an individual, entity or a group (excluding the Company,
an employee benefit plan of the Company, the Primm Family, the Gary Primm
Group, or a corporation controlled by either the Gary Primm Group or the
Primm Family) of thirty percent (30%) or more of the Company's common stock or
voting securities; (ii) a change in a majority of the Incumbent Board
(excluding any persons approved by a vote of at least a majority of the
Incumbent Board other than in connection with an actual or threatened proxy
contest); (iii) consummation of a Business Combination other than a Business
Combination in which all or substantially all of the stockholders of the
Company receive fifty percent (50%) or more of the stock of the company
resulting from the Business Combination or its parent entity, at least
one-half (1/2) of the board of directors of the resulting corporation or its
parent entity thereof were members of the Incumbent Board, and after which no
Person owns fifteen percent (15%) or more of the voting stock of the resulting
corporation or its parent entity, who did not own voting stock of at least that
amount in a constituent corporation or its parent entity, immediately before
the Business Combination.
40
<PAGE>
(e) "Change In Control Period" shall mean the period from the date of this
Agreement until the third (3rd) anniversary of date of this Agreement, and
unless terminated in writing by the Company sixty (60) days prior to the third
(3rd) anniversary of this Agreement, this Agreement shall automatically renew
for one (1) additional three (3) year period.
(f) "Compensation and Benefits" shall mean: (i) a monthly base salary equal to
the highest monthly base salary paid to the Executive by the Company during the
twenty-four (24) months immediately prior to the Effective Date; (ii) an annual
bonus in cash equal to the average bonuses paid to the Executive during the
twenty-four (24) month period immediately prior to the Effective Date; (iii)
incentive, savings, welfare benefit, fringe benefit, medical, dental, vision,
disability, and retirement plan participation at least equal to the most
favorable coverage and options in effect for senior executives of the Company
during the twelve (12) month period immediately prior to the Effective Date;
and (iv) the obligations accrued at the Effective Date with respect to salary,
bonuses, deferred compensation, vacation pay, death and disability benefits
(if any).
(g) "Compensation Obligation" shall mean the absolute and unconditional
obligation of the Company, its successors and assigns, to pay the Executive,
the Beneficiary, or the Executive's estate, whichever the case may be, the
Compensation and Benefits throughout the Protected Period in accordance with
Section 3 of this Agreement directly offset by any other severance or
termination payments and benefits otherwise paid or payable to the
Executive by the Company.
(h) "Effective Date" shall mean the date upon which the obligations hereunder
becomes effective, that is when a Change In Control occurs during the Change In
Control Period.
(I) "Gary Primm Group" shall mean Gary E. Primm, his spouse, issue, in-laws,
guardian, executors, administrators, testamentary trustees, heirs, legatees or
beneficiaries, or any entity or entities controlled by, or under the common
control of, any one or more of the foregoing parties.
(j) "Good Reason" shall mean the material diminution of responsibilities,
assignment to inappropriate duties, failure of the Company to comply with
Compensation and Benefits provisions, transfer more than fifty (50) miles, a
purported termination of the Agreement by the Company other than in accordance
with the Agreement.
(k) "Incumbent Board" shall mean the current board of directors of the
Company.
(l) "Person" shall mean any legal entity, including but not limited to any
individual, corporation, group or assemblage, partnership, limited partnership,
joint venture, association, joint stock company, limited liability company,
limited liability partnership, or trust.
(m) "Primm Family" shall mean any one or more of the following: Gary E. Primm,
Janet Primm Rosa, Judith Primm Clemetson, Joyce Primm Schweickert, Roger B.
Primm and Gregory B. Primm, their respective spouses, issues, and in-laws,
guardians, executors, administrators, testamentary trustees, heirs, legatees
and beneficiaries, or any entity or entities controlled by, or under common
control of, any one or more of the foregoing individuals.
41
<PAGE>
(n) "Protected Period" shall mean the time period commencing on the date the
Change In Control occurs until the first (1st) year anniversary of that date.
2. Rights and Obligations Upon A Change of Control. Upon the Effective Date,
the following rights and obligations shall arise and become fully enforceable:
(a) The Executive s employment with the Company may be terminated either by
the Company without Cause, or by the Executive for Good Reason at anytime
during the Protected Period by written notice to the other;
(b) In the event of either such termination set forth in paragraph (a) above,
the Executive's death, or the Executive's disability during the Protected
Period, the Executive shall be entitled to the Compensation and Benefits during
the Protected Period and the Compensation Obligation shall become due and
payable by the Company in accordance with Section 3; and
(c) If the Executive is employed by the Company at any time during the
Protected Period, the Executive shall be entitled to receive, at a minimum,
the Compensation and Benefits.
Nothing contained in this Agreement constitutes an employment commitment by the
Company, affects the Executive s status as an employee at will who is subject
to termination without cause, confers upon the Executive any right to remain
employed by the Company or any subsidiary, interferes in any way with the right
of the Company or of any subsidiary at any time to terminate the Executive s
employment, or affects the Company s right to increase or decrease the
Executive s compensation except for the Compensation and Benefits payable
during the Protected Period. In the event the Executive s employment with the
Company is terminated after a public announcement of an impending Change In
Control, but before consummation of the Change In Control and absent a
severance agreement between the parties which nullifies this Agreement, such
termination shall be deemed to be in connection with, or in anticipation of the
Change In Control. In such event, the Executive shall be entitled to the
payment of the Compensation and Benefits in accordance with Section 3 less any
amounts previously paid by the Company to the Employee in the form of severance
or termination compensation (offset proportionally against the Compensation and
Benefits over the remaining portion of the Protected Period).
3. Payment of Compensation and Benefits. Upon the Effective Date, Company
shall pay, and continue to pay, the Compensation and Benefits to the
Executive at the regular and customary intervals in effect prior to the
Change in Control, throughout the Protected Period subject to customary
federal and state withholding requirements. For each month the Executive
remains employed by the Company during the Protected Period, the Compensation
Obligation of the Company is correspondingly reduced. The payment of
Compensation Obligation by the Company shall not preclude any rights the
Executive may have under COBRA to elect continued health insurance at the
Executive s cost and expense.
4. Spendthrift Provision. Prior to actual receipt by the Executive, the
Beneficiary, or the Executive's estate, as the case may be, no right or benefit
under this Agreement and without limitation, no interest in any payment
hereunder shall be:
(a) anticipated, assigned, or encumbered or subject to any creditor's claim or
subject to execution, attachment or similar legal process; or
42
<PAGE>
(b) applied on behalf of or subject to the debts, contracts, liabilities or
torts of the Person entitled or who might become entitled to such benefits or
subject to the claims of any creditor of any such Person.
5. Recipients of Payments and Designation of Beneficiary. Compensation and
Benefits payable by Company pursuant this Agreement shall be made only to the
Executive during the Protected Period, or, in the event of his death, to the
Beneficiary designated by the Executive during the Protected Period on forms
prescribed by the Company . If the Executive has not designated the
Beneficiary, then the payments shall be made to the Executive's estate. The
Company shall have no obligation to make payments to any Person not designated
by the Executive as the Beneficiary, or the Executive's estate. If the
Executive is married, the written consent of the Executive's spouse will be
required to be delivered to the Company before such designation is binding on
the Company. Furthermore, Company shall have no obligation to make any
payments to the Beneficiary until and unless the Beneficiary has agreed in
writing to be bound by the provisions of this Section 5. The Executive, the
Executive's estate, or the Beneficiary, as the case may be, shall discharge,
defend and hold the Company harmless from any liability for payments actually
made to such Beneficiary or to the Executive's estate if no Beneficiary has
been designated. The Executive may designate and, from time to time, change
the Beneficiary only through a written, signed, and notarized designation by
the Executive and, if married, by his spouse, which is delivered to the
Company's corporate secretary, and disburse in accordance with such
conditions and procedures as the Company may, from time to time, proscribe.
6. Elections. Whenever the Compensation and Benefits provide for any election
exercisable by the Executive, the Beneficiary, or the Executive's estate,
whichever the case may be, that election shall be made solely by the person or
persons receiving payments pursuant to this Agreement at that time and shall be
made in that Person's sole discretion and without regard to the effect of such
decision on subsequent payment recipients. Such decision shall be final and
binding on all subsequent recipients of payments.
7. Arbitration. Any and all disputes, controversies or claims arising under or
in connection with this Agreement, including without limitation, the general
validity or enforceability of this Agreement, shall be governed by the laws of
the State of Nevada, without giving effect to its conflict of laws provisions
and shall be submitted to binding arbitration before one arbitrator and in
accordance with the voluntary labor arbitration rules of the American
Arbitration Association conducted in Clark County, Nevada. All expenses of
any arbitration shall be borne equally by the Company and the Executive.
All fees, including legal fees shall be borne by the party who incurred said
fees. The award of the arbitrator shall be final and enforceable in the courts
of Nevada. All costs of enforcement are to be borne by the losing party. In
reaching his or her decision, the arbitrator shall have no authority to change
or modify any provision of this Agreement. The parties shall be entitled to
avail themselves of all discovery procedures available in civil actions in the
State of Nevada under the Nevada Rules of Civil Procedure. The parties have
not agreed to arbitrate any dispute except for those disputes arising out of or
relating to the construction, application or enforcement of this Agreement.
For example, and without limitation, the parties have not agreed to arbitrate
wage-hour, workers' compensation, defamation, or public policy discharge
claims, parties expressly reserve all rights and remedies available to them, at
law in equity, to resolve any dispute which they have not expressly agreed in
this Agreement to arbitrate.
43
<PAGE>
8. Modification. This Agreement shall not be modified, amended, supplemented
or extended except by written consent executed by both parties hereto, except
as expressly provided herein to the contrary.
9. Assignment. In the event of a Change In Control, the successor in interest
to the Company, or to the Company's operating businesses, shall expressly
assume as guarantor of the obligations of the Company under this Agreement. An
assumption shall serve as a novation and release of the Company's obligations
hereunder and the Company, its successors and assigns, shall have no further
liability with respect to such obligations in such event. The Company shall
not otherwise voluntarily subcontract or assign any of its rights, duties or
obligations hereunder without first obtaining the Executive's written consent.
The Executive shall not subcontract or assign any of his rights, duties or
obligations hereunder under any circumstances other than upon his death,
consistent with the terms hereof.
10. Notice. Notices or other communications required, permitted, or made
necessary by the terms of this Agreement shall be given in writing to the
respective representatives of the Company and the Executive. Written notices
shall be personally delivered to the either party's representative, as
appropriate or sent by the United States registered or certified mail, postage
prepaid, return requested, addressed to the Company to its regular business
mailing address and to the Executive, at the Executive's resident address,
respectively set forth below. Notices sent by mail shall be deemed made,
delivered and received on the date of the United States postmark thereon.
Either party may change its address for notice by giving notice of such change
to the other party in the manner specified in this section.
11. No Waiver. No waiver of any breach or default in any of the terms and
provisions set forth herein shall be deemed to constitute or be construed as a
waiver of the subsequent breach or default of the same, similar or dissimilar
nature.
12. Choice of Law and Invalidity. The validity, construction, performance and
effect of this Agreement shall be governed by the laws of the State of Nevada.
In case any one or more of the provisions contained herein shall for any reason
be held to be invalid, illegal, or unenforceable in any respect, such
invalidity, illegality, or unenforceability shall not affect any other
provisions of this Agreement, but this Agreement shall be construed as if such
invalid, illegal, or unenforceable provision had never been contained herein.
If any one or more provisions contained herein shall, for any reason, be held
to be excessively broad as to time, duration, geographical scope, activity or
subject, said provision shall be construed by limiting and reducing it so as to
be enforceable to the extent compatible with the then applicable law, it being
the intent of the parties hereto to give the maximum permitted effect to the
restrictions set forth herein.
13. Gender and Number. If necessary to give effect to the terms and provisions
hereof, the masculine, feminine, and neuter gender and the singular and plural
number shall each be deemed to included the other whenever the context so
indicates.
14. Headings. Headings in this Agreement are inserted for convenience and
identification only and are in no way intended to describe, interpret, define
or limit the scope, extent or intent of this Agreement or any provision hereof.
44
<PAGE>
15. Counterparts. This Agreement may be executed in any number of
counterparts, any of which may be constituted in this Agreement between the
parties hereto.
16. Time. Time is of the essence for all obligations contemplated in this
Agreement.
17. Sole Understanding. This Agreement contains and sets forth the entire
understanding between the parties with respect to the subject matter hereof.
All prior negotiations and agreements between the parties with respect to the
intent and scope of this Agreement are mutually rescinded, replaced and
superseded hereby.
18. Authority. The Company warrants and represents that it is a corporation
duly organized and validly existing under the laws of the State of Nevada, has
the corporate power and authority to enter into and execute this Agreement, has
taken all necessary action with respect to this Agreement, and that the
undersigned is authorized to execute this Agreement on behalf of the Company.
The wife of the Executive, by her execution of this Agreement, agrees to be
bound by all its terms and conditions as it affects any community property
interest she may now or hereafter possess.
19. Inurement. Each covenant and condition in this Agreement shall be binding
on, inure solely to the benefit of and enforceable by the parties to it, their
respective heirs, legal representatives, successors and assigns. If the
Executive should die while any amounts are still payable to him hereunder, all
such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms hereof to the Beneficiary or, if there are no such designee, to
the Executive's estate.
20. Legal Representation and No Reliance. The Executive and the Company each
represents and agrees to the other that each has had the opportunity to discuss
all aspects of this Agreement hereof with their respective legal counsel and
that each carefully read and understands the terms hereof and that each is
voluntarily entering into this Agreement. Neither party is relying upon any
representations or agreement of the party not otherwise contained in this
Agreement in entering into this Agreement.
21. Neither Party is Drafter. The parties agree that neither party shall be
deemed the drafter of this Agreement and that in the event this Agreement is
ever construed by an arbitrator, a court of law or equity, such arbitrator or
court shall not construe this Agreement or any provision against either party
as drafter of this Agreement, the parties acknowledging that each of the
parties hereto has contributed substantially and materially to the preparation
hereof.
22. Term. The term of this Agreement shall be the Change In Control Period, as
renewed pursuant to Section 1(e) and if a Change In Control occurs during the
Change In Control Period, the Protected Period.
23. Confidential Information. The Executive agrees to hold for the benefit of
the Company all confidential information concerning the Company obtained over
the course of the Executive's employment strictly confidential and agrees not
at anytime, without the Company s prior written consent, to disclose to any
other person or business entities any trade secret as defined by Nevada law,
proprietary or other confidential information concerning the Company as defined
by the Company s policies, procedures, and practices, including, without
45
<PAGE>
limitation, the Company s customers, and its casino, hotel and marketing
practices, procedures and management policies, development plans, mergers,
acquisitions, sales of assets or stock, and labor relations which is not
generally and already known to the public.
IN WITNESS WHEREOF, the parties to this Agreement have duly executed it on the
day and year first above written.
Company:
Primadonna Resorts, Inc.,
a Nevada corporation
By: ________________________________
Its: _____________________________
whose regular office address is:
P.O. Box 95997
Las Vegas, Nevada 89193-5997
Executive:
____________________________________
JOHN L. SHIGLEY
whose residence address is:
804 Petit Chalet Court
Las Vegas, Nevada 89128
46
A:\SHIGLEY.AGR
August 7, 19986A:\SHIGLEY.AGR August 7, 1998
<PAGE>
CHANGE IN CONTROL
AND
SALARY CONTINUATION AGREEMENT
This Change in Control and Salary Continuation Agreement (this "Agreement") is
made as of this 11th day of July, 1998, by and between Gregg Schatzman, an
unmarried man, (the "Executive") and Primadonna Resorts, Inc., a Nevada
corporation (the "Company").
R E C I T A L S:
This Agreement is made with reference to the following facts and objectives:
A. The Executive is an officer of the Company; and
B. The Company desires to provide for the financial security of its officers
in the event of a Change In Control of the Company (as hereinafter defined).
A G R E E M E N T:
For and in consideration of the sum of $10.00, in hand paid, receipt of which
is acknowledged, and for and in consideration of their respective covenants
herein made, the parties agree as follows:
1. Definitions. As used in this Agreement, the following capitalized terms
shall have the meanings set forth below:
(a) "Beneficiary" shall mean any Person or Persons designated, from time to
time, by the Executive pursuant to Section 5 on forms prescribed by the
Company.
(b) "Business Combination" shall mean a complete liquidation or dissolution
of the Company or a merger, consolidation, or sale of all or substantially all
of the Company's assets.
(c) "Cause" shall mean the willful and continued failure of the Executive to
perform his duties or the engaging by the Executive in illegal conduct,
misconduct or gross negligence any of which is materially injurious to the
Company.
(d) A "Change In Control" shall mean: (i) any acquisition (other than
directly from the Company) by an individual, entity or a group (excluding the
Company, an employee benefit plan of the Company, the Primm Family, the Gary
Primm Group, or a corporation controlled by either the Gary Primm Group or the
Primm Family) of thirty percent (30%) or more of the Company's common stock or
voting securities; (ii) a change in a majority of the Incumbent Board
(excluding any persons approved by a vote of at least a majority of the
Incumbent Board other than in connection with an actual or threatened proxy
contest); (iii) consummation of a Business Combination other than a Business
Combination in which all or substantially all of the stockholders of the
Company receive fifty percent (50%) or more of the stock of the company
resulting from the Business Combination or its parent entity, at least one-half
(1/2) of the board of directors of the resulting corporation or its parent
entity thereof were members of the Incumbent Board, and after which no Person
owns fifteen percent (15%) or more of the voting stock of the resulting
corporation or its parent entity, who did not own voting stock of at least
that amount in a constituent corporation or its parent entity, immediately
before the Business Combination.
47
<PAGE>
(e) "Change In Control Period" shall mean the period from the date of this
Agreement until the third (3rd) anniversary of date of this Agreement, and
unless terminated in writing by the Company sixty (60) days prior to the third
(3rd) anniversary of this Agreement, this Agreement shall automatically renew
for one (1) additional three (3) year period.
(f) "Compensation and Benefits" shall mean: (i) a monthly base salary equal
to the highest monthly base salary paid to the Executive by the Company during
the twenty-four (24) months immediately prior to the Effective Date; (ii) an
annual bonus in cash equal to the average bonuses paid to the Executive during
the twenty-four (24) month period immediately prior to the Effective Date;
(iii) incentive, savings, welfare benefit, fringe benefit, medical, dental,
vision, disability, and retirement plan participation at least equal to the
most favorable coverage and options in effect for senior executives of the
Company during the twelve (12) month period immediately prior to the Effective
Date; and (iv) the obligations accrued at the Effective Date with respect to
salary, bonuses, deferred compensation, vacation pay, death and disability
benefits (if any).
(g) "Compensation Obligation" shall mean the absolute and unconditional
obligation of the Company, its successors and assigns, to pay the Executive,
the Beneficiary, or the Executive's estate, whichever the case may be, the
Compensation and Benefits throughout the Protected Period in accordance with
Section 3 of this Agreement directly offset by any other severance or
termination payments and benefits otherwise paid or payable to the
Executive by the Company.
(h) "Effective Date" shall mean the date upon which the obligations
hereunder becomes effective, that is when a Change In Control occurs during the
Change In Control Period.
(I) "Gary Primm Group" shall mean Gary E. Primm, his spouse, issue, in-laws,
guardian, executors, administrators, testamentary trustees, heirs, legatees or
beneficiaries, or any entity or entities controlled by, or under the common
control of, any one or more of the foregoing parties.
(j) "Good Reason" shall mean the material diminution of responsibilities,
assignment to inappropriate duties, failure of the Company to comply with
Compensation and Benefits provisions, transfer more than fifty (50) miles, a
purported termination of the Agreement by the Company other than in accordance
with the Agreement.
(k) "Incumbent Board" shall mean the current board of directors of the
Company.
(l) "Person" shall mean any legal entity, including but not limited to any
individual, corporation, group or assemblage, partnership, limited partnership,
joint venture, association, joint stock company, limited liability company,
limited liability partnership, or trust.
(m) "Primm Family" shall mean any one or more of the following: Gary E.
Primm, Janet Primm Rosa, Judith Primm Clemetson, Joyce Primm Schweickert,
Roger B. Primm and Gregory B. Primm, their respective spouses, issues, and
in-laws, guardians, executors, administrators, testamentary trustees, heirs,
legatees and beneficiaries, or any entity or entities controlled by, or under
common control of, any one or more of the foregoing individuals.
48
<PAGE>
(n) "Protected Period" shall mean the time period commencing on the date
the Change In Control occurs until the first (1st) year anniversary of that
date.
2. Rights and Obligations Upon A Change of Control. Upon the Effective Date,
the following rights and obligations shall arise and become fully enforceable:
(a) The Executive s employment with the Company may be terminated either by
the Company without Cause, or by the Executive for Good Reason at anytime
during the Protected Period by written notice to the other;
(b) In the event of either such termination set forth in paragraph (a) above,
the Executive's death, or the Executive's disability during the Protected
Period, the Executive shall be entitled to the Compensation and Benefits during
the Protected Period and the Compensation Obligation shall become due and
payable by the Company in accordance with Section 3; and
(c) If the Executive is employed by the Company at any time during the
Protected Period, the Executive shall be entitled to receive, at a minimum,
the Compensation and Benefits.
Nothing contained in this Agreement constitutes an employment commitment by the
Company, affects the Executive s status as an employee at will who is subject
to termination without cause, confers upon the Executive any right to remain
employed by the Company or any subsidiary, interferes in any way with the right
of the Company or of any subsidiary at any time to terminate the Executive s
employment, or affects the Company s right to increase or decrease the
Executive s compensation except for the Compensation and Benefits payable
during the Protected Period. In the event the Executive s employment with the
Company is terminated after a public announcement of an impending Change In
Control, but before consummation of the Change In Control and absent a
severance agreement between the parties which nullifies this Agreement, such
termination shall be deemed to be in connection with, or in anticipation of
the Change In Control. In such event, the Executive shall be entitled to the
payment of the Compensation and Benefits in accordance with Section 3 less any
amounts previously paid by the Company to the Employee in the form of severance
or termination compensation (offset proportionally against the Compensation and
Benefits over the remaining portion of the Protected Period).
3. Payment of Compensation and Benefits. Upon the Effective Date, Company
shall pay, and continue to pay, the Compensation and Benefits to the Executive
at the regular and customary intervals in effect prior to the Change in
Control, throughout the Protected Period subject to customary federal and
state withholding requirements. For each month the Executive remains employed
by the Company during the Protected Period, the Compensation Obligation of the
Company is correspondingly reduced. The payment of Compensation Obligation by
the Company shall not preclude any rights the Executive may have under COBRA to
elect continued health insurance at the Executive s cost and expense.
4. Spendthrift Provision. Prior to actual receipt by the Executive, the
Beneficiary, or the Executive's estate, as the case may be, no right or
benefit under this Agreement and without limitation, no interest in any payment
hereunder shall be:
(a) anticipated, assigned, or encumbered or subject to any creditor's claim
or subject to execution, attachment or similar legal process; or
49
<PAGE>
(b) applied on behalf of or subject to the debts, contracts, liabilities or
torts of the Person entitled or who might become entitled to such benefits or
subject to the claims of any creditor of any such Person.
5. Recipients of Payments and Designation of Beneficiary. Compensation and
Benefits payable by Company pursuant this Agreement shall be made only to the
Executive during the Protected Period, or, in the event of his death, to the
Beneficiary designated by the Executive during the Protected Period on forms
prescribed by the Company . If the Executive has not designated the
Beneficiary, then the payments shall be made to the Executive's estate. The
Company shall have no obligation to make payments to any Person not designated
by the Executive as the Beneficiary, or the Executive's estate. If the
Executive is married, the written consent of the Executive's spouse will be
required to be delivered to the Company before such designation is binding on
the Company. Furthermore, Company shall have no obligation to make any
payments to the Beneficiary until and unless the Beneficiary has agreed in
writing to be bound by the provisions of this Section 5. The Executive, the
Executive's estate, or the Beneficiary, as the case may be, shall discharge,
defend and hold the Company harmless from any liability for payments actually
made to such Beneficiary or to the Executive's estate if no Beneficiary has
been designated. The Executive may designate and, from time to time, change
the Beneficiary only through a written, signed, and notarized designation by
the Executive and, if married, by his spouse, which is delivered to the
Company's corporate secretary, and disburse in accordance with such
conditions and procedures as the Company may, from time to time, proscribe.
6. Elections. Whenever the Compensation and Benefits provide for any election
exercisable by the Executive, the Beneficiary, or the Executive's estate,
whichever the case may be, that election shall be made solely by the person or
persons receiving payments pursuant to this Agreement at that time and shall be
made in that Person's sole discretion and without regard to the effect of such
decision on subsequent payment recipients. Such decision shall be final and
binding on all subsequent recipients of payments.
7. Arbitration. Any and all disputes, controversies or claims arising under
or in connection with this Agreement, including without limitation, the general
validity or enforceability of this Agreement, shall be governed by the laws of
the State of Nevada, without giving effect to its conflict of laws provisions
and shall be submitted to binding arbitration before one arbitrator and in
accordance with the voluntary labor arbitration rules of the American
Arbitration Association conducted in Clark County, Nevada. All expenses of
any arbitration shall be borne equally by the Company and the Executive. All
fees, including legal fees shall be borne by the party who incurred said fees.
The award of the arbitrator shall be final and enforceable in the courts of
Nevada. All costs of enforcement are to be borne by the losing party. In
reaching his or her decision, the arbitrator shall have no authority to change
or modify any provision of this Agreement. The parties shall be entitle to
avail themselves of all discovery procedures available in civil actions in the
State of Nevada under the Nevada Rules of Civil Procedure. The parties have
not agreed to arbitrate any dispute except for those disputes arising out of
or relating to the construction, application or enforcement of this Agreement.
For example, and without limitation, the parties have not agreed to arbitrate
wage-hour, workers' compensation, defamation, or public policy discharge
claims, parties expressly reserve all rights and remedies available to them,
at law in equity, to resolve any dispute which they have not expressly agreed
in this Agreement to arbitrate.
50
<PAGE>
8. Modification. This Agreement shall not be modified, amended, supplemented
or extended except by written consent executed by both parties hereto, except
as expressly provided herein to the contrary.
9. Assignment. In the event of a Change In Control, the successor in interest
to the Company, or to the Company's operating businesses, shall expressly
assume as guarantor of the obligations of the Company under this Agreement.
An assumption shall serve as a novation and release of the Company's
obligations hereunder and the Company, its successors and assigns, shall have
no further liability with respect to such obligations in such event. The
Company shall not otherwise voluntarily subcontract or assign any of its
rights, duties or obligations hereunder without first obtaining the
Executive's written consent. The Executive shall not subcontract or assign
any of his rights, duties or obligations hereunder under any circumstances
other than upon his death, consistent with the terms hereof.
10. Notice. Notices or other communications required, permitted, or made
necessary by the terms of this Agreement shall be given in writing to the
respective representatives of the Company and the Executive. Written notices
shall be personally delivered to the either party's representative, as
appropriate or sent by the United States registered or certified mail, postage
prepaid, return requested, addressed to the Company to its regular business
mailing address and to the Executive, at the Executive's resident address,
respectively set forth below. Notices sent by mail shall be deemed made,
delivered and received on the date of the United States postmark thereon.
Either party may change its address for notice by giving notice of such change
to the other party in the manner specified in this section.
11. No Waiver. No waiver of any breach or default in any of the terms and
provisions set forth herein shall be deemed to constitute or be construed as a
waiver of the subsequent breach or default of the same, similar or dissimilar
nature.
12. Choice of Law and Invalidity. The validity, construction, performance and
effect of this Agreement shall be governed by the laws of the State of Nevada.
In case any one or more of the provisions contained herein shall for any reason
be held to be invalid, illegal, or unenforceable in any respect, such
invalidity, illegality, or unenforceability shall not affect any other
provisions of this Agreement, but this Agreement shall be construed as if such
invalid, illegal, or unenforceable provision had never been contained herein.
If any one or more provisions contained herein shall, for any reason, be held
to be excessively broad as to time, duration, geographical scope, activity or
subject, said provision shall be construed by limiting and reducing it so as to
be enforceable to the extent compatible with the then applicable law, it being
the intent of the parties hereto to give the maximum permitted effect to the
restrictions set forth herein.
13. Gender and Number. If necessary to give effect to the terms and
provisions hereof, the masculine, feminine, and neuter gender and the singular
and plural number shall each be deemed to included the other whenever the
context so indicates.
14. Headings. Headings in this Agreement are inserted for convenience and
identification only and are in no way intended to describe, interpret, define
or limit the scope, extent or intent of this Agreement or any provision hereof.
51
<PAGE>
15. Counterparts. This Agreement may be executed in any number of
counterparts, any of which may be constituted in this Agreement between the
parties hereto.
16. Time. Time is of the essence for all obligations contemplated in this
Agreement.
17. Sole Understanding. This Agreement contains and sets forth the entire
understanding between the parties with respect to the subject matter hereof.
All prior negotiations and agreements between the parties with respect to the
intent and scope of this Agreement are mutually rescinded, replaced and
superseded hereby.
18. Authority. The Company warrants and represents that it is a corporation
duly organized and validly existing under the laws of the State of Nevada, has
the corporate power and authority to enter into and execute this Agreement, has
taken all necessary action with respect to this Agreement, and that the
undersigned is authorized to execute this Agreement on behalf of the Company.
The wife of the Executive, by her execution of this Agreement, agrees to be
bound by all its terms and conditions as it affects any community property
interest she may now or hereafter possess.
19. Inurement. Each covenant and condition in this Agreement shall be binding
on, inure solely to the benefit of and enforceable by the parties to it, their
respective heirs, legal representatives, successors and assigns. If the
Executive should die while any amounts are still payable to him hereunder, all
such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms hereof to the Beneficiary or, if there are no such designee, to
the Executive's estate.
20. Legal Representation and No Reliance. The Executive and the Company each
represents and agrees to the other that each has had the opportunity to
discuss all aspects of this Agreement hereof with their respective legal
counsel and that each carefully read and understands the terms hereof and
that each is voluntarily entering into this Agreement. Neither party is
relying upon any representations or agreement of the party not otherwise
contained in this Agreement in entering into this Agreement.
21. Neither Party is Drafter. The parties agree that neither party shall be
deemed the drafter of this Agreement and that in the event this Agreement is
ever construed by an arbitrator, a court of law or equity, such arbitrator or
court shall not construe this Agreement or any provision against either party
as drafter of this Agreement, the parties acknowledging that each of the
parties hereto has contributed substantially and materially to the
preparation hereof.
22. Term. The term of this Agreement shall be the Change In Control Period,
as renewed pursuant to Section 1(e) and if a Change In Control occurs during
the Change In Control Period, the Protected Period.
23. Confidential Information. The Executive agrees to hold for the benefit of
the Company all confidential information concerning the Company obtained over
the course of the Executive's employment strictly confidential and agrees not
at anytime, without the Company s prior written consent, to disclose to any
other person or business entities any trade secret as defined by Nevada law,
proprietary or other confidential information concerning the Company as defined
by the Company s policies, procedures, and practices, including, without
52
<PAGE>
limitation, the Company s customers, and its casino, hotel and marketing
practices, procedures and management policies, development plans, mergers,
acquisitions, sales of assets or stock, and labor relations which is not
generally and already known to the public.
IN WITNESS WHEREOF, the parties to this Agreement have duly executed it on the
day and year first above written.
Company:
Primadonna Resorts, Inc.,
a Nevada corporation
By: ________________________________
Its: _____________________________
whose regular office address is:
P.O. Box 95997
Las Vegas, Nevada 89193-5997
Executive:
____________________________________
GREGG SCHATZMAN
whose residence address is:
53
A:\SCHATZ.AGR
August 6, 19987A:\SCHATZ.AGR August 6, 1998
