<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 September 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 November 12, 1998
Common Stock, $.01 par value 28,819,100 Shares
Total No. of Pages 35 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 September 30, 1998
(Unaudited) and December 31, 1997..................... 3 - 4
Consolidated Statements of Income (Unaudited) for the
Three and Nine Months Ended September 30, 1998 and 1997 5 - 6
Condensed Consolidated Statements of Cash Flows (Unaudited)
For the Nine Months Ended September 30, 1998 and 1997.. 7
Notes to Consolidated Financial Statements (Unaudited)... 8 - 14
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................... 15 - 21
Part II. OTHER INFORMATION 22 - 23
2
<PAGE>
PRIMADONNA RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(Amounts in Thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
_________ ___________
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 7,319 $ 9,973
Accounts and notes receivable 1,464 988
Income tax refund receivable - 1,664
Inventories 1,401 1,687
Prepaid expenses and other 9,180 6,647
________ ________
Total current assets 19,364 20,959
________ ________
PROPERTY AND EQUIPMENT:
Buildings and improvements 239,289 212,396
Land improvements 108,631 95,364
Furniture, fixtures and equipment 152,608 144,371
________ ________
500,528 452,131
Less: accumulated depreciation
and amortization (169,195) (144,653)
________ ________
331,333 307,478
Land 5,340 5,654
Construction in progress 2,506 19,495
________ ________
339,179 332,627
________ ________
INVESTMENT IN JOINT VENTURE 123,385 104,436
________ _______
NOTES RECEIVABLE, net of current portion 2,306 2,718
________ ________
OTHER ASSETS, net 10,609 9,955
________ ________
$494,843 $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>
September 30, December 31,
1998 1997
_________ __________
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Accounts and construction payables $ 2,762 $ 10,265
Accrued expenses 10,518 10,432
Current portion of long-term debt 137 1,639
________ ________
Total current liabilities 13,417 22,336
________ ________
LONG-TERM DEBT 231,763 220,765
________ ________
DEFERRED INCOME TAXES PAYABLE 20,553 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;
28,819,100 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 135,525 118,169
Less: treasury stock, at cost (36,462) (35,662)
________ ________
229,110 211,633
________ ________
$494,843 $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 September 30,
____________________________
1998 1997
_________ ___________
(Unaudited)
<S> <C> <C>
REVENUES:
Casino $ 41,718 $ 41,964
Food and beverage 7,452 8,007
Hotel 5,344 5,438
Entertainment 3,118 3,894
Service station 4,904 4,597
Other 1,397 1,969
Operating income from New York-New York 9,872 12,999
________ ________
73,805 78,868
Less: promotional allowances (3,311) (5,057)
________ ________
Net revenues 70,494 73,811
________ ________
COSTS AND EXPENSES:
Casino 12,858 14,648
Food and beverage 6,817 7,206
Hotel 3,219 2,552
Entertainment 2,314 2,152
Service station 4,332 4,086
Other 722 714
Selling, general and administrative 11,856 11,846
Property costs 5,820 5,494
Depreciation and amortization 8,493 7,244
________ ________
56,431 55,942
________ ________
Income from operations 14,063 17,869
OTHER INCOME (EXPENSE)
Interest expense, net (4,302) (3,352)
Interest expense, net from New York-New York (2,117) (2,511)
________ ________
Income before taxes 7,644 12,006
INCOME TAX PROVISION (2,910) (4,299)
________ ________
NET INCOME $ 4,734 $ 7,707
======== ========
Earnings per share
Basic and Diluted earnings from net income $0.16 $0.27
======== ========
</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>
Nine Months Ended September 30,
____________________________
1998 1997
_________ ___________
(Unaudited)
<S> <C> <C>
REVENUES:
Casino $123,983 $124,770
Food and beverage 22,428 22,821
Hotel 14,942 16,374
Entertainment 9,755 10,155
Service station 13,354 12,557
Other 4,710 5,338
Operating income from New York-New York 29,541 42,416
________ ________
218,713 234,431
Less: promotional allowances (10,240) (13,498)
________ ________
Net revenues 208,473 220,933
________ ________
COSTS AND EXPENSES:
Casino 38,195 41,274
Food and beverage 19,855 20,159
Hotel 8,467 7,922
Entertainment 6,658 5,516
Service station 11,816 11,375
Other 2,115 2,041
Selling, general and administrative 35,798 35,087
Property costs 15,077 14,215
Depreciation and amortization 24,598 21,483
________ ________
162,579 159,072
________ ________
Income from operations 45,894 61,861
OTHER INCOME (EXPENSE)
Interest expense, net (12,248) (9,579)
Interest expense, net from New York-New York (6,473) (7,519)
________ ________
Income before taxes 27,173 44,763
INCOME TAX PROVISION 9,817 16,027
________ ________
Income before extraordinary item: 17,356 28,736
EXTRAORDINARY ITEM-loss on early retirement
of debt, net of income tax benefit - 964
________ ________
NET INCOME $ 17,356 $ 27,772
======== ========
Earnings per share
Basic and Diluted earnings from income
before extraordinary item $0.60 $0.97
======== ========
Basic and Diluted earnings from net income $0.60 $0.94
======== ========
</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>
Nine Months Ended
September 30,
____________________________
1998 1997
_________ __________
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 17,356 $ 27,772
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 24,706 21,685
Equity income from New York-New York
in excess of distributions (18,949) (22,277)
Extraordinary Loss - 1,483
Other adjustments to reconcile net income
to net cash provided by operating
activities (3,425) 6,253
________ ________
Total adjustments 2,332 7,144
________ ________
Net cash provided by operating activities 19,688 34,916
________ ________
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (31,533) (49,950)
Investment in joint venture - (7,000)
Increase in other assets, net (426) (1,596)
________ ________
Net cash used in investing activities (31,959) (58,546)
________ ________
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from exercise of options $ 921 $ 517
Purchase of treasury stock (800) (22,369)
Proceeds from issuance of long-term debt 179,200 328,300
Principal payments of short-term debt (1,502) -
Principal payments of long-term debt (168,202) (285,271)
________ ________
Net cash provided by
financing activities 9,617 21,177
________ ________
Net decrease in cash and
cash equivalents (2,654) (2,453)
Cash and cash equivalents, beginning of year 9,973 10,027
________ ________
Cash and cash equivalents, end of period $ 7,319 $ 7,574
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
PRIMADONNA RESORTS, INC. AND SUBSIDIARIES
NOTES TO 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 nine month periods ended September 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 nine 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>
Nine Months Ended
September 30,
________________________
1998 1997
_____ _____
(In thousands)
<S> <C> <C>
Cash payments made for interest
(net of amounts capitalized) $ 11,767 $ 9,918
======== ========
Cash payments made for income taxes $ 5,200 $ 14,200
======== ========
Assets acquired through
capitalized leases $ - $ 383
======== ========
</TABLE>
9
<PAGE>
3. EARNINGS PER SHARE
Earnings per share for the three months ended September 30, 1998 and 1997
consist of the following:
<TABLE>
<CAPTION>
Three Months Ended September 30
1998 1997
________________ _______________
(In thousands, except per share amounts)
Income Shares Income Shares
_______ ______ ______ ______
<S> <C> <C> <C> <C>
Basic EPS:
Net income available to
common shareholders $ 4,734 28,886 $ 7,707 28,918
======= ====== ======= ======
Per share amounts:
Net income available to
common shareholders $ 0.16 $ 0.27
====== ======
Diluted EPS:
Income before
extraordinary item $ 4,734 28,886 $ 7,707 28,918
Effect of dilutive
stock options - - - 112
_______ ______ _______ ______
Net income available to
common shareholders and
assumed conversion $ 4,734 28,886 $ 7,707 29,030
======= ====== ======= ======
Per share amounts:
Income before
extraordinary item $ 0.16 $ 0.27
Effective of Dilutive
Securities Stock Option - -
______ ______
Net income available to
common shareholders and
assumed conversion $ 0.16 $ 0.27
====== ======
</TABLE>
Options to purchase 1,949,500 and 788,000 shares of common stock at
September 30,1998 and 1997, respectively, at prices of $15.00-$31.25 and
$18.75-$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.
10
<PAGE>
Earnings per share for the nine months ended September 30, 1998 and 1997 consist
of the following:
<TABLE>
<CAPTION>
Nine Months Ended September 30
1998 1997
________________ _______________
(In thousands, except per share amounts)
Income Shares Income Shares
_______ ______ ______ ______
<S> <C> <C> <C> <C>
Basic EPS:
Income before
extraordinary item $17,356 28,896 $28,736 29,420
Extraordinary Item - - (964) -
_______ ______ _______ ______
Net income available to
common shareholders $17,356 28,896 $27,772 29,420
======= ====== ======= ======
Per share amounts:
Income before
extraordinary item $ 0.60 $ 0.98
Extraordinary Item - (.03)
______ ______
Net income available to
common shareholders $ 0.60 $ 0.95
====== ======
Diluted EPS:
Income before
extraordinary item $17,356 28,896 $28,736 29,420
Effect of dilutive
stock options - 34 - 149
_______ ______ _______ ______
Income before extraordinary
item and dilutive options 17,356 28,930 $28,736 29,569
Extraordinary item - - (964) -
_______ ______ _______ ______
Net income available to
common shareholders $17,356 28,930 $27,772 29,569
======= ====== ======= ======
Per share amounts:
Income before extraordinary
item and dilutive option $ 0.60 $ 0.98
Effect of Dilutive
Securities Stock Option - (.01)
______ ______
Income before
extraordinary item 0.60 0.97
Extraordinary item - (.03)
______ ______
Net income available to
common shareholders $ 0.60 $ 0.94
====== ======
</TABLE>
Options to purchase 1,949,500 and 334,000 shares of common stock at
September 30, 1998 and 1997, respectively, at prices of $15.00-$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.
11
<PAGE>
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. In September 1998, the joint venture amended its limited
recourse $285 million bank financing. The amendment included a reduction in
bank commitments to $210 million and eliminated the scheduled reductions under
the bank loan. The joint venture also has 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.
Also, in September 1998, the Company and MGM amended the operating agreement
for the joint venture to require scheduled reductions of the bank financing and
to utilize cash flow from operations, after tax distributions, to reduce the
amount outstanding under the current bank loan.
Summary condensed financial information for the joint venture is as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1998 1997 1998 1997
_____________________ __________________
Condensed Statement of Income Data
__________________________________
<S> <C> <C> <C> <C>
Net revenues $55,852 $ 61,709 $164,584 $196,978
Operating income 19,745 25,998 59,082 84,833
Interest expense, net 4,234 5,022 12,946 15,039
Net income 15,511 20,976 46,137 69,794
</TABLE>
<TABLE>
<CAPTION>
At September 30, 1998 At December 31, 1997
_____________________ ____________________
Condensed Balance Sheet Data
____________________________
<S> <C> <C>
Total assets $455,411 $470,252
Long-term debt 208,304 246,403
Members' equity 221,247 183,350
</TABLE>
12
<PAGE>
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
7.1% at September 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.
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 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 following:
<TABLE>
<CAPTION>
September 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 $231,700 $220,600
NEW YORK-NEW YORK theme rights due January
6, 1997 and January 7, 1998 - 1,500
Other 200 304
________ ________
231,900 222,404
Less: current portion 137 1,639
________ ________
Total long-term debt $231,763 $220,765
======== ========
</TABLE>
13
<PAGE>
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, and has consulting agreements with several other
Native American tribes.
The Company exchanged a portion of a $2.2 million note from Southwest for a
note from the Kickapoo tribe, secured by the assets of the Kickapoo gaming
facility. The note currently has a balance of $1.7 million. On October 30,
1998 the Company agreed to convert the $1.6 million convertible term promissory
note (which was fully reserved) and the $.3 million remaining balance of the
$2.2 million demand promissory note into 2.9 million warrants for convertible
preferred stock in Southwest, as part of Southwest's plan of recapitalization.
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 third quarter of 1998, net income before extraordinary items declined
38.5% to $4.7 million, or $.16 per diluted share, compared to $7.7 million, or
$.27 per diluted share in the prior year period. For the nine month period
ended September 30, 1998, net income decreased 37.5% to $17.4 million, or $.60
per diluted share before extraordinary items, from $27.8 million, or $.97 per
diluted share in the prior year period. The number of shares outstanding used
to compute diluted earnings were 28,929,737 for the nine-month period of 1998
and 29,569,380 for the nine-month period of 1997.
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
earnings of New York-New York Hotel and Casino, the Company's 50% owned joint
venture. The Company's operations at Primm, Nevada realized improved earnings
before interest, taxes and depreciation (EBITDA) of 5% and 0.1% during the
respective three and nine month periods of 1998. Net income from the Primm
properties declined during the periods, primarily due to higher depreciation
and interest expenses.
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 both 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 airline passengers and flat California
automobile traffic counts, continues to cause competitive pressures in
southern Nevada. The Company also believes its operations have been negatively
impacted by Indian gaming in southern California.
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 nine
month periods ended September 30, 1998 versus the comparable periods of 1997.
THREE MONTHS ENDED SEPTEMBER 30, 1998
REVENUES
Net revenues for the third quarter decreased 4.5% to $70.5 million. This
decrease is primarily due to the Company's share of earnings from NY-NY, which
were off $3.1 million or 24.1% for the quarter. Operations at Primm, Nevada
experienced a slight decrease in net revenues which totaled $190 thousand or
0.3% for the same period.
Casino revenue decreased $246 thousand or 0.6% due primarily to a 1.6% decline
in slot coin-in, partially offset by higher hold percentage.
15
<PAGE>
Food and Beverage revenues declined from $8.0 million in the third quarter of
1997, to $7.5 million in the comparable period of 1998. This decrease was
primarily the result of outsourcing select food outlets to third party
operators.
Hotel revenue declined $94 thousand or 1.7% in the quarter due to a 5.7%
reduction in the average room rate, partially offset by a 2.6% increase in
rooms sold. The increase in rooms sold was the result of a 22.7% improvement
in cash room nights occupied, as complimentary room nights declined 51.7%.
The reduction in average room rate is primarily due to competitive conditions
in southern Nevada.
Entertainment revenue in the third quarter was $776 thousand or 19.9% less than
in the prior year. The opening of a second golf course at Primm Valley helped
generate an additional $424 thousand in cash green fees, but this was more than
offset by declines in complimentary amusement and arena revenue.
Service station revenues increased $307 thousand or 6.7% for the three month
period. The amount of gasoline and diesel fuel sold increased 18.0%, more than
offsetting declines in consumer gas prices.
Other revenues were $572 thousand or 29.1% less than the comparable period of
last year. The decline in other revenue is primarily related to the cash
surrender value of key man life insurance. The Company recorded a $164
thousand charge to other income in 1998 compared to a $297 thousand credit in
1997. These amounts reflect changes in the value of investments underlying the
policies.
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 $9.9
million, a decline of 24.1% from the $13.0 million posted in the third
quarter of last year. Overall, New York - New York generated $15.5 million of
pre-tax income on net revenues of $55.9 million, compared with $21.0 million of
pre-tax income on net revenues of $61.7 million in the third quarter of 1997.
EBITDA was $25.5 million (a 45% margin) in the third quarter of 1998 versus
$31.2 million (a 51% margin) in the third quarter of 1997.
COSTS AND EXPENSES
Casino expenses decreased $1.8 million or 12.2% 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 $321 thousand or 5.9%.
Hotel expenses increased $667 thousand or 26.1% for the third quarter,
primarily due to a decrease in the amount of hotel costs transferred to casino
expense. This reflects a 51.7% decline in complimentary rooms given to casino
customers. Additionally, total rooms sold increased by 2.6%.
Entertainment costs increased $162 thousand for the three month period when
compared to the same period of last year. Operating expenses of the Primm
Valley Golf Club increased $278 thousand for the quarter due to the opening
of the Desert course in second quarter of 1998. This increase was partially
offset by a reduction in arena entertainer contract costs, and lower amusement
operating costs.
Service station costs increased $246 thousand or 6.0% for the three month
period, the result of the increase in gallons sold.
16
<PAGE>
Selling, general and administrative expenses increased just $10 thousand or
0.1% in the quarter. However, there were several offsetting variances within
this item. Lower development, marketing payroll, and advertising costs were
more than offset by increases in key man life insurance expense, and lobbying
expenses.
Property costs increased $326 thousand, or 5.9% for the quarter, due primarily
to increased costs for life safety, lighting, 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.
INTEREST EXPENSE
Interest expense, net, increased $950 thousand 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 $394 thousand for the
three months due to decreases in the amounts outstanding under that credit
facility.
INCOME TAXES
Income taxes decreased to $2.9 million for the quarter ended September 1998
compared to $4.3 million in the comparable prior year period. The decrease in
taxes is primarily due to lower earnings before taxes. The effective tax rate
for the company, however, increased from 35.8% of income in the third quarter
of 1997 to 38.5% of income in the same period of 1998 as the above mentioned
lobbying and life insurance expenses are not deductible for tax purposes.
NINE MONTHS ENDED SEPTEMBER 30, 1998
REVENUES
For the nine months ended September 30, 1998, net revenues decreased 5.6% to
$208.5 million from $220.9 million in the same period last year. This decrease
is due to the Company's share of earnings from New York-New York, which were
off $12.9 million or 30.4% for the nine months. In the period, net revenue
increases from the operations at Primm, Nevada, totaled $415 thousand or 0.2%.
Casino revenue declined by $787 thousand or 0.6% from last year, primarily due
to decreased slot volume. Slot revenues declined $1.1 million and were only
partially offset by an increase in table games revenue of $452 thousand.
Food and Beverage revenues declined from $22.8 million for the nine months
ended September 30, 1997, to $22.4 million in the comparable period of 1998.
This decrease was primarily the result of outsourcing select food outlets to
third party operators.
For the nine months ended September 30, 1998, hotel revenue was $1.4 million
below prior year levels due to a 2.2% reduction in occupied rooms and a 7.7%
decline in the average rate. The decrease in occupied rooms was entirely in
the complimentary segment, which experienced a 33.9% decrease, offset in part
by an increase in cash rooms occupied of 7.3%. The room rate decline is
primarily due to the competitive conditions in southern Nevada.
17
<PAGE>
Entertainment revenues were $400 thousand or 3.9% less than last year due to
increased revenues from Primm Valley Golf Club. The opening of a second golf
course at Primm Valley helped generate an additional $2.0 million in cash
green fees, but this was more than offset by declines in complimentary
amusement and arena revenue.
Service station revenues increased $797 thousand or 6.3% for the nine month
period. The amount of fuel sold increased 16.3%, and more than offset a
decline in consumer 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 $12.9
million or 30.4% less than the grand opening year. Net revenues at
New York-New York declined to $164.6 million from $197.0 million in the prior
year nine month period. Casino revenues were down $23.2 million or 20.7% for
the nine month period, primarily due to lower table game drop and reduced slot
handle.
COSTS AND EXPENSES
Casino expenses decreased $3.1 million for the nine month period, a decline of
7.5%. This decrease is largely the result of a decrease in promotional
allowances reflective of changes in marketing programs. In addition, payroll
costs were reduced by $856 thousand or 5.4%.
Hotel expenses increased by $545 thousand for the nine months ended
September 30, 1998. The increase in costs is associated with a decrease in the
amount of complimentary room costs transferred to the casino. In the period,
complimentary rooms sold declined by 33.9%.
Entertainment costs increased $1.1 million for the nine month period due
primarily to increased operating expenses of the Primm Valley Golf Club, which
were $1.0 million higher due to the opening of the second course.
Service station costs increased $441 thousand or 3.9% for the nine month
period, the result of selling more diesel fuel.
Selling, general and administrative expenses increased $711 thousand or 2.0%
in the nine month period. Decreases in development, marketing and advertising
were more than offset by increases in bus tour marketing subsidies, key man
life insurance, and lobbying expenses.
Property costs increased $862 thousand or 6.1% for the nine month period, due
primarily to increased costs for life safety, signage, parking lot maintenance,
lighting systems, and property grounds service.
Depreciation increased $3.1 million for the nine month period due to completion
of the expanded and remodeled casino, public spaces and parking garage at Primm
Valley, as well as the addition of the second golf course.
INTEREST EXPENSE
Interest expense, net, increased $2.7 million or 27.9% for the nine 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 $1.0 million or 13.9%
for the nine month period due to decreases in the amounts outstanding under its
credit facility.
18
<PAGE>
INCOME TAXES
Income taxes declined to $9.8 million for the nine months ended September 30,
1998 compared to $16.0 million in the prior year period. The decrease in taxes
is due to lower earnings before taxes. The effective tax rate was slightly
higher in the period due to non-deductible charges incurred in the third
quarter of 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company held cash and cash equivalents of $7.3 million as of September 30,
1998. Net cash provided by operations during the nine months ended
September 30, 1998 was $19.7 million as compared to $34.9 million in the
prior year. The decline is due to both the decrease in tax distributions from
New York-New York and a significant reduction in construction and accounts
payable. The Company funds its daily operations through cash flow from
operations, and borrows funds for significant capital expenditures and
investments.
The Company has a $350 million Credit Agreement. ("Agreement", see Note 5 of
the notes to the Condensed Consolidated Financial Statements). At September 30,
1998, the amount outstanding under the Agreement was $231.7 million at an
average all-in rate of 7.1%. 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. In September 1998, the joint venture
amended its limited recourse $285 million bank financing. The amendment
included a reduction in bank commitments to $210 million and eliminated the
scheduled reductions under the bank loan. At September 30, 1998, $195.6
million was outstanding under this loan. Additionally, term loan financing was
obtained in January 1997, with a balance at September 30, 1998 of approximately
$15.2 million. 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 2,114,500 shares for $36.5 million at September 30, 1998.
The first phase of the 525,000 square foot Fashion Outlet of Las Vegas opened
July 16, 1998. The facility was built and financed by the developers, although
the Company has incurred $1.6 million for the infrastructure improvements
necessary to accommodate this development. The Company may benefit from the
increase in visitors to Primm, Nevada caused by the mall. In addition, the
Company has placed slot machines in the facility's transition area from the
Primm Valley Resort & Casino, and may place additional slot machines in the
mall itself. 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.
19
<PAGE>
Capital expenditures for the nine months ended September 30, 1998 were $31.5
million, as compared to $57.0 million for the nine months ended September 30,
1997. In addition to the above mentioned projects, the Company has completed
the construction of a second golf course at Primm Valley, 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
experienced.
The Company expects continuing difficult year-ago comparisons for
New York - New York, due to its extremely successful opening in 1997, and
increasing competitive pressures in the Las Vegas market. Room and gaming
capacity in the Las Vegas market has expanded and is expected to continue to
increase significantly over the next two years. Such additions to supply may
have a negative impact on both New York-New York and the Primm properties. In
addition, on November 3, 1998, California voters passed Proposition Five, which
permits gaming on Indian reservations. While the Company anticipates that
Proposition Five will be subject to a variety of legal challenges, its
implementation or any other expansion of Indian gaming in Southern California
would have a negative impact on the Primm operations and, to a lesser extent,
on the operations of New York-New York.
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, in conjunction with the system vendor, expects to
implement a compliant version of the system at a cost of approximately
$1 million. The implementation is expected to be completed prior to the fourth
quarter of 1999. However, if the upgrade on this system is not accomplished in
a timely manner, its failure could have an adverse effect on the Company's
operation. 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.
20
<PAGE>
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", "intend", "may", "expect", "will", 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.
21
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
In September 1998, discovery began in the purported class action lawsuit by
Poulos, Ahern, Schreirer as discussed in the Annual Report Form 10-K Legal
Proceeding.
There have been no significant events in the lawsuit filed by, Yolanda Manuel,
the non-custodial parent of Sherrice Iverson, as discussed in the Company's
Annual Report on Form 10-K. There have been no significant events in a lawsuit
filed by Leroy Iverson and Harold Jordon, the custodial parent and "personal
representative" of Ms. Iverson's estate and brother of Sherrice Iverson.
Items 2 through 4. Are not applicable.
Item 5. Market for Registrant's Common Stock & Related Stockholders Matters
On October 13, 1998, the Compensation Committee of the Board of Directors
authorized an offer to re-price the previous stock option awards to all
management employees, excluding directors and consultants. The offer to
re-price included the following conditions: (1) all re-priced options would be
subject to a 20% forfeiture of the individual's stock option awards, (2) all
re-priced options would not be exercisable for six months unless certain events
occur, and (3) the exercise price would be the closing price on the date,
between October 26, 1998 and October 30, 1998, the individual agreed to the
conditions, but not less than 4 7/8, the closing price on October 13, 1998.
All offers to re-price were accepted with exercise prices ranging from
6 15/16 to 7 1/4.
On November 9, 1998, the Company and MGM Grand, Inc. announced that their
respective Boards of Directors have approved in principle MGM Grand's
acquisition of Primadonna in an all stock transaction. The terms of the merger
provide for Primadonna's stockholders to receive 0.33 shares of MGM Grand
common stock for each share of Primadonna stock held, or a total of
approximately 9.5 million shares of MGM Grand common stock. The transaction
is subject to the execution of a definitive merger agreement, Primadonna
shareholder approval and the satisfaction of various conditions to be
contained in the merger agreement, including obtaining certain regulatory
approvals. The parties expect to enter into a definitive merger agreement
within two weeks. The merger is expected to be completed in the first quarter
of 1999.
22
<PAGE>
Item 6. Exhibits and Reports on Form 8 - K.
(a) Exhibits.
10.37 Change in Control and Salary Continuation Agreement by and among
Gary Primm and Primadonna Resorts, Inc. dated as of September 24,
1998.
10.38 Amendment to Operating Agreement by and between MGM Grand, Inc.
("MGM) and PRMA Las Vegas, Inc. ("PRMA-LV) dated as of August ,
1998 (incorporated by reference to Exhibit 10.17 to the Form 10-K
for the year ended December 31, 1994).
27. Financial Data Schedule as of September 30, 1998.
See exhibit index on page 24 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.
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: November 12, 1998 By /s/John L. Shigley
__________________________
John L. Shigley
Chief Financial Officer
23
<PAGE>
EXHIBIT INDEX
Exhibit Sequentially
No. Description Numbered
Pages
_______ ___________________________________________ ____________
10.37 Change in Control and Salary Continuation Agreement
by and among Gary Primm and Primadonna Resorts,
Inc. dated as of July 11, 1998. 25 - 32
10.38 Amendment to Operating Agreement by and between MGM
Grand, Inc. ("MGM) and PRMA Las Vegas, Inc. ("PRMA-LV)
dated as of September 24, 1998 (incorporated by
reference to Exhibit 10.17 to the Form 10-K for the year
ended December 31, 1994). 33 - 34
27 Financial Data Schedule as of September 30, 1998 35
24
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Quarterly
Form 10-Q as of September 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> 1000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998
<PERIOD-START> JAN-01-1998 JAN-01-1998
<PERIOD-END> SEP-30-1998 SEP-30-1998
<CASH> 7319 7319
<SECURITIES> 0 0
<RECEIVABLES> 1464 1464
<ALLOWANCES> 0 0
<INVENTORY> 1401 1401
<CURRENT-ASSETS> 19364 19364
<PP&E> 508374 508374
<DEPRECIATION> 169195 169195
<TOTAL-ASSETS> 494843 494843
<CURRENT-LIABILITIES> 13417 13417
<BONDS> 231763 231763
0 0
0 0
<COMMON> 309 39
<OTHER-SE> 228801 228801
<TOTAL-LIABILITY-AND-EQUITY> 494843 494843
<SALES> 73805 218713
<TOTAL-REVENUES> 70494 208473
<CGS> 30262 87106
<TOTAL-COSTS> 56431 162579
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 6419 18721
<INCOME-PRETAX> 7644 27173
<INCOME-TAX> 2910 9817
<INCOME-CONTINUING> 4734 17356
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 4734 17356
<EPS-PRIMARY> 0.16 0.60
<EPS-DILUTED> 0.16 0.60
</TABLE>
CHANGE IN CONTROL AND
SALARY CONTINUATION AGREEMENT
This Change in Control and Salary Continuation Agreement (this "Agreement") is
made as of this 24th day of November, 1998, by and between Gary E. Primm, 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
25
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.
(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-
(ii) 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.
26
(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.
(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).
27
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
(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.
28
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.
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.
29
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.
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.
30
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 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.
31
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:
____________________________________
GARY E. PRIMM
whose residence address is:
7000 Tomiyasu Lane
Las Vegas, Nevada 89120
32
::ODMA\PCDOCS\DOCS\4606\3
111198/1740
October 2, 1998
Primadonna Resorts, Inc.
PRMA Las Vegas, Inc.
New York- New York Hotel & Casino, LLC
Gentlemen:
Reference is made to that certain Amendment No. 3 dated as of September 24,
1998 ("Amendment No.3") to the Construction/Revolving Loan Agreement among
New York-New York Hotel & Casino, LLC. ("Borrower"), the Banks party thereto,
Bank of Scotland, and Societe Ganerale, as Lead Managers, Wells Fargo Bank,
N.A. (Successor to First Interstate Bank of Nevada), as Co-Agent, and Bank of
America National Trust and Savings Association, as Managing Agent (the "Credit
Agreement"), and to the Consent of Guarantors to Amendment No. 3 dated
concurrently therewith entered into by MGM Grand, Inc. ("MGMG") and Primadonna
Resorts, Inc. ("PRMS") ("the Consent").
As an inducement to MGMG entering into and delivering the Consent, PRMA, PRMA
Las Vegas, Inc. and Borrower hereby covenant and agree with MGMG as follows:
1. Notwithstanding anything to the contrary permitted by the Credit Agreement,
as amended by Amendment No. 3, the parties hereto shall cause Borrower to make
voluntary reductions to the Commitment pursuant to Section 2.5 of the Credit
Agreement equal to the amount computed from time to time as if Section 2.6 of
the Credit Agreement (which was deleted by operation of Amendment No. 3)
remained in full force and effect. Such voluntary reductions shall be made at
such time or times as they would have been required under Section 2.6. The
foregoing shall be in addition to any other voluntary reductions to the
Commitment which Borrower may elect to make.
2. The covenants and agreements contained herein are for the sole benefit of
the parties hereto, and it is the parties' mutual intention that no third party
rights or benefits are created hereby (including with respect to the other
parties to the Credit Agreement).
33
If the foregoing is acceptable, please execute and return a copy of this letter
to signify our mutual agreement.
Very truly yours,
MGM Grand, Inc.
By: _______________________________
Accepted and Agreed
Primadonna Resorts, Inc.
By: _______________________________
PRMA Las Vegas, Inc.
By: _______________________________
New York- New York Hotel & Casino, LLC
By: ________________________________
34
Primadonna Resorts, Inc.
PRMA Las Vegas, Inc.
New York- New York Hotel & Casino, LLC
August __, 1998
Page 2
