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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 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 No. 0-22088
Monarch Casino & Resort, Inc.
(Exact name of registrant as specified in its charter)
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NEVADA 88-0300760
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1175 W. MOANA LANE, SUITE 200
RENO, NEVADA 89509
(Address of principal (Zip code)
executive offices)
Registrant's telephone number, including area code: (775) 825-3355
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Name of each exchange
Title of each class on which registered
------------------- -------------------
None None
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, $0.01 PAR VALUE
(Title of Class)
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
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The aggregate market value of voting stock held by nonaffiliates of the
Registrant as of March 19, 1999, based on the closing price as reported on The
Nasdaq Stock Market(SM) of $7.688 per share, was approximately $17,875,945.
As of March 29, 1999, Registrant had outstanding 9,436,275 shares of
Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for Registrant's 1999 Annual Meeting of
Stockholders, which Proxy Statement shall be filed with the Commission not
later than 120 days after the end of the fiscal year covered by this report,
are incorporated by reference into Part III.
STATEMENTS IN THIS ANNUAL REPORT ON FORM 10-K WHICH EXPRESS THE "BELIEF",
"ANTICIPATION", "INTENTION", "EXPECTATION", OR "SCHEDULES" AS WELL AS OTHER
STATEMENTS WHICH ARE NOT HISTORICAL FACT, AND STATEMENTS AS TO BUSINESS
OPPORTUNITIES, MARKET CONDITIONS, COST ESTIMATIONS AND OPERATING PERFORMANCE
INSOFAR AS THEY MAY APPLY PROSPECTIVELY, ARE FORWARD LOOKING STATEMENTS WITHIN
THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF
THE SECURITIES EXCHANGE ACT OF 1934 AND INVOLVE RISKS AND UNCERTAINTIES THAT
COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE PROJECTED.
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PART I
ITEM 1. BUSINESS
Monarch Casino & Resort, Inc., through its wholly-owned subsidiary Golden
Road Motor Inn, Inc. ("Golden Road"), owns and operates the tropically-themed
Atlantis Casino Resort in Reno, Nevada (the "Atlantis"). Unless otherwise
indicated, "Monarch" or the "Company" refers to Monarch Casino & Resort, Inc.
and its subsidiaries Golden Road, Dunes Marina Resort & Casino, Inc. ("Dunes
Marina"), and Sea World Processors, Inc. ("Sea World"). Monarch was
incorporated in 1993 under Nevada law for the purpose of acquiring all of the
stock of Golden Road. The principal asset of Monarch is the stock of Golden
Road, which holds substantially all of the assets of the Atlantis. The
Company's principal executive offices are located at 1175 West Moana Lane,
Suite 200, Reno, Nevada 89509, telephone (775) 825-3355.
THE ATLANTIS CASINO RESORT
Through Golden Road, the Company owns and operates the tropically-themed
Atlantis, which is located approximately three miles south of downtown Reno in
the generally more affluent southwest area of Reno. In the 1998 second
quarter, the Company began construction of a major expansion of the Atlantis
(the "Atlantis Expansion") that when completed, will represent an increase of
approximately 85% in the Company's investment in property and equipment at the
Atlantis. The Atlantis expansion is currently scheduled for completion in the
1999 second quarter. All descriptions in this report which reference
"following completion of the Atlantis Expansion" assume that the Atlantis
Expansion will be completed and opened to the public for business as scheduled.
Based on current construction progress, the Company believes that the Atlantis
Expansion will be able to open for business in the 1999 second quarter, but due
to the possibility of the occurrence of unanticipated events, there is no
assurance that all portions of the Atlantis Expansion will be opened as
currently expected.
The two primary components of the Atlantis Expansion are a new 27-story
hotel tower with approximately 392 new hotel rooms and suites with an adjoining
new low rise structure containing additional casino and public space (the
"Hotel Tower Project"), and an enclosed overhead "skywalk" structure connecting
the Atlantis with a 16 acre site across South Virginia Street from the
Atlantis, which contains approximately 8,000 square feet of casino and public
space (the "Skywalk"). The Skywalk was officially opened to the public on
March 18, 1999.
Following completion of the Atlantis Expansion scheduled in the 1999
second quarter, the Atlantis will feature approximately 51,000 square feet of
casino space interspersed with waterfalls and water features, giant artificial
palm trees, thatched-roof huts and other tropical features; a hotel and a motor
lodge; eight food outlets; a nightclub; pool, health club and salon facilities;
retail outlets featuring traditional "gift shop" merchandise as well as
clothing and other merchandise adorned with the Atlantis logo; an 8,000 square-
foot family entertainment center; and approximately 25,000 square feet of
banquet, convention and meeting room space. The Atlantis is the closest hotel
casino to the 370,000 square-foot Reno Sparks Convention Center (the
"Convention Center"), and the only hotel casino located within easy walking
distance of the Convention Center.
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Casino. Following completion of the Atlantis Expansion, the Atlantis'
casino will feature approximately 40 table games, including blackjack, craps,
roulette, mini-baccarat, "Let it Ride(TM)", "Three Card Poker(TM)", "Fortune
Pai Gow Poker(TM)", and "Royal Match(TM)"; approximately 1,600 slot and video
poker machines; a race and sports book (which is operated by an independent
third party pursuant to a lease arrangement with the Company); and keno.
During the year ended December 31, 1998, 76% of the Atlantis' casino revenue
was from slot and video poker machines, 22% was from table games, and the
remaining 2% was from keno.
The Atlantis offers what the Company believes to be higher-than-average
payout rates on slot machines and has adopted liberal rules for its blackjack
games which include using mostly single decks of cards at its tables and
allowing the player to "double down" on the first two cards. The Company's
present policy is to extend gaming credit only to a limited number of qualified
customers.
Lodging. Following completion of the Atlantis Expansion, the Atlantis
will feature three contiguous high-rise hotel towers offering a total of 835
rooms and suites, and a low-rise motor lodge offering another 149 rooms, for a
total guest room count of 984. The first of the three hotel towers was
completed in April 1991, and contains 160 rooms and suites in 13 stories. The
second hotel tower was completed in September 1994 and contains 283 rooms and
suites in 19 stories. The third tower, which is part of the Atlantis
Expansion, is scheduled to be completed in the 1999 second quarter and will
contain 392 rooms and suites in 27 stories; the top seven floors in the newest
tower are five feet wider on each side than the lower floors, enlarging
standard guest rooms on these floors be nearly 20% over the standard guest
rooms on the lower floors. The rooms in these top seven floors will feature
premium appointments in addition to their larger square footage, and they will
be serviced by dedicated elevators and a dedicated concierge service in order
to accommodate guests seeking more upscale accommodations, as well as
convention and trade show visitors seeking upscale convention market amenities.
The Atlantis' hotel rooms feature fresh, colorful interior decorations and
furnishings consistent with the Atlantis' tropical theme, as well as nine-foot
ceilings (most standard hotel rooms feature eight-foot ceilings), which give
the rooms an open and spacious feel. Following completion of the Atlantis
Expansion, the hotel will feature a four story waterfall with an adjacent
swimming pool in a climate controlled, five story glass enclosure which shares
an outdoor third floor pool deck with an outdoor swimming pool and whirlpool,
as well as health club and salon facilities. The hotel also features glass
elevators rising the full 19 and 27 stories of the two taller hotel towers,
providing panoramic views of the northern Reno valley and the Sierra Nevada
mountains.
The two-story, 149-room motor lodge, which has been operated by the
Company since 1973, is located on the back half of the Atlantis' 13-acre site.
The motor lodge rooms, which are also decorated and furnished consistently with
the Atlantis' tropical theme, contain less average square footage than the
hotel rooms and have standard eight-foot ceilings. The Company believes the
motor lodge rooms appeal to value conscious travelers who still want to enjoy
the experience of and amenities associated with a stay at a first-class hotel
casino resort. The Company renovated all of the motor lodge units in early
1996.
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The average occupancy rate at the Atlantis for fiscal years 1998, 1997,
and 1996 was 88.0%, 85.9%, and 88.7%, respectively.
Dining. Following completion of the Atlantis Expansion, the Atlantis will
feature eight food outlets, including a large buffet restaurant featuring a
wide variety of standard hot food line selections, salads and seafood, and
specialty substations featuring Mongolian Barbecue made to order, fresh Mexican
food, meats roasted in French Rotisserie ovens, and caesar and spinach salads
made to order; an upscale steak and seafood restaurant in an "under the sea"
atmosphere; an upscale, intimate Italian restaurant featuring a centrally
located wine "cellar" room and seasonal outdoor terrace seating; a twenty-four
hour coffee shop; a cafe restaurant featuring pizzas from a wood-fired brick
oven; a snack bar and soda fountain; an oyster bar, located on the skywalk,
featuring seafood flown in daily and soups and bisques made to order; and a
gourmet coffee bar, also located on the skywalk, featuring fine specialty
coffee drinks and pastries and desserts made fresh on property daily.
The Skywalk. The Skywalk is a one-of-a-kind structure, with a diamond-
shaped blue glass body rising approximately 55 feet from street level and
spanning 160 feet across South Virginia Street with no intermediate support
pillars. It is supported at each end by two 100 foot tall Grecian columns
which erupt in flames at regular intervals. The tropically-themed interior of
the Skywalk contains an oyster bar and a gourmet coffee bar with adjacent table
seating, a video poker bar and numerous banks of slot machines, and a lounge
area featuring oversized leather sofas and chairs. The Skywalk connects the
Atlantis with additional parking on a 16 acre site owned by the Company across
South Virginia Street from the Atlantis.
Capital expenditures (including those financed with debt and capitalized
lease obligations) at the Atlantis totaled approximately $27.2 million, $2.3
million, and $2.8 million in fiscal years 1998, 1997, and 1996, respectively.
Capital expenditures during 1998 primarily reflect construction costs
associated with the Atlantis Expansion, and the expenditures for 1997 and 1996
were primarily directed toward ongoing refurbishments and enhancements to the
Atlantis, including equipment replacements. During 1996, the Company also
renovated all of the Atlantis' motor lodge rooms at a total cost of
approximately $690 thousand.
Operations at the Atlantis are conducted 24 hours a day, every day of the
year. The Atlantis' business is moderately seasonal in nature, with its
highest revenues typically occurring in the summer months and lower amounts
generally in the winter months.
MARKETING
The Company's revenues and operating income are largely dependent on the
level of gaming activity at the Atlantis' casino; therefore, the Company's
predominant marketing goal is to attract gaming customers to its casino. The
Company's primary objective for its hotel, food and beverage outlets, and other
amenities is to utilize those facilities to generate additional casino play,
although as a secondary goal the Company also seeks to maximize revenues from
those areas.
The Company's marketing efforts are directed toward three broad consumer
groups: Reno area residents, non-conventioneer visitors to the Reno area, and
conventioneers. The Company believes that the Atlantis' location outside the
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downtown area and near the Convention Center makes the property appealing to
all three groups.
Reno area residents. The Atlantis' proximity to rapidly growing,
generally more affluent southwestern Reno residential areas provides a
significant source of middle to upper-middle income gaming customers. The
Company markets to Reno area residents ("Locals") primarily on the basis of the
Atlantis' location and accessibility, the quality and ambiance of the Atlantis
facility, friendly efficient service, the quality and relative value of its
food and beverage offerings, entertainment offerings, promotions, and gaming
values. The Company believes that Locals as a group tend to prefer slot and
video poker machines over table games, and tend to prefer video poker machines
over reel-spinning (or electronically simulated reel-spinning) slot machines.
Accordingly, the Atlantis provides a large, diverse selection of video poker
machines. Moreover, the Company believes that Locals tend to seek out and
frequent those casinos with higher-than-average payout rates on slot and video
poker machines and liberal rules on table games. The Company believes that the
Atlantis offers higher-than-average payout rates on slot machines, and has
adopted liberal rules for its blackjack games which include using mostly single
decks of cards at its tables and allowing players to "double down" on the first
two cards.
Non-conventioneer Visitors. Reno is a popular gaming and vacation
destination which enjoys direct freeway access to nearly all major northern
California population centers, and non-stop air service from most large cities
in the western United States as well as many midwest and southern population
centers such as Chicago, Dallas, Minneapolis and St. Louis. The principal
segments of Reno's non-conventioneer visitor market are leisure travelers,
package tour and travel customers, and higher-level wagerers. The Company
attempts to maximize its gaming revenues and hotel occupancy through a balanced
marketing approach addressing each market segment.
Leisure travelers are not affiliated with groups and make their
reservations directly with hotels of their choice or through independent travel
agents. The Company believes that this segment is largely comprised of
individuals driving, and to a lesser extent, flying to Reno from a regional
market, primarily California and to a lesser extent, the Pacific Northwest.
The Company strives to attract the middle to upper-middle income strata of this
segment through advertising and direct marketing in select markets. This
segment represents a significant portion of the Atlantis' customers, especially
those customers visiting on weekends.
The package tour and travel segment consists of visitors who utilize
travel "packages" produced by wholesale operators. The Company markets to this
segment through relationships with select wholesalers, primarily to generate
customer visits and supplement occupancy mid-week.
The Company selectively markets to higher-level wagerers through direct
sales. The Company utilizes complimentary rooms, food and beverage, special
events and the extension of gaming credit to attract higher-level wagerers.
Conventioneers. Convention business, like package tour and travel,
generates mid-week customer visits and supplements occupancy during low-demand
periods. Conventioneers typically also pay higher average room rates than non-
conventioneers. The Company seeks those convention and meeting groups which it
believes will materially enhance the Atlantis' average occupancy rate and
average daily room rates, as well as those the Company believes will be
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more likely to gamble. As the only hotel casino within easy walking distance
of the Convention Center, the Company believes the Atlantis is uniquely
positioned to capitalize on this segment. The Company believes that this
market segment is presently underserved in the Reno area, and that the
additional rooms and amenities added with the Atlantis Expansion will enhance
the Company's ability to realize the potential of this market segment.
The Company markets to all customer segments, including conventioneers, on
the basis of the quality and ambiance of the Atlantis facility, friendly
efficient service, the quality and relative value of its rooms and food and
beverage offerings, entertainment offerings, promotions, and gaming values.
The Company has instituted a frequent player club, "Club Paradise", which
allows the Atlantis' customers to earn rewards and special privileges based on
the amount of their play, while at the same time allowing the Company to track
the play of those customers utilizing a computerized player tracking system.
The Company uses this information to determine appropriate levels of
complimentary awards, and also in its direct marketing efforts. The Company
believes that Club Paradise significantly enhances the Company's ability to
build customer loyalty and generate repeat customer visits.
COMPETITION
Competition in the Reno area gaming market is intense. Based on
information obtained from the December 31, 1998 Gaming Revenue Report published
by the Nevada State Gaming Control Board and Company estimates, the Company
believes that there are approximately 16 casinos in the Reno area which
generate more than $12 million each annually in gaming revenues, approximately
nine of which are located in downtown Reno.
The Company believes that the Atlantis' competition for Locals comes
primarily from other large-scale casinos located outside of downtown Reno that
offer amenities that appeal to middle to upper-middle income customers, and
secondarily with those casinos located in downtown Reno which offer similar
amenities. The Company competes for Locals primarily on the basis of the
desirability of its location, the quality and ambiance of the Atlantis
facility, friendly efficient service, the quality and relative value of its
food and beverage offerings, entertainment offerings, promotions, and gaming
values. The Company believes its proximity to residential areas in southwest
and southeast Reno and its abundant surface parking afford it an advantage over
the casinos located in downtown Reno in attracting Locals.
The Company believes that the Atlantis' primary competition for non-
conventioneer visitors comes from other large-scale casinos, including those
located in downtown Reno and those located away from downtown Reno, that offer
amenities that appeal to middle to upper-middle income customers. The Company
competes for non-conventioneer visitors on the basis of the desirability of its
location, the quality and ambiance of the Atlantis facility, friendly efficient
service, the quality and relative value of its rooms and food and beverage
offerings, entertainment offerings, promotions, and gaming values. The Company
believes that its location away from downtown Reno is appealing to many
customers who prefer to avoid the more congested downtown Reno area; however,
the Atlantis' location is a disadvantage in that it does not afford the Company
the ability to generate walk-in traffic, which is a significant source of
customers for some casinos located in downtown Reno.
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The Company believes that the Atlantis' primary competition for
conventioneers comes from other large-scale hotel casinos in the Reno area that
actively target the convention market segment, and secondarily from other
cities on the U.S. west coast with large convention facilities and substantial
hotel capacity, including Las Vegas. The Company competes for conventioneers
based on the desirability of its location, the quality and ambiance of the
Atlantis facility, meeting and banquet rooms designed to appeal to conventions
and groups, friendly efficient service, and the quality and relative value of
its rooms and food and beverage offerings. The Company believes that the
Atlantis' proximity to the Convention Center affords it a distinct competitive
advantage in attracting conventioneers.
The Atlantis also competes for gaming customers with hotel casino
operations located in other parts of Nevada, especially Las Vegas and Lake
Tahoe, and with hotel casinos, Indian casinos, and riverboat casinos located
elsewhere throughout the United States and the world. The Company believes
that the Atlantis also competes to a lesser extent with state-sponsored
lotteries, off-track wagering, card parlors, and other forms of legalized
gaming, particularly in California and the Pacific Northwest.
The Company believes that the legalization of unlimited land-based casino
gaming in or near any major metropolitan area in the Atlantis' key marketing
areas, such as San Francisco or Sacramento, could have a material adverse
effect on its business.
REGULATION AND LICENSING
Nevada Gaming Regulation
The ownership and operation of casino gaming facilities in Nevada are
subject to: (i) the Nevada Gaming Control Act and the regulations promulgated
thereunder (collectively, the "Nevada Act"); and (ii) various local
regulations. The Company's gaming operations are subject to the licensing and
regulatory control of the Nevada Gaming Commission (the "Nevada Commission"),
the Nevada State Gaming Control Board (the "Nevada Board"), and the Reno City
Council (the "Reno Board"). (The Nevada Commission, the Nevada State Gaming
Control Board, and the Reno Board are collectively hereinafter referred to as
the "Nevada Gaming Authorities.")
The laws, regulations and supervisory procedures of the Nevada Gaming
Authorities are based upon declarations of public policy which are concerned
with, among other things: (i) the prevention of unsavory or unsuitable persons
from having a direct or indirect involvement with gaming at any time or in any
capacity; (ii) the establishment and maintenance of responsible accounting
practices and procedures; (iii) the maintenance of effective controls over the
financial practices of licensees, including the establishment of minimum
procedures for internal fiscal affairs and the safeguarding of assets and
revenues, providing reliable record keeping and requiring the filing of
periodic reports with the Nevada Gaming Authorities; (iv) the prevention of
cheating and fraudulent practices; and (v) providing a source of state and
local revenues through taxation and licensing fees. Changes in such laws,
regulations and procedures could have an adverse effect on the Company's gaming
operations.
Golden Road, which operates the Atlantis, is required to be licensed by
the Nevada Gaming Authorities. The gaming license requires the periodic
payment of fees and taxes and is not transferable. The Company is registered
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by the Nevada Commission as a publicly traded corporation ("Registered
Corporation") and as such, it is required periodically to submit detailed
financial and operating reports to the Nevada Commission and furnish any other
information which the Nevada Commission may require. No person may become a
stockholder of, or receive any percentage of profits from, Golden Road without
first obtaining licenses and approvals from the Nevada Gaming Authorities. The
Company and Golden Road have obtained from the Nevada Gaming Authorities the
various registrations, approvals, permits and licenses required in order to
engage in gaming activities in Nevada.
The Nevada Gaming Authorities may investigate any individual who has a
material relationship to, or material involvement with, the Company or Golden
Road in order to determine whether such individual is suitable or should be
licensed as a business associate of a gaming licensee. Officers, directors and
key employees of Golden Road must file applications with the Nevada Gaming
Authorities and may be required to be licensed or found suitable by the Nevada
Gaming Authorities. Officers, directors and key employees of the Company who
are actively and directly involved in gaming activities of Golden Road may be
required to be licensed or found suitable by the Nevada Gaming Authorities.
The Nevada Gaming Authorities may deny an application for licensing for any
cause which they deem reasonable. A finding of suitability is comparable to
licensing, and both require submission of detailed personal and financial
information followed by a thorough investigation. The applicant for licensing
or a finding of suitability must pay all the costs of the investigation.
Changes in licensed positions must be reported to the Nevada Gaming Authorities
and in addition to their authority to deny an application for a finding of
suitability or licensure, the Nevada Gaming Authorities have jurisdiction to
disapprove a change in a corporate position.
If the Nevada Gaming Authorities were to find an officer, director or key
employee unsuitable for licensing or unsuitable to continue having a
relationship with the Company or Golden Road, the companies involved would have
to sever all relationships with such person. In addition, the Nevada
Commission may require the Company or Golden Road to terminate the employment
of any person who refuses to file appropriate applications. Determinations of
suitability or of questions pertaining to licensing are not subject to judicial
review in Nevada.
The Company and Golden Road are required to submit detailed financial and
operating reports to the Nevada Commission. Substantially all material loans,
leases, sales of securities and similar financing transactions by Golden Road
must be reported to, or approved by, the Nevada Commission.
If it were determined that the Nevada Act was violated by Golden Road, the
gaming licenses it holds could be limited, conditioned, suspended or revoked,
subject to compliance with certain statutory and regulatory procedures. In
addition, Golden Road, the Company, and the persons involved could be subject
to substantial fines for each separate violation of the Nevada Act at the
discretion of the Nevada Commission. Further, a supervisor could be appointed
by the Nevada Commission to operate the Company's gaming properties and, under
certain circumstances, earnings generated during the supervisor's appointment
(except for the reasonable rental value of the Company's gaming properties)
could be forfeited to the State of Nevada. Limitation, conditioning or
suspension of any gaming license or the appointment of a supervisor could (and
revocation of any gaming license would) materially adversely affect the
Company's gaming operations.
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Any beneficial holder of the Company's voting securities, regardless of
the number of shares owned, may be required to file an application, be
investigated, and have his suitability as a beneficial holder of the Company's
voting securities determined if the Nevada Commission has reason to believe
that such ownership would otherwise be inconsistent with the declared policies
of the State of Nevada. The applicant must pay all costs of investigation
incurred by the Nevada Gaming Authorities in conducting any such investigation.
The Nevada Gaming Act requires any person who acquires more than 5% of the
Company's voting securities to report the acquisition to the Nevada Commission.
The Nevada Act requires that beneficial owners of more than 10% of the
Company's voting securities apply to the Nevada Commission for a finding of
suitability within 30 days after the Chairman of the Nevada Board mails the
written notice requiring such filing. Under certain circumstances, an
"institutional investor," as defined in the Nevada Act, which acquires more
than 10%, but not more than 15%, of the Company's voting securities may apply
to the Nevada Commission for a waiver of such finding of suitability if such
institutional investor holds the voting securities for investment purposes
only. An institutional investor shall not be deemed to hold voting securities
for investment purposes unless the voting securities were acquired and are held
in the ordinary course of business as an institutional investor and not for the
purpose of causing, directly or indirectly, the election of a majority of the
members of the board of directors of the Company, any change in the Company's
corporate charter, bylaws, management, policies or operations of the Company,
or any of its gaming affiliates, or any other action which the Nevada
Commission finds to be inconsistent with holding the Company's voting
securities for investment purposes only. Activities which are not deemed to be
inconsistent with holding voting securities for investment purposes only
include: (i) voting on all matters voted on by stockholders; (ii) making
financial and other inquiries of management of the type normally made by
securities analysts for informational purposes and not to cause a change in its
management, policies or operations; and (iii) such other activities as the
Nevada Commission may determine to be consistent with such investment intent.
If the beneficial holder of voting securities who must be found suitable is a
corporation, partnership or trust, it must submit detailed business and
financial information including a list of beneficial owners. The applicant is
required to pay all costs of investigation.
Any person who fails or refuses to apply for a finding of suitability or a
license within 30 days after being ordered to do so by the Nevada Commission or
the Chairman of the Nevada Board, may be found unsuitable. The same
restrictions apply to a record owner if the record owner, after request, fails
to identify the beneficial owner. Any stockholder found unsuitable and who
holds, directly or indirectly, any beneficial ownership of the common stock of
a Registered Corporation beyond such period of time as may be prescribed by the
Nevada Commission may be guilty of a criminal offense. The Company is subject
to disciplinary action if, after it receives notice that a person is unsuitable
to be a stockholder or to have any other relationship with such Company or
Golden Road, the Company (i) pays that person any dividend or interest upon
voting securities of the Company, (ii) allows that person to exercise, directly
or indirectly, any voting right conferred through securities held by that
person, (iii) pays remuneration in any form to that person for services
rendered or otherwise, or (iv) fails to pursue all lawful efforts to require
such unsuitable person to relinquish his voting securities for cash at fair
market value.
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The Nevada Commission may, in its discretion, require the holder of any
debt security of a Registered Corporation to file applications, be investigated
and be found suitable to own the debt security of a Registered Corporation. If
the Nevada Commission determines that a person is unsuitable to own such
security, then pursuant to the Nevada Act, the Registered Corporation can be
sanctioned, including the loss of its approvals, if without the prior approval
of the Nevada Commission, it: (i) pays to the unsuitable person any dividend,
interest, or any distribution whatsoever; (ii) recognizes any voting right by
such unsuitable person in connection with such securities; (iii) pays the
unsuitable person remuneration in any form; or (iv) makes any payment to the
unsuitable person by way of principal, redemption, conversion, exchange,
liquidation or similar transaction.
The Company is required to maintain a current stock ledger in Nevada which
may be examined by the Nevada Gaming Authorities at any time. If any
securities are held in trust by an agent or by a nominee, the record holder may
be required to disclose the identity of the beneficial owner to the Nevada
Gaming Authorities. A failure to make such disclosure may be grounds for
finding the record holder unsuitable. The Company is also required to render
maximum assistance in determining the identity of the beneficial owner. The
Nevada Commission has the power to require the Company's stock certificates to
bear a legend indicating that the securities are subject to the Nevada Act.
The Company may not make a public offering of its securities without the
prior approval of the Nevada Commission if the securities or proceeds therefrom
are intended to be used to construct, acquire or finance gaming facilities in
Nevada, or to retire or extend obligations incurred for such purposes. Such
approval does not constitute a finding, recommendation or approval by the
Nevada Commission or the Nevada Board as to the accuracy or adequacy of the
prospectus or the investment merits of the securities. Any representation to
the contrary is unlawful.
Changes in control of the Company through merger, consolidation, stock or
asset acquisitions, management or consulting agreements, or any act or conduct
by a person whereby he obtains control, may not occur without the prior
approval of the Nevada Commission. Entities seeking to acquire control of a
Registered Corporation must satisfy the Nevada Board and Nevada Commission in a
variety of stringent standards prior to assuming control of such Registered
Corporation. The Nevada Commission may also require controlling stockholders,
officers, directors and other persons having a material relationship or
involvement with the entity proposing to acquire control, to be investigated
and licensed as part of the approval process relating to the transaction.
The Nevada legislature has declared that some corporate acquisitions
opposed by management, repurchases of voting securities and corporate defense
tactics affecting Nevada gaming licensees, and Registered Corporations that are
affiliated with those operations, may be injurious to stable and productive
corporate gaming. The Nevada Commission has established a regulatory scheme to
ameliorate the potentially adverse effects of these business practices upon
Nevada's gaming industry and to further Nevada's policy to: (i) assure the
financial stability of corporate gaming operators and their affiliates; (ii)
preserve the beneficial aspects of conducting business in the corporate form;
and (iii) promote a neutral environment for the orderly governance of corporate
affairs. Approvals are, in certain circumstances, required from the Nevada
Commission before the Company can make exceptional repurchases of voting
securities above the current market price thereof and before a corporate
acquisition opposed by management can be
-11- <PAGE>
consummated. The Nevada Act also requires prior approval of a plan of
recapitalization proposed by the Company's Board of Directors in response to a
tender offer made directly to the Registered Corporation's stockholders for the
purposes of acquiring control of the Registered Corporation.
Licensee fees and taxes computed in various ways depending on the type of
gaming or activity involved, are payable to the State of Nevada and to the
counties and cities in which the Nevada licensee's respective operations are
conducted. Depending upon the particular fee or tax involved, these fees and
taxes are payable either monthly, quarterly or annually and are based upon
either: (i) a percentage of the gross revenues received; (ii) the number of
gaming devices operated; or (iii) the number of table games operated. A casino
entertainment tax is also paid by casino operations where entertainment is
furnished in connection with the selling of food or refreshments. Nevada
licensees that hold a license as an operator of a slot route, a manufacturer or
a distributor also pay certain fees and taxes to the State of Nevada.
Any person who is licensed, required to be licensed, registered, required
to be registered, or is under common control with such persons (collectively,
"Licensees"), and who proposes to become involved in a gaming venture outside
of Nevada is required to deposit with the Nevada Board, and thereafter
maintain, a revolving fund in the amount of $10,000 to pay the expenses of
investigation of the Nevada Board of their participation in such foreign
gaming. The revolving fund is subject to increase or decrease in the
discretion of the Nevada Commission. Thereafter, Licensees are required to
comply with certain reporting requirements imposed by the Nevada Act. A
licensee is also subject to disciplinary action by the Nevada Commission if it
knowingly violates any laws of the foreign jurisdiction pertaining to the
foreign gaming operation, fails to conduct the foreign gaming operation in
accordance with the standards of honesty and integrity required of Nevada
gaming operations, engages in activities that are harmful to the State of
Nevada or its ability to collect gaming taxes and fees, or employs a person in
the foreign operation who has been denied a license or finding of suitability
in Nevada on the ground of personal unsuitability.
EMPLOYEES
As of March 19, 1999, the Company had approximately 1,424 employees. None
of the Company's employees are covered by collective bargaining agreements.
The Company believes that its relationship with its employees is good.
ITEM 2. PROPERTIES
The Company's properties consist of:
(a) The approximately 13 acre site in Reno, Nevada on which the
Atlantis is situated, including the hotel towers, casino, restaurant facilities
and surrounding parking. These 13 acres are, in part or in whole, held subject
to trust deed encumbrances in favor of financial institutions totaling
approximately $67.9 million as of March 19, 1999.
(b) An approximately 16 acre site in Reno, Nevada adjacent to the
Atlantis and now connected to the Atlantis by the Skywalk, approximately seven
acres of which is paved and used for customer, employee and valet parking and
the remainder of which is undeveloped. This site is suitable and available for
future expansion of the Atlantis facilities, parking, or
-12- <PAGE>
complimentary resort and/or entertainment amenities. The Company has not
determined what the ultimate use of this site will be. These 16 acres are held
subject to a trust deed encumbrance in the approximate amount of $66.1 million
as of March 19, 1999, which amount is also secured by the 13 acre site.
ITEM 3. LEGAL PROCEEDINGS
On April 26, 1994 and May 10, 1994, complaints in purported class action
lawsuits (William Poulos v. Caesars World, Inc. et al., Case No. 94-478-Civ-
Orl-22, and William H. Ahern v. Caesars World, Inc. et al., Case No. 94-532-
Civ-Orl-22, respectively) were filed in the United States District Court for
the Middle District of Florida (the "Florida Complaints") and were subsequently
transferred to the United States District Court for the District of Nevada,
Southern Division (the "Nevada District Court"). On September 26, 1995, a
complaint in a purported class action lawsuit (Larry Schrier v. Caesars World,
Inc. et al., Case No. 95-923-LDG (RJJ)) was filed in Nevada District Court
(along with the Florida Complaints, the "Complaints"). The Complaints allege
that manufacturers, distributors and casino operators of video poker and
electronic slot machines, including the Company, have engaged in a course of
conduct intended to induce persons to play such games based on a false belief
concerning how the gaming machines operate, as well as the extent to which
there is an opportunity to win on a given play. The Complaints charge
Defendants with violations of the Racketeer Influenced and Corrupt
Organizations Act, as well as claims of common law fraud, unjust enrichment and
negligent misrepresentation, and seek damages in excess of $1 billion without
any substantiation of that amount. The Nevada District Court consolidated the
actions (and one other action styled William Poulos v. American Family Cruise
Line, N.V. et al., Case No. CV -S-95-936-LDG (RLH), in which the Company is not
a named defendant). The parties are currently awaiting a decision from the
Nevada U.S. District Court on the issue of class certification. Management
believes that the substantive allegations in the Complaints are without merit
and intends vigorously to defend the allegations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of the Company's security
holders during the fourth quarter of fiscal 1998.
-13- <PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) The Company's common stock trades on The Nasdaq Stock Market(SM)
under the symbol MCRI. The following table sets forth the high and low sales
prices of the Company's common stock, as reported by The Nasdaq Stock
Market(SM), during the periods indicated.
<TABLE>
<CAPTION>
1998 1997
-------------- --------------
High Low High Low
------ ------ ------ ------
<S> <C> <C> <C> <C>
First quarter........... 7 3/4 4 3/4 2 1/2 2
Second quarter.......... 7 5 3/8 4 3/8 2 1/4
Third quarter........... 6 1/2 5 3/8 8 3/8 3 5/8
Fourth quarter.......... 6 4 3/4 7 3/8 4 1/2
</TABLE>
(b) As of March 19, 1999, there were approximately 140 holders of
record of the Company's common stock, and approximately 978 beneficial
stockholders.
(c) The Company paid no dividends in 1998 or 1997. The Company
presently intends to retain earnings to finance the operation and expansion of
its business and does not anticipate declaring cash dividends in the
foreseeable future. The Company's bank loan agreement also contains provisions
which limit Monarch's ability to pay dividends to its stockholders. See Item
8, "FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA, Notes to Consolidated
Financial Statements."
-14- <PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Years ended December 31,
--------------------------------------------
(In thousands except per share amounts) 1998<F1> 1997<F2> 1996<F3> 1995<F4> 1994
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS
Casino revenues $40,717 $37,254 $31,836 $30,072 $20,306
Other revenues 31,802 30,365 29,476 30,099 21,482
--------------------------------------------
Gross revenues 72,519 67,619 61,312 60,171 41,788
Promotional allowances (10,009) (8,504) (7,676) (6,772) (5,348)
--------------------------------------------
Net revenues 62,511 59,115 53,636 53,399 36,440
Income from operations 8,859 8,975 6,049 6,351 636
Income (loss) before income
taxes and extraordinary item 5,681 5,722 1,298 2,323 (1,393)
Income (loss) before
extraordinary item 3,760 3,710 830 1,564 (722)
Net income (loss) 3,760 3,526 830 1,564 (722)
- ----------------------------------------------------------------------------------------
INCOME PER SHARE OF COMMON STOCK
Income (loss) before extraordinary item
Basic $ 0.40 $ 0.39 $ 0.09 $ 0.16 $ (0.08)
Diluted $ 0.40 $ 0.39 $ 0.09 $ 0.16 $ (0.08)
Net income (loss)
Basic $ 0.40 $ 0.37 $ 0.09 $ 0.16 $ (0.08)
Diluted $ 0.40 $ 0.37 $ 0.09 $ 0.16 $ (0.08)
Weighted average number of common shares
and potential common shares outstanding
Basic 9,436 9,444 9,502 9,536 9,536
Diluted 9,502 9,479 9,502 9,536 9,536
- ----------------------------------------------------------------------------------------
OTHER DATA
EBITDA<F5> 13,458 13,284 10,191 10,370 3,372
Depreciation and amortization 4,617 4,309 4,142 4,020 2,736
Interest expense 2,222 3,253 3,627 4,087 2,330
Capital expenditures<F6> 27,206 2,270 2,838 2,148 31,384
- ----------------------------------------------------------------------------------------
BALANCE SHEET DATA
Total assets $89,456 $67,828 $67,379 $69,269 $69,344
Current maturities of long-term debt 850 2,244 3,487 3,993 5,387
Long-term debt, less current maturities 52,310 32,908 37,602 39,069 41,357
Stockholders' equity<F7> 26,453 22,694 19,001 18,435 16,871
<FN>
<F1> 1998 includes a non-cash disposal of fixed assets charge of $956 thousand.
<F2> 1997 includes a $185 thousand non-cash extraordinary loss on early retirement of
debt, net of applicable income tax benefit.
<F3> 1996 includes non-cash fixed asset impairment charges of $1.3 million (before
minority interests).
<F4> 1995 includes a $433 thousand provision for litigation expenses related to two
unfavorable judgments rendered in unrelated cases, and a $459 thousand charge
for asset impairment associated with changing the name of the Company's hotel
casino to the Atlantis Casino Resort.
<F5> "EBITDA" consists of income from operations plus depreciation and amortization.
EBITDA should not be construed as an alternative to operating income (as determined
in accordance with generally accepted accounting principles) as an indicator of the
Company's operating performance, or as an alternative to cash flows from operating
activities (as determined in accordance with generally accepted accounting
principles) as a measure of liquidity. This item enables comparison of the
Company's performance with the performance of other companies that report EBITDA.
<F6> Includes amounts financed with debt or capitalized lease obligations.
<F7> The Company paid no dividends during the five year period ended December 31, 1998.
</FN>
</TABLE>
-15- <PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
STATEMENT ON FORWARD-LOOKING INFORMATION
Certain information included herein contains statements that may be
considered forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934,
such as statements relating to anticipated expenses, capital spending and
financing sources. Such forward-looking information involves important risks
and uncertainties that could significantly affect anticipated results in the
future and, accordingly, such results may differ from those expressed in any
forward-looking statements made herein. These risks and uncertainties include,
but are not limited to, those relating to competitive industry conditions,
Reno-area tourism conditions, dependence on existing management, leverage and
debt service (including sensitivity to fluctuations in interest rates), the
regulation of the gaming industry (including actions affecting licensing),
outcome of litigation, domestic or global economic conditions and changes in
federal or state tax laws or the administration of such laws.
RESULTS OF OPERATIONS
1998 Compared with 1997
For the year ended December 31, 1998, the Company earned $3.8 million, or
$.40 per share, on net revenues of $62.5 million, compared to earnings of $3.5
million, or $.37 per share, on net revenues of $59.1 million for the year ended
December 31, 1997. The Company's income from operations totaled $8.9 million
for 1998 compared to $9.0 million for 1997. The Company believes the Atlantis
continued to benefit in 1998 from the rapid growth occurring in the residential
and industrial communities south of the Atlantis in Reno, and from the
increasing popularity of the Atlantis with visitors to the Reno area. The
Company also believes its results were positively impacted in 1998 by the
American Bowling Congress tournament, which ran from March through June 1998 at
the National Bowling Stadium in downtown Reno and which brought approximately
90,000 visitors to the Reno area. However, the Company also believes its
results were detrimentally impacted in 1998 by unusually severe winter weather
in the first quarter of the year and by disruptions associated with the
Atlantis Expansion, which involved major construction activity on both sides of
the Atlantis during the third and fourth quarters of the year.
Casino revenues totaled $40.7 million in 1998, up 9% from $37.3 million in
1997, driven by increases in both slot and table game win. Revenue from slot
and video poker machines ("slot machines") increased approximately 8% in 1998
compared to 1997 due to an increase in the average daily win per slot machine.
Table game win increased approximately 16% in 1998 compared to 1997 due to an
increase in table game drop and an improvement in table game hold. Casino
operating expenses amounted to 43.7% of casino revenues in 1998, compared to
43.1% in 1997, primarily as a result of higher promotional allowance costs in
1998.
Food and beverage revenues were up slightly in 1998, rising approximately
2% to $18.2 million from $17.8 million in 1997. Food and beverage operating
expenses were basically unchanged, amounting to 54.2% of food and beverage
revenues in 1998 compared to 54.3% in 1997.
-16- <PAGE>
Hotel revenues totaled $10.9 million in 1998, up more than 7% from $10.2
million in 1997, driven by a 2.1 point improvement in the Atlantis' average
occupancy rate and a 5% increase in the Atlantis' average daily room rate
("ADR"). The Atlantis' ADR was $56.23 in 1998, compared to $53.50 in 1997.
The average occupancy rate at Atlantis was 88.0% in 1998 compared to 85.9% in
1997. Hotel operating expenses amounted to 32.6 % of hotel revenues in 1998,
compared to 36.4% in 1997, with the improvement reflecting increased operating
efficiencies and a higher level of revenue from which to offset the relatively
high level of fixed costs of the hotel operation.
Other revenues increased approximately 15% in 1998 to $2.7 million from
$2.3 million in 1997, primarily reflecting increased revenues from the
Atlantis' retail outlet. Other expenses equaled 18.0% of other revenues in
1998, down slightly from 18.5% in 1997.
Selling, general and administrative ("SG&A") expenses totaled 27.7% of net
revenues in 1998, compared to 27.0% in 1997, with the increase primarily
reflecting higher personnel costs and higher marketing costs in 1998. This
increase in part reflects additional marketing and administrative staff added
in preparation for the 1999 opening of the Atlantis Expansion, as well as
additional operating expenses associated with the Atlantis Expansion.
Interest expense for 1998 totaled $2.2 million, down from $3.3 million in
1997, reflecting lower average interest rates on the Company's debt and the
capitalization of certain interest costs in 1998. In 1998, the Company
capitalized approximately $433 thousand in interest costs related to
construction activities at the Atlantis. During 1997, there was no capitalized
interest.
The Company incurred a non-cash expense of $956 thousand in the fourth
quarter of 1998 for the disposal of certain fixed assets in conjunction with
the Atlantis Expansion, including certain exterior walls, door and windows that
had to be removed to make way for the expanded facilities.
1997 Compared with 1996
For the year ended December 31, 1997, the Company generated earnings
before extraordinary items of $3.7 million, or $.39 per share, compared to $830
thousand, or $.09 per share, for the year ended December 31, 1996. After
giving effect to a non-cash extraordinary loss on the early retirement of debt
(net of an applicable income tax benefit) of $(185) thousand, or $(.02) per
share, the Company reported net income of $3.5 million or $.37 per share for
the fiscal year ended December 31, 1997, compared to $830 thousand, or $.09 per
share for the fiscal year ended December 31, 1996.
Net revenues for 1997 totaled $59.1 million, up 10% from $53.6 million in
1996, while operating costs and expenses rose 5% to $50.1 million in 1997 from
$47.6 million in 1996. The Company's operating expense margin (operating
expenses as a percentage of net revenues) for 1997 was 84.8%, compared to 88.7%
for 1996, resulting in a 48% increase in income from operations to $9.0 million
in 1997 from $6.0 million in 1996. The Company believes the increases in
revenue and profitability in 1997 compared to 1996 resulted from the increasing
popularity of the Atlantis and its south Reno location with patrons from the
rapidly growing residential and business communities south of the Atlantis in
Reno, as well as with visitors to the Reno area. The Company also credits
effective casino marketing programs, and a continued emphasis on cost control.
-17 <PAGE>
Casino revenues increased 17% in 1997 compared to 1996, driven by growth
in both slot and table game win. Revenue from slot machines increased
approximately 20% in 1997 compared to 1996, due to an increase in the average
daily win per slot machine, and contributed approximately 77% of casino revenue
in 1997, compared to 75% in 1996. Table game win increased approximately 6% in
1997 compared to 1996, due to an approximately 17% increase in table game drop,
which was partially offset by a moderate decline in table game hold.
Casino operating expenses amounted to 43.1% of casino revenues during
1997, compared to 45.3% in 1996, with the higher expense levels during 1996 due
primarily to higher levels of promotional allowance costs (relative to gaming
revenues) during 1996.
Food and beverage revenues increased approximately 2% in 1997, rising to
$17.8 million from $17.4 in 1996, due primarily to higher average tickets at
the Atlantis' food and beverage outlets. Food and beverage operating expenses
during 1997 amounted to 54.3% of food and beverage revenues, compared to 55.8%
in 1996, with the improvement due to lower food costs and improved operating
efficiency.
Hotel revenues increased 4% in 1997 compared to 1996, with a 7% increase
in the Atlantis' ADR more than offsetting a 2.8 point decline in the Atlantis'
average occupancy rate. The Atlantis' ADR in 1997 was $53.50, compared to
$49.90 in 1996. The average occupancy rate at Atlantis was 85.9% in 1997
compared to 88.7% in 1996. During 1996, the Atlantis' hotel revenues were
adversely impacted by unusually severe price competition in the Reno area
lodging market, which the Company believes also negatively impacted the hotel
revenues of the Atlantis' primary competitors. The Company believes that the
decline in the Atlantis' average occupancy in 1997 was partly due to the
approximately 26% increase in hotel room capacity added to the Reno market
during 1995 and 1996 which the Company believes has not yet been fully
absorbed, and partly due to a concerted effort by the Company to increase the
Atlantis' ADR. Hotel operating expenses in 1997 equaled 36.4% of hotel
revenues, essentially unchanged from 36.6% in 1996.
SG&A expenses amounted to 27.0% of net revenues in 1997, compared to 28.6%
in 1996. The improvement primarily reflects the higher net revenues generated
in 1997, which more than offset the incremental increase in actual SG&A
outlays. The Company's 1996 SG&A expenses were also adversely affected by name
change costs and increased marketing costs necessitated by the name change and
an intensified competitive environment.
Interest expense declined by approximately 10% in 1997 compared to 1996,
falling to $3.3 million from $3.6 million. The decrease reflects lower average
outstanding debt during 1997.
In 1997, the Company incurred a non-cash extraordinary loss on the early
retirement of debt, net of an applicable income tax benefit, of $(185)
thousand, or $(.02) per share. The extraordinary charge was incurred in the
1997 fourth quarter when the Company refinanced its long-term debt with a new
bank credit facility, resulting in the write-off of approximately $280 thousand
in unamortized loan origination costs. In 1996, the Company recorded non-cash
fixed asset impairment loss charges totaling $(1.3) million, which were offset
by a minority interest in the net loss of a consolidated subsidiary of $206
thousand. The impairment losses were recognized on a
-18- <PAGE>
marine vessel owned by a subsidiary of the Company, which the Company had
intended to use as a riverboat gaming vessel.
OTHER FACTORS AFFECTING CURRENT AND FUTURE RESULTS
In July 1998, the Company commenced construction of the Hotel Tower
Project, which will add 392 rooms, additional casino space and other amenities
to the Atlantis. The Hotel Tower Project is expected to be completed in the
second quarter of 1999. The Company carefully planned the Hotel Tower Project
to mitigate the disruptive effects of construction by redirecting traffic
flows, creating alternative access points at the Atlantis, and restricting
construction crews, materials and vehicles to specified areas. Following the
very disruptive construction mobilization process in July 1998, the Company
believes these steps have been effective in reducing the disruptive effect of
the construction activities; however, the Company believes that some disruption
is occurring and will continue to occur until the project is completed.
With the Hotel Tower Project, the Company is subject to certain risks
typically associated with large-scale construction projects, including the
risks of delay, shortages of materials or skilled labor, unforeseen
engineering, environmental and/or geological problems, work stoppages, weather
interference and unanticipated cost increases.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically funded its daily hotel and casino activities
with net cash provided by operating activities. For the years 1998, 1997, and
1996, net cash provided by operating activities totaled $8.6 million, $9.6
million, and $5.3 million, respectively. During each of the three years, net
cash provided by operating activities was sufficient to fund the day to day
operating expenses of the Company.
Net cash used in investing activities, which consisted entirely of
acquisitions of property and equipment, totaled $26.1 million, $1.7 million,
and $1.5 million in 1998, 1997,and 1996, respectively. Total capital
expenditures, including amounts financed, were $27.2 million, $2.3 million, and
$2.8 million in 1998, 1997, and 1996, respectively. Capital expenditures
during 1998 primarily reflect construction costs associated with the Atlantis
Expansion, and the expenditures for 1997 and 1996 were primarily directed
toward ongoing refurbishments and enhancements to the Atlantis, including
equipment replacements.
Net cash provided by financing activities in 1998 totaled $16.9 million,
as the Company borrowed funds under its bank credit facilities to finance the
construction of the Atlantis Expansion. Net cash used in financing activities
in 1997 and 1996 totaled $6.3 million, and $3.5 million, respectively, with the
funds used primarily to reduce long-term debt. The Company also used funds in
1997 and 1996 to repurchase its common stock on the open market.
In 1998, the Company entered into two separate fixed price construction
contracts totaling approximately $39.5 million for the two major hard cost
components of the Atlantis Expansion, the Hotel Tower Project and the Skywalk.
The Company anticipates that it will expend approximately $23.5 million for
Atlantis Expansion costs not included in the two fixed price construction
contracts, bringing the estimated total project cost to approximately $63
million. The Company is funding the majority of these costs with available
-19- <PAGE>
borrowings under its $80 million Credit Facility (the principal terms of which
are summarized at Note 4 of the Notes to Consolidated Financial Statements -
see Item 8, "FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA, Notes to Consolidated
Financial Statements"), together with other available borrowing capacity and
cash flow from operations. At December 31, 1998, the outstanding balance of
the Credit Facility was $50.3 million.
In addition to the funding requirements associated with the Atlantis
Expansion, the Company continues to monitor expansion opportunities at its
other Reno site and elsewhere in Nevada and in other jurisdictions. The
decision by the Company to proceed with any substantial project will require
the Company to secure adequate financing on acceptable terms. No assurances
can be made that if such projects are pursued that adequate financing would be
available on acceptable terms, if at all.
The Company believes that its existing cash balances, cash flow from
operations and borrowings allowed under the Credit Facility will provide the
Company with sufficient resources to complete the Atlantis Expansion, fund its
operations, meet its debt repayment obligations and fund its other capital
expenditure requirements; however, the Company's operations are subject to
financial, economic, competitive, regulatory, and other factors, many of which
are beyond its control. If the Company is unable to generate sufficient cash
flow, it could be required to adopt one or more alternatives, such as reducing,
delaying or eliminating planned capital expenditures, selling assets,
restructuring debt or obtaining additional equity capital.
On April 10, 1995, the Company announced that its Board of Directors
authorized the open market repurchase of up to 200,000 shares of the Company's
common stock. As of March 19, 1999, the Company had repurchased 100,000 shares
on the open market at a total cost of approximately $330 thousand. The Company
has funded the purchases made to date and intends to fund any future
repurchases from cash on hand.
YEAR 2000
In conjunction with the Atlantis Expansion, the Company has begun
replacing most of the Atlantis' internal information systems (both hardware and
software) in order to provide the technology needed to support the property's
increased size and operating complexity. All of the systems critical to the
operation of the Atlantis will be replaced and/or upgraded as part of the
Atlantis Expansion. The process began in the fourth quarter of 1998 and is
expected to be substantially completed in the second quarter of 1999. Although
the Company did not undertake this replacement process in response to concerns
regarding potential Year 2000 problems, most Year 2000 issues related to the
Atlantis' internal information systems will be resolved as a result. All of
the hardware and software acquired or licensed as part of this replacement
process has been certified by the vendors to be Year 2000 compliant.
The Company has begun, and is continuing to assess, potential issues
related to the Year 2000 other than those relating to the Company's internal
information systems, such as critical supplier readiness and potential problems
associated with embedded technologies, and will develop and implement plans to
correct any deficiencies identified.
The costs of addressing the Company's year 2000 issues have not been fully
determined, but are not currently expected to be material to the
-20- <PAGE>
Company's financial position. Should the Company and/or its critical suppliers
fail to identify and/or correct material Year 2000 issues, such failure could
impact the Company's ability to operate as it did before the Year 2000, and
subsequently have a material impact on the Company's operating results or
financial position. In such an event, the Company will address issues as they
arise and strive to minimize any impact on the Company's operations.
-21- <PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
BOARD OF DIRECTORS
MONARCH CASINO & RESORT, INC.
We have audited the accompanying consolidated balance sheets of Monarch
Casino & Resort, Inc. as of December 31, 1998 and 1997, and the related
consolidated statements of income, stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Monarch Casino
& Resort, Inc. as of December 31, 1998 and 1997, and the consolidated results
of its operations and its consolidated cash flows for each of the three years
in the period ended December 31, 1998, in conformity with generally accepted
accounting principles.
/s/Grant Thornton LLP
Reno, Nevada
January 29, 1999
-22- <PAGE>
MONARCH CASINO & RESORT, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years ended December 31,
-------------------------------------------
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Revenues
Casino................................ $ 40,716,535 $ 37,254,033 $ 31,836,177
Food and beverage..................... 18,169,375 17,841,009 17,410,800
Hotel................................. 10,948,283 10,199,911 9,811,353
Other................................. 2,685,012 2,323,885 2,253,393
------------ ------------ ------------
Gross revenues..................... 72,519,205 67,618,838 61,311,723
Less promotional allowances........... (10,008,673) (8,504,072) (7,675,567)
------------ ------------ ------------
Net revenues....................... 62,510,532 59,114,766 53,636,156
------------ ------------ ------------
Operating expenses
Casino................................ 17,800,326 16,043,256 14,422,670
Food and beverage..................... 9,850,599 9,682,253 9,714,389
Hotel................................. 3,567,021 3,710,462 3,595,239
Other................................. 479,560 430,471 394,256
Selling, general and administrative... 17,337,640 15,964,188 15,318,911
Depreciation and amortization......... 4,616,722 4,308,991 4,141,528
------------ ------------ ------------
Total.............................. 53,651,868 50,139,621 47,586,993
------------ ------------ ------------
Income from operations............. 8,858,664 8,975,145 6,049,163
------------ ------------ ------------
Other income (expense)
Interest expense...................... (2,222,089) (3,253,067) (3,626,980)
Impairment loss on fixed assets....... - - (1,330,592)
Disposal of fixed assets.............. (955,836) - -
Minority interests in net loss of
consolidated subsidiaries............ - - 206,456
------------ ------------ ------------
Total.............................. (3,177,925) (3,253,067) (4,751,116)
------------ ------------ ------------
Income before income
taxes and extraordinary item...... 5,680,739 5,722,078 1,298,047
Provision for income taxes.............. 1,920,957 2,011,930 468,179
------------ ------------ ------------
Income before extraordinary item... 3,759,782 3,710,148 829,868
Extraordinary item - loss on
early retirement of debt, net
of applicable income tax
benefit of $95,057..................... - (184,524) -
------------ ------------ ------------
Net income......................... $ 3,759,782 $ 3,525,624 $ 829,868
============ ============ ============
INCOME PER SHARE OF COMMON STOCK
Income before extraordinary item
Basic.............................. $ 0.40 $ 0.39 $ 0.09
Diluted............................ $ 0.40 $ 0.39 $ 0.09
Net income
Basic.............................. $ 0.40 $ 0.37 $ 0.09
Diluted............................ $ 0.40 $ 0.37 $ 0.09
Weighted average number of
common shares and potential
common shares outstanding
Basic.............................. 9,436,275 9,444,333 9,501,658
Diluted............................ 9,502,327 9,479,359 9,501,658
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
-23- <PAGE>
MONARCH CASINO & RESORT, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
----------------------------
1998 1997
------------ ------------
<S> <C> <C>
ASSETS
Current assets
Cash........................................ $ 4,950,244 $ 5,527,839
Receivables, net............................ 1,274,343 837,420
Inventories................................. 476,948 570,367
Prepaid expenses............................ 1,628,717 1,333,176
Prepaid federal income tax.................. 449,226 -
Deferred income taxes....................... 432,874 1,055,000
------------ ------------
Total current assets..................... 9,212,352 9,323,802
------------ ------------
Property and equipment
Land........................................ 10,339,530 10,339,530
Buildings................................... 35,335,973 36,273,298
Furniture and equipment..................... 24,667,318 22,304,919
Improvements................................ 4,969,881 5,040,033
------------ ------------
75,312,702 73,957,780
Less accumulated
depreciation and amortization.............. (22,125,039) (17,868,111)
------------ ------------
53,187,663 56,089,669
Construction in progress.................... 25,393,665 682,047
------------ ------------
Net property and equipment............... 78,581,328 56,771,716
------------ ------------
Other assets.................................. 1,662,663 1,732,569
------------ ------------
$ 89,456,343 $ 67,828,087
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt........ $ 850,498 $ 2,243,611
Accounts payable............................ 3,441,829 4,111,457
Accrued expenses............................ 4,152,237 3,383,855
Federal income taxes payable................ - 240,970
------------ ------------
Total current liabilities................ 8,444,564 9,979,893
Long-term debt, less current maturities....... 52,309,785 32,907,530
Deferred income taxes......................... 2,248,548 2,247,000
Commitments and contingencies................. - -
Stockholders' equity
Preferred stock, $.01 par value, 10,000,000
shares authorized; none issued............. - -
Common stock, $.01 par value, 30,000,000
shares authorized; 9,536,275 issued;
9,436,275 outstanding...................... 95,363 95,363
Additional paid-in capital.................. 17,241,788 17,241,788
Treasury stock.............................. (329,875) (329,875)
Retained earnings........................... 9,446,170 5,686,388
------------ ------------
Total stockholders' equity............... 26,453,446 22,693,664
------------ ------------
$ 89,456,343 $ 67,828,087
============ ============
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
-24- <PAGE>
MONARCH CASINO & RESORT, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock
-------------------- Additional Retained
Shares Paid-in Earnings Treasury
Outstanding Amount Capital (Deficit) Stock Total
----------- -------- ------------ ----------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1996 9,536,275 $ 95,363 $ 17,008,779 $ 1,330,896 $ - $ 18,435,038
Net income - - - 829,868 - 829,868
Treasury stock acquired,
at cost (83,000) - - - (264,000) (264,000)
----------- -------- ------------ ----------- --------- ------------
Balance, December 31, 1996 9,453,275 95,363 17,008,779 2,160,764 (264,000) 19,000,906
Net income - - - 3,525,624 - 3,525,624
Treasury stock acquired,
at cost (17,000) - - - (65,875) (65,875)
Other - - 233,009 - - 233,009
----------- -------- ------------ ----------- --------- ------------
Balance, December 31, 1997 9,436,275 95,363 17,241,788 5,686,388 (329,875) 22,693,664
Net income - - - 3,759,782 - 3,759,782
----------- -------- ------------ ----------- --------- ------------
Balance, December 31, 1998 9,436,275 $ 95,363 $ 17,241,788 $ 9,446,170 $(329,875) $ 26,453,446
=========== ======== ============ =========== ========= ============
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
-25- <PAGE>
MONARCH CASINO & RESORT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended December 31,
------------------------------------------
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income................................... $ 3,759,782 $ 3,525,624 $ 829,868
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization.............. 4,616,722 4,308,991 4,141,528
(Gain) loss on disposal of assets.......... 955,836 (4,589) (22,862)
Impairment of assets....................... - - 1,330,592
Increase in receivables, net............... (436,923) (318,205) (15,932)
(Increase) decrease in inventories......... 93,419 (208,174) (46,637)
(Increase) decrease in prepaid expenses.... (744,767) (144,526) 26,196
(Increase) decrease in
deferred income tax asset................ 622,126 529,009 (514,000)
(Increase) decrease in other assets........ (114,034) 394,241 63,649
Increase (decrease) in accounts payable.... (669,628) 108,691 (763,703)
Increase in accrued expenses............... 527,411 980,769 247,794
Increase in deferred income tax liability.. 1,548 420,000 240,000
Decrease in minority interests............. - - (206,456)
------------ ------------ ------------
Net cash provided by
operating activities..................... 8,611,492 9,591,831 5,310,037
------------ ------------ ------------
Cash flows from investing activities:
Proceeds from sale of assets................. 8,170 188,040 142,569
Acquisition of property and equipment........ (26,145,670) (1,933,080) (1,593,865)
------------ ------------ ------------
Net cash used in investing activities..... (26,137,500) (1,745,040) (1,451,296)
------------ ------------ ------------
Cash flows from financing activities:
Proceeds from long-term borrowings........... 21,385,843 32,810,000 500,000
Principal payments on long-term debt......... (4,437,430) (39,085,029) (3,717,152)
Acquisition of treasury stock................ - (65,875) (264,000)
------------ ------------ ------------
Net cash provided by
(used in) financing activities............ 16,948,413 (6,340,904) (3,481,152)
------------ ------------ ------------
Net increase (decrease) in cash........... (577,595) 1,505,887 377,589
Cash at beginning of period.................... 5,527,839 4,021,952 3,644,363
------------ ------------ ------------
Cash at end of period.......................... $ 4,950,244 $ 5,527,839 $ 4,021,952
============ ============ ============
Supplemental disclosure of
cash flow information:
Cash paid for interest, net of
capitalized interest....................... $ 1,669,848 $ 3,406,740 $ 3,773,617
Capitalized interest......................... 432,835 - -
Cash paid for income taxes................... 1,987,479 610,000 587,542
Supplemental schedule of non-cash
investing and financing activities:
The Company financed the purchase of property
and equipment in the following amounts...... 1,060,730 336,926 1,243,878
Capitalized loan costs included
in accounts payable......................... - 1,185,000 -
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
-26- <PAGE>
MONARCH CASINO & RESORT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 1998, 1997, and 1996
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
Monarch Casino & Resort, Inc. ("Monarch") was incorporated in 1993.
Golden Road Motor Inn, Inc. ("Golden Road") operates the Atlantis Casino Resort
(the "Atlantis") in Reno, Nevada. Unless stated otherwise, the "Company"
refers collectively to Monarch, its wholly owned subsidiary Golden Road, and
majority owned subsidiaries, Dunes Marina Resort and Casino, Inc. ("Dunes
Marina"), formed in December 1993, and Sea World Processors, Inc. ("Sea
World"), purchased in February 1994.
The consolidated financial statements include the accounts of Monarch,
Golden Road, Dunes Marina and Sea World, and eliminate intercompany balances
and transactions.
Use of Estimates
In preparing these financial statements in conformity with generally
accepted accounting principles, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and revenues and expenses during the year. Actual results could
differ from those estimates.
Reclassifications
Certain amounts in the 1997 and 1996 consolidated financial statements
have been reclassified to conform with the 1998 presentation. These
reclassifications had no effect on the Company's net income.
Inventories
Inventories, consisting primarily of food, beverages, and retail
merchandise, are stated at the lower of cost or market. Cost is determined on
a first-in, first-out basis.
Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation
and amortization. Since inception, property and equipment have been
depreciated principally on an accelerated basis over the estimated service
lives as follows:
Buildings..........30-40 years
Furniture..........5-10 years
Equipment..........5-20 years
Improvements.......15-40 years
-27- <PAGE>
Casino Revenues
Casino revenues represent the net win from gaming activity, which is the
difference between wins and losses. Additionally, net win is reduced by a
provision for anticipated payouts on progressive jackpots.
Promotional Allowances
The retail value of hotel, food and beverage services provided to
customers without charge is included in gross revenue and deducted as
promotional allowances. The estimated departmental costs of providing such
promotional allowances are included in casino costs and expenses as follows:
<TABLE>
<CAPTION>
Years ended December 31,
---------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Hotel.............. $ 1,129,300 $ 401,000 $ 476,000
Food and beverage.. 5,644,800 5,393,000 5,043,000
----------- ----------- -----------
$ 6,774,100 $ 5,794,000 $ 5,519,000
=========== =========== ===========
</TABLE>
Advertising Costs
All advertising costs are expensed as incurred. Advertising expense was
$1,897,036, $1,940,628, and $1,558,895 for 1998, 1997, and 1996, respectively.
Income Taxes
Income taxes are recorded in accordance with the liability method
specified by Statement of Financial Accounting Standards ("SFAS") No. 109.
Under the asset and liability approach for financial accounting and reporting
for income taxes, the following basic principles are applied in accounting for
income taxes at the date of the financial statements: (a) a current liability
or asset is recognized for the estimated taxes payable or refundable on taxes
for the current year; (b) a deferred tax liability or asset is recognized for
the estimated future tax effects attributable to temporary differences and
carryforwards; (c) the measurement of current and deferred tax liabilities and
assets is based on the provisions of the enacted tax law; the effects of future
changes in tax laws or rates are not anticipated; and (d) the measurement of
deferred taxes is reduced, if necessary, by the amount of any tax benefits
that, based upon available evidence, are not expected to be realized.
Earnings Per Share
In 1997 the Company adopted the provisions of SFAS No. 128, Earnings Per
Share. Earnings per share for the year ended December 31, 1996 have been
restated to reflect the adoption of SFAS No. 128. SFAS No. 128 requires
companies to present basic earnings per share, and, if applicable, diluted
earnings per share. Basic earnings per share excludes dilution and is computed
by dividing net earnings available to common stockholders by the weighted
average number of common shares outstanding for the period. Diluted
-28- <PAGE>
earnings per share reflects the potential dilution that could occur if options
to issue common stock were exercised into common stock.
The following is a reconciliation of the number of shares (denominator)
used in the basic and diluted earnings per share computations (Shares in
thousands):
<TABLE>
<CAPTION>
Years ended December 31,
------------------------------------------------------
1998 1997 1996
---------------- ---------------- ----------------
Per Share Per Share Per Share
Shares Amount Shares Amount Shares Amount
------ --------- ------ --------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Income before
Extraordinary item
Basic..................... 9,436 $0.40 9,444 $0.39 9,502 $0.09
Effect of dilutive
stock options............ 66 - 35 - - -
------ --------- ------ --------- ------ ---------
Diluted................... 9,502 $0.40 9,479 $0.39 9,502 $0.09
====== ========= ====== ========= ====== =========
Net Income
Basic..................... 9,436 $0.40 9,444 $0.37 9,502 $0.09
Effect of dilutive
stock options............ 66 - 35 - - -
------ --------- ------ --------- ------ ---------
Diluted................... 9,502 $0.40 9,479 $0.37 9,502 $0.09
====== ========= ====== ========= ====== =========
</TABLE>
The following options were not included in the computation of diluted
earnings per share because the options' exercise price was greater than the
average market price of the common shares:
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Options to purchase shares of
common stock (in thousands)..... 16 26 32
Exercise prices.................. $5.88-$8.06 $4.88-$8.06 $3.50-$8.06
Expiration dates................. 6/99-5/08 9/98-6/00 9/98-6/00
</TABLE>
Fair Value of Financial Instruments
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS No. 107
"Disclosures About Fair Value of Financial Instruments." The estimated fair
value of the Company's financial instruments have been determined by the
Company, using available market information and valuation methodologies.
However, considerable judgment is required to develop the estimates of fair
value; thus, the estimates provided herein are not necessarily indicative of
the amounts that the Company could realize in a current market exchange.
The carrying amounts of cash, receivables, accounts payable and accrued
expenses, and current installments of long-term debt approximate fair value
because of the short-term nature of these instruments.
-29- <PAGE>
The fair value of long-term debt is estimated based on the current
borrowing rates offered to the Company for debt of the same remaining
maturities.
It is estimated that the carrying amounts of all of the Company's
financial instruments approximate fair value at December 31, 1998.
Concentrations of Credit Risk
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of bank deposits and trade
receivables. The Company maintains its cash in bank deposit accounts which, at
times, may exceed federally insured limits. The Company has not experienced
any losses in such accounts. Concentrations of credit risk with respect to
trade receivables are limited due to the large number of customers comprising
the Company's customer base. The Company believes it is not exposed to any
significant credit risk on cash and accounts receivable.
NOTE 2. ACCOUNTS RECEIVABLE
Accounts receivable consist of the following:
<TABLE>
<CAPTION>
December 31,
-------------------------
1998 1997
----------- -----------
<S> <C> <C>
Casino....................... $ 975,726 $ 644,426
Hotel........................ 322,002 260,300
Other........................ 142,193 83,419
----------- -----------
1,439,921 988,145
Less allowance for
doubtful accounts........... (165,578) (150,725)
----------- -----------
$ 1,274,343 $ 837,420
=========== ===========
</TABLE>
The following is a reconciliation of the allowance for doubtful accounts:
Balance, December 31, 1996 $ 123,726
Additions charged to income 201,343
Accounts written off, less recoveries (174,344)
---------
Balance, December 31, 1997 150,725
Additions charged to income 194,853
Accounts written off, less recoveries (180,000)
---------
Balance, December 31, 1998 $ 165,578
=========
NOTE 3. ACCRUED EXPENSES
Accrued expenses consist of the following:
-30- <PAGE>
<TABLE>
<CAPTION>
December 31,
-------------------------
1998 1997
----------- -----------
<S> <C> <C>
Accrued salaries, wages
and related benefits........ $ 1,506,699 $ 1,063,776
Progressive slot machine
and other gaming accruals... 1,175,361 1,426,365
Accrued gaming taxes......... 174,508 101,133
Accrued interest............. 559,084 6,843
Other accrued liabilities.... 736,585 785,738
----------- -----------
$ 4,152,237 $ 3,383,855
=========== ===========
</TABLE>
NOTE 4. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31,
---------------------------
1998 1997
------------ ------------
<S> <C> <C>
Amounts outstanding under bank construction and reducing
revolving credit facility, collateralized by substantially
all property and equipment of Golden Road and guaranteed
by Monarch and its three largest stockholders, with
floating interest rates tied to a base rate approximately
equal to the prime rate or LIBOR (at the Company's option)
plus a margin which fluctuates according to the Company's
ratio of funded debt to EBITDA. At December 31, 1998,
the Company's average interest rate was approximately 7.0%.
The loan matures in June 2004, with all unpaid interest
and principal due and payable at that time.................. $ 50,328,451 $ 32,810,000
Note payable to bank, collateralized by real property and
guaranteed by Monarch and its three largest stockholders,
with floating interest rates equal to the three month
LIBO rate plus a margin which fluctuates according to
the Company's ratio of funded debt to EBITDA. At
December 31, 1998, the Company's interest rate was
Approximately 6.81%. Interest and scheduled principal
payments are payable quarterly until June, 2004,
with all unpaid interest and principal due and payable
at that time................................................ 1,855,097 -
Land purchase loan to seller, collateralized by real
Property, with interest fixed at 6%. Interest only
payable monthly until September 1998, when all unpaid
principal and interest is due............................... - 1,897,597
Amounts outstanding under bank credit facility,
collateralized by furniture, fixtures and equipment and
guaranteed in full by Monarch and in part by Monarch's
three largest stockholders, with interest rates on
advances fixed at a margin over five year U.S. Treasury
notes. At December 31, 1998, the Company's average
interest rate was 6.8%. Each advance under the credit
facility is repaid in 60 monthly installments of
principal and interest. The Company may borrow up to
$4,500,000 on this credit facility through June 30, 1999.... 339,795 -
Slot purchase contracts, collateralized by equipment,
maturing in 1999............................................ 515,736 215,668
-31- <PAGE>
Notes payable, collateralized by equipment, with
principal and interest due monthly through 2000............. 121,204 227,876
------------ ------------
$ 53,160,263 $ 35,151,141
Less current maturities...................................... (850,498) (2,243,611)
------------ ------------
$ 52,309,785 $ 32,907,530
============ ============
</TABLE>
THE CREDIT FACILITY. The Company has a $80 million construction and
reducing revolving bank credit facility (the "Credit Facility") with a
consortium of banks. The Credit Facility is a direct obligation of Golden
Road, and is guaranteed by Monarch. The Credit Facility is also guaranteed by
John Farahi, Co-Chairman of the Board, Chief Executive Officer and Chief
Operating Officer of Monarch and Golden Road and General Manager of the
Atlantis; Behrouz Ben Farahi, Co-Chairman of the Board, Chief Financial
Officer, Secretary and Treasurer of Monarch and Golden Road; and Bahram (Bob)
Farahi, Co-Chairman of the Board and President of Monarch and Golden Road,
individually.
The Company can borrow up to $80 million under the Credit Facility for
construction costs related to the Atlantis Expansion. The Credit Facility may
be used only for construction of the Atlantis Expansion until the project is
completed, and during this period, draws under the Credit Facility are subject
to the satisfaction of various conditions typically applicable to construction
loans. Following completion of the Atlantis Expansion, the Credit Facility
will convert from a construction loan to a reducing revolving term loan, and
the Company will be able to utilize proceeds from the Credit Facility for
working capital needs and general corporate purposes relating to the Atlantis
and for ongoing capital expenditure requirements at the Atlantis.
At the Company's option, borrowings under the Credit Facility can accrue
interest at a rate designated by the agent bank as its base rate (the "Base
Rate") or at the London Interbank Offered Rate ("LIBOR") for one, two, three or
six month periods. The rate of interest paid by the Company will include a
margin added to either the Base Rate or to LIBOR that is tied to the Company's
ratio of funded debt to EBITDA (the "Leverage Ratio"). Depending on the
Company's Leverage Ratio, this margin can vary between 0.00 percent and 2.00
percent above the Base Rate, and between 1.50 percent and 3.50 percent above
LIBOR. At December 31, 1998, the applicable margin was the Base Rate plus
0.50%, and the applicable LIBOR margin was LIBOR plus 2.0%. The Base Rate at
December 31, 1998 was 7.75%, and the one month LIBOR was approximately 5.1%.
At December 31, 1998, the Company had Base Rate loans outstanding of
approximately $577 thousand and LIBOR loans outstanding of approximately $49.7
million.
The maturity date of the Credit Facility is June 30, 2004. Beginning July
1, 2000, the maximum principal available under the Credit Facility will reduce
quarterly from $80 million by an aggregate of $40 million in increasing
increments ranging from $1.5 million to $6 million. The Company may prepay
borrowings under the Credit Facility without penalty (subject to certain
charges applicable to the prepayment of LIBOR borrowings prior to the end of
the applicable interest period) so long as the amount repaid is at least $200
thousand and a multiple of $10 thousand. Following completion of the Atlantis
Expansion, amounts prepaid under the Credit Facility may be reborrowed so long
as the total borrowings outstanding do not exceed the maximum principal
available. The Company may also permanently reduce the maximum principal
-32- <PAGE>
available under the Credit Facility at any time so long as the amount of such
reduction is at least $500 thousand and a multiple of $50 thousand.
The Credit Facility is secured by liens on substantially all of the real
and personal property of Golden Road, as well as by the aforementioned parent
and personal guarantees. The Credit Facility contains covenants customary and
typical for a facility of this nature, including, but not limited to, covenants
requiring the preservation and maintenance of the Company's assets (including
provisions requiring that a minimum amount equal to two percent of the
Company's gaming revenues each year must be expended on capital expenditures at
the Atlantis), and covenants restricting the Company's ability to merge,
transfer ownership of Golden Road, incur additional indebtedness, encumber
assets, and make certain investments. The Credit Facility also contains
covenants requiring the Company to maintain certain financial ratios, and
provisions restricting transfers between Golden Road and Monarch and between
Golden Road and other specified persons. The Credit Facility also contains
provisions requiring the achievement of certain financial ratios before the
Company can repurchase its common stock or pay or declare dividends.
Following completion of the Atlantis Expansion, the Credit Facility also
provides for certain swingline loans to the Company, generally to provide
short-term financing pending the funding of a draw by the lenders under the
Credit Facility. Such swingline loans will accrue interest at the Base Rate in
the same manner as other borrowings under the Credit Facility.
The Company paid various fees and other loan costs upon the closing of the
Credit Facility that are being amortized over the term of the Credit Facility.
Following completion of the Atlantis Expansion, the Company will be required to
pay a fee equal to three eighths of one percent per annum on the average unused
portion of the Credit Facility.
Annual maturities of long-term debt as of December 31, 1998, are as
follows:
<TABLE>
<CAPTION>
Years ending
December 31,
------------
<S> <C>
1999.......... $ 850,498
2000.......... 248,909
2001.......... 471,726
2002.......... 476,476
2003 481,184
Thereafter 50,631,470
-------------
$ 53,160,263
=============
</TABLE>
NOTE 5. INCOME TAX
Income tax expense consists of the following:
-33- <PAGE>
<TABLE>
<CAPTION>
Years ended December 31,
---------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Current expense....................... $ 1,297,283 $ 1,062,921 $ 694,747
Deferred expense (benefit)............ 623,674 949,009 (226,568)
----------- ----------- -----------
$ 1,920,957 $ 2,011,930 $ 468,179
=========== =========== ===========
</TABLE>
The difference between the Company's provision for federal income taxes as
presented in the accompanying Consolidated Statements of Income, and the
provision for income taxes computed at the statutory rate is comprised of the
items shown in the following table as a percentage of pre-tax earnings.
<TABLE>
<CAPTION>
Years ended December 31,
---------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Income tax at the statutory rate...... 34.0% 34.0% 34.0%
Non-deductible expenses............... 1.7% 1.2% 3.1%
Tax credits........................... (1.2)% - -
Other, net............................ (0.7)% - (1.0)%
----------- ----------- -----------
33.8% 35.2% 36.1%
=========== =========== ===========
</TABLE>
The components of the deferred income tax assets and liabilities at
December 31, 1998 and 1997, as presented in the Consolidated Balance Sheets,
are as follows:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
CURRENT ASSETS
Compensation and benefits............ $ 88,319 $ 73,000
Bad debt reserves.................... 56,297 51,000
Accrued gaming liabilities........... 71,406 136,000
Accrued other liabilities............ - 51,000
Alternative minimum tax credit....... 216,852 506,000
General business tax credit.......... - 238,000
----------- -----------
Deferred income tax asset $ 432,874 $ 1,055,000
=========== ===========
NONCURRENT LIABILITIES
Impairment of assets................. (70,195) (70,000)
Depreciation......................... (1,900,810) (1,899,000)
Land basis........................... (277,543) (278,000)
----------- -----------
Deferred income tax liability $(2,248,548) $(2,247,000)
=========== ===========
</TABLE>
-34- <PAGE>
NOTE 6. BENEFIT PLANS
Self Insurance - The Company is self-insured for health care claims for
eligible active employees. Benefit plan administrators assist the Company in
determining its liability for self-insured claims, and such claims are not
discounted. The Company is also self-insured for workman's compensation. Both
plans limit the Company's maximum liability under stop-loss agreements with
insurance companies.
Savings Plan - Effective November 1, 1995, the Company adopted a savings
plan, which qualifies under Section 401(k) of the Internal Revenue Code. Under
the plan, participating employees may defer up to 15% of their pre-tax
compensation, but not more than statutory limits. The Company contributes
twenty five cents for each dollar contributed by a participant, with a maximum
contribution of 4% of a participant's compensation. The Company's matching
contribution was approximately $19,300 in 1998 and $17,000 in 1997 and 1996.
Stock Option Plans - The Company maintains three stock option plans,
consisting of the Directors' Stock Option Plan, the Executive Long Term
Incentive Plan, and the Employee Stock Option Plan, which collectively provide
for the granting of up to 425,000 common shares. The exercise price of stock
options granted under the plans is established by the respective plan
committees, but the exercise price may not be less than the market price of the
Company's common stock on the date the option is granted. Options expire five
to ten years from the grant date.
The Company has adopted the disclosure-only provisions of SFAS No. 123,
Accounting For Stock-Based Compensation, but applies Accounting Principles
Board Opinion No. 25 and related interpretations in accounting for its plans.
If the Company had elected to recognize compensation cost on the fair market
value at the grant dates for awards under the stock option plans, consistent
with the method prescribed by SFAS No. 123, net income and income per share
would have been changed to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
Years ended December 31,
---------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Income before
extraordinary item As reported $ 3,759,782 $ 3,710,148 $ 829,868
Pro forma 3,728,019 3,515,191 829,145
Net income As reported 3,759,782 3,525,625 829,868
Pro forma 3,728,019 3,330,668 829,145
Basic earnings per share
before extraordinary item As reported 0.40 0.39 0.09
Pro forma 0.40 0.37 0.09
Basic earnings per share As reported 0.40 0.37 0.09
Pro forma 0.40 0.35 0.09
Diluted earnings per share
before extraordinary item As reported 0.40 0.39 0.09
Pro forma 0.39 0.37 0.09
Diluted earnings per share As reported 0.40 0.37 0.09
Pro forma 0.39 0.35 0.09
</TABLE>
-35- <PAGE>
The fair value of the Company's stock options was estimated as of the
grant date using the Black-Scholes option pricing model with the following
weighted average assumptions for 1998, 1997 and 1996: dividend yield of 0.0%;
expected volatility of 60.0%, 35.0% and 55.0%, respectively; a weighted average
risk free interest rate of 4.90%, 6.61% and 6.25%, respectively; and an
expected holding period of three to seven years.
Presented below is a summary of the status of the Company's stock options
and the related transactions.
<TABLE>
<CAPTION>
Weighted Average
Shares Exercise Price
-------- ----------------
<S> <C> <C>
Outstanding at December 31, 1995.... 26,900 $ 7.02
Granted............................ 5,800 3.91
Exercised.......................... - -
Forfeited/expired.................. (1,000) (7.50)
-------
Outstanding at December 31, 1996.... 31,700 6.44
Granted............................ 233,700 3.21
Exercised.......................... - -
Forfeited/expired.................. (2,500) (2.88)
-------
Outstanding at December 31, 1997.... 262,900 $ 3.60
Granted....................... 14,600 5.98
Exercised..................... - -
Forfeited/expired............. (25,300) (6.27)
--------
Outstanding at December 31, 1998..... 252,200 $ 3.47
========
Weighted average fair value of
options granted during 1998......... $ 2.18
========
1997......... $ 1.28
========
1996......... $ 0.26
========
</TABLE>
<TABLE>
<CAPTION>
Stock Options Outstanding Stock Options Exercisable
------------------------- -------------------------
Weighted Weighted Weighted
Average Average Average
Range of Contractual Exercise Exercise
Exercise Prices Shares Life Price Shares Price
---------------- ------- -------- --------- ------- --------
<S> <C> <C> <C> <C> <C>
$2.25 to $3.50 162,400 6.67 $ 2.72 52,400 $ 2.37
$4.00 to $5.00 60,600 1.60 4.50 59,600 4.49
$5.75 to $8.13 17,000 5.13 6.28 9,800 6.46
------- -------
Total 240,000 121,800
======= =======
</TABLE>
NOTE 7. RELATED PARTY TRANSACTION
The Company purchased water rights for the Atlantis Expansion during 1998
for $358,000 from a partnership in which three major stockholders of the
Company are general partners. These stockholders are also directors of the
-36- <PAGE>
Company. The water rights were purchased at the prevailing price at the time
of the transaction.
NOTE 8. LEGAL PROCEEDINGS
The Company is a defendant in various pending legal proceedings. In the
opinion of management, all pending claims in such litigation will not, in the
aggregate, have a material adverse effect on the Company's financial position
or results of operations.
-37- <PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
This information is incorporated by reference to the Company's Proxy
Statement to be filed with the Commission in connection with the Annual Meeting
of Stockholders on June 9, 1999.
ITEM 11. EXECUTIVE COMPENSATION
This information is incorporated by reference to the Company's Proxy
Statement to be filed with the Commission in connection with the Annual Meeting
of Stockholders on June 9, 1999.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
This information is incorporated by reference to the Company's Proxy
Statement to be filed with the Commission in connection with the Annual Meeting
of Stockholders on June 9, 1999.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
This information is incorporated by reference to the Company's Proxy
Statement to be filed with the Commission in connection with the Annual Meeting
of Stockholders on June 9, 1999.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
Included in Part II of this report:
Consolidated Statements of Income for the years ended
December 31, 1998, 1997, and 1996.
Consolidated Balance Sheets at December 31, 1998 and 1997.
Consolidated Statements of Stockholders' Equity for the years
ended December 31, 1998, 1997 and 1996.
Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996.
Notes to Consolidated Financial Statements.
2. Schedules are omitted because of the absence of conditions under
which they are required or because the required information is
provided in the financial statements or notes thereto.
-38- <PAGE>
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the 1998
fourth quarter.
(c) Exhibits
Number Exhibit Description
------ -------------------
3.01 Articles of Incorporation of Monarch Casino & Resort, Inc., filed
June 11, 1993 are incorporated herein by reference from the
Company's Form S-1 registration statement (SEC File 33-64556),
Part II, Item 16, Exhibit 3.01.
3.02 Bylaws of Monarch Casino & Resort, Inc., adopted June 14, 1993
are incorporated herein by reference from the Company's Form S-1
registration statement (SEC File 33-64556), Part II, Item 16,
Exhibit 3.02.
3.03 Articles of Incorporation of Golden Road Motor Inn, Inc. filed
March 6, 1973; Certificate Amending Articles of Incorporation of
Golden Road Motor Inn, Inc. filed August 29, 1973; and
Certificate of Amendment of Articles of Incorporation filed April
5, 1984 are incorporated herein by reference from the Company's
Form S-1 registration statement (SEC File 33-64556), Part II,
Item 16, Exhibit 3.03.
3.04 Bylaws of Golden Road Motor Inn, Inc., adopted March 9, 1973 are
incorporated herein by reference from the Company's Form S-1
registration statement (SEC File 33-64556), Part II, Item 16,
Exhibit 3.04.
4.01 Specimen Common Stock Certificate for the Common Stock of Monarch
Casino & Resort, Inc. is incorporated herein by reference from
the Company's Form S-1 registration statement (SEC File 33-
64556), Part II, Item 16, Exhibit 4.01.
4.02 Amended and Restated Monarch Casino & Resort, Inc. 1993 Directors'
Stock Option Plan.
4.03 Amended and Restated Monarch Casino & Resort, Inc. 1993 Executive
Long Term Incentive Plan is incorporated herein by reference to
the Company's Form 10-K report (SEC File 0-22088) for the fiscal
year ended December 31, 1997, Item 14(c), Exhibit 4.03.
4.04 Amended and Restated Monarch Casino & Resort, Inc. 1993 Employee
Stock Option Plan is incorporated herein by reference to the
Company's Form 10-K report (SEC File 0-22088) for the fiscal year
ended December 31, 1997, Item 14(c), Exhibit 4.04.
10.01 Construction and Reducing Revolving Credit Agreement, dated as of
December 29, 1997, among Golden Road Motor Inn, Inc. as Borrower,
Monarch Casino & Resort, Inc., John Farahi, Bahram Farahi, and
Behrouz Farahi as guarantors, the Lenders as defined therein, and
Wells Fargo Bank as administrative and collateral Agent for the
Lenders and Swingline Lender is incorporated herein by reference
-39- <PAGE>
to the Company's Form 8-K report (SEC File 0-22088) dated January
14, 1998, Exhibit 10.01.
10.02 First Amendment to Construction and Reducing Revolving Credit
Agreement, dated as of January 9, 1998, among Golden Road Motor
Inn, Inc. as Borrower, Monarch Casino & Resort, Inc., John Farahi,
Bahram Farahi, and Behrouz Farahi as guarantors, the Lenders as
defined therein, and Wells Fargo Bank as administrative and
collateral Agent for the Lenders, Swingline Lender and L/C Issuer
is incorporated herein by reference to the Company's Form 10-K
report (SEC File 0-22088) for the fiscal year ended December 31,
1997, Item 14(c), Exhibit 10.02.
10.03 Second Amendment to Construction and Reducing Revolving Credit
Agreement, dated as of June 12, 1998, among Golden Road Motor Inn,
Inc. as Borrower, Monarch Casino & Resort, Inc., John Farahi,
Bahram Farahi, and Behrouz Farahi as guarantors, the Lenders as
defined therein, and Wells Fargo Bank as administrative and
collateral Agent for the Lenders, Swingline Lender and L/C Issuer
is incorporated herein by reference to the Company's Form 10-Q
report (SEC File 0-22088) for the fiscal quarter ended June 30,
1998, Item 6(a), Exhibit 10.01.
10.04 Term Loan Agreement, entered into as of the 23rd day of July,
1998, by and among Golden Road Motor Inn, Inc., as Borrower,
Monarch Casino & Resort, Inc., John Farahi, Bahram Farahi and
Behrouz Farahi as guarantors, and U.S. Bank National Association
as Term Lender is incorporated herein by reference to the
Company's Form 10-Q report (SEC File 0-22088) for the fiscal
quarter ended September 30, 1998, Item 6(a), Exhibit 10.01.
10.05 Schedule to Master Loan Agreement, dated as of December 16, 1998;
Master Loan Agreement, dated as of October 3, 1998; and
Guaranties, dated as of September 9, 1998, by and among Golden
Road Motor Inn, Inc., as Borrower, Monarch Casino & Resort, Inc.,
John Farahi, Bahram Farahi and Behrouz Farahi as guarantors, and
U.S. Bank Leasing and Financial as Lender.
10.06 Agreement dated April 20, 1998, between Golden Road Motor Inn,
Inc. and Krump Construction, Inc. is incorporated herein by
reference to the Company's Form 10-Q report (SEC File 0-22088) for
the fiscal quarter ended March 31, 1998, Item 6(a), Exhibit 10.01.
10.07 Agreement dated June 12, 1998, between Golden Road Motor Inn, Inc.
and Perini Building Company, Inc. is incorporated herein by
reference to the Company's Form 10-Q report (SEC File 0-22088) for
the fiscal quarter ended June 30, 1998, Item 6(a), Exhibit 10.02.
10.08 Lease, by and between Sierra Development Company, dba Club Cal-
Neva, Tenant, and Golden Road Motor Inn, Inc., dba Clarion Hotel
and Casino, Landlord, dated June 10, 1991 is incorporated herein
by reference from the Company's Form S-1 registration statement
(SEC File 33-64556), Part II, Item 16, Exhibit 10.03.
10.09 Agreement for Purchase of Real Property between Marcelle M.
Caramella, a widow, individually and Marcelle Margaret Caramella,
as trustee of the Trust created under the Last Will and Testament
-40- <PAGE>
of Ernest John Caramella, deceased, Ben A. Caramella and Cecile
D. Caramella, as trustees of the Caramella Family Trust Agreement
dated December 1, 1989, Marcelle Margaret Caramella, Erma V.
Pezzi, Trustee of the Erma V. Pezzi Trust Agreement dated
November 21, 1991, Golden Road Motor Inn, Inc. and Farahi
Investment Company, dated June 1, 1993 is incorporated herein by
reference from the Company's Form S-1 registration statement (SEC
File 33-64556), Part II, Item 16, Exhibit 10.04.
10.10 Agreement between Monarch Casino & Resort, Inc. and Peter Wilday
dated May 13, 1994; First Amendment to Agreement between Monarch
Casino & Resort, Inc. and Peter Wilday dated June 8, 1994; and
Second Amendment to Agreement between Monarch Casino & Resort,
Inc. and Peter Wilday dated March 23, 1995 are incorporated
herein by reference from the Company's Form 10-K report (SEC File
0-22088) for the fiscal year ended December 31, 1994, Item
14(a)(3), Exhibit 10.20.
10.11 Nonstandardized 401(k) Plan Adoption Agreement between Monarch
Casino & Resort, Inc. and Smith Barney Shearson dated November 7,
1995 is incorporated herein by reference to the Company's Form
10-K report (SEC File 0-22088) for the fiscal year ended December
31, 1995, Item 14(a)(3), Exhibit 10.21.
10.12 Recordkeeping Service Agreement between Monarch Casino & Resort,
Inc. and Travelers Recordkeeping dated June 29, 1995 is
incorporated herein by reference to the Company's Form 10-K
report (SEC File 0-22088) for the fiscal year ended December 31,
1995, Item 14(a)(3), Exhibit 10.22.
10.13 Trademark Agreement between Golden Road Motor Inn, Inc. and
Atlantis Lodge, Inc., dated February 3, 1996 is incorporated
herein by reference to the Company's Form 10-K report (SEC File
0-22088) for the fiscal year ended December 31, 1995, Item
14(a)(3), Exhibit 10.23.
21.01 List of Subsidiaries of Monarch Casino & Resort, Inc. is
incorporated by reference from the Company's Form 10-K report
(SEC File 0-22088) for the fiscal year ended December 31, 1993,
Item 14(a)(3), Exhibit 21.01.
27.01 Financial Data Schedule
-41- <PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
MONARCH CASINO & RESORT, INC.
(Registrant)
<TABLE>
<S> <C>
Date: March 30, 1999 By: /s/ BEN FARAHI
------------------------------------
Ben Farahi, Co-Chairman of the Board,
Secretary, Treasurer and Chief
Financial Officer(Principal Financial
Officer and Duly Authorized Officer)
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
------------------ ----------------------------------- ----
<S> <C> <C>
/s/ JOHN FARAHI Co-Chairman of the Board of Directors, March 30, 1999
------------------ Chief Executive Officer (Principal
John Farahi Executive Officer) and Director
/s/ BOB FARAHI Co-Chairman of the Board of Directors, March 30, 1999
------------------ President, and Director
Bob Farahi
/s/ BEN FARAHI Co-Chairman of the Board of Directors, March 30, 1999
------------------ Secretary, Treasurer, Chief Financial
Ben Farahi Officer (Principal Financial Officer
and Principal Accounting Officer) and
Director
/s/ CRAIG F.
SULLIVAN Director March 30, 1999
------------------
Craig F. Sullivan
/s/FRANK A. MODICA Director March 30, 1999
------------------
Frank A. Modica
</TABLE>
-42- <PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Page
Number Description Number
- ----------- ------------------------------------------------------------------ --------
<S> <C> <C>
3.01 Articles of Incorporation of Monarch Casino & Resort, Inc., filed
June 11, 1993 are incorporated herein by reference from the
Company's Form S-1 registration statement (SEC File 33-64556),
Part II, Item 16, Exhibit 3.01.
3.02 Bylaws of Monarch Casino & Resort, Inc., adopted June 14, 1993
are incorporated herein by reference from the Company's Form S-1
registration statement (SEC File 33-64556), Part II, Item 16,
Exhibit 3.02.
3.03 Articles of Incorporation of Golden Road Motor Inn, Inc. filed
March 6, 1973; Certificate Amending Articles of Incorporation of
Golden Road Motor Inn, Inc. filed August 29, 1973; and
Certificate of Amendment of Articles of Incorporation filed April
5, 1984 are incorporated herein by reference from the Company's
Form S-1 registration statement (SEC File 33-64556), Part II,
Item 16, Exhibit 3.03.
3.04 Bylaws of Golden Road Motor Inn, Inc., adopted March 9, 1973 are
incorporated herein by reference from the Company's Form S-1
registration statement (SEC File 33-64556), Part II, Item 16,
Exhibit 3.04.
4.01 Specimen Common Stock Certificate for the Common Stock of Monarch
Casino & Resort, Inc. is incorporated herein by reference from
the Company's Form S-1 registration statement (SEC File 33-
64556), Part II, Item 16, Exhibit 4.01.
4.02 Amended and Restated Monarch Casino & Resort, Inc. 1993 Directors' 46
Stock Option Plan.
4.03 Amended and Restated Monarch Casino & Resort, Inc. 1993 Executive
Long Term Incentive Plan is incorporated herein by reference to
the Company's Form 10-K report (SEC File 0-22088) for the fiscal
year ended December 31, 1997, Item 14(c), Exhibit 4.03.
4.04 Amended and Restated Monarch Casino & Resort, Inc. 1993 Employee
Stock Option Plan is incorporated herein by reference to the
Company's Form 10-K report (SEC File 0-22088) for the fiscal year
ended December 31, 1997, Item 14(c), Exhibit 4.04.
10.01 Construction and Reducing Revolving Credit Agreement, dated as of
December 29, 1997, among Golden Road Motor Inn, Inc. as Borrower,
Monarch Casino & Resort, Inc., John Farahi, Bahram Farahi, and
Behrouz Farahi as guarantors, the Lenders as defined therein, and
Wells Fargo Bank as administrative and collateral Agent for the
Lenders and Swingline Lender is incorporated herein by reference
to the Company's Form 8-K report (SEC File 0-22088) dated January
14, 1998, Exhibit 10.01.
10.02 First Amendment to Construction and Reducing Revolving Credit
Agreement, dated as of January 9, 1998, among Golden Road Motor
Inn, Inc. as Borrower, Monarch Casino & Resort, Inc., John Farahi,
Bahram Farahi, and Behrouz Farahi as guarantors, the Lenders as
defined therein, and Wells Fargo Bank as administrative and
collateral Agent for the Lenders, Swingline Lender and L/C Issuer
is incorporated herein by reference to the Company's Form 10-K
report (SEC File 0-22088) for the fiscal year ended December 31,
1997, Item 14(c), Exhibit 10.02.
-43- <PAGE>
10.03 Second Amendment to Construction and Reducing Revolving Credit
Agreement, dated as of June 12, 1998, among Golden Road Motor Inn,
Inc. as Borrower, Monarch Casino & Resort, Inc., John Farahi,
Bahram Farahi, and Behrouz Farahi as guarantors, the Lenders as
defined therein, and Wells Fargo Bank as administrative and
collateral Agent for the Lenders, Swingline Lender and L/C Issuer
is incorporated herein by reference to the Company's Form 10-Q
report (SEC File 0-22088) for the fiscal quarter ended June 30,
1998, Item 6(a), Exhibit 10.01.
10.04 Term Loan Agreement, entered into as of the 23rd day of July,
1998, by and among Golden Road Motor Inn, Inc., as Borrower,
Monarch Casino & Resort, Inc., John Farahi, Bahram Farahi and
Behrouz Farahi as guarantors, and U.S. Bank National Association
as Term Lender is incorporated herein by reference to the
Company's Form 10-Q report (SEC File 0-22088) for the fiscal
quarter ended September 30, 1998, Item 6(a), Exhibit 10.01.
10.05 Schedule to Master Loan Agreement, dated as of December 16, 1998; 53
Master Loan Agreement, dated as of October 3, 1998; and
Guaranties, dated as of September 9, 1998, by and among Golden
Road Motor Inn, Inc., as Borrower, Monarch Casino & Resort, Inc.,
John Farahi, Bahram Farahi and Behrouz Farahi as guarantors, and
U.S. Bank Leasing and Financial as Lender.
10.06 Agreement dated April 20, 1998, between Golden Road Motor Inn,
Inc. and Krump Construction, Inc. is incorporated herein by
reference to the Company's Form 10-Q report (SEC File 0-22088) for
the fiscal quarter ended March 31, 1998, Item 6(a), Exhibit 10.01.
10.07 Agreement dated June 12, 1998, between Golden Road Motor Inn, Inc.
and Perini Building Company, Inc. is incorporated herein by
reference to the Company's Form 10-Q report (SEC File 0-22088) for
the fiscal quarter ended June 30, 1998, Item 6(a), Exhibit 10.02.
10.08 Lease, by and between Sierra Development Company, dba Club Cal-
Neva, Tenant, and Golden Road Motor Inn, Inc., dba Clarion Hotel
and Casino, Landlord, dated June 10, 1991 is incorporated herein
by reference from the Company's Form S-1 registration statement
(SEC File 33-64556), Part II, Item 16, Exhibit 10.03.
10.09 Agreement for Purchase of Real Property between Marcelle M.
Caramella, a widow, individually and Marcelle Margaret Caramella,
as trustee of the Trust created under the Last Will and Testament
of Ernest John Caramella, deceased, Ben A. Caramella and Cecile
D. Caramella, as trustees of the Caramella Family Trust Agreement
dated December 1, 1989, Marcelle Margaret Caramella, Erma V.
Pezzi, Trustee of the Erma V. Pezzi Trust Agreement dated
November 21, 1991, Golden Road Motor Inn, Inc. and Farahi
Investment Company, dated June 1, 1993 is incorporated herein by
reference from the Company's Form S-1 registration statement (SEC
File 33-64556), Part II, Item 16, Exhibit 10.04.
10.10 Agreement between Monarch Casino & Resort, Inc. and Peter Wilday
dated May 13, 1994; First Amendment to Agreement between Monarch
Casino & Resort, Inc. and Peter Wilday dated June 8, 1994; and
Second Amendment to Agreement between Monarch Casino & Resort,
Inc. and Peter Wilday dated March 23, 1995 are incorporated
herein by reference from the Company's Form 10-K report (SEC File
0-22088) for the fiscal year ended December 31, 1994, Item
14(a)(3), Exhibit 10.20.
10.11 Nonstandardized 401(k) Plan Adoption Agreement between Monarch
Casino & Resort, Inc. and Smith Barney Shearson dated November 7,
1995 is incorporated herein by reference to the Company's Form
10-K report (SEC File 0-22088) for the fiscal year ended December
31, 1995, Item 14(a)(3), Exhibit 10.21.
10.12 Recordkeeping Service Agreement between Monarch Casino & Resort,
Inc. and Travelers Recordkeeping dated June 29, 1995 is
incorporated herein by reference to the Company's Form 10-K
-44- <PAGE>
report (SEC File 0-22088) for the fiscal year ended December 31,
1995, Item 14(a)(3), Exhibit 10.22.
10.13 Trademark Agreement between Golden Road Motor Inn, Inc. and
Atlantis Lodge, Inc., dated February 3, 1996 is incorporated
herein by reference to the Company's Form 10-K report (SEC File
0-22088) for the fiscal year ended December 31, 1995, Item
14(a)(3), Exhibit 10.23.
21.01 List of Subsidiaries of Monarch Casino & Resort, Inc. is
incorporated by reference from the Company's Form 10-K report
(SEC File 0-22088) for the fiscal year ended December 31, 1993,
Item 14(a)(3), Exhibit 21.01.
27.01 Financial Data Schedule
</TABLE>
-45- <PAGE>
Amended and Restated
MONARCH CASINO & RESORT, INC.
1993 Directors' Stock Option Plan
Adopted by the Board of Directors June 15, 1993
Amended by the Board of Directors September 14, 1993
Approved by the Stockholders June 15, 1994
Amended by the Board of Directors May 14, 1997
Amended by the Board of Directors September 17, 1998
1. Purpose
The Monarch Casino & Resort, Inc. 1993 Directors' Stock Option Plan (the
"Plan") is intended to promote the interests of Monarch Casino & Resort, Inc.
(the "Corporation") and its subsidiaries by offering members of the Board of
Directors of the Corporation who are not employed as regular salaried officers
or employees of the Corporation or any of its subsidiaries (hereinafter
referred to as "Non-Employee Directors" or "Optionees") the opportunity to
participate in a stock option plan in order to encourage Non-Employee
Directors to take a long term view of the affairs of the Corporation; to
attract and retain new top-notch Non-Employee Directors; and to aid in
rewarding Non-Employee Directors for their services to the Corporation.
2. Administration
The Plan shall be administered by a Committee (the "Committee") of not
less than two Directors of the Corporation who are not eligible to participate
under the Plan, selected by and serving at the pleasure of its Board of
Directors (the "Board").
The Committee shall have the authority to otherwise interpret the Plan
and make all determinations necessary or advisable for its administration.
The Committee's decisions under the Plan shall be subject to the approval
of the Board
3. Eligibility
Only Non-Employee Directors will be eligible to be granted awards.
4. Stock Subject to the Plan
The stock from which awards may be granted shall be the Corporation's
$.01 par value Common Stock ("Common Stock"). When options are exercised, the
Corporation may either issue authorized but unissued shares of Common Stock or
transfer issued shares of Common Stock held in its treasury. The total number
of shares of Common Stock which may be granted as stock options shall not
exceed 75,000. If an option expires, or is otherwise terminated prior to its
exercise, the Common Stock covered by such an option immediately prior to such
expiration or other termination shall continue to be available for grant under
the Plan.
5. Grant and Amount of Options
5.1. Basic Grant
The date of the initial option grant for a Non-Employee Director serving
his or her term upon approval of the Plan shall be the date that the Plan is
approved by the stockholders. The date of the initial option grant for a Non-
Employee Director commencing his or her term shall be the date that he or she
becomes a member of the Board of Directors.
The initial option grant shall be to purchase 2 400 shares of Common
Stock (subject to adjustment per Section 7). Each Non-Employee Director
serving as the chairman of a committee of the Board shall receive an
additional option grant to purchase 650 shares for each committee chaired.
All annual awards of options shall be granted immediately following the
close of the annual stockholders' meeting, with the first annual grant
effective at the 1994 annual stockholders' meeting. All annual awards of such
option grants will be to purchase 2,400 shares of Common Stock (subject to
adjustment per Section 7) for five years following election to the Board. Each
Non-Employee Director serving as the Chairman of a committee of the Board
shall receive an additional annual award to purchase 650 shares for each
committee chaired.
5.2. Discretionary Grants
The Committee may recommend discretionary grants of options on terms
deemed appropriate by the Committee, subject to the approval of the Board.
6. Terms and Conditions of Options
Options shall be designated non-qualified options or not qualified as
Incentive Stock Options under Section 422A of the Internal Revenue Code of
1986, as amended (the "Code"), and shall be evidenced by written instruments
approved by the Committee. Such instruments shall conform to the following
terms and conditions.
6.1. Option Price
The option price shall be not less than the fair market value of the
shares of Common Stock under option. The fair market value per share shall be
the last reported sale price of the stock on such date on the NASDAQ National
Market System, or on such other stock exchange that the stock may be listed
from time to time. The option price shall be paid (i) in cash or (ii) in
shares of Common Stock of the Corporation having a fair market value equal to
such option price or (iii) in a combination of cash and shares of Common
Stock. The fair market value of shares of Common Stock delivered to the
Corporation pursuant to the immediately preceding sentence shall be determined
on the basis of the last reported sale price of the stock on the NASDAQ
National Market System on the day next preceding the day of exercise on which
there was such a sale.
6.2. Exercise and term of options
Each option shall be exercisable six months and one day after the date of
grant.
Except in special circumstances or as provided in Discretionary Grants
pursuant to Section 5.1 hereof, each option shall expire the latter of the
fifth anniversary of the date of its grant or nine months after the Non-
Employee Director retires, whichever occurs first.
After becoming exercisable, each option shall remain exercisable until
expiration or termination of the option. After becoming exercisable an option
may be exercised by the Optionee from time to time, in whole or part, up to
the total number of shares with respect to which it is then exercisable. The
Committee may provide that payment of the option exercise price may be made
following delivery of the certificate for the exercised shares.
Upon the exercise of a stock option, the purchase price will be payable in
full in cash or its equivalent in property acceptable to the Corporation. In
the discretion of the Committee, the purchase price may be paid by the
assignment and delivery to the Corporation of shares of Common Stock or a
combination of cash and such shares equal in value to the purchase price. Any
shares of Common Stock so assigned and delivered to the Corporation in payment
or partial payment of the purchase price will be valued at Fair Market Value
on the exercise date. Upon the exercise of a non-qualified stock option, the
Corporation shall withhold from the shares of Common Stock to be issued to the
eligible Optionee the number of shares necessary to satisfy the Corporation's
obligation to withhold Federal taxes, such determination to be based on the
shares' Fair Market Value on the date of exercise.
6.3. Termination of Directorship
If an Optionee ceases, other than by reason of death or retirement to be
elected to serve on the Board of Directors, all options granted to such
Optionee and exercisable on the date of termination of Directorship shall
expire on the earlier of (i) the fifth anniversary after the date of grant or
(ii) nine months after the day such Optionee's term ends.
6.4. Exercise upon death of optionee
If an Optionee dies, the option may be exercised, to the extent of the
number of shares that the Optionee could have exercised on the date of such
death, by the Optionee's estate, personal representative or beneficiary who
acquires the option by will or by the laws of descent and distribution. Such
exercise may be made at any time prior to the earlier of (i) the fifth
anniversary after the date of grant or (ii) the second anniversary of such
Optionee's death. On the earlier of such dates, the option shall terminate.
The Committee may approve all cash payments to the estate of an Optionee if
circumstances warrant such a decision.
6.5. Assignability
No option shall be assignable or transferable by the Optionee except by
will or by the laws of descent and distribution and during the lifetime of the
Optionee the option shall be exercisable only by such Optionee.
7. Capital Adjustments
The number and price of shares of Common Stock covered by each award of
options and the total number of shares that may be granted under the Plan
shall be proportionally adjusted to reflect, as deemed equitable and
appropriate by the Committee and subject to any required action by the
stockholders, any stock dividend or split, recapitalization, merger,
consolidation, spin-off, reorganization, combination or exchange of shares or
other similar corporate change.
8. Change of Control
Notwithstanding the provisions of Section 6, in the event of a change of
control, all vesting on all unexercised stock options will accelerate to the
change of control date. For purposes of this Plan, a "Change of Control" of
the Corporation shall be deemed to have occurred at such time as (a) any
"person" (as the term is used in Section 13(d) and 14(d) of the Securities
Exchange Act of 1934 ("Exchange Act")) becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Corporation representing 25 0% or more of the combined
voting power of the Corporation's outstanding securities ordinarily having the
right to vote at the election of directors; or (b) individuals who constitute
the Board of Directors on the date hereof (the "Incumbent Board") cease for
any reason to constitute at least a majority thereof, provided that any person
becoming a director subsequent to the date hereof whose election was approved
by at least a majority of the directors comprising the Incumbent Board, or
whose nomination for election was approved by a majority of the Board of
Directors of the Corporation serving under an Incumbent Board, shall be, for
purposes of this clause (b), considered as he or she were a member of the
Incumbent Board; or (c) merger, consolidation or sale of all or substantially
all the assets of the Corporation occurs, unless such merger or consolidation
shall have been affirmatively recommended to the Corporation's stockholders by
a majority of the Incumbent Board; or (d) a proxy statement soliciting proxies
from stockholders of the Corporation by someone other than the current
management of the Corporation seeking stockholder approval of a plan or
reorganization, merger or consolidation of the Corporation with one or more
corporations as a result of which the outstanding shares of the Corporation's
securities are actually exchanged for or converted into cash or property or
securities not issued by the Corporation unless the reorganization, merger or
consolidation shall have been affirmatively recommended to the Corporation's
stockholders by a majority of the Incumbent Board.
9. Approvals
The issuance of shares pursuant to this Plan is expressly conditioned
upon obtaining all necessary approvals from the Nevada Gaming Commission and
upon obtaining stockholder approval of the Plan.
10. Effective Date of Plan
The effective date of the Plan is June 14, 1993.
11. Term: Amendment of Plan
This Plan shall expire on June 13, 2003 (except to options outstanding on
that date). The Board may terminate the Plan at any time. The Board may amend
the Plan at any time, provided however, the provisions of Section 5 pertaining
to the amount of options to be granted and the timing of such option grants
and the provisions of Section 6.1 pertaining to the option price of the Common
Stock under option shall not be amended more than once every six months, other
than to comport with changes in the Internal Revenue Code or the rules
thereunder. Further provided however, that, without the approval of the
holders of a majority of the outstanding shares of Common Stock; the total
number of shares that may be sold, issued or transferred under the Plan may
not be increased (except by adjustment pursuant to Section 7); the provisions
of Section 3 regarding eligibility may not be modified; the purchase price at
which shares may be offered pursuant to options may not be reduced (except by
adjustment pursuant to Section 7); and the expiration date of the Plan may not
be extended and no change may be made which would cause the Plan not to comply
with Rule 1 6b-3 of the Exchange Act, as amended from time to time. No action
of the Board or stockholders, however, may, without the consent of an
Optionee, alter or impair such Optionee's rights under any option previously
granted.
12. Withholding Taxes
The Corporation shall have the right to deduct withholding taxes from any
payments made pursuant to the Plan or to make such other provisions as it
deems necessary or appropriate to satisfy its obligations to withhold Federal,
state or local income or other taxes incurred by reason of payments or the
issuance of shares of Common Stock under the Plan. Whenever under the Plan,
shares of Common Stock are to be delivered upon exercise of an option, the
Committee shall be entitled to require as a condition of delivery that the
grantee remit an amount sufficient to satisfy all Federal, state and other
government withholding tax requirements related thereto.
13. Plan Not A Trust
Nothing contained in the Plan and no action taken pursuant to the Plan
shall create or be construed to create a trust of any kind, or a fiduciary
relationship, between the Corporation and any Optionee, the executor,
administrator or other personal representative, or designated beneficiary of
such Optionee, or any other persons. Any reserves that may be established by
the Corporation in connection with the Plan shall continue to be part of the
general funds of the Corporation and no individual or entity other than the
Corporation shall have any interest in such funds until paid to an Optionee.
If and to the extent that any Optionee or such Optionee's executor,
administrator or other personal representative, as the case may be, acquires a
right to receive any payment from the Corporation pursuant to the Plan, such
right shall be no greater than the right of an unsecured general creditor of
the Corporation.
14. Notices
Each Optionee shall be responsible for furnishing the Committee with the
current and proper address for the mailing of notices and delivery of
agreements, Common Stock and cash pursuant to the Plan. Any notices required
or permitted to be given shall be deemed given if directed to the person to
whom addressed at such address and mailed by regular United States mail,
first-class and prepaid. If any item mailed to such address is returned as
undeliverable to the addressee, mailing will be suspended until the Optionee
furnishes the proper address. This provision shall not be construed as
requiring the mailing of any notice or notification if such notice is not
required under the terms of the Plan or any applicable law.
15. Separability of Provisions
If any provision of this Plan shall be held invalid or unenforceable,
such invalidity or unenforceability shall not affect any other provisions
hereof, and this Plan shall be construed and enforced as if such provisions
had not been included.
16. Payment to Minors, etc.
Any benefit payable to or for the benefit of a minor, an incompetent
person or other person incapable of receipting therefor shall be deemed paid
when paid to such person's guardian or to the party providing or reasonably
appearing to provide for the care of such person, and such payment shall fully
discharge the Committee, the Corporation and other parties with respect
thereto.
17. Headings and Captions
The headings and captions herein are provided for reference and
convenience only, shall not be considered part of the Plan, and shall not be
employed in the construction of the Plan.
18. Controlling Law
This Plan shall be construed and enforced according to the laws of the
State of Nevada to the extent not preempted by Federal law, which shall
otherwise control. <PAGE>
SCHEDULE TO MASTER LOAN AGREEMENT
Golden Road Motor Inn, Inc. dba Atlantis Hotel and Casino
1175 W. Moana Lane, Suite 200
Reno, Nevada 89509
$339,794.60 Effective Date _____ Loan Transaction Number
1. THIS SCHEDULE is made between Golden Road Motor Inn, Inc. dba Atlantis
Hotel and Casino, as Debtor, and U.S. BANCORP LEASING & FINANCIAL (which,
together with its successor and assigns, will be called the "Secured Party")
pursuant to the Master Loan Agreement dated as of September 22, 1998 (the
"Loan Agreement"), the terms of which (including the definitions) are
incorporated herein. If any terms hereof are inconsistent with the terms of
the Loan Agreement, the terms hereof shall prevail.
2. FOR VALUE RECEIVED, Debtor hereby promises to pay to the order of Secured
Party the principal amount of Three Hundred Thirty-Nine Thousand, Seven
Hundred Ninety-Four and 60/100 Dollars ($339,794.60) with interest on any
outstanding principal balance at the rate(s) specified herein from the
Effective Date hereof until this Schedule shall have been paid in full in
accordance with the following payment schedule: sixty (60) installments of
$6,696.45 each, including the entire amount of interest accrued on this
Schedule at the time of payment of each installment. The first payment shall
be due on January 20, 1999 and a like payment shall be due on the same day of
each succeeding month thereafter until the entire principal and interest have
been paid. At the time of the final installment hereon, all unpaid principal
and interest shall be due and owing. Each payment shall be applied first to
accrued and unpaid interest, and the balance to the outstanding principal
hereof. As a result, such final installment may be substantially more or
substantially less than the installments specified herein.
3. The Debtor promises to pay interest on the principal balance outstanding
at a rate of 6.77 percent per annum.
4. The Debtor may prepay this Schedule, in whole or in part, by paying
simultaneously with an in addition to the prepayment, a premium for such
prepayment privilege equal to the specified percent of the amount prepaid in
accordance with the following schedule, one (1) to twelve (12) months; five
(5.00)%, thirteen (13) to twenty-four (24) months; one (1.00)%, thereafter;
zero co:
Notwithstanding the foregoing, payments made within 30 days of the date an
installment is due which do not exceed the scheduled amount of such
installment shall not be considered prepayments.
5. Each of Debtor, if more than one, and all other parties who at any time
may be liable hereon in any capacity, hereby jointly and severally waive
diligence, demand, presentment, presentment for payment, protest, notice of
protest and notice of dishonor of this Schedule, and authorize the Secured
Party, without notice, to grant extensions in the time of payment of and
reductions in the rate of interest on any moneys owing on this Schedule.
6. The following property is hereby made Collateral for all purposes under
the Loan Agreement:
Various items of Hotel fixtures, furniture, and equipment located at the
Golden Road Motor Inn, Inc. dba Atlantis Hotel and Casino at 3800 S. Virginia
St., Reno, Nevada 89502; Washoe County and including but not limited to, all
property improvements, miscellaneous upgrades, non-salvageable material, slot
machines, buffet kitchen, casino bars, buffet bars, furniture, room
accessories and partitions, ice machines, and spas.
Whether any of the foregoing is owned now or acquired later; all accessions,
additions, replacements, and substitutions relating to any of the foregoing;
all records of any kind relating to any of the foregoing; all proceeds
relating to any of the foregoing (including insurance, general intangibles
and accounts proceeds).
7. The Collateral hereunder shall be based at the following location(s):
3800 S. Virginia Street
Reno, NV 89502
COUNTY: Washoe
IN WITNESS WHEREOF, Debtor has executed this Schedule this 16th day of
December, 1998.
Golden Road Motor Inn, Inc. dba Atlantis Hotel and Casino
By /s/Ben Farahi
Name: Ben Farahi
Title: CFO
<PAGE>
MASTER LOAN AGREEMENT
1.0 PARTIES, COLLATERAL AND OBLIGATIONS
1.1 This Agreement is dated as of September 22, 1998. For valuable
consideration, the receipt and sufficiency of which are hereby acknowledge,
Golden Road Motor Inn, Inc. dba Atlantis Hotel and Casino (hereinafter call
"Debtor") with offices at 1175 W. Moana Lane, Suite 200, Reno, Nevada 89509
intending to be legally bound, hereby promises to pay to U.S. BANCORP LEASING
& FINANCIAL, an Oregon corporation having offices at P.O. Box 2177, 7659 S.W.
Mohawk Street, Tualatin, Oregon 97062-2177 (hereinafter called "Secured
Party"), any amounts set forth on any Schedule to Master Loan Agreement
hereunder (the "Schedule(s)", all the terms of which are incorporated herein)
and grants a security interest in and assigns, transfers and sets over to and
to the successors and assigns thereof, the property specified in any Schedule
hereunder wherever located, and any and all proceeds thereof, insurance
recoveries, and all replacements, additions, accessions, accessories and
substitutions thereto or therefor (hereunder called the "Collateral"). The
security interest granted hereby is to secure payment of any and all
liabilities or obligations of Debtor to the Secured Party, matured or
unmatured, direct or indirect, absolute or contingent, heretofore arising,
now existing or hereafter arising, and whether under this Agreement or under
any other writing between Debtor and Secured Party) (all hereinafter called
the "obligations" and/or the "liabilities").
1.2 Joint and Several Liability; Payment Terms. In the event there is more
than one Debtor, all obligations shall be considered as joint and several
obligations of all Debtors regardless of the source of Collateral or the
particular Debtor with which the obligation originated. Interest shall be
calculated on the basis of a 360-day year. All payments on any Schedule
hereunder shall be made in lawful money of the United States at the post
office address of the Secured Party or at such other place as the Secured
Party may designate to Debtor in writing from time to time. In no event shall
any Schedule hereunder be enforced in any way which permits Secured Party to
collect interest in excess of the maximum lawful rate. Should interest
collected exceed such rate, Secured Party shall refund such excess interest
to Debtor. In such event, Debtor agrees that the Secured Party shall not be
subject to any penalties for contracting for or collecting interest in excess
of the maximum lawful rate.
1.3 Late Charge. If any of the obligations remains overdue for more than ten
(10) days, Debtor hereby agrees to pay on demand, as a late charge, an amount
equal to the lesser of (i) five percent (5.0) of each such overdue amount; or
(ii) the maximum percentage of any such overdue amount permitted by
applicable law as a late charge. Debtor agrees that the amount of such late
charge represents a reasonable estimate of the cost to secured Part of
processing a delinquent payment and that the acceptance of any late charge
shall not constitute a waiver of default with respect to the overdue amount
or prevent Secured Party from exercising any other available rights and
remedies.
2.0 WARRANTIES AND COVENANTS OF DEBTOR Debtor hereby represents, warrants and
covenants that:
2.1 Business Organization Status and Authority. (i) Debtor is duly organized,
validly existing and in good standing under the laws of the state of its
organization and is qualified to do business in all states and countries in
which such qualification is necessary; (ii) Debtor has the lawful power and
authority to own its assets and to conduct the business in which it is
engaged; and to execute and comply with the provisions of this Agreement and
any related documents; (iii) the execution and delivery of this Agreement and
any related documents have been duly authorized by all necessary action; (iv)
no authorization, consent, approval, license or exemption of, or filing or
registration with, any or all of the owners of Debtor or any governmental
entity was, is or will be necessary to the valid execution, delivery,
performance or full enforceability of this Agreement and any related
documents. Except as specifically disclosed to Secured Party, Debtor utilizes
no trade names in the conduct of its business and/or has not changed its name
within the past five years.
2.2 Merger; Transfer of Assets. Debtor will not consolidate or merge with or
into any other entity, liquidate or dissolve, distribute, sell, lease,
transfer or dispose of all of its properties or assets or any substantial
portion thereof other than in the ordinary course of its business, unless the
Secured Party shall give its prior written consent, and the surviving, or
successor entity or the transferee of such assets, as the case may be, shall
assume, by a written instrument which is legal, valid and enforceable against
such surviving or successor entity or transferee, all of the obligations of
Debtor to Secured Party or any affiliate of Secured Party.
2.3 No Violation of Covenants or Laws. Debtor is not party to any agreement
or subject to any restriction which materially and adversely affects its
ability to perform its obligations under this Agreement and any related
documents. The execution of and compliance with the terms of this Agreement
and any related documents does not and will not (i) violate any provision of
law, or (ii) conflict with or result in a breach of any order, injunction, or
decree of any court of governmental authority or the formation documents of
Debtor, or (iii) constitute or result in a default under any agreement, bond
or indenture by which Debtor is bound or to which any of its property is
subject, or (iv) result in the imposition of any lien or encumbrance upon any
of Debtor's assets, except for any liens created hereunder or under any
related documents.
2.4 Accurate Information. All financial information submitted to the Secured
Party in regard to Debtor, was prepared in accordance with generally accepted
accounting principles, consistently applied, and fairly and accurately
depicts the financial position and results of operations of Debtor or such
other person, as of the respective dates or for the respective periods, to
which such information pertains. Debtor had good, valid and marketable title
to all the properties and assets reflected as being owned by it on any
balance sheets of Debtor submitted to Secured Party as of the dates thereof.
2.5 Judgments; Pending Legal Action. There are no judgments outstanding
against Debtor, and there are no actions or proceedings pending or, to the
best knowledge of Debtor, threatened against or affecting Debtor or any of
its properties in any court or before any governmental entity which, if
determined adversely to Debtor, would result in any material adverse change
in the business, properties or assets, or in the condition, financial or
otherwise, of Debtor or would materially and adversely affect the ability of
Debtor to satisfy its obligations under this Agreement and any related
documents.
2.6 No Breach of Other Agreements; Compliance with Applicable Laws. Debtor is
not in breach of or in default under any loan agreement, indenture, bond,
note or other evidence of indebtedness, or any other material agreement or
any court order, injunction or decree or any lien, statute, rule or
regulation. The operations of Debtor comply with all laws, ordinances and
governmental rules and regulations applicable to them. Debtor has filed all
Federal, state and municipal income tax returns which are required to be
filed and has paid all taxes as shown on said returns and on all assessments
billed to it to the extent that such taxes or assessments have become due.
Debtor does not know of any other proposed tax assessment against it or of
any basis for one.
2.7 Sale Prohibited. Debtor will not sell, dispose of or offer to sell or
otherwise transfer the Collateral or any interest therein without the prior
written consent of Secured Party.
2.8 Location of Collateral. The Collateral will be kept at the location(s)
shown on the Schedule(s) hereunder and Debtor will promptly notify Secured
Party of any change in the location(s) of the Collateral. Debtor will not
remove the collateral from said location(s) without the prior written consent
of Secured Party.
2.9 Collateral not a Fixture. Notwithstanding any presumption of applicable
law, and irrespective of any manner of attachment, the Collateral shall not
be deemed real property but shall retain its character as personal property.
However, Debtor will at the option of Secured Party furnish the latter with a
waiver or waivers in recordable form, signed by all persons having an
interest in the real estate, of any interest in the Collateral which is or
might be deemed to be prior to Secured Party's interest.
2.10 Perfection of Security Interest. Except for (i) the security interest
granted hereby and (ii) any other security interest previously disclosed by
Debtor to Secured Party in writing, Debtor is the owner of the Collateral
free from any adverse lien, security interest or encumbrance. Debtor will
defend the Collateral against all claims and demands of all persons at any
time claiming any interest therein. Except as previously disclosed in writing
to Secured Party, no financing statement covering any Collateral or any
proceeds thereof is on file in any public office. At the request of Secured
Party, Debtor will execute, acknowledge and deliver to Secured Party in
recordable or fileable form, any document or instrument required by Secured
Party to further the purposes of this Agreement, or to perfect its interest
in the Collateral or to maintain such perfected interest in full force and
effect, including (without limitation) any fixture filings and financial
statements and any amendments and continuation statements thereto pursuant to
the Uniform Commercial Code, in form satisfactory to Secured Party, and will
pay the cost of filing the same or filing or recording this Agreement in all
public offices wherever filing or recording is deemed by Secured Party to be
necessary or desirable. Debtor hereby agrees that this Agreement shall be and
constitute a financing statement for purposes of the Uniform Commercial Code.
2.11 Insurance. Unless otherwise agreed, Debtor will have and maintain
insurance from financially sound carriers at all times with respect to all
Collateral against risks of fire (including so-called extended coverage),
theft, collision, "mysterious disappearance" and other such risks as Secured
Party may require, containing such terms, in such form, for such periods and
written by such companies as may be satisfactory to Secured Party; each
insurance policy shall name Secured Party as loss payee and shall be payable
to Secured Party and Debtor as their interest may appear; all policies of
insurance shall provide for ten days' written minimum cancellation notice to
Secured Party; Debtor shall furnish Secured Party with certificates or other
evidence satisfactory to Secured Party of compliance with the foregoing
insurance provisions.
2.12 Use of the Collateral. Debtor will use the Collateral for business
purposes only and operate it by qualified personnel in accordance with
applicable manufacturers' manuals. Debtor will keep the Collateral free from
any adverse lien or encumbrance and in good working order, condition and
repair and will not waste or destroy the Collateral or any part thereof;
Debtor will keep the Collateral appropriately protected from the elements,
and will furnish all required parts and servicing (including any contract
service necessary to maintain the benefit of any warranty of the
manufacturer); Debtor will not use the Collateral in violation of any
statute, ordinance, regulation or order; and Secured Party may examine and
inspect the Collateral and any and all books and records of Debtor during
business hours at any tome; such right of inspection shall include the right
to copy Debtor's books and records and to converse with Debtor's officers,
employees, agents, and independent accountants.
2.13 Taxes and Assessments. Debtor will pay promptly when due all taxes,
assessments, levies, imposts, duties and charges, of any kind or nature,
imposed upon the Collateral or for its use or operation or upon this
Agreement or upon any instruments evidencing the obligations.
2.14 Financial Statements. Debtor shall furnish Secured Party within ninety
(90) days after the close of each fiscal year of Debtor, its financial
statements (including, without limitation, a balance sheet, a statement of
income and surplus account and a statement of changes in financial position)
for the immediately preceding fiscal year, setting forth the corresponding
figures for the prior fiscal year in comparative form, all in reasonable
detail without any qualification or exception deemed material by Secured
Party. Such financial statements shall be prepared at least as a review by
Debtor's independent certified accountants and, if prepared as an audit,
shall be certified by such accountants. Debtor shall also furnish Secured
Party with any other financial information deemed necessary by Secured Party.
Each financial statement submitted by Debtor to Secured Party shall be
accompanied by a certificate signed by the chief executive officer, the chief
operating officer or the chief financial officer of Debtor, certifying that
(i) such financial statement was prepared in accordance with the generally
accepted accounting principles consistently applied and fairly and accurately
presents the Debtor's financial condition and results of operations for the
period to which it pertains, and (ii) no event of default has occurred under
this Agreement during the period to which such financial statements pertains.
3.0 EVENTS OF DEFAULT
3.1 the following shall be considered events of default: (i) failure on the
part of Debtor to promptly perform in complete accordance with its
representations, warranties and covenants made in this Agreement or in any
other agreement with Secured Party, including, but not limited to, the
payment of any liability, with interest, when due, or default by Debtor under
the provisions of any other material agreement to which Debtor is party; (ii)
the death of Debtor of an individual or the dissolution of Debtor if a
business organization; (iii) more than one of the present officers of Debtor
leave the business except for reason of the death or disability of an
individual; (iv) the filing of any petition or complain under the Federal
Bankruptcy Code or other federal or state acts of similar nature, by or
against Debtor; or an assignment for the benefit of creditors by Debtor; (v)
an application for or the appointment of a Receiver, Trustee or Conservator,
voluntary or involuntary, by or against Debtor or for any substantial assets
of Debtor, (vi) insolvency of Debtor under either the Federal Bankruptcy Code
or applicable principles of equity; (vii) entry of judgment, issuance of any
garnishment or attachment, or filing of any lien, claim or government
attachment against the Collateral or which, in Secured Party's sole
discretion, might impair the Collateral; (viii) the determination by Secured
Party that a material misrepresentation of fact has been made by Debtor in
this Agreement or in any writing supplementary or ancillary hereto; (ix) a
determination by Secured Party that Debtor has suffered a material adverse
change in its financial condition from the date of this Agreement; or (x)
bankruptcy, insolvency, termination, dissolution or default of any guarantor
for Debtor.
4.0 REMEDIES
4.1. Upon the happening of any event of default which is not cured within ten
(10) days, or at any time thereafter: (i) all liabilities of Debtor shall, at
the option of Secured Party, become immediately due and payable; (ii) Secured
Party shall have and may exercise all of the rights and remedies granted to a
Secured Party under the Uniform Commercial Code; (iii) Secured Party shall
have the right, immediately, and without notice or other action, to set-off
against any of Debtor's liabilities to Secured Party any money owed by
Secured Party in any capacity to Debtor, whether or not due, and Secured
Party shall be deemed to have exercised such right of set-off and to have
made a charge against any such money immediately upon the occurrence of such
default event though actual book entries may be made at some time subsequent
thereto; (iv) Secured Party may proceed with or without judicial process to
take possession of all or any part of the Collateral; Debtor agrees that upon
receipt of notice of Secured Party's intention to take possession of all or
any part of said Collateral, Debtor will do everything necessary to make same
available to Secured Party (including, without limitation, assembling the
Collateral and making it available to Secured Party at a place designated by
Secured Party which is reasonably convenient to Debtor and Secured Party);
and so long as Secured Party acts in a commercially reasonable manner, Debtor
agrees to assign, transfer and deliver at any time the whole or any portion
of the Collateral or any rights or interest therein in accordance with the
Uniform Commercial Code and without limiting the scope of Secured Party's
rights thereunder, (v) Secured Party may sell the Collateral at public or
private sale or in any other commercially reasonable manner and, at the
option of Secured Party, in bulk or in parcels and with or without having the
Collateral at the sale or other disposition, and Debtor agrees that in case
of sale or other disposition of the Collateral, or any portion thereof,
Secured Party shall apply all proceeds first to all costs and expenses of
disposition, including attorneys' fees, and then to Debtor's obligations to
Secured Party, (vi) Secured Party may elect to retain the Collateral or any
part thereof in satisfaction of all sums due from Debtor upon notice to
Debtor and any other party as may be required by the Uniform Commercial Code.
All remedies provided in this paragraph shall be cumulative. Secured Party
may exercise any one or more of such remedies in addition to any and all
other remedies Secured Party may have under any applicable law or in equity.
4.2 Expenses; Disposition. Upon default, all amounts due and to become due
hereunder shall, without notice, bear interest at the lesser of (i) twelve
percent (12%) per annum or (ii) the maximum rate per annum which Secured
Party is permitted by law to charge from the date such amounts are due until
paid. Debtor shall pay all reasonable expenses of realizing upon the
Collateral hereunder upon default and collecting all liabilities of Debtor to
Secured Party, which reasonable expenses shall include attorneys' fees,
whether or not litigation is commenced and whether incurred at trial, on
appeal, or in any other proceeding. Any notification of a sale or other
disposition of Collateral or of other action by Secured Party required to be
given by Secured Party, will be sufficient if given personally, mailed, or
delivered by facsimile machine or overnight carrier not less than five (5)
days prior to the day on which such sale or other disposition will be made or
action taken, and such notification shall be deemed reasonable notice.
5.0 MISCELLANEOUS
5.1 No Implied Waivers; Entire Agreement. The waiver by Secured Party of any
default hereunder or of any provisions hereof shall not discharge any party
hereto from liability hereunder and such waiver shall be limited to the
particular event of default and shall not operate as a waiver of any
subsequent default. This Agreement and any Schedule hereunder are non-
cancelable. No modification of this Agreement or waiver of any right of
Secured Party, hereunder shall be valid unless in writing and signed by an
authorized officer of Secured Party. No failure on the part of Secured Party
to exercise, or delay in exercising, any right or remedy hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right or remedy hereunder preclude any other or further exercise thereof or
the exercise of any other right or remedy. The provisions of this Agreement
and the rights and remedies granted to Secured Party herein shall be in
addition to, and not in limitation of those of any other agreement with
Secured Party or any other evidence of any liability held by Secured Party.
This Agreement and any Schedule hereunder (a "Transaction") embody the entire
agreement between the parties and supersede all prior agreements and
understandings relating to the same subject matter, except in any case where
the Secured Party takes an assignment from a vendor of its security interest
in the same Collateral, in which case the terms of the Transaction shall be
incorporated into the assigned agreement and shall prevail over any
inconsistent terms therein but shall not be construed to create a new
contract.
5.2. Choice of Law. This Agreement and the rights of the parties hereto shall
be governed by applicable Federal law and the laws of the State of Nevada.
Any action arising out of this Agreement may be litigated under the laws of
Nevada and submitted to the jurisdiction of Nevada, and that service of
process by certified mail, return receipt requested, will be sufficient to
confer personal jurisdiction over the Debtor.
5.3. Protection of the Collateral. At its option, Secured Party may discharge
taxes, liens or other encumbrances at any time levied or placed on the
Collateral, may pay for insurance on the Collateral and may pay for the
maintenance and preservation of the Collateral. Debtor agrees to reimburse
Secured Party on demand for any payment made or any expense incurred by
Secured Party pursuant to the foregoing authorization. Any payments made by
Secured Party shall be immediately due and payable by Debtor and shall bear
interest at the rate of fifteen percent (15%) per annum. Until default,
Debtor may retain possession of the Collateral and use it in any lawful
manner not inconsistent with the provisions of this Agreement and any other
agreement between Debtor and Secured Party, and not inconsistent with any
policy of insurance thereon.
5.4. Binding Agreement; Time of the Essence. This Agreement shall take effect
as a sealed instrument and shall be binding upon and shall inure to the
benefit of the parties hereto, their respective heirs, executors,
administrators, successors, and assigns. Time is of the essence with respect
to the performance of Debtors obligations under this Agreement and any other
agreement between Debtor and Secured Party.
5.5 Enforceability. Any term, clause or provision of this Agreement or of any
evidence of indebtedness from Debtor to Secured Party which is unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective only to
the extent of such prohibition or unenforceability without invalidating the
remaining terms or clauses of such provision or the remaining provisions
hereof, and any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such term, clause or provision
in any other jurisdiction.
5.6 Notices. Any notices or demands required to be given herein shall be
given to the parties in writing by United States first class mail (express,
certified or otherwise) at the addresses set forth on page I of this
Agreement or to such other addresses as the parties may hereafter substitute
by written notice given in the manner prescribed in this paragraph.
5.7 Additional Security. If there shall be any other collateral for any of
the obligations, or for the obligations of any guarantor thereof, Secured
Party may proceed against and/or enforce any or all of the Collateral and
such collateral in whatever order it may, in its sole discretion, deem
appropriate. Any amount(s) received by Secured Party from whatever source and
applied by it to any of the obligations shall be applied in such order of
application as Secured Party shall from time to time, in its sole discretion,
elect.
6.0 ASSIGNMENT
6.1 SECURED PARTY MAY SELL OR ASSIGN ANY AND ALL RIGHT, TITLE AND INTEREST IT
HAS IN THE COLLATERAL AND/OR ARISING UNDER THIS AGREEMENT TO A FINANCIAL
INSTITUTION. DEBTOR SHALL, UPON THE DIRECTION OF SECURED PARTY: 1) EXECUTE
ALL DOCUMENTS NECESSARY TO EFFECTUATE SUCH ASSIGNMENT AND, 2) PAY DIRECTLY
AND PROMPTLY TO SECURED PARTYS ASSIGNEE WITHOUT ABATEMENT, DEDUCTION OR SET-
OFF, ALL AMOUNTS WHICH HAVE BECOME DUE UNDER THE ASSIGNED AGREEMENTS. SECURED
PARTY'S ASSIGNEE SHALL HAVE ANY AND ALL RIGHTS, IMMUNITIES AND DISCRETION OF
SECURED PARTY HEREUNDER AND SHALL BE ENTITLED TO EXERCISE ANY REMEDIES OF
SECURED PARTY HEREUNDER. ALL REFERENCES HEREIN TO SECURED PARTY SHALL INCLUDE
SECURED PARTYS ASSIGNEE (EXCEPT THAT SAID ASSIGNEE SHALL NOT BE CHARGEABLE
WITH ANY OBLIGATIONS OR LIABILITIES HEREUNDER OR IN RESPECT HEREOF). DEBTOR
WILL NOT ASSERT AGAINST SECURED PARTY'S ASSIGNEE ANY DEFENSE, COUNTERCLAIM OR
SET-OFF WHICH DEBTOR MAY HAVE AGAINST SECURED PARTY.
6.2 DEBTOR SHALL NOT ASSIGN OR IN ANY WAY DISPOSE OF ALL OR ANY OF ITS RIGHTS
OR OBLIGATIONS UNDER THIS AGREEMENT OR ENTER INTO ANY AGREEMENT REGARDING OF
ALL OR ANY PART OF THE COLLATERAL WITHOUT THE PRIOR WRITTEN CONSENT OF
SECURED PARTY WHICH SHALL NOT BE UNREASONABLY WITHHELD. IN CONNECTION WITH
THE GRANTING OF SUCH CONSENT AND THE PREPARATION OF NECESSARY DOCUMENTATION,
A FEE SHALL BE ASSESSED EQUAL TO ONE PERCENT (1%) OF THE TOTAL REMAINING
BALANCE THEN DUE HEREUNDER.
7.0 POWER OF ATTORNEY
7.1 Secured Party is hereby appointed Debtor's attorney-in-fact to sign
Debtor's name and to make non-material amendments (including completing and
conforming the description of the Collateral) on any document in connection
with this Agreement (including any financing statement) and to obtain,
adjust, settle, and cancel any insurance required by this Agreement and to
endorse any drafts in connection with such insurance.
In Witness Whereof, the parties hereto have caused this Agreement to be duly
executed the 3rd day of Oct., 1998.
U.S. BANCORP LEASING & FINANCIAL Golden Road Motor Inn, Inc.
dba Atlantis Hotel and Casino (Debtor)
By: By: /s/ Ben Farahi
An authorized officer thereof Authorized Corporate Officer
By: Authorized Corporate Officer<PAGE>
GUARANTY
In order to induce U.S. BANCORP LEASING & FINANCIAL (the "Creditor") to enter
into one or more financing arrangements in the form of lease(s) or loan(s)
(referred to herein as the "Transaction") with, or otherwise directly or
indirectly making property available to GOLDEN ROAD MOTOR INN, INC. dba
Atlantis Hotel & Casino (the "Obligor) and/or to induce Creditor to grant to
Obligor such renewals, extensions, forbearances, releases of collateral or
other relinquishments of rights, whether in connection with the
Transaction(s) or otherwise, as Creditor may in its sole discretion deem
advisable, and in consideration of any agreements heretofore or hereafter
entered into between Creditor and Obligor (any and all such notes, security
agreements, loan agreements, lease agreements, entered into between Obligor
and Creditor together with any and all schedules and riders thereto and any
and all other instruments or agreements including, without limitation, pledge
agreements and assignments, executed and delivered by Obligor in connection
therewith, being hereinafter collectively called the "Agreements"), and for
other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, EACH OF THE UNDERSIGNED (EACH OF WHOM IS HEREINAFTER
CALLED A "GUARANTOR"), INTENDING TO BE LEGALLY BOUND, HEREBY JOINTLY AND
SEVERALLY GUARANTEES THE FULL, PROMPT, COMPLETE AND FINAL PAYMENT AND
PERFORMANCE OF ALL THE OBLIGOR'S OBLIGATIONS PURSUANT TO THE AGREEMENTS OR IN
ANY WAY ARISING THEREFROM AND ANY AND ALL OTHER OBLIGATIONS AND LIABILITIES
OF OBLIGOR TO CREDITOR, WHETHER NOW IN EXISTENCE OR ARISING HEREAFTER, AND
WHETHER DIRECT OR INDIRECT, CONTINGENT OR ABSOLUTE, MATURED OR UNMATURED,
SECURED OR UNSECURED, AND HOWEVER CONTRACTED OR ARISING (ALL SUCH OBLIGATIONS
AND LIABILITIES BEING HEREINAFTER CALLED THE "OBLIGATIONS").
Each Guarantor hereby promises to pay Creditor when due, on demand, all
indebtedness of any kind or nature emanating from the Agreements (including,
without limitation, if an event of default shall occur under the Agreements,
payment on demand of all unpaid sums to become due under the defaulted
Agreements for the entire term thereof), whether now or hereafter arising and
however and whenever evidenced; and each Guarantor agrees to indemnify and
hold Creditor harmless from and against any and all losses, liabilities and
costs emanating from any failure of Obligor to fully, promptly and completely
satisfy the Obligations. For purposes hereof, (i) "losses, liabilities and
costs" shall include (without limitation), all losses, liabilities,
obligations, claims, demands, judgments, costs and expenses of whatever kind
or nature (including, without limitation, attorneys' fees) and (ii)
"emanating" from an event or cause shall include (without limitation) in any
way directly or indirectly being caused by or in any other way arising out of
such event or cause.
Each Guarantor hereby waives any notice of default or nonpayment or of late
or inadequate satisfaction in regard to the Obligations. In particular (and
not in limitation of the foregoing), each Guarantor hereby agrees that, in
enforcing this Guaranty, Creditor shall not be required (i) to demand payment
of the amount due (known as "demand"); (ii) to present for payment any
evidence of the Obligations (known as "presentment" or "presentment for
payment"), (iii) to give notice that amounts due have not been paid (known as
"notice of dishonor"); or (iv) to obtain an official certification of
nonpayment (known as "protest") or to give any Guarantor notice of any such
"protest;" and each Guarantor hereby waives demand, presentment, presentment
for payment, notice of dishonor, protest and notice of protest, as aforesaid.
Each Guarantor hereby further waives notice of acceptance hereof and any and
all other notices to which such Guarantor may be entitled.
Each Guarantor hereby consents and agrees that without any further notice to,
or assent by Guarantor, the liability of Obligor or any other guarantor of
the Obligations may from time to time, in whole or in part, be extended,
renewed, continued, amended modified, composed, accelerated, supplemented,
compromised, settled or released in Creditor's sole discretion, and that any
collateral for any of the Obligations or for any guaranty thereof (including
this Guaranty) may from time to time, in whole or part, be exchanged, sold or
surrendered in Creditor's sole discretion. Each Guarantor hereby agrees that
no such extension, renewal, continuation, amendment, modification,
composition, acceleration, supplement, compromise, settlement, release,
exchange, sale or surrender shall in any way impair, affect or release the
liability of any Guarantor hereunder or constitute a waiver of any of
Creditor's rights hereunder.
This Guaranty is unlimited, absolute, irrevocable and unconditional and shall
continue in full force and effect until all the Obligations shall have been
fully, completely and finally satisfied and paid. The obligations of each
Guarantor hereunder shall continue and survive the repossession of any
property or other property leased pursuant to the Agreements (or any property
in which Creditor has a security interest securing any of the Obligations)
whether or not any such repossession constitutes an "election of remedies"
against the Obligor or any other person. Each Guarantor agrees to be
obligated hereunder notwithstanding any termination of the Agreements in
whole or part by operation of law or any unenforceability or invalidity of
the Agreements for any reason whatsoever (including, without limitation
invalidity or voidness ab initio and/or partial or complete unenforceability
as a result of impossibility or impracticability of performance or
frustration of the purpose of the Agreements). The obligations of the
Guarantors hereunder are joint and several and shall not be subject to any
abatement, setoff, defense or counterclaim for any cause whatsoever.
Each Guarantor hereby agrees that its obligations hereunder are direct and
primary and that Creditor may proceed directly and in the first instance
against each or any Guarantor or combination of Guarantors and have its
remedy hereunder without first being obliged to resort to any other right or
remedy or security for any of the Obligations. Each Guarantor hereby waives
any right to require Creditor to proceed against the Obligor or to proceed
against any other Guarantor or to proceed against any other guarantor of the
Obligations. If there shall be any securities for any of the Obligations, or
for the obligations of any Guarantor hereunder, or for the obligations of any
other guarantor of any of the Obligations, Creditor may proceed against
and/or enforce any or all of such securities in whatever order it may, in its
sole discretion deem appropriate. Any amount(s) received by Creditor from
whatever source and applied by it to any of the Obligations shall be applied
in such order of application as Creditor shall, in its sole discretion,
elect.
In the event of any default in regard to any Guarantor's obligations
hereunder, or in the event of death, incompetency, termination, dissolution
or insolvency of the Obligor, or if a receiver, liquidator or conservator be
appointed for any part of the property or assets of the Obligor, or if the
Obligor makes an assignment for the benefit of creditors, or if the Obligor
shall file a voluntary petition in bankruptcy or any involuntary petition in
bankruptcy shall be filed against it then, and in any such case, each
Guarantor agrees to pay to Creditor, upon demand, the full amount which would
be payable hereunder by such Guarantor if all the Obligations and
indebtedness including, but not limited to, any remaining payments owing
pursuant to the Agreements or any of the other guaranteed Agreement, were
then due and payable.
Notwithstanding any provision hereof or any provision of any other instrument
or agreement, or any presumption of applicable law or principle of legal
construction to the contrary: (i) nothing shall discharge or satisfy any
Guarantor's obligations hereunder except full, complete and final payment and
satisfaction of all the Obligations, Indebtedness and Indemnities; (ii) each
Guarantor hereby waives any and all defenses to its obligations hereunder
including, without limitation, any defense arising by reason of any cessation
of the Obligor's business or any bankruptcy, insolvency or business failure
of the Obligor or any other person; and (iii) no Guarantor shall have any
right of subrogation against the Obligor, and each Guarantor hereby waives
any and all rights of subrogation it may have against the Obligor, to enforce
any right or remedy which Creditor has or may hereafter have against the
Obligor, and waives the benefits of, and any and all rights to participate
in, any security or securities now or hereafter held by Creditor. It is
expressly understood by each Guarantor that payments received by Creditor
from or on behalf of Obligor shall be solely for the benefit of Creditor and
shall not benefit the Guarantor in any way. Each Guarantor hereby further
acknowledges that such Guarantor is not and shall be construed as a
"Creditor" of Obligor by virtue of this Guaranty.
Each Guarantor hereby represents and warrants to Creditor that all
information concerning such Guarantor, including (without limitation)
financial statements and other financial information, furnished to Creditor
in connection with the Agreements or any of the other Guaranteed Agreements,
was true, complete and accurate as of the date of delivery thereof to
Creditor, and that all such information remains true, complete and accurate,
and that there have been no material adverse changes in such Guarantor's
financial condition as of the date hereof. In the event of any breach of any
Guarantor's representations and warranties herein or any material adverse
change in the financial condition of any Guarantor, upon the request of
Creditor, such Guarantor shall promptly furnish to Creditor such additional
security for the performance of such Guarantor's obligations hereunder as
Creditor may reasonably request.
No notice of termination of this Guaranty shall be effective unless and until
such notice shall be in writing and executed by Guarantor and shall have been
received at Creditor's principal corporate headquarters at P.O. Box 2177,
7659 S.W. Mohawk Street, Tualatin, Oregon 97062-2177; provided, however, that
in the event of such notice, this Guaranty shall continue in full force and
effect with regard to all Obligations created, existing or arising prior to
the date of such receipt. No modification hereof or amendment hereto and no
waiver of any term or provision hereof shall be valid unless in writing and
signed by an authorized officer of Creditor. No delay or failure on the part
of Creditor in the exercise of any right or remedy shall operate as a waiver
thereof, and no single or partial exercise by Creditor of any right or remedy
shall preclude any other or further exercise thereof or the exercise of any
other right or remedy. No action of Creditor permitted hereunder shall
invalidate or in any way impair this Guaranty. No waiver of any right or
remedy hereunder shall constitute a waiver of any other or further right or
remedy hereunder.
Each Guarantor hereby consents and agrees that without any further notice to,
or assent by Guarantor, this Guaranty may be assigned by Creditor and
reassigned, in the sole discretion of Creditor or its assignee. As used
herein, the term "Creditor" includes Creditor and any successor or assign of
Creditor. This Guaranty shall be binding upon each Guarantor, and upon the
legal successors, representatives, and assigns of such Guarantor. Each and
every waiver made herein by any Guarantor is and shall be deemed to be and
construed as an absolute, irrevocable and unconditional waiver of the right
waived.
This Guaranty is intended to be legal, valid, binding and enforceable in
accordance with its terms. Whenever possible, each term and provision of this
Guaranty shall be interpreted so as to be effective and to effectuate its
intent under applicable law. If any term or provision of this Guaranty shall
be unenforceable, invalid or prohibited in any jurisdiction under applicable
law, such term or provision shall be ineffective in such jurisdiction but
only to the extent of such unenforceability, invalidity or prohibition, and
the remainder of such term or provision, and the other terms and provisions
of the Guaranty, shall not thereby be affected or impaired in such
jurisdiction, nor shall any of the terms or provisions of the Guaranty be
thereby affected or impaired in any way in any other jurisdiction.
This Guaranty shall be governed by the construed in accordance with Federal
Law and the laws of the State of Nevada and that service of process by
certified mail, return receipt requested, will be sufficient to confer
personal jurisdiction over such Guarantor for purposes of litigating any
actions arising hereunder in the courts of such State. This Guaranty is in
addition to, and not in limitation or derogation of, any and all other
guaranties of the Obligations executed by any Guarantor. In the event of any
conflict between the provisions of this Guaranty and those of any such other
guaranty, the provisions of this Guaranty shall govern. Each Guarantor hereby
agrees and acknowledges that time is of the essence with regard to the
performance of such Guarantor's obligations hereunder. This Guaranty shall
take effect as a sealed instrument.
NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, THE OBLIGATION OF THE
GUARANTORS TOGETHER HEREUNDER IS LIMITED TO $1,000,000.00, AND IS JOINT AND
SEVERAL.
IN WITNESS WHEREOF, each of the undersigned has caused this Guaranty to be
duly executed and delivered as of 9th day of Sept., 1998.
Witness: Behrouz Ben Farahi
/s/ John Bydalek /s/Behrouz Ben Farahi
Print Name: John Bydalek an individual
Address: 1175 W. Moana Ln. SS#
#200, Reno, NV 89509
Witness: Bahram Bob Farahi
/s/ John Bydalek /s/Bahram Bob Farahi
Print Name: John Bydalek an individual
Address: SS#
Witness: John Farahi
/s/ John Bydalek /s/John Farahi
Print Name: John Bydalek an individual
Address: SS# ###-##-####
GUARNATOR'S SIGNATURE MAY NOT BE WITNESSED BY GUARANTOR'S SPOUSE OR OTHER
FAMILY MEMBER<PAGE>
GUARANTY
In order to induce U.S. BANCORP LEASING & FINANCIAL (the "Creditor") to enter
into one or more financing arrangements in the form of lease(s) or loan(s)
(referred to herein as the "Transaction") with, or otherwise directly or
indirectly making property available to GOLDEN ROAD MOTOR INN, INC. dba
Atlantis Hotel & Casino (the "Obligor) and/or to induce Creditor to grant to
Obligor such renewals, extensions, forbearances, releases of collateral or
other relinquishments of rights, whether in connection with the
Transaction(s) or otherwise, as Creditor may in its sole discretion deem
advisable, and in consideration of any agreements heretofore or hereafter
entered into between Creditor and Obligor (any and all such notes, security
agreements, loan agreements, lease agreements, entered into between Obligor
and Creditor together with any and all schedules and riders thereto and any
and all other instruments or agreements including, without limitation, pledge
agreements and assignments, executed and delivered by Obligor in connection
therewith, being hereinafter collectively called the "Agreements"), and for
other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, EACH OF THE UNDERSIGNED (EACH OF WHOM IS HEREINAFTER
CALLED A "GUARANTOR"), INTENDING TO BE LEGALLY BOUND, HEREBY JOINTLY AND
SEVERALLY GUARANTEES THE FULL, PROMPT, COMPLETE AND FINAL PAYMENT AND
PERFORMANCE OF ALL THE OBLIGOR'S OBLIGATIONS PURSUANT TO THE AGREEMENTS OR IN
ANY WAY ARISING THEREFROM AND ANY AND ALL OTHER OBLIGATIONS AND LIABILITIES
OF OBLIGOR TO CREDITOR, WHETHER NOW IN EXISTENCE OR ARISING HEREAFTER, AND
WHETHER DIRECT OR INDIRECT, CONTINGENT OR ABSOLUTE, MATURED OR UNMATURED,
SECURED OR UNSECURED, AND HOWEVER CONTRACTED OR ARISING (ALL SUCH OBLIGATIONS
AND LIABILITIES BEING HEREINAFTER CALLED THE "OBLIGATIONS").
Each Guarantor hereby promises to pay Creditor when due, on demand, all
indebtedness of any kind or nature emanating from the Agreements (including,
without limitation, if an event of default shall occur under the Agreements,
payment on demand of all unpaid sums to become due under the defaulted
Agreements for the entire term thereof), whether now or hereafter arising and
however and whenever evidenced; and each Guarantor agrees to indemnify and
hold Creditor harmless from and against any and all losses, liabilities and
costs emanating from any failure of Obligor to fully, promptly and completely
satisfy the Obligations. For purposes hereof, (i) "losses, liabilities and
costs" shall include (without limitation), all losses, liabilities,
obligations, claims, demands, judgments, costs and expenses of whatever kind
or nature (including, without limitation, attorneys' fees) and (ii)
"emanating" from an event or cause shall include (without limitation) in any
way directly or indirectly being caused by or in any other way arising out of
such event or cause.
Each Guarantor hereby waives any notice of default or nonpayment or of late
or inadequate satisfaction in regard to the Obligations. In particular (and
not in limitation of the foregoing), each Guarantor hereby agrees that, in
enforcing this Guaranty, Creditor shall not be required (i) to demand payment
of the amount due (known as "demand"); (ii) to present for payment any
evidence of the Obligations (known as "presentment" or "presentment for
payment"), (iii) to give notice that amounts due have not been paid (known as
"notice of dishonor"); or (iv) to obtain an official certification of
nonpayment (known as "protest") or to give any Guarantor notice of any such
"protest;" and each Guarantor hereby waives demand, presentment, presentment
for payment, notice of dishonor, protest and notice of protest, as aforesaid.
Each Guarantor hereby further waives notice of acceptance hereof and any and
all other notices to which such Guarantor may be entitled.
Each Guarantor hereby consents and agrees that without any further notice to,
or assent by Guarantor, the liability of Obligor or any other guarantor of
the Obligations may from time to time, in whole or in part, be extended,
renewed, continued, amended modified, composed, accelerated, supplemented,
compromised, settled or released in Creditor's sole discretion, and that any
collateral for any of the Obligations or for any guaranty thereof (including
this Guaranty) may from time to time, in whole or part, be exchanged, sold or
surrendered in Creditor's sole discretion. Each Guarantor hereby agrees that
no such extension, renewal, continuation, amendment, modification,
composition, acceleration, supplement, compromise, settlement, release,
exchange, sale or surrender shall in any way impair, affect or release the
liability of any Guarantor hereunder or constitute a waiver of any of
Creditor's rights hereunder.
This Guaranty is unlimited, absolute, irrevocable and unconditional and
shall continue in full force and effect until all the Obligations shall
have been fully, completely and finally satisfied and paid. The obligations
of each Guarantor hereunder shall continue and survive the repossession of
any property or other property leased pursuant to the Agreements (or any
property in which Creditor has a security interest securing any of the
Obligations) whether or not any such repossession constitutes an "election
of remedies" against the Obligor or any other person. Each Guarantor agrees
to be obligated hereunder notwithstanding any termination of the Agreements
in whole or part by operation of law or any unenforceability or invalidity
of the Agreements for any reason whatsoever (including, without limitation
invalidity or voidness ab initio and/or partial or complete
unenforceability as a result of impossibility or impracticability of
performance or frustration of the purpose of the Agreements). The
obligations of the Guarantors hereunder are joint and several and shall not
be subject to any abatement, setoff, defense or counterclaim for any cause
whatsoever.
Each Guarantor hereby agrees that its obligations hereunder are direct and
primary and that Creditor may proceed directly and in the first instance
against each or any Guarantor or combination of Guarantors and have its
remedy hereunder without first being obliged to resort to any other right or
remedy or security for any of the Obligations. Each Guarantor hereby waives
any right to require Creditor to proceed against the Obligor or to proceed
against any other Guarantor or to proceed against any other guarantor of the
Obligations. If there shall be any securities for any of the Obligations, or
for the obligations of any Guarantor hereunder, or for the obligations of any
other guarantor of any of the Obligations, Creditor may proceed against
and/or enforce any or all of such securities in whatever order it may, in its
sole discretion deem appropriate. Any amount(s) received by Creditor from
whatever source and applied by it to any of the Obligations shall be applied
in such order of application as Creditor shall, in its sole discretion,
elect.
In the event of any default in regard to any Guarantor's obligations
hereunder, or in the event of death, incompetency, termination, dissolution
or insolvency of the Obligor, or if a receiver, liquidator or conservator be
appointed for any part of the property or assets of the Obligor, or if the
Obligor makes an assignment for the benefit of creditors, or if the Obligor
shall file a voluntary petition in bankruptcy or any involuntary petition in
bankruptcy shall be filed against it then, and in any such case, each
Guarantor agrees to pay to Creditor, upon demand, the full amount which would
be payable hereunder by such Guarantor if all the Obligations and
indebtedness including, but not limited to, any remaining payments owing
pursuant to the Agreements or any of the other guaranteed Agreement, were
then due and payable.
Notwithstanding any provision hereof or any provision of any other instrument
or agreement, or any presumption of applicable law or principle of legal
construction to the contrary: (i) nothing shall discharge or satisfy any
Guarantor's obligations hereunder except full, complete and final payment and
satisfaction of all the Obligations, Indebtedness and Indemnities; (ii) each
Guarantor hereby waives any and all defenses to its obligations hereunder
including, without limitation, any defense arising by reason of any cessation
of the Obligor's business or any bankruptcy, insolvency or business failure
of the Obligor or any other person; and (iii) no Guarantor shall have any
right of subrogation against the Obligor, and each Guarantor hereby waives
any and all rights of subrogation it may have against the Obligor, to enforce
any right or remedy which Creditor has or may hereafter have against the
Obligor, and waives the benefits of, and any and all rights to participate
in, any security or securities now or hereafter held by Creditor. It is
expressly understood by each Guarantor that payments received by Creditor
from or on behalf of Obligor shall be solely for the benefit of Creditor and
shall not benefit the Guarantor in any way. Each Guarantor hereby further
acknowledges that such Guarantor is not and shall be construed as a
"Creditor" of Obligor by virtue of this Guaranty.
Each Guarantor hereby represents and warrants to Creditor that all
information concerning such Guarantor, including (without limitation)
financial statements and other financial information, furnished to Creditor
in connection with the Agreements or any of the other Guaranteed Agreements,
was true, complete and accurate as of the date of delivery thereof to
Creditor, and that all such information remains true, complete and accurate,
and that there have been no material adverse changes in such Guarantor's
financial condition as of the date hereof. In the event of any breach of any
Guarantor's representations and warranties herein or any material adverse
change in the financial condition of any Guarantor, upon the request of
Creditor, such Guarantor shall promptly furnish to Creditor such additional
security for the performance of such Guarantor's obligations hereunder as
Creditor may reasonably request.
No notice of termination of this Guaranty shall be effective unless and until
such notice shall be in writing and executed by Guarantor and shall have been
received at Creditor's principal corporate headquarters at P.O. Box 2177,
7659 S.W. Mohawk Street, Tualatin, Oregon 97062-2177; provided, however, that
in the event of such notice, this Guaranty shall continue in full force and
effect with regard to all Obligations created, existing or arising prior to
the date of such receipt. No modification hereof or amendment hereto and no
waiver of any term or provision hereof shall be valid unless in writing and
signed by an authorized officer of Creditor. No delay or failure on the part
of Creditor in the exercise of any right or remedy shall operate as a waiver
thereof, and no single or partial exercise by Creditor of any right or remedy
shall preclude any other or further exercise thereof or the exercise of any
other right or remedy. No action of Creditor permitted hereunder shall
invalidate or in any way impair this Guaranty. No waiver of any right or
remedy hereunder shall constitute a waiver of any other or further right or
remedy hereunder.
Each Guarantor hereby consents and agrees that without any further notice to,
or assent by Guarantor, this Guaranty may be assigned by Creditor and
reassigned, in the sole discretion of Creditor or its assignee. As used
herein, the term "Creditor" includes Creditor and any successor or assign of
Creditor. This Guaranty shall be binding upon each Guarantor, and upon the
legal successors, representatives, and assigns of such Guarantor. Each and
every waiver made herein by any Guarantor is and shall be deemed to be and
construed as an absolute, irrevocable and unconditional waiver of the right
waived.
This Guaranty is intended to be legal, valid, binding and enforceable in
accordance with its terms. Whenever possible, each term and provision of this
Guaranty shall be interpreted so as to be effective and to effectuate its
intent under applicable law. If any term or provision of this Guaranty shall
be unenforceable, invalid or prohibited in any jurisdiction under applicable
law, such term or provision shall be ineffective in such jurisdiction but
only to the extent of such unenforceability, invalidity or prohibition, and
the remainder of such term or provision, and the other terms and provisions
of the Guaranty, shall not thereby be affected or impaired in such
jurisdiction, nor shall any of the terms or provisions of the Guaranty be
thereby affected or impaired in any way in any other jurisdiction.
This Guaranty shall be governed by the construed in accordance with Federal
Law and the laws of the State of Nevada and that service of process by
certified mail, return receipt requested, will be sufficient to confer
personal jurisdiction over such Guarantor for purposes of litigating any
actions arising hereunder in the courts of such State. This Guaranty is in
addition to, and not in limitation or derogation of, any and all other
guaranties of the Obligations executed by any Guarantor. In the event of any
conflict between the provisions of this Guaranty and those of any such other
guaranty, the provisions of this Guaranty shall govern. Each Guarantor hereby
agrees and acknowledges that time is of the essence with regard to the
performance of such Guarantor's obligations hereunder. This Guaranty shall
take effect as a sealed instrument.
IN WITNESS WHEREOF, each of the undersigned has caused this Guaranty to be
duly executed and delivered as of 9th day of Sept., 1998.
Monarch Casino & Resort, Inc.
By: /s/ Ben Farahi
Ben Farahi [Print Name]
CFO [Title]
1175 West Moana Lane, Suite 200
Reno, Nevada 89509
FED ID # 88.0300760
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS FINANCIAL INFORMATION EXTRACTED FROM REGISTRANT'S
CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 1998 AND THE ACCOMPANYING
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS AND NOTES TO FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 4,950,244
<SECURITIES> 0
<RECEIVABLES> 1,439,921
<ALLOWANCES> 165,578
<INVENTORY> 476,948
<CURRENT-ASSETS> 9,212,352
<PP&E> 100,706,367
<DEPRECIATION> 22,125,039
<TOTAL-ASSETS> 89,456,343
<CURRENT-LIABILITIES> 8,444,564
<BONDS> 52,309,785
0
0
<COMMON> 95,363
<OTHER-SE> 26,358,083
<TOTAL-LIABILITY-AND-EQUITY> 89,456,343
<SALES> 0
<TOTAL-REVENUES> 62,510,532
<CGS> 0
<TOTAL-COSTS> 31,697,506
<OTHER-EXPENSES> 4,616,722
<LOSS-PROVISION> 194,853
<INTEREST-EXPENSE> 2,222,089
<INCOME-PRETAX> 5,680,739
<INCOME-TAX> 1,920,957
<INCOME-CONTINUING> 3,759,782
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,759,782
<EPS-PRIMARY> 0.40
<EPS-DILUTED> 0.40
</TABLE>
