<PAGE>
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 31,1997
-----------------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to ___________________
Commission file number 1-12802
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HARVEYS CASINO RESORTS
----------------------
(Exact Name of Registrant as Specified in its Charter)
Nevada 88-0066882
------ ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Highway 50 & Stateline Avenue
P.O. Box 128
Lake Tahoe, Nevada 89449
------------------ -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (702) 588-2411
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 __
On October 10, 1997 the registrant had outstanding 9,840,069 shares of its $.01
par value, common stock.
<PAGE>
HARVEYS CASINO RESORTS
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
- --------
Item 1. Financial Statements
Condensed Consolidated Balance Sheets,
August 31, 1997 and November 30, 1996 3
Condensed Consolidated Statements of
Income For the Three Months and Nine
Months Ended August 31, 1997 and 1996 4
Condensed Consolidated Statements of Cash
Flows For the Nine Months
Ended August 31, 1997 and 1996 5
Notes to Condensed Consolidated Financial
Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 19
Item 2. Changes in Securities 19
Item 3. Defaults Upon Senior Securities 19
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 5. Other Information 19
Item 6. Exhibits and Reports on Form 8-K 19
SIGNATURES 20
2
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
HARVEYS CASINO RESORTS
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
August 31, November 30,
1997 1996
---------- ------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 26,048 $ 21,121
Accounts and notes receivable, net 6,083 8,760
Prepaid expenses 5,311 3,992
Other current assets 7,614 7,275
---------- ----------
Total current assets 45,056 41,148
Property and equipment (net of accumulated depreciation
of $123,595 and $112,977) 319,900 314,908
Notes receivable 2,093 4,868
Other assets 18,436 17,607
Investment in unconsolidated affiliate 16,561 15,237
---------- ----------
Total assets $402,046 $393,768
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt $ 1,350 $ 2,753
Accounts and contracts payable 6,729 9,542
Accrued interest payable 4,157 242
Income taxes payable 5,701 -
Other current liabilities 20,501 16,898
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Total current liabilities 38,438 29,435
Long-term debt, net of current portion 167,720 181,354
Deferred income taxes 19,339 19,339
Other liabilities 15,986 13,877
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Total liabilities 241,483 244,005
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Stockholders' equity
Common stock, $.01 par value;30,000,000 shares authorized;
shares issued 9,835,297 and 9,818,322 98 98
Additional paid-in capital and other 38,654 38,058
Retained earnings 121,811 111,607
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Total stockholders' equity 160,563 149,763
---------- ----------
Total liabilities and stockholders' equity $ 402,046 $ 393,768
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of these statements.
3
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HARVEYS CASINO RESORTS
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended August 31, Ended August 31,
---------------- ----------------
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenues
Casino $ 63,148 $ 54,847 $ 162,397 $ 137,121
Lodging 10,199 9,505 24,659 21,765
Food and beverage 13,378 12,584 33,380 30,029
Other 2,099 2,036 5,267 4,994
Management fees and joint venture 1,251 932 3,920 3,501
Less: Casino promotional allowances (6,399) (5,655) (16,092) (14,307)
----------- ----------- ----------- -----------
Total net revenues 83,676 74,249 213,531 183,103
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Costs and expenses
Casino 27,306 23,524 75,168 64,628
Lodging 3,524 3,498 10,051 8,546
Food and beverage 8,461 8,267 22,595 17,886
Other operating 806 816 2,145 2,139
Selling, general and administrative 20,541 18,491 55,432 49,661
Depreciation and amortization 5,043 4,455 13,987 11,904
Pre-opening expenses - - - 4,099
----------- ----------- ----------- -----------
Total costs and expenses 65,681 59,051 179,378 158,863
----------- ----------- ----------- -----------
Operating income 17,995 15,198 34,153 24,240
----------- ----------- ----------- -----------
Other income(expense)
Interest income 81 205 245 611
Interest expense (4,929) (5,018) (14,776) (10,092)
Other, net (166) 148 49 (72)
----------- ----------- ----------- -----------
(5,014) (4,665) (14,482) (9,553)
----------- ----------- ----------- -----------
Income before income taxes and
extraordinary item 12,981 10,533 19,671 14,687
Income tax provision (5,257) (4,248) (7,965) (5,834)
----------- ----------- ----------- -----------
Income before extraordinary item 7,724 6,285 11,706 8,853
Extraordinary item-loss on early retirement
of debt, net of income tax benefit - (380) - (522)
----------- ----------- ----------- -----------
Net income $ 7,724 $ 5,905 $ 11,706 $ 8,331
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Income per common share
Income before extraordinary item $ 0.78 $ 0.64 $ 1.19 $ 0.92
Extraordinary item-loss on early retirement
of debt, net of income tax benefit $ - $ (0.04) $ - $ (0.06)
----------- ----------- ----------- -----------
Net income per common share $ 0.78 $ 0.60 $ 1.19 $ 0.86
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Weighted average shares used in
calculating income per common share 9,851,443 9,878,644 9,835,297 9,650,161
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Dividends declared per common share $ 0.05 $ 0.05 $ 0.15 $ 0.13
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these statements.
4
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HARVEYS CASINO RESORTS
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
Nine Months Ended August 31,
----------------------------
1997 1996
--------- -----------
<S> <C> <C>
Cash flows from operating activities
Net income $ 11,706 $ 8,331
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 13,987 11,904
Other, net 14,165 17,962
---------- ----------
Net cash provided by operating activities 39,858 38,197
---------- ----------
Cash flows from investing activities
Capital expenditures (22,114) (61,791)
Proceeds from disposition of assets 3,674 -
Purchase of notes and accrued interest
of consolidated subsidiary - (6,000)
Other, net (45) 89
---------- ----------
Net cash used in investing activities (18,485) (67,702)
---------- ----------
Cash flows from financing activities
Principal payments on long-term debt (26,049) (205,799)
Dividends paid (1,474) (1,259)
Proceeds from long-term debt 11,014 103,000
Proceeds from public debt offering - 150,000
Debt issuance costs (114) (6,313)
Other, net 177 (247)
---------- ----------
Net cash provided by (used in) financing activities (16,446) 39,382
---------- ----------
Increase in cash and cash equivalents 4,927 9,877
Cash and cash equivalents at beginning of period 21,121 10,493
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Cash and cash equivalents at end of period $ 26,048 $ 20,370
---------- ----------
---------- ----------
Supplemental cash flows disclosure
Cash paid for interest, net of amounts capitalized $ 10,104 $ 7,761
Cash paid for income taxes 663 2,128
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE>
HARVEYS CASINO RESORTS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation and Consolidation - Harveys Casino Resorts, a Nevada
corporation, (the 'Company') is engaged in the casino entertainment
industry. In 1996, the Company formed a wholly-owned subsidiary, Harveys
Tahoe Management Company, Inc. ('HTMC') to own and operate the Company's
resort on the south shore of Lake Tahoe, Nevada. On May 22, 1997, HTMC was
licensed by the Nevada gaming authorities and on June 1, 1997 the Company
transferred the ownership of Harveys Resort Hotel/Casino to HTMC. The
Company, through its wholly-owned subsidiary, Harveys C. C. Management
Company, Inc. ('HCCMC'), owns and operates Harveys Wagon Wheel Hotel/Casino
in Central City, Colorado. Until April 30, 1996, HCCMC owned 70% of the
equity interest in Harveys Wagon Wheel Casino Limited Liability Company
('HWW') which owns Harveys Wagon Wheel Hotel/Casino. On April 30, 1996,
the Company acquired all of the 30% minority interest in HWW in exchange
for common stock of the Company. On June 1, 1997, the Company contributed
its 30% interest in HWW to HCCMC. Through its wholly-owned subsidiary,
Harveys L. V. Management Company, Inc. ('HLVMC'), the Company owns 40% of
the equity interest in Hard Rock Hotel, Inc. ('HRHC'), which owns the Hard
Rock Hotel and Casino in Las Vegas, Nevada. HLVMC has a contract to manage
the Las Vegas hotel and casino (see Note 6). Additionally, the Company's
wholly-owned subsidiary, Harveys Iowa Management Company, Inc. ('HIMC') is
the owner and operator of Harveys Casino Hotel, a riverboat casino, hotel
and convention center complex in Council Bluffs, Iowa. The riverboat
casino portion of the complex opened for business on January 1, 1996 and
the land-based hotel opened for business on May 24, 1996.
The condensed consolidated financial statements include the accounts of
Harveys Casino Resorts and its majority and wholly-owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated.
Investments in unconsolidated affiliates are stated at cost adjusted by
equity in undistributed earnings or losses.
The condensed consolidated balance sheet as of November 30, 1996 has been
prepared from the audited financial statements at that date. The
accompanying condensed consolidated financial statements as of August 31,
1997 and for the three months and nine months ended August 31, 1997 and
1996 have been prepared by the Company, without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission.
Accordingly, certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted.
In the opinion of management, all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of financial
condition, results of operations and cash flows have been included. The
results of operations for the interim periods should not be considered
indicative of results for a full fiscal year. These financial statements
should be read in conjunction with the financial statements, and notes
thereto, in the Company's Annual Report on Form 10-K for the year ended
November 30, 1996.
6
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2. Net Income Per Common Share - Net income per share is computed based on the
weighted average number of shares of common stock and dilutive common stock
equivalents outstanding during the period. Fully diluted per share
amounts are the same as primary per share amounts for all periods
presented.
3. Pre-opening Expenses - Pre-opening expenses are associated with the
acquisition, development and opening of the Company's new casino resorts.
These amounts are expensed when the resort commences operations and include
items that were capitalized as incurred prior to opening and items that are
directly related to the opening of the property and are non-recurring in
nature. Approximately $4.1 million of pre-opening expenses were expensed in
the first two quarters of 1996 in connection with the Company's opening of
HIMC's riverboat casino in Council Bluffs, Iowa on January 1, 1996 and the
opening of the land-based facilities on May 24, 1996.
4. Recently Adopted Accounting Standards - The Financial Accounting Standards
Board ('FASB') issued Statement of Financial Accounting Standards ('SFAS')
No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of, in March 1995. This statement was
adopted by the Company for the fiscal year beginning December 1, 1996 and
requires that long-lived assets and certain identifiable intangibles to be
held and used by an entity be reviewed whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The adoption of SFAS No. 121 did not have an effect on the
financial position or results of operations of the Company.
The FASB issued SFAS No. 123, Accounting for Stock-Based Compensation, in
October 1995. This statement was adopted by the Company for the fiscal
year beginning December 1, 1996 and requires certain disclosures about the
impact on results of operations of the fair value of stock-based employee
compensation arrangements. Management intends to continue to account for
stock-based employee compensation arrangements in accordance with
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees, and accordingly adoption of SFAS No. 123 did not have a
significant effect on the financial position or results of operations of
the Company. The Company will include the pro forma effects of this
statement in its notes to financial statements for the fiscal year ending
November 30, 1997.
5. Recently Issued Accounting Standards - The FASB has issued SFAS No. 128,
Earnings Per Share, which (a) simplifies current standards by eliminating
the presentation of primary earnings per share ('EPS') and requiring the
presentation of basic EPS, which includes no potential common shares and
thus no dilution, (b) requires companies with complex capital structures to
present basic and diluted EPS on the face of the income statement, and (c)
eliminates the modified treasury stock method of computing potential
shares. SFAS No. 128 will be effective for the Company beginning December
1, 1997, including interim periods ending after that date. On adoption,
restatement of all prior-period EPS data presented will be required.
Management believes the adoption of SFAS No. 128 will not have a material
effect on the computation of EPS for any of the three months or nine months
ended August 31, 1997 and 1996.
The FASB has issued SFAS No. 131, Disclosures About Segments of an
Enterprise and Related Information, which establishes new standards for
determining a reportable segment and for disclosing information regarding
each such segment. A reportable segment is an operating segment (a) that
engages in business activities from which it earns revenues and incurs
expenses,
7
<PAGE>
5. Recently Issued Accounting Standards (continued) -
(b) whose operating results are regularly reviewed by the enterprise's
chief operating decision maker in deciding how to allocate resources and in
assessing performance, (c) for which discrete financial information is
available, and (d) that exceeds specific quantitative thresholds. SFAS No.
131 will be effective for the Company beginning December 1, 1998. On
adoption, and to the extent practicable, segment information for earlier
comparative years will be restated. The Company anticipates with the
adoption of SFAS No. 131, it will expand its segment disclosures relative
to its Nevada, Colorado and Iowa operations. The Company believes the
segment information required to be disclosed under SFAS No. 131 will be
more comprehensive than previously provided, including expanded disclosure
of income statement and balance sheet items for each of its reportable
operating segments.
6. Commitments - The Company has completed construction of a parking facility
adjacent to Harveys Wagon Wheel Hotel/Casino in Central City, Colorado.
The facility accommodates approximately 530 automobiles and was completed
in June 1997. The Company has entered into various contracts or agreements
relative to the construction of the parking facility. The cost of the
project is estimated to be approximately $10.8 million. Through August 31,
1997, the Company had expended approximately $9.7 million.
On July 1, 1997 the Company entered into a Stock Purchase and Management
Buyout Agreement ( the 'Stock Purchase Agreement') with HRHC, Lily Pond
Investments, Inc. ('Lily Pond') and HLVMC. Pursuant to the Stock Purchase
Agreement, among other things, HRHC will repurchase from the Company all
the capital stock of HRHC held by the Company, representing 40% of the
currently outstanding capital stock of HRHC, and the Company's management
agreement will be terminated. The Company will continue to manage the Hard
Rock Hotel and Casino until the closing of the transaction. The
consummation of the transaction is subject to certain conditions and
approvals, including approval by Nevada gaming authorities. Upon closing,
the management agreement currently in effect between HRHC and HLVMC
relating to the management and operations of HRHC will terminate, and the
stockholders agreement among the Company, HRHC and Lily Pond will be
canceled. The total consideration to be paid to the Company upon closing
is $45 million cash.
7. Subsidiary Guarantors - The 10 5/8% Senior Subordinated Notes due 2006 (the
'Senior Subordinated Notes'), issued by the Company are guaranteed by all
direct and indirect subsidiaries of the Company ( the 'Subsidiary
Guarantors') except for subsidiaries which are inconsequential. The
guarantees are full and unconditional and are joint and several. The
aggregate assets, liabilities, earnings, and equity of the Subsidiary
Guarantors are substantially equivalent to the assets, liabilities,
earnings, and equity of the Company on a consolidated basis. Separate
financial statements and other disclosures concerning the Subsidiary
Guarantors have not been included because management has determined they
are not material to investors.
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
OVERVIEW
The Company currently owns and operates Harveys Resort Hotel/Casino on the south
shore of Lake Tahoe, Nevada, Harveys Wagon Wheel Hotel/Casino in Central City,
Colorado and Harveys Casino Hotel in Council Bluffs, Iowa. Additionally, the
Company owns a 40% equity interest in and manages the Hard Rock Hotel and Casino
in Las Vegas.
On July 1, 1997 the Company entered into an agreement whereby HRHC will purchase
the Company's interests in HRHC for $45 million in cash. The consummation of
the transaction is subject to certain conditions and approvals, including
approval by Nevada gaming authorities. Until the transaction closes, the
Company will continue to manage the operations of the Hard Rock Hotel and Casino
and will continue to recognize management fee income and equity in the earnings
from the Hard Rock Hotel and Casino. Upon closing, the management agreement
currently in effect will terminate and the Company will no longer hold an equity
interest in HRHC.
The following table presents certain operating results for the Company's
properties. The operating results for Harveys Resort Hotel/Casino, which, since
June 1, 1997, has been owned and operated by the Company's wholly-owned
subsidiary, HTMC, have been presented for all periods, excluding the effects of
corporate and new business development expenses. Those expenses have been
presented under the caption 'Corporate and Development'. On April 30, 1996, the
Company acquired the 30% minority interest in HWW. As a result of the
acquisition, Harveys Wagon Wheel Hotel/Casino and HWW became wholly owned by the
Company. The riverboat casino portion of Harveys Casino Hotel opened on January
1, 1996 and the land-based facilities opened on May 24, 1996. The operating
results of Harveys L. V. Management Company include the fees earned by such
entity for managing the operations of the Hard Rock Hotel and Casino and the 40%
equity interest in the income of the Hard Rock Hotel and Casino.
<TABLE>
<CAPTION>
Three Months Nine Months
Ended August 31, Ended August 31,
---------------- ----------------
1997 1996 1997 1996
------- -------- -------- --------
(dollars in thousands)
<S> <C> <C> <C> <C>
Net Revenues
Harveys Resort Hotel/Casino $ 42,339 $ 41,316 $ 98,390 $ 99,394
Harveys Wagon Wheel Hotel/Casino 13,919 10,927 36,350 32,330
Harveys Casino Hotel - Iowa (1) 26,167 21,074 74,871 47,878
Harveys L. V. Management Company 1,251 932 3,920 3,501
Operating Income (Loss)
Harveys Resort Hotel/ Casino $ 11,946 $ 11,941 $ 18,298 $ 18,470
Harveys Wagon Wheel Hotel/ Casino 2,852 1,694 7,215 5,683
Harveys Casino Hotel - Iowa (1) 4,754 3,400 13,423 5,087
Harveys L. V. Management Company 1,196 877 3,754 3,333
Corporate and Development (2,753) (2,714) (8,537) (8,333)
EBITDA (2)
Harveys Resort Hotel/ Casino $ 14,217 $ 14,072 $ 24,546 $ 24,968
Harveys Wagon Wheel Hotel/ Casino 3,704 2,432 9,573 7,915
Harveys Casino Hotel - Iowa (1) 6,481 4,900 18,230 12,152
Harveys L. V. Management Company 1,251 932 3,920 3,499
Corporate and Development (2,615) (2,683) (8,129) (8,291)
</TABLE>
9
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Notes to the operating results
(1) The riverboat casino portion of Harveys Casino Hotel - Iowa
commenced casino operations on January 1, 1996, and the land-
based hotel facilities opened on May 24, 1996. The operating
results for the nine months ended August 31, 1996 include
approximately $4.1 million of pre-opening expenses.
(2) EBITDA (operating income plus depreciation and amortization)
should not be construed as an indicator of the Company's
operating performance, or as an alternative to cash flows from
operating activities as a measure of liquidity. The Company has
presented EBITDA solely as supplemental disclosure because the
Company believes that it enhances the understanding of the
financial performance of companies with substantial depreciation
and amortization. For the nine months ended August 31, 1996,
Harveys Casino Hotel -Iowa's EBITDA excludes approximately $4.1
million of pre-opening expenses.
COMPARISON OF THE THREE MONTHS ENDED AUGUST 31, 1997 AND AUGUST 31,
1996
The Company's consolidated net revenues for the third quarter of
fiscal 1997 amounted to approximately $83.7 million, a new record for
the Company's third quarter and an increase of $9.4 million, or 12.7%,
over net revenues recorded in the third quarter of fiscal 1996. The
improvement was largely attributed to the $5.1 million increase in net
revenues produced by Harveys Casino Hotel. The third quarter
comparison is the first in which both periods include a full quarter
of revenues from the riverboat casino and the land-based facilities.
The increase in net revenues generated during the current year third
quarter at the Company's Lake Tahoe property amounted to approximately
$1.0 million, or 2.5%. Harveys Wagon Wheel Hotel/Casino experienced a
27.4% increase in net revenues, up $3.0 million. The improvement in
the net revenues from the Central City, Colorado property was
attributed, in part, to the June opening of the 530 space parking
garage. The Hard Rock Hotel and Casino contributed an increase of
approximately $0.3 million to the Company's net revenues in the third
quarter of fiscal 1997, by way of management fees and equity in the
joint venture income.
Casino revenue for the third quarter of fiscal 1997 amounted to
approximately $63.1 million, an improvement of $8.3 million over the
comparable quarter of the prior year. The third quarter of gaming
activity at the Company's Council Bluffs facility produced
approximately $22.5 million of casino revenue accounting for
approximately $4.0 million of the quarter-over-quarter increase. The
Company's Lake Tahoe and Colorado properties contributed $1.1 million
and $3.2 million, respectively, to the increase in casino revenues.
Casino costs and expenses increased for the comparable quarterly
periods, up $3.8 million to $27.3 million for the current year period.
The Council Bluffs casino accounted for $2.2 million of the increase
while the Lake Tahoe and Colorado operations accounted for
approximately $0.4 million and $1.2 million of the increase,
respectively, Over $1.9 million of the increase in casino costs and
expenses was attributable to gaming taxes and licenses, a consequence
of the increase in casino revenues. The balance of the increase was
primarily due to promotional expenses at all properties.
Lodging revenues for the fiscal 1997 third quarter improved by
approximately $0.7 million over the prior year third quarter and
amounted to $10.2 million. The hotel facility in Council Bluffs,
which included revenues from the land-based hotel for all of the
fiscal 1997 and 1996 quarters, contributed
10
<PAGE>
$0.3 million of the increase, while the Company's Lake Tahoe and
Colorado properties contributed $0.3 million and $0.1 million,
respectively, to the increase in lodging revenues. Lodging costs and
expenses remained relatively level, consequently, lodging profits
improved by approximately $0.7 million.
Food and beverage revenues for the current fiscal year third quarter
amounted to $13.4 million, an improvement of nearly $0.8 million over
the prior year third quarter. Food and beverage revenue from the
Council Bluffs property, which included revenues from the land-based
facilities for both quarters, contributed an increase of
approximately $0.7 million. The Lake Tahoe property provided an
increase in food and beverage revenues of approximately $0.3 million.
Those increases were offset by a decline of over $0.2 million at the
Central City property as the result of outsourcing, since the second
quarter of fiscal 1996, the food service and a portion of the beverage
service to an unaffiliated management company. Food and beverage
profits and margins improved for the quarter-to-quarter comparison
primarily as a result of the increases in revenues and the controlling
of related costs.
Other revenues and the $1.2 million contribution from management fees
and equity in the earnings from the Hard Rock Hotel and Casino for the
fiscal 1997 third quarter amounted to $3.3 million, an improvement of
$0.4 million over the prior year third quarter.
Selling, general and administrative expenses increased by
approximately $2.0 million, or 11.1%, to $20.5 million for the current
fiscal year third quarter. The Council Bluffs operations accounted
for approximately $0.9 million of the increase. The Lake Tahoe and
Central City properties recognized increases in overall selling,
general and administrative expenses of approximately $0.4 million and
$0.8 million, respectively, while corporate expenses declined by
approximately $0.1 million. Depreciation and amortization expenses
increased by approximately $0.6 million. The increase in depreciation
was associated with the facilities in Council Bluffs and the opening
of the Central City parking garage.
Interest expense, net of interest income and interest capitalized,
amounted to $4.8 million for the third quarter of fiscal 1997, level
with the prior year third quarter. The Company capitalized
approximately $0.2 million of interest in the third quarter of fiscal
1996 in connection with the construction of the Council Bluffs
facilities and capitalized approximately $0.1 million of interest in
the current year third quarter in connection with the construction of
the parking facility at Harveys Wagon Wheel Hotel/Casino in Central
City.
In June 1996, the Company retired the $19 million principal balance
outstanding under a note payable resulting from the financing of the
construction of the Company's riverboat. At that time, the Company
expensed the remaining unamortized debt issuance costs related to the
riverboat financing. In July 1996, the Company redeemed, for $7.8
million plus accrued and unpaid interest, the $8 million aggregate
principal amount of subordinated notes issued, together with $6.0
million in cash, in exchange for approximately $11.9 million of 12%
subordinated notes, and accrued interest thereon, of HWW payable to
affiliates of the former owner of the 30% minority interest in
11
<PAGE>
HWW. The Company expensed the remaining unamortized debt issuance
costs associated with the redeemed notes. The expensing of the debt
issuance costs was reported as an extraordinary loss, net of income
tax benefits, in the results of operations for the third quarter of
fiscal 1996.
Net income for the fiscal 1997 third quarter amounted to approximately
$7.7 million compared to $5.9 million for the prior fiscal year third
quarter. If the extraordinary loss on early retirement of debt is
excluded from the prior year period, the results would have been net
income of approximately $6.3 million for the prior year period.
COMPARISON OF THE NINE MONTH PERIODS ENDED AUGUST 31, 1997 AND AUGUST
31, 1996
The Company's consolidated net revenues through the nine months ended
August 31, 1997 amounted to approximately $213.5 million, an increase
of $30.4 million, or 16.6%, over net revenues recorded in the same
period of fiscal 1996. The improvement was substantially attributable
to the $27.0 million increase in net revenues produced by Harveys
Casino Hotel. Net revenues for fiscal 1997 from the Council Bluffs,
Iowa property included a full nine months of operations of the
complete facility while fiscal 1996 included only eight months of
revenues from the riverboat casino and three full months of revenues
from the land-based facilities. Net revenues from the Company's Lake
Tahoe property declined by approximately $1.0 million, or 1.0%, the
result of adverse first quarter weather conditions and severe flooding
in northern Nevada and in many of the northern California communities
that provide many of the Lake Tahoe property's customers. Mud slides
triggered by the inclement weather closed U. S. Highway 50, the major
link between the south shore of Lake Tahoe and northern California,
for 42 days of the first quarter. Harveys Wagon Wheel Hotel/Casino
experienced a 12.4% increase in net revenues, up $4.0 million, a
substantial portion of which was recognized in the third quarter,
after the opening of that property's new parking garage. The revenue
contribution from the management fees and equity in earnings from the
Hard Rock Hotel and Casino increased approximately $0.4 million.
Casino revenues for the current fiscal year period, enhanced by a full
nine months of casino operations in Council Bluffs compared to eight
months of casino operations in the prior year, amounted to
approximately $162.4 million, an improvement of $25.3 million over the
comparable prior year period. The nine months of gaming activity in
Iowa produced an increase of approximately $20.5 million in casino
revenues compared to those produced at the Council Bluffs property
during the initial eight months of operations in fiscal 1996. The
Company's Lake Tahoe property suffered a decline in casino revenues of
approximately $0.3 million as a result of the adverse weather and road
conditions experienced in the first quarter. Harveys Wagon Wheel
Hotel/Casino produced an increase of approximately $5.1 million in
casino revenue over the prior year comparable period. Casino costs
and expenses increased for the comparable periods, up $10.5 million to
$75.2 million for the current year period. The Council Bluffs casino
accounted for $8.7 million of the increase while the Colorado
operations accounted for approximately $2.5 million of the increase.
The Lake Tahoe operations produced a $0.7 million improvement in
casino costs due to lower payroll and related costs and the reduction
of other operating costs in reaction to the lower casino volume
resulting from the impact of the first quarter's adverse weather
conditions.
12
<PAGE>
Lodging revenues for the fiscal 1997 nine-month period improved by
approximately $2.9 million over the prior year comparable period and
amounted to $24.7 million. The hotel facility in Council Bluffs, which
opened at the end of May 1996, contributed an increase of $2.6 million
in lodging revenues during the 1997 nine-month period, accounting for
the majority of the lodging revenues improvement. Lodging profits
improved by approximately $1.4 million. The decline in lodging profit
margins was the result of the contribution from the Council Bluffs
hotel, which has a lower profit margin than the Lake Tahoe hotel,
becoming a more significant part of lodging profits and of the
increase in promotional costs at the Lake Tahoe hotel.
Food and beverage revenues for the current fiscal year period amounted
to $33.4 million, an improvement of approximately $3.4 million over
the 1996 period. Food and beverage revenue from the Council Bluffs
property, which included revenues from the land-based facilities for
all of 1997, compared to three full months of the 1996 period,
contributed an increase of approximately $5.6 million. That increase
was offset by declines at Lake Tahoe, precipitated by the effects of
adverse weather, and declines at Central City as the result of
outsourcing, commencing the second quarter of fiscal 1996, the food
service and a portion of the beverage service. Food and beverage
profits and margins declined for the period-to-period comparison
primarily as a result of the decision to attractively price the food
and beverage offerings at the Council Bluffs property to attract local
customers.
Other revenues and the $3.9 million contribution from management fees
and equity in the earnings from the Hard Rock Hotel and Casino
improved by approximately $0.7 million.
Selling, general and administrative expenses increased by
approximately $5.8 million to $55.4 million for the current fiscal
year period. The operations in Council Bluffs experienced an increase
of approximately $5.0 million in selling, general and administrative
expenses. The Lake Tahoe operations recognized an improvement in
overall selling, general and administrative expenses of approximately
$0.2 million from the fiscal 1996 period to the current fiscal year
period, while these expenses increased by $1.1 million at the Central
City property. Depreciation and amortization expenses increased by
$2.1 million. The increase in depreciation was associated with the
expanded facilities in Council Bluffs and the opening of the Central
City parking garage.
With the opening of the Council Bluffs casino in January 1996 and the
opening of land-based facilities in May 1996, the Company recognized
approximately $4.1 million of pre-opening expenses. These charges had
previously been incurred in connection with the development of the
property and deferred until operations commenced.
Interest expense, net of interest income and interest capitalized,
increased by approximately $5.0 million to $14.5 million for the first
nine months of fiscal 1997. The increase was attributable to the
Senior Subordinated Notes which were issued in May 1996, and to the
effect of capitalizing approximately $2.6 million of interest in
fiscal 1996 in connection with the construction of the Council Bluffs
facilities compared to the effect of capitalizing approximately $0.4
million of interest in the current year in connection with the
construction of the parking facility in Central City.
13
<PAGE>
In May 1996, the Company expensed the remaining unamortized debt
issuance costs related to a $10 million note payable that was retired
before maturity. The write-off of these costs along with the
expensing of similar costs associated with debt retired in the third
quarter of fiscal 1996 was reflected in the 1996 operating results as
an extraordinary loss of approximately $522,000 which was net of an
income tax benefit of approximately $334,000.
Net income for the first nine months of fiscal 1997 amounted to
approximately $11.7 million compared to $8.3 million for the prior
fiscal year period. If pre-opening expenses, net of taxes, are
excluded from the prior fiscal period results, and if the
extraordinary loss on early retirement of debt, net of taxes, is
excluded from the prior year, the results would have been net income
of approximately $11.3 million for the prior year.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity and capital resources
during the first nine months of fiscal year 1997 have been cash flow
of approximately $39.9 million from operations, the net proceeds of
approximately $3.7 million from the sale of assets, including the sale
of the Company's note receivable from an unrelated party and the sale
of the Company's airplane and approximately $11.0 million in
borrowings.
At August 31, 1997, the Company had approximately $26.0 million of
cash and cash equivalents and a maximum of approximately $96.3 million
available under a reducing revolving credit agreement with a
consortium of banks ( the 'Credit Facility'), subject to compliance
with certain financial covenants.
During the first nine months of fiscal 1997, the Company expended
approximately $1.5 million in cash relative to construction payables
and retentions associated with the construction of the hotel and
convention center portion of Harveys Casino Hotel in Council Bluffs
and expended approximately $7.5 million in cash relative to the
construction of a parking garage at Harveys Wagon Wheel Hotel/Casino
in Central City, Colorado. Additionally, the Company made cash
payments for dividends of approximately $1.5 million during the
period, incurred additional cash expenditures of approximately $13.1
million in connection with capital improvements and replacements and
made cash payments of approximately $26.0 million reducing the
Company's outstanding borrowings.
The Company expects that its primary capital needs for the remainder
of fiscal year 1997 will include (a) approximately $1.0 million for
the satisfaction of payables and construction retention relative to
the construction of the parking garage adjacent to Harveys Wagon Wheel
Hotel/Casino which was completed in June 1997, (b) approximately $6.0
million of capital expenditures at the Company's current facilities,
and (c) dividend payments and debt service.
14
<PAGE>
The Company's debt at August 31, 1997, including the current portion
of approximately $1.4 million, amounted to $169.1 million and
consisted of $150 million of Senior Subordinated Notes,
$17.5 million outstanding under the Credit Facility, $1.3 million
outstanding under HWW's equipment financing notes payable to a
financing company and approximately $230,000 of other debt.
The equipment financing agreement entered into by HWW allowed for the
financing of up to $7.5 million of gaming and associated equipment.
Under the terms of the agreement, repayments of principal and interest
are due in monthly installments through July, 1998. The equipment
financing agreement is secured by all of the gaming and associated
equipment financed under the agreement. The obligation under the
financing agreement is guaranteed by the Company.
The maximum available principal balance under the Credit Facility at
August 31, 1997 was $115 million, reduced by outstanding borrowings
and letter of credit exposure. At August 31, 1997 the outstanding
borrowings under the Credit Facility amounted to $17.5 million, the
letters of credit exposure was $1.2 million and the maximum amount
available was approximately $96.3 million, subject to compliance with
financial covenants.
There are no required repayments of principal under the Credit
Facility in fiscal 1997. The Credit Facility is secured by all of the
real and personal property of (a) HTMC, (b) HIMC, (c) HWW, and (d)
HCR Services Company, Inc. ('HCRSC'), a Nevada corporation, which is
wholly owned by the Company, as well as all of the contracts the
Company has entered into in connection with its ownership and
operation of (i) HTMC, (ii) HIMC, (iii) HWW, and (iv) HCRSC.
Additional security is provided by a pledge of the stock of the
following subsidiaries of the Company: HLVMC, HCCMC, HIMC, HTMC,
HCRSC, and Reno Projects, Inc., a Nevada corporation, which is wholly
owned by the Company. Interest on borrowings outstanding under the
Credit Facility is payable, at the Company's option, at either the
London Inter-Bank Offering Rate ('LIBOR') or the prime rate of Wells
Fargo Bank, National Association ('Wells Fargo'), in each case plus an
applicable margin. The applicable margin is determined with reference
to the Company's funded debt to EBITDA ratio. The applicable margins
as of August 31, 1997 were 2.25% with respect to the LIBOR-based
interest rate, and 0.75% with respect to the Wells Fargo prime-rate
interest rate.
The Credit Facility contains certain financial and other covenants.
The financial covenants prevent the Company from making any
investments in or advances to affiliates without the prior written
consent of the lenders under the Credit Facility. The covenants allow
the declaration and payment of dividends without the prior written
consent of the lenders if certain fixed charge coverage ratios are
maintained. The covenants require the Company to maintain certain set
standards with respect to (a) minimum tangible net worth, (b) fixed
charge coverage ratios, and (c) minimum annual capital expenditures.
The financial covenants also limit the Company's ability to incur
additional indebtedness. The Company was in compliance with these
covenants at August 31, 1997.
15
<PAGE>
The Senior Subordinated Notes are governed by an indenture ( the
'Indenture') and are general unsecured obligations of the Company,
subordinated in right of payment to all existing and future Senior
Debt of the Company (as defined in the Indenture). The Senior
Subordinated Notes are guaranteed by each of the Restricted
Subsidiaries of the Company ( as defined in the Indenture).
Each guarantee is a general unsecured obligation of the guaranteeing
Restricted Subsidiary, subordinated in right of payment to all
existing and future Senior Debt of each guaranteeing Restricted
Subsidiary. The guaranteeing Restricted Subsidiaries are HCCMC, HWW,
HIMC, HLVMC and HTMC.
Interest on the Senior Subordinated Notes is payable semi-annually on
June 1 and December 1 of each year. The Senior Subordinated Notes
will mature on June 1, 2006. The Senior Subordinated Notes are
redeemable at the option of the Company, in whole or in part, at any
time on or after June 1, 2001 at prices ranging from 105.313% of the
principal amount plus accrued and unpaid interest, to 100% of the
principal amount plus accrued and unpaid interest beginning June 1,
2004 and thereafter. Upon a Change of Control (as defined in the
Indenture) each holder of the Senior Subordinated Notes will have the
right to require the Company to repurchase such holder's Senior
Subordinated Notes at 101% of the principal amount plus accrued and
unpaid interest to the repurchase date.
The Indenture contains certain covenants that impose limitations on,
among other things, (a) the incurrance of additional indebtedness by
the Company or any Restricted Subsidiary, (b) the payment of
dividends, (c) the repurchase of capital stock and the making of
certain other Restricted Payments and Restricted Investments (as
defined in the Indenture) by the Company or any Restricted Subsidiary,
(d) mergers, consolidations and sales of assets by the Company or any
Restricted Subsidiary, (e) the creation or incurrance of liens on the
assets of the Company or any Restricted Subsidiary, and (f)
transactions by the Company or any of its subsidiaries with Affiliates
( as defined in the Indenture). These limitations are subject to a
number of qualifications and exceptions as described in the Indenture.
The Company was in compliance with these covenants at August 31, 1997.
The Company believes that its existing cash and cash equivalents, cash
flows from operations and its borrowing capacity under the Credit
Facility are sufficient to meet the cash requirements of its existing
operations for the next twelve months, including (a) capital
improvements and replacements at the operating properties, (b) the
construction of a parking garage adjacent to Harveys Wagon Wheel
Hotel/Casino, and (c) dividend and debt service requirements.
On July 1, 1997, the Company entered into an agreement whereby HRHC
will purchase the Company's interests in HRHC for $45 million in cash.
The consummation of the transaction is subject to certain conditions
and approvals, including approval by Nevada gaming authorities. The
Company believes the requisite conditions will be met and the
necessary approvals will be obtained, before the end of the current
fiscal year, and intends to use a portion of the proceeds from the
sale to pay the outstanding balance under the Credit Facility.
16
<PAGE>
The existing sources of cash, and the possibility of $45 million in
proceeds for the expected sale of the Company's interests in HRHC,
provide the Company some flexibility in potential expansion of current
operations or in its pursuit of new gaming opportunities in existing
and emerging jurisdictions. The realization of such expansion
opportunities may require capital investments in excess of current
resources and additional financing may be required. The Company
believes that additional funds could be obtained through additional
debt or equity financing. However, no assurance can be made that such
financing would be available at terms acceptable to the Company, if at
all.
17
<PAGE>
CAUTIONARY STATEMENT FOR PURPOSES OF THE 'SAFE HARBOR' PROVISIONS OF
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.
This document includes various 'forward-looking statements' within the
meaning of Section 27A of the securities Act of 1933, as amended, and
Sections 21E of the Securities Exchange Act of 1934, as amended, which
represent the Company's expectations or beliefs concerning future
events. Statements containing expressions such as 'believes',
'anticipates', or 'expects' used in the Company's press releases and
periodic reports on Forms 10-K and 10-Q filed with the Securities and
Exchange Commission are intended to identify forward-looking
statements. All forward-looking statements involve risks and
uncertainties. Although the Company believes its expectations are
based upon reasonable assumptions within the bounds of its knowledge
of its business and operations, there can be no assurances that actual
results will not materially differ from expected results. The Company
cautions that these and similar statements included in this report and
in previously filed periodic reports, including reports filed on Forms
10-K and 10-Q, are further qualified by important factors that could
cause actual results to differ materially from those in the
forward-looking statements. Such factors include, without limitation,
the following; increased competition in existing markets or the
opening of new gaming jurisdictions; a decline in the public
acceptance of gaming; the limitation, conditioning or suspension of
any of the Company's gaming licenses; increases in or new taxes
imposed on gaming revenues or gaming devices; a finding of
unsuitability by regulatory authorities with respect to the Company's
officers, directors or key employees; loss or retirement of key
executives; significant increases in fuel or transportation prices;
adverse economic conditions in the company's key markets; severe and
unusual weather in the Company's key markets; adverse results of
significant litigation matters. Readers are cautioned not to place
undue reliance on forward-looking statements, which speak only as of
the date thereof. The Company undertakes no obligation to publicly
release any revision to such forward-looking statements to reflect
events or circumstances after the date thereof.
18
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not Applicable
Item2. Changes in Securities
Not Applicable
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
See attached Exhibit Index
(b) Report on Form 8-K
On July 1, 1997, the Company filed a Current Report on Form
8-K, under Item 5, Other Events, in order to report the
Company entering into a Stock Purchase and Management Buyout
Agreement ( the 'Stock Purchase Agreement') with Hard Rock
Hotel, Inc., a Nevada corporation ('HRHC'), Lily Pond
Investments, Inc., a Nevada corporation ('Lily Pond'), and
Harveys L. V. Management Company, Inc., a Nevada corporation
and wholly owned subsidiary of the Company ('HLVMC').
Pursuant to the Stock Purchase Agreement, HRHC will
repurchase from the Company all of the capital stock of HRHC
held by the Company, representing 40% of the currently
outstanding capital stock of HRHC. Upon the closing of the
transactions contemplated by the Stock Purchase Agreement,
the management agreement currently in effect between HRHC
and HLVMC relating to the management and operations of HRHC
will terminate, and a stockholders agreement among the
Company, HRHC and Lily Pond will be canceled.
19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HARVEYS CASINO RESORTS
----------------------
Registrant
Date: October 13, 1997
/s/ John J. McLaughlin
----------------------------------------
John J. McLaughlin,
Senior Vice President,
Chief Financial Officer andTreasurer
(Authorized Officer and Principal
Financial Officer)
20
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description Page
- -------- ------------------------------------------------------------- --------
3.1 Restated Articles of Incorporation of the Registrant (1)
3.2 Sixth Amended Bylaws of the Registrant (2)
4.1 Form of Stock Certificate of the Registrant (1)
4.2 Indenture, dated as of April 30, 1996 between the Registrant and
IBJ Schroder Bank and Trust, as Trustee ( including form of
Note) (3)
4.3 Indenture, dated as of May 15, 1996 by and among the Registrant (
the 'Issuer') Harveys Wagon Wheel Casino Limited Liability
Company, Harveys C. C. Management Company, Inc., Harveys Iowa
Management Company, Inc. and Harveys L. V. Management Company,
Inc. ( the 'Guarantors') and IBJ Schroder Bank & Trust Company as
Trustee ( including form of Note) (4)
4.4 First Supplemental Indenture, dated as of June 5, 1996,
supplementing the Indenture as of May 15, 1996 among the
Registrant (the 'Issuer'), Harveys Wagon Wheel Casino Limited
Liability Company, Harveys C. C. Management Company, Inc.,
Harveys Iowa Management Company, Inc. and Harveys L.V. Management
Company, Inc. (the 'Guarantors'), and IBJ Schroder Bank and Trust
Company as Trustees (5)
10.1 Employment Agreement, dated June 23, 1997 between James J.
Rafferty and the Registrant (6)
10.2 Employment Agreement, dated July 1, 1997 between Verne Welch and
the Registrant (6)
10.3 Employment Agreement, dated July 21, 1997 between John R.
Bellotti and the Registrant (6)
10.4 Harveys Casino Resorts Change of Control Plan, effective June 1,
1997 (6)
10.5 Assignment of Leases, effective June 1, 1997 by and between
Harveys Casino Resorts, formerly known as Harvey's Wagon Wheel,
Inc. ( the 'Assignor'), a Nevada corporation, Harveys Tahoe
Management Company, Inc., ( the 'Assignee'), a Nevada
corporation, and Park Cattle Co. ( the 'Landlord'), a Nevada
corporation (6)
10.6 Third Amendment to Lease Agreement, dated June 1, 1997, by and
between Park Cattle Co. (the 'Landlord'), a Nevada corporation
and Harveys Casino Resorts, formerly known as Harvey's Wagon
Wheel, Inc., ( the 'Tenant'), a Nevada corporation (6)
10.7 First Amendment to Lease Agreement, dated June 1, 1997, between
Park Cattle Co. ( the 'Landlord'), a Nevada corporation and
Harveys Casino Resorts, formerly known as Harvey's Wagon Wheel,
Inc., ( the 'Tenant'), a Nevada corporation ( Douglas County,
Nevada property) (6)
10.8 First Amendment to Lease Agreement, dated June 1, 1997, between
Park Cattle Co. ( the 'Landlord'), a Nevada corporation and
Harveys Casino Resorts, formerly known as Harvey's Wagon Wheel,
Inc., ( the 'Tenant'), a Nevada corporation (El Dorado County,
California property) (6)
21
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description Page
10.9 Fourth Amendment to Reducing Revolving Credit Agreement, dated
July 25, 1997, by and among Harveys Casino Resorts, a Nevada
corporation, Harveys C. C. Management Company, Inc., a Nevada
corporation, Harveys Wagon Wheel Casino Limited Liability
Company, Harveys Iowa Management Company, Inc., a Nevada
corporation, Harveys Tahoe Management Company, Inc., a Nevada
corporation (collectively the 'Borrowers') Wells Fargo Bank, N.
A., Bank of the West, First Security Bank, N.A., Imperial Bank,
Norwest Bank of Nebraska, N. A., The First National Bank of
Chicago, Societe Generale, The Sumitomo Bank, Limited, U. S. Bank
and Argentbank (the 'Lenders'). (6)
10.10 Assumption Agreement, dated July 25, 1997, by and among Harveys
Casino Resorts, a Nevada corporation, Harveys Tahoe Management
Company, Inc., a Nevada corporation and Wells Fargo Bank, N. A.
(6)
10.11 Asset Transfer Agreement between Harveys Casino Resorts and
Harveys Tahoe Management Company, Inc. , effective June 1, 1997
(6)
10.12 Second Supplemental Indenture, dated as of May 22, 1997,
Supplementing the Indenture Dated as of May 15, 1996 among
Harveys Casino Resorts, Issuer, Harveys C. C. Management Company,
Inc., Harveys Wagon Wheel Casino Limited Liability Company,
Harveys Iowa Management Company, Inc. and Harveys L. V.
Management Company, Inc., as Guarantors and IBJ Schroder Bank and
Trust Company, Trustee, as amended and supplemented to date. (6)
27 Financial Data Schedule (6)
-----------------------------------------------
(1) Incorporated herein by reference to Registration Statement No.
33-70670.
(2) Incorporated herein by reference to the Registrant's Quarterly
Report on Form 10-Q for the period ended May 31, 1996.
(3) Incorporated herein by reference to the Registration Statement
No. 333-616.
(4) Incorporated herein by reference to Registration Statement No.
333-3576.
(5) Incorporated herein by reference to Registrant's Current Report
of Form 8-K filed June 14, 1996.
(6) Filed herewith
22
<PAGE>
CARSON CITY OFFICE
600 E. WILLIAM STREET, SUITE 300
CARSON CITY, NV 89701-4052
(702) 882-4577
SCARPELLO & ALLING, LTD.
ATTORNEYS AT LAW
LAKE TAHOE OFFICE
276 KINGSBURY GRADE, SUITE 2000
P. O. BOX 3390
LAKE TAHOE, NV 89449-3390
(702) 588-6676
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made and entered into this 23rd day of June, 1997, by and
between HARVEYS CASINO RESORTS, a Nevada corporation, hereinafter referred to as
"HARVEYS" and/or "EMPLOYER", and JAMES J. RAFFERTY hereinafter referred to as
"EMPLOYEE", as follows:
W I T N E S S E T H:
WHEREAS, HARVEYS desires to secure the benefits of EMPLOYEE'S background,
knowledge, experience, ability, expertise and industry to promote and maintain
HARVEYS stability, growth, viability and profitability; and
WHEREAS, HARVEYS desires to engage the services of EMPLOYEE who is desirous
of being employed by HARVEYS under the terms and conditions as herein set out;
and
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements herein contained, together with other good and valuable consideration
the receipt of which is hereby acknowledged, the parties hereto do hereby agree
as follows:
I
DEFINITIONS
1.01 EMPLOYEE shall at all times mean JAMES J. RAFFERTY.
1.02 EMPLOYER shall at all times mean HARVEYS CASINO RESORTS, a Nevada
corporation, and its Successors in Interest together with its subsidiaries.
1.03 HARVEYS shall at all times mean HARVEYS CASINO RESORTS, a
Nevada corporation, and its Successor in Interest together with its
subsidiaries.
1
<PAGE>
[Running Header]
1.04 Successor in Interest shall mean any entity which is the successor or
assign of HARVEYS, at law or at equity, and shall include without limitation,
any entity into which HARVEYS is merged or consolidated, and any entity to which
all or substantially all of the assets or businesses of HARVEYS is transferred.
II
NATURE OF EMPLOYMENT AND DUTIES OF EMPLOYEE
2.01 Effective upon the execution hereof, EMPLOYEE shall become Senior Vice
President of Corporate Marketing, or such other position as determined by the
Chief Executive Officer of HARVEYS. EMPLOYEE shall do and perform all services,
acts, or things necessary or advisable to assist in the management and conduct
of the business of EMPLOYER, subject always to the policies as set forth by the
Board of Directors.
2.02 EMPLOYEE shall be responsible for organizing and developing Harveys'
strategic marketing plans and focus for each property and corporate organization
to ensure achievement of market share and awareness goals, database growth and
utilization; for product and service developments, enhancements, and alliances
in order to develop a competitive advantage in each market; create and cultivate
corporate communications systems and programs to improve communications among
customer markets, employees, senior management and the board of directors.
The EMPLOYEE shall have the responsibility of ensuring that all creative
applications are consistently applied to HARVEYS' standards. EMPLOYEE shall
also be responsible for annually orginaizing and developing corporate strategic
and tactical plans.
2
<PAGE>
[Running Header]
2.03 EMPLOYEE has reviewed and concurs with his responsibilities and duties
as set forth in Section 2.02 above.
2.04 EMPLOYEE shall devote his entire productive time, ability and
attention to the business of EMPLOYER during the term of this contract.
EMPLOYEE shall not directly or indirectly render any service of a business,
commercial or professional nature, to any other person or organization, whether
for compensation or otherwise, without the prior written consent of the
President/CEO of HARVEYS except that EMPLOYEE shall not be precluded from
involvement in charitable or civic activities or his personal financial
investments provided the same do not interfere with his time or attention to the
business of EMPLOYER.
2.05 EMPLOYEE agrees that to the best of his ability and experience he will
at all times conscientiously perform all of the duties and obligations expressly
required of him.
III
TERM OF EMPLOYMENT
3.01 EMPLOYER hereby employs the EMPLOYEE, and EMPLOYEE hereby agrees to
be employed by HARVEYS for a period of at least two (2) years commencing on the
23rd day of June, 1997.
IV
TERMINATION OF EMPLOYMENT WITHOUT CAUSE
4.01 EMPLOYEE may be terminated at any time by HARVEYS' Board of Directors
on ninety (90) days' prior written notice to EMPLOYEE specifying grounds for
termination and, if they are not those as provided in 5.01 herein, then EMPLOYEE
shall continue to be paid all compensation and shall receive all benefits to
which he is entitled to hereunder through the balance of the term hereof as
provided for in paragraph 3.01 above.
3
<PAGE>
[Running Header]
4.02 EMPLOYEE may, at EMPLOYEE'S sole option and right, terminate this
Agreement at any time by giving HARVEYS ninety (90) days' prior written notice
and EMPLOYER shall be under no obligation to EMPLOYEE except to pay him
compensation for such services as may have been performed up to the effective
date of such termination.
4.03 If during the term hereof EMPLOYEE shall die or become disabled, he
shall be entitled to death and/or disability benefits that may be due
EMPLOYEE under any other benefit plans in effect from time to time.
V
TERMINATION OF EMPLOYMENT FOR CAUSE
5.01 EMPLOYER may at any time, at its election, exercise by written notice
to EMPLOYEE stating with specificity the reason for the termination, terminate
this Agreement and the employment term because of EMPLOYEE'S:
(a) Gross negligence or willful malfeasance in the performance of his
duties under this Agreement;
(b) Failure to obtain or retain any permits, licenses, or approvals
which may be required by any state or local authorities in order to permit the
EMPLOYEE to continue his employment as contemplated by this Agreement;
(c) Conviction of a crime involving moral turpitude;
(d) Dishonesty with respect to EMPLOYER including breach of duty to
EMPLOYER involving EMPLOYEE'S personal gain or profit; or,
4
<PAGE>
[Running Header]
Upon the occurrence of any of the above, at EMPLOYER'S sole option,
EMPLOYEE'S employment shall immediately cease and terminate and EMPLOYER shall
be under no obligation to EMPLOYEE except to pay him for such services as may
have been performed up to the date of such termination.
VI
COMPENSATION OF EMPLOYEE
6.01 ANNUAL SALARY - EMPLOYEE shall receive an annual salary of One Hundred
Seventy-Five Thousand Dollars ($175,000.00), payable in at least monthly
installments, less all applicable Federal, State and Local Taxes, Social
Security and any other government mandated deductions.
VII
OTHER PERQUISITES
7.01 HARVEYS 401(k) PLAN - During the employment term the EMPLOYEE shall be
allowed to participate in HARVEYS 401(k) Plan and EMPLOYER shall match
EMPLOYEE'S contribution as provided for in said Plan.
7.02 VACATION - EMPLOYEE shall be entitled in each fiscal year to a
vacation and holiday pay in accordance with the policy in place from time to
time as implemented by EMPLOYER for senior vice-president positions.
7.03 COMPLIMENTARY PRIVILEGES - EMPLOYEE shall be entitled to Level I
complimentary privileges as are afforded all other senior vice-presidents from
time to time.
7.04 DISABILITY - EMPLOYEE shall also be entitled to short term disability
coverage and long term disability coverage as in effect from time to time as
implemented by EMPLOYER for Senior Vice President positions.
5
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7.05 AUTOMOBILE - EMPLOYER shall provide EMPLOYEE with an automobile in
accordance with the Class Two category of EMPLOYE'S Standard Automobile Policy
and Procedures, as from time to time amended.
7.06 SHORT AND LONG TERM INCENTIVES - EMPLOYEE shall be allowed to
participate in the Short Term Incentive Plan and the Long Term Incentive Plan as
said plans are in effect from time to time.
7.08 MEDICAL, VISION AND DENTAL INSURANCE - EMPLOYER shall provide medical,
vision and dental benefits to EMPLOYEE, his spouse and dependents in accordance
with EMPLOYER'S Class One coverage under the Executive Medical Plan, as amended
from time to time.
7.09 SERP - EMPLOYEE shallcontinue to participate lin EMPLOYER'S
Supplemental Executive Retirement Program, as the same is amended from time to
time.
7.10 DEFERRED COMPENSATION PROGRAM - EMPLOYEE shall be allowed to
participate in the Deferred Compensation Program as said plan is in effect from
time to time.
7.11 GROUP LIFE INSURANCE - During the term of this Agreement EMPLOYER
shall furnish EMPLOYEE with Group Term Life Insurance and Accidental
Death/Dismemberment Insurance with the maximum benefit being equal two times
EMPLOYEE'S annual salary. In addition, EMPLOYEE may elect, at EMPLOYEE'S
expense, to participate in the Supplemental Life Insurance Program, all of said
plans are in effect from time to time.
7.12 ADDITIONAL EMPLOYEE BENEFIT PLANS - EMPLOYEE is entitled to
participate in all additional employee benefits plans which may, in the future,
be made available to management employees.
6
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[Running Header]
IX
MISCELLANEOUS
8.01 If any action at law or in equity is necessary to enforce or interpret
the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorneys' fees, costs, and necessary disbursements in addition to
any other relief to which he may be entitled.
8.02 This Agreement shall be construed and governed by the laws of the
State of Nevada, and any action between the parties shall be maintained only
within the Ninth Judicial District Court of the State of Nevada, in and for the
County of Douglas, or such jurisdiction's successor court.
8.03 This Agreement, and all of the terms and conditions hereof, shall bind
the EMPLOYER and its successors and assigns and shall bind the EMPLOYEE and his
heirs, executors and administrators. No transfer or assignment of this
Agreement shall release EMPLOYER from any obligation to EMPLOYEE hereunder.
8.04 NOTICES - Notices to or for the respective parties shall be given in
writing and delivered in person or mailed by certified or registered mail,
addressed to the respective party at the address as set out below, or at such
other address as either party may elect to provide in advance in writing, to the
other party:
EMPLOYEE:
JAMES J. RAFFERTY
P.O. Box 516
Glenbrook, NV 89413
EMPLOYER:
HARVEYS CASINO RESORTS
Attn: CHARLES W. SCHARER, Chief Executive Officer
Highway 50 and Stateline Avenue
Post Office Box 128
Stateline, NV 89449
7
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[Running Header]
WITH A COPY TO:
Ronald D. Alling, Esq.
SCARPELLO & ALLING, LTD.
276 Kingsbury Grade, Suite 2000
Post Office Box 3390
Lake Tahoe, NV 89449
8.05 If any provision of this Agreement is held by the aforesaid court to
be invalid, illegal, or unenforceable by reason of any rule of law or public
policy, all other provisions of this Agreement shall nevertheless remain in
effect. No provision of this Agreement shall be deemed dependent on any other
provision unless so expressed herein.
8.06 Nothing contained in this Agreement shall be construed to require the
commencement of any act contrary to law, and when there is any conflict between
any provision of this Agreement and any statute, law, ordinance, or regulation,
contrary to which the parties have no legal right to contract, then the latter
shall prevail; but in such an event, the provisions of this Agreement so
affected shall be curtailed and limited only to the extent necessary to bring it
within the legal requirements.
8.07 The several rights and remedies provided for in this Agreement shall
be construed as being cumulative, and no one of them shall be deemed to be
exclusive of the others or of any right or remedy allowed by law. No waiver by
EMPLOYER or EMPLOYEE of any failure by EMPLOYEE or EMPLOYER, respectively, to
keep or perform any provision of this Agreement shall be deemed to be a wavier
of any preceding or succeeding breach of the same or other provision.
8.08 This Agreement supersedes any and all other agreements, either oral or
in writing, between the parties hereto with respect to the employment of the
EMPLOYEE by the EMPLOYER and along with the Agreement and Covenant Not to
Compete or Use or Disclose Trade Secrets, executed concurrently herewith,
contains all of the covenants, conditions and agreements between the parties
with respect to such employment. Each party to this Agreement acknowledges that
no representations, inducements, promises or other agreements, oral or
otherwise, have been made by any
8
<PAGE>
[Running Header]
party, or anyone acting on behalf of any party, which are not embodied herein,
and that no other agreement, statement or promise not contained in this
Agreement shall be valid or binding. Any addendum to or modification of this
Agreement shall be effective only if it is in writing and signed by the parties
to be charged.
DATED this 23RD day of June, 1997.
EMPLOYEE:
JAMES J. RAFFERTY
------------------------------
EMPLOYER:
HARVEYS CASINO RESORTS
By: CHARLES W. SCHARER
--------------------------------------
Chief Executive Officer
9
<PAGE>
Carson City Office
600 E. William Street, Suite 300
Carson City, NV 89701-4052
(702) 882-4577
Scarpello & Alling, Ltd.
Attorneys At Law
Lake Tahoe Office
276 Kingsbury Grade, Suite 2000
P. O. Box 3390
Lake Tahoe, NV 89449-3390
(702) 588-6676
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made and entered into this 1st day of July, 1997, by and
between HARVEYS CASINO RESORTS, a Nevada Corporation, hereinafter referred to
as "HARVEYS" and/or "EMPLOYER", and VERNE WELCH, hereinafter referred to as
"EMPLOYEE", as follows:
W I T N E S S E T H:
WHEREAS, HARVEYS desires to secure the benefits of EMPLOYEE's background,
knowledge, experience, ability, expertise and industry to promote and maintain
HARVEYS stability, growth, viability and profitability; and
WHEREAS, HARVEYS desires to engage the services of EMPLOYEE who is desirous
of being employed by HARVEYS under the terms and conditions as herein set out;
and
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements herein contained, together with other good and valuable consideration
the receipt of which is hereby acknowledged, the parties hereto do hereby agree
as follows:
I
DEFINITIONS
1.01 EMPLOYEE shall at all times mean VERNE WELCH.
1.02 EMPLOYER shall at all times mean HARVEYS CASINO RESORTS, a Nevada
Corporation, and its Successor in Interest together with its subsidiaries.
1.03 HARVEYS shall at all times mean HARVEYS CASINO RESORTS, a Nevada
Corporation, and its Successor in Interest together with its subsidiaries.
1.04 Successor in Interest shall mean any entity which is the successor or
assign of HARVEYS, at law or at equity, and shall include without limitation,
any entity into which HARVEYS is merged or consolidated, and any entity to which
all or substantially all of the assets or businesses
1
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[Running Header]
of HARVEYS is transferred.
II
NATURE OF EMPLOYMENT AND DUTIES OF EMPLOYEE
2.01 Effective upon the commencement date of this Agreement, EMPLOYEE will
continue as Senior Vice President/General Manager of HARVEYS CASINO HOTEL,
Council Bluffs, Iowa. EMPLOYEE shall do and perform all services, acts, or
things necessary or advisable to assist in the management and conduct of the
business of EMPLOYER, subject always to the policies as set forth by the Board
of Directors.
2.02 EMPLOYEE is responsible for the overall direction of the Council
Bluffs facility and shall direct all operating departments for successful
implementation of business policies and plans for the property. EMPLOYEE shall
provide support in the conceptual, strategic and policy formulation functions of
the business and shall direct and coordinate property activities to obtain
optimum efficiency and economy of operations so as to maximize profits.
EMPLOYEE shall report directly to the Chief Operating Officer of Subsidiary
Operations.
2.03 EMPLOYEE has reviewed and concurs with his responsibilities and duties
as set forth above.
2.04 EMPLOYEE shall devote his entire productive time, ability and
attention to the business of EMPLOYER during the term of this contract.
EMPLOYEE shall not directly or indirectly render any service of a business,
commercial or professional nature, to any other person or organization, whether
for compensation or otherwise, without the prior written consent of the
President/CEO of HARVEYS except that EMPLOYEE shall not be precluded from
involvement in charitable or civic activities or his personal financial
investments provided the same do not interfere with his time or attention to the
business of EMPLOYER.
2.05 EMPLOYEE agrees that to the best of his ability and experience he will
at all times
2
<PAGE>
[Running Header]
conscientiously perform all of the duties and obligations expressly required of
him.
III
TERM OF EMPLOYMENT
3.01 EMPLOYER hereby employs the EMPLOYEE and EMPLOYEE hereby agrees to be
employed by HARVEYS for a period of two (2) years commencing on the first day of
July, 1997 and terminating on the first day of July, 1999. This Agreement may
be terminated earlier as hereinafter provided.
3.02 The term of employment may be extended for the purposes set forth in
the Change of Control Plan implemented by HARVEYS' Board of Directors.
IV
TERMINATION OF EMPLOYMENT WITHOUT CAUSE
4.01 EMPLOYEE may be terminated at any time by the HARVEYS' Board of
Directors on ninety (90) days prior written notice to EMPLOYEE specifying
grounds for termination and if they are not those as provided in 5.01 herein,
then EMPLOYEE shall continue to be paid all compensation and shall receive all
benefits to which he is entitled to hereunder through the balance of the term
hereof as provided for in paragraph 3.01 above.
///
4.02 EMPLOYEE may, at EMPLOYEE's sole option and right terminate this
Agreement at any time by giving HARVEYS ninety (90) days prior written notice
and EMPLOYER shall be under no obligation to EMPLOYEE except to pay him
compensation for such services as may have been performed up to the effective
date of such termination.
4.03 If during the term hereof EMPLOYEE shall die or become disabled, he
shall be entitled to death and/or disability benefits that may be due EMPLOYEE
under any other benefit plans in effect from time to time.
3
<PAGE>
[Running Header]
V
TERMINATION OF EMPLOYMENT FOR CAUSE
5.01 EMPLOYER may at any time, at its election, exercise by written notice
to EMPLOYEE stating with specificity the reason for the termination, terminate
this Agreement and the employment term because of EMPLOYEE's:
(a) Gross negligence or willful malfeasance in the performance of his
duties under this Agreement;
(b) Failure to obtain or retain any permits, licenses, or approvals
which may be required by any state or local authorities in order to permit the
EMPLOYEE to continue his employment as contemplated by this Agreement;
(c) Conviction of a crime involving moral turpitude;
(d) Dishonesty with respect to EMPLOYER including breach of duty to
EMPLOYER involving EMPLOYEE's personal gain or profit.
Upon the occurrence of any of the above, at EMPLOYER's sole option,
EMPLOYEE's employment shall immediately cease and terminate and EMPLOYER shall
be under no obligation to EMPLOYEE except to pay
///
him for such services as may have been performed up to the date of such
termination.
VI
COMPENSATION OF EMPLOYEE
6.01 ANNUAL SALARY - EMPLOYEE shall receive an annual salary of One Hundred
Eighty-Eight Thousand Dollars ($188,000.00), payable in at least monthly
installments, less all applicable Federal, State and Local Taxes, Social
Security and any other government mandated deductions.
4
<PAGE>
[Running Header]
EMPLOYEE's salary shall be subject to annual review and increase based upon
acceptable performance by EMPLOYEE of the responsibilities and duties as set
forth herein, as determined by EMPLOYER.
VII
AUTOMOBILE
7.01 EMPLOYER shall provide EMPLOYEE with an automobile in accordance with
the Class Two category of EMPLOYER's Standard Automobile Policy and Procedures,
as from time to time amended.
VIII
OTHER PERQUISITES
8.01 HARVEYS' 401K PLAN - During the employment term the EMPLOYEE shall be
allowed to participate in HARVEYS' 401K Plan, and EMPLOYER shall match
EMPLOYEE's contribution as provided for in said Plan once EMPLOYEE becomes
eligible.
8.02 VACATION - EMPLOYEE shall be entitled in each fiscal year to a
vacation and holiday pay in accordance with the policy in place from time to
time as implemented by EMPLOYER for Senior Vice President positions.
///
8.03 COMPLIMENTARY PRIVILEGES - EMPLOYEE shall be entitled to Level I
complimentary privileges as are afforded all other senior executives from time
to time.
8.04 DISABILITY - EMPLOYEE shall also be entitled to short term disability
coverage and long term disability coverage as in effect from time to time as
implemented by EMPLOYER's Department of Human Resources for Senior Vice
President positions.
8.05 MEDICAL, VISION AND DENTAL INSURANCE - Effective immediately upon
commencement of employment, EMPLOYER shall provide medical, vision and dental
benefits to EMPLOYEE, his
5
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[Running Header]
spouse and dependents in accordance with EMPLOYER's Class One coverage under the
Executive Medical Plan, as amended from time to time.
8.06 ADDITIONAL BENEFITS - EMPLOYEE shall be allowed to participate in the
Supplemental Executive Retirement Plan, the Short Term Incentive Plan, the Long
Term Incentive Plan and the Deferred Compensation Program as said plans are in
effect from time to time.
8.07 GROUP TERM LIFE INSURANCE - During the term of this Agreement EMPLOYER
shall furnish EMPLOYEE with Group Term Life Insurance at least equal to 200% of
his annual salary.
8.08 ADDITIONAL EMPLOYEE BENEFIT PLANS - EMPLOYEE is entitled to
participate in all additional employee benefits plans which may, in the future,
be made available to management employees.
IX
MISCELLANEOUS
9.01 If any action at law or in equity is necessary to enforce or interpret
the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorney's fees, costs, and necessary
///
disbursements in addition to any other relief to which that party may be
entitled.
9.02 This Agreement shall be construed and governed by the laws of the
State of Nevada, and any action between the parties shall be maintained only
within the Ninth Judicial District Court of the State of Nevada, in and for the
County of Douglas, or such jurisdiction's successor Court.
9.03 This Agreement, and all of the terms and conditions hereof, shall bind
the EMPLOYER and its successors and assigns and shall bind the EMPLOYEE and his
heirs, executors and administrators. No transfer or assignment of this
Agreement shall release EMPLOYER from any obligation to EMPLOYEE hereunder.
9.04 NOTICES - Notices to or for the respective parties shall be given in
writing and delivered
6
<PAGE>
[Running Header]
in person or mailed by certified or registered mail, addressed to the respective
party at the address as set out below, or at such other address as either party
may elect to provide in advance in writing, to the other party:
EMPLOYEE:
VERNE WELCH
680 Highway 88
Gardnerville, Nevada 89410
EMPLOYER:
HARVEYS CASINO RESORTS
Attention: Chief Executive Officer
Post Office Box 128
Stateline, NV 89449
WITH A COPY TO:
Ronald D. Alling, Esq.
SCARPELLO & ALLING, LTD.
Post Office Box 3390
Lake Tahoe, NV 89449-3390
9.05 If any provision of this Agreement is held by the aforesaid court to
be invalid, illegal, or unenforceable by reason of any rule of law or public
policy, all other provisions of this Agreement shall nevertheless remain in
effect. No provision of this Agreement shall be deemed dependent on any other
provision unless so expressed herein.
9.06 Nothing contained in this Agreement shall be construed to require the
commencement of any act contrary to law, and when there is any conflict between
any provision of this Agreement and any statute, law, ordinance, or regulation,
contrary to which the parties have no legal right to contract, then the latter
shall prevail. In such an event, the provisions of this Agreement so affected
shall be curtailed and limited only to the extent necessary to bring it within
the legal requirements.
9.07 The several rights and remedies provided for in this Agreement shall
be construed as being cumulative, and no one of them shall be deemed to be
exclusive of the others or of any right or remedy allowed by law. No waiver by
EMPLOYER or EMPLOYEE or any failure by EMPLOYEE
7
<PAGE>
[Running Header]
or EMPLOYER, respectively, to keep or perform any provision of this Agreement
shall be deemed to be a wavier of any preceding or succeeding breach of the same
or other provision.
9.08 This Agreement supersedes any and all other agreements, either oral or
in writing, between the parties hereto with respect to the employment of the
EMPLOYEE by the EMPLOYER and along with the Agreement, Covenant Not to Compete
or Use or Disclose Trade Secrets, executed concurrently herewith, and the
Agreement Relating to Copyrights Inventions and Confidentiality of Company or
Customer Information contains all of the covenants, conditions and agreements
between the parties with respect to such employment. Each party to this
Agreement acknowledges that no representations, inducements, promises or other
agreements, oral or otherwise, have been made by any party, or anyone acting on
behalf of any party, which are not embodied herein, and that no other agreement,
statement or promise not contained in this Agreement shall be valid or binding.
Notwithstanding the foregoing, this Agreement does not supersede or invalidate
the terms, covenants and conditions of the Confidentiality Agreement between
EMPLOYEE and EMPLOYER.
Any modification of this Agreement shall be effective only if it is in
writing and signed by both parties.
DATED: This 1st day of July, 1997.
EMPLOYEE:
By: /s/ VERNE WELCH
------------------------------------------
VERNE WELCH
EMPLOYER:
HARVEYS CASINO RESORTS, a Nevada corporation
By: /s/ CHARLES W. SCHARER
-------------------------------
CHARLES W. SCHARER
President/Chief Executive Officer
8
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made and entered into this 21st day of July, 1997, by and
between HARVEYS CASINO RESORTS, a Nevada corporation, hereinafter referred to as
"HARVEYS" and/or "EMPLOYER", and JOHN R. BELLOTTI, hereinafter referred to as
"EMPLOYEE", as follows:
W I T N E S S E T H:
WHEREAS, HARVEYS desires to secure the benefits of EMPLOYEE'S background,
knowledge, experience, ability, expertise and industry to promote and maintain
HARVEYS stability, growth, viability and profitability; and
WHEREAS, HARVEYS desires to engage the services of EMPLOYEE who is desirous
of being employed by HARVEYS under the terms and conditions as herein set out;
and
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements herein contained, together with other good and valuable consideration
the receipt of which is hereby acknowledged, the parties hereto do hereby agree
as follows:
I
DEFINITIONS
1.01 EMPLOYEE shall at all times mean JOHN R. BELLOTTI.
1.02 EMPLOYER shall at all times mean HARVEYS CASINO RESORTS, a Nevada
corporation, and its Successors in Interest together with its subsidiaries.
1.03 HARVEYS shall at all times mean HARVEYS CASINO RESORTS, a
Nevada corporation, and its Successor in Interest together with its
subsidiaries.
1.04 Successor in Interest shall mean any entity which is the successor or
assign of HARVEYS, at law or at equity, and shall include without limitation,
any entity into which HARVEYS is merged or consolidated, and any entity to which
all or substantially all of the assets or businesses of HARVEYS is transferred.
II
NATURE OF EMPLOYMENT AND DUTIES OF EMPLOYEE
2.01 Effective upon the commencement date of this Agreement, EMPLOYEE shall
become Corporate Vice President of Human Resources of HARVEYS CASINO RESORTS,
corporate offices located in Douglas County, Nevada.
<PAGE>
EMPLOYEE shall do and perform all services, acts, or things necessary or
advisable to assist in the management and conduct of the business of EMPLOYER,
subject always to the policies as set forth by the Board of Directors.
2.02 EMPLOYEE shall be responsible for the creation, installation, and
ongoing direction and monitoring of human resources programs for properties
owned and operated by Harveys Casino Resorts; oversees the development and
implementation of compensation and benefits administration, health care claims
processing, 401(k) administration, employment and personnel policy initiation,
succession planning, executive development, risk management, employee relations,
Board of Review system, and other corporate employee programs.
2.03 EMPLOYEE has reviewed and concurs with his responsibilities and duties
as set forth in Section 2.02 above.
2.04 EMPLOYEE shall devote his entire productive time, ability and
attention to the business of EMPLOYER during the term of this contract.
EMPLOYEE shall not directly or indirectly render any service of a business,
commercial or professional nature, to any other person or organization, whether
for compensation or otherwise, without the prior written consent of the
President/CEO of HARVEYS except that EMPLOYEE shall not be precluded from
involvement in charitable or civic activities or his personal financial
investments provided the same do not interfere with his time or attention to the
business of EMPLOYER.
2.05 EMPLOYEE agrees that to the best of his ability and experience he will
at all times conscientiously perform all of the duties and obligations expressly
required of him.
III
TERM OF EMPLOYMENT
3.01 EMPLOYER hereby employs the EMPLOYEE, and EMPLOYEE hereby agrees to
be employed by HARVEYS for a period of at least three (3) years commencing on
the 21st day of August, 1997, and terminating on the 21st day of August, 2000.
This Agreement may be terminated earlier as hereinafter provided.
IV
TERMINATION OF EMPLOYMENT WITHOUT CAUSE
4.01 EMPLOYEE may be terminated at any time by HARVEYS' Board of Directors
on ninety (90) days' prior
<PAGE>
written notice to EMPLOYEE specifying grounds for termination and, if they are
not those as provided in 5.01 herein, then EMPLOYEE shall continue to be paid
all compensation and shall receive all benefits to which he is entitled to
hereunder through the balance of the term hereof as provided for in paragraph
3.01 above.
4.02 EMPLOYEE may, at EMPLOYEE'S sole option and right, terminate this
Agreement at any time by giving HARVEYS ninety (90) days' prior written notice
and EMPLOYER shall be under no obligation to EMPLOYEE except to pay him
compensation for such services as may have been performed up to the effective
date of such termination.
4.03 If during the term hereof EMPLOYEE shall die or become disabled, he
shall be entitled to death and/or disability benefits that may be due EMPLOYEE
under any other benefit plans in effect from time to time.
V
TERMINATION OF EMPLOYMENT FOR CAUSE
5.01 EMPLOYER may at any time, at its election, exercise by written notice
to EMPLOYEE stating with specificity the reason for the termination, terminate
this Agreement and the employment term because of EMPLOYEE'S:
(a) Gross negligence or willful malfeasance in the performance of his
duties under this Agreement;
(b) Failure to obtain or retain any permits, licenses, or approvals
which may be required by any state or local authorities in order to permit the
EMPLOYEE to continue his employment as contemplated by this Agreement;
(c) Conviction of a crime involving moral turpitude;
(d) Dishonesty with respect to EMPLOYER including breach of duty to
EMPLOYER involving EMPLOYEE'S personal gain or profit; or,
Upon the occurrence of any of the above, at EMPLOYER'S sole option,
EMPLOYEE'S employment shall immediately cease and terminate and EMPLOYER shall
be under no obligation to EMPLOYEE except to pay him for such services as may
have been performed up to the date of such termination.
VI
COMPENSATION OF EMPLOYEE
6.01 Annual Salary - EMPLOYEE shall receive an annual salary of One Hundred
Fifty Thousand Dollars ($150,000.00), payable in at least monthly installments,
less all applicable Federal, State and Local Taxes, Social Security and any
other government mandated deductions. EMPLOYEE'S salary shall be subject to a
six (6) month
<PAGE>
review, and annually thereafter, as determined by the Chief Executive Officer of
EMPLOYER.
6.02 Signing Bonus - Immediately upon the execution hereof, EMPLOYEE shall
receive a Fifteen Thousand Dollar ($15,000.00) signing bonus.
6.03 Stock Option - Upon the commencement of the term of this Agreement as
set forth in paragraph 3.01, EMPLOYEE shall receive stock options of 10,000
shares of common stock of HARVEYS CASINO RESORTS as more particularly set forth
in the 1996 Omnibus Incentive Plan. Stock options shall vest one-third (1/3)
the first Anniversary Date, one-third (1/3) on the second Anniversary Date and
one-third (1/3) on the third Anniversary Date.
VII
OTHER PERQUISITES
7.01 HARVEYS 401(k) Plan - During the employment term the EMPLOYEE shall be
allowed to participate in HARVEYS 401(k) Plan and EMPLOYER shall match
EMPLOYEE'S contribution once EMPLOYEE becomes eligible.
7.02 Vacation - Following the first annual Anniversary Date, EMPLOYEE shall
be entitled to three (3) weeks vacation and holiday pay in accordance with the
policy in place from time to time by EMPLOYER for corporate vice-president
positions. During the first twelve (12) months of EMPLOYEE'S employment, it is
agreed that EMPLOYEE shall be entitled to holiday pay and a reasonable vacation
of at least one (1) week.
7.03 Complimentary Privileges - EMPLOYEE shall be entitled to Level I
complimentary privileges as are afforded all other Corporate Vice-Presidents
from time to time.
7.04 Disability - EMPLOYEE shall also be entitled to short term disability
coverage and long term disability coverage as in effect from time to time as
implemented by EMPLOYER for Corporate Vice President positions.
7.05 Short Term Incentive - EMPLOYEE shall participate in the Short-Term
Incentive Plan for the current fiscal year on a pro-rata basis, starting with
the commencement of employment through the end of the fiscal year. EMPLOYEE is
guaranteed a minimum '96-'97 fiscal year bonus under the Short-Term Incentive
Plan of at least Twenty-Seven Thousand Dollars ($27,000.00), plus signing bonus
set forth in paragraph 6.1, above. (STI guaranteed bonus of Twenty Seven
Thousand Dollars ($27,000.00), plus Fifteen Thousand Dollars ($15,000.00)
signing bonus equals Forty-Two Thousand Dollars ($42,000.00).
7.06 Long Term Incentive - EMPLOYEE shall be allowed to participate in the
Long-Term Incentive Plan as such
<PAGE>
plan is in effect from time to time.
7.07 Medical, Vision and Dental Insurance - EMPLOYER shall
7.08 SERP - EMPLOYEE shall be allowed to participate in EMPLOYER'S
Supplemental Executive Retirement Program, as the same is amended from time to
time.
7.09 Deferred Compensation Program - EMPLOYEE shall be allowed to
participate in the Deferred Compensation Program as said plan is in effect from
time to time.
7.10 Group Life Insurance - During the term of this Agreement EMPLOYER
shall furnish EMPLOYEE with Group Term Life Insurance and Accidental
Death/Dismemberment Insurance with the maximum benefit being equal two times
EMPLOYEE'S annual salary. In addition, EMPLOYEE may elect, at EMPLOYEE'S
expense, to participate in the Supplemental Life Insurance Program, all of said
plans are in effect from time to time.
7.11 Additional Employee Benefit Plans - EMPLOYEE is entitled to
participate in all additional employee benefits plans which are now, or which
may, in the future, be made available to Corporate Vice-Presidents, including
relocation assistance, laundry privileges, executive physical examinations,
short and long term disability, etc.
IX
MISCELLANEOUS
8.01 If any action at law or in equity is necessary to enforce or interpret
the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorneys' fees, costs, and necessary disbursements in addition to
any other relief to which he may be entitled.
8.02 This Agreement shall be construed and governed by the laws of the
State of Nevada, and any action between the parties shall be maintained only
within the Ninth Judicial District Court of the State of Nevada, in and for the
County of Douglas, or such jurisdiction's successor court.
8.03 This Agreement, and all of the terms and conditions hereof, shall bind
the EMPLOYER and its successors and assigns and shall bind the EMPLOYEE and his
heirs, executors and administrators. No transfer or assignment of this
Agreement shall release EMPLOYER from any obligation to EMPLOYEE hereunder.
8.04 Notices - Notices to or for the respective parties shall be given in
writing and delivered in person or mailed by certified or registered mail,
addressed to the respective party at the address as set out below, or at such
<PAGE>
other address as either party may elect to provide in advance in writing, to the
other party:
EMPLOYEE:
JOHN R. BELLOTTI
909 Appomattox Circle
Naperville, Illinois 60540
EMPLOYER:
HARVEYS CASINO RESORTS
Attn: CHARLES W. SCHARER, Chief
Executive Officer
Highway 50 and Stateline Avenue
Post Office Box 128
Stateline, NV 89449
WITH A COPY TO:
Ronald D. Alling, Esq.
SCARPELLO & ALLING, LTD.
276 Kingsbury Grade, Suite 2000
Post Office Box 3390
Lake Tahoe, NV 89449
8.05 If any provision of this Agreement is held by the aforesaid court to
be invalid, illegal, or unenforceable by reason of any rule of law or public
policy, all other provisions of this Agreement shall nevertheless remain in
effect. No provision of this Agreement shall be deemed dependent on any other
provision unless so expressed herein.
8.06 Nothing contained in this Agreement shall be construed to require the
commencement of any act contrary to law, and when there is any conflict between
any provision of this Agreement and any statute, law, ordinance, or regulation,
contrary to which the parties have no legal right to contract, then the latter
shall prevail; but in such an event, the provisions of this Agreement so
affected shall be curtailed and limited only to the extent necessary to bring it
within the legal requirements.
8.07 The several rights and remedies provided for in this Agreement shall
be construed as being cumulative, and no one of them shall be deemed to be
exclusive of the others or of any right or remedy allowed by law. No waiver by
EMPLOYER or EMPLOYEE of any failure by EMPLOYEE or EMPLOYER, respectively, to
keep or perform any provision of this Agreement shall be deemed to be a wavier
of any preceding or succeeding breach of the same or other provision.
8.08 This Agreement supersedes any and all other agreements, either oral or
in writing, between the parties
<PAGE>
hereto with respect to the employment of the EMPLOYEE by the EMPLOYER and along
with the Agreement and Covenant Not to Compete or Use or Disclose Trade Secrets,
executed concurrently herewith, and the Agreement Relating to Copyrights
Inventions and Confidentiality of Company or Customer Information previously
executed by EMPLOYEE contain all of the covenants, conditions and agreements
between the parties with respect to such employment. Each party to this
Agreement acknowledges that no representations, inducements, promises or other
agreements, oral or otherwise, have been made by any party, or anyone acting on
behalf of any party, which are not embodied herein, and that no other agreement,
statement or promise not contained in this Agreement shall be valid or binding.
Any addendum to or
modification of this Agreement shall be effective only if it is in writing and
signed by the parties to be charged.
DATED this 21st day of July, 1997.
EMPLOYEE: /s/ JOHN R. BELLOTTI
---------------------
JOHN R. BELLOTTI
EMPLOYER:
HARVEYS CASINO RESORTS
By: /s/ CHARLES W. SCHARER
-------------------------
CHARLES W. SCHARER
Chief Executive Officer
<PAGE>
HARVEYS CASINO RESORTS
CHANGE OF CONTROL PLAN
1. PURPOSE. The purpose of Harveys Casino Resorts ("Harveys") Change of
Control Plan (the "Plan") is to provide additional special arrangements for a
select group of senior management if termination of their employment or
substantial diminution of their compensation or responsibilities occurs in
connection with a change in control, or ownership of Harveys; and to provide
special arrangements for certain members of Harveys Board of Directors. It is
intended that the Plan will help retain key employees during times of disruption
and potential loss of employment; maintain the integrity of Harveys' management
team and preserve the continued value of Harveys during periods of disruption
surrounding a Change of Control; enable the Board of Directors and senior
management to make the "right" decision without undue concern for their own
well-being or continued employment; and provide a positive incentive for Board
Members and key executives to support a desired transaction and maximize value
for shareholders.
2. ELIGIBILITY. Persons eligible to participate in the Plan shall be limited
to those members of senior management that are specifically identified by the
President/CEO and confirmed by the Compensation Committee of the Board of
Directors of Harveys whose:
(a) Employment is terminated as a result of a Change of Control;
(b) Position has been restructured to involve demotion or other diminution
of duties or responsibilities as a result of a Change of Control; or
(c) Compensation is materially reduced in anticipation of, or within two
(2) years of a Change of Control.
3. CHANGE OF CONTROL. For the purposes of this Plan, "CHANGE OF CONTROL"
shall mean the definition as set forth in Harveys Casino Resorts 1996 Omnibus
Incentive Plan. The anticipation of Change of Control shall occur when the
Participant's employment is terminated before such Change of Control and it is
reasonably demonstrated that such employment termination:
(a) Was at the request, directly or indirectly, of a third-party who has
taken steps reasonably calculated to effect the Change of Control; or
(b) Otherwise arose in connection with, or in anticipation of the Change
of Control.
For purposes of this Plan, Change of Control shall be deemed to have occurred
immediately prior to the employment termination of a Participant.
4. SEVERANCE COMPENSATION. A Participant in this Plan shall be entitled to
receive severance compensation, i.e. continuation of salary and core benefits
(medical, dental, vision and
1
<PAGE>
life) for the remainder of the balance of his or her employment contract term,
or as specifically set forth below, whichever is greater.
Participant Employee Salary & Benefits
- -----------------------------------------------------------
- -----------------------------------------------------------
Level I - CEO 36 months
- -----------------------------------------------------------
Level II - COO & CFO 30 months
- -----------------------------------------------------------
Level III - Remaining 24 months
Participants
- -----------------------------------------------------------
- -----------------------------------------------------------
5. MANAGEMENT INCENTIVE PLAN (SHORT TERM INCENTIVE PLAN). A Participant who
is also an eligible participant in the Management Incentive Plan, whose
employment is terminated as a result of a Change of Control shall receive a lump
sum payout at maximum, of the sums payable for that year under the Management
Incentive Plan upon termination. If following a Change of Control the
Management Incentive Plan is terminated or amendments are made that materially
adversely affect a Participant, who is also a participant in the Management
Incentive Plan, then that Participant shall receive a lump sum payout at maximum
within sixty (60) days following the termination of the Management Incentive
Plan, or the fiscal year during which the material amendments were made.
6. LONG-TERM INCENTIVE PLAN. A Participant in this Plan, who is also a
participant in the Long-Term Incentive Plan, who is retained at the same level
of responsibility and compensation subsequent to a Change of Control, shall
receive a payout at maximum for each cycle of the Long Term Incentive Plan,
within sixty (60) days following the end of each plan year. Participants who
are also participants in the Long-Term Incentive Plan, who are discharged as a
result of a Change of Control, shall receive a lump sum payout at maximum for
each cycle of the Long-Term Incentive Plan within thirty (30) days of their
termination. Participants who are also participants in the Long-Term Incentive
Plan, who are retained but demoted, or who have had their compensation
materially reduced as a result of a Change of Control, shall receive a lump sum
payment at maximum for each cycle of the Long-Term Incentive Plan within thirty
(30) days of their demotion or reduction in compensation.
7. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN. Upon a Change of Control, a
Participant who is also a participant in the Supplemental Executive Retirement
Plan, shall be entitled to the greater of their actual vesting, plus the term of
the severance payment, they will receive pursuant to the schedule set forth in
Section 4 above, or five (5) years. (Adjusted Vested Interest).
A Participant who is also a participant in the Supplemental Executive
Retirement Plan, who is demoted, discharged, or who has had their compensation
materially reduced as a result of a Change of Control, shall be entitled to
receive a present value lump sum payment equal to their Adjusted Vested Interest
in the Supplemental Executive Retirement Plan within 30 days from a
2
<PAGE>
Change of Control.
Projected Annual Salary (PAS) shall be a Participant's monthly based salary
as of the date of Change of Control x 12 (months), plus a Five Percent (5%)
annual increase, compounded times the number of years until a Participant's
Normal Retirement Age (as defined in the Supplemental Retirement Plan).
The lump sum formula used herein shall be a Participant's adjusted vested
interest times Vesting Per Plan Schedule times PAS times 15 (length of normal
payout under SERP), discounted by 15 year treasury bill rate as quoted on the
close of the last business day immediately preceding the date of the Change of
Control.
AVI X VESTING PER PLAN SCHEDULE* X PAS X 15
--------------------------------------------
15-Year T-Bill Rate
* The SERP Plan dated October 25, 1990, provides a retirement benefit as a
percentage of Projected Annual Salary (PAS) as follows: 3 years of service 10%,
4 years of service 20%, 5 years of service 30%, 6 years of service 40%, and 7
years of service and thereafter 50%. The Amended SERP Plan, dated October 27,
1994, provides for a 2.5% vesting each year up to 20 years.
8. BOARD OF DIRECTORS. Members of the Board of Directors who are asked to
resign as a result of Change of Control shall be paid their Annual Compensation
for the balance of their term for which they were elected, in cash,
simultaneously with their resignation.
Members of the Board of Directors who are asked to resign as a result of
the Change of Control shall be entitled to a lump sum payment of the benefit
compensation due under the Board of Directors Retirement Plan in effect
immediately prior to the Change of Control.
All options granted to the directors under the 1993 Non-Employee Directors
Stock Option Plan shall immediately vest upon a Change of Control.
9. COVENANTS NOT TO COMPETE. A Participant in this Plan, who has
previously signed a Covenant Not to Compete with Harveys, shall, in the event of
a Change of Control, no longer be bound by the previously entered into Covenant
Not to Compete, upon his or her termination of employment, as a result of a
Change of Control.
10. RIGHT TO TERMINATE EMPLOYMENT. Nothing contained in this Change of
Control Plan, or in any agreement entered into pursuant to this Change of
Control Plan shall confer upon any person the right to continue in the
employment of Harveys or affect any right Harveys may have to terminate the
employment of such person.
3
<PAGE>
11. WITHHOLDING. Whenever any payments are to be made under this Change of
Control Plan, Harveys shall withhold amounts sufficient to satisfy any
withholding tax requirement.
12. AFFECT ON OTHER PLANS. Except as specifically set forth in this Change of
Control Plan, this Plan shall not affect a Participant's eligibility to
participate in any other Plan of Harveys.
13. AMENDMENT. Harveys may terminate or amend this Change of Control Plan
at any time. No amendment or termination, however, shall adversely affect the
right of a Participant in this Plan to receive payment of any amounts determined
prior to such amendment or termination.
14. EFFECTIVE DATE. This Plan, except for the portions dealing with Members of
the Board of Directors, was approved in concept by the Board of Directors on May
22, 1997, and shall be effective as of June 1, 1997, notwithstanding a later
execution hereof. Those portions dealing with the Members of the Board of
Directors shall be effective as of the ____ day of _______, 1997.
Dated this ______ day of _____________________ , 1997.
----------------------------
CHARLES W. SCHARER
Chairman, President/CEO
HARVEYS CASINO RESORTS
----------------------------
EUGENE WHITE
Chairman, Compensation Committee
HARVEYS CASINO RESORTS
4
<PAGE>
ASSIGNMENT OF LEASES
This Assignment of Leases effective the 1st day of June, 1997 by and
between HARVEYS CASINO RESORTS, formerly known as HARVEY'S WAGON WHEEL, INC.
(the Assignor'), a Nevada corporation, HARVEYS TAHOE MANAGEMENT COMPANY, INC.,
(the Assignee'), a Nevada corporation, and PARK CATTLE CO. (the Landlord'),
a Nevada corporation.
WITNESSETH
1. Assignor has entered into three Lease Agreements with Landlord as
follows:
A. The Parking Lease dated July 9, 1973, as amended on April 27,
1979, February 28, 1985 and June 1, 1997, a copy of which is attached hereto and
by this reference incorporated herein as Exhibit A';
B. The Douglas County, Nevada Open Space Lease dated February 28,
1985, as amended on June 1, 1997, a copy of which is attached hereto and by this
reference incorporated herein as Exhibit B';
C. The El Dorado County, California Open Space Lease dated February
28, 1985 and June 1, 1997, a copy of which is attached hereto and by this
reference incorporated herein as Exhibit C';
Said Leases are collectively referred to herein as the Leases'.
2. Assignee is a wholly owned subsidiary of Assignor.
3. Assignor desires to assign and Assignee desires to accept an
assignment of the Leases on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing, and the mutual covenants
and conditions herein contained, Assignor and Assignee hereby agree as follows:
1. Assignment. Assignor does hereby assign all of its right, title and
interest in and to the Leases to Assignee.
2. Assignor Remains Obligated. Notwithstanding this Assignment,
Assignor acknowledges and agrees that it is not relieved of and remains bound to
observe and perform all of the covenants, terms and conditions of the Leases,
including, without limitation, the payment of rent thereunder.
3. Changes to Leases. Assignor acknowledges and agrees that Landlord and
Assignee may amend or modify any provision in the Leases, including the lease
term and provisions with respect to the payment of rent, without notice to or
the consent of Assignor and without in any manner releasing, waiving,
discharging or relieving Assignor from continued liability under the Leases, as
originally executed and subsequently amended or modified, and Assignor shall
remain liable under all terms, conditions, covenants and restrictions of the
Leases, as originally executed and as subsequently amended or modified.
4. Acceptance of Assignment. Assignee accepts the Assignment of the
Leases and assumes Assignor's obligation for the payment of rent and for the
full and faithful observance and performance of the covenants, terms and
conditions contained therein, and Assignee will, at Landlord's election, attorn
directly to Landlord in the event Assignor's Leases are terminated for any
reason.
5. Effective Date. This Assignment of Leases shall not enter in
effect unless and until all required governmental approvals of it have been
obtained, including, without limitation, the approval of the Nevada Gaming
Commission.
6. Consent to Assignment. Landlord hereby consents to the foregoing
assignment of
<PAGE>
Leases. This consent to assignment is not intended to, and does not, alter,
abrogate or release HARVEYS CASINO RESORTS of its obligations under the Leases.
This consent to assignment shall not enter into effect unless and until all
required governmental approvals of it have been obtained, including, without
limitation, the approval of the Nevada Gaming Commission.
7. Recording. The Landlord, Assignor and Assignee will execute,
acknowledge and deliver to each other Memoranda of Assignment of Leases in form
suitable for recording in the office in El Dorado County, California, and
Douglas County, Nevada, in which such records are kept, which sets forth the
names of the Landlord, the Assignor and Assignee, a description of the Premises,
the term of the Leases, and such other provisions, if any, as may be required
under the laws of the State of California or Nevada to permit the recording of
the Memoranda and to make this Assignment of Leases superior to any
subsequently recorded document of title or mortgage relating to the Premises to
which the Leases are not expressly subordinated. Either the Landlord, the
Assignor or Assignee may at any time record the Memoranda of Assignment of
Leases in the office in El Dorado County, California, or Douglas County, Nevada,
as the case may be, in which records relating to title to real property are
kept.
IN WITNESS WHEREOF, Assignor, Assignee and Landlord have executed this
Assignment of Leases dated this 1st day of June, 1997.
ASSIGNOR: ASSIGNEE:
HARVEYS CASINO RESORTS, HARVEYS TAHOE MANAGEMENT
formerly known as COMPANY, INC.
HARVEYS WAGON WHEEL, INC.
By Charles W. Scharer By Charles W. Scharer
Its Chairman, President & CEO Its President
PARK CATTLE CO.
By Bruce Park
Its President
<PAGE>
THIRD AMENDMENT TO LEASE AGREEMENT
BETWEEN PARK CATTLE CO, LANDLORD AND
HARVEYS CASINO RESORTS,
FORMERLY KNOWN AS HARVEYS WAGON WHEEL, INC., TENANT
This Third Amendment to Lease Agreement dated as of the 1st day of June,
1997 by and between PARK CATTLE CO. (the Landlord'), a Nevada corporation and
HARVEYS CASINO RESORTS, formerly known as HARVEY'S WAGON WHEEL, INC. (the
Tenant'), a Nevada corporation,
WITNESSETH:
1. On July 9, 1973, the Landlord and Tenant entered into a Lease
Agreement (the Lease').
2. On April 27, 1979, Landlord and Tenant entered into a Modification of
the Lease (the First Amendment to Lease Agreement').
3. On February 28, 1985, the Landlord and Tenant entered into a Second
Amendment to Lease Agreement.
4. Tenant desires to extend the term of the Lease.
5. Landlord is willing to extend the term of the Lease subject to certain
terms and conditions.
6. The Landlord and Tenant desire to amend the Lease, as amended, as is
hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing, and the mutual covenants
and conditions herein contained, Landlord and Tenant hereby agree as follows:
I. Paragraph 2 of the Lease, as amended, is hereby amended to read as follows:
The Term
2. The term of this Lease shall be a period of seventy-two (72) years
commencing April 1, 1973 and terminating March 31, 2045, subject to earlier
termination as hereinafter set forth.
II. Paragraph 3 of the Lease, as amended, is hereby amended to read as follows:
The Rent
3. (a) Until December 1, 1997, the annual percentage rent for the
Premises shall be a sum equal to three percent (3%) of Gross Gaming Winnings
received and reported by the licensed operator of gaming on the property now
known as Harveys Lake Tahoe Resort during each Lease Year subject to the minimum
annual rent hereinafter provided. For the period December 1, 1997 through
November 30, 1998, the annual percentage rent for the Premises shall be a sum
which is the greater of three and twenty-five one-hundredths percent (3.25%) of
Gross Gaming Winnings received and reported by the licensed operator of gaming
on the property now known as Harveys Lake Tahoe Resort during each Lease Year,
or two and fifteen one-hundredths percent (2.15%) of all Net Revenues received
from the operation of the property now known as Harveys Lake Tahoe Resort during
each Lease Year, subject to the minimum annual rent hereinafter provided. For
the period December 1, 1998 through November 30, 1999, the annual percentage
rent for the Premises shall be a sum which is the greater of three and
thirty-five one-hundredths percent (3.35%) of the Gross Gaming Winnings received
and reported by the licensed operator of gaming on the property now known as
Harveys Lake Tahoe Resort during each Lease Year, or two and twenty-five
one-hundredths percent (2.25%) of all Net Revenues received from the operation
of the property now known as Harveys Lake Tahoe Resort during each Lease Year,
subject to the minimum annual rent hereinafter provided. Commencing December 1,
1999 the annual percentage rent for the Premises shall be a sum which is the
greater of three and fifty one-hundredths percent (3.50%) of Gross Gaming
Winnings received and reported by the licensed operator of gaming on the
property now known as Harveys Lake Tahoe Resort during each Lease Year, or two
and thirty-five one-hundredths percent (2.35%) of all Net Revenues from the
operation of the property now known as Harveys Lake Tahoe Resort during each
Lease Year, subject to the minimum annual rent hereinafter provided. To the
extent that the formula for calculating annual percentage rent changes during a
Lease Year, the change in formula shall be applied to that portion of the Lease
Year which occurs beginning on and after the date of the change.
<PAGE>
(b) The annual percentage rent shall be paid by Tenant to Landlord
in four (4) quarterly installments within thirty (30) days of the close of each
quarter of the Fiscal Year of Tenant. The monthly minimum rent payments, as
hereinafter provided, made during each such quarter shall be credited against
such quarterly rent payment.
(c) For purposes of this Lease, the term Gross Gaming Winnings'
means the total of all sums received as winnings, less only the total of all
sums paid out as losses from all types of gaming conducted in or about the
casino and hotel now known as Harveys Lake Tahoe Resort. Such gross winnings
for each calendar quarter are now required by law to be reported to the Nevada
Gaming Commission. For purposes of this Lease, the term Net Revenues' shall
include all amounts received, whether by cash or credit, from the operation of
all of the facilities on the Premises and the property now known as Harveys Lake
Tahoe Resort, including, but not limited to, rooms, bars, restaurants,
concessions and gaming, but excluding only Casino Promotional Allowance. For
purposes of this Lease, Casino Promotional Allowance' means allowances
consisting principally of the retail value of complimentary rooms, food,
beverage, and other promotional allowances provided to customers without charge.
Tenant shall keep or cause to be kept complete and accurate records and accounts
of Net Revenues and Casino Promotional Allowance.
(d) With each quarterly payment of rent Tenant shall cause to be
delivered to Landlord an exact copy of all reports required by law to be made to
any agency or department of government of the State of Nevada for the purpose of
disclosing all revenue from the licensed gaming operations at the property now
known as Harveys Lake Tahoe Resorts during such quarter. In addition,
commencing December 1, 1997, with each quarterly payment of rent Tenant shall
cause to be delivered to Landlord a statement of Net Revenues for the preceding
calendar quarter and the amount of any authorized deduction therefrom. The
statement shall be certified as correct by Tenant's independent accountants or
by Tenant's chief financial officer.
(e) Within thirty (30) days after the close of a Fiscal Year of
Tenant, Landlord shall be furnished with a statement certified by Tenant's
independent accountants or chief financial officer of the amount of the Gross
Gaming Winnings and, in addition, commencing December 1, 1997, of Net Revenues
for the Fiscal Year of Tenant just ended, together with an appropriate
accounting setting forth the gross amount of percentage rental to which Landlord
was entitled for the immediately preceding Fiscal Year of Tenant, the amounts
paid to Landlord on account thereof and the resulting balance due Landlord or
the amount of overpayment which Landlord has received in the event that payments
on account exceeded the percentage rental for the preceding Fiscal Year of
Tenant. Landlord will be paid any such balance due at the time of delivery of
said certified statement, or, if there has been such an overpayment, the amount
of said overpayment shall be credited against percentage rental obligations for
the first or subsequent quarters of the following Fiscal Year of Tenant until
such credit has been reduced to zero.
(f) Landlord shall have the right, once with respect to each Fiscal
Year of Tenant and not later than one (1) year after the end thereof, to cause
an audit of the business of Tenant to be conducted at Harveys Lake Tahoe Resort
by a certified public account of Landlord's selection, to verify the amount set
forth in Tenant's statement of Gross Gaming Winnings and Net Revenues for such
Fiscal Year. The records, books and accounts which maybe audited shall include,
but not be limited to certified federal tax returns, sales tax returns, room tax
returns, and such tax returns of all their subtenants with respect to the
determination of Net Revenues'. All accounting records required to be kept
shall be available for inspection and copying by Landlord or its authorized
agents, attorneys or accountants at all reasonable times and places during the
term of this Lease. If a statement of Net Revenues made by Tenant shall be
found to be in error such that Tenant has underpaid annual percentage rent for
the Fiscal Year of Tenant audited by an amount exceeding two percent (2%) of the
percentage for such Fiscal Year of Tenant, Tenant shall immediately pay within
five (5) working days the additional amount of percentage rent owed plus the
cost of the audit. In all other events the cost of the audit shall be paid
solely by Landlord. Tenant agrees to keep and maintain, at its offices, intact
for a period of one (1) year after the end of each Fiscal Year of Tenant all of
the records, books, accounts and other data which are regularly kept by Tenant
in the ordinary course of its business to establish Tenant's Net Revenues and
Casino Promotional Allowances.
<PAGE>
(g) If any new federal, state or county tax or license fee is imposed
by law on gaming income, games or gaming devices at said Harveys Lake Tahoe
Resort, or the rate or amount of any existing tax or license fee thereon is
increased by the amendment of an act, statute or ordinance, the aggregate dollar
amount resulting from such new or increased tax or license fee shall be
subtracted from the Gross Gaming Winnings before calculating the percentage rent
called for by subparagraph 3(a) above.
(h) During the term hereof Tenant shall cause to be placed, and
remain on file with the Nevada State Gaming Control Board and the Nevada Gaming
Commission or any successor agency a continuing written consent and
authorization from the licensee at Harveys Lake Tahoe Resort by which a
representative of Landlord may during business hours examine and copy all
reports and return showing the gross winnings or gross revenue from gaming
licensed and conducted at Harveys Lake Tahoe Resort. The requirements of this
subparagraph are a condition to this Lease. Such requirements must be met
irrespective of who may be the licensee at Harveys Lake Tahoe Resort.
(i) As noted in subparagraph 3(a) above, Tenant shall pay Landlord a
minimum annual rent of Five Hundred Fourteen Thousand Two Hundred Dollars
($514,200.00) for the Premises, and such minimum annual rent shall be paid in
twelve (12) installments of Forty-Two Thousand Eight Hundred Fifty Dollars
($42,850.00) on the first day of each month of the Lease Year. Such minimum
annual rent payments shall be credited against the quarterly percentage rent
payment required by subparagraph 3(a) and (b) and they shall be modified as
hereinafter provided.
(j) The minimum annual rent shall be adjusted on each anniversary
date of this Lease to reflect any change of one point or more, up or down, in
the Consumer Price Index for all items' in San Francisco, California, compiled
and published by the United States Department of Labor or any successor agency.
Such Index for the quarter ending March 31, 1973, is 128.7, and that shall be
the base for the calculations required by this subparagraph. The first
adjustment in the minimum annual rent to be made because of a change in the
Index shall be calculated, if the facts so require, as soon as the all items'
Index figure for San Francisco for the period ending March 31, 1973, becomes
available, and shall be applicable to the installment of rent due April 1, 1974,
and to each successive installment of minimum rent until changed pursuant to
this subparagraph.
(k) In the event that the Bureau of Labor Statistics shall change the
cycle for publication of the Consumer Price Index so that no Index number is
published for the month of March, then the Index for the nearest month before
the month of March shall be substituted. If the manner in which the Consumer
Price Index is determined by the Bureau of Labor Statistics shall be
substantially revised, an adjustment shall be made in such revised index which
would produce the results equivalent, as nearly possible, to those which would
have been obtained if the Consumer Price Index had not been so revised. If the
1967 average shall no longer be used as an index of 100, such change shall
constitute a substantial revision. If the Consumer Price Index shall become
unavailable to the public because publication is discontinued, or otherwise, a
comparable index based upon changes in the cost of living or purchasing power of
the consumer dollar published by any other governmental agency or, if no such
index shall be available, then a comparable index published by a major bank or
other financial institution or by a university or a recognized financial
publication shall be used to calculate the rental increases required by this
Article.
(l) For the purposes of this Lease, the term Lease Year' means the
period beginning on the Commencement Date and ending March 31, 1974, and each
twelve (12) month period thereafter.
(m) For the purposes of this Lease, the term Fiscal Year of Tenant'
shall mean the period December 1 of a year to November 30 of the following year.
<PAGE>
III. Paragraph 10 of the Lease, as amended, is hereby amended to read as
follows:
Assignment and Subletting
Section 10.1. Tenant shall not assign this Lease, or any interest
therein, and shall not sublet the Premises or any part thereof, or any right or
privilege appurtenant thereof, or suffer any other person (the agents and
servants of Tenant excepted) to occupy or use the Premises, or any portion
thereof, without the written consent of Landlord first had and obtained. A
consent to one assignment, subletting, occupation or use by any other person
shall not be deemed to be a consent to any subsequent assignment, subletting,
occupation or use by another person. Any such assignment or subletting without
such consent shall be void, and shall be an event of default. This Lease shall
not, nor shall any interest therein, be assignable, as to the interest of
Tenant, by operation of law, without the written consent of Landlord.
Section 10.2. The consent of the Landlord required under Section 10.1
above, may not be unreasonably withheld. Landlord may withhold or condition the
consent required under Section 10.1 on Tenant remaining obligated to pay the
rent and to perform all other obligations to be performed by the Tenant
hereunder for any of the following reasons, which list is not exclusive, and
such withholding or conditioning of consent shall be deemed to be reasonable:
(a) Lack of experience operating a hotel/gaming facility
comparable to Harveys Lakee Tahoe Resort by the proposed sublessee or assignee;
or
(b) Financial inadequacy or general business history or
experience of the proposed sublessee or assignee.
Section 10.3. Notwithstanding the foregoing, the following conditions
shall apply to any proposed assignment or sublease hereunder:
(a) Each and every covenant, condition, or obligation imposed
upon Tenant by this Lease and each and every right, remedy or benefit afforded
Landlord by this Lease shall not be impaired or diminished as a result of such
assignment or sublease.
(b) The sale, lease, transfer, conveyance, or other disposition,
in one or a series of related transactions of Harveys Lake Tahoe Resort and the
liquidation or dissolution of Harveys Casino Resorts each shall be deemed an
assignment within this paragraph 10.
(c) The acceptance of rent by Landlord from any person shall not
be deemed to be a waiver by Landlord of any provision of this Lease or to be a
consent to any assignment or subletting.
(d) Tenant shall have the right without the consent of Landlord
but upon prior written notice to Landlord, to assign this Lease to a company
incorporated or to be incorporated by Tenant provided that Tenant owns or
beneficially controls all of the issued and outstanding shares of the capital
stock of the company (the Subsidiary Company'). Such assignment shall not,
however, relieve Tenant from its obligation for the payment of rent and for the
full and faithful observance and performance of the covenants, terms and
conditions contained herein. If at any time after such an assignment there is
any Change of Control of the Subsidiary Company, such Change of Control shall
constitute an assignment subject to the provisions of this Paragraph 10. A
Change of Control shall occur whenever Tenant does not own or beneficially
control all of the issued and outstanding shares of the Subsidiary Company.
(e) No permitted assignment or sublease shall be valid and no
assignee or sublessee shall take possession of the Premises assigned or sublet
unless, within ten (10) days after the execution thereof, Tenant shall deliver
to Landlord a duly executed duplicate original of such assignment or sublease in
form satisfactory to Landlord which provides (1) the assignee or sublessee
assumes Tenant's
<PAGE>
obligation for the payment of rent and for the full and faithful observance and
performance of the covenants, terms and conditions contained herein, and (2)
that such assignee or sublessee will, at Landlord's election, attorn directly to
Landlord in the event Tenant's lease is terminated for any reason, and (3) such
assignment of sublease contains such other assurance as Landlord reasonably
deems necessary.
IV. The Lease, as amended, is hereby amended by adding a new paragraph 20 as
follows:
Agreement to Enter Into Restated Lease Agreement
20. The parties hereto agree to prepare and enter into a
Restated Lease Agreement incorporating and to the extent necessary, clarifying
all of the terms and provisions of the Lease as amended.
V. Except as specifically modified herein, the Lease dated July 9, 1973, as
modified April 27, 1979, and February 28, 1985, shall remain in full force and
effect and the parties shall be bound by all the terms and conditions thereof.
IN WITNESS WHEREOF, the Landlord and Tenant have executed this Third
Amendment to Lease Agreement dated this 1st day of June, 1997.
LANDLORD: TENANT:
PARK CATTLE CO. HARVEYS CASINO RESORTS
formerly knows as HARVEYS
By Bruce Park WAGON WHEEL, INC.
Its President By Charles W. Scharer
Its Chairman, President &
CEO
<PAGE>
FIRST AMENDMENT TO LEASE AGREEMENT
BETWEEN PARK CATTLE CO., LANDLORD AND
HARVEYS CASINO RESORTS formerly known as
HARVEY'S WAGON WHEEL, INC., TENANT
(Douglas County, Nevada property)
This First Amendment to Lease Agreement dated as of the 1st day
of June, 1997, by and between PARK CATTLE CO. (the Landlord'), a
Nevada corporation and HARVEYS CASINO RESORTS, formerly known as
HARVEY'S WAGON WHEEL, INC. (the Tenant'), a Nevada corporation.
WITNESSETH:
1. On February 28, 1985, the Landlord and Tenant entered into a
Lease Agreement (the Lease').
2. Tenant desires to extend the term of the Lease.
3. Landlord is willing to extend the term of the Lease subject
to certain terms and conditions.
4. The Landlord and Tenant desire to amend the Lease as is
hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing, and the mutual
covenants and conditions herein contained, Landlord and Tenant hereby
agree as follows:
I. Article I of the Lease is hereby amended to read as follows:
ARTICLE I
Premises and Term of Lease
Section 1.1. The Landlord hereby demises and leases to the Tenant,
and the Tenant hereby hires and leases from the Landlord, the property (the
Premises') in Douglas County, Nevada, consisting of the parcel of land described
on Exhibit A.
<PAGE>
Section 1.2. At any time during the entire term of this Lease
Landlord may require this Lease to be amended to substitute a different parcel
of land owned by Landlord for and as the Premises. Tenant must accept the
substitution if the parcel meets the open space requirements for Tenant's Master
Plan Project, the approvals, if any, required from governmental agencies having
jurisdiction have been obtained and the consent, if any, required from lenders
holding a security interest in Tenant's leasehold interest have been obtained.
Landlord and Tenant shall cooperate in obtaining all such approvals and
consents.
Section 1.3. The term of this Lease shall commence at 12:01 A.M. on
the day (the Commencement Date') which is the 28th day of February, 1985, and
shall end at 11:59 P.M. on March 31, 2045.
Section 1.4. During the entire term of this Lease the Tenant will
have the right to occupy and use the Premises, enjoy all the rights and
privileges relating to the Premises, and receive, subject to its obligations to
pay rent and make other payments as required by this Lease, all the rents and
profits from the Premises.
II. Article XI of the Lease is hereby amended to read as follows:
ARTICLE XI
Assignment and Subletting
Section 11.1. Tenant shall not assign this Lease, or any interest
therein, and shall not sublet the Premises or any part thereof, or any right or
privilege appurtenant thereto, or suffer any other person (the agents and
servants of Tenant excepted) to occupy or use the Premises or any portion
thereof, without the written consent of Landlord first had and obtained. A
consent to one assignment, subletting, occupation or use by any other person,
shall not be deemed to be a consent to any subsequent assignment, subletting,
occupation or use by another person. Any such assignment or subletting without
such consent shall be void and shall be an event of default. This Lease shall
not, nor shall any interest therein, be assignable, as to interest of Tenant, by
operation of law, without the written consent of Landlord.
Section 11.2. The consent of the Landlord required under Section 11.1
above may not be unreasonably withheld. Landlord may withhold or condition the
consent required under section 11.1 on Tenant remaining obligated to pay the
rent and to perform all other obligations to be performed by the Tenant
hereunder for any of the following reasons, which list is not exclusive, and
such withholding or conditioning of consent shall be deemed to be reasonable:
(a) Lack of experience operating a hotel/gaming facility
comparable to Harveys Lake Tahoe Resort by the proposed sublessee or assignee;
or
(b) Financial inadequacy or general business history or
experience of the proposed sublessee or assignee.
Section 11.3. Notwithstanding the foregoing, the following conditions
shall apply to any proposed assignment or sublease hereunder.
(a) Each and every covenant, condition or obligation
imposed upon Tenant by this Lease and each and every right, remedy, or benefit
afforded Landlord by this Lease shall not be impaired or diminished as a result
of such assignment or sublease;
(b) The sale, lease, transfer, conveyance or other
disposition, in one or a series of related transactions of Harveys Lake Tahoe
Resort and the liquidation or dissolution of Harveys Casino Resorts each shall
be deemed an assignment within this Article XI.
<PAGE>
(c) The acceptance of rent by Landlord from any person
shall not be deemed to be a waiver by Landlord or any provision of this Lease or
to be a consent to any assignment or subletting.
(d) Tenant shall have the right without the consent of
Landlord but upon prior written notice to Landlord, to assign this Lease to a
company incorporated or to be incorporated by Tenant provided that Tenant owns
or beneficially controls all the issued and outstanding shares of the capital
stock of the company (the Subsidiary Company'). Such assignment shall not,
however, relieve Tenant from its obligation for the payment of rent and for the
full and faithful observance and performance of the covenants, terms and
conditions contained herein. If at any time after such an assignment, there is
any Change of Control of the Subsidiary Company, such Change of Control shall
constitute an assignment subject to the provisions of this Article XI. A Change
of Control shall occur whenever Tenant does not own or beneficially control all
of the issued and outstanding shares of the Subsidiary Company.
(e) No permitted assignment or sublease shall be valid and
no assignee or sublessee shall take possession of the Premises assigned or
sublet unless, within ten (10) days after the execution thereof, Tenant shall
deliver to landlord a duly executed duplicate original of such assignment or
sublease in form satisfactory to Landlord which provides (1) the assignee or
sublessee assumes Tenant's obligation for the payment of rent and for the full
and faithful observance and performance of the covenants, terms and conditions
contained herein, and (2) that such assignee or sublessee will, at Landlord's
election, attorn directly to landlord in the event Tenant's lease is terminated
for any reason, and (3) such assignment or sublease contains such other
assurance as Landlord reasonably deems necessary.
III. Except as specifically modified herein, the Lease dated February 28,
1985, shall remain in full force and effect and the parties shall be bound by
all of the terms and conditions thereof.
IN WITNESS WHEREOF, the Landlord and Tenant have executed this First
Amendment to Lease Agreement dated this 1st day of June, 1997.
LANDLORD: TENANT:
PARK CATTLE CO. HARVEYS CASINO RESORTS,
formerly known as HARVEY'S WAGON
WHEEL, INC.
By: Bruce Park By: Charles W. Scharer
Its: President Its: Chairman, President and CEO
<PAGE>
FIRST AMENDMENT TO LEASE AGREEMENT
BETWEEN PARK CATTLE CO., LANDLORD AND
HARVEYS CASINO RESORTS formerly known as
HARVEYS WAGON WHEEL, INC., TENANT
(El Dorado County, California property)
This First Amendment to Lease Agreement dated as of the 1st day of June,
1997 by and between PARK CATTLE CO. (the Landlord'), a Nevada corporation and
HARVEYS CASINO RESORTS, formerly known as HARVEY'S WAGON WHEEL, INC. (the
Tenant'), a Nevada corporation,
WITNESSETH:
1. On February 28, 1985, the Landlord and Tenant entered into a Lease
Agreement (the Lease').
2. Tenant desires to extend the term of the lease.
3. Landlord is willing to extend the term of the Lease subject to certain
terms and
conditions.
4. The Landlord and Tenant desire to amend the Lease as is hereinafter
set forth.
NOW, THEREFORE, in consideration of the foregoing, and the mutual covenants
and conditions herein contained, Landlord and Tenant hereby agree as follows:
I. Article I of the Lease is hereby amended to read as follows:
ARTICLE I
Premises and Term of Lease
Section 1.1. The Landlord hereby demises and leases to the
Tenant,and the Tenant hereby hires and leases from the Landlord, the property
(the Premises') in El Dorado County, California, consisting of the parcel of
land described on Exhibit A.
Section 1.2. At any time during the entire term of this Lease,
Landlord may require this Lease to be amended to substitute a different parcel
of land owned by Landlord for and as the Premises. Tenant must accept the
substitution if the parcel meets the open space requirements for Tenant's Master
Plan Project, the approvals, if any, required from governmental agencies having
jurisdiction have been obtained and the consent, if any, required from lenders
holding a security interest in Tenant's leasehold interest have been obtained.
Landlord and Tenant shall cooperate in obtaining all such approvals and
consents.
Section 1.3. The Term of this Lease shall commence at 12:01 A.M. on
the day (the Commencement Date') which is the 28th day of February, 1985, and
shall end at 11:59 P.M. on March 31, 2045.
Section 1.4. During the entire term of this Lease the Tenant will
have the right to occupy and use the Premises, enjoy all the rights and
privileges relating to the Premises, and receive, subject to its obligations to
pay rent and make other payments as required by this Lease, all the rents and
profits from the Premises.
<PAGE>
II. Article XI of the Lease is hereby amended to read as follows:
ARTICLE XI
Assignment and Subletting
Section 11.1. Tenant shall not assign this Lease, or any interest
therein, and shall not sublet the Premises or any part thereof, or any right or
privilege appurtenant thereto, or suffer any other person (the agents and
servants of Tenant excepted) to occupy or use the Premises, or any portion
thereof, without the written consent of Landlord first had and obtained. A
consent to one assignment, subletting, occupation or use by any other person,
shall not be deemed to be a consent to any subsequent assignment, subletting,
occupation or use by another person. Any such assignment or subletting without
such consent shall be void, and shall be an event of default. This Lease shall
not, nor shall any interest therein, be assignable, as to the interest of
Tenant, by operation of law, without the written consent of Landlord.
11.2 The consent of the Landlord required under Section 11.1 above,
may not be unreasonably withheld. Landlord may withhold or condition the
consent required under Section 11.1 on Tenant remaining obligated to pay the
rent and to perform all other obligations to be performed by the Tenant
hereunder for any of the following reasons, which list is not exclusive, and
such withholding or conditioning of consent shall be deemed to be reasonable:
(a) Lack of experience operating a hotel/gaming facility
comparable to Harveys Lake Tahoe Resort by the proposed sublessee or assignee;
or
(b) Financial inadequacy or general business history or
experience of the proposed sublessee or assignee.
Section 11.3. Notwithstanding the foregoing, the following conditions
shall apply to any proposed assignment or sublease hereunder:
(a) Each and every covenant, condition, or obligation imposed
upon Tenant by this Lease and each and every right, remedy, or benefit afforded
Landlord by this Lease shall not be impaired or diminished as a result of such
assignment or sublease;
(b) The sale, lease, transfer, conveyance or other disposition,
in one or a series of related transactions of Harveys Lake Tahoe Resort and the
liquidation or dissolution of Harveys Casino Resorts each shall be deemed an
assignment within this Article XI.
(c) The acceptance of rent by Landlord from any person shall not
be deemed to be a waiver by Landlord or any provision of this Lease or to be a
consent to any assignment or subletting.
(d) Tenant shall have the right without the consent of Landlord
but upon prior written notice to Landlord, to assign this Lease to a company
incorporated or to be incorporated by Tenant provided that Tenant owns or
beneficially controls all the issued and outstanding shares of the capital stock
of the company (the Subsidiary Company'). Such assignment shall not, however,
relieve Tenant from its obligation for the payment of rent and for the full and
faithful observance and performance of the covenants, terms and conditions
contained herein. If at any time after such an assignment there is any Change
of Control of the Subsidiary Company, such Change of Control shall constitute an
assignment subject to the provisions of this Article XI. A Change of Control
shall occur whenever Tenant does not own or beneficially control all of the
issued and outstanding shares of the Subsidiary Company.
<PAGE>
(e) No permitted assignment or sublease shall be valid and no
assignee or sublessee shall take possession of the Premises assigned or sublet
unless, within ten (10) days after the execution thereof, Tenant shall deliver
to Landlord a duly executed duplicate original of such assignment or sublease in
form satisfactory to Landlord which provides (1) the assignee or sublessee
assumes Tenant's obligation for the payment of rent and for the full and
faithful observance and performance of the covenants, terms and conditions
contained herein, and (2) that such assignee or sublessee will, at Landlord's
election, attorn directly to Landlord in the event Tenant's lease is terminated
for any reason, and (3) such assignment or sublease contains such other
assurance as Landlord reasonably deems necessary.
III. Except as specifically modified herein, the Lease dated February 28,
1985, shall remain in full force and effect and the parties shall be bound by
all the terms and conditions thereof.
IN WITNESS WHEREOF, the Landlord and Tenant have executed this First
Amendment to Lease Agreement dated this 1st day of June, 1997.
LANDLORD: TENANT:
PARK CATTLE CO. HARVEYS CASINO RESORTS,
formerly known as HARVEYS WAGON
WHEEL, INC.
By Bruce Park By Charles W. Scharer
Its President Its Chairman, President & CEO
<PAGE>
FOURTH AMENDMENT TO
REDUCING REVOLVING CREDIT AGREEMENT
THIS FOURTH AMENDMENT TO REDUCING REVOLVING CREDIT AGREEMENT ("Fourth
Amendment to Credit Agreement") is made and entered into as of the 25th day of
July, 1997, by and among HARVEYS CASINO RESORTS, a Nevada corporation ("HCR"),
HARVEYS C.C. MANAGEMENT COMPANY, INC., a Nevada corporation ("HCCMC"), HARVEYS
WAGON WHEEL CASINO LIMITED LIABILITY COMPANY ("HWWLLC"), HARVEYS IOWA MANAGEMENT
COMPANY, INC., a Nevada corporation ("HIMC"), HARVEYS TAHOE MANAGEMENT COMPANY,
INC., a Nevada corporation ("HTMC") and HCR SERVICES COMPANY, INC., a Nevada
corporation ("HCRSC" and together with HCR, HCCMC, HWWLLC, HIMC and HTMC
collectively the "Borrowers"), WELLS FARGO BANK, National Association (successor
by merger to First Interstate Bank of California and First Interstate Bank of
Nevada, N.A.), BANK OF THE WEST, FIRST SECURITY BANK, N.A. (formerly known as
FIRST SECURITY BANK OF IDAHO, N.A.), IMPERIAL BANK, NORWEST BANK OF NEBRASKA,
N.A., THE FIRST NATIONAL BANK OF CHICAGO, SOCIETE GENERALE, THE SUMITOMO BANK,
LIMITED, U.S. BANK and ARGENTBANK (herein together with their respective
successors and assigns collectively the "Lenders"), WELLS FARGO BANK, National
Association, as the swingline lender (herein in such capacity, together with its
successors and assigns, the "Swingline Lender"), WELLS FARGO BANK, National
Association, as the issuer of letters of credit hereunder (herein in such
capacity, together with its successors and assigns, the "L/C Issuer") and WELLS
FARGO BANK, National Association, as administrative and collateral agent for the
Lenders, Swingline Lender and L/C Issuer (herein, in such capacity, called the
"Agent Bank" and, together with the Lenders, Swingline Lender and L/C Issuer,
collectively referred to as the "Banks").
R_E_C_I_T_A_L_S:
WHEREAS:
A. HCR, HCCMC, HIMC and Banks (The Sumitomo Bank, Limited, Chicago
Branch, having acquired the interest of The Daiwa Bank, Limited by Assignment,
Assumption and Consent Agreement dated as of February 2, 1996) entered into a
Reducing Revolving Credit Agreement dated as of August 14, 1995 (the "Original
Credit Agreement"). HCR, HCCMC, HWWLLC and HIMC and Banks entered into a First
Amendment to Reducing Revolving Credit Agreement dated as of May 15, 1996 (the
"First Amendment to Credit Agreement"), a Second Amendment to Reducing Revolving
Credit Agreement dated as of May 23, 1996
<PAGE>
(the "Second Amendment to Credit Agreement"), and a Third Amendment to Reducing
Revolving Credit Agreement dated as of September 30, 1996 (the "Third Amendment
to Credit Agreement" and, together with the Original Credit Agreement, First
Amendment to Credit Agreement and Second Amendment to Credit Agreement,
collectively the "Existing Credit Agreement").
B. In this Fourth Amendment to Credit Agreement, all capitalized
words and terms shall have the respective meanings and be construed herein as
provided in Section 1.01 of the Existing Credit Agreement, as that Section is
amended hereby. This Fourth Amendment to Credit Agreement shall be deemed to
incorporate such words and terms as a part hereof in the same manner and with
the same effect as if the same were fully set forth herein.
C. HTMC is a wholly owned subsidiary of HCR organized for the
purpose of holding title or leasehold interests, as applicable, to and operating
the Tahoe Real Property and Tahoe Hotel/Casino Facility. HCRSC is a wholly
owned subsidiary of HCR organized for the purpose of employing certain corporate
personnel and providing services to the Tahoe Hotel/Casino Facility, Central
City Casino and Iowa Riverboat/Hotel Facilities.
D. HCCMC is in the process of being licensed by the Gaming
Authorities of the State of Colorado for the ownership and operation of the
Central City Casino. At such time as HCCMC has been approved for such licenses,
HCR intends to cause the Central City Casino Property and Central City
Hotel/Casino Facility to be transferred and conveyed to HCCMC and to dissolve
HWWLLC.
E. Banks have agreed to the creation of HTMC and HCRSC and to the
transfers described above subject to HTMC and HCRSC's assumption of all
obligations as Borrowers under the Bank Facilities, all on the terms and subject
to the additional conditions hereinafter set forth.
NOW, THEREFORE, for good and valuable consideration, the parties
hereto agree to amend the Existing Credit Agreement by amending and
substituting, as applicable, the amended terms and provisions as hereinafter set
forth, which amended terms shall be deemed effective as of the Fourth Amendment
Effective Date.
Section 1. DEFINITIONS. Section 1.01 of the Existing Credit
Agreement shall be and is hereby amended to include the following definitions.
Those terms which are
- 2 -
<PAGE>
currently defined by Section 1.01 of the Existing Credit Agreement and which are
also defined below shall be defined as set forth below as of the Fourth
Amendment Effective Date:
"Borrower Consolidation" shall mean collective reference to HCR,
HCCMC, HWWLLC, HIMC, HTMC and HCRSC on a consolidated basis without regard to
any New Venture, New Venture Subsidiaries or Affiliate.
"Borrowers" shall have the meaning set forth in the Preamble to the
Fourth Amendment to Credit Agreement.
"Credit Agreement" shall mean the Existing Credit Agreement as amended
by the Fourth Amendment to Credit Agreement, as it may be further amended,
modified, extended, renewed or restated from time to time.
"Existing Credit Agreement" shall have the meaning set forth in
Recital Paragraph A to the Fourth Amendment to Credit Agreement.
"First Amendment to Credit Agreement" shall have the meaning set forth
in Recital Paragraph A to the Fourth Amendment to Credit Agreement.
"Fourth Amendment Effective Date" shall mean July 30, 1997.
"Fourth Amendment to Credit Agreement" shall have the meaning set
forth in the Preamble of the Fourth Amendment to Reducing Revolving Credit
Agreement dated as of July 25, 1997, executed by and among Borrowers and Banks.
"HCRSC" shall have the meaning set forth in the Preamble to the
Fourth Amendment to Credit Agreement.
"HTMC" shall have the meaning set forth in the Preamble to the Fourth
Amendment to Credit Agreement.
"Original Credit Agreement" shall have the meaning set forth in
Recital Paragraph A to the Fourth Amendment to Credit Agreement.
"Second Amendment to Credit Agreement" shall have the meaning set
forth in Recital Paragraph A to the Fourth Amendment to Credit Agreement.
"Tahoe Transfer Date" shall mean the date on which all right, title
and interest of HCR in and to the Tahoe Real
- 3 -
<PAGE>
Property is transferred and conveyed to HTMC, including an assignment of HCR's
interest in and to the Tahoe Greenbelt Lease, the California Greenbelt Lease and
Park Cattle Lease, together with all FF&E and other Tahoe Collateral relating to
the Tahoe Hotel/Casino Facility.
"Third Amendment to Credit Agreement" shall have the meaning set forth
in Recital Paragraph A to the Fourth Amendment to Credit Agreement.
Section 2. CONSENT TO CREATION OF ADDITIONAL SUBSIDIARIES. Banks do
hereby consent to the organization and creation of HTMC and HCRSC as wholly
owned subsidiaries of HCR.
Section 3. ASSUMPTION BY HTMC AND HCRSC. HTMC and HCRSC join in the
execution of this Fourth Amendment to Credit Agreement for the purpose of
evidencing their agreement to and, as of the date hereof, do hereby jointly and
severally assume all duties, obligations and liabilities of Borrowers under the
Credit Agreement, the Notes and each of the other Loan Documents as a Borrower
and each agrees to jointly and severally perform all of the promises, covenants
and other obligations of Borrowers thereunder arising or performable from and
after the date hereof. In this regard, as of the Tahoe Transfer Date, HTMC
shall execute such additional assumption documents as may be reasonably required
by Agent Bank and its attorneys for the purpose of evidencing its assumption of
all obligations of HCR under the Tahoe Security Documents, including, without
limitation, the execution and delivery of Tahoe Financing Statements as the
debtor.
Section 4. STOCK PLEDGE. As of the Tahoe Transfer Date, HCR shall
execute and deliver to and for the benefit of Agent Bank on behalf of Lenders:
(a) the original stock certificates evidencing all of the issued and outstanding
capital stock of HTMC and HCRSC, (b) Irrevocable Stock Powers executed in blank
with respect to such shares, and (c) an amendment to that certain Security
Agreement and Pledge of Stock dated August 14, 1995, executed by and between HCR
and Agent Bank for the purpose of adding to the Pledged Stock thereunder all of
the issued and outstanding capital stock of HTMC and HCRSC.
Section 5. CONSENT TO DISSOLUTION OF HWWLLC. Upon approval thereof
of the Gaming Authorities for the State of Colorado and the transfer and
conveyance of all assets, rights and interests of HWWLLC in and to the Central
City Hotel/Casino Facility and Central City Property to HCCMC,
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<PAGE>
Banks shall and do hereby consent to the dissolution of HWWLLC.
Section 6. CONSENT TO LEASE AMENDMENTS AND ASSIGNMENT. As of the
Fourth Amendment Effective Date, Banks shall and do hereby consent to:
a. the amendment of the Park Cattle Lease in the form of the
Third Amendment to Lease Agreement approved by Agent Bank;
b. the amendment of the Tahoe Green Belt Lease in the form of
the First Amendment to Lease Agreement approved by Agent Bank;
c. the amendment of the California Green Belt Lease in the form
of the First Amendment to Lease Agreement approved by Agent Bank; and
d. the assignment by HCR to HTMC of all of HCR's right, title
and interest in and to the Park Cattle Lease, Tahoe Green Belt Lease and
California Green Belt Lease in the form of the Assignment of Lease approved by
Agent Bank.
Section 7. CONDITIONS PRECEDENT TO FOURTH AMENDMENT EFFECTIVE
DATE. This Fourth Amendment to Credit Agreement is further subject to Agent
Bank having received the following documents and payment, in each case in a form
and substance reasonably satisfactory to Agent Bank on or before the Fourth
Amendment Effective Date:
a. a true and correct copy of the Articles of Incorporation and
Bylaws of each of HTMC and HCRSC;
b. a certificate of good standing issued by the Secretary of
State of the State of Nevada for each of HTMC and HCRSC, in each instance dated
within thirty (30) days of the Fourth Amendment Effective Date;
c. a duly executed corporate resolution for each of the
Borrowers, authorizing each Borrower to enter into and execute the amendments
and related documents set forth and referenced in the Fourth Amendment to Credit
Agreement and, in the case of HTMC and HCRSC, authorizing the assumption of all
duties, obligations and liabilities as Borrowers under the Credit Agreement,
Notes and each of the other Loan Documents;
d. two (2) UCC-1 financing statements, in the form of the Tahoe
Financing Statements and acceptable to Agent
- 5 -
<PAGE>
Bank, executed by HTMC as debtor and Agent Bank, as secured party;
e. the Consent to Amendment and Assignment of Leases and
Affirmation of Estoppels, in the form acceptable to Agent Bank, duly executed by
Agent Bank, on behalf of the Banks, HTMC and Park Cattle Co.;
f. reimbursement to Agent Bank by Borrowers for the reasonable
attorneys' fees and expenses of Henderson & Nelson relating to the preparation
and execution of this Fourth Amendment to Credit Agreement and related
documentation; and
g. such other documents, instruments or conditions as may
reasonably be required by Agent Bank.
Section 8. REPRESENTATIONS AND WARRANTIES. To induce Banks to
enter into this Fourth Amendment to Credit Agreement, Borrowers hereby certify
that (i) the representations and warranties contained in Article IV of the
Credit Agreement and in each of the Loan Documents (other than representations
and warranties which expressly speak only as of a different date, which shall be
true and correct in all material respects as of such date), shall be true and
correct in all material respects on and as of the Fourth Amendment Effective
Date as though made on and as of the Fourth Amendment Effective Date, except to
the extent that such representations and warranties are not true and correct as
a result of a change which is permitted by the Credit Agreement or by any other
Loan Document or which has been otherwise consented to by Banks; and (ii) no
Default or Event of Default has occurred and is continuing under the Credit
Agreement or any other Loan Document.
Section 9. NO OTHER CHANGES. Except as specifically set forth
herein, the Existing Credit Agreement shall remain unchanged and in full force
and effect.
Section 10. GOVERNING LAW. This Fourth Amendment to Credit Agreement
shall be governed by the internal laws of the State of Nevada without reference
to conflicts of laws principles.
Section 11. COUNTERPARTS. This Fourth Amendment to Credit Agreement
may be executed in any number of counterparts, all of which taken together shall
constitute one agreement, and any party hereto may execute this Fourth Amendment
to Credit Agreement by signing any such counterpart.
- 6 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Fourth
Amendment to Credit Agreement to be executed as of the day and year first above
written.
BORROWERS:
HARVEYS CASINO RESORTS,
a Nevada corporation
By /s/ Charles W. Scharer
---------------------------------
Charles W. Scharer,
President
By /s/ William B. Ledbetter
---------------------------------
William B. Ledbetter,
Secretary
Address:
Highway 50
P.O Box 128
Stateline, Nevada 89449
Telephone: (702) 586-6756
Facsimile: (702) 588-0601
S - 1
<PAGE>
HARVEYS C.C.
MANAGEMENT COMPANY, INC.,
a Nevada corporation
By /s/ Charles W. Scharer
---------------------------------
Charles W. Scharer,
President
By /s/ William B. Ledbetter
---------------------------------
William B. Ledbetter,
Secretary
Address:
Highway 50
P.O Box 128
Stateline, Nevada 89449
Telephone: (702) 586-6756
Facsimile: (702) 588-0601
HARVEYS IOWA
MANAGEMENT COMPANY., INC.,
a Nevada corporation
By /s/ Charles W. Scharer
---------------------------------
Charles W. Scharer,
President
By /s/ William B. Ledbetter
---------------------------------
William B. Ledbetter,
Secretary
Address:
Highway 50
P.O Box 128
Stateline, Nevada 89449
Telephone: (702) 586-6756
Facsimile: (702) 588-0601
S - 2
<PAGE>
HARVEYS WAGON WHEEL CASINO
LIMITED LIABILITY COMPANY
By /s/ Charles W. Scharer
---------------------------------
Charles W. Scharer,
President
By /s/ William B. Ledbetter
---------------------------------
William B. Ledbetter,
Secretary
Address:
Highway 50
P.O. Box 128
Stateline, NV 89449
Telephone: (702) 586-6756
Facsimile: (702) 588-0601
HARVEYS TAHOE MANAGEMENT
COMPANY, INC., a Nevada
corporation
By /s/ Charles W. Scharer
---------------------------------
Charles W. Scharer,
President
Address:
Highway 50
P.O. Box 128
Stateline, NV 89449
Telephone: (702) 586-6756
Facsimile: (702) 588-0601
S - 3
<PAGE>
HCR SERVICES COMPANY, INC.,
a Nevada corporation
By /s/ Charles W. Scharer
---------------------------------
Charles W. Scharer,
President
Address:
Highway 50
P.O. Box 128
Stateline, NV 89449
Telephone: (702) 586-6756
Facsimile: (702) 588-0601
BANKS:
WELLS FARGO BANK,
National Association,
successor by merger to
FIRST INTERSTATE BANK OF
NEVADA, N.A. and FIRST
INTERSTATE BANK OF
CALIFORNIA, Agent Bank,
Lender, Swingline Lender and L/C
Issuer
By /s/ Rob Medeiros
---------------------------------
Rob Medeiros,
Vice President
Address:
One East First Street
Reno, Nevada 89501
Telephone: (702) 334-5747
Facsimile: (702) 334-5637
S - 4
<PAGE>
BANK OF THE WEST,
Lender
By /s/ Dale J. Kobsar
---------------------------------
Name Dale J. Kobsar
-------------------------------
Title Regional Vice President
------------------------------
Address:
1450 Treat Boulevard
Walnut Creek, CA 94596
Telephone: (510) 942-8675
Facsimile: (510) 256-8276
FIRST SECURITY BANK,
N.A., formerly known as
FIRST SECURITY BANK OF
IDAHO, N.A., Lender
By /s/ David P. Williams
---------------------------------
Name David P. Williams
-------------------------------
Title Vice President
------------------------------
Address:
15 East 100 South
2nd Floor
Salt Lake City, UT 84111
Telephone: (801) 246-5540
Facsimile: (801) 246-5532
S - 5
<PAGE>
IMPERIAL BANK,
Lender
By /s/ Steven K. Johnson
---------------------------------
Name Steven K. Johnson
-------------------------------
Title Senior Vice President
------------------------------
Address:
9920 S. La Cienega
Ingelwood, CA 90301
Telephone: (310) 417-5657
Facsimile: (310) 338-6160
NORWEST BANK OF NEBRASKA,
N.A., Lender
By /s/ Michael V. Hinrichs
---------------------------------
Name Michael V. Hinrichs
-------------------------------
Title Vice President
------------------------------
Address:
1919 Douglas Street
Omaha, NE 68102
Telephone: (402) 536-2576
Facsimile: (402) 536-2251
S - 6
<PAGE>
THE FIRST NATIONAL BANK
OF CHICAGO,
Lender
By /s/ Michael P. Gage
---------------------------------
Name Michael P. Gage
-------------------------------
Title Vice President
------------------------------
Address:
777 South Figueroa Street
4th Floor
Los Angeles, CA 90017-5800
Telephone: (213) 683-4948
Facsimile: (213) 683-4999
SOCIETE GENERALE,
Lender
By /s/ Donald L. Schubert
---------------------------------
Name Donald L. Schubert
-------------------------------
Title Vice President
------------------------------
Address:
2029 Century Park East
Suite 2900
Los Angeles, CA 90067
Telephone: (310) 788-7104
Facsimile: (310) 551-1537
S - 7
<PAGE>
THE SUMITOMO BANK, LIMITED,
Lender
By /s/ Bradford E. Chambers
---------------------------------
Name Bradford E. Chambers
-------------------------------
Title Vice President
------------------------------
By /s/ Yvone K. Tso
---------------------------------
Name Yvone K. Tso
-------------------------------
Title Vice President
------------------------------
Address:
800 W. Sixth Street
Suite 950
Los Angeles, CA 90017
Telephone: (213) 623-7847
Facsimile: (213) 623-4629
U.S. BANK,
Lender
By /s/ Kurt Imerman
---------------------------------
Name Kurt Imerman
-------------------------------
Title Senior Vice President
------------------------------
Address:
One East Liberty Street
2nd Floor
Reno, NV 89501
Telephone: (702) 688-6589
Facsimile: (702) 688-6597
S - 8
<PAGE>
ARGENTBANK,
Lender
By /s/ Lionel J. Lagarde
---------------------------------
Name Lionel J. Lagarde
-------------------------------
Title Vice President
------------------------------
Address:
203 West 2nd Street
Thibodaux, LA 70301
Telephone: (504) 447-0552
Facsimile: (504) 447-0604
S - 9
<PAGE>
ASSUMPTION AGREEMENT
THIS ASSUMPTION AGREEMENT ("Agreement") is made and entered into this
25th day of July, 1997, by and among HARVEYS CASINO RESORTS, a Nevada
corporation ("HCR"), HARVEYS TAHOE MANAGEMENT COMPANY, INC., a Nevada
corporation ("HTMC"), and WELLS FARGO BANK, National Association, as Agent
Bank on behalf of itself and each of the Lenders, Swingline Lender and L/C
Issuer described hereinbelow, hereinafter referred to as "Agent Bank".
R_E_C_I_T_A_L_S:
A. Reference is made to that certain Reducing Revolving Credit
Agreement, dated as of August 14, 1995, as amended by First Amendment to
Reducing Revolving Credit Agreement dated as of May 15, 1996, Second
Amendment to Reducing Revolving Credit Agreement dated as of May 23, 1996 and
Third Amendment to Reducing Revolving Credit Agreement dated September 30,
1996 (the "Existing Credit Agreement"), by and among Harveys Casino Resorts,
a Nevada corporation, Harveys C.C. Management Company, Inc., a Nevada
corporation, Harveys Wagon Wheel Casino Limited Liability Company, a Colorado
limited liability company and Harveys Iowa Management Co., Inc., a Nevada
corporation (collectively the "Existing Borrowers"), the Lenders therein
named (each, together with their respective successors and assigns,
individually being referred to as a "Lender" and collectively as the
"Lenders"), Wells Fargo Bank, National Association, as the swingline lender
(herein in such capacity, together with its successors and assigns, the
"Swingline Lender"), Wells Fargo Bank, National Association, as the issuer of
letters of credit hereunder (herein in such capacity, together with its
successors and assigns, the "L/C Issuer") and Wells Fargo Bank, National
Association, as administrative and collateral agent for the Lenders,
Swingline Lender and L/C Issuer (herein, in such capacity, called the "Agent
Bank" and, together with the Lenders, Swingline Lender and L/C Issuer,
collectively referred to as the "Banks").
B. HTMC is a wholly owned subsidiary of HCR organized for the purpose
of holding title or leasehold interests, as applicable, to and operating the
hotel Casino and related business activities located on that certain real
property (the "Real Property") more particularly described on that certain
exhibit marked "Exhibit A", affixed hereto and by this reference incorporated
herein and made a part hereof.
<PAGE>
C. The credit facilities established under the Existing Credit
Agreement are further evidenced by: (i) that certain Reducing Revolving
Credit Promissory Note (the "Note") dated August 14, 1995, in the original
principal sum of One Hundred Fifty Million Dollars ($150,000,000.00),
executed by Existing Borrowers, payable to the order of Agent Bank on behalf
of the Lenders, and (ii) that certain Swingline Note (the "Swingline Note"
and together with the Note, collectively the "Notes") dated August 14, 1995,
in the original principal sum of Five Million Dollars ($5,000,000.00),
executed by Existing Borrowers, payable to the order of Swingline Lender.
D. The Credit Agreement and Notes are secured by, amongst other
things, the following documents and instruments (herein collectively the
"Tahoe Security Documents"):
(i) Leasehold and Fee Deed of Trust, Fixture Filing and Security
Agreement with Assignment of Rents (Tahoe), recorded August 16,
1995, in the Official Records of Douglas County, Nevada, in Book
895, at Page 2526, as Document No. 368422;
(ii) UCC-1 Financing Statement (Tahoe) recorded August 16, 1995, in
the Official Records of Douglas County, Nevada, in Book 895, at
Page 2596, as Instrument No. 368427;
(iii) UCC-1 Financing Statement (Tahoe) filed in the Office of
the Secretary of State of the State of Nevada on August 16, 1995,
under File No. 9511516;
(iv) Assignment of Spacelease, Contracts, Rents and Revenues
(Tahoe) recorded August 16, 1995, in the Official Records of
Douglas County, Nevada, in Book 895, at Page 2571, as Instrument
No. 368425;
(v) Assignment of Permits, Licenses and Contracts (Tahoe) recorded
August 16, 1995, in the Official Records of Douglas County, Nevada,
in Book 895, at Page 2585, as Instrument No. 368426;
(vi) Assignment of Park Cattle Lease recorded August 16, 1995, in
the Official Records of Douglas
2
<PAGE>
County, Nevada, in Book 895, at Page 2553, as Instrument No. 368423;
(vii) Assignment of Tahoe Greenbelt Lease recorded August 16,
1995, in the Official Records of Douglas County, Nevada, in Book
895, at Page 2562, as Instrument No. 368424; and
(viii) Assignment of California Greenbelt Lease recorded August 16,
1995, in the Official Records of El Dorado County, California, in
Book 4522, at Page 088, as Document No. 036647.
E. Concurrently or substantially concurrently herewith, HCR has or is
about to transfer and convey to HTMC, all right, title and interest held by
HCR in and to the Real Property. Concurrently herewith, Existing Borrowers,
HTMC, HCR Services Company, Inc., a Nevada corporation ("HCRSC") and Banks
have entered into a Fourth Amendment to Reducing Revolving Credit Agreement
("Fourth Amendment to Credit Agreement" and together with the Existing Credit
Agreement, collectively the "Credit Agreement") for the purpose, amongst
other things, of providing for the assumption of the Credit Agreement and
Notes by HTMC and HCRSC.
F. HCR and Agent Bank desire to execute this Assumption Agreement for
the purpose of further evidencing HTMC's assumption of all duties,
obligations and liabilities as a Borrower under the Credit Agreement and the
Notes and of each duty, obligation and liability of HCR as set forth and
contained in the Tahoe Security Documents.
NOW, THEREFORE, in consideration of Banks' consent to the transfer of
HCR's fee and leasehold interests in and to the Real Property to HTMC and
other good and valuable considerations described in the Fourth Amendment to
Credit Agreement, the receipt whereof are hereby acknowledged, HTMC does
hereby agree and affirm to Agent Bank and each of the Banks as follows:
1. ASSUMPTION. HTMC shall and does hereby assume the Credit
Agreement, the Notes and each of the Tahoe Security Documents and takes its
ownership and leasehold interests in the Real Property subject to each and
every duty, obligation, promise, covenant, warranty, representation and other
commitment of HCR made in connection with the Credit Agreement, the Notes and
each of the Tahoe Security Documents.
3
<PAGE>
2. JOINDER BY HCR. HCR joins in the execution of this Assumption
Agreement for the purpose of evidencing its agreement and understanding that
nothing herein contained shall be construed or deemed to be a release of HCR
or any other Borrower from any of the terms, covenants, promises, assurances
and provisions contained in the Credit Agreement, Notes or any of the Loan
Documents.
3. GOVERNING LAW. This Assumption Agreement shall be governed by the
internal laws of the State of Nevada without reference to conflicts of law
principles.
4. COUNTERPARTS. This Assumption Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one
agreement, and any party hereto may execute this Assumption Agreement by
signing any such counterpart.
IN WITNESS WHEREOF, the parties hereto have caused this Assumption
Agreement to be executed as of the day and year first above written.
HTMC:
HARVEYS TAHOE MANAGEMENT
COMPANY, INC., a Nevada
corporation
By /s/ Charles W. Scharer
-----------------------------
Charles W. Scharer,
President
HCR:
HARVEYS CASINO RESORTS,
a Nevada corporation
By /s/ Charles W. Scharer
-----------------------------
Charles W. Scharer,
President
By /s/ William B. Ledbetter
-----------------------------
William B. Ledbetter,
Secretary
4
<PAGE>
AGENT BANK:
WELLS FARGO BANK,
National Association,
successor by merger to
FIRST INTERSTATE BANK OF
NEVADA, N.A., on behalf of
itself and each of the Banks
By /s/ Rob Medeiros
----------------------------
Rob Medeiros,
Vice President
STATE OF NEVADA )
) ss
COUNTY OF Douglas )
--------
This instrument was acknowledged before me on July 28, 1997, by
CHARLES W. SCHARER as President of/for HARVEYS TAHOE MANAGEMENT COMPANY, INC.
/s/ Connie M. Friedman
- ----------------------------
Notary Public
STATE OF NEVADA )
) ss
COUNTY OF Douglas )
---------
This instrument was acknowledged before me on July 28, 1997, by
CHARLES W. SCHARER as President of/for HARVEYS CASINO RESORTS.
/s/ Connie M. Friedman
- ----------------------------
Notary Public
5
<PAGE>
STATE OF NEVADA )
) ss
COUNTY OF Douglas )
---------
This instrument was acknowledged before me on July 28, 1997, by
WILLIAM B. LEDBETTER as Secretary of/for HARVEYS CASINO RESORTS.
/s/ Connie M. Friedman
- ----------------------------
Notary Public
STATE OF NEVADA )
) ss
COUNTY OF WASHOE )
This instrument was acknowledged before me on July 29, 1997, by
MEDEIROS as Vice President of/for WELLS FARGO BANK.
/s/ Doreen Harris
- ----------------------------
Notary Public
6
<PAGE>
Scarpello & Alling, Ltd.
276 Kingsbury Grade
Suite 2000
Lake Tahoe, NV 89449
(702) 588-6676
ASSET TRANSFER AGREEMENT
BETWEEN HARVEYS CASINO RESORTS AND
HARVEYS TAHOE MANAGEMENT COMPANY, INC.
This Asset Transfer Agreement (the "Agreement") is made and entered into
effective the 1st day of June, 1997, by and between Harveys Casino Resorts, a
publicly traded Nevada corporation (the "Transferor") and Harveys Tahoe
Management Company, Inc., a Nevada corporation (the "Transferee").
RECITALS
WHEREAS, Transferor and Transferee desire to enter into a transaction
whereby Transferor will transfer and assign certain assets to Transferee with
respect to Transferor's Lake Tahoe, Nevada Casino/Hotel in exchange for one
hundred percent (100%) of the common stock of Transferee.
NOW, THEREFORE, for good and valuable consideration, the receipt of which
is hereby acknowledged, Transferor and Transferee agree as follows:
WITNESSETH
1. DEFINITIONS.
1.1 "Assets" means all assets transferred from Transferor to
Transferee hereunder, with respect to the Lake Tahoe, Nevada Hotel/Casino,
including but not limited to the Contracts, Equipment, Real Estate, Technical
Records, Pre-Paid Expenses and Other Property, including any and all liabilities
attached to such Property. Transferor agrees to prepare a balance sheet
reflecting the assets and the Transferor's book value of the assets transferred
under this Agreement as of the Transfer Date, which Transferor agrees to deliver
to Transferee as soon as reasonably practicable.
1.2 "Contracts" means all agreements with vendors, purchase
contracts, employment contracts, service contracts and all other contracts or
agreements associated with
1
<PAGE>
the Lake Tahoe, Nevada Hotel/Casino in the name of Transferor as of the Transfer
Date, including any and all liabilities owed under such contracts prior to the
Transfer Date.
1.3 "Equipment" means the office equipment, furniture and
furnishings, all assets related to the Casino/Hotel operations, accessories,
supplies, computer hardware and software and other personal property used by
Transferor in connection with the Casino/Hotel as of the Transfer Date.
1.4 "Administrative and Management Functions" means the management,
administrative, marketing, and other activities carried out by various
departments of Transferor which are intended to remain part of the Lake Tahoe,
Nevada operations excluding those administrative and management functions
considered to be "corporate" functions.
1.5 "Parties" refers to, collectively, the Transferor and Transferee.
1.6 "Other Property" means all of the property associated with the
Administrative and Management Functions and Hotel/Casino operations.
1.7 "Prepaid Expenses" means all prepaid expenses by Transferor.
1.8 "Real Estate" means all leasehold interests of Transferor and the
fee title held by Transferor in certain real property, as set forth on Exhibit
A.
1.9 "Technical Records" means all documents, records, ledgers,
journals and other recorded materials in whatever form (including but not
limited to written records, electronic records, magnetic records, optical
records) used by Transferor in connection with the Administrative and Management
Functions as of the Transfer Date.
1.10 "Transfer Date" means the effective date set forth in the initial
paragraph of this Agreement.
2
<PAGE>
2. TRANSFER AND ASSIGNMENT OF ASSETS.
2.1 Transferor hereby transfers and assigns to Transferee, and
Transferee hereby acquires and assumes from Transferor, all right, title and
interest of Transferor in and to the Assets in exchange for one hundred percent
(100%) of the issued and outstanding shares of common stock of Transferee.
Transferee represents that at the time of this transfer, there are no other
shares of its common stock nor any other class of stock issued or outstanding.
2.2 The transfer and assignment of the Assets and issuance of stock
as contemplated by this Agreement shall be effective as of the Transfer Date.
2.3 Transferor and Transferee intend the transfer and assignment of
Assets in exchange for the common stock of Transferee to qualify under Internal
Revenue Code Section 351 as a tax-free transaction.
2.4 Except as explicitly provided for herein, neither Transferor nor
Transferee make any representation or warranties with respect to the transfer
and assignment of assets herein.
3. CONTINUING OBLIGATION OF THE PARTIES.
The Parties hereto agree that if at any time after the Transfer Date,
further action is necessary to carry out the purposes of this Agreement,
Transferor and Transferee will take such further action, including the execution
and delivery of instruments and documents, as either Transferor or Transferee
may reasonably request.
4. LIABILITIES AND INDEMNIFICATION.
Transferee agrees to assume such liabilities of Transferor with
respect to the
3
<PAGE>
Assets as may be necessary, provided, however, that unless specifically agreed
upon with the third-party obligee, Transferor shall also remain responsible for
such liabilities. Transferor agrees to indemnify and hold harmless Transferee
from and against any and all costs, losses, liabilities, damages and expenses
accruing prior to the Transfer Date and arising out of Transferor's obligations
under the assets. Transferee agrees to indemnify and hold Transferor harmless
from and against any and all costs, losses, liabilities, damages and expenses
accruing on or after the Transfer Date and arising out of Transferee's
obligations pursuant to the Assets.
5. ACQUISITION OF STOCK BY TRANSFEROR.
Transferor represents and warrants that it is acquiring the common
stock of Transferee for its own account for investment and not with a view to or
for sale in connection with any distribution.
6. EMPLOYEES AND EMPLOYEE BENEFITS.
Transferor and Transferee agree and acknowledge that, effective on the
Transfer Date, certain specific employees of Transferor employed at the Lake
Tahoe, Nevada Hotel/Casino shall become employees of Transferee, as mutually
agreed upon by the Parties. Transferor and Transferee shall execute the
required documents and take other necessary steps to ensure that Transferee will
be included as an affiliated employer of Transferor for purposes of all employee
benefit plans. All transferred employees shall retain their continuity of
services for purposes of any benefits plan.
7. MISCELLANEOUS.
7.1 This Agreement, including all documents referred to herein,
constitutes the entire agreement among the Parties and supersedes any prior
understandings, agreements, or representations by or among the Parties, written
or oral, to the extent they
4
<PAGE>
relate in any way to the subject matter hereof.
7.2 This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original but all of which together will constitute
one and the same instrument.
7.3 Section headings contained in this Agreement are inserted for
convenience only and shall not in any way effect the meaning or interpretation
of this Agreement.
7.4 All notices, requests, demands, claims and other communications
hereunder shall be either in writing or hand delivered or sent by first-class
mail, postage prepaid, or sent by facsimile to the recipient at the address
below:
Harveys Casino Resorts
P.O. Box 128
Lake Tahoe, NV 89449
Attn: Chief Executive Officer
Harveys Tahoe Management Company, Inc.
P.O. Box 128
Lake Tahoe, NV 89449
Attn: President
With a copy to:
Scarpello & Alling, Ltd.
P.O. Box 3390
Stateline, NV 89449
Attn: Ronald D. Alling, Esq.
7.5 This Agreement shall be governed and construed in accordance with
the laws of the State of Nevada. The Parties agree that any action or dispute
herein shall be subject to jurisdiction and venue in Douglas County, Nevada.
7.6 No amendment of any provision of this Agreement shall be valid
unless the same shall be in writing and agreed to by Transferor and Transferee.
5
<PAGE>
7.7 Any term or provision of this Agreement that is invalid or
unenforceable in any way shall not effect the validity or enforceability of the
remaining terms and provisions hereof or the validity or enforceability in any
other situation or jurisdiction.
///
///
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement to be
effective as of the date set forth above.
Harveys Casino Resorts, a Nevada
Corporation
By: /s/ Charles W. Scharer
---------------------------------
Its: President
--------------------------------
By: /s/ John J. McLaughlin
---------------------------------
Its: Treasurer
--------------------------------
Harveys Tahoe Management Company,
Inc., a Nevada Corporation
By: /s/ Charles W. Scharer
---------------------------------
Its: President
--------------------------------
6
<PAGE>
EXHIBIT A
REAL ESTATE
7
<PAGE>
HARVEYS CASINO RESORTS,
Issuer
HARVEYS C.C. MANAGEMENT COMPANY, INC.,
HARVEYS WAGON WHEEL CASINO LIMITED LIABILITY COMPANY,
HARVEYS TAHOE MANAGEMENT COMPANY, INC.,
HARVEYS IOWA MANAGEMENT COMPANY, INC.,
and
HARVEYS L.V. MANAGEMENT COMPANY, INC.,
as Guarantors
and
IBJ SCHRODER BANK & TRUST COMPANY,
Trustee
Second Supplemental Indenture
Dated as of May 22, 1997
$150,000,000
10-5/8% SENIOR SUBORDINATED NOTES DUE 2006
Supplementing the Indenture Dated as of May 15, 1996 among
Harveys Casino Resorts, Issuer, Harveys C.C. Management Company,
Inc., Harveys Wagon Wheel Casino Limited Liability Company,
Harveys Iowa Management Company, Inc. and Harveys L.V. Management
Company, Inc., as Guarantors and IBJ Schroder Bank & Trust
Company, Trustee, as amended and supplemented to date
<PAGE>
THIS SECOND SUPPLEMENTAL INDENTURE (the 'Second Supplemental
Indenture'), dated as of May 22, 1997 among HARVEYS CASINO RESORTS, a Nevada
corporation (the 'Issuer'), and HARVEYS TAHOE MANAGEMENT COMPANY, INC., a Nevada
corporation ('HTMC'), HARVEYS C.C. MANAGEMENT COMPANY, INC., a Nevada
corporation, HARVEYS WAGON WHEEL CASINO LIMITED LIABILITY COMPANY, a Colorado
limited liability company, HARVEYS IOWA MANAGEMENT COMPANY, INC., a Nevada
corporation and HARVEYS L.V. MANAGEMENT COMPANY, INC., a Nevada corporation (the
'Guarantors'), and IBJ SCHRODER BANK & TRUST COMPANY, a New York banking
corporation, as Trustee (the 'Trustee'), under the Indenture dated as of May 15,
1996 (the 'Original Indenture'), as amended and supplemented by a First
Supplemental Indenture dated as of June 5, 1996 (the 'First Supplemental
Indenture') (the Original Indenture as so amended and supplemented by the First
Supplemental Indenture, the 'Indenture'),
W I T N E S S E T H :
WHEREAS, the Issuer has issued its 10-5/8% Senior Subordinated Notes
Due 2006 (the 'Securities') pursuant to the Indenture; and
WHEREAS, pursuant to Section 3.16 of the Indenture, any Restricted
Subsidiary (as defined in the Indenture) of the Issuer receiving assets of the
Issuer with a book value in excess of $5,000,000 must enter into a Subsidiary
Guarantee and Supplemental Indenture; and
WHEREAS, the Issuer has organized HTMC as a wholly-owned subsidiary
for the purpose of holding title to and operating substantially all of the
assets used in the Issuer's Lake Tahoe, Nevada casino and hotel presently doing
business as Harveys Resort Hotel/Casino, such assets having a book value in
excess of $5,000,000; and
WHEREAS, HTMC has never been designated as an Unrestricted Subsidiary
and is therefore a Restricted Subsidiary under the Indenture and the Issuer and
the Guarantors therefore wish to amend and supplement the Indenture, pursuant to
Section 7.1(d) thereof, in order that HTMC may enter into this Second
Supplemental Indenture and thereby make a Subsidiary Guarantee;
NOW, THEREFORE, intending to be legally bound hereby, the parties
agree as follows. Capitalized terms used herein and not otherwise defined shall
have the meanings assigned to them in the Indenture.
ARTICLE ONE
HTMC hereby, jointly and severally with all other Guarantors,
guarantees the obligations of the Issuer under the Securities in accordance with
the provisions of Article XI of the Indenture and agrees to be subject to and
bound by all the provisions of such Article XI and all other provisions of the
Indenture applicable to Restricted Subsidiaries or Guarantors.
ARTICLE TWO
SECTION 2.01. Except as amended hereby, all of the terms of the
Indenture shall remain and continue in full force and effect and are hereby
confirmed in all respects.
SECTION 2.02. This Second Supplemental Indenture and each and every
provision hereof shall be deemed to be a contract made under the laws of the
State of New York and for all purposes shall be construed in accordance with the
laws of such State.
SECTION 2.03. This Second Supplemental Indenture may be executed in
any number of counterparts, each of which shall be an original; but such
counterparts shall constitute but one and the same instrument.
SECTION 2.04. The recitals contained herein shall be taken as the
statements of the Issuer, and the
<PAGE>
Trustee assumes no responsibility whatsoever for their correctness nor for the
validity or sufficiency of this Second Supplemental Indenture or for the due
execution hereof by the Issuer.
SECTION 2.05. In entering into this Second Supplemental Indenture,
the Trustee shall be entitled to the benefit of every provision of the Indenture
relating to the conduct or affecting the liability of or affording protection to
the Trustee, whether or not elsewhere herein so provided.
IN WITNESS WHEREOF, the parties hereto have caused this Second
Supplemental Indenture to be duly executed, and their respective corporate seals
to be hereunto affixed and attested, all as of the date hereof.
[CORPORATE SEAL]
By
------------------------
By
--------------------------
[CORPORATE SEAL]
By
------------------------
By
------------------------
HARVEYS CASINO RESORTS
By
------------------------ By William B. Ledbetter
Name:William B. Ledbetter
Title: Vice Chairman & Secretary
IBJ SCHRODER BANK & TRUST
COMPANY, as Trustee
By
------------------------ By Barbara McCluskey
Name:Barbara McCluskey
Title:Vice President
By
------------------------ HARVEYS C.C. MANAGEMENT
COMPANY, INC.
By By John J. McLaughlin
------------------------ Name:John J. McLaughlin
Title: Treasurer
HARVEYS WAGON WHEEL CASINO
LIMITED LIABILITY COMPANY
<PAGE>
By Charles W. Scharer
Name:Charles W. Scharer
Title:Chairman
HARVEYS TAHOE MANAGEMENT
COMPANY, INC.
By Charles W. Scharer
Name:Charles W. Scharer
Title: President
HARVEYS IOWA MANAGEMENT
COMPANY, INC.
By William B. Ledbetter
Name: William B. Ledbetter
Title: Secretary
HARVEYS L.V. MANAGEMENT
COMPANY, INC.
By John J. McLaughlin
Name:John J. McLaughlin
Title: Treasurer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> AUG-31-1997
<CASH> 26048
<SECURITIES> 490
<RECEIVABLES> 6488
<ALLOWANCES> 405
<INVENTORY> 3641
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0
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