0000950144-95-002362.txt : 19950816 0000950144-95-002362.hdr.sgml : 19950816 ACCESSION NUMBER: 0000950144-95-002362 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 21 CONFORMED PERIOD OF REPORT: 19950430 FILED AS OF DATE: 19950815 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CROWN CASINO CORP CENTRAL INDEX KEY: 0000799850 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS AMUSEMENT & RECREATION [7990] IRS NUMBER: 630851141 STATE OF INCORPORATION: TX FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-14939 FILM NUMBER: 95564075 BUSINESS ADDRESS: STREET 1: 2415 W NORTHWEST HWY STE 103 CITY: DALLAS STATE: TX ZIP: 75220 BUSINESS PHONE: 2143527561 MAIL ADDRESS: STREET 1: 2415 W NORTHWEST HWY STREET 2: SUITE 103 CITY: DALLAS STATE: TX ZIP: 75220 FORMER COMPANY: FORMER CONFORMED NAME: SKYLINK AMERICA INC DATE OF NAME CHANGE: 19920703 10-K 1 CROWN CASINO CORPORATION FORM 10-K FOR 4/30/95 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ____________________ FORM 10-K ____________________ (Mark One) [X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Fiscal Year Ended April 30, 1995 (Fee Required) ____________________ [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (No Fee Required) For the transition period from ____________ to _____________ Commission File No. 0-14939 CROWN CASINO CORPORATION A Texas Corporation (IRS Employer Identification No. 63-0851141) 2415 West Northwest Highway Suite 103 Dallas, Texas 75220-4446 (214) 352-7561 Securities Registered Pursuant to Section 12(b) of the Securities Exchange Act of 1934: None ____________________ Securities Registered Pursuant to Section 12(g) of the Securities Exchange Act of 1934: Common Stock, par value $.01 per share ____________________ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of the Common Stock of the registrant held by nonaffiliates of the registrant (9,129,066 shares) on August 10, 1995 was $49,068,730. For the purposes of this response, officers, directors and holders of 5% or more of the registrant's common stock are considered to be affiliates of the registrant at that date. The number of shares outstanding of the registrant's Common Stock as of August 10, 1995: 11,741,459 shares. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant's Annual Report to Stockholders for the year ended April 30, 1995 are incorporated by reference into Part II of this report and portions of the registrant's definitive Proxy Statement for its Annual Meeting of Stockholders to be held in 1995 are incorporated by reference in answer to Part III of this report, with the exception of information regarding executive officers required under Item 10 of Part III, which information is included in Part I, Item 1. 2 PART I ITEM 1. BUSINESS. GENERAL Crown Casino Corporation, formerly Skylink America Incorporated, and subsidiaries (the "Company") owns a 50% interest in a riverboat gaming casino located in Calcasieu Parish, Louisiana that opened in July 1995, owns an 18.6 acre tract of land in the gaming district of Las Vegas, Nevada which is being held for development of a hotel and casino, and in July 1995 entered into a definitive purchase agreement to acquire the Bourbon Street Hotel and Casino located in Las Vegas, Nevada. The Company is also actively pursuing other gaming opportunities in these and other jurisdictions. Prior to March 1994, the Company had been engaged in various facets of the cable programming business including (i) providing Free-To-Guest ("FTG") and Pay-Per-View ("PPV") programming services and equipment to the lodging and hospital industries, (ii) designing, producing and selling PPV equipment, (iii) constructing and operating Satellite Master Antenna Television and Community Antenna Television systems, and (iv) the buying and selling of cable properties and assets. HISTORY Since its inception in 1983, the Company has been engaged in various facets of the cable and related programming businesses. During the fiscal year ended April 30, 1992 it became apparent to management of the Company that the hotel/motel FTG programming business had become increasingly competitive from a profit margin standpoint and that programming in the hotel industry was at or near saturation, and it was management's opinion that the value of the FTG business had peaked. Taking into account these and other factors, in late fiscal 1992, the Company sold the majority of its FTG programming business which accounted for approximately 85% of the Company's cable revenues during fiscal 1992. During the next fiscal year, the Company reviewed the status of its remaining cable operations, namely PPV and franchised cable, and began exploring new business opportunities. In early fiscal 1994, the Company began focusing its attention on opportunities in the gaming industry. In June 1993, the Company made the decision to enter the gaming business through the acquisition of St. Charles Gaming Company, Inc. ("SCGC"). Based upon that decision, the Company sold its remaining cable assets in November 1993 and February 1994. The dispositions of the FTG, PPV and other cable assets in fiscal 1992 and 1994 did not require stockholder approval under the laws of the State of Texas and therefore no vote of stockholders was taken. Such assets were sold to third parties unaffiliated with the Company. GAMING DEVELOPMENT On June 25, 1993, Crown entered the gaming industry with the purchase of SCGC for $500,000 cash and 1.6 million shares of Crown common stock. SCGC had been formed in January 1993 in order to apply to the Louisiana Riverboat Gaming Commission ("Gaming Commission") to operate a riverboat gaming casino to be based in St. Charles Parish, Louisiana, near New Orleans. On June 18, 1993, SCGC received preliminary approval of its application from the Gaming Commission and in July 1993 filed its application with the Louisiana Riverboat Gaming Enforcement Division of the Office of State Police (the "Enforcement Division") for a license to operate a riverboat gaming casino. On March 29, 1994, SCGC received one of only fifteen authorized riverboat gaming licenses, subject to certain conditions, issued in the State of Louisiana. 3 In January 1995, SCGC made the strategic decision to relocate the site for its planned Louisiana riverboat casino from St. Charles Parish to Calcasieu Parish in the southwest part of the state near the Texas border. In March 1995, the Company entered into an agreement with Louisiana Riverboat Gaming Partnership ("LRGP") to form a joint venture to develop the Calcasieu Parish project. LRGP, a joint venture owned 50% by Casino America, Inc. ("Casino America") and 50% by Louisiana Downs, Inc., an Edward J. DeBartolo company, owns the Isle of Capri(SM) dockside riverboat casino in Bossier City, Louisiana. On June 9, 1995, the Company sold 50% of the outstanding common stock of SCGC for (i) a five-year $20 million note (the "LRGP Note"), (ii) $1 million cash, and (iii) a warrant (which may only be exercised by converting a portion of the LRGP Note) to purchase 416,667 shares of Casino America common stock at $12 per share. In July 1995, SCGC's riverboat casino opened for business in Calcasieu Parish as an Isle of Capri(SM) themed property. SCGC's site in Calcasieu Parish consists of a 10.5 acre tract and an adjacent 5.5 acre tract (collectively, the "Site") on the west bank of the Calcasieu River bordering Lake Charles to the east and approximately 1/8 mile south of Interstate 10. The Site is approximately 28 miles east of the Texas border which makes the Casino the closest riverboat gaming establishment to Houston, Texas. The Company believes a majority of the Casino's patrons will come from Texas due, in part, to the current absence of legalized gaming in that state. SCGC has entered into lease agreements with respect to the Site for an initial term of five years with renewal options for an additional thirty-five years. SCGC's gaming operations are being managed by Casino America. Casino America owns and operates casinos in Biloxi and Vicksburg, Mississippi, and operates the dockside riverboat casino in Bossier City, Louisiana owned by LRGP. On December 13, 1993, the Company acquired 100% of the outstanding common stock of Gaming Entertainment Management Services, Inc. ("GEMS"), a Nevada corporation, which was organized in September 1992 for the purpose of developing a hotel and casino project in Las Vegas, Nevada known as the Desert Winds Hotel and Casino (the "Desert Winds"). GEMS via contract had the right to purchase an 18.6 acre tract of land for $10 million in the gaming district of Las Vegas. The option was exercised and the land was purchased on June 8, 1994. GEMS has no operations other than its development of the Desert Winds project. In connection with this transaction, the Company issued 885,000 shares of its common stock and assumed approximately $585,000 of liabilities. The Desert Winds site has received zoning approval for the construction of a twelve story, 400 room hotel and casino. In July 1995, the Company entered into a definitive asset purchase agreement to acquire the Bourbon Street Hotel and Casino (the "Bourbon Street") located in Las Vegas, Nevada for a purchase price of $10 million. The Bourbon Street has approximately 430 slot machines and 15 table games over its 2 4 15,000 square feet of gaming space, 166 hotel rooms, including 16 suites, and has reported annual revenues of approximately $12 million. Consummation of this transaction is expected to occur by October 1995. The Company's business strategy is to expand its gaming operations through acquisition and development in new and existing gaming jurisdictions. The LRGP Joint Venture Agreement. On March 2, 1995, the Company entered into an agreement with LRGP to form a joint venture to develop the Company's Louisiana casino project (the "Agreement"). Pursuant to the Agreement, on June 9, 1995, the Company sold 50% of the outstanding common stock of SCGC to LRGP for (i) the $20 million LRGP Note, (ii) $1 million cash, (iii) a warrant (which may only be exercised by converting a portion of the LRGP Note) to purchase up to 416,667 shares of Casino America common stock at an exercise price of $12.00 per share. The LRGP Note bears interest at 11.5% per annum, payable monthly, and is collateralized by LRGP's 50% interest in SCGC. Principal is payable in seventeen equal quarterly installments beginning in June 1996. If the distributions from SCGC to LRGP during any quarter are less than the principal installment due for such quarter, LRGP will only be obligated to pay the amount of such distribution and any deficiency will be deferred to the next installment due under the LRGP Note. All principal and interest not previously paid will be due and payable in June 2000. With the approval of the Company's senior lender, LRGP loaned certain funds to SCGC for working capital and casino design planning purposes and to buy out its former casino management agreement with Century Casinos, Inc. for $4 million. In addition, pursuant to the Agreement, LRGP will lend funds to, or will provide a financing source for, SCGC, to provide for the development of the Calcasieu Parish project and the payment of interest on SCGC's senior debt, in amounts to be agreed upon between LRGP and the Company. The maximum amount of all loans funded or guaranteed by LRGP will not exceed $45 million, unless agreed to by the parties. At April 30, 1995, Casino America and LRGP had loaned or advanced SCGC a total of approximately $6.9 million. The loans bear interest at 11.5% per annum and are due three business days after SCGC retires all of its outstanding debt with its senior lender. In August 1995, SCGC and LRGP jointly issued $38.4 million of Senior Secured Increasing Rate Notes (the "New Notes") to the same institutional lender. The proceeds from the issuance of the New Notes were used to retire all of SCGC's senior debt ($21.9 million), certain LRGP obligations ($8.4 million), and the balance of which will be used in the development of the Calcasieu Parish project. Simultaneously with the execution of the Agreement, SCGC entered into a casino management agreement with Casino America. The casino management agreement has a term of 99 years and provides for a management fee of (i) 2% of "Revenues," as defined in the agreement (generally net gaming revenues less gaming and admission taxes plus all other operating revenues), plus (ii) 10% of "Net Operating Income," as defined in the agreement, provided, however, the total management fee shall not exceed 4% of "Revenues." In the event the LRGP Note goes into default and the Company reacquires LRGP's 50% interest in SCGC, SCGC will have the right to terminate the Casino America management agreement. The Company and LRGP also entered into a shareholders' agreement respecting their joint ownership of SCGC, which governs the ownership rights by the Company and LRGP to the stock of SCGC. The shareholders' agreement provides, among other things, that in the event that either the Company or LRGP desire to sell their interest in SCGC, whether through an asset or stock sale, such shareholder must first offer to sell 3 5 its interest in SCGC to the other shareholder under the terms and conditions provided in the agreement. Except as expressly permitted by the shareholders' agreement, neither the Company nor LRGP may sell, assign, or otherwise transfer or encumber any part of the SCGC stock owned by either of them without the written consent of the other. In addition to the foregoing, the Company granted LRGP a right of first refusal to jointly develop its Desert Winds project in the event the Company chooses to develop such project on a joint venture basis. CALCASIEU PARISH CASINO FACILITIES The Calcasieu Parish casino (the "Casino") is a four deck riverboat measuring approximately 292 feet in length by 74 feet in width. The Casino offers approximately 48,000 square feet of floor space including 26,000 square feet which is used for active gaming operations. The Casino contains approximately 903 slot machines, all of which are equipped with IGT's computerized player tracking system ("The Smart System"), which allows the Casino to build a data base of its customers' playing habits, and 52 table games (including black jack, craps, Caribbean stud and roulette) on three levels for a total of approximately 1,250 gaming positions. The fourth level of the riverboat contains approximately 9,000 square feet of entertainment space. The Casino can accommodate 2,000 passengers and has been designed to create a comfortable and spacious atmosphere. The Casino's land based support properties currently consist of a 15,000 square foot temporary facility and the first of two 700-space parking garages. Construction of the second parking garage and the permanent terminal facility, which when combined with the temporary facility will encompass 90,000 square feet of space, is ongoing. The permanent land-based pavilion, which is expected to be completed in early 1996, will contain a variety of non-gaming amenities such as restaurants, bars and lounges, an entertainment area, a gift shop and a boarding area, as well as administrative offices. After completion of the permanent facility, SCGC plans to begin construction of a 300-plus room hotel. CALCASIEU PARISH SITE The Calcasieu Parish site (the "Site") consists of a 10.5 acre tract and an adjacent 5.5 acre tract on the west bank of the Calcasieu River bordering Lake Charles to the east and approximately 1/8 mile south of Interstate 10. The Site, located in the Greater Lake Charles area, is approximately 28 miles east of the Texas border, which makes it the closest riverboat gaming establishment to Houston, Texas. In March and July 1995, SCGC entered into agreements to lease the two parcels of land that comprise the Site. The leases have an initial term of five years with seven five-year renewal options. During the initial term, the leases require annual rental payments of $850,000 in years one through four, and $1,000,000 in year five, payable monthly. During the first renewal term, the rent will be increased annually by the greater of (i) 5%, or (ii) the percentage increase in the average consumer price index for Calcasieu Parish, Louisiana for the previous twelve month period. During the second through seventh renewal terms, the lessor and SCGC will attempt to set the rent equal to 100% of the rent paid by other riverboat gaming operators in Louisiana and Mississippi for comparable property usages, or if no agreement can be made, then the parties will appoint real estate appraisers to set the rent for such renewal term. However, in no event shall the annual rent be less than $1.6 million during the fourth and all subsequent renewal terms. In addition, SCGC will pay all real estate taxes, except for taxes due on the 4 6 unimproved value of the property. The Company has guaranteed the obligations of SCGC under these leases. CALCASIEU PARISH RIVERBOAT OPERATIONS The Casino will make up to eight cruises per day at three-hour intervals beginning at 8:45 a.m. with the latest cruise at 5:45 a.m. While on board the passengers will be offered a variety of slot machines, craps, black jack, roulette, Caribbean stud and any other gaming opportunity for which there is a perceived market demand. Pursuant to Louisiana law, the Casino can remain at the dock during periods of adverse weather at the discretion of the riverboat captain and gaming can continue. The Casino's gaming operations are being managed by Casino America pursuant to a casino management agreement which was executed simultaneously with the Agreement. SCGC had previously contracted with Century Casinos, Inc. to manage the Casino's gaming operations. As a result of the Agreement, however, SCGC and Century Casinos, Inc. terminated their agreement pursuant to which SCGC paid a termination fee of $4 million. Since 1992, Casino America has been a developer, owner and operator of dockside riverboat and floating pavilion casinos and related facilities. Casino America currently owns and operates floating pavilion casinos in Biloxi and Vicksburg, Mississippi, and operates the dockside riverboat casino in Bossier City, Louisiana owned by LRGP. Casino America is generally responsible, subject to the direction and approval of an executive management committee, for the construction, development and operation of the Casino. During the pre-opening and construction phase, Casino America is generally expected to, among other things, (i) create the design and specifications of the land-based facilities, (ii) assist in the supervision of construction activities, (iii) assist in the purchasing of equipment for the land-based facility, (iv) prepare operating budgets, (v) develop and implement operating policies, marketing strategies and credit systems, (vi) hire and train personnel, (vii) coordinate advertising and public relations, (viii) assist in obtaining necessary licenses and permits, and (ix) provide other services incidental to the completion of the development. During the operating phase Casino America is generally expected to, among other things, (i) employ, pay, and supervise all employees of the Casino, (ii) purchase or provide for all necessary supplies and provisions, (iii) maintain, repair and operate the Casino in a first class and professional manner, (iv) ensure compliance with all statutes, ordinances, laws, rules and regulations of applicable governing bodies, (v) arrange for utilities, telephone service, security and trash removal, (vi) supervise concessionaires, (vii) establish and maintain accounting systems and internal controls, (viii) hire, book, and retain entertainment, and (ix) provide additional services necessary for the successful operation of the Casino. 5 7 CALCASIEU PARISH MARKET Calcasieu Parish has a population of approximately 172,000 including approximately 160,000 in the Greater Lake Charles area. The following table reflects the estimated population within various distances from the Casino:
Distance from Estimated Casino Population (in miles) (in millions) ---------- ------------- 50 .5 100 1.5 150 6.4 200 9.9
Lake Charles is an active community with a cultural heritage and community resources including a symphony orchestra, ballet and numerous art galleries and museums. The area is also host to seasonal festivals and special events which highlight Cajun food and music, historic crafts and water sports. Lake Charles hosts the annual "Contraband Days," which is the second largest festival in Louisiana after New Orleans' Mardi Gras Festival. Contraband Days spans a period of two weeks and attracts approximately 200,000 visitors to the area. In addition, Lake Charles has a civic center which offers a 2,000 seat theater and a 50,000 square foot exhibition hall which is used for conventions, sporting events and entertainment. Lake Charles is well known for its outdoor recreational activities including hunting, boating and fishing. U.S. Interstate 10 connects Lake Charles to Texas cities to the west including Orange (35 miles), Beaumont (58 miles), Port Arthur (59 miles), Galveston (135 miles), and Houston (140 miles), and the Louisiana cities of Baton Rouge (123 miles), and New Orleans (207 miles) to the east. The Company believes a majority of its patrons will come from Texas, particularly from the Greater Houston area, due in large part to the current absence of legalized casino gaming in Texas. LAS VEGAS MARKET According to the Las Vegas Convention and Visitors Association (the "LVCVA"), the number of visitors to Las Vegas has increased at a steady and significant rate for the last ten years from 12.8 million in 1984 to 28.2 million visitors in 1994, a compound annual rate of increase of 8.2%. Aggregate expenditures by visitors increased at an estimated compound annual rate of 11.7% from $6.3 billion in 1984 to an estimated $19.0 billion in 1994. The number of hotel and motel rooms increased by approximately 44.2% from 61,394 in 1988 to 88,560 in 1994. Despite this significant increase in hotel and motel rooms the Las Vegas hotel occupancy rate exceeded 85% in each year from 1988 to 1994. Las Vegas hotel occupancy rates are among the highest of any major market in the United States. The expansion of gaming in the United States has been accompanied by an increasing acceptance of gaming as a form of entertainment. As a result of the increased popularity and public acceptance of gaming, Las Vegas has sought to increase its popularity as a vacation resort. An increasing number of destination resorts are developing non-gaming entertainment to complement their gaming in order to draw visitors to Las Vegas. The Company believes that large themed resorts will serve to increase the popularity of Las Vegas as a vacation and convention destination. The MGM Grand Hotel and Theme Park opened 6 8 in December 1993 with 5,000 hotel rooms, a multi-themed casino and a large scale amusement and entertainment facility. Shortly before the MGM opening, the Luxor's 2,600-room project along with Treasure Island's 2,900-room complex adjacent to the Mirage opened. By the end of 1997, it is anticipated that at least another 8,500 hotel rooms will be opened in Las Vegas. In addition, Clark County, in which Las Vegas is located, has had one of the fastest growing populations in the United States, increasing at a compound annual rate of 5.9% from 1984 to 1994. The Company believes that the growth in the Las Vegas market has been enhanced as a result of dedicated programs by the LVCVA and major Las Vegas hotels to promote Las Vegas as a major convention site, the increased capacity of McCarran International Airport ("McCarran") and the introduction of large multi-themed destination resorts in Las Vegas. In 1984, approximately one million people attended conventions in Las Vegas and spent approximately $800 million. In 1994, the number of convention attendees had increased to more than 2.6 million, and the amount spent by convention attendees increased to approximately $3.0 billion. Currently, Las Vegas is the fourth largest convention market in the country. During the past five years, the facilities of McCarran have been expanded to accommodate the increasing number of airlines and passengers it services. The number of passengers traveling through McCarran increased from 10.1 million in 1984 to 26.9 million in 1994, a compound annual rate of increase of 10.3%. A $200 million expansion project was recently completed, allowing for the accommodation of up to 30 million travelers annually. Long-term expansion plans for McCarran provide for additional runways, three new satellite concourses, 65 additional gates and other facilities which would allow McCarran to handle up to 60 million visitors annually. SALES AND MARKETING Calcasieu Parish. SCGC's marketing strategy is to attract customers to the Casino by designing and implementing marketing strategies and promotions that emphasize the Isle of Capri's(SM) Caribbean theme and promote repeat visitation and customer loyalty. For example, SCGC offers Island Gold Players Club membership for its slot machine patrons and "V.I.P." services to higher wagering and repeat gaming patrons. The Island Gold Players Club is a promotional activity in which members accumulate points that can be exchanged for benefits, such as casino cash tokens, prizes and complimentary services. In addition, Club members receive double hand-paid jackpots, tournament priority and monthly newsletters. It is anticipated that (to the extent permitted by law) Club membership cards will be usable on an interchangeable basis at other Isle of Capri(SM) casino properties. Further, SCGC uses the Club to track patron slot play and develop a customer database, which SCGC utilizes in its marketing programs. To encourage group sales, SCGC emphasizes bus programs, corporate and hotel sales programs and golf package programs with area hotels and golf courses. The Company also places a significant emphasis on attracting local residents and seeks to maintain a strong local identity by being a leader in staging and supporting special events. The Company further enhances its appeal to local patrons by offering liberal rules on its table games and by encouraging enrollment in the Island Gold Players Club. SCGC uses radio, outdoor and print media to promote its services and to achieve greater name recognition. To further enhance the Isle of Capri(SM) casino tropical theme, SCGC utilizes Jeffrey Holder, 7 9 a well known actor and television personality popularly known as the "Uncola(R) Man,"(1) as a celebrity spokesperson for certain of the Isle of Capri(SM) television and print media advertisements. Las Vegas. The Bourbon Street is located one block east of the Strip (Las Vegas Boulevard) in Las Vegas. Within this block are situated some of the most famous hotels in the world: Bally's, Flamingo Hilton, Caesar's Palace, Barbary Coast, and the soon to be built Bellagio. In the past two years over 11,000 hotel rooms have opened on the Las Vegas Strip and over 6,000 additional rooms are presently under construction. In 1994, the Las Vegas visitor count increased 19% over 1993, with over 28 million visitors, augmenting the already highly competitive atmosphere in the city. Management believes that the size of Bourbon Street lends itself to a specific market. With 150 rooms, 16 suites, and 15,000 square feet of gaming space, it is small in comparison to other Strip hotels. Many of the major Strip hotels have over 2,000 rooms, with vast casino and public areas. The major Strip hotels market to families as well as the traditional gambler. Rising operating costs and significant debt service have forced many larger hotels to reduce the complimentaries that gamblers have been accustomed to receiving. Bourbon Street, on the other hand, has the ability to cater to players by virtue of its smaller size, with personal recognition and attention to detail, offering a more rewarding experience for those whose main purpose in visiting Las Vegas is to gamble. Management believes that its target customer is less interested in a family experience or the theatrical type attractions found at many of the new Strip properties. Availability of the most popular games, with better odds for the player, favorable limits, good food, and pleasant surroundings are the key features to offer the Bourbon Street customer. In addition, the Bourbon Street endeavors to garner some of the locals market. Locals often do not frequent the Strip area, believing it to be too congested, with parking extremely difficult, and less friendly service than may be found at the local casinos. The Bourbon Street, on the other hand, is more accessible and prides itself on a friendly staff and more personal recognition. Management plans to refurbish the casino areas, brightening all the areas and making it more comfortable and attractive. Slot machines have become the mainstay of the Casino industry, and in this regard, management plans to upgrade and replace most of the existing machines. Management is also considering the possible future expansion of the Bourbon Street, as the current buildings only cover approximately 50% of the land being purchased by the Company. Marketing efforts presently are concentrated on the existing customer data base and tour and travel wholesalers. Management intends to focus more on marketing to junket operators, who generally service more serious gamblers, and to travel agents in key markets such as California and Arizona. Local marketing efforts will also be utilized, and new collateral marketing materials will be developed. INDUSTRY AND COMPETITION The gaming industry nationwide is undergoing dramatic transformation. The legalization of gaming on Indian reservations has influenced the spread of gaming throughout the U.S. An active area of expansion is riverboat gaming which presently is permitted in Illinois, Indiana, Missouri, Iowa, Louisiana and Mississippi. In addition, ballots and referenda related to some form of legalized gaming are being considered in several other states. Given the success and generally positive reception to date, management believes that gaming is likely to continue to expand. ________________________ (1) The Uncola(R) trademark is owned by Dr. Pepper/Seven-Up Companies, Inc. 8 10 The Company believes that the expansion into emerging markets of gaming, including riverboat and dockside gaming, state sponsored video lotteries, small stakes casino gaming and gaming on Indian land, reflects the increasing popularity and acceptability of gaming activities in the United States. The primary reason for the growth in the legalization of riverboat and dockside gaming is attributable to a need by states to increase tax revenues and create jobs without increasing general taxation. Secondly, riverboat and dockside gaming is apparently more palatable to the general public than traditional land-based casinos because riverboat casinos are by their nature restricted to waterways and therefore remove some of the public's concern of having a casino operating in their neighborhood. Lastly, as public officials see their citizens travel across borders to neighboring states that have approved gaming, there is competitive pressure to pass gaming legislation and retain the related tax revenues. Riverboat gaming operations can differ from traditional land based casinos in that they can charge for admission, sometimes require reservations, and can restrict entry and departure to a period of fixed duration. Even when the vessels remain at the dock during inclement weather, boarding times may be restricted. The casino floor, however, does not need to be cleared between gaming sessions. Riverboats, unlike land based facilities, are also regulated by the U.S. Coast Guard, whose regulations affect boat design, on-board facilities, equipment and personnel. The casino gaming industry is highly fragmented and characterized by a high degree of competition among a large number of participants, including riverboat, dockside and land-based casinos, video lottery terminals, Indian gaming, and other forms of legalized gaming in the United States. The Company will be competing with larger, more established gaming companies, many of which have far greater financial resources than the Company. The Company believes that competition in the gaming industry, particularly the riverboat and dockside gaming industry, is based on the quality and location of gaming facilities, the effectiveness of marketing efforts, and customer service and satisfaction. Although management of the Company believes that the location of the Calcasieu Parish Casino will allow the Company to effectively compete with other casinos in the geographic area surrounding it, the Company expects competition in the casino gaming industry to be intense as more casinos are opened and new entrants into the gaming industry become operational. Calcasieu Parish. Louisiana state law currently limits the number of riverboat gaming licenses that may be granted to 15, plus a single land-based facility in New Orleans. There are also Indian gaming casinos operating in the state, which are not subject to Louisiana gaming laws. The Company believes Louisiana's self imposed limitation on the number of licenses that may be granted may create a favorable operating environment for the holders of such licenses. The primary market area for the Calcasieu Parish Casino includes the Houston, Texas metropolitan area, other population centers west of the Casino such as Beaumont, Galveston, Orange and Port Arthur, Texas and population centers east of the Casino such as Lafayette and Baton Rouge, Louisiana. SCGC expects that more than half of its patrons will come from Texas, with a significant portion coming from metropolitan Houston. Although casino gaming is not currently permitted in Texas, the Texas legislature has considered various proposals to authorize casino gaming. Gaming cannot commence in Texas until the legislature adopts appropriate legislation (which may require an amendment to the Texas Constitution and an affirmative vote of the people) and operators complete the licensing and construction process. If casinos commence operations in Texas in or near SCGC's primary market area, they would adversely affect the Calcasieu Parish Casino. 9 11 The Calcasieu Parish Casino will be the third riverboat gaming facility to enter the Lake Charles, Louisiana market. Two riverboats, containing an aggregate of approximately 50,000 square feet of casino floor space, currently operate from a single location in the City of Lake Charles approximately three miles from the site of SCGC's Casino. In addition, a land-based, Indian-owned casino opened in January 1995 in Kinder, Louisiana, approximately 39 miles from the site of the Casino. As a new entrant into the Lake Charles market, the Casino will face the additional challenge of competing for established customers of its competitors. Management believes that the Casino will have several competitive advantages in the Lake Charles gaming market. The Casino, with its location at the western end of the Lake Charles gaming market, will be the first gaming facility reached by patrons arriving from the west, including Texas. The Company intends to capitalize on its superior location by maximizing the visibility of the Casino with a 120-foot-high tower. Moreover, management believes that free on-site parking facilities further enhance the competitive advantages of the Casino. Las Vegas. The Bourbon Street casino faces competition from other casinos and hotels in the Las Vegas area, including competitors located on the Las Vegas Strip, east of the Las Vegas Strip, on the Boulder Highway and in downtown Las Vegas. Such competition includes a number of operations that target local residents, as well as gaming facilities not related to hotels. Recently, several of the Company's direct competitors who cater to the "locals" market have completed major expansion projects, and other expansions are in progress or are planned. Currently, there are approximately 27 major gaming properties located on or near the Las Vegas Strip, 12 located in the downtown area and several located in other areas of Las Vegas. The Bourbon Street competes with other state and international gaming operations, as well as hotel-casinos located in the Laughlin and Reno-Lake Tahoe areas of Nevada. The Company believes that it competes for gaming customers with the casinos in Atlantic City, New Jersey and other parts of the world, and with state-sponsored lotteries, on- and off-track wagering, card parlors, riverboat and Native American gaming ventures and other forms of legalized gaming in the United States, as well as with gaming on cruise ships. In addition, certain states have recently legalized and several other states are currently considering legalizing casino gaming in specific geographic areas within those states. The Company believes that the legalization of unlimited land-based casino gaming in or near any major metropolitan area, such as Chicago or Los Angeles, could have a material adverse effect on its hotel-casino business. The availability of other gaming opportunities such as local casinos, lotteries and other forms of gaming in other states, particularly in areas close to Nevada, such as California, could adversely affect the Company's operations. LOUISIANA GAMING REGULATION In July 1991, the Louisiana legislature adopted legislation permitting certain types of gaming activity on the Mississippi, Red, Calcasieu, Mermentau, Ouachita or Atchafalaya rivers, in the Mississippi River Gulf Outlet, Bayou Bienvenue, Lake Ponchartrain, Lake Maurepas, Lake Charles and the Intracoastal Waterway. The legislation granted authority to supervise gaming activities to the Gaming Commission and the Enforcement Division. The Gaming Commission is authorized to hear and determine all appeals relative to the granting, suspension, revocation, and renewal of all licenses, permits and applications. In addition, the Gaming Commission must establish regulations concerning authorized routes and duration of excursions, minimum levels of insurance, construction of riverboats and periodic inspections. The 10 12 Enforcement Division is authorized to investigate applicants and issue licenses, investigate violations of the statute and conduct reviews of gaming activities. In issuing a license, the Enforcement Division must find that the applicant is a person of good character, honesty and integrity and the applicant is a person whose prior activities, criminal record, if any, reputation, habits and associations do not pose a threat to the public interest of the State of Louisiana or to the effective regulation and control of gaming, or create or enhance the dangers of unsuitable, unfair or illegal practices, methods, and activities in the conduct of gaming or the carrying on of business and financial arrangements in connection therewith. The Enforcement Division will not grant a license unless it finds that: (i) the applicant is capable of conducting gaming operations, which means that the applicant can demonstrate the capability, either through training, education, business experience, or a combination of the above to operate a gaming casino; (ii) the proposed financing of the riverboat and the gaming operations is adequate for the nature of the proposed operation and from a source suitable and acceptable to the Enforcement Division; (iii) the applicant demonstrates a proven ability to operate a vessel of comparable size, capacity and complexity to a riverboat so as to ensure the safety of its passengers; (iv) the applicant submits a detailed plan of design of the riverboat in its application for a license; (v) the applicant designates the docking facilities to be used by the riverboat; (vi) the applicant shows adequate financial ability to construct and maintain a riverboat; and (vii) the applicant has a good faith plan to recruit, train, and upgrade minorities in all employment classifications. The Enforcement Division is empowered to issue up to fifteen licenses to conduct gaming activities on a riverboat of new construction in accordance with applicable law. However, no more than six licenses may be granted to riverboats operating from any one parish. The Louisiana gaming law specifies certain restrictions and conditions relating to riverboat gaming operations, including but not limited to the following: (i) gaming is not permitted while a riverboat is docked, unless the vessel is docked for less than 45 minutes between excursions, or unless dangerous weather or water conditions exist; (ii) each round trip riverboat cruise may not be less than three nor more than eight hours in duration (inclusive of the 45 minutes between excursions), subject to specified exceptions; (iii) agents of the Enforcement Division are permitted on board at any time during gaming operations; (iv) gaming devices, equipment, and supplies may only be purchased or leased from permitted suppliers; (v) gaming may only take place in the designated gaming area while the riverboat is upon a designated river or waterway; (vi) gaming equipment may not be possessed, maintained, or exhibited by any person on a riverboat except in the specifically designated gaming area, or a secure area used for inspection, repair, or storage of such equipment; (vii) wagers may be received only from a person present on a licensed riverboat; (viii) persons under 21 are not permitted in designated gaming areas; (ix) except for slot machine play, wagers may be made only with tokens, chips, or electronic cards purchased from the licensee aboard a riverboat; (x) licensees may only use docking facilities and routes for which they are licensed and may only board and discharge passengers at the riverboat's licensed berth; (xi) licensees must have adequate protection and indemnity insurance; (xii) licensees must have all necessary federal and state licenses, certificates, and other regulatory approvals prior to operating a riverboat; and (xiii) gaming may only be conducted in accordance with the terms of the license and the rules and regulations adopted by the Enforcement Division. Louisiana law permits 24-hour unlimited stakes gaming on newly constructed riverboats which conduct cruises, does not have loss or bet limitations, but restricts the percentage of space on a riverboat that may be utilized for gaming to the lesser of (a) 60% of the total square footage of the passenger access 11 13 area, or (b) 30,000 square feet. A total of 15 riverboat gaming licenses are authorized to be granted, with a maximum of six riverboat gaming licenses in any one parish. Louisiana law also allows a single, land-based casino in the City of New Orleans. The legal age for gaming in Louisiana is 21. The license fee to conduct gaming activities on a riverboat is (i) $50,000 per riverboat for the first year of operation and $100,000 per year per riverboat thereafter plus (ii) 3 1/2% of the net gaming proceeds. In addition, an annual franchise fee of 15% of the net gaming proceeds will be charged to conduct operations on Louisiana waterways. The local governing authority (city or parish) is permitted to assess the riverboat operation up to $2.50 per person as an admissions tax. In addition, Calcasieu Parish has a statutory fifty cents ($.50) per head admissions tax applicable to riverboat gaming operations, the proceeds of which are used to support education. The transfer of a license or permit or an interest in a license or permit is prohibited. The sale, assignment, transfer, pledge, or disposition of securities which represent 5% or more of the total outstanding shares issued by a corporation that holds a license is subject to Enforcement Division approval. A security issued by a corporation that holds a license must generally disclose these restrictions. The conditions to SCGC's permanent riverboat casino license include the operation of the riverboat under an approved plan of security and internal controls for a period of six months, exercising due diligence in the development of its planned hotel in Calcasieu Parish and obtaining of the Enforcement Division's prior written approval to any modification to its plans for such hotel, including the abandonment of any portion of the project. Upon satisfaction of the conditions to the license, a permanent license will be issued by the Enforcement Division. NEVADA GAMING REGULATION The ownership and operation of casino gaming facilities in Nevada are subject to: (i) the Nevada Gaming Control Act and the regulations promulgated thereunder (collectively, the "Nevada Act"); and (ii) various local ordinances and regulations. Gaming operations in Nevada are subject to the licensing and regulatory control of the Nevada Gaming Commission ("Nevada Commission"), the Nevada State Gaming Control Board ("Nevada Board") and various other county and city regulatory agencies, including the City of Las Vegas; collectively referred to as the "Nevada Gaming Authorities." The laws, regulations and supervisory procedures of the Nevada Gaming Authorities are based upon declarations of public policy which are concerned with, among other things: (i) the prevention of unsavory or unsuitable persons from having a direct or indirect involvement with gaming at any time or in any capacity; (ii) the establishment and maintenance of responsible accounting practices and procedures; (iii) the maintenance of effective controls over the financial practices of licensees, including the establishment of minimum procedures for internal fiscal affairs and the safeguarding of assets and revenues, providing reliable recordkeeping and requiring the filing of periodic reports with the Nevada Gaming Authorities; (iv) the prevention of cheating and fraudulent practices; and (v) providing a source of state and local revenues through taxation and licensing fees. Change in such laws, regulations and procedures could have an adverse effect on the Company's proposed gaming operations. The Company will be required to be registered with the Nevada Commission as a publicly traded corporation (a "Registered Corporation") and to be found suitable to own the stock of Bourbon Street. Bourbon Street is licensed by the Nevada Gaming Authorities as a corporate licensee ( a "Corporate Licensee") under the terms of the Nevada Act. The following regulatory requirements will be applicable to the Company and Bourbon Street upon their receipt of all necessary approvals from the Nevada Gaming Authorities in connection with their applications for registration or licensing, as applicable. There can be 12 14 no assurance that such approvals will be obtained or that if obtained, that they will be obtained on a timely basis. As a Registered Corporation, the Company will be required periodically to submit detailed financial and operating reports to the Nevada Commission and furnish any other information which the Nevada Commission may require. No person may become a stockholder of, or receive, any percentage of profits from a Corporate Licensee without first obtaining licenses and approvals from the Nevada Gaming Authorities. The Nevada Gaming Authorities may investigate any individual who has a material relationship to, or material involvement with, the Company or the Corporate Licensee in order to determine whether such individual is suitable or should be licensed as a business associate of the Corporate Licensee. Officers, directors and certain key employees of the Corporate Licensee will be required to file applications with the Nevada Gaming Authorities and may be required to be licensed or found suitable by the Nevada Gaming Authorities. Officers, directors and key employees of the Company who are actively and directly involved in the activities of the Corporate Licensee may be required to be licensed or found suitable by the Nevada Gaming Authorities. The Nevada Gaming Authorities may deny an application for licensing, and both require submission of detailed personal and financial information followed by a thorough investigation. The applicant for licensing or a finding of suitability must pay all the costs of the investigation. Changes in licensed positions must be reported to the Nevada Gaming Authorities and in addition to their authority to deny an application for a finding of suitability or licensure, the Nevada Gaming Authorities have jurisdiction to disapprove a change in a corporate position. If the Nevada Gaming Authorities were to find an officer, director or key employee unsuitable for licensing or unsuitable to continue having a relationship with the Company or the Corporate Licensee, the companies involved would have to sever all relationships with such person. In addition, the Nevada Commission may require the Company or the Corporate Licensee to terminate the employment of any person who refuses to file appropriate applications. Determinations of suitability or resolutions of questions pertaining to licensing are not subject to judicial review in Nevada. The Company and the Corporate Licensee will be required to submit detailed financial and operating reports to the Nevada Commission. Substantially all material loans, liens, sales of securities and similar financing transactions by the Corporate Licensee will be required to be reported to or approved by the Nevada Commission. If it were determined that the Nevada Act was violated by the Corporate Licensee, the licenses it holds could be limited, conditioned, suspended or revoked, subject to compliance with certain statutory and regulatory procedures. In addition, the Company, the Corporate Licensee and the persons involved could be subject to substantial fines for each separate violation of the Nevada Act at the discretion of the Nevada Commission. Limitation, conditioning or suspension of the licenses of the Corporate Licensee could (and revocation of any license of the Corporate Licensee would) materially adversely affect the Company. Any beneficial holder of a Registered Corporation's voting securities, regardless of the number of shares owned, may be required to file an application, be investigated and have their suitability as a beneficial holder of the Registered Corporation's voting securities determined if the Nevada Commission has reason to believe that such ownership would otherwise be inconsistent with the declared policies of the State of 13 15 Nevada. The applicant must pay all costs of investigation incurred by the Nevada Gaming Authorities in conducting any such investigation. The Nevada Act requires any person who acquires more than 5% of a Registered Corporation's voting securities to report the acquisition to the Nevada Commission. The Nevada Act requires that beneficial owners of more than 10% of a Registered Corporation's voting securities apply to the Nevada Commission for a finding of suitability within thirty days after the Chairman of the Nevada Board mails the written notice requiring such filing. Under certain circumstances, an "institutional investor," as defined in the Nevada Act, which acquires more than 10%, but not more than 15%, of a Registered Corporation's voting securities may apply to the Nevada Commission for a waiver of such finding of suitability if such institutional investor holds the voting securities for investment purposes only. An institutional investor shall not be deemed to hold voting securities for investment purposes unless the voting securities were acquired and are held in the ordinary course of business as an institutional investor and not for the purpose of causing, directly or indirectly, the election of a majority of the members of the board of directors of the Registered Corporation, any change in the Registered Corporation's corporate charter, bylaws, management, policies or operations, or any of its gaming affiliates, or any other action which the Nevada Commission finds to be inconsistent with holding the Registered Corporation's voting securities for investment purposes only. Activities which are not deemed to be inconsistent with holding voting securities for investment purposes only include: (i) voting on all matters voted on by stockholders; (ii) making financial and the other inquiries of management of the type normally made by securities analysts for informational purposes and not to cause a change in its management, policies or operations; and (iii) such other activities as the Nevada Commission may determine to the consistent with such investment intent. If the beneficial holder of voting securities who must be found suitable is a corporation, partnership or trust, it must submit detailed business and financial information including a list of beneficial owners. The applicant is required to pay all costs of investigation. Any person who fails or refuses to apply for a finding of suitability or a license within thirty days after being ordered to do so by the Nevada Commission or the Chairman of the Nevada Board, may be found unsuitable. The same restrictions apply to a record owner if the record owner, after request, fails to identify the beneficial owner. Any stockholder found unsuitable and who holds, directly or indirectly, any beneficial ownership of the voting securities of the Company beyond such period of time as may be prescribed by the Nevada Commission may be guilty of a criminal offense. The Company will be subject to disciplinary action if, after it receives a notice that a person is unsuitable to be a stockholder or to have any other relationship with it, it (i) pays that person any dividend or interest upon voting securities of the Company, (ii) allows that person to exercise, directly or indirectly, any voting right conferred through securities held by that person, (iii) pays remunerations in any form to that person for services rendered or otherwise, or (iv) fails to pursue all lawful efforts to require such unsuitable person to relinquish his voting securities including, if necessary, the immediate purchase of said voting securities for cash at fair market value. The Nevada Commission may, in its discretion, require the holder of any debt security of a Registered Corporation to file applications, be investigated and be found suitable to own the debt security of a Registered Corporation. If the Nevada Commission determines that a person is unsuitable to own such security, then pursuant to the Nevada Act, the Registered Corporation can be sanctioned, including the loss of its approvals, if without the prior approval of the Nevada Commission, it: 14 16 (i) pays to the unsuitable person any dividend, interest, or any distribution whatsoever; (ii) recognizes any voting right by such unsuitable person in connection with such securities; (iii) pays the unsuitable person remunerations in any form; or (iv) makes any payment to the unsuitable person by way of principal, redemption, conversion, exchange, liquidation, or similar transaction. The Company will be required to maintain a current stock ledger in Nevada which may be examined by the Nevada Gaming Authorities at any time. If any securities are held in trust by an agent or by a nominee, the record holder may be required to disclose the identity of the beneficial owner to the Nevada Gaming Authorities. A failure to make such disclosure may be grounds for finding the record holder unsuitable. The Company will also be required to render maximum assistance in determining the identity of the beneficial owner. The Company will also be required to disclose to the Nevada Commission, upon its request, the identities of any of their security holders. The Nevada Commission has the power to require the stock certificates of the Company to bear a legend indicating that the securities are subject to the Nevada Act. It is unknown whether the Nevada Commission will impose such a requirement on the Company. After becoming a Registered Corporation, the Company may not make a public offering of its securities without the prior approval of the Nevada Commission if the securities or proceeds therefrom are intended to be used to construct, acquire or finance gaming facilities in Nevada, or to retire or extend obligations incurred for such purposes. The regulations of the Nevada Board and the Nevada Commission also provide that any entity which is not an "affiliated company," as such term is defined in the Nevada Act, or which is not otherwise subject to the provisions of the Nevada Act or such regulations, such as the Company, which plans to make a public offering of securities intending to use such securities, or the proceeds from the sale thereof for the construction or operation of gaming facilities in Nevada, or to retire or extend obligations incurred for such purposes, may apply to the Nevada Commission for prior approval of such offering. The Nevada Commission may find an applicant unsuitable to be a holding company if it did not submit such an application. Changes in control of a Registered Corporation through merger, consolidation, stock or asset acquisitions, management or consulting agreements, or any act or conduct by a person whereby he obtains control, may not occur without the prior approval of the Nevada Commission. Entities seeking to acquire control of a Registered Corporation must satisfy the Nevada Board and Nevada Commission in a variety of stringent standards prior to assuming control of such Registered Corporation. The Nevada Commission may also require controlling stockholders, officers, directors and other persons having a material relationship or involvement with the entity proposing to acquire control, to be investigated and licensed as part of the approval process relating to the transaction. The Nevada legislature has declared that some corporate acquisitions opposed by management, repurchases of voting securities and corporate defense tactics affecting Nevada corporate gaming licensees, and Registered Corporations that are affiliated with those operations, may be injurious to stable and productive corporate gaming. The Nevada Commission has established a regulatory scheme to ameliorate the potentially adverse effects of these business practices upon Nevada's gaming industry and to further Nevada's policy to: (i) assure the financial stability of corporate gaming licensees and their affiliates; (ii) preserve the beneficial aspects of conducting business in the corporate form; and (iii) promote a neutral environment for the orderly governance of corporate affairs. Approvals are, in certain circumstances, 15 17 required from the Nevada Commission before the Registered Corporation can make exceptional repurchases of voting securities above the current market price thereof and before a corporate acquisition opposed by management can be consummated. The Nevada Act also requires prior approval of a plan of recapitalization proposed by the Registered Corporation's Board of Directors in response to a tender offer made directly to the Registered Corporation's stockholders for the purposes of acquiring control of the Registered Corporation. License fees and taxes, computed in various ways depending on the type of gaming or activity involved, are payable to the State of Nevada and to the counties and cities in which the Nevada licensee's respective operations are conducted. Depending upon the particular fee or tax involved, these fees and taxes are payable either monthly, quarterly or annually and are based upon either: (i) a percentage of the gross revenues received; (ii) the number of gaming devices operated; or (iii) the number of table games operated. A casino entertainment tax is also paid by casino operations where entertainment is furnished in connection with the selling of food or refreshments. Nevada licensees that hold a license to manufacture or distribute gaming devices also pay certain fees and taxes to the State of Nevada. Any person who is licensed, required to be licensed, registered, required to be registered, or is under common control with such persons (collectively, "Licensees"), and who proposes to become involved in a gaming venture outside of Nevada, is required to deposit with the Nevada Board, and thereafter maintain, a revolving fund in the amount of $10,000 to pay the expenses of investigation by the Nevada Board of their participation in such foreign gaming. The revolving fund is subject to increase or decrease in the discretion of the Nevada Commission. Thereafter, Licensees are required to comply with certain reporting requirements imposed by the Nevada Act. Licensees are also subject to disciplinary action by the Nevada Commission if they knowingly violate any laws of the foreign jurisdiction pertaining to the foreign gaming operation, fail to conduct the foreign gaming operation in accordance with the standards of honesty and integrity required of Nevada gaming operations, engage in activities that are harmful to the State of Nevada or its ability to collect gaming taxes and fees, or employ a person in the foreign operation who was denied a license or finding of suitability in Nevada on the grounds of personal unsuitability. NON-GAMING REGULATIONS The Company is subject to certain federal, state and local safety and health laws, regulations and ordinances that apply to non-gaming businesses generally, such as the Clean Air Act, Clean Water Act, Occupational Safety and Health Act, Resource Conservation Recovery Act and the Comprehensive Environmental Response, Compensation and Liability Act. The Company has not made, and does not anticipate making, material expenditures with respect to such environmental laws and regulations. However, the coverage and attendant compliance costs associated with such laws, regulations and ordinances may result in future additional costs to the Company's operations. The federal Merchant Marine Act of 1936 and the federal Shipping Act of 1916 and applicable regulations thereunder contain provisions designed to prevent persons who are not citizens of the United States from holding in the aggregate more than 25% of the outstanding shares of common stock of entities subject to such regulation. All navigable vessels must comply with U.S. Coast Guard requirements as to boat design, on-board facilities, equipment, personnel (including 16 18 requirements that each vessel be operated by a minimum complement of personnel) and safety. Each vessel must hold a Certificate of Inspection from the Coast Guard. The Coast Guard requirements establish design standards, set limits on the operation of the vessels and require individual licensing of certain personnel involved with the operation of the vessel. The Calcasieu Parish Casino will be subject to periodic inspections by the Coast Guard and every five years the Casino must be dry docked for hull and other inspections, which will result in a loss of service that can have an adverse effect on the Company. Failure to hold a Certificate of Inspection would preclude the use of the riverboat as a floating casino. All shipboard employees of SCGC, even those not involved in the actual operation of the vessel, such as dealers, cocktail hostesses and security personnel, may be subject to the Jones Act which, among other things, exempts those employees from state limits on workers' compensation awards. Continuing construction activities on the Site require the approval of a variety of regulatory agencies including those associated with sewage, fire and building safety, food service and sanitation and other construction and development related matters. FUTURE EXPANSION In December 1993, Crown acquired all of the outstanding stock of GEMS, which had an option to purchase an 18.6 acre tract of land for $10 million in the gaming district of Las Vegas located across the street from the Gold Coast Hotel and Casino. GEMS exercised the option and purchased the land on June 8, 1994. The land has received zoning approval for the construction of a twelve story, 400 room hotel and casino known as the Desert Winds Hotel and Casino. Crown intends to develop the Desert Winds project either independently or through a joint venture. In connection with the joint venture agreement with LRGP, the Company granted LRGP a right of first refusal to jointly develop its Desert Winds project in the event the Company chooses to develop such project on a joint venture basis. GEMS has no other operations other than its development of the Desert Winds project. In July 1995, the Company entered in to a definitive asset purchase agreement to acquire the Bourbon Street Hotel and Casino in Las Vegas, Nevada for a purchase price of $10 million. The Bourbon Street has approximately 430 slot machines and 15 table games over its 15,000 square feet of gaming space, 166 hotel rooms, including 16 suites, and has reported annual revenue of approximately $12 million. Consummation of this transaction is expected to occur by October 1995. In the event the Company is not licensed to operate a casino in Nevada prior to closing the Bourbon Street acquisition, the Company will lease the Bourbon Street facilities back to the current gaming operator for $62,500 per month for up to eighteen months. EMPLOYEES At July 31, 1995 the Company employed 11 persons full time. None of the Company's employees are covered by a collective bargaining agreement and the Company believes that its employee relations are satisfactory. SCGC currently employs approximately 1,200 persons full time. The Bourbon Street currently employs approximately 350 persons full time. 17 19 EXECUTIVE OFFICERS The executive officers of the Company are as follows:
NAME AGE POSITION WITH THE COMPANY ---- --- ------------------------- Edward R. McMurphy . . . . . . . . . . 44 Chairman of the Board, President and Chief Executive Officer Tilman J. Falgout, III . . . . . . . . 46 Executive Vice President, General Counsel and Director Mark D. Slusser . . . . . . . . . . . . 37 Vice President Finance, Chief Financial Officer and Secretary Edward J. Preuss, Jr. . . . . . . . . . 62 Vice President Project Development Leslie M. Clavir . . . . . . . . . . . 54 Vice President Gaming
EDWARD R. MCMURPHY, has served as President of the Company since July 1984 and as Chief Executive Officer since January 1988. He has been a director of the Company since its inception in April 1983. Prior to and during his involvement with the Company, Mr. McMurphy served as President of Marion Properties, Inc., a real estate investment and development company from 1979 to 1986. TILMAN J. FALGOUT, III, has served as Executive Vice President and General Counsel of the Company since March 1995 and as a director of the Company since September 1992. From 1978 through June, 1995, Mr. Falgout was a partner in the law firm of Stumpf & Falgout, Houston, Texas. MARK D. SLUSSER, has served as Chief Financial Officer of the Company since October 1989 and as Secretary since April 1990. From 1981 until joining the Company, Mr. Slusser was employed by Ernst & Young LLP, where he held various positions in the Audit Department including Senior Manager. Mr. Slusser is a Certified Public Accountant. EDWARD J. PREUSS, JR., has served as Vice President Project Development since April 1994. He was self employed as a general business consultant for 11 years prior to joining the Company. Prior to his self-employment, Mr. Preuss worked at Marion Corporation as Vice President of Corporate Communications from 1976 to 1983. LESLIE M. CLAVIR, has served as Vice President Gaming of the Company since March 1995. From December 1993 to February 1995, Mr. Clavir was employed by Century Casinos, Inc. as General Manager of the Company's Louisiana riverboat casino. From 1991 to November 1993, Mr. Clavir served as Director of Casino Operations for the Hotel San Remo in Las Vegas, Nevada. From 1986 to 1991, Mr. Clavir owned and operated three bar and restaurant properties. From 1982 to 1986, Mr. Clavir was General Manager of the Pioneer Inn Hotel and Casino in Reno, Nevada. From 1977 to 1982, Mr. Clavir was employed by the Boyd Group where he held various casino operational and management positions. 18 20 ITEM 2. PROPERTIES. The Company currently maintains its executive offices in approximately 3,000 square feet of leased office space in Dallas, Texas. In July 1995, the Company executed a lease for approximately 6,000 square feet of office space at a different location in the Dallas area. The lease has a five-year term with two three-year renewal options. During the initial term, annual rent (excluding insurance, taxes and common area maintenance charges) ranges from $65,450 in year one to $77,350 in year five. On July 8, 1994, SCGC purchased its Casino. The Casino consists of four decks and an aggregate of 48,000 square feet of floor space, including 26,000 square feet to be used for active gaming operations. In March and July 1995, SCGC entered into agreements to lease the two parcels of land that compromise the 16-acre Calcasieu Parish site. The leases have an initial term of five years with seven five year renewal options. During the initial term, the leases require annual rental payments of $850,000 (excluding property taxes) in years one through four, and $1,000,000 in year five, payable monthly. In July 1995, the Company entered into a definitive asset purchase agreement to acquire the Bourbon Street Hotel and Casino located in Las Vegas, Nevada, for a purchase price of $10 million. The Bourbon Street has 166 hotel rooms, including 16 suites. Closing is expected to occur by October 1995. The Company owns 6.5 acres of land adjacent to the Mississippi River levee in St. Charles Parish, Louisiana that it had planned to use in connection with its former riverboat casino site in St. Charles Parish. The Company will seek to sell such property in the near future. The Company, through its GEMS subsidiary, exercised an option to purchase an 18.6 acre tract of land in the gaming district of Las Vegas, Nevada on June 8, 1994, for $10 million. The land has received zoning approval for the construction of a twelve story, 400 room hotel and casino. ITEM 3. LEGAL PROCEEDINGS. Other than as set forth below, there are no pending legal proceedings to which the Company is a party or of which any of its properties are subject that the Company believes have the potential to have a material adverse effect on the Company. There are no material proceedings known to the Company being contemplated by any governmental authority. There are no material proceedings known to the Company, pending or contemplated, in which any director, officer or affiliate or any principal security holder of the Company or any associate of any of the foregoing, is a party and has an interest, adverse to the Company. On September 21, 1994, an action was filed against the Company and SCGC in the 24th Judicial District Court for the Parish of Jefferson, Louisiana by Avondale Industries, Inc. ("Avondale"). In this action, Avondale alleges that the Company was contractually obligated to Avondale for the construction of SCGC's riverboat vessel based upon a letter of intent (allegedly reaffirming a previous agreement entered into between Avondale and SCGC). Avondale alleges that the Company breached a duty to negotiate in good faith toward the execution of a definitive Vessel Construction Contract. Alternatively, Avondale alleges that a separate, oral contract for the construction of the vessel existed and that the Company committed unspecified unfair trade practices and misrepresentation. Avondale seeks unspecified 19 21 damages including "all lost profits and lost overhead" and attorneys fees. The Company intends to vigorously contest liability in this matter. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS. No matters were submitted to a vote of security holders of the Company during the fourth quarter ended April 30, 1995. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The information required by this item is included in the Company's 1995 Annual Report to Stockholders ("1995 Annual Report") on page 31 under the heading "Common Stock Information, Dividends and Related Stockholder Matters" and such information is incorporated herein by reference. ITEM 6. SELECTED FINANCIAL DATA. The information required by this item is included in the Company's 1995 Annual Report on page 31 under the heading "Selected Financial Data" and such information is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The information required by this item is included in the Company's 1995 Annual Report on pages 10 through 12 under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" and such information is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The financial statements on pages 13 through 30 of the Company's 1995 Annual Report are incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. On October 26, 1993, Ernst & Young LLP, the independent auditors for the Company, resigned. Ernst & Young LLP advised the Company that a primary reason for their resignation was due to the Company's change in its business from cable programming to the gaming industry. Ernst & Young LLP advised the Company that the local Dallas office did not have sufficient expertise in this area and that substantial additional educational requirements would have to be met in order for the local office to continue the engagement. Ernst & Young LLP's report on the financial statements of the Company for the fiscal year ended April 30, 1993 did not contain an adverse opinion or a disclaimer of opinion, and was not qualified or modified as to uncertainty, audit scope or accounting principles. 20 22 During the fiscal year ended April 30, 1993 and the subsequent interim period preceding the resignation of Ernst & Young LLP, there were no disagreements with Ernst & Young LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure. No event listed in Paragraphs (A) through (D) of Item 304 a(1)(v) of Regulation S-K occurred during the fiscal year ended April 30, 1993 and the subsequent interim period prior to Ernst & Young LLP's resignation. Ernst & Young LLP provided the Company with a letter indicating its agreement with the foregoing statements made by the Company. On April 28, 1994, the Company engaged Coopers & Lybrand L.L.P. as its independent auditors. During the Company's fiscal year ended April 30, 1993 and the subsequent interim period prior to engaging Coopers & Lybrand L.L.P., the Company did not consult with Coopers & Lybrand L.L.P. regarding either the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company's financial statements. There were no disagreements with or a reportable event related to the engagement of the Company's prior independent accountants. PART III Except as to information with respect to executive officers which is contained in a separate heading under Item 1 to this Form 10-K, the information required by Part III of Form 10-K is, pursuant to General Instruction G(3) of Form 10-K, incorporated by reference from the Company's definitive proxy statement to be filed pursuant to Regulation 14A for the Company's Annual Meeting of Stockholders to be held on September 29, 1995. The Company will, within 120 days of the end of its fiscal year, file with the Securities and Exchange Commission a definitive proxy statement pursuant to Regulation 14A. ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The information concerning directors and executive officers of the registrant is set forth in the Proxy Statement to be delivered to stockholders in connection with the Company's Annual Meeting of Stockholders to be held on September 29, 1995 (the "Proxy Statement") under the headings "Election of Directors" and "Compliance with Section 16(a) of the Securities Exchange Act of 1934," which information is incorporated herein by reference. The name, age and position of each executive officer of the Company is set forth under the heading "Executive Officers" in Item 1 of this report. ITEM 11. EXECUTIVE COMPENSATION. The information concerning executive compensation is set forth in the Proxy Statement under the heading "Executive Compensation," which information is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The information concerning security ownership of certain beneficial owners and management is set forth in the Proxy Statement under the heading "Security Ownership of Certain Beneficial Owners and Management," which information is incorporated herein by reference. 21 23 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The information concerning certain relationships and related transactions is set forth in the Proxy Statement under the heading "Certain Transactions," which information is incorporated herein by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (a)(1). Financial Statements and Auditors' Reports. The following financial statements and auditors' reports included in the Company's 1995 Annual Report are incorporated herein by reference in Item 8 of this report: Reports of Independent Auditors Consolidated Balance Sheets as of April 30, 1994 and 1995 Consolidated Statements of Operations for the fiscal years ended April 30, 1993, 1994 and 1995 Consolidated Statements of Cash Flows for the fiscal years ended April 30, 1993, 1994 and 1995 Consolidated Statements of Stockholders' Equity for the fiscal years ended April 30, 1993, 1994 and 1995 Notes to Consolidated Financial Statements Financial Statement Schedules. (2). The following supporting financial statement schedule for the three years ended April 30, 1993, 1994, and 1995 are filed with this report: II - Valuation and Qualifying Accounts All other schedules are omitted since the required information is not present, or is not present in amounts sufficient to require submission of the schedules, or because the information required is included in the consolidated financial statements and notes thereto. 22 24 (3). Exhibits
EXHIBIT NUMBER DESCRIPTION OF EXHIBITS ------ ----------------------- 2.1 Stock Purchase Agreement dated June 11, 1993, by and among Skylink America Incorporated and Gerald L. Adams. (9) 2.2 Stock Purchase Agreement dated November 1, 1993 by and among Crown Casino Corporation ("Crown") and Charles Golding Jr., Michael Bailey, William M. Dougal, Timothy M. Dougal, William Saetveit and WDT Associates, Inc. (the "Principal Shareholders"). (12) 2.2.1 Form of Stock Purchase Agreement between Crown and certain other Gaming Entertainment Management Services, Inc. ("GEMS") selling shareholders. (12) 2.2.2 First Amendment to Stock Purchase Agreement dated December 13, 1993 by and between Crown and the Principal Shareholders. (12) 2.3 Amended Stock Purchase Agreement dated June 9, 1995 between Crown and Louisiana Riverboat Gaming Partnership. (1) 3.1 Articles of Incorporation of Skylink America Incorporated (formerly SKAI, Inc.). (4) 3.1.1 Articles of Merger of Skylink America Incorporated and SKAI, Inc. filed with the Secretary of State of the State of Alabama on September 29, 1989. (4) 3.1.2 Articles of Merger of Skylink America Incorporated and SKAI, Inc. filed with the Secretary of State of the State of Texas on October 10, 1989. (4) 3.1.3 Articles of Amendment filed with the Secretary of State of the State of Texas on October 7, 1993. (13) 3.1.4 Articles of Amendment filed with the Secretary of State of Texas on October 5, 1994. (13) 3.2 By-Laws dated August 24, 1989. (5) 4.1 Specimen stock certificate. (14) 4.2 Form of Registration Rights Agreement dated January 5, 1994 by and between Crown and Dabney-Resnick, Inc. (13) 4.2.1 Form of Stock Purchase Warrant dated January 5, 1994 allowing Dabney-Resnick, Inc. to purchase shares of common stock of Crown. (13) 4.3 Form of Registration Rights Agreement dated January 5, 1994 by and between Crown and Sun Life Insurance Company of America, Inc. (13) 4.3.1 Form of Stock Purchase Warrant dated January 5, 1994 allowing Sun Life Insurance Company of America, Inc. to purchase shares of common stock of Crown. (13) 4.4 Stock Purchase Warrant dated June 3, 1994, allowing Nomura Holding America, Inc. ("Nomura") to purchase shares of Common Stock of Crown. (14)
23 25
EXHIBIT NUMBER DESCRIPTION OF EXHIBITS ------ ----------------------- 4.4.1 Note Purchase Agreement dated as of May 31, 1994 by and among St. Charles Gaming Company, Inc. ("SCGC"), Crown, Hibernia National Bank, as Agent ("Hibernia"), and Nomura, together with $28 million Senior Secured Increasing Rate Note. (14) 4.4.2 Escrow Agreement dated as of May 31, 1994 among SCGC, Crown, GEMS, Nomura and Hibernia. (14) 4.4.2.1 Letter Agreement dated October 7, 1994 among SCGC, Crown, GEMS, Nomura and Hibernia. (13) 4.4.3 Mortgage dated May 27, 1994 between SCGC and Hibernia. (14) 4.4.4 SCGC Security Agreement dated as of May 31, 1994. (14) 4.4.5 Crown Security Agreement dated as of May 31, 1994. (14) 4.4.6 Crown Stock Pledge Agreement dated as of May 31, 1994. (14) 4.4.7 GEMS Guarantee dated as of May 31, 1994. (14) 4.4.8 GEMS Security Agreement dated as of May 31, 1994. (14) 4.4.9 Waiver dated September 30, 1994 of certain Non-Funding Events under the Note Purchase Agreement dated May 31, 1994. (13) 4.4.10 Waiver dated October 7, 1994 of certain Non-Funding Events under the Note Purchase Agreement dated May 31, 1994. (13) 4.4.11 Amendment and Waiver to Note Purchase Agreement dated as of December 3, 1994. (13) 4.4.12 Amendment to Stock Purchase Warrant dated as of December 3, 1994. (13) 4.5 Form of Stock Purchase Warrant dated as of April 15, 1994 allowing the following parties to purchase shares of Common Stock of Crown: Daniel G. Goggin (38,990 shares), Gerard M. Jacobs (77,981 shares), and The Hubbard Company, Inc. (77,981 shares). (14) 4.6 Form of Stock Purchase Warrant dated March 18, 1994 granting Dabney-Resnick, Inc. the right to purchase 120,000 shares of Common Stock of Crown. (13) 4.7 Common Stock Purchase Warrant dated July 8, 1994 granting Kehl River Boats, Inc. the right to purchase 100,000 shares of Common Stock of Crown. (13) 4.8 Common Stock Purchase Warrant dated October 6, 1994 granting Don Farris the right to purchase 50,000 shares of Common Stock of Crown. (13) 4.9 Common Stock Purchase Warrant dated June 2, 1994 granting Gerard M. Jacobs the right to purchase 50,000 shares of Common Stock of Crown. (13) 10.1 Skylink America Incorporated 1986 Incentive Stock Option Plan. (2) 10.1.1 Amendment to Incentive Stock Option Plan adopted September 27, 1990. (6)
24 26
EXHIBIT NUMBER DESCRIPTION OF EXHIBITS ------ ----------------------- 10.2 Lease Agreement dated April 2, 1991 between the Registrant and FDIC as Manager of the FSLIC Resolution Fund as Receiver for First Gibraltar. (6) 10.3 Employment Agreement dated as of January 1, 1988 between Registrant and Edward R. McMurphy. (3) 10.3.1 Amendment to Employment Agreement dated February 25, 1991 between Registrant and Edward R. McMurphy. (7) 10.4 Severance Agreement dated March 26, 1992 between the Registrant and Mark D. Slusser. (8) 10.5 Skylink America Incorporated 1991 Non-Qualified Stock Option Plan. (8) 10.6 Agreement dated May 20, 1993, by and between Skylink America Incorporated and 10 Westpark Corporation. (9) 10.7 Form of Indemnification Agreement between the Registrant and Edward R. McMurphy, Mark D. Slusser, T.J. Falgout III, David J. Douglas, J. David Simmons and Michael B. Cloud. (10) 10.8 LRGP $20,000,000 Promissory Note dated June 9, 1995 in favor of Crown. (1) 10.9 Shareholders Agreement dated June 9, 1995 by and between LRGP and Crown. (1) 10.10 Asset Purchase Agreement dated July 11, 1995 by and between Crown and SLT Realty Limited Partnership and Hotel Investors Corporation of Nevada, Inc. (1) 10.11 Management Agreement dated March 2, 1995 by and between SCGC and Riverboat Services, Inc. (1) 10.12 Lease Agreement dated May 20, 1994 by and between IGT-North America and SCGC. (14) 10.12.1 Modification of Lease Agreement dated December 23, 1994 between IGT-North America and SCGC. (13) 10.13 Teaming Agreement dated June 2, 1994 between Crown and Gerard M. Jacobs. (13) 10.14 Stock Option Agreement dated December 28, 1993 between the Company and Paul J. Murray, III and Ray A. Davezak (as shareholders of Murzac, Inc.). (13) 10.14.1 First Amendment to Stock Option Agreement dated January 4, 1994. (13) 10.15 Compromise Agreement dated January 27, 1995 among Crown, SCGC and Century Casinos Management, Inc. (13) 10.16 Development Agreement dated June 9, 1995 by and between SCGC and Calcasieu Parish Police Jury. (1) 10.16.1 First Amendment to Development Agreement dated July 25, 1995 by and between SCGC and Calcasieu Parish Police Jury. (1)
25 27
EXHIBIT NUMBER DESCRIPTION OF EXHIBITS ------ ----------------------- 10.17 Lease dated March 24, 1995 by and between Port Resources,Inc. and CRU. Inc. (collectively, "Landlord") and SCGC. (1) 10.17.1 Amendment to Lease dated May 3, 1995 by and between SCGC and Landlord. (1) 10.17.2 Second Amendment to Lease dated May 16, 1995 by and between SCGC and Landlord. (1) 13.1 Annual Report to Stockholders for the fiscal year ended April 30, 1995. (1) 16.1 Letter from Ernst & Young LLP, the Company's former independent auditor, regarding the Company's statements in its current report concerning the resignation of Ernst & Young LLP as the Company's independent auditor. (13) 21.1 Subsidiaries of Registrant. (18) 23.1 Consent of Coopers & Lybrand, L.L.P. (1) 23.2 Consent of Ernst & Young LLP. (1) 24.1 Power of Attorney of Edward R. McMurphy. (1) 24.2 Power of Attorney of Tilman J. Falgout, III. (1) 24.3 Power of Attorney of Gerard M. Jacobs. (1) 24.4 Power of Attorney of David J. Douglas. (1) 24.5 Power of Attorney of John David Simmons. (1) 24.6 Power of Attorney of Robert J. Kehl. (1) 27 Financial Data Schedule (for SEC use only).
______________________ (1) Filed herewith. (2) Previously filed as an Exhibit to the Registrant's Registration Statement on Form 10, as amended (No. 0-14939) and incorporated herein by reference. (3) Previously filed as an Exhibit to the Registrant's Annual Report on Form 10-K for the year ended April 30, 1988 and incorporated herein by reference. (4) Previously filed as an Exhibit to the Registrant's Quarterly Report on Form 10-Q for the quarter ended October 31, 1989 and incorporated herein by reference. (5) Previously filed as an Exhibit to the Registrant's Annual Report on Form 10-K for the year ended April 30, 1990 and incorporated herein by reference. (6) Previously filed as an Exhibit to the Registrant's Annual Report on Form 10-K for the year ended April 30, 1991 and incorporated herein by reference. (7) Previously filed as an Exhibit to the Registrant's Quarterly Report on Form 10-Q for the quarter ended July 31, 1991 and incorporated herein by reference. (8) Previously filed as an Exhibit to the Registrant's Annual Report on Form 10-K for the year ended April 30, 1992 and incorporated herein by reference. 26 28 (9) Previously filed as an Exhibit to the Registrant's Current Report on Form 8-K dated June 25, 1993 and incorporated herein by reference. (10) Previously filed as an Exhibit to the Registrant's Quarterly Report on Form 10-Q for the quarter ended July 31, 1993 and incorporated herein by reference. (11) Previously filed as an Exhibit to the Registrant's Current Report on Form 8-K dated October 26, 1993 and incorporated herein by reference. (12) Previously filed as an Exhibit to the Registrant's Current Report on Form 8-K dated December 13, 1993 and incorporated herein by reference. (13) Previously filed as an Exhibit to the Registrant's Registration Statement on Form S-1, as amended, initially filed with the Securities and Exchange Commission on May 31, 1994 (No. 33-79484) and incorporated herein by reference. (14) Previously filed as an Exhibit to the Registrant's Annual Report on Form 10-K for the year ended April 30, 1994 and incorporated herein by reference. (b) Reports on Form 8-K. No reports on Form 8-K were filed during the fourth fiscal quarter ended April 30, 1995. 27 29 Crown Casino Corporation (Formerly Skylink America Incorporated) Schedule II - Valuation and Qualifying Accounts
Balance at Charged to Balance at Beginning of Costs and Charged to Deductions - End of Description Period Expenses Other Accounts Describe (1) Period ---------------------------------------------------------------------------------------------------------------- Year ended April 30, 1995: Allowance for doubtful accounts $200,000 $60,629 $139,371 Year ended April 30, 1994: Allowance for doubtful accounts $ 38,500 $218,510 $ 57,010 $200,000 Year ended April 30, 1993: Allowance for doubtful accounts $ 86,308 $ 16,374 $ 64,182 $ 38,500
(1) Uncollectible accounts written off, net of recoveries. 30 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CROWN CASINO CORPORATION Dated: August 10, 1995 By:/s/ Edward R. McMurphy --- -------------------------------------------- Edward R. McMurphy President and Chief Executive Officer (principal executive officer) Dated: August 10, 1995 By:/s/ Mark D. Slusser --- -------------------------------------------- Mark D. Slusser Vice President Finance and Chief Financial Officer (principal financial and accounting officer) Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- * President, Chief Executive August 10, 1995 ------------------------------------ Officer and Director ---- Edward R. McMurphy * Executive Vice President, August 10, 1995 ------------------------------------ General Counsel and Director ---- Tilman J. Falgout, III * Director August 10, 1995 ------------------------------------ ---- David J. Douglas * Director August 10, 1995 ------------------------------------ ---- John David Simmons Director August 1995 ------------------------------------ ---- Gerald L. Adams * Director August 10, 1995 ------------------------------------ ---- Gerard M. Jacobs August 10, 1995 * Director ---- ------------------------------------ Robert J. Kehl *By /s/ Mark D. Slusser --------------------------------- Mark D. Slusser As Attorney-in-Fact Pursuant to Powers of Attorney Filed Herewith
31 EXHIBIT INDEX
Exhibit Sequential Number Description of Exhibit Page No. ------- ---------------------- -------- 2.3 Amended Stock Purchase Agreement dated June 9, 1995 between Crown and Louisiana Riverboat Gaming Partnership ("LRGP") 10.8 LRGP $20,000,000 Promissory Note dated June 9, 1995 in favor of Crown. 10.9 Shareholders Agreement dated June 9, 1995 by and between LRGP and Crown. 10.10 Asset Purchase Agreement dated July 11, 1995 by and between Crown and SLT Realty Limited Partnership and Hotel Investors Corporation of Nevada, Inc. 10.11 Management Agreement dated March 2, 1995 by and between SCGC and Riverboat Services, Inc. 10.16 Development Agreement dated June 9, 1995 by and between SCGC and Calcasieu Parish Police Jury. 10.16.1 First Amendment to Development Agreement dated July 25, 1995 by and between SCGC and Calcasieu Parish Police Jury. 10.17 Lease dated March 24, 1995 by and between Port Resources, Inc. and CRU, Inc. (collectively, "Landlord") and SCGC. 10.17.1 Amendment to Lease dated May 3, 1995 by and between SCGC and Landlord. 10.17.2 Second Amendment to Lease dated May 16, 1995 by and between SCGC and Landlord. 13.1 Annual Report to Stockholders for the fiscal year ended April 30, 1995 23.1 Consent of Coopers & Lybrand, L.L.P. 23.2 Consent of Ernst & Young LLP 24.1 Power of Attorney of Edward R. McMurphy 24.2 Power of Attorney of Tilman J. Falgout, III 24.3 Power of Attorney of Gerard M. Jacobs 24.4 Power of Attorney of David J. Douglas 24.5 Power of Attorney of John David Simmons 24.6 Power of Attorney of Robert J. Kehl 27 Financial Data Schedule (for SEC use only).
EX-2.3 2 AMENDED STOCK PURCHASE AGREEMENT 1 EXHIBIT 2.3 AMENDED STOCK PURCHASE AGREEMENT THIS AMENDED STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into as of this 2nd day of June, 1995 but effective as of March 2, 1995 by and among CROWN CASINO CORPORATION, a Texas corporation ("Crown"), ST. CHARLES GAMING COMPANY, INC., a Louisiana corporation (the "Company") and LOUISIANA RIVERBOAT GAMING PARTNERSHIP, a Louisiana partnership ("LRGP"). RECITALS A. Crown currently owns all of the outstanding capital stock of the Company (the "Company Stock") and desires to sell 50% of the Company Stock to LRGP. B. LRGP is willing to purchase 50% of the Company Stock. C. The Company's principal business will be the operation of a riverboat casino and related facilities (the "Calcasieu Casino") in Calcasieu Parish, Louisiana. NOW, THEREFORE, in consideration of the mutual representations, warranties, covenants and agreements, and upon the terms and subject to the conditions hereinafter set forth, the parties do hereby agree as follows: Section 1. Purchase and Sale of Stock. Crown shall sell, transfer, assign and deliver and LRGP shall purchase 50% of the Company Stock ("LRGP Stock") on the Closing Date (as hereinafter defined) for the purchase price of $21,000,000. The purchase price shall be payable as follows: on the Closing Date LRGP shall pay Crown the sum of $1,000,000 cash (less the $100,000 deposit previously delivered and any amounts then owing by Crown to the Company) and shall deliver to Crown a $20,000,000 Promissory Note (the "Purchase Money Note") described below. In addition, at Closing, LRGP shall pay one-half of any excess of current assets over Current Liabilities (as defined below) as of the effective date of this Agreement and Crown shall pay to LRGP one-half of any excess of Current Liabilities (as defined below) over current assets as of the effective date of this Agreement. Current Liabilities of St. Charles for purposes of this adjustment provision shall be defined as current liabilities, exclusive of debt and lease obligations stated on Schedule 2. Also, at Closing, Crown, St. Charles and LRGP shall pay such monies as may be required to account for various adjustments and advances pursuant to Sections 6.C and 8.4. LRGP shall advance funds to St. Charles to permit any payments required pursuant to such sections. In 2 addition, LRGP shall pay to Crown the Extension Fee, as defined below. 1.1 Purchase Money Note. The Purchase Money Note shall be executed by LRGP in favor of Crown in the principal sum of $20,000,000, and shall be substantially in the form of Exhibit A-1 hereto; the Purchase Money Note shall be secured by the LRGP Stock pursuant to a Security Agreement-Pledge substantially in the form of Exhibit A-2 hereto. 1.2 Warrant to Convert Purchase Money Note Into Equity. At the Closing, Casino America, Inc., a Delaware corporation ("CSNO"), shall issue a warrant (the "Warrant") to Crown, pursuant to which at any time prior to the repayment in full of the Purchase Money Note, Crown shall have the right to convert up to 50% of the principal amount outstanding on the Purchase Money Note (but not more than a total conversion of $5,000,000) for common stock of CSNO at a conversion rate of $12 per share. The Warrant shall be substantially in the form of Exhibit B hereto. 1.3 Delivery of Common Stock. At the Closing, Crown shall deliver certificates for the LRGP Stock in negotiable form, duly endorsed in blank or with separate stock transfer powers attached, free and clear of all liens, encumbrances, claims and other charges thereon of every kind. 1.4 Shareholders Agreement. At the Closing. Crown and LRGP shall execute a shareholders agreement substantially in the form of Exhibit C hereto. 1.5 Closing. The consummation (the "Closing") of the transactions contemplated by this Agreement shall take place at the offices of Phelps Dunbar, 400 Poydras Street, New Orleans, Louisiana on that date which is not more than ten days after all conditions of Closing set forth in Sections 8 and 9 have been satisfied or waived, or at such other time and place as shall be mutually agreed upon by LRGP and Crown, but in no event later than May 31, 1995, (the date of Closing being herein referred to as the "Closing Date"). The parties will use their best efforts to cause the Closing to occur by May 15, 1995. LRGP shall pay to Crown at Closing a fee (the "Extension Fee") equal to $6,300 for each day after May 15, 1995 that the Closing actually occurs. If the Closing has not occurred on or prior to May 31, 1995 any party hereto shall have the right to abandon and not consummate the transactions contemplated herein pursuant to Section 21 hereof. Section 2. Management Agreement. On the effective date of this Agreement, the Company and Riverboat Services, Inc., a wholly-owned subsidiary of Casino America, Inc., entered into a management agreement for the operation of the Calcasieu Casino, in the form of Exhibit D hereto. - 2 - 3 Section 3. Representations and Warranties of Crown. Crown represents and warrants to LRGP as follows: 3.1 Organization, Good Standing and Authority. Crown is a corporation duly organized, validly existing and in good standing under the laws of the State of Texas, and has the corporate power and authority to perform its business as presently conducted and to own and lease the properties used in connection therewith. Crown is duly qualified to do business and is in good standing in Louisiana, and is duly qualified to do business in all other jurisdictions where the failure to so qualify would have a material adverse impact on the financial condition or operations of Crown. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby are within the power of Crown and have been duly authorized by all necessary corporate and other action. This Agreement constitutes the valid obligation of Crown legally binding upon it and enforceable in accordance with its terms. 3.2 Stock Ownership. Crown is the lawful owner of record and beneficially owns all of the Company Stock, free and clear of any liens, encumbrances, rights, equities, security interests and any other adverse claims whatsoever (except for the security interest created by the Pledge Agreement dated as of May 31, 1994 (the "Nomura Pledge Agreement") executed by Crown in favor of Hibernia National Bank ("Hibernia") as agent for the purchaser of Notes issued by the Company pursuant to the Note Purchase Agreement among the Company, Crown, Hibernia and the Noteholders (as therein defined) (the "Nomura Loan Agreement") (the Nomura Pledge Agreement, the Nomura Loan Agreement and the ancillary instruments executed and defined in connection therewith are herein sometimes called "Nomura Loan Documents"). Crown has full legal power and authority to transfer and deliver the LRGP Stock in accordance with this Agreement, and by delivery of a certificate therefor, and upon receipt of the consents stated in Section 3.4 hereof, Crown will transfer to LRGP good and marketable title to 50% of the Company Stock, free and clear of all liens, encumbrances, equities and claims. Neither Crown nor the Company is a party to, or bound by any written or oral contract or agreement which grants to any person an option or right of first refusal or other right to acquire at any time, or upon the happening of any stated events, any of the Company Stock. 3.3 No Conflict. Except for the Nomura Loan Documents, neither the execution, delivery or performance of this Agreement by Crown, nor the consummation of the transactions contemplated hereby will (a) violate, conflict with or result in a breach of any provisions of, constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, result in the termination of or accelerate the performance required by, or - 3 - 4 result in the creation of any lien, security interest, charge or encumbrance upon any of the properties or assets of Crown under, any of the terms, conditions or provisions of its Certificate of Incorporation or By-laws or any note, bond, mortgage, indenture, deed of trust, lease, license, agreement or other instrument or obligation which binds it or any of its assets or (b) violate any order, writ, injunction, decree, statute, rule or regulation of any governmental body applicable to Crown or any of its assets, except for the consents stated in Section 3.4 hereof. 3.4 Consents. All consents, approvals or authorizations required to be obtained by Crown or the Company in connection with the transactions contemplated by this Agreement have been obtained, except for consent by Nomura Holding America, Inc. 3.5 No Claims. Except as stated in Schedule 3.5 hereto, there is no action, suit, proceeding or claim by any person, and no investigation by any governmental agency, pending or threatened against Crown. 3.6 Disclosure. No representation or warranty by Crown in by this Agreement or in the Schedules attached hereto contains any untrue statement of material facts or omits to state any material facts necessary to make any statement herein not misleading. Section 4. Representations and Warranties of Crown and the Company. Crown and the Company represent and warrant to LRGP as follows: 4.1. Organization, Standing, Qualification and Capitalization. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Louisiana, and has the corporate power and authority to perform its business as presently conducted and to own and lease the properties used in connection therewith. The Company is duly qualified to do business and is in good standing in each jurisdiction where the conduct of its business or the ownership of its property requires such qualification. The Company has no subsidiary or direct or indirect ownership interest in any other firm, partnership, corporation, association or business. The authorized capital stock of the Company consists of 100,000 shares of common stock, no par value. The Company has no authority to issue any other series or class of capital stock or security. Of the authorized shares of Common Stock there are only 100,000 fully paid and nonassessable shares validly issued and outstanding, all of which are held of record and owned by Crown and evidenced by certificate No. 3. All of such issued and out- standing shares of Common Stock (a) have been duly authorized, validly issued and fully paid, and are non-assessable, (b) have not been issued in violation of any agreement or document restricting their issuance and (c) are registered as owned by Crown in the - 4 - 5 Company's stock records. Except for the Nomura Loan Documents, neither Crown nor the Company is a party to or bound by any written or oral contract or agreement which grants to any person an option or right of first refusal or other right of any character to acquire at any time, or upon the happening of any stated events, shares of Common Stock of the Company whether or not presently issued or outstanding. 4.2 Compliance. The business and operations of the Company have been and are being conducted in compliance with all applicable laws, rules and regulations of all authorities, noncompliance with which would have a material adverse effect on its business, results of operations or prospects. The Company is not in violation of any term or provision of its Certificate of Incorporation or By-laws, or any indenture, contract, lease, agreement or instrument by which it is bound or any applicable law, rule or regulation, the violation of which would have a material adverse effect on its business, financial or other condition or its prospects. 4.3 Financial Statements. The Company has delivered to LRGP copies of the following financial statements, all of which have been prepared in accordance with generally accepted accounting principles (except for the absence of footnotes or as otherwise disclosed therein) applied on a basis consistent with that of the preceding fiscal year. (i) Balance sheet of the Company as of June 24, 1993, certified by Fred Bastie & Associates, PC, certified public accountants, and as of April 30, 1994 and January 31, 1995, prepared by the Company, which balance sheets present fairly the financial condition and assets and liabilities of the Company as of their respective dates. The balance sheet of the Company as of January 31, 1995 is attached as Schedule 4.3 hereto and will be hereinafter called the "1995 Balance Sheet". (ii) Statements of operations for the Company for the period from inception to June 24, 1993, certified by Fred Bastie & Associates, PC, certified public accountants, and for the period from June 25, 1993 to April 30, 1994 and for the nine months ended January 31, 1995, prepared by the Company, which statements together with any notes to the respective statements of net income present fairly the results of operations of the Company for the said periods. (iii) Balance sheet of Crown as of April 30, 1994 and statements of income of Crown for the year then ended, certified by Coopers & Lybrand, L.L.P., certified public accountants, which balance sheet and statement of income present fairly the results of operations of Crown for said period. - 5 - 6 4.4 Changes in Financial Condition. (a) Since January 31, 1995 there has not been (i) any adverse change in the financial condition or in the operations, businesses or properties of the Company (except for expenses incurred in the ordinary course of business); (ii) any damage, destruction or loss, whether covered by insurance or not, materially and adversely affecting the operations, businesses or properties of the Company; (iii) any declaration, setting aside or payment of any dividend, or any distribution in respect of capital stock of the Company, or any redemption, purchase or other acquisition of any of such shares of the Company; (iv) any increase in the compensation payable or to become payable by the Company to any of its officers, directors or employees; (v) any change in the terms of any bonus, insurance, pension or other benefit plan for or with any officers, directors or employees which increases amounts paid, payable or to become payable thereunder; or (vi) any complaints or other concerns which have been brought to the attention of the Company and which relate to the Company's labor relations. (b) Undisclosed Liabilities. There are no liabilities or obligations of the Company either accrued, absolute, contingent or otherwise, including, but not limited to, any tax liabilities due or to become due other than (i) those reflected in the 1995 Balance Sheet, (ii) unpaid expenses incurred since the 1995 Balance Sheet in the ordinary course of business and (iii) as stated in the Schedules to this Agreement and not heretofore paid or discharged. (c) All liabilities owing by the Company to Crown as of February 8, 1995 will be converted into equity. In addition, Crown will pay on behalf of the Company or reimburse the Company for all interest on the debt of the Company to Nomura Holding America, Inc. accrued through February 8, 1995, but paid after the effective date of this Agreement. 4.5 No Conflict. Neither the execution, delivery or performance of this Agreement by the Company, nor the consummation of the transactions contemplated hereby will (a) violate, conflict with or result in a breach of any provisions of, constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, result in the termination of or accelerate the performance required by, or result in the creation of any lien, security interest, charge or encumbrance upon any of the properties or assets of the Company under, any of the terms, conditions or provisions of its Certificate of Incorporation or By-laws or any note, bond, mortgage, indenture, deed of trust, lease, license, agreement or other instrument or obligation which binds it or any of its assets or (b) violate any order, writ, injunction, decree, statute, rule or regulation of any governmental body applicable to the Company or any of its assets, except for the approvals and consents stated in Section 3.4 hereto. - 6 - 7 4.6 Title to And Condition of Properties. (a) The Company has good and marketable title to all its properties and assets reflected in the 1995 Balance Sheet, free and clear of all mortgages, claims, liens, pledges, equitable interests, charges or other encumbrances of any nature whatsoever, except any mortgages, liens, pledges, charges or other encumbrances disclosed in the 1995 Balance Sheet or in Schedule 4.6 hereto, and liens for current taxes not yet due and payable. (b) All of the personal property reflected on the 1995 Balance Sheet, together with any personal property acquired thereafter, including without limitation, the Calcasieu Casino riverboat and all of the gaming and other equipment located thereon, are in good condition and working order, ordinary wear and tear excepted. The Calcasieu Casino riverboat is completed and has been paid for in full. 4.7 Tax Matters. The amounts set up as provisions for taxes on the 1995 Balance Sheet are sufficient for the payment of all foreign, federal, state, county and local taxes, and all employment and payroll related taxes, including any penalties or interest thereon, whether disputed or not, of the Company accrued for or applicable to all periods ended on or prior to January 31, 1995. The Company did not and will not realize any gain or income of any kind with respect to activities subsequent to January 31, 1995 and through the Closing Date except gain and income incurred in the ordinary course of business subsequent to January 31, 1995. The Company has timely made all deposits required by law to be made with respect to employees' withholding taxes. The Company has timely filed all income, foreign, franchise, excise, employment and payroll related, real and personal property, sales and gross receipts tax returns and all other tax returns which were required to be filed by it, and has paid, or has set up adequate reserves for the payment of, all taxes shown on such returns. No agreement for the extension of time for the assessment of any deficiency or adjustment with respect to any tax return filed by the Company has been assessed, and the Company has no knowledge of any assessed tax deficiency proposed or threatened against the Company. 4.8 Litigation and Labor Matters. Except as stated in Schedule 4.8 hereto, (a) there is no litigation, proceeding, governmental investigation or claim pending or, to the Company's knowledge, threatened, against or related to the Company, or its properties or business; (b) the Company is not in default with respect to any order, writ, injunction or decree of any court or federal, state, municipal or governmental department, commission, board, bureau, agency or instrumentality; and (c) the Company has not committed, and the Company has not received any notice of union election or claim that the Company has committed any unfair labor practice under applicable federal or state law. - 7 - 8 4.9 Insurance. The Company is insured under various policies of fire, liability and other forms of insurance, as stated in Schedule 4.9 hereto, which policies are valid and enforceable in accordance with their terms and provide adequate insurance for the business of the Company and its assets and properties; all outstanding claims under such policies are described in said Schedule 4.9. To the Company's knowledge, there is no liability for retrospective insurance premium adjustments for any period prior to the date hereof, except as stated in Schedule 4.9 hereto. 4.10 Patents, Trademarks and Copyrights. There are no patents, patent applications, registered trademarks, registered service marks, trademark and service mark applications, unregistered trademarks and service marks, copyrights and copyright applications, owned or filed by the Company or in which the Company has an interest and the nature of such interest. Except for the right to use "Isle of Capri", no other patent, trademark or service mark, copyright or license is necessary to permit the business of the Company to be conducted as now conducted or as heretofore or proposed to be conducted. No person, firm or corporation has any proprietary, financial or other interest in any of such patents, patent applications, registered trademarks, registered service marks, trademark and service mark applications, unregistered trademarks and service marks, copyrights and copyright applications, and there are no violations by others of any of the rights of the Company thereunder. To the knowledge of Crown and the Company, the Company is not infringing upon any patent trademark or service mark, or copyright or otherwise violating the rights, of any third party, and no proceedings have been instituted or are pending or, to the knowledge of the Company, are threatened, and no claim has been received by the Company, alleging any such violation. The Company is not a party to or bound by any license agreement requiring the payment by the Company of any royalty payment. 4.11 Contracts and Commitments. Except as stated in Schedule 4.11 hereto, the Company is not a party to any written or oral contract or commitment or any letter of intent, letter of understanding or other similar instrument. Copies of all such instruments have been provided to counsel for LRGP. Except as stated in Schedule 4.11, the Company, and to the Company's knowledge, the other parties to the above contracts have complied with the provisions thereof, such contracts are valid and enforceable, no party is in default thereunder, and no event has occurred which but for the passage of time or the giving of notice would constitute a default thereunder. The Company has terminated its management agreement with Century Casinos, Inc. ("Century") effective March 18, 1995 in consideration of the payment by the Company of $4 million in cash. 4.12 Defaults. The Company is not in default in the performance, observance or fulfillment of any obligation, covenant - 8 - 9 or condition contained in any debenture or note, or contained in any conditional sale or equipment trust agreement, or loan or other borrowing agreement to which the Company is a party. 4.13 Restrictions. The Company is not subject to any charter or other corporate restriction or any judgment, order, writ, injunction or decree, which materially and adversely affects the businesses, operations, prospects, properties, assets or condition, financial or otherwise, of the Company. 4.14 Pension Plans. There are no plans of the Company to which the Employee Retirement Income Security Act ("ERISA") applies, in whole or in part. 4.15 Employees. Schedule 4.15 hereto sets forth the names, addresses and social security numbers of all employees of the Company, their rates of compensation and all other material terms and conditions of their employment. Except as set forth in Schedule 4.15, all such employees may be terminated immediately without any further or ongoing contractual obligations whatsoever. The Company is not a party to any collective bargaining agreement, and the Company is not aware of any attempts to organize its employees. 4.16 Compliance with Laws. The Company has complied with and is not in default under, or in violation of, any laws, ordinances, rules, regulations or orders (including, without limitation, any antitrust, environmental, securities, employment, safety, health or trade laws, ordinances, rules, regulations or orders) applicable to the operations, businesses or properties of the Company which materially and adversely affect or, so far as Crown can now foresee, may in the future materially and adversely affect, the business, operations, prospects, properties, assets or condition, financial or otherwise, of the Company. 4.17 Consents. Except as stated in Section 3.4 hereof, all consents, approvals or authorizations required to be obtained by the Company in connection with the transactions contemplated by this Agreement have been obtained. 4.18 No Claims. Except as stated in Schedule 4.18 hereto, there is no action, suit, proceeding or claim by any person, and no investigation by any governmental agency, pending or threatened against the Company. 4.19 Disclosure. No representation or warranty by the Company in this Agreement or in the Schedules hereto contains any untrue statement of material facts or omits to state any material facts necessary to make any statement herein not misleading. Section 5. Representations and Warranties of LRGP. LRGP represents and warrants to Crown that: - 9 - 10 5.1 Organization and Authority. LRGP is a general partnership duly organized and validly existing under the laws of the State of Louisiana, and has full power and authority to own its properties and assets and to carry on its business as presently conducted. The partners of LRGP are, and will be at Closing, Louisiana River Site Development, Inc. and CSNO, Inc. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby are within the power of LRGP and have been duly authorized by all necessary corporate and other action. This Agreement constitutes the valid obligation of LRGP legally binding upon it, enforceable in accordance with its terms. 5.2 Validity of Contemplated Transactions. Except for the provisions of the note in the face amount of $35 million of LRGP to CSNO, Inc., neither the execution, delivery or performance of this Agreement by LRGP, nor the consummation of the transactions contemplated hereby will (a) violate, conflict with or result in a breach of any provisions of, constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, result in the termination of or accelerate the performance required by, or result in the creation of any lien, security interest, charge or encumbrance upon any of the properties or assets of LRGP under, any of the terms, conditions or provisions of its Articles of Partnership or any note, bond, mortgage, indenture, deed of trust, lease, license, agreement or other instrument or obligation which binds it or any of its assets or (b) violate any order, writ, injunction, decree, statute, rule or regulation of any governmental body applicable to LRGP or any of its assets. 5.3 Investment Representations. The Company Stock being delivered pursuant to the provisions of this Agreement is being purchased by LRGP for investment for its own account and not with a view to the distribution thereof. 5.4 Compliance. The business and operations of LRGP have been and are being conducted in compliance with all applicable laws, rules and regulations of all authorities, noncompliance with which would have a material adverse effect on its business, results of operations or prospects. LRGP is not in violation of any term or provision of its Articles of Partnership, or any indenture, contract, lease, agreement or instrument by which it is bound or any applicable law, rule or regulation, the violation of which would have a material adverse effect on its business, financial or other condition or its prospects. 5.5 Financial Statements. LRGP has delivered to Crown copies of the following financial statements, all of which have been prepared in accordance with generally accepted accounting principles (except for the absence of footnotes and as otherwise disclosed therein) applied on a basis consistent with that of the preceding fiscal year. - 10 - 11 (i) Balance sheets as of December 31, 1994, prepared by LRGP, which balance sheets together with any notes to the respective balance sheets present fairly the financial condition and assets and liabilities of LRGP as of their respective dates. (ii) Income statement of LRGP for the fiscal year ended December 31, 1994, prepared by LRGP, which statement together with any notes to the respective statements of net income present fairly the results of operations of LRGP for the said periods. 5.6 Changes in Financial Condition. (a) Since December 31, 1994 there has not been (i) any adverse change in the financial condition or in the operations, businesses or properties of LRGP; or (ii) any damage, destruction or loss, whether covered by insurance or not, materially and adversely affecting the operations, businesses or properties of LRGP. 5.7 Litigation. There is no litigation, proceeding, governmental investigation or claim pending or threatened, against or related to LRGP, or its properties or business and not covered by insurance; and (b) LRGP is not in default with respect to any order, writ, injunction or decree of any court or federal, state, municipal or governmental department, commission, board, bureau, agency or instrumentality. 5.8 Defaults. LRGP is not in default in the performance, observance or fulfillment of any obligation, covenant or condition contained in any debenture or note, or contained in any conditional sale or equipment trust agreement, or loan or other borrowing agreement to which LRGP is a party. 5.9 Compliance with Laws. LRGP has complied with and is not in default under, or in violation of, any laws, ordinances, rules, regulations or orders (including, without limitation, any safety, health or trade laws, ordinances, rules, regulations or orders) applicable to the operations, businesses or properties of LRGP which materially and adversely affect or, so far as LRGP can now foresee, may in the future materially and adversely affect, the business, operations, prospects, properties, assets or condition, financial or otherwise, of LRGP. 5.10 Disclosure. No representation or warranty by LRGP in this Agreement contains any untrue statement of material facts or omits to state any material facts necessary to make any statement herein not misleading. Section 6. Conduct of Business Pending Closing. A. Pending the Closing, Crown and the Company covenant in favor of LRGP as follows (which covenants may not be modified without the consent of LRGP): - 11 - 12 6.1 Business in the Ordinary Course. Except for transactions incurred in the ordinary course of business, the Company shall refrain from engaging in any transactions except with the concurrence of LRGP, which will not be unreasonably withheld. 6.2 Accounting Changes. The Company will not make any change in its accounting procedures and practices from those in existence at January 31, 1995. 6.3 Capitalization, Options and Dividends. The Company will not (i) make any change in its Articles of Incorporation or By-Laws (except to the extent necessary to implement the provisions of this Agreement and the Shareholders Agreement attached as Exhibit C hereto), (ii) issue or reclassify or alter any shares of its outstanding or unissued capital stock, (iii) grant options, warrants or other rights of any kind to purchase, or agree to issue any shares of its capital stock, (iv) purchase, redeem or otherwise acquire for a consideration any shares of its capital stock, or (v) declare, pay, set aside or make any dividends or other distribution or payment in respect of its capital stock. 6.4 Encumbrance of Assets. The Company will not mortgage, pledge or encumber any of its properties or assets, except to LRGP to secure Debt of the Company to LRGP. 6.5 Employment Agreements. The Company will not enter into any employment agreements, will keep in effect its present salary administration program (including pension plans and other fringe benefits), and will not increase the compensation of any of its directors, officers or employees; nor shall the Company make any contribution to any profit- sharing or pension plan, deferred compensation or other employee benefit plan. 6.6 Real Property Acquisition, Dispositions and Leases. The Company will not acquire or dispose of real estate or enter into leases of real estate or equipment, except for (a) the leases of the real property consisting of approximately 16 acres in Calcasieu Parish, Louisiana, for the site of the Calcasieu Casino (the "Site") as stated in Schedule 8.6 hereto, and (b) the purchase of real property in the area surrounding the Site for an aggregate purchase price not to exceed $2,500,000 on terms and conditions approved by LRGP. 6.7 Litigation During Interim Period. The Company will promptly advise LRGP in writing of the commencement or threat against the Company of any suit, proceeding, or claim by any person. 6.8 Inspection. LRGP and its officers, attorneys, accountants and representatives shall be permitted to examine the property, books and records of Crown (as they relate to the Company) and the Company, and such officers, attorneys, accountants - 12 - 13 and representatives shall be afforded access to such property, books and records and Crown and the Company will upon reasonable request furnish LRGP with any information reasonably required in respect to Crown and the Company's property, assets and business and will provide LRGP with copies of any contract, document or instrument listed in any Schedule hereto. No such examination, however, shall constitute a waiver or relinquishment on the part of LRGP of its right to rely upon the covenants, representations and warranties made by Crown and the Company herein. 6.9 Good Will. The Company will use its best efforts to preserve the good will of suppliers and others having business relations with it. 6.10 Insurance. The Company will not cause or permit any of its current insurance contracts to be cancelled or terminated or any coverage thereunder to lapse unless, simultaneously therewith, replacement policies providing equal or greater coverage for substantially the same premiums are in effect. 6.11 Closing. Crown and the Company will each use all reasonable efforts to bring about the satisfaction of the conditions of Closing specified in Section 8 hereof as they relate to such party. 6.12 No Breach. The Company and Crown will not commit or omit to do any act which act or omission would cause a breach of any agreement, contract or commitment or which would have a material adverse effect on the Company's financial condition, results of operations, business or prospects. 6.13 No Violation. The Company and Crown will not violate any law, statute, rule, governmental regulation or order, which violation would have a material adverse effect on the Company's financial condition, results of operations, business or prospects. B. Pending the Closing, LRGP covenants and agrees that it will use all reasonable efforts to bring about the conditions of Closing specified in Section 9 hereof as they relate to LRGP. C. From and after the effective date hereof, LRGP or an affiliate thereof shall provide loans (the "Loans") to the Company for all expenses and development costs (in amounts to be agreed upon by LRGP and Crown) related to the Calcasieu Casino accrued or incurred by the Company since February 8, 1995, including, but not limited to, the sum of $4,000,000 to buy out the Management Agreement between the Company and Century Casinos, Inc., and the payment of interest on the loan evidenced by the Nomura Loan Documents (the "Nomura Loan") from and after February 8, 1995. In addition, LRGP may, in its discretion, and with Crown's consent, make advances ("Crown Advances") on the Loans to enable St. Charles to pay interest on the Nomura Loan accrued prior to February 8, - 13 - 14 1995 and unpaid on February 8, 1995 plus any other obligations of St. Charles or Crown to others. LRGP shall be repaid from Crown the total amount of all Crown Advances immediately prior to the Closing. The maximum amount of all such Loans shall not exceed $45,000,000 in the aggregate. The Loans shall be represented by a note or notes of the Company bearing interest at 11.5% per annum and shall be repaid by the Company in four (4) equal quarterly installments of principal and interest beginning three (3) months after the Closing Date (or as otherwise agreed by the parties), and shall be guaranteed by Crown until the Closing and, if the Closing does not occur, until repayment in full notwithstanding any termination of this Agreement pursuant to Section 21(a) or otherwise. If the Closing occurs, the guarantee of Crown shall be released immediately and effective as of the Closing. In the event that on or after the Closing Date LRGP guaranties any debt of the Company and/or the Company refinances its existing indebtedness to and/or borrows new monies from Nomura Holding America, Inc. (the "Nomura Loan") on terms where (i) LRGP is either a co-issuer with the Company on the Nomura Loan or a guarantor of the Nomura Loan, and/or (ii) LRGP becomes a co-borrower or guarantor of additional or other indebtedness of the Company to a third party lender, the Company hereby agrees to reimburse LRGP immediately on demand and indemnify LRGP against any amount which LRGP may hereafter pay to Nomura on the Nomura Loan or such third party lender on such other loan(s). This reimbursement obligation shall be absolute and unconditional irrespective of any counterclaim or defense to payment which the Company may have against Nomura or such third party lender. The Company agrees to execute any further instrument as LRGP shall reasonably require to evidence said reimbursement and indemnity obligation. LRGP shall use its best efforts to obtain third party financing for the Company on terms satisfactory to Crown, the Company and LRGP, but without the requirement for (i) Crown to grant a security interest in the 18.6 acres of land owned by a subsidiary of Crown located in Las Vegas, Nevada and other Crown assets, (ii) Crown to guarantee such financing and, (iii) Crown and LRGP to grant a security interest in the Company Stock; provided, however, that if such third party lender requires the pledge of the Company Stock as a first priority security interest for such financing, Crown and LRGP agree to do so and Crown further agrees to subordinate its security interest in the LRGP Stock to the first priority security interest in favor of such third party lender. In the event that on or after the Closing Date, LRGP or its designated affiliate [including Casino America Inc. ("CSNO")] obtains funds from the issuance of equity or debt securities or commercial loan proceeds or from other sources to refinance the indebtedness of the Company to Nomura, other third party lenders, and LRGP and to otherwise develop the Calcasieu Casino, LRGP and/or such affiliate shall make loans to the Company and the Company - 14 - 15 agrees that the loans shall bear interest at the cost of such funds to LRGP and/or such affiliate (including offering costs) to the extent that the loaned funds are derived solely from debt securities or a commercially reasonable rate to the extent that the loan funds are derived solely from equity securities or in part from equity and debt securities, shall be secured by substantially all assets, and if required by an unrelated third party stock of the Company, and shall otherwise be on terms commercially reasonable terms satisfactory to the Company, Crown, LRGP and CSNO. In the event that Crown is required to subordinate the Purchase Money Note to certain indebtedness (the "Hibernia Loan") of LRGP to Hibernia National Bank ("Hibernia") in order for LRGP to obtain funds to loan to the Company, LRGP agrees (i) not to accept advances on the Hibernia Loan unless such advances are immediately re-loaned to the Company, (ii) to make all principal and interest payments on the Hibernia Loan promptly when due (irrespective of LRGP's ability to simultaneously obtain repayment thereof from the Company) and (iii) to repay the Hibernia Loan in full not later than the repayment in full of the indebtedness of the Company to Nomura. Section 7. Liability and Indemnification . (a) Crown shall defend, indemnify and hold harmless LRGP against and in respect of any and all liability, damage, loss, deficiency, cost and expenses arising out of or otherwise in respect of (i) any misrepresentation, breach of warranty (or claims which would constitute a breach of warranty if true) or non-fulfillment of any agreement or covenant contained in this Agreement, certificate or other instrument furnished by Crown or the Company, (ii) the costs and expenses incurred after the Closing Date, including attorneys fees, judgments, fines and amounts paid in settlements of all actions, suits or proceedings, whether civil, criminal, administrative or investigative, involving the Company which relate to acts or omissions occurring prior to the date hereof, and (iii) any and all actions, suits, proceedings, audits, demands, assessments, judgments, costs and legal and other expenses incident to any of the foregoing or the enforcement of this Section, but only to the extent that any such liability, damage, loss, deficiency, cost or expense exceeds $5,000 individually and $25,000 in the aggregate, provided, however, such limitation shall not apply to a breach of Section 4.4(b). (b) LRGP shall defend, indemnify and hold harmless Crown against and in respect of any and all liability, damage, loss, deficiency, cost and expenses arising out of or otherwise in respect of (i) any misrepresentation, breach of warranty or non-fulfillment of any agreement or covenant contained in this Agreement, certificate or other instrument furnished by LRGP, and (ii) any and all actions, suits, proceedings, audits, demands, assessments, judgments, costs and legal and other expenses incident to any of the foregoing or the enforcement of this Section. - 15 - 16 Section 8. Conditions Precedent to LRGP's Obligations. All obligations of LRGP under this Agreement are subject to the fulfillment, prior to or at the Closing, of each of the following conditions; 8.1 Representations and Warranties. Crown's and the Company's representations and warranties contained in this Agreement, certificates or other instrument delivered pursuant to the provisions hereof shall be true and correct as of the effective date of this Agreement and as of the Closing Date (except those made as of a specific date) as though such representations and warranties were made at and as of such time, and Crown and the Company shall have delivered to LRGP a certificate dated the Closing Date and signed by them to such effect. 8.2 Compliance with Agreements. Crown and the Company shall have performed or complied with all agreements and conditions required by this Agreement to be performed or complied with by them prior to or at the Closing, and Crown and the Company shall have delivered to LRGP a certificate dated the Closing Date and signed by them to such effect. 8.3 Opinion of Counsel. Crown and the Company shall have delivered to LRGP an opinion of their counsel, dated the Closing Date, substantially in the form of Exhibit E hereto. 8.4 Debt to and From Parent. Any Debt of the Company to Crown existing on the date of this Agreement or at Closing which shall not have been repaid shall have been converted to shareholders equity by increasing paid-in capital. Any debt of the Company to Crown incurred after February 8, 1995 shall be repaid immediately prior to Closing. Any Debt of Crown to the Company existing at Closing shall be repaid in full immediately prior to the Closing. 8.5 Environmental Reports. Prior to executing the leases described in Section 8.6 hereof, LRGP shall have received, reviewed and approved Phase I (or Phase II or Phase III if deemed necessary by LRGP) environmental engineering reports on the property subject to said proposed leases. 8.6 Leases. The Company and landlord(s) shall have executed leases and recorded memorandums of leases of the Site pursuant to the options to lease described in Schedule 8.6 hereto. 8.7 Regulatory Approvals. The Company, Crown and LRGP shall have received all necessary approvals of governmental authorities to consummate the transactions contemplated by this Agreement. 8.8 Hart-Scott-Rodino Filing. Crown and LRGP (and any other required parties) shall have made any filings with the Federal Trade Commission required by the Hart-Scott-Rodino Antitrust - 16 - 17 Improvements Act of 1976, and shall not have received any timely objection to the consummation of the transactions contemplated by this Agreement. 8.9 Litigation. There shall not have been filed, or to the knowledge of Crown or the Company, threatened, any action, suit, proceeding or claim by any person, which if successful would have a material adverse effect on the business of the Company or the transactions contemplated by this Agreement. No action or proceeding shall have been threatened or instituted before a court or other governmental body by any person, governmental agency or public authority to restrain or prohibit the transactions contemplated by this Agreement or to obtain damages or other material relief in connection with the execution of this Agreement or the consummation of the transactions contemplated hereby. In addition, no governmental agency shall have given notice to the effect that consummation of the transactions contemplated by this Agreement would constitute a violation of any law or that it intends to commence proceedings to restrain consummation of the transactions contemplated hereby. 8.10 Satisfactory Proceedings. All corporate and other proceedings and actions taken in connection with the transactions contemplated hereby and all certificates, opinions, agreements, instruments and documents referred to in this Section 8 or incident to any such transactions shall be reasonably satisfactory in form and substance to LRGP and its counsel. Crown and the Company shall furnish to LRGP and its counsel such supporting documentation and evidence of the satisfaction of any or all of the conditions precedent specified in this Section 8 as LRGP or its counsel may reasonably request. 8.11 Financing Consent. Crown and the Company shall have obtained the consent of Nomura Holding America, Inc. to all of the transactions contemplated by this Agreement. 8.12 Delivery of Company Stock. Crown shall have delivered the LRGP Stock to LRGP, free and clear of any liens, encumbrances, rights, equities, security interests and other adverse claims whatsoever, except for the security interest in favor of Crown to secure the Purchase Money Note. Section 9. Conditions Precedent to Crown's Obligations. All obligations of Crown under this Agreement are subject to the fulfillment, prior to or at the Closing, of each of the following conditions: 9.1 Representations and Warranties. The representations and warranties of LRGP contained in this Agreement or in any certificate or other instrument delivered pursuant to the provisions hereof shall be true and correct as of the effective date of this Agreement and as of the Closing Date as though such - 17 - 18 representations and warranties were made at and as of such time, and LRGP shall have delivered to Crown a certificate dated the Closing Date and signed by it to such effect. 9.2 Compliance with Agreements. LRGP shall have performed or complied with all agreements and conditions required by this Agreement to be performed or complied with by it prior to or at the Closing, and LRGP shall have delivered to Crown a certificate dated the Closing Date and signed by it to such effect. 9.3 Opinion of Counsel. LRGP shall have delivered to Crown an opinion of LRGP's counsel, dated the Closing Date, substantially in the form of Exhibit F hereto. 9.4 Regulatory Approvals. The Company, LRGP and Crown shall have received all applicable approvals of governmental authorities to consummate the transactions contemplated by this Agreement. 9.5 Hart-Scott-Rodino Filing. Crown and LRGP (and any other required parties) shall have made any filings with the Federal Trade Commission required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, and not have received any timely objection to the consummation of the transactions contemplated by this Agreement. 9.6 No Action. No action or proceeding shall have been threatened or instituted before a court or other governmental body by any person, governmental agency or public authority to restrain or prohibit the transactions contemplated by this Agreement or to obtain damages or other material relief in connection with the execution of this Agreement or the consummation of the transactions contemplated hereby. In addition, no governmental agency shall have given notice to the effect that consummation of the transactions contemplated by this Agreement would constitute a violation of any law or that it intends to commence proceedings to restrain consummation of the transactions contemplated hereby. 9.7 Satisfactory Proceedings. All corporate and other proceedings and actions taken in connection with the transactions contemplated hereby and all certificates, opinions, agreements, instruments and documents referred to in this Section 9 or incident to any such transactions shall be reasonably satisfactory in form and substance to Crown and its counsel. LRGP shall furnish to Crown and its counsel such supporting documentation and evidence of the satisfaction of any or all of the conditions precedent specified in this Section 9 as Crown or its counsel may reasonably request. 9.8 Loans. LRGP or an affiliate shall have provided, or caused to be provided by a third party lender, the Loans to the Company as contemplated by Section 6.C. hereof, and the Company shall have entered into a loan agreement acceptable to LRGP and - 18 - 19 Crown with a third party lender providing for loans in an amount not to exceed $45,000,000, unless otherwise agreed by the parties, to be used in the manner set forth in Section 6.C. hereof, or, alternatively, the Company and LRGP shall have entered into a loan agreement acceptable to Crown and LRGP whereby LRGP shall loan such funds up to the maximum amount referred to above in accordance with the terms of Section 6.C. hereof. Section 10. Broker and Finder's Fees. Crown and the Company represent and warrant to LRGP that they have not engaged or dealt with any person who may be entitled to any broker fee or commission in respect of the execution of this Agreement or the consummation of the transactions contemplated hereby. LRGP represents and warrants to Crown that it has not engaged or dealt with any broker or other person who may be entitled to any brokerage fee or commission in respect of the execution of this Agreement or the consummation of the transactions contemplated hereby. Each of the parties hereto shall indemnify and hold the others harmless against any and all claims, losses, liabilities or expenses which may be asserted against such other parties as a result of such first mentioned party's dealings, arrangements or agreements with any such broker or person. Notwithstanding the foregoing, with the written approval of Crown and LRGP which may be given or withheld in each such party's sole and absolute discretion, the Company may pay a finders fee to Sid Goldstein and/or Mike Profit in connection with the transactions contemplated by this Agreement. Section 11. Expenses. Crown and LRGP shall each bear their own expenses in connection with the Agreement and the transactions contemplated thereby. Unless otherwise agreed by LRGP, Crown shall also bear the expenses of the Company in connection with this Agreement and the transactions contemplated hereby. Section 12. Announcements. LRGP and Crown will consult and cooperate with each other as to the timing and content of any announcements of the transactions contemplated hereby to the general public or to employees, customers or suppliers. Except as otherwise required by applicable law, neither party without the consent of the other, will issue any press release concerning the transactions contemplated by this Agreement, it being the intent of the parties that any press releases will be issued simultaneously and the contents thereof will be approved by all parties. Section 13. Further Actions and Assurances. LRGP and Crown will execute and deliver any and all documents, and will cause any and all other action to be taken, either before or after Closing, which may be necessary or proper to effect or evidence the provisions of this Agreement and the transactions contemplated hereby. Section 14. Purchase Money Note Restructure. Notwithstanding any of the foregoing, in the event that the Company (with the - 19 - 20 consent of both Crown and LRGP) enters into one or more financing arrangements with persons unaffiliated with Crown or LRGP, the terms of the Purchase Money Note (including interest rate and repayment terms) and/or the collateral arrangements shall be adjusted so as to comply with any affirmative or negative covenants (including limitations on distributions) imposed by such third party lender on the Company; in such event, the Purchase Money Note shall be amended to reflect such required adjustments. Section 15. Counterparts. This Agreement may be executed in several counterparts each of which is an original. This Agreement and any counterpart so executed shall be deemed to be one and the same instrument. It shall not be necessary in making proof of this Agreement or any counterpart hereof to produce or account for any of the other counterparts. Section 16. Contents of Agreement; Parties in Interest. Etc.. This Agreement sets forth the entire understanding of the parties. Any previous agreements or understandings between the parties regarding the subject matter hereof are merged into and superseded by this Agreement. This Agreement may not be assigned by any party hereto without the prior written consent of the other parties. Subject to the foregoing, all representations, warranties, covenants, terms, conditions and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective heirs, legal representatives, successors and assigns of Crown, the Company and LRGP. Section 17. Governing Law. This Agreement is being delivered and is intended to be performed in the State of Louisiana and shall be construed and enforced in accordance with the laws thereof. Section 18. Section Headings and Gender. The section headings herein have been inserted for convenience of reference only and shall in no way modify or restrict any of the terms or provisions hereof. The use of the masculine pronoun herein when referring to any party has been for convenience only and shall be deemed to refer to the particular party intended regardless of the actual gender of such party. Section 19. Schedules and Exhibits. All Schedules and Exhibits referred to in this Agreement are intended to be and are hereby specifically made a part of this Agreement. Section 20. Notices. Any notice or demand which, by provision of this Agreement, is required or permitted to be given or served by LRGP to or on Crown and the Company shall be deemed to have been sufficiently given and served for all purposes (if mailed) three calendar days after being deposited, postage prepaid, in the United States Mail, registered or certified mail, or (if delivered by express courier) one Business Day after being delivered to such courier, or (if delivered in person) the same day - 20 - 21 as delivery, in each case addressed (until another address or addresses is given in writing by Crown to LRGP) as follows: Crown Casino Corporation 2415 West Northwest Highway, Suite 103 Dallas, Texas 75220 Attention: Mr. Mark D. Slusser Vice President - Finance St. Charles Gaming Company, Inc. c/o Crown Casino Corporation 2415 West Northwest Highway, Suite 103 Dallas, Texas 75220 Attention: Mr. Mark D. Slusser Vice President - Finance with a copy to: T. J. Falgout, III, Esq. Stumpf & Falgout 1400 Post Oak Boulevard, Suite 400 Houston, Texas 77056 Any notice or demand which, by any provision of this Agreement, is required or permitted to be given or served by Crown to or on LRGP shall be deemed to have been sufficiently given and served for all purposes (if mailed) three calendar days after being deposited, postage prepaid, in the United States Mail, registered or certified mail, or (if delivered by express courier) one Business Day after being delivered to such courier, or (if delivered in person) the same day as delivery, in each case addressed (until another address or addresses are given in writing by LRGP to Crown) as follows: Louisiana Riverboat Gaming Partnership c/o Louisiana River Site Development, Inc. The Edward J. DeBartolo Corporation 7620 Market Street Youngstown, Ohio 44513-3287 Attention: Mr. Gerald Wiemann Vice President - 21 - 22 Louisiana Riverboat Gaming Partnership c/o CSNO, Inc. Casino America, Inc. 711 Washington Loop Biloxi, Mississippi 39530 Attention: Mr. James E. Ernst Chief Executive Officer with copies to: Mr. Arthur Wolfcale Vice President and Secretary Edward J. DeBartolo Corporation 7620 Market Street Youngstown, Ohio 44512-6085 and Allan B. Solomon, Esq. Chairman of the Executive Committee Casino America, Inc. 2200 Corporate Blvd., N.W., Suite 310 Boca Raton, Florida 33431 Section 21. Termination. (a) This Agreement may be terminated at any time prior to the Closing (i) by consent of Crown, the Company and LRGP; (ii) by LRGP if any of the conditions described in Section 8 hereof have not been met as of the proposed Closing Date and have not been waived by LRGP; (iii) by Crown if any of the conditions described in Section 9 hereof have not been met as of the proposed Closing Date and have not been waived by Crown; or (iv) by any party if the Closing has not occurred by May 31, 1995. Any termination pursuant to this Section 21 shall be effective immediately upon the giving of notice by the terminating party to the other party. In the event of termination pursuant to this Section 21(a), this Agreement shall become null and void and no party shall have any obligations to any other party. (b) If this Agreement is terminated as a result of the breach by Crown or the Company of its obligations hereunder, LRGP shall be entitled to the return of the $100,000 deposit made prior to the execution of this Agreement. Such right shall be in addition to any and all other rights and remedies which would be available to LRGP at law or in equity. Section 22. Exclusivity. From and after the date of this Agreement until the earlier of the Closing Date or the termination of this Agreement pursuant to Section 21 hereof, Crown and the Company will not solicit or encourage inquiries or proposals with respect to, or furnish any information relating to, or participate in any negotiations or discussions concerning, any acquisition of - 22 - 23 the Calcasieu Casino, or any of the Company Stock or any other matters contemplated by this Agreement, and Crown and the Company shall instruct their officers, directors, agents and affiliates to refrain from doing so. Crown and the Company will notify LRGP immediately if any such serious inquiries or proposals are received by Crown or the Company, or if any such information is requested from Crown of the Company, or any such negotiations are sought to be initiated with Crown or the Company, and any response thereto shall be approved in advance by LRGP. Section 23. No Waiver. The failure by any party to enforce any of its rights hereunder shall not be deemed to be a waiver of such rights, unless such waiver is an express written waiver which has been signed by the waiving party. Waiver of any one breach shall not be deemed to be a waiver of any other breach of the same or any other provisions hereof. Section 24. Survival. The representations, warranties, covenants and agreements contained in this Agreement shall survive the Closing for a period of five (5) years thereafter except that the representations and warranties contained in Sections 3.1, 3.2, 3.3, 3.4 and 4.1 shall survive for the maximum period permitted by applicable law. IN WITNESS WHEREOF, this Agreement has been executed as of the day and year first above written. CROWN CASINO CORPORATION By: /s/ Mark D. Slusser -------------------------------------- Name: Mark D. Slusser Title: Vice President - 23 - 24 ST. CHARLES GAMING COMPANY, INC. By: /s/ Mark D. Slusser --------------------------------------- Name: Mark D. Slusser Title: Vice President LOUISIANA RIVERBOAT GAMING PARTNERSHIP, a Louisiana general partnership By: LOUISIANA RIVER SITE DEVELOPMENT, INC., General Partner, a wholly-owned subsidiary of Louisiana Downs, Inc. By: /s/ Gerald Wiemann -------------------------------------- Name: Gerald Wiemann Title: Vice President, Secretary and Treasurer By: CSNO, INC., General Partner, a wholly-owned subsidiary of Casino America, Inc. By: /s/ Allan B. Solomon -------------------------------------- Name: Allan B. Solomon Title: Secretary and Treasurer - 24 - EX-10.8 3 PROMISSORY NOTE 1 EXHIBIT 10.8 PROMISSORY NOTE $20,000,000.00 Dallas, Texas June 9, 1995 ------- FOR VALUE RECEIVED, the undersigned, LOUISIANA RIVERBOAT GAMING PARTNERSHIP, a Louisiana partnership (hereinafter called the "Maker") promises to pay to the order of CROWN CASINO CORPORATION, a Texas corporation (hereinafter called the "Payee"), at its offices at 2415 W. Northwest Highway, Suite 103, Dallas, Texas 75220, in lawful money of the United States of America, the sum of TWENTY MILLION AND NO/100 DOLLARS ($20,000,000.00), together with interest thereon from and after the date hereof until maturity at a fixed rate per annum which is eleven and one-half percent (11.5%). All past due principal (and, to the extent permitted by law, past due interest) shall bear interest at eighteen percent (18%) per annum from maturity until paid. Interest shall be computed on a per annum basis of a year of 365 or 366 days, as the case may be, and for the actual number of days elapsed (including the first day but excluding the last day), or (b) the Maximum Rate (as hereinafter defined). All past due principal and interest shall bear interest from and after maturity until paid, regardless of how maturity occurs, at an interest rate which, from day to day, shall be equal to the lesser of (a) the Maximum Rate, or (b) eighteen percent (18%) per annum. Interest on the outstanding principal balance of this Note shall be due and payable monthly as it accrues on the first day of each and every calendar month during the term hereof commencing July 1, 1995. The principal amount of this Note shall be due and payable in seventeen (17) equal quarterly installments of One Million One Hundred Seventy-six Thousand Four Hundred Seventy and 59/100 Dollars ($1,176,470.59), each, on the first day of every July, October, January and April during the term hereof, commencing July 1, 1996 through and including July 1, 2000, on which date, the then remaining balance of principal and accrued, unpaid interest shall be due and payable in full. Notwithstanding anything to the contrary stated above, it is acknowledged by the Payee that the Maker's source of funds for the principal installments set forth above (exclusive of the final payment on the maturity date) shall be the cash dividends or other distributions (the "Distributions") which the Maker shall receive by virtue of its ownership of fifty percent (50%) of the issued and outstanding capital stock of St. Charles Gaming Company, Inc., a Louisiana corporation ("SCGC"); the capital stock of SCGC owned by the Maker is hereinafter called "Maker's SCGC Stock". In the event the Distributions from SCGC to the Maker during any calendar quarter are less than the principal installment due for such quarter, the Maker shall be obligated only to pay the amount of such Distribution, credited first to the payment of interest accrued and unpaid hereunder, with any deficiency between the scheduled quarterly payment and the amount of the Distribution paid to the Payee being deferred and due with the next scheduled quarterly principal installment due under this Note and such deferred delinquency shall not be deemed to be past due principal within the meaning of this Note, provided however, all remaining principal (and accrued and unpaid interest) shall be due and payable on July 1, 2000, without regard to the Distributions from SCGC to Maker. Initial: AAS Page 1 of 5 Pages --- 2 If any payment of principal or interest on this Note shall become due on a day which is not a Business Day (as hereinafter defined), such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computing of interest in connection with such payment. As used herein, the term "Business Day" shall mean any day other than a day on which commercial banks in the State of Texas are authorized to be closed. Any check, draft, money order or other instrument given in payment of all or any portion of this Note may be accepted by the Payee and handled in collection in the customary manner, but the same shall not constitute payment or diminish any rights of the Payee except to the extent that actual cash proceeds of such instrument are unconditionally received by the Payee. If any installment or payment of principal or interest of this Note is not paid when due, and such installment is not paid within ten (10) days of the scheduled due date thereof; or if a default occurs under any instrument now or hereafter executed in connection with or as security for this Note, including without limitation, that certain Security Agreement - Pledge (the "Pledge Agreement") of even date herewith executed by the Maker in favor of the Payee granting to the Payee a security interest in and pledge of all of the Maker's SCGC Stock; thereupon, at the option of the Payee, the principal and unpaid accrued interest on this Note shall become and be due and payable forthwith without demand, notice of default or of intent to accelerate the maturity hereof, notice of acceleration, notice of nonpayment, presentment, protest or notice of dishonor, all of which are hereby expressly waived by the Maker. If this Note is not paid at maturity whether by acceleration or otherwise and is placed in the hands of an attorney for collection, or suit is filed hereon, or proceedings are had in probate, bankruptcy, receivership, reorganization, arrangement or other legal proceedings for collection hereof, the Maker agrees to pay the Payee its collection costs, including reasonable attorney's fees. The Maker is and shall be directly and primarily liable for the payment of all sums called for hereunder, and the Maker hereby expressly waives bringing of suit and diligence in taking any action to collect any sums owing hereon and in the handling of any security, and the Maker hereby consents to and agrees to remain liable hereon regardless of any renewals, extensions for any period or rearrangements hereof, or partial prepayments hereon, or any release or substitution of security for this Note, in whole or in part, with or without notice, from time to time, before or after maturity. The Maker shall have the privilege to prepay at any time, and from time to time, all or any part of the principal amount of this Note, without notice, penalty or fee. Such advances or prepayments will be applied, first to the payment of interest then accrued and unpaid hereon, including the amount of interest accruing and to accrue on the amount of principal being prepaid, and the balance, if any, to the payment of the installments of principal in the inverse order of maturity. It is expressly provided and stipulated that notwithstanding any provision of this Note or any other instrument evidencing or securing the loan evidenced hereby, in no event shall the aggregate of all interest paid by the Maker to the Payee under this Note ever exceed the Maximum Rate on the principal balance of this Note from time to time advanced and remaining unpaid. In this connection, it is expressly stipulated and agreed that it is the intent of the Payee Initial: AAS Page 2 of 5 Pages --- 3 and the Maker in the execution and delivery of this Note to contract in strict compliance with the Applicable Laws. In furtherance thereof, none of the terms of this Note or any other instrument evidencing or securing the loan evidenced hereby, shall ever be construed to create a contract to pay for the use, forbearance or detention of money, interest at a rate in excess of the Maximum Rate permitted to be charged of the Maker under such laws. The Maker or any guarantors, endorsers or other parties now or hereafter becoming liable for payment of this Note shall never be liable for interest in excess of The Maximum Rate, and the provision of this paragraph and the immediately succeeding paragraph shall govern over all other provisions of this Note and any instruments evidencing or securing the loan evidenced hereby, should such provisions be in apparent conflict herewith. Specifically and without limiting the generality of the foregoing paragraph, it is expressly provided that: (i) In the event of prepayment of the principal of this Note (if permitted hereunder) or the payment of the principal of this Note prior to the stated maturity date hereof resulting from acceleration of maturity of this Note, if the aggregate amounts of interest accruing hereon prior to such payment plus the amount of any interest accruing after maturity and plus any other amounts paid or accrued in connection with the loan evidenced hereby which by Applicable Law are deemed interest on the loan evidenced by this Note and which aggregate amount paid or accrued (if calculated in accordance with the provisions of this Note other than this paragraph) would exceed the Maximum Rate, then in such event the amount of such excess shall be credited, as of the date paid, toward the payment of principal of this Note so as to reduce the amount of the final payment of principal due on this Note; (ii) If under any circumstance the aggregate amounts paid on the loan evidenced by this Note prior to and incident to the final payment hereof include amounts which by Applicable Law are deemed interest and which would exceed the Maximum Rate, the Maker stipulates that such payment and collection will have been and will be deemed to have been the result of a mathematical error on the part of both the Maker and the Payee, and any excess shall be credited on the Note by the Payee. If this Note shall have been paid in full, the party receiving such excess payment shall promptly refund the amount of such excess (to the extent only of the excess of such interest payments above the Maximum Rate) upon the discovery of such error by the party receiving such payment or notice thereof from the party making such payment; and (iii) All amounts paid or agreed to be paid in connection with the indebtedness evidenced by this Note which would under Applicable Law be deemed interest shall, to the extent provided by Applicable Law, be amortized, prorated, allocated and spread throughout the full term of this Note. All notice required or permitted under this Note shall be in writing and shall be deemed to have been sufficiently given or served for all purposes when presented personally or Initial: AAS Page 3 of 5 Pages --- 4 deposited with the United States Postal Service, postage prepaid, certified mail, return receipt requested, to the Maker at the address set forth below, or at such other address of which the Maker shall have notified the President or any Vice President of the Payee in writing at least thirty (30) days prior to the date of the Payee giving such notice. Where appropriate, any pertinent noun, verb or pronoun shall be construed and interpreted to include both the proper number and gender. This Note shall not be renewed, extended, or modified except by a written instrument evidencing the same. Notwithstanding anything to the contrary contained herein or in any instrument securing the payment hereof, including without limitation, the Pledge Agreement, the exclusive remedy of the Payee for the failure of the Maker to pay all or any portion of the principal owing hereunder shall be limited to proceeding against the properties, rights and estates described in and encumbered by the Pledge Agreement, and no attachment, execution, or other writ or process shall be sought, issued, or levied upon any other assets, properties, or funds of the Maker. The provisions of this paragraph shall only be applicable to a default by the Maker in the payment of the principal portion hereof, and the Payee has and shall continue to possess full recourse against the Maker for the payment of all interest accrued hereon through the earlier to occur of (i) the maturity date hereof, whether same occurs by reason of acceleration or otherwise, or (ii) the date on which the Payee conducts a foreclosure sale on the Maker's SCGC Stock. "Applicable Law" means that law in effect from time to time and applicable to this Note which permits the charging and collection of the highest permissible lawful nonusurious rate of interest on this Note, including laws of the State of Texas and laws of the United States of America. It is intended that Article 1.04, Title 79, Revised Civil Statutes of Texas, 1925, as amended (Article 5069-1.04, as amended, Vernon's Texas Civil Statutes) shall be included in the laws of the State of Texas in determining Applicable Law; and for the purpose of applying Article 1.04 to this Note, the interest ceiling applicable to this Note under Article 1.04 shall be the indicated rate ceiling from time to time in effect. "Maximum Rate" means the maximum lawful nonusurious rate of interest (if any) which under Applicable Law the Payee is permitted to charge the Maker on this Note from time to time. As permitted by Article 5069-15.10(b), Title 79, Revised Civil Statutes of Texas, 1925, as amended (Article 5069-15.10(b), as amended, Vernon's Texas Civil Statutes), the Maker and the Payee have agreed that the provisions of Chapter 15 of Title 79, as amended, shall not be applicable to this Note or any "Account" or "Arrangement" (as such terms are defined in Article 5069-15.01 of Title 79) which may exist by virtue of this Note or the instruments securing this Note. The Payee shall have the right and option to convert (the "Conversion Right") up to the lesser of (a) fifty percent (50%) of the outstanding principal balance of this Note on the date such option is exercised by the Payee, or (b) Five Million and No/100 Dollars ($5,000,000.00) of the principal hereof, into shares of the Common Stock of Casino America, Inc., a Delaware corporation ("Casino America"), the parent corporation of CSNO, Inc., a general partner of the Initial: AAS Page 4 of 5 Pages --- 5 Maker, at a conversion rate of Twelve and No/100 Dollars ($12.00) per share. The Conversion Right may be exercised by the Payee pursuant to the terms of that certain Warrant to Purchase up to 416,667 Shares of Common Stock of even date herewith executed by Casino America in favor of the Payee. This Note shall be construed under and governed by the laws of the State of Texas and applicable federal law. THIS PROMISSORY NOTE REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. MAKER: ----- Address of Maker: ---------------- LOUISIANA RIVERBOAT GAMING PARTNERSHIP, a Louisiana general partnership 500 Slattery Building Shreveport, LA 71165 By: Louisiana River Site Development, Inc., General Partner, a wholly-owned subsidiary of Louisiana Downs, Inc. By: /s/ Gerald Wiemann --------------------------------- Name: Gerald Wiemann Title: Vice President - Secretary/Treasurer By: CSNO, Inc., General Partner, a wholly-owned subsidiary of Casino America, Inc. By: /s/ Allan B. Solomon --------------------------------- Name: Allan B. Solomon Title: Secretary ALL INDEBTEDNESS EVIDENCED BY THIS NOTE IS SUBORDINATED TO OTHER INDEBTEDNESS PURSUANT TO, AND TO THE EXTENT PROVIDED IN, AND IS OTHERWISE SUBJECT TO THE TERMS OF, THE SUBORDINATION AGREEMENT, DATED JUNE 9, 1995 (THE "SUBORDINATION AGREEMENT") BY AND AMONG CROWN CASINO CORPORATION, LOUISIANA RIVERBOAT GAMING PARTNERSHIP, AND HIBERNIA NATIONAL BANK, AS BANK REFERRED TO IN THE SUBORDINATION AGREEMENT, AS THE SAME MAY BE AMENDED, MODIFIED OR OTHERWISE SUPPLEMENTED FROM TIME TO TIME. 6 ENDORSEMENT TO PROMISSORY NOTE This Endorsement is attached to that certain Promissory Note of Louisiana Riverboat Gaming Partnership payable to the order of Crown Casino Corporation dated June 9, 1995 in the principal sum of $20,000,000. PAY TO THE ORDER OF NOMURA HOLDING AMERICA, INC. WITHOUT RECOURSE CROWN CASINO CORPORATION By: /s/ T.J. Falgout, III ------------------------ Name: T.J. Falgout, III Title: Executive Vice President Dated: June 9, 1995 SIGNATURE GUARANTEED MEDALLION GUARANTEED HIBERNIA NATIONAL BANK /s/ Patricia C. Meinger ----------------------- AUTHORIZED SIGNATURE (03) (A0225193) SECURITIES TRANSFER AGENTS MEDALLION PROGRAM(SM) 7 ENDORSEMENT NO. 2 The Senior Secured Increasing Rate Note due June 3, 1995 (as amended, supplemented or otherwise modified from time to time, the "Note") made by ST. CHARLES GAMING COMPANY, INC., a Louisiana corporation (the "Company"), in favor of NOMURA HOLDING AMERICA INC. ("Nomura"), to which this Endorsement is attached is hereby amended by deleting the first paragraph thereof in its entirety and substituting in lieu thereof the following: "ST. CHARLES GAMING COMPANY, INC., a Louisiana corporation (the "Company"), for value received, hereby promises to pay to the order to NORMURA HOLDING AMERICA INC. ("Nomura") or its registered assigns, at the office of BANK OF NEW YORK located at 10161 Centurion Parkway, Jacksonville, Florida 32256 Attention: Corporate Trust Department), in lawful money of the United States of America and in same-day funds, the principal amount of TWENTY ONE MILLION NINE HUNDRED THIRTY THOUSAND DOLLARS ($21,930,000.00) as provided in the note Purchase Agreement (as defined below) on June 9, 1995 (the "Maturity Date"), which date shall be automatically extended to the earlier of (x) the final approval or disapproval by the Louisiana Department of Public Safety and Corrections, Office of State Police, Riverboat Gaming Division in connection with the transactions contemplated by that certain letter agreement, dated May 23, 1995, executed by Louisiana Riverboat Gaming Partnership, a Louisiana general partnership ("LRGP"), the Company, Crown Casino Corporation and Nomura (as Nomura or its counsel may deem necessary or advisable) and (y) July 31, 1995, provided, however, that if all consents, approvals, authorizations of or declarations, registrations or filings with any Governmental Authority or any nongovernmental Person, including without limitation, any creditor or partner of LRGP, required in connection with the execution or delivery by LRGP of the guarantee by LRGP of all the obligations of the Company under the Notes and the Note Purchase Agreement (as defined below) shall not have been obtained on or before June 9, 1995, then such date shall be June 9, 1995, with interest (computed on the basis of a 30-day year of twelve 30-day months) on the unpaid balance of such principal amount at the rate specified below from the date hereof, payable quarterly in arrears on September 3, 1994, December 3, 1994, March 3, 1995, June 3, 1995 and on the Maturity Date. Capitalized terms not defined herein shall have the meaning ascribed to them in the Note Purchase Agreement (as defined below)." Except as expressly amended by this Endorsement, all the terms and conditions of the Note shall continue in full force and effect. This Endorsement shall constitute a part of the Note and Nomura is hereby authorized to attach this Endorsement thereto. 8 This endorsement shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York. Dated June 9, 1995 ST. CHARLES GAMING COMPANY, INC. By: /s/ T.J. Falgout, III ---------------------------- Title: Vice-President NOMURA HOLDING AMERICA INC. By: ---------------------------- Title: Accepted, Acknowledged and Agreed to: CROWN CASINO CORPORATION By: /s/ T.J. Falgout, III ------------------------------- Title: Executive Vice President GAMING ENTERTAINMENT MANAGEMENT SERVICES, INC. By: /s/ T.J. Falgout, III ------------------------------- Title: Vice-President EX-10.9 4 SHAREHOLDERS AGREEMENT 1 EXHIBIT 10.9 SHAREHOLDERS AGREEMENT THIS SHAREHOLDERS AGREEMENT (this "Agreement") is made and entered into as of this 9th day of June, 1995 by and between CROWN CASINO CORPORATION, a Texas corporation ("Crown") and LOUISIANA RIVERBOAT GAMING PARTNERSHIP, a Louisiana partnership ("LRGP"), the sole shareholders of St. Charles Gaming Company, Inc., a Louisiana corporation ("Company") (Crown and LRGP, individually a "Shareholder" and together the "Shareholders"). RECITALS A. Each of the Shareholders owns 50% of the outstanding capital stock of the Company ("Company Stock"). B. The Shareholders desire to enter into this Agreement to regulate certain aspects of their relationship and to provide for, among other things, restrictions on the transfer or other disposition of securities or assets of the Company and in matters relating to the corporate governance of the Company. NOW, THEREFORE, in consideration of the recitals and the respective covenants, representations and agreements herein contained, the parties hereto agree as follows: Section 1. Restrictions on Transfer of Company Stock 1.1 General Restrictions. Except as expressly permitted herein, no Shareholder shall sell, assign, transfer, mortgage, charge or otherwise encumber or suffer any third party to sell, assign, transfer, mortgage, charge or otherwise encumber or contract to do or permit any of the foregoing, whether voluntarily or by operation of law (herein sometimes collectively called a "transfer"), any part or all of the Company Stock without the written consent of the other Shareholder, and any attempt to do so shall be void ab initio. The giving of such consent in any one or more instances shall not limit or waive the need for such consent in any other subsequent instances and shall always be at such shareholder's sole and absolute discretion. 1.2 Permitted Transfers. Either Shareholder may, without the consent of the other Shareholder: (a) Upon 30 day's prior written notice, transfer its Company Stock to another legal entity which the Shareholder either controls or is controlled by, or to another legal entity in which a majority equity interest is controlled by the Shareholder. (b) LRGP may pledge all of its Company Stock to Crown as security for the $20,000,000 purchase money note given by LRGP to 2 Crown representing a portion of the purchase price of the Company Stock owned by LRGP. (c) In the event LRGP is liquidated and dissolved, it may transfer its Company Stock to its partners. (d) Either Shareholder has the right to pledge its Company Stock as security for indebtedness, so long as secured party receives the Company Stock subject to the terms of this Agreement and so long as the pledge thereof does not constitute an event of default under any agreement to which the Company is a party. 1.3 Sale of Company Stock: Right of First Refusal. If at any time after January 1, 1996, either Shareholder (the "Offeror") receives a bona fide Offer from a third party unrelated to either Shareholder for the purchase of all or any part of the Offeror's Company Stock which it desires to accept, the Offeror shall send a copy of the Offer, in the manner provided in this Agreement for the giving of notices, to the other Shareholder (the "Offeree"), which shall disclose the name and address of the proposed purchaser. The Offeree shall have the absolute right to purchase the portion of the Company Stock subject to the Offer upon the terms and conditions set forth in the Offer, except that the Offeree shall not be required to pay a broker's commission, if any. The Offeree shall, within 30 days of such receipt, specify in a notice to the Offeror whether or not the Offeree desires to accept the Offer. If the Offeree timely accepts the Offer, the Closing of the sale of the Company Stock shall take place within 60 days thereafter (or as soon thereafter as practicable if the transaction is delayed solely by reason of the time constraints in receiving third- party consents). Failure to send such notice of acceptance within said 30-day period shall constitute an election by the Offeree to reject the Offer, and the Offeror may then sell the Company Stock subject to the Offer to the proposed purchaser whose name and address were disclosed in the Offer, but only upon the same terms and conditions as those set forth in the Offer and only within 180 days after the expiration of said 30-day period; otherwise, any such sale shall be considered null and void and the Company Stock of the Offeror shall remain subject to all the provisions of this Subsection 1.3. If the consideration offered by a third party under this Section 1.3 consists of property, the value thereof shall be determined by reference to any established national exchange if such property consists of tradable securities or other readily tradable commodities, by an appraiser mutually agreed to by the Shareholders, or by submission to arbitration in New Orleans, Louisiana, before an arbitrator chosen in accordance with the rules and regulations of the American Arbitration Association. - 2 - 3 1.4 Sale of Company Assets: Right of First Refusal. If at any time after January 1, 1996, the Company or either Shareholder receives a bona fide Offer from a third party unrelated to either Shareholder to purchase all or substantially all of the Company's assets for consideration that consists of at least 75% cash and/or highly liquid marketable securities, then the Company or the Shareholder (as the case may be) shall, within ten (10) days of receiving the Offer and regardless of any desire to accept or reject the Offer, give written notice (the "Asset Notice") to the other Shareholder (or the Shareholders) of the Offer and the terms and conditions of the Offer. Each Shareholder shall, within thirty days after the receipt of such notice, give written notice to the other Shareholder stating whether or not such Shareholder desires to accept the Offer. If both Shareholders desire to accept the Offer, the sale to the third- party shall proceed. If one Shareholder desires to accept the Offer (the "Accepting Shareholder") but the other Shareholder desires to reject the Offer (the "Rejecting Shareholder"), then the Rejecting Shareholder (or the Company at the Rejecting Shareholder's option) shall purchase all of the shares of stock of the Accepting Shareholder. The purchase price for each Accepting Shareholder's stock and the terms and conditions of payment shall be the same as the Accepting Shareholder would have received had the Offer been accepted, the sale consummated and the Company thereafter dissolved as provided herein. Such purchase price must be paid within 180 days of the rejection by the Rejecting Shareholder of the Asset Notice. If the consideration offered by any third-party under this Section 1.4 consists of property, the value thereof shall be determined by reference to any established national exchange if such property consists of tradable securities or other readily tradeable commodities, by an appraiser mutually agreed to by the Shareholders, or by submission to arbitration in New Orleans, Louisiana, before an arbitrator chosen in accordance with the rules and regulations of the American Arbitration Association. 1.5 Sale of Company Stock: Gaming Suitability. (a) If the State of Louisiana determines for any reason that either (i) a Shareholder is not a suitable applicant for a gaming license or (ii) that a Shareholder is not suitable to continue as a licensee, and the Shareholder has exhausted all reasonable opportunities to cure any deficiencies in an application or appeal, then that Shareholder's Company Stock shall be purchased by the Company or by the other Shareholder, at such other Shareholder's option, for a purchase price equal to the fair market value of the Company's stock, as mutually agreed upon by the Shareholders or an appraiser appointed by mutual agreement of the Shareholders, and if not agreed within 30 days, as determined by arbitration in Lake Charles, Louisiana, before an arbitrator chosen in accordance with the rules and regulations of the American Arbitration Association. - 3 - 4 All loans payable to such Shareholder, if requested by such Shareholder, shall also be repaid at such time, and any requirement of such Shareholder to make additional loans shall cease, and the Company shall use its best efforts to relieve such Shareholder from any guaranties or other security given or provided by such Shareholder on behalf of the Company. If for any reason this procedure is unacceptable to the State of Louisiana, then the Company may at its option take any steps reasonably necessary to comply with the request of the State of Louisiana, and the departing Shareholder hereby consents to such steps. The departing Shareholder shall not participate in dividends of the Company after the date its Company Stock is purchased or disposed of pursuant hereto. (b) At the option of the Company or the purchasing Shareholder, the purchase price may be paid over a period of five years, with 20% to be paid in the first year and the balance to be paid over the remaining four years in equal annual installments with interest at the prime rate as published in the southeast edition of the Wall Street Journal on the date of the closing of such purchase, or, if not available, the prime rate charged at such date by Citibank, N.A., New York. 1.6 Restraining Order. In the event that any Shareholder shall at any time transfer or attempt to transfer its Company Stock in violation of the provisions of this Agreement and any rights hereby granted, then the other Shareholder shall, in addition to all rights and remedies at law and in equity, be entitled to a decree or order restraining and enjoining such transfer and the defending Shareholder shall not plead in defense thereto that there would be an adequate remedy at law; it being expressly acknowledged and agreed that damages at law will be an inadequate remedy for a breach or threatened breach or the violation of the provisions concerning transfer as set forth in this Agreement. 1.7 Transferee Obligations. Notwithstanding any other provision of this Agreement as to any transfer under this Section 1, any transferee shall execute and deliver to the other Shareholder and the Company a counterpart hereof, and the other Shareholder shall agree to such conditions of transfer, the performance of such acts, the execution and delivery of such agreements, certificates or other instruments and the rendering of such covenants or undertakings by the transferee of the Company Stock, as counsel for the Company may reasonably determine to be necessary to avoid the violation of any federal and state securities or gaming laws with respect to such transfer, to evidence the transferee's agreement to be bound by all the terms and provisions hereof and to evidence the intent of the transferee - 4 - 5 to purchase the Company Stock for investment and not with a view to the distribution thereof. 1.8 Securities Act. (a) Each Shareholder agrees that, in addition to the other requirements herein relating to the transfer, it will not transfer any Company Stock except pursuant to an effective registration statement under the Securities Act of 1933, as amended, or upon receipt by the Company of an opinion of counsel to the Shareholder reasonably satisfactory to the Company or its counsel to the effect that no registration statement is required because of the availability of an exemption from registration under the Securities Act of 1933, as amended. (b) Each certificate representing Company Stock shall be endorsed with the following legends and such other legends that may be required by applicable law: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE RESTRICTIONS CONTAINED IN A SHAREHOLDERS AGREEMENT DATED ____________, 1995 (A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY). NO REGISTRATION OR TRANSFER OF SUCH SECURITIES WILL BE MADE ON THE BOOKS OF THE COMPANY UNTIL AND UNLESS ALL APPLICABLE RESTRICTIONS SHALL HAVE BEEN COMPLIED WITH." "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY BE OFFERED AND SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE." Any certificate issued at any time in exchange or substitution for any certificate bearing such legend shall also bear such legend unless in the opinion of counsel for the Company the Company Stock represented thereby is no longer subject to the provisions of this Agreement or to the restrictions imposed under the Securities Act of 1933, as amended, or state securities laws, in which case the applicable legend may be removed. Section 2. Corporate Governance 2.1 Nominations to Board of Directors. From and after the date hereof, each Shareholder shall vote or cause to be voted all shares of Company Stock over which such Shareholder has voting control, at any regular or special meeting of Shareholders called for the purpose of filling positions on the board of directors, or to execute a written consent in lieu of such meeting of Shareholders, and shall take all actions necessary to insure the election to the board of four individuals: two individuals (the - 5 - 6 "Crown nominees") to be designated by Crown and two individuals (the "LRGP nominees") to be designated by LRGP. If prior to his election to the Board of Directors, any nominee shall be unable or unwilling to serve as a director of the Company, the Shareholder who nominated such nominee shall be entitled to nominate a replacement to serve on the board of directors. 2.2 Vacancies. In the event that a vacancy is created on the Board of Directors at any time by the death, disability, retirement, resignation or removal (with or without cause) of a director, the Shareholder who nominated such director shall nominate a replacement to serve on the Board of Directors. 2.3 Covenant to Vote. Each Shareholder hereby irrevocably and unconditionally agrees to take all actions necessary to call, or to cause the Company and the appropriate officers and directors of the Company to call, a special or annual meeting of Shareholders of the Company and to vote all shares of Company Stock owned by such Shareholder in favor of, or take all actions by written consent in lieu of any such meeting necessary to cause, the election as members of the Board of Directors of those individuals so nominated in accordance with Subsection 2.2. In addition, each Shareholder agrees to vote the shares of Company Stock owned by such Shareholder upon any matter arising under this Agreement submitted to a vote of the Shareholders in a manner that will implement the terms of this Agreement. 2.4 Removal. If either Shareholder requests that a director nominated by such Shareholder and elected to the Board of Directors be removed from the Board of Directors (with or without cause) by written notice to the other Shareholder, such director shall be removed and each Shareholder agrees to vote all shares of Company Stock owned by such Shareholder to effect such removal or to consent in writing to effect such removal upon such request. No director shall be removed without cause except as provided in this Subsection 2.4. 2.5 Affirmative Board Vote. The affirmative vote of at least three of the members of the Board of Directors shall be required to approve any action of the Board of Directors. 2.6 No Conflict with Articles or By-Laws. Each Shareholder shall vote its shares of Company Stock, and shall take all actions necessary, to ensure that the Articles of Incorporation and By-Laws of the Company do not, from time to time, conflict with the provisions of this Agreement. 2.7 Cash Distributions. Each Shareholder shall vote its shares of Company Stock and shall take all actions necessary to - 6 - 7 ensure that the Company distributes as dividends at the end of each fiscal quarter (or such shorter period as the Board of Directors may agree upon) all of its cash on hand available for such distribution after providing and reserving for the payment of all debts and other obligations and the provision of such reserves as the Board of Directors reasonably determines is appropriate. Section 3. Competition 3.1 Mutual Covenants. Other than as set forth herein, the Shareholders may engage independently or with others in other business ventures of any nature and description, including, without limitation, real estate and gaming activities (which may be geographically proximate to the business of the Company) and the management and operation thereof. Neither the Company or any Shareholder shall have any right by virtue of this Agreement or the relationship created hereby in or to such other ventures or activities, or to the income or proceeds derived therefrom; and the pursuit of such ventures, even if competitive with the business of the Company, shall not be deemed wrongful or improper. A Shareholder shall not be obligated to present any particular investment opportunity to the Company even if such opportunity is of the character which, if presented to the Company, could be taken by the Company, and such Shareholder shall have the right to take for its own account (individually or as a trustee) or to recommend to others any such particular investment opportunity. Notwithstanding anything set forth herein to the contrary, any information generated for or by reason of this Agreement or the transactions contemplated hereby, which is not generally available to members of the public, shall remain confidential and shall not be disclosed by any party hereto without the written consent of the other, unless required by law. 3.2 Specific Covenant. Notwithstanding the foregoing, the Shareholders agree that while they are Shareholders of the Company and for a period of two years after the sale by a Shareholder of its stock in the Company, such Shareholder will not, alone or through an affiliated person or otherwise, or as a member or partner of any partnership, limited partnership, limited liability company or similar entity, or as a shareholder or investor in any corporation or other entity directly or indirectly owned or managed, or otherwise connected with, engage in the operation of gaming activities within a one hundred (100) mile radius of the location of the Company's casino riverboat on the Calcasieu River in Calcasieu Parish, Louisiana. 3.3 Right of First Refusal. Crown hereby agrees that LRGP shall have the right to participate with Crown or any affiliate of Crown, including its subsidiary, Gaming Entertainment Management - 7 - 8 Services, Inc. ("GEMS"), in the development of an 18.6 acre parcel of land in the gaming district of Las Vegas, Nevada if Crown or GEMS develop the property on a joint venture basis. Accordingly, Crown shall offer to LRGP any proposed arrangement for such development before GEMS is permitted to develop such property in a joint venture or other similar arrangement with another person. LRGP shall within thirty (30) days of receiving a joint venture proposal for GEMS, either accept or reject participation in a joint venture under the same terms and conditions of such proposal. Section 4. Miscellaneous Provisions 4.1 Term. This Agreement shall terminate upon the mutual agreement of the Shareholders. 4.2 Recapitalization, Exchanges Affecting Company Stock. The provisions of this Agreement shall apply to any and all securities of the Company which may be issued in respect of, in exchange for, or in substitution of the Company Stock, and shall be appropriately adjusted for any stock dividends, splits, reverse splits, combinations, reclassifications and the like occurring after the date hereof. 4.3 Counterparts. This Agreement may be executed in several counterparts, each of which is an original. This Agreement and any counterpart so executed shall be deemed to be one and the same instrument. 4.4 Governing Law. This Agreement is being delivered and is intended to be performed in the State of Louisiana and shall be construed and enforced in accordance with the laws thereof. 4.5 Section Headings and Gender. The section headings herein have been inserted for convenience of reference only and shall in no way modify or restrict any of the terms or provisions hereof. The use of the masculine pronoun herein when referring to any party has been for convenience only and shall be deemed to refer to the particular party intended regardless of the actual gender of such party. 4.6 Notices. Any notice or demand which, by provision of this Agreement, is required or permitted to be given or served by LRGP to or on Crown shall be deemed to have been sufficiently given and served for all purposes (if mailed) three calendar days after being deposited, postage prepaid, in the United States Mail, registered or certified mail, or (if delivered by express courier) one Business Day after being delivered to such courier, or (if delivered in person) the same day as delivery, in each case - 8 - 9 addressed (until another address or addresses is given in writing by Crown to LRGP) as follows: Crown Casino Corporation 2415 West Northwest Highway, Suite 103 Dallas, Texas 75220 Attention: Mr. Mark D. Slusser Vice President - Finance with a copy to: T. J. Falgout, III, Esq. Stumpf & Falgout 1400 Post Oak Boulevard, Suite 400 Houston, Texas 77056 Any notice or demand which, by any provision of this Agreement, is required or permitted to be given or served by the Crown to or on LRGP shall be deemed to have been sufficiently given and served for all purposes (if mailed) three calendar days after being deposited, postage prepaid, in the United States Mail, registered or certified mail, or (if delivered by express courier) one Business Day after being delivered to such courier, or (if delivered in person) the same day as delivery, in each case addressed (until another address or addresses are given in writing by LRGP to Crown) as follows: Louisiana Riverboat Gaming Partnership c/o Louisiana River Site Development, Inc. The Edward J. DeBartolo Corporation 7620 Market Street Youngstown, Ohio 44513-3287 Attention: Mr. Gerald Wiemann Vice President Louisiana Riverboat Gaming Partnership c/o CSNO, Inc. Casino America, Inc. 711 Washington Loop Biloxi, Mississippi 39530 Attention: Mr. James E. Ernst Chief Executive Officer - 9 - 10 with copies to: Mr. Arthur Wolfcale Vice President and Secretary The Edward J. DeBartolo Corporation 7620 Market Street Youngstown, Ohio 44512-6085 and Allan B. Solomon, Esq. Chairman of the Executive Committee Casino America, Inc. 2200 Corporate Blvd., N.W., Suite 310 Boca Raton, Florida 33431 4.7 Remedies. The parties hereto acknowledge that monetary damages are inadequate for a breach hereof, and hereby agree that the provisions of this Agreement shall be enforceable by equitable relief, including specific performance, and each of the parties hereby waives any defense in the enforcement of this Agreement through equitable relief. However, equitable relief shall not be an exclusive remedy for breach of this Agreement and the election of specific performance, damages or any other remedy hereunder shall not preclude the exercise of any other remedy in connection with such relief or from time to time hereafter. CROWN CASINO CORPORATION By:/s/ Mark D. Slusser ------------------------------------------ Name: Mark D. Slusser Title: Vice President LOUISIANA RIVERBOAT GAMING PARTNERSHIP, a Louisiana general partnership By: LOUISIANA RIVER SITE DEVELOPMENT, INC., General Partner, a wholly-owned subsidiary of Louisiana Downs, Inc. By:/s/ Gerald Wiemann ---------------------------------- Name: Gerald Wiemann Title: Vice President - 10 - 11 By: CSNO, INC., General Partner, a wholly-owned subsidiary of Casino America, Inc. By:/s/ Allan B. Solomon ---------------------------------- Name: Allan B. Solomon Title: Secretary and Treasurer - 11 - EX-10.10 5 ASSET PURCHASE AGREEMENT 1 EXHIBIT 10.10 ASSET PURCHASE AGREEMENT THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered into as of the 11th day of July, 1995, by and among CROWN CASINO CORPORATION, a Texas corporation ("Crown"), and CROWN CASINO NEVADA, INC., a Nevada corporation ("Buyer"), SLT REALTY LIMITED PARTNERSHIP, a Delaware Limited Partnership (the "Partnership"), and HOTEL INVESTORS CORPORATION OF NEVADA, INC., a Nevada corporation ("HICN," and together with the Partnership, "Sellers"), with reference to the following facts: A. The Partnership owns that certain hotel, restaurant, bar and casino commonly known as the Bourbon Street Hotel & Casino located at 120 E. Flamingo Road, Las Vegas, Nevada 89109 (the "Hotel/Casino"), as well as the real and personal property comprising a 24 unit apartment building located at 135 Albert, Las Vegas, Nevada 89109 (the "Apartment Building"). B. The Hotel/Casino is currently leased by the Partnership to, and the Hotel/Casino is currently operated by, HICN pursuant to that certain amended and restated lease dated January 1, 1993 "Partnership/HICN Lease"). The Apartment Building is operated by the Partnership. HICN owns or otherwise has the right to use all coin-operated gaming devices, gaming equipment and all food and beverage inventories and gift shop inventories located at the Hotel/Casino. C. Buyer is the wholly-owned subsidiary of Crown. D. Buyer and Sellers heretofore have entered into negotiations pursuant to which Buyer offered to purchase and acquire from Sellers, upon the terms and subject to the conditions set forth herein, the assets hereinafter described. NOW, THEREFORE, in consideration of the covenants, agreements, representations and warranties herein contained, Crown, Buyer and Sellers agree as follows: Article 1. Sale and Purchase of Assets. 1.1 Upon the terms and subject to the conditions hereinafter set forth: 1.1.1 At the "First Closing" (as defined in Section 4.1 hereof), Sellers shall sell, assign, convey, transfer and deliver to Buyer, and Buyer shall purchase and acquire from Sellers, all right, title and interest of Sellers in and to the "Non-Gaming Assets" (as defined in Section 1.2 hereof); and 1.1.2 At the "Second Closing" (as defined in Section 4A.1 hereof), Sellers shall sell, assign, convey, transfer and deliver to Buyer, and Buyer shall purchase and acquire from Sellers, all right, title and interest of Sellers in and to the "Gaming Assets" (as defined in Section 1.3 hereof). 2 1.2 As used in this Agreement, the term "Non-Gaming Assets" means and includes: 1.2.1 The land and all appurtenances thereto on which the Hotel/Casino is located, which land (the "Hotel Land"), is more particularly described on Exhibit 1.2.1 hereto; 1.2.2 All buildings, structures, parking areas and other improvements located on the Hotel Land (the "Hotel Improvements"); 1.2.3 The land and all appurtenances thereto on which the Apartment Building is located, which land (the "Apartment Land"), is more particularly described on Exhibit 1.2.3 hereto; 1.2.4 All buildings, structures, parking areas and other improvements located on the Apartment Land (the "Apartment Improvements"); 1.2.5 All furniture, fixtures and equipment owned or leased by a Seller or which a Seller otherwise has the right to use and located at the Hotel/Casino or the Apartment Building, including, without limitation, those assets that will be listed on Exhibit 1.2.5 hereto at the time a schedule of those assets is prepared in accordance with subsection 4D.3.10 hereof, but excluding the Gaming Assets (collectively, the "FF & E"); 1.2.6 The automobile(s) and other vehicle(s) listed on Exhibit 1.2.6 hereto; 1.2.7 All customer lists, sales records, files, supplier lists, credit information, business records and plans, sales and promotional literature and other selling material, and computer software related to the foregoing; 1.2.8 All rights for public utility connection access, if any, including water, waste water, sewage and drainage "hook-ups" with state or local government agencies or public utilities, and all transferable licenses, permits, certificates or similar governmental approvals or authorizations, including occupancy, life-safety, and elevator operation permits issued by state or local government agencies; provided, however, Buyer shall be responsible for processing and paying all costs and expenses associated with the transfer of any such access rights or licenses, permits, certificates, approvals or authorizations. 1.2.9 All other assets of the Hotel/Casino and all rights of Sellers or either of them in connection therewith, including, without limitation, the name and service mark "Bourbon Street Hotel & Casino" and Sellers' respective rights under the contracts and commitments referred to in the first paragraph of subsection 2.1.4 hereof, but excluding any such asset(s) as are Gaming Assets. 2 3 1.3 As used in this Agreement, the term "Gaming Assets" means and includes: 1.3.1 All coin operated gaming devices and associated equipment ("Slot Machines"), owned by HICN and located at the Hotel/Casino; 1.3.2 The stock-in-trade and inventory of the Casino, including, without limitation, all dice, playing cards and casino chips and tokens; and 1.3.3 All rights of Sellers or either of them in connection with the assets described in the preceding subsections 1.3.1 through 1.3.2, and Sellers' respective rights under the Gaming Service Contracts (as defined in subsection 2.1.4 hereof). As used herein, the term "Casino" means that portion of the Hotel/Casino in which any gaming activity or related function is conducted. A list of the Slot Machines located at the Casino as of the date hereof is attached hereto as Exhibit 1.3.1. 1.4 The Non-Gaming Assets and the Gaming Assets (together the "Assets"), sold to Buyer hereunder shall, subject to Sections 10.3 and 10A.1 hereof, mean such assets as are Non-Gaming Assets and Gaming Assets as of the First Closing and the Second Closing, respectively, and notwithstanding any provision of Sections 1.2 or 1.3 hereof to the contrary, neither the Non-Gaming Assets nor the Gaming Assets shall include: 1.4.1 Any of Sellers' food, beverage and gift shop inventories located at the Hotel/Casino, but excluding stock which is not useable and saleable (collectively, the "Inventories"); 1.4.2 Any of Sellers' cash or cash equivalents, coinage or casino bankroll; 1.4.3 Any utility or other deposits of a Seller; 1.4.4 Any accounts, notes or other receivables of a Seller; 1.4.5 The corporate seal, certificate of incorporation, minute book, stock book, tax returns, books of account or other records having to do with the corporate organization of HICN; 1.4.6 The rights of either Seller to any claim(s) for any refund of federal, state, county or local taxes (including gaming taxes); 1.4.7 The rights of HICN under any insurance policy referred to in Section 8.16 hereof (subject, however, to the provisions of Section 12.1 hereof); 1.4.8 The rights that accrue or will accrue to a Seller under this Agreement, including, without limitation, the rights that accrue or will accrue to HICN under the Buyer/HICN Lease (as defined in subsection 4.3.7 hereof). 3 4 1.4.9 Any non-transferable licenses; and/or 1.4.10 Any personal property located on the Hotel Land or the Apartment Land and not owned by a Seller including, without limitation, any items owned by any tenants of the Hotel/Casino and/or the Apartment Building, by public or private utilities or any contractors, or Slot Machines which are subject to participation or similar agreements. Article 2. Consideration. 2.1 The purchase price for the Non-Gaming Assets (the "Non-Gaming Assets Purchase Price"), shall be Nine Million Five Hundred Thousand Dollars ($9,500,000.00), and the purchase price for the Gaming Assets (the "Gaming Assets Purchase Price"), shall be Five Hundred Thousand Dollars ($500,000.00), for an aggregate purchase price (the "Purchase Price"), of Ten Million Dollars ($10,000,000.00). In consideration of the purchase by Buyer of the Assets, Buyer shall pay to Sellers the Purchase Price as follows and take the following actions: 2.1.1 Buyer will deliver to the "Escrow Agent" (as defined in Section 3.1 hereof), for deposit into the "Escrow" (as defined in Section 3.1 hereof), cash in the amount of One Hundred Thousand Dollars ($100,000.00) (the "Escrow Deposit"), on the day of full execution of this Agreement. 2.1.2 In the event Buyer does not terminate this Agreement prior to expiration of the "Limited Inspection Period" (as defined in subsection 4D.4.1 hereof), Buyer shall deposit with Escrow Agent the additional sum of Four Hundred Thousand Dollars ($400,000.00) in cash (the "Additional Deposit") within three (3) days of the expiration of the Limited Inspection Period. The Escrow Deposit and the Additional Deposit, together with all interest earned thereon, are referred to collectively herein as the "Deposit". In the event Buyer terminates this Agreement as set forth in Article 4D below or any of Buyer's conditions precedent to its obligation to consummate the First Closing under Articles 5 and 6 hereof are not satisfied, and Buyer is not in default hereunder, the Deposit (or so much thereof as has been deposited with Escrow Agent), shall be returned to Buyer upon Buyer's written notice to Sellers and Escrow Agent and neither party shall have any further rights or obligations under this Agreement except for the provisions of Sections 4D.1 and 16.9 hereof. Should Sellers fail to consummate the transaction after full execution of this Agreement through no fault of Buyer and all of Sellers' conditions precedent to their obligations to consummate the First Closing under Articles 5 and 6A hereof have been satisfied, Buyer shall receive a return of the Deposit in full, and shall have the right to pursue all legal and equitable remedies against Sellers, including without limitation, specific performance. Should Buyer fail to consummate the transaction after full execution of this Agreement (and Buyer has not terminated this Agreement pursuant to Section 4.D below) and all of Buyer's conditions precedent to its obligations to consummate the First Closing under Articles 5 and 6 hereof have been satisfied, Sellers shall be entitled, upon Sellers' written notice to Escrow Agent and Buyer of such default, to receive the Deposit (or so much thereof as has been deposited with Escrow Agent), 4 5 including all interest earned thereon, as liquidated damages as its sole and exclusive remedy for such default and neither party shall have any further rights and obligations under this Agreement except for the provisions of Sections 4D.1 and 16.9 hereof. 2.1.3 No later than 10:00 a.m., Las Vegas time, on the scheduled "First Closing Date" (as defined in Section 4.1 hereof ), Buyer shall deposit into the Escrow by federal wire transfer or bank cashier's or certified check for delivery to Sellers the Non-Gaming Assets Purchase Price less the amount of the Deposit. No later than 10:00 a.m., Las Vegas time, on the scheduled "Second Closing Date" (as defined in Section 4A.1), Buyer shall deposit into Escrow by federal wire transfer or bank cashier's or certified check, for delivery to Sellers, the Gaming Assets Purchase Price. 2.1.4 At the First Closing, Buyer shall assume and agree to pay, perform or otherwise discharge all liabilities and obligations in respect of the Apartment Building accruing or arising after the First Closing. All obligations of Sellers arising under any existing service contracts, maintenance contracts, personal property leases or similar agreements pertaining to the Hotel/Casino including, without limitation, the contracts specifically identified in the Disclosure Letter in response to Sections 7.9, 7.10, 8.10 or 8.11 hereof (the "Hotel Service Contracts"), shall remain Sellers' obligation following the First Closing and throughout the " Lease Term" (as defined in the Buyer/HICN Lease). At the Second Closing, Buyer shall assume and agree to pay, perform or otherwise discharge all liabilities and obligations in respect of the Gaming Assets and the Non-Gaming Assets not assumed by Buyer at the First Closing and accruing or arising after the Second Closing, whether pursuant to the Hotel Service Contracts, or under any service contracts, maintenance contracts, personal property leases or similar agreements pertaining to the Gaming Assets, including, without limitation, the contracts specifically identified in the Disclosure Letter in response to Sections 7.9, 7.10, 8.10 or 8.11 hereof (the "Gaming Service Contracts"), and to the extent such Hotel Service Contracts and Gaming Service Contracts not specifically identified in the Disclosure Letter in response to Sections 7.9, 7.10, 8.10 or 8.11 hereof have been approved by Buyer and were entered into by Sellers with unaffiliated third parties in the ordinary course of business (subject, however, to the provisions of Article 11 hereof), other than any and all liabilities and obligations of HICN for any gaming taxes and fees due to any Nevada governmental authority pursuant to any deficiency assessment made subsequent to the Second Closing Date (as defined in Section 4A.1 hereof), to the extent that such assessment encompasses the operation of the Gaming Assets at the Hotel/Casino prior to such date, which liabilities and obligations of HICN shall be and remain liabilities and obligations of HICN. 2.2 The Purchase Price shall be allocated between the Partnership and HICN and among the Assets as described on Exhibit 2.2 hereto. Neither Sellers nor Buyer shall take any position on any income tax return, before any governmental agency charged with the collection of any income tax, or in any judicial proceeding which position is in any way inconsistent with the terms of this Section 2.2. 5 6 2.3 In addition to purchasing the Gaming Assets, Buyer shall purchase from HICN at the Second Closing all Inventories then located at the Hotel/Casino, and shall pay to HICN in respect thereof an amount in cash equal to fifty percent (50%) of HICN's delivered costs (including freight and taxes), for such Inventories (the "Inventory Purchase Price"), as determined from the books and records of HICN, as follows: A physical inventory of the foodstuffs and beverages and gift shop items located at the Hotel/Casino immediately prior to the Second Closing shall be jointly conducted by representatives of HICN and Buyer, shall be completed by the close of business on the day preceding the scheduled Second Closing Date, and shall be the basis on which the Inventories purchased by Buyer and the Inventory Purchase Price payable to HICN pursuant to this Section 2.3 are determined. Except as set forth in this Section 2.3, Buyer shall have no obligation pursuant to this Agreement to purchase any inventory located at the Hotel/Casino. Article 3. The Escrow. 3.1 Promptly upon the execution hereof by Buyer and Sellers, Buyer and Sellers shall open an escrow (the "Escrow"), with Nevada Title Company, Las Vegas, Nevada (in such capacity the "Escrow Agent"), for the purpose of consummating the transactions contemplated hereby. Buyer and Sellers shall direct the Escrow Agent to deposit an executed copy of this Agreement into the Escrow, and the provisions of this Agreement shall govern the Escrow and shall constitute instructions to the Escrow Agent pertaining to the matters set forth herein. The Escrow Agent, by accepting such deposit, shall have agreed to be bound by the provisions hereof. Any further escrow instructions prepared by the Escrow Agent shall implement the performance of this Agreement, and shall be deemed to incorporate the provisions hereof, whether or not specifically stated therein. Unless any such further escrow instructions as shall be prepared by the Escrow Agent and signed by the parties hereto shall specifically provide that such instructions are to supersede or amend any provision(s) of this Agreement, such instructions shall in no way be deemed to alter any provision hereof, but all such provisions shall be and remain in full force and effect, and if there be any inconsistency between such further escrow instructions and this Agreement, the provisions of this Agreement shall prevail. 3.2 Upon delivery of an executed copy of this Agreement to the Escrow Agent, the Escrow Agent shall prepare such further escrow instructions pertaining to the transactions contemplated hereby as the Escrow Agent shall deem necessary, which escrow instructions (to the extent the same are consistent with the provisions of Section 3.1 hereof), shall be promptly signed by Buyer and Sellers. 3.3 The Escrow Agent shall invest or deposit all monies delivered to the Escrow Agent for deposit into the Escrow in such account(s) at, or in such certificates of deposit issued by, such bank or savings and loan association located in Las Vegas, Nevada, as Buyer shall direct and as shall be reasonably satisfactory to Sellers. Except as otherwise expressly provided herein, all interest, dividends and other income earned in respect of such deposited monies shall accrue to the account and for the benefit of Buyer and shall be reinvested or deposited as aforesaid. 6 7 Article 4. The First Closing. 4.1 The closing of the sale and purchase of the Non-Gaming Assets herein provided for (the "First Closing"), shall take place at the Hotel/Casino commencing at 10:00 a.m., local time, on the date which is ninety (90) days after the expiration of the Limited Inspection Period, or such other date as the parties hereto may agree upon. The date on which the First Closing actually occurs is sometimes referred to herein as the "First Closing Date", and the First Closing shall be effective at 12:01 a.m., local time, on such date (the "First Closing Time"). 4.2 Prior to the First Closing: 4.2.1 Sellers shall duly execute and deliver to the Escrow Agent for deposit into the Escrow (i) a grant, bargain and sale deed transferring to Buyer fee simple title to the Hotel Land and Hotel Improvements (the "Hotel/Casino Deed"), and a grant, bargain and sale deed transferring to Buyer fee simple title to the Apartment Land and Apartment Improvements (the "Apartment Deed"), and, together with the Hotel/Casino Deed, the "Deeds"), in each case subject only to the "Permitted Exceptions" (as defined in subsection 4.D.4 hereof); (ii) a bill of sale with respect to the FF&E having covenants of warranty consistent with the provisions of Sections 7.4 and 8.8 hereof; (iii) assignments consistent with the provisions of subsection 2.1.4 hereof; and (iv) other instruments and documents of conveyance and transfer in form reasonably satisfactory to Buyer and its counsel, as together shall be necessary and effective to transfer to Buyer all of Sellers' right, title and interest in and to the Non-Gaming Assets; and 4.2.2 Buyer shall deliver to the Escrow Agent for deposit into the Escrow (i) the Non-Gaming Assets Purchase Price, which shall be delivered by Buyer at the times provided for and otherwise in accordance with subsections 2.1.1 and 2.1.2 hereof together with any additional sums owed by Buyer to Sellers or Escrow Agent pursuant to the provisions of Section 4.5 hereof; and (ii) an undertaking whereby Buyer will assume and agree to pay, perform or otherwise discharge, as appropriate, Sellers' liabilities and obligations with respect to the Non-Gaming Assets as and to the extent provided in the first paragraph of subsection 2.1.4 hereof, in form reasonably satisfactory to Sellers and their counsel. 4.3 At the First Closing: 4.3.1 The parties hereto shall notify the Escrow Agent to cause the Deeds to be recorded in the public records for the County of Clark, State of Nevada (the "Records"), and no delivery at the First Closing shall be deemed final until the Escrow Agent shall confirm that the Deeds have been so recorded in the Records. 4.3.2 The parties hereto shall notify Commonwealth Land Title Insurance Company (in such capacity the "Title Insurance Company"), to cause the "Title Insurance Policy" to be issued. For purposes of this Agreement, the "Title Insurance Policy" shall be and mean an ALTA extended coverage policy of title insurance issued by the Title Insurance Company insuring Buyer's fee simple title to the Hotel Land, the Hotel Improvements, the Apartment Land and the Apartment Improvements subject only to the 7 8 Permitted Exceptions. The Title Insurance Policy shall contain such endorsements as Buyer may reasonably request; provided, however, that Buyer shall pay all costs of obtaining any and all such endorsements. Liability coverage under the Title Insurance Policy shall be equal to $9.5 million. 4.3.3 The bills of sale, assignments and other instruments and documents described in subsection 4.2.1 hereof shall be delivered by the Escrow Agent to Buyer. 4.3.4 The Non-Gaming Assets Purchase Price, less the amount(s) provided for in the immediately following paragraph, together with the undertaking described in clause (ii) of subsection 4.2.2 hereof, shall be delivered by the Escrow Agent to Sellers. The Escrow Agent shall withhold from the monies to be delivered to Sellers pursuant to the immediately preceding paragraph such amounts as Sellers and Buyer shall agree are necessary to comply with the provisions of Nevada Revised Statutes ("NRS") 612.695 and 372.620, until such time as Sellers furnish to Buyer and the Escrow Agent the receipts or certificates provided for in said statute or, if not so provided for, such evidence as Buyer may reasonably require in order to assure Buyer that the applicable obligations have been satisfied. If Sellers do not produce such receipts and certificates within the time period provided in said statute, or if any lien or other claim therefor is asserted against Buyer or the Non-Gaming Assets by a governmental authority, the Escrow Agent shall pay such withheld funds to the appropriate governmental authorities. Each Seller also shall deliver to Buyer at the First Closing a certification of non-foreign status in substantially the form contemplated by Section 1.1445-2(b) of the Income Tax Regulations of the Internal Revenue Service under Section 1445(a) of the Internal Revenue Code, and Buyer expressly agrees that upon Buyer's receipt of such certifications, Buyer shall not withhold under said Section 1445(a) any portion of the Non-Gaming Assets Purchase Price (or any other amount(s) payable to Sellers hereunder). 4.3.5 The parties hereto shall deliver to each other the certificates, opinions and other instruments and documents referred to in Article 6 hereof. 4.3.6 The Escrow Agent shall deliver to Sellers and Buyer such amounts as may be payable to any of them pursuant to Section 4.5 hereof. 4.3.7 HICN and Buyer shall execute and deliver a lease by Buyer to HICN of the Hotel/Casino and Apartment Building in the form of Annex A hereto (the "Buyer/HICN Lease"). 4.4 Subject to the provisions of the Buyer/HICN Lease, possession of the Non-Gaming Assets shall be delivered by Sellers to Buyer at the First Closing. Buyer and Sellers shall follow the procedures for transfer of possession of the Hotel/Casino and Apartment Building set forth 8 9 herein and shall use their mutual best efforts to develop such additional procedures as may be necessary for the orderly transfer of possession of the Non-Gaming Assets. 4.5 Sellers shall pay the cost of the Title Insurance Policy (provided Buyer shall pay the costs of any endorsements thereto), the Termite Report referred to in Section 4.D.15 hereof, and the Survey (as defined in Section 4.D.14 hereof). Buyer and the appropriate Seller each shall pay through the Escrow one-half of the following expenses: any and all sales and use taxes, documentary transfer stamps and taxes, and intangible taxes payable in respect of the transfer of the Non-Gaming Assets to Buyer, the costs of recording the Deeds and of filing and/or publishing any and all other notices or documents required by law or this Agreement to be filed or published in connection with Buyer's purchase of the Non-Gaming Assets, and all fees and expenses of the Escrow Agent; provided, however, that in the event the First Closing shall fail to occur as a result solely of the failure of Sellers, on the one hand, or Buyer, on the other hand, to perform any obligation required by this Agreement to be performed by such party or parties hereunder at or prior to the First Closing, the defaulting party or parties shall bear all costs of obtaining the Title Insurance Policy and the Survey and all fees and expenses of the Escrow Agent. Article 4A. The Second Closing. 4A.1 The closing of the sale and purchase of the Slot Machines and the other Gaming Assets herein provided for (the "Second Closing"), shall take place as soon as practicable (and in any event within 62 days), after Buyer has received such licenses and other consents and approvals ("Gaming Licenses"), from the Nevada Gaming Control Board, Nevada Gaming Commission and the Clark County Liquor and Gaming Licensing Board (collectively, the "Nevada Gaming Authorities"), required by applicable law for Buyer or its designee to purchase and operate the Gaming Assets at the Hotel/Casino as currently operated. In the event Buyer or its designee has not obtained the Gaming Licenses within sixteen (16) months following the First Closing Date, the Buyer/HICN Lease shall terminate as more particularly set forth therein, HICN shall remove all of the Gaming Assets from the Hotel/Casino, HICN shall have no further obligation to operate the Hotel/Casino and Sellers shall have no obligation to sell the Gaming Assets to Buyer. Buyer or its designee shall, on or before the date which is thirty (30) days prior to the First Closing Date, submit a complete application to the Nevada Gaming Authorities to obtain the Gaming Licenses and shall thereafter use diligent and continued efforts to obtain the Gaming Licenses. Buyer acknowledges that it may be required to incur significant expenses in connection with its application for the Gaming Licenses and that such expenses shall be borne solely by Buyer. The date on which the Second Closing actually occurs is sometimes referred to herein as the "Second Closing Date ," and the Second Closing shall be effective at 12:01 a.m. local time, on such date (the "Second Closing Time"). 9 10 4A.2 Prior to the Second Closing: 4A.2.1 Sellers shall duly execute and deliver to the Escrow Agent for deposit into the Escrow (i) a bill of sale with respect to the Gaming Assets having covenants of warranty consistent with the provisions of Sections 7.4 and 8.8 hereof; (ii) assignments consistent with the provisions of subsection 2.1.4 hereof; (iii) any sums required to be paid by Sellers pursuant to the provisions of subsections 4A.4.1 and 4A.4.2 and Section 4A.5; and, (iv) other instruments and documents of conveyance and transfer in form reasonably satisfactory to Buyer and its counsel, as together shall be necessary and effective to transfer to Buyer all of Sellers' right, title and interest in and to the Gaming Assets; and 4A.2.2 Buyer shall deliver to the Escrow Agent for deposit into the Escrow (i) the Gaming Assets Purchase Price, which shall be delivered by Buyer at the times provided for and otherwise in accordance with subsections 2.1.1 and 2.1.2 hereof and any sums required to be paid by Buyer pursuant to the provisions of Sections 4A.4 and 4A.5; (ii) the Inventory Purchase Price; and (iii) an undertaking whereby Buyer will assume and agree to pay, perform or otherwise discharge, as appropriate, Sellers' liabilities and obligations with respect to the Gaming Assets as and to the extent provided in the second paragraph of subsection 2.1.4 hereof, in form reasonably satisfactory to Sellers and their counsel. 4A.3 At the Second Closing: 4A.3.1 The bills of sale, assignments and other instruments and documents described in subsection 4A.2.1 hereof relating to the Slot Machines and the other Gaming Assets and any sums owed to Buyer pursuant to Section 4A.4 shall be delivered by the Escrow Agent to Buyer; 4A.3.2 The Gaming Assets Purchase Price, the Inventory Purchase Price, any sums owed to Sellers pursuant to Section 4A.4, and the undertaking described in clause (iii) of subsection 4A.2.2 hereof shall be delivered by the Escrow Agent to Sellers; 4A.3.3 HICN shall reimburse Buyer for 65% of the "Average Chip and Token Float" (as hereinafter defined); 4A.3.4 Buyer and Sellers shall deliver to each other the certificates and copies of consents referred to in Article 6B hereof; and 4A.3.5 The Buyer/HICN Lease shall terminate. 10 11 As used in this Section 4A.3, the term "Average Chip and Token Float" means the average daily aggregate amount of HICN's outstanding casino chips and tokens during the 30 days preceding the Second Closing Date, as calculated by HICN's accountants, subject to verification by Buyer and/or its accountants. 4A.3.6 Possession of the Slot Machines and the other Gaming Assets shall be delivered by Sellers to Buyer at the Second Closing. 4A.4.1 Following the First Closing, HICN will be entitled to certain revenues and income and will be obligated for certain expenses relating to the Non-Gaming Assets as more fully provided in the Buyer/HICN Lease. Accordingly, except as may be otherwise expressly provided in this Agreement or the Buyer/HICN Lease, all revenues, income and expenses of the Non-Gaming Assets (including rents and expenses associated with the Apartment Building) with respect to the period prior to the Second Closing or the sooner termination of the Buyer/HICN Lease shall be for the account of Sellers, and all revenues, income and expenses of the Non-Gaming Assets (including rents and expenses associated with the Apartment Building) with respect to the period after the Second Closing or the sooner termination of the Buyer/HICN Lease shall be for the account of Buyer. Accordingly, the following expenses shall be allocated and apportioned as of the Second Closing Date or the sooner termination of the Buyer/HICN Lease on the basis of a 30-day month and a 365-day year, and shall be paid or credited by the appropriate Seller to Buyer or by Buyer to the appropriate Seller, as the case may be (i.e., prorated), at the Second Closing or the sooner termination of the Buyer/HICN Lease: (i) rent and other sums payable under each lease, conditional sale agreement or other contract pursuant to which a Seller leases or otherwise holds any FF&E, and each other contract and commitment described in the first paragraph of subsection 2.1.4 hereof; (ii) real and personal property taxes, assessments and special district levies applicable to the Hotel/Casino and the Apartment Building (based on the tax bills for the current year, copies of which bills shall be delivered by Sellers to Buyer prior to or at the Second Closing or the sooner termination of the Buyer/HICN Lease), other than personal property taxes applicable to the Slot Machines or the other Gaming Assets; (iii) charges for electricity, gas, telephone, water, sewage, cable and other utilities furnished to the Hotel/Casino (Buyer and HICN hereby expressly agreeing, however, to cause, if possible, all utility meters to be read on the day before the Second Closing Date or the sooner termination of the Buyer/HICN Lease); (iv) annual license, permit and/or inspection fees applicable to the Non- Gaming Assets; and (v) other expenses (including prepaid expenses), incurred by Sellers in connection with the ownership or operation of the Non-Gaming Assets; provided, however, that if such apportionment of any of the foregoing expenses is unnecessary because an invoice, bill or other statement of the amount of such expense accrued and unpaid as of the Second Closing Date can be obtained at the Second Closing or the sooner termination of the Buyer/HICN Lease, the Partnership or HICN, as the case may be, shall pay the accrued amount of such expense as shown on such statement. In addition, if any of the foregoing expenses cannot be accurately allocated on the Second Closing Date or the sooner termination of the Buyer/HICN Lease, the same shall be allocated as soon as practicable after the Second Closing Date, and in any event no later than sixty (60) days after the Second Closing Date or the sooner termination of the 11 12 Buyer/HICN Lease, and either the Partnership or HICN, as the case may be, or Buyer shall promptly pay to the other the sum determined pursuant to such subsequent allocation. Notwithstanding the foregoing provisions of this subsection 4A.4.1: (a) HICN shall retain or be entitled to receive all guest room rentals, all restaurant, banquet and lounge food and beverage revenues and all meeting room rentals earned for the night before the Second Closing or the sooner termination of the Buyer/HICN Lease (which shall be the night period beginning on the day preceding the Second Closing Date and ending at noon of the Second Closing Date or the sooner termination of the Buyer/HICN Lease); and (b) All guest room deposits and any other deposits or advance rentals paid to HICN under bookings or other confirmed reservations for the use of Hotel/Casino guest rooms or banquet or other Hotel/Casino facilities will be prorated among HICN and Buyer in accordance with clause (a) of this subsection 4A.4.1. HICN or Buyer shall promptly pay to the other the sum determined pursuant to this proration. 4A.4.2 Except as may be otherwise expressly provided in this Agreement, all revenues, income and expenses of the Gaming Assets with respect to the period prior to the Second Closing shall be for the account of Sellers, and all revenues, income and expenses of the Gaming Assets with respect to a period after the Second Closing shall be for the account of Buyer. Accordingly, the following expenses shall be allocated and apportioned as of the Second Closing Date on the basis of a 30-day month and a 365-day year, and shall be paid or credited by the appropriate Seller to Buyer or by Buyer to the appropriate Seller, as the case may be (i.e., prorated), to the extent permitted by applicable law, at the Second Closing: (i) rent and other sums payable under each lease or purchase or participation agreement pursuant to which a Seller leases or otherwise has the right to use any Slot Machine or other Gaming Asset; (ii) personal property taxes applicable to the Slot Machines or the other Gaming Assets (based on the tax bills for the current year, copies of which bills shall be delivered by Sellers to Buyer at the Second Closing); (iii) annual license, permit, inspection and/or similar fees applicable to the Gaming Assets; and, (iv) other expenses (including prepaid expenses, but excluding prepaid gaming taxes), incurred by Sellers prior to the Second Closing Time in connection with the ownership or operation of the Gaming Assets; provided, however, that if such apportionment of any of the foregoing expenses is unnecessary because the amount of such expense accrued and unpaid as of the Second Closing Date can be accurately determined at the Second Closing (whether by obtaining an invoice, bill or other statement or otherwise), the Partnership or HICN, as the case may be, shall pay the accrued amount of the expense as shown on such statement. In addition, if any of the foregoing expenses cannot be accurately allocated on the Second Closing Date, the same shall be allocated as soon as practicable after the Second Closing Date and in any event no later than sixty (60) days after the Second Closing Date, and either the Partnership or HICN, as the case may be, or Buyer shall promptly pay to the other the sum determined pursuant to such subsequent allocation. 12 13 4A.5 Buyer and the appropriate Seller each shall pay one-half of the following expenses: any and all sales and use taxes payable in respect of the transfer of the Gaming Assets to Buyer and the costs of filing or publishing any and all notices or documents required by law or this Agreement to be filed or published in connection with Buyer purchase of the Gaming Assets. Article 4B. Intentionally Omitted. Article 4C. Third-Party Consents. Buyer acknowledges and expressly agrees that to the extent that a Seller's rights under any contract or commitment as to which such Seller's liabilities and obligations are to be assigned to Buyer pursuant to this Agreement may not be so assigned without the consent of the other party or parties to such contract, such Seller shall use its best efforts to obtain (and Buyer shall use its best efforts to assist such Seller in obtaining), such consent, but the failure of Sellers to have obtained any one or more such consents as of the date on which the asset(s) subject to such contract or commitment are to be sold and transferred to Buyer hereunder shall not constitute a breach by either Seller of any representation, warranty or covenant made by such Seller in this Agreement or constitute a defense to Buyer's performance of any of Buyer's obligations hereunder. Notwithstanding the foregoing, Sellers shall use their best efforts to obtain, as a condition of Buyer's performance hereunder, the consents identified prior to the First Closing or the Second Closing, as set forth in Exhibit 4C (the "Required Consents"). Article 4D. Limited Inspection Period. 4D.1 Subject to subsections 4D.4.2 and 4D.5.2 hereof, Buyer has taken the opportunity to conduct whatever inspections and investigations of the Assets that Buyer has deemed necessary or desirable. Buyer has conducted all of such inspections and investigations, and will conduct such other inspections and investigations provided below, in good faith at Buyer's sole cost and expense to determine the feasibility and desirability of purchasing the Assets. Sellers have allowed Buyer or Buyer's representatives access to the Assets. Buyer hereby indemnifies Sellers against any damages or liabilities whatsoever incurred by Sellers resulting from or caused by the inspections, investigations or other activities of Buyer or Buyer's agents before the date of this Agreement and during the Limited Inspection Period. Without limitation on the foregoing, Buyer shall promptly repair any damage to the Assets caused as a result of Buyer's investigations before the date of this Agreement and during the Limited Inspection Period. Buyer shall not have any conversations or contact whatsoever with any employee of the Hotel/Casino or the Apartment Building other than Richard Ross, unless permission is first obtained from an executive officer of Sellers, which permission will not be unreasonably withheld or delayed and all such conversations and consents shall be subject to compliance with applicable employment law and gaming regulatory requirements. 4D.2 Buyer represents to Sellers that before the date of this Agreement and during the Limited Inspection Period, it has or will engage (i) a professional environmental engineer or consultant to conduct such environmental inquiries or tests as it may determine to be necessary; (ii) a public accounting firm to evaluate the books and records of HICN regarding operation and 13 14 ownership of the Assets; and (iii) legal counsel to make such investigations and preliminary inquiries of the Nevada Gaming Authorities and other governmental or regulatory authorities as such counsel deems appropriate; provided, however, Buyer's failure to engage any of such persons or entities shall not be deemed a breach hereof. 4D.3 Except as provided in Section 4D.3.10 of this Agreement and subject to subsection 4.D.4.1 hereof, promptly following the execution of this Agreement by the parties hereto, Buyer acknowledges that Sellers have made available or delivered, as hereinafter indicated, to Buyer, or will deliver or make available to Buyer as specified below, the following items and such other items Buyer has reasonably requested: 4D.3.1 Sellers have made available at the Hotel/Casino all as-built plans and specifications for the Hotel Improvements and the Apartment Improvements as are in the possession of Sellers. 4D.3.2 Sellers have delivered to Buyer a copy of a Preliminary Site Assessment dated July 19, 1991, prepared by Dames & Moore and a Precision Tank Test dated September 25, 1992, prepared by Dames & Moore (collectively, the "Environmental Reports"). 4D.3.3 Sellers have delivered to Buyer copies of all existing Hotel Service Contracts and Gaming Service Contracts. 4D.3.4 Sellers have delivered to Buyer a current preliminary title report (the "Title Report") relating to the Hotel Land and the Apartment Land, including copies of all items referred to in the Title Report as exceptions. 4D.3.5 Sellers have delivered to Buyer copies of all property tax bills and summaries of property insurance pertaining to the Assets. 4D.3.6 Sellers have delivered to Buyer operating statements for the businesses conducted at the Assets for 1991, 1992, 1993, 1994, and the first three (3) months of 1995. 4D.3.7 Sellers have delivered to Buyer copies of utility bills pertaining to the Assets for the past twelve (12) months. 4D.3.8 Sellers have delivered to Buyer copies of schedules of capital improvements made to the Hotel/Casino or the Apartment Building during 1992, 1993, 1994, and the first three (3) months of 1995. 4D.3.9 Sellers have made available to Buyer for inspection a schedule of all employees of the Hotel/Casino and Apartment Building (together with copies of their original employment applications) with the name, position, date of hire, current amount or rate of compensation and all accrued benefits of each employee, all employment 14 15 contracts relating to the Hotel/Casino and Apartment Building, and any union negotiations, agreements and/or contracts related to the Hotel/Casino and Apartment Building. 4D.3.10 Within thirty (30) days after the date upon which the Deposit has been made in accordance with Sections 2.1.1 and 2.1.2, Seller shall deliver to Buyer a schedule of all furniture, fixtures, equipment, stock, inventory, and other non-fixed or permanently attached assets of the Hotel/Casino and Apartment Building, including without limitation, all gaming equipment and devices, kitchen equipment, tables and chairs, other furniture, accessories, office equipment, computer equipment and devices, and hard count devices. Once delivered to Buyer, the schedule will be attached hereto as Exhibit 1.2.5. 4D.3.11 Sellers have delivered or made available to Buyer a copy of the systems of internal control governing the Hotel/Casino as approved by the Nevada Gaming Authorities. 4D.3.12 Sellers have delivered to Buyer a schedule of all security interests, liens and encumbrances on the Assets; the most recent survey of the Hotel Land and the Apartment Land available to the Partnership. 4D.3.13 Sellers have delivered to Buyer a schedule of all pre-sold rooms and/or promotions affecting the Hotel/Casino that would be a material obligation if assumed by Buyer. 4D.3.14 Sellers have delivered to Buyer a current as-built survey (the "Survey") of the Hotel/Casino and Apartment Building in form and content acceptable to the Title Insurance Company and sufficient to allow the Title Insurance Company to delete from the Title Insurance Policy all standard exceptions concerning boundary lines. 4D.3.15 Within five (5) days after the date of this Agreement, Sellers shall deliver to Buyer a current termite and pest control report ("Termite Report"), for the Hotel/Casino and Apartment Building prepared by a licensed pest control company, certifying inspection. 4D.4.1 Notwithstanding anything to the contrary in this Article 4D, Buyer shall have until July 21, 1995 (the "Limited Inspection Period"), to conduct inspections and investigations only with respect to the following: (a) The Title Report; (b) The Survey; (c) The Termite Report; 15 16 (d) Environmental assessments and other reports, other than the Environmental Reports, obtained by Buyer at Buyer's sole cost and expense (the "Updated Environmental Reports"); and (e) A survey of the Hotel Land, Hotel Improvements, Apartment Land and Apartment Improvements obtained by Buyer at Buyer's sole cost and expense to determine compliance or noncompliance with the American with Disabilities Act (the "ADA Survey" and, together with the Title Report, Survey, Termite Report and Updated Environmental Reports, the "Limited Review Items"). During the Limited Inspection Period, Buyer is given the opportunity to obtain Updated Environmental Reports and an ADA Survey to further investigate the Assets. However, Buyer cannot terminate this Agreement by reason of Buyer's failure to obtain Updated Environmental Reports or an ADA Survey. 4D.4.2 If, before July 13, 1995, Buyer notifies Sellers in writing of any exceptions to the Title Report or any matter shown on the Survey which Buyer disapproves ("Disapproved Items"), Sellers will have five (5) days after receipt of Buyer's notification of any Disapproved Items in which to advise Buyer that: (a) Sellers will cause the Disapproved Items to be removed or obtain appropriate endorsements to the Title Insurance Policy on or before the First Closing Date; or (b) Sellers will not cause the Disapproved Items to be removed. If Sellers advise Buyer that they will not cause the Disapproved Items to be removed, Buyer will have five (5) days to elect, as its sole remedy, to: (c) Proceed with the transactions contemplated herein, in which case the Disapproved Items shall be deemed approved by Buyer; or (d) Terminate this Agreement in accordance with subsection 4D.5.2. If Buyer does not give Sellers notice of its election within five (5) days, Buyer will be deemed to have elected to proceed with the transactions contemplated herein and the Disapproved Items shall be deemed approved by Buyer. Buyer's notice of Disapproved Items and Sellers response thereto will extend the Limited Inspection Period to the last day for Buyer's response to Seller's response to Buyer's notice of Disapproved Items. Buyer hereby objects as a Disapproved Item liens and encumbrances of all deeds of trust, assignments of leases and financing statements that secure an obligation to pay money, whether to a third party or to an affiliate of either Seller. These liens and encumbrances will be Disapproved Items without Buyer delivering any notice to Sellers. 16 17 If Buyer elects to proceed or is deemed to have elected to proceed with the transactions set forth herein in accordance with subsection 4D.5.2, Buyer will be deemed to have approved (i) liens for current taxes, assessments or special district levies on real property not yet delinquent, (ii) except for Disapproved Items that Seller has agreed to remove from the Title Insurance Policy pursuant to this subsection 4D.4.2, easements, restrictions, agreements or exceptions shown on the Title Report; (iii) the Buyer/HICN Lease; (iv) any easement or encroachments as a result of the Street Widening (as defined in Section 7.7 hereof), provided the same does not materially interfere with the use of the Hotel/Casino and the Apartment Building for their intended purposes; (v) the Title Insurance Company's standard printed exceptions; and (vi) except for Disapproved Items that Sellers have agreed to remove from the Title Insurance Policy pursuant to this subsection 4D.4.2, any matters shown on the Survey (collectively, the "Permitted Exceptions"). 4D.5.1 Intentionally Omitted. 4D.5.2 Buyer may terminate this Agreement during the Limited Inspection Period only if in Buyer's good faith judgment matters disclosed by the Limited Review Items materially and adversely affect the value of the Assets taken as a whole. If Buyer makes this determination, Buyer shall deliver written notice to that effect and of the termination of this Agreement to Sellers and the Escrow Agent no later than three (3) days following the expiration of the Limited Inspection Period, in which case, Buyer shall deliver to Sellers the Updated Environmental Reports, the ADA Survey and all other inspections and due diligence reports obtained or commissioned by Buyer respecting the Limited Review Items, the Deposit shall be returned to Buyer and neither party shall have any further rights or obligations under this Agreement except for the indemnification obligations of Buyer pursuant to Section 4D.1 and Section 16.9. If Buyer fails to deliver such termination notice no later than three (3) days following the expiration of the Limited Inspection Period, Buyer shall be deemed to have elected to proceed with the transactions set forth herein, to have approved the Limited Review Items and Buyer shall deposit the Additional Deposit with Escrow Agent as provided in Article 2 above. 4D.6 If Buyer elects to proceed or is deemed to have elected to proceed with the transactions set forth herein, Buyer's obligations under this Agreement will be contingent only upon the satisfaction (or waiver by Buyer) of the conditions specified in Articles 5, 6 and 6B. 4D.7 The examination and inspection by Buyer of the Assets shall not constitute a waiver or relinquishment on the part of Buyer of its right to rely on the representations, warranties and covenants made by Seller herein. Article 5. Conditions to the Closings. The respective obligations of Sellers and Buyer to sell and purchase the Assets and to consummate the other transactions contemplated hereby are subject to the satisfaction of the condition that as of each of the First Closing Date and the Second Closing Date, no court or 17 18 administrative agency having jurisdiction shall have issued, entered or adopted any decision, order, rule or regulation restraining or prohibiting the consummation of the transactions contemplated by this Agreement to be consummated on such date (a "Regulatory Termination"). In the event of a Regulatory Termination before the First Closing Date, the Deposit shall be promptly returned to Buyer upon Buyer's or Sellers' written notice to Escrow Agent that a Regulatory Termination has occurred. Article 6. Additional Conditions Precedent to Buyer's First Closing Obligations. The obligation of Buyer to purchase from Sellers the Non-Gaming Assets and to consummate the other transactions contemplated by this Agreement to be consummated at the First Closing is subject to the satisfaction or waiver by Buyer, prior to or at the First Closing, of (in addition to the conditions specified in Article 5 hereof), each of the following conditions: 6.1 The representations and warranties of Sellers set forth in this Agreement shall, to the extent such representations and warranties relate to the Non-Gaming Assets, be true in all material respects as of the First Closing as if made again at such time; Sellers shall have complied with and performed in all material respects the covenants and obligations set forth in this Agreement to be complied with or performed by Sellers prior to or at the First Closing; and Buyer shall have received a certificate of Sellers, dated the First Closing Date, certifying that the condition specified in this Section 6.1 has been satisfied. 6.2 The Title Insurance Company shall have issued to Buyer the Title Insurance Policy, insuring Buyer's fee simple title to the Hotel Land, the Hotel Improvements, the Apartment Land and the Apartment Improvements, subject only to the Permitted Exceptions. 6.3 Intentionally Omitted. 6.4 The Escrow Agent shall have delivered to Buyer (i) the bills of sale, assignments and other instruments and documents described in subsection 4.2.1 hereof and relating to the Non-Gaming Assets; and (ii) such amounts as may be payable to Buyer pursuant to Section 4.5 hereof. 6.5 Buyer shall have received the opinion letter of Seller's counsel dated as of the First Closing Date, in form and substance reasonably satisfactory to Buyer and its counsel, with respect to the matters set forth in Sections 7.1, 7.2, 7.3, 8.1, 8.2 and 8.5 hereof, and that the bills of sale and other instruments of conveyance with respect to the personal property contained in the Non-Gaming Assets are valid and binding in accordance with Nevada law and effectively vest in Buyer all of Sellers' right, title and interest in such personal property. Buyer acknowledges that certain portions of such opinion letter (including, without limitation, such counsel's opinions with respect to the last sentences of Sections 7.2 and 8.2 (other than clause (i) of each of said sentences), and with respect to Sections 7.3 and 8.5), may be qualified as being to the best knowledge of such counsel (or similar qualification), and the opinions expressed in such opinion letter concerning enforceability may be subject to such exceptions and limitations as such counsel deems necessary or appropriate. 18 19 6.6 Sellers shall have obtained and delivered to Buyer all Required Consents. 6.7 Sellers shall have delivered to Buyer their certificate stating that there has been no material adverse change in the business, operations or financial condition of the Assets, and the Assets have not been materially and adversely affected due to fire, accident, other casualty or Act of God. 6.8 Any liens, mortgages, security interests or other encumbrances to which the Assets are subject (other than the Permitted Exceptions) shall have been released and Buyer shall be provided with evidence of such releases having been filed in the appropriate offices of governmental officials in each jurisdiction where such filing is necessary for proper filing in accordance with applicable law. Article 6A. Additional Conditions Precedent to Sellers' First-Closing Obligations. The respective obligations of the Partnership and HICN to sell to Buyer the Non-Gaming Assets owned by such Seller and to consummate the other transactions contemplated by this Agreement to be consummated at the First Closing are subject to the satisfaction or waiver by the Partnership or HICN, as the case may be, prior to or at the First Closing, of (in addition to the conditions specified in Article 5 hereof), each of the following conditions: 6A.1 The representations and warranties of Buyer set forth in this Agreement shall be true in all material respects as of the First Closing as if made again at such time; Buyer shall have complied with and performed in all material respects the covenants and obligations set forth in this Agreement to be complied with or performed by Buyer prior to or at the First Closing; and Sellers shall have received a certificate of Buyer, dated the First Closing Date, certifying that the condition specified in this Section 6A.1 has been satisfied. 6A.2 Sellers shall have received such consents and approvals of the Nevada Gaming Authorities (other than the consents and approvals specified in subsection 6B.2.2 hereof), and such other governmental or regulatory consents and approvals, if any, to the transactions contemplated hereby as in the opinion of Sellers' counsel may be required by applicable law. 6A.3 The Escrow Agent shall have delivered to Sellers the amounts payable to Sellers pursuant to subsection 4.3.4 hereof, the undertaking described in clause (ii) of subsection 4.2.2 hereof, and such other amounts as may be payable to Sellers pursuant to Section 4.5 hereof. 6A.4 Sellers shall have received the opinion letter of counsel to Buyer and Crown, dated as of the First Closing Date, in form and substance reasonably satisfactory to Sellers and their counsel, with respect to the matters set forth in Sections 9.1 through 9.3 hereof. Sellers acknowledge that certain portions of such opinion letter (including, without limitation, such counsel's opinion with respect to the last sentence of Section 9.2 (other than clause (i) thereof) 19 20 and with respect to Section 9.3), may be qualified as being to the best of such counsel's knowledge (or similar qualification), and that the opinions expressed in such opinion letter concerning enforceability may be subject to such exceptions and limitations as such counsel deems necessary or appropriate. Article 6B. Additional Conditions Precedent to Sellers' and Buyer's Second Closing Obligations. 6B.1 Buyer's obligation to purchase the Gaming Assets from Sellers and to consummate the other transactions contemplated by this Agreement to be consummated at the Second Closing is subject to the satisfaction or waiver by Buyer, prior to or at the Second Closing, of each of the following conditions: 6B.1.1 The representations and warranties of Sellers set forth in this Agreement shall, to the extent the same relate to the Gaming Assets, be true in all material respects as of the Second Closing as if made again at such time; Sellers shall have complied with and performed in all material respects the covenants and obligations set forth in this Agreement to be complied with or performed by Sellers with respect to the Gaming Assets prior to or at the Second Closing; and Buyer shall have received a certificate of Sellers, dated the Second Closing Date, certifying that the condition specified in this subsection 6B.1.1 has been satisfied. 6B.1.2 Buyer or its designee shall have received the Gaming Licenses from the Nevada Gaming Authorities. 6B.1.3 The Escrow Agent shall have delivered to Buyer (i) the bills of sale, assignments and other instruments and documents described in subsection 4A.2.1 hereof and relating to the Gaming Assets; and (ii) such amounts as may be payable to Buyer pursuant to Section 4A.4 and 4A.5 hereof. 6B.2 Sellers' respective obligations to sell the Gaming Assets to Buyer and to consummate the other transactions contemplated by this Agreement to be consummated at the Second Closing are subject to the satisfaction or waiver by Sellers, prior to or at the Second Closing, of each of the following conditions: 6B.2.1 The representations and warranties of Buyer set forth in this Agreement shall be true in all material respects as of the Second Closing as if made again at such time; Buyer shall have complied with and performed in all material respects the covenants and obligations set forth in this Agreement to be complied with or performed by Buyer prior to or at the Second Closing with respect to the Gaming Assets; and Sellers shall have received a certificate of Buyer, dated the Second Closing Date, certifying that the condition specified in this subsection 6B.2.1 has been satisfied. 20 21 6B.2.2 Sellers shall have received such consents and approvals of the Nevada Gaming Authorities to Sellers' sale to Buyer of the Gaming Assets as in the opinion of Sellers' counsel are required by applicable law. 6B.2.3 The Escrow Agent shall have delivered to Sellers the Gaming Assets Purchase Price and such amounts as may be payable to Seller pursuant to Section 4A.4 hereof and the undertaking described in clause (ii) of Section 4.2.2 hereof. Article 7. Representations and Warranties of the Partnership. The Partnership represents and warrants to and agrees with Crown and Buyer that, except as may be otherwise set forth in the Disclosure Letter delivered by Sellers to Buyer concurrently with Sellers' execution hereof (the "Disclosure Letter"): 7.1 The Partnership is a limited partnership duly organized, validly existing and in good standing under the laws of the State of Delaware, and has all requisite partnership power and authority to own its assets and conduct its business as presently conducted. The sole general partner of the Partnership is Starwood Lodging Trust, formerly known as Hotel Investors Trust, a Maryland real estate investment trust (the "Trust"). The Trust will continue to be the sole general partner of the Partnership through the Second Closing. 7.2 The Partnership has all requisite partnership power and authority to execute and deliver this Agreement and to perform the Partnership's obligations hereunder. The execution and delivery of this Agreement by the Partnership and the Partnership's performance of its obligations hereunder as of the First Closing will have been duly authorized by all necessary partnership action. This Agreement has been duly executed and delivered by the Partnership and constitutes a valid and binding obligation of the Partnership, enforceable against the Partnership in accordance with its terms, except as such enforceability may be limited by the provisions of applicable bankruptcy and insolvency, moratorium or similar laws affecting creditors' rights generally, and except that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceedings therefor may be brought. The execution and delivery of this Agreement by the Partnership does not, and the Partnership's consummation of the transactions contemplated hereby to be consummated by the Partnership will not, (i) violate any provision of the partnership agreement of the Partnership; (ii) result in the breach of any of the terms or conditions of, or constitute a default under, any contract, lease, franchise, concession, license, permit, note, bond, indenture, mortgage, deed of trust, security interest or other agreement or instrument to which the Partnership is a party or by which the Assets owned or held by the Partnership may be bound; (iii) subject to obtaining the consents and approvals contemplated by Section 6A.2 and subsection 6B.2.2 of this Agreement, violate any law or governmental or regulatory rule or regulation, or any order, judgment or award of any court or administrative agency, or any decision or finding of any arbitrator, binding upon the Partnership or the Assets owned or held by the Partnership; or (iv) except for the consents and approvals contemplated by Section 6A.2 and subsection 6B.2.2 of this Agreement, require the consent of any governmental authority; except for in the case of 21 22 clauses (ii) and (iii) above, breaches, defaults and/or violations that in the aggregate will not have a material adverse effect on the Partnership's ability to perform its obligations hereunder, Buyer's ownership or operation of the Hotel/Casino, or Buyer's ownership of the Apartment Building. 7.3 There is no suit, action, proceeding (legal, administrative or otherwise), arbitration or governmental investigation pending, or to the best knowledge of the Partnership, threatened, against or with respect to the Partnership or the Assets owned or held by the Partnership which suit, action, proceeding, arbitration or investigation will have a material adverse effect on the Partnership's ability to perform its obligations hereunder, Buyer's ownership or operation of the Hotel/Casino, or Buyer's ownership or operation of the Apartment Building. 7.4 The Partnership as of the First Closing will have good and marketable title in fee simple to the Hotel Land, the Hotel Improvements, the Apartment Land and the Apartment Improvements, and will have good title to (or a valid leasehold interest in, or other valid right to use), all other Non-Gaming Assets owned or held by the Partnership, in each case free and clear of any mortgage, deed of trust, security interest, pledge, lease or other claim, charge, lien or encumbrance, except for the Permitted Exceptions. The Partnership as of the Second Closing will have good title and marketable to (or a valid leasehold interest in or other valid right to use), all Gaming Assets owned or held by the Partnership, free and clear of any security interest, pledge, lease or other claim, charge, lien or encumbrance, except for the Permitted Exceptions. 7.5 To the Partnership's knowledge, there are no material structural, electrical, plumbing or mechanical defects in the Hotel/Casino or Apartment Building. 7.6 Except as disclosed by the Environmental Reports or any Updated Environmental Reports obtained by Buyer and except for potential violations of the Americans with Disabilities Act ("ADA") or violations of the ADA disclosed by the ADA Survey obtained by Buyer, to the best knowledge of the Partnership, neither the Hotel/Casino nor the Apartment Building are in violation of any federal, state, county or local law, rule or regulation (including, without limitation, any applicable building, zoning or other land use requirement or any law relating to pollution, protection of the environment, or Hazardous Substances as herein defined), or any regulation of the National Board of Fire Underwriters, which violation if not corrected would materially adversely affect Buyer's ownership or operation of the Hotel/Casino and Apartment Building, nor has the Partnership received any notice that any governmental authority, insurer or other person is asserting any violation of the same. 7.7 Except as hereinafter provided, there are no pending or, to the best knowledge of the Partnership, overtly threatened condemnation actions or proceedings in eminent domain with respect to the Hotel/Casino or the Apartment Building, nor has the Partnership received notice of the commencement of any proceeding that would change the present zoning classification of the Hotel Land or the Apartment Building. The present zoning classification of the Hotel Land and the Apartment land is H-1. Various state and local Nevada governmental authorities are in 22 23 the process of widening Flamingo Road (the "Street Widening") and Sellers have or will grant certain easements to the State of Nevada in connection with the Street Widening and the State of Nevada and/or certain local governmental authorities have granted certain encroachment rights to Sellers in connection therewith. All proceeds from the Street Widening are the sole property of Sellers, are not a part of the Assets and will not be a credit against the Purchase Price. 7.8 The FF&E is in the same operating condition and state of repair as when such items (or their predecessors), were inspected by Buyer prior to the date of this Agreement (subject to ordinary wear and maintenance), and all such FF&E is in all material respects adequate and suitable for the purposes for which such FF&E is presently being used. 7.9 Other than contracts or commitments that will be terminated or discharged at or prior to the time the asset(s) subject thereto are sold to Buyer hereunder, the Partnership is not a party to any contract or commitment in respect of the Assets which contract or commitment either has a remaining unexpired term of one year or more or provides for the payment by the Partnership of more than $100 per month, unless such contract or commitment may be cancelled by the Partnership without charge or other penalty upon not more than 30 days' prior notice. Each contract or commitment specifically identified in the Disclosure Letter in response to this Section 7.9 is valid and in full force and effect, and there exists no default, or event that with notice or the lapse of time or both would constitute a default, under any such contract or commitment by the Partnership or, to the best knowledge of the Partnership, by any other party to such contract or commitment. The Partnership has provided the Buyer with true and correct copies of such contracts and commitments. In the event that the Partnership intends to terminate any contract or commitment of the Partnership relating to the Non-Gaming Assets at or prior to the First Closing, the Partnership will use all reasonable efforts to notify Buyer of the same, and if Buyer so requests, such contract or commitment shall not be terminated by the Partnership, but shall be assigned by the Partnership to Buyer on the same terms and subject to the same conditions as the contracts and commitments specifically identified in the Disclosure Letter in respect to this Section 7.9 are so assigned. 7.10 Other than liabilities arising pursuant to the leases and other contracts and commitments referred to in Section 7.9 hereof, Buyer will not, by virtue of Buyer's assumption of the liabilities of the Partnership referred to in subsection 2.1.4 hereof, assume any liability, debt or obligation of the Partnership whatsoever, and the Partnership covenants to timely pay and discharge all of its debts, obligations and liabilities with respect to the Assets. 7.11 Neither this Agreement, the Exhibits attached hereto, nor any other document furnished by the Partnership, taken as a whole, contain any untrue statement of a material fact or omit to state a material fact necessary to make the statement contained herein and therein not misleading, and except as disclosed herein or therein, there is no fact (other than matters of a general economic or political nature which do not affect the Hotel/Casino uniquely), known to the Partnership which materially adversely affects or in the future can be reasonably expected to 23 24 materially adversely affect the Hotel/Casino. In addition, to the best knowledge of the Partnership, the representations and warranties of HICN in Article 8 are true and correct in all material respects. 7.12 The Partnership has filed or has obtained presently effective extensions with respect to all federal, state, county and local tax returns required to have been filed by the Partnership, and has paid all taxes shown thereon as due and payable on or prior to the date hereof, with respect to the Assets owned or operated by the Partnership. Article 8. Representations and Warranties of HICN. HICN represents and warrants to, and agrees with Crown and Buyer that, except as otherwise set forth in the Disclosure Letter: 8.1 HICN is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada, with all requisite corporate power and authority to own its assets and conduct its business as presently conducted. 8.2 HICN has all requisite corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution and delivery of this Agreement by HICN and HICN's performance of its obligations hereunder as of the First Closing will have been duly authorized by all necessary corporate action. This Agreement has been duly executed and delivered by HICN and constitutes a valid and binding obligation of HICN, enforceable against HICN in accordance with its terms, except as such enforceability may be limited by the provisions of applicable bankruptcy and insolvency, moratorium or similar laws affecting creditors' rights generally, and except that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceedings therefore may be brought. The execution and delivery of this Agreement by HICN does not, and the consummation by HICN of the transactions contemplated hereby to be consummated by HICN will not, (i) violate any provision of HICN's certificate of incorporation or bylaws; (ii) result in the breach of any of the terms or conditions of, or constitute a default under, any contract, lease, franchise, concession, license, permit, note, bond, indenture, mortgage, deed of trust, security interest or other agreement or instrument to which HICN is a party or by which the Inventories, the Slot Machines, or the other Assets owned or held by HICN may be bound; (iii) subject to obtaining the consents and approvals contemplated by Section 6A.2 and subsection 6B.2.2 of this Agreement, violate any law or governmental or regulatory rule or regulation, or any order, judgment or award of any court or administrative agency, or any decision or finding of any arbitrator, binding upon HICN or the Inventories, the Slot Machines or the other Assets owned or held by HICN; or, (iv) except for the consents and approvals contemplated by Section 6A.2 and subsection 6B.2.2 of this Agreement, require the consent of any governmental authority; except for in the case of clauses (ii) and (iii) above, breaches, defaults or violations that individually or in the aggregate will not have a material adverse effect on HICN's ability to perform its obligations hereunder or on Buyer's operation of the Hotel/Casino. 24 25 8.3 HICN has delivered to Buyer the unaudited balance sheet of HICN with respect to HICN's operation of the Hotel/Casino at April 30, 1995, and the related statement of earnings for HICN, all for the 4-month period then ended, together with the related notes and schedules thereto, as certified by the Chief Financial Officer of HICN (hereinafter referred to as "HICN's Financial Statements"). HICN's Financial Statements (i) are in accordance with the books of account and records of HICN's operation of the Hotel/Casino and fairly present the financial position in all material respects of HICN with respect to the Hotel/Casino and fairly present the financial position in all material respects of HICN with respect to the Hotel/Casino at the date indicated; (ii) contain and reflect reserves for all material liabilities; and (iii) were prepared in accordance with generally accepted accounting principles applied on a basis consistent with prior accounting periods. Except to the extent reflected or reserved against in HICN's Financial Statements or the notes thereto, HICN is not obligated for, nor any of its assets or property subject to, any liabilities (whether accrued, absolute, contingent or otherwise), or adverse obligations, whether or not such liabilities or obligations are normally shown or reflected on a balance sheet, other than liabilities and obligations arising in the ordinary course of business since the date of HICN's Financial Statements, none of which are material and adverse. 8.4 Since the date of HICN's Financial Statements, except as set forth in Exhibit 8.4 attached hereto, or as set forth below, HICN (with respect to the Hotel/Casino), has not: (i) suffered the occurrence of any events which, individually or in the aggregate, have had a material adverse affect on the Assets (with respect to the Hotel/Casino); (ii) except in the ordinary course of business, made or granted any general wage or salary increase to persons employed by HICN at the Hotel/Casino; (iii) except in the ordinary course of business, made any increase in or commitment to increase any benefits for employees of the Hotel/Casino or adopted or made any commitments to adopt any additional benefit plan for such employees; (iv) sold or transferred, or agreed to sell or transfer, any of the Assets (except sales in the ordinary course of business); or (v) suffered any damage, destruction or loss, whether or not covered by insurance which, to the best of HICN's knowledge and belief, materially and adversely affects the Assets, or had any material adverse change in the business, operations, financial condition or prospects of the Assets. 8.5 There is no suit, action, proceeding (legal, administrative or otherwise), arbitration or governmental investigation pending, or to the best knowledge of HICN, threatened, against or with respect to HICN or the Assets owned or held by HICN which suit, action and proceeding, arbitration or investigation will have a material adverse effect on HICN's ability to perform its obligations hereunder or Buyer's operation of the Hotel/Casino. 8.6 HICN has all licenses and permits necessary to conduct the business currently being conducted by HICN at the Hotel/Casino and to operate the business currently being operated by HICN at the Apartment Building, the absence of which would have a material adverse effect on such assets and all such licenses and permits are in full force and effect. No material violation exists or has been asserted by any governmental authority with respect to any such license or permit. No proceeding is pending or, to HICN's knowledge, has been threatened for the purpose of revoking, suspending or limiting any such license or permit. Exhibit 8.6 attached hereto sets forth a complete and accurate list of such licenses and permits. 25 26 8.7 HICN has filed or has obtained presently effective extensions with respect to all federal, state, county and local tax returns required to have been filed by HICN, and has paid all taxes shown thereon as due and payable on or prior to the date hereof, with respect to HICN's operation of the Hotel/Casino. 8.8 As of the First Closing, HICN will have good and marketable title to (or a valid leasehold interest in, or other valid right to use), all Non-Gaming Assets owned or held by HICN, in each case free and clear of any security interest, pledge or other claim, charge, lien or encumbrance, except for (i) the Permitted Exceptions; (ii) claims, charges, liens and encumbrances arising out of contracts entered into by HICN pursuant to the Buyer/HICN Lease; and (iii) the Hotel Service Contracts. As of the Second Closing, HICN will have good title to all of the Inventories and good title to (or a valid leasehold interest in, or other valid right to use), the Slot Machines and the other Gaming Assets owned or held by HICN, free and clear of any security interest, pledge or other claim, charge, lien or encumbrance, except for (i) the Permitted Exceptions; (ii) claims, charges, liens and encumbrances arising out of contracts entered into by HICN pursuant to the Buyer/HICN Lease; and (iii) the Gaming Service Contracts. 8.9 The Slot Machines are in the same operating condition and state of repair as when such machines (or their predecessors), were inspected by Buyer prior to the date of this Agreement (subject to ordinary wear and maintenance), and are in all material respects adequate and suitable for the purposes for which the same are presently being used. 8.10 Other than contracts or commitments that will be terminated or discharged at or prior to the time the Asset(s) subject thereto are sold to Buyer hereunder, HICN is not a party to any contract or commitment in respect of the Assets which contract or commitment either has a remaining unexpired term of one year or more or provides for the payment by HICN of more than $100 per month, unless such contract or commitment may be cancelled by HICN without charge or other penalty upon not more than 30 days' prior notice and, unless otherwise identified in the Disclosure Letter, all tenant leases of units within the Apartment Building may be terminated without charge or penalty upon not more than 60 days' prior notice. Each such contract or commitment is specifically identified in the Disclosure Letter in response to this Section 8.10 and is valid and in full force and effect, and there exists no default, or event that with notice or the lapse of time or both, would constitute a default, under any such contract or commitment by HICN or, to the best knowledge of HICN, any other party to such contract or commitment. HICN has provided Buyer with true and correct copies of such contracts and commitments. In the event that HICN intends to terminate any contract or commitment of HICN relating to the Non-Gaming Assets at or prior to the First Closing, HICN will use all reasonable efforts to notify Buyer of the same, and if Buyer so requests, such contract or commitment shall not be terminated by HICN, but shall be assigned by HICN to Buyer on the same terms and subject to the same conditions as the contracts or commitments specifically identified in the Disclosure Letter in response to this Section 8.10 are so assigned. 26 27 8.11 Except for liabilities pursuant to the leases, purchase and participation agreements and other contracts and commitments specifically identified in response to Section 8.10 hereof or that HICN acquires or becomes subject to as a result of actions taken by HICN pursuant to the Buyer/HICN Lease, Buyer will not, by virtue of Buyer's assumption of the liabilities of HICN referred to in subsection 2.1.4 hereof, assume any material liability, debt or obligation of HICN whatsoever, and HICN covenants to timely pay and discharge all of its debts, obligations and liabilities with respect to the Assets. 8.12 To the best knowledge of HICN, neither the Hotel/Casino nor HICN's use or occupancy thereof is in violation of any federal, state, country or local law, rule or regulation (including, without limitation, any applicable building, zoning or other land use requirement or any law relating to pollution or protection of the environment or Hazardous Substances), or any regulation of the National Board of Fire Underwriters, which violation if not corrected would materially adversely affect Buyer's operation of the Hotel/Casino, nor has HICN received any notice that any governmental authority, insurer or other person is asserting any violation of the same. 8.13 Other than the Street Widening as set forth in Section 7.7 hereof, there are no pending or, to the best knowledge of HICN, threatened condemnation actions or proceedings in eminent domain with respect to the Hotel/Casino, nor has HICN received notice of the commencement of any proceeding that would change the present zoning classification of the Hotel/Casino or the Apartment Building. 8.14 Except for a proposed contract with maintenance workers affiliated with the operating engineers of the AFL-CIO, none of the employees of the Hotel/Casino is a party to any employment or consulting agreement with HICN or represented as a Hotel/Casino employee by any labor union, and there is not presently in effect any collective bargaining agreement pertaining to the Hotel/Casino or its employees. Since December 30, 1988, there has not been any labor strike, work stoppage, interruption or slow-down, or other labor disturbance in connection with HICN's operation of the Hotel/Casino, and no such labor trouble (including, without limitation, any labor union organizational drive), currently is, to the best knowledge of HICN, threatened. 8.15 HICN heretofore has either delivered to Buyer or made available for inspection by Buyer true and complete copies (or a written description of the material terms and conditions), of any and all bonus, profit-sharing, stock option, pension, severance and similar plans and arrangements maintained by HICN for employees of the Hotel/Casino (collectively, the "Employee Plans"). HICN is not a party to, and is not required to make any employer contribution to, any "employee pension benefit plan" (within the meaning of Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")), or any "employee welfare benefit plan" (within the meaning of Section 3(1) of ERISA), affecting any employee of the Hotel/Casino. 27 28 8.16 Included in the Disclosure Letter is a true and complete schedule of all policies of fire, public liability and other kinds of insurance maintained as of the date hereof by HICN relating to the Hotel/Casino, which schedule includes, without limitation, the kind of insurance, the insurer, the amount of coverage, the expiration date, the annual premium, the person(s) to whom the proceeds are payable, the policy number and any pending claim(s) thereunder. All such policies are binding and in full force and effect, and there exists no default, or event that with notice or the lapse of time or both, would constitute a default, under any such insurance policy by HICN or, to the best knowledge of HICN, by the insurance company issuing such policy. 8.17 Except as set forth in the Environmental Reports and any environmental reports obtained by Buyer (without, however, HICN making any representation or warranty relating to the accuracy or completeness of any environmental reports obtained by Buyer), and any such material used in the ordinary course of the businesses conducted by Sellers or their tenants at the Hotel/Casino and Apartment Building and stored in accordance with applicable environmental laws and regulations, to the best of HICN's knowledge, there are no Hazardous Substances, as hereinafter defined, located at the Hotel Land, Hotel Improvements, Apartment Land or Apartment Improvements. As used herein, "Hazardous Substances" shall mean any material or substance defined as "hazardous substances", "hazardous materials", "toxic substances", "pollutants", or hazardous waste" (including asbestos), under federal, state and local laws regulating hazardous or toxic substances. 8.18 Neither this Agreement, the Exhibits attached hereto, nor any other document furnished by HICN, taken as a whole, contain any untrue statement of a material fact or omit to the state a material fact necessary to make the statement contained herein and therein not misleading, and except as disclosed herein or therein, there is no fact (other than matters of a general economic or political nature which do not affect the Hotel/Casino uniquely), known to HICN which materially adversely affects or in the future can be reasonably expected to materially adversely affect the Hotel/Casino. In addition, to the best knowledge of HICN, the representations and warranties of the Partnership set forth in Article 7 hereof are true and correct in all material respects. Article 9. Representations and Warranties of Crown and Buyer. Crown and Buyer represent and warrant to Sellers that: 9.1 Crown and Buyer are corporations duly organized, validly existing and in good standing under the laws of the States of Texas and Nevada, respectively, with all requisite corporate power and authority to own their assets and conduct their business as presently conducted. Crown and Buyer have all requisite corporate power and authority to execute and deliver this Agreement and to perform their respective obligations hereunder. 9.2 This Agreement has been duly executed and delivered by Crown and Buyer, and constitutes Crown's and Buyer's valid and binding obligation, enforceable against each of them in accordance with its terms, except as such enforceability may be limited by the provisions of 28 29 applicable bankruptcy and insolvency, moratorium or similar laws affecting creditors' rights generally, and except that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceedings therefor may be brought. The execution and delivery of this Agreement by Crown and Buyer and the consummation by Crown and Buyer of the transactions contemplated hereby to be consummated by Crown and Buyer do not and will not (i) violate any provision of their respective charter or by-laws; (ii) result in the breach of any of the terms or conditions, or constitute a default under, any contract, lease, franchise, concession, license, permit, note, bond, indenture, mortgage, deed of trust, security interest or other agreement or instrument to which Crown and Buyer is a party or by which Crown or Buyer or their respective assets may be bound; (iii) subject to obtaining the consents and approvals contemplated by subsection 6B.1.2 hereof, violate any law or governmental rule or regulation, or any order, judgment or award of any court or administrative agency, or any decision or finding of any arbitrator, binding upon Crown and Buyer; or (iv) except for the consents and approvals contemplated by subsection 6B.1.2 hereof and Nomura Holding, Inc. ("Nomura"), require the consent of any governmental authority or other person. The consent of Nomura shall be obtained, or no longer required, prior to the First Closing Date. The consent of Nomura is not a condition precedent in any manner whatsoever to the obligations of Crown or Buyer under this Agreement. 9.3 There is no suit, action, proceeding (administrative or otherwise), arbitration or governmental investigation pending, or to the best knowledge of Crown and Buyer, threatened, against Crown or Buyer that will adversely affect the performance by Crown or Buyer of their respective obligations hereunder. 9.4 To the best knowledge of Crown and Buyer, the representations and warranties of the other set forth in this Article 9 are true and correct in all material respects. Article 10. Operation of the Hotel/Casino Pending the First Closing. Between the date hereof and the First Closing: 10.1 HICN shall carry on the business of the Hotel/Casino in the ordinary course as such business is presently being conducted. 10.2 HICN shall use its best efforts to preserve intact the business organization of the Hotel/Casino, to retain the services of the Hotel/Casino's present employees and to preserve the Hotel/Casino's present relationships with the suppliers, customers and others having business relationships with the Hotel/Casino. 10.3 Except as may be first approved by Buyer (whose approval shall not be unreasonably withheld), or as may be otherwise contemplated by this Agreement, neither Seller shall (i) except for non-material changes in the ordinary course of business, amend, supplement or otherwise change in any material respect the terms and conditions of any Hotel Service Contracts; (ii) enter into any contract or commitment, or incur any liability, with respect to the Non-Gaming Assets, except contracts and commitments entered into, and current liabilities incurred, in the ordinary course of business with third parties; or (iii) sell or otherwise dispose 29 30 of any Non-Gaming Asset owned or held by such Seller as of the date of this Agreement, except for dispositions of non-material portions thereof in the ordinary course of business. 10.4 Except as may be first approved by Buyer (whose approval shall not be unreasonably withheld), HICN shall not (i) increase any compensation payable or to become payable by HICN to any employee of the Hotel/Casino, other than in the ordinary course of business; or (ii) make any change in the benefits payable to any Hotel/Casino employee under any bonus or pension plan or other employee benefit plan or arrangement specifically identified by HICN in the Disclosure Letter in response to Section 8.15 hereof, other than in the ordinary course of business. 10.5 Each Seller shall file all tax returns required to be filed by such Seller (other than income tax returns), and pay all taxes shown thereon to be due and payable, prior to the First Closing Date with respect to the Non-Gaming Assets. 10.6 Each Seller shall file all reports or returns required to be filed by such Seller prior to the First Closing Date with governmental authorities and relating to the ownership or operation of the Non-Gaming Assets owned or held by such Seller. 10.7 HICN shall maintain its existing insurance (or equivalent insurance coverage), with respect to the Hotel/Casino and the Apartment Building, subject to variations in amounts required by the ordinary operation of the Hotel/Casino's and Apartment Building's business. At the request of Buyer and at Buyer's sole expense, HICN shall use its best efforts to increase the amount of insurance against fire and other casualties that, at the date of this Agreement, HICN carries on the Hotel/Casino and Apartment Building or in respect of its operations by the amount or amounts Buyer shall specify. 10.8 Sellers will maintain, service and repair (if necessary) the Assets so that, at First Closing, such Assets are in at least as good operating condition and repair as when inspected by the Buyer prior to the date of this Agreement. 10.9 Sellers will comply in all respects with all applicable laws, rules, regulations, judgments, decrees, orders, governmental permits, certificates and licenses related to the Assets. 10.10 At all reasonable times prior to the First Closing, Sellers shall provide to Buyer, its counsel and other authorized representatives, full and free access, at reasonable times and upon reasonable notice, to all of the properties, books, contracts, commitments and records of Sellers related to the Hotel/Casino and Apartment Building. Article 10A. Operation of Gaming Assets Pending the Second Closing. Between the date hereof and the Second Closing: 10A.1 Except as may be first approved by Buyer (whose approval shall not be unreasonably withheld), or as may be otherwise contemplated by this Agreement or permitted by 30 31 the Buyer/HICN Lease, Sellers shall not (i) except for non-material changes in the ordinary course of business, amend, supplement or otherwise change in any material respect the terms and conditions of any Gaming Service Contract; (ii) enter any contract or commitment, or incur any liability, with respect to the Slot Machines and the other Gaming Assets, except contracts and commitments entered into, and current liabilities incurred, in the ordinary course of business with third parties; or (iii) sell or otherwise dispose of any Gaming Asset owned or held by such Seller as of the date of this Agreement, except for dispositions of non-material portions thereof in the ordinary course of business. 10A.2 Each Seller shall file all tax returns, if any, required to be filed by such Seller (other than income tax returns), and pay all taxes shown thereon to be due and payable, prior to the Second Closing Date with respect to the Gaming Assets. 10A.3 Each Seller shall file all reports or returns, if any, required to be filed by such Seller prior to the Second Closing Date with governmental authorities (including, without limitation, the Nevada Gaming Authorities) and relating to the ownership or operation of the Gaming Assets owned or operated by such Seller. 10A.4 Sellers shall comply with the provisions of Sections 10.1 through 10.9 hereof, subject to the terms of the Buyer/HICN Lease. Article 11. Indemnification. 11.1 Subject to the remaining provisions of this Article 11, each of the Partnership and HICN shall severally, but not jointly, indemnify and hold harmless Crown and Buyer from, against and in respect of any and all damages, losses or expenses (including reasonable attorneys' fees), suffered or paid as a result of any and all claims, judgments and liabilities against or sustained by Crown or Buyer as a result of (i) any inaccuracy in, or breach of any representation or warranty or covenant made by such Seller herein; (ii) any breach, non-fulfillment or default in the performance by such Seller of any of the covenants or agreements made by such Seller herein or in any documents delivered in connection herewith; or (iii) any failure of such Seller to duly pay, perform or otherwise discharge any liability or obligation of such Seller (x) in respect of the Non-Gaming Assets, accruing or arising prior to the First Closing, and (y) in respect of the Gaming Assets, accruing or arising prior to the Second Closing; provided, however, that Crown and Buyer shall be entitled to indemnification hereunder only at such time as the aggregate amount of all of such damages, losses and expenses exceeds $50,000, except that such minimum amount shall not apply to a failure by Sellers to duly pay, perform or discharge any liability or obligation as set forth in Section 8.11 hereof. HICN shall further indemnify and hold harmless Buyer as follows: In the event that the Nevada Gaming Authorities determine that Buyer may not at the Second Closing terminate any progressive Slot Machine liability then in place and notify Buyer of the same, HICN shall, upon delivery to HICN of a copy of such notice, reimburse Buyer for the aggregate amount shown on the "meters" of all such Slot Machines, if any, as of the Second Closing Time. 31 32 11.2 Crown and Buyer shall, jointly and severally, indemnify and hold harmless each Seller from, against and in respect of any and all damages, losses or expenses (including reasonable attorneys' fees), suffered or paid as a result of any and all claims, judgments and liabilities against or sustained by such Seller as a result of (i) any inaccuracy in, or breach of any representation or warranty or covenant made by Crown and Buyer herein; (ii) any breach, non-fulfillment or default in performance by Crown or Buyer of any of the covenants or agreements made by Crown or Buyer herein or in any documents delivered in connection herewith; or (iii) any failure of Crown or Buyer to duly pay, perform or otherwise discharge any contractual or other liability or obligation assumed by Crown or Buyer pursuant to subsection 2.1.4 hereof. 11.3 In the event that Crown and Buyer, on the one hand, or a Seller, on the other, (in such capacity, the "Indemnified Party"), obtains knowledge of any damage, loss, expense, claim, judgment or liability that the Indemnifying Party determines has given or give rise to a claim under this Article 11, the Indemnified Party shall promptly give notice of the same to the party required by this Agreement to provide such indemnification (the "Indemnifying Party," and such notice a "Notice of Claim"). A Notice of Claim shall specify, in reasonable detail, the nature of the facts or circumstances that the Indemnified Party has determined have given or may give rise to a claim for indemnification hereunder. With respect to any third-party claim giving rise to a Notice of Claim, the Indemnifying Party may defend, at its expense, such third-party claim; provided, however, that the Indemnified Party, at its expense, shall have the right to participate in such defense. The Indemnified Party shall make available to the Indemnifying Party or its attorneys or other representatives all books and records of the Hotel/Casino or the Apartment building, as the case may be, and all other materials reasonably required by the Indemnifying Party or its representatives for use in contesting any third-party claim, and shall cooperate fully with the Indemnifying Party in the defense of all such claims. 11.4 In the event that any facts or circumstances shall occur that would otherwise entitle any party hereto to assert a claim for indemnification hereunder, no damage, loss or expense shall be deemed to have been sustained by such party to the extent of any proceeds received by such party from any insurance policy or policies with respect thereto. 11.5 An Indemnifying Party shall not be liable under this Article 11 for any damage, loss or expense resulting from any facts or circumstances relating to a breach of any representation or warranty if the Indemnifying Party can establish that the Indemnified Party has actual knowledge of such facts by reason of a writing or written materials on or prior to the First Closing Date (or, to the extent such representation or warranty relates to the Gaming Assets, on or prior to the Second Closing Date); provided, however, such writing or written materials shall have been delivered by a Seller or its attorneys to Crown, Buyer or their attorneys pursuant to this Agreement and, with respect to writings or written materials delivered after the date of this Agreement, the receipt thereof shall have been acknowledged in writing by the President or a Vice President of Crown, Buyer or their attorneys. Notwithstanding the foregoing, the provisions hereof shall not affect Sellers' liability relating to a breach of any representation or warranty relating to the title of the Assets, and any modification to a representation and warranty required by such writing or written materials shall have been evidenced in the certificate of Seller required 32 33 at the First or the Second Closing, as the case may be, pursuant to Section 6.1 and subsection 6B.1.1, respectively, and such modification shall have been accepted and approved by Buyer, and Buyer shall have waived such modification to the accuracy of any such representation or warranty. 11.6 For purposes of this Article 11, the representations and warranties contained in this Agreement and relating to the Non-Gaming Assets shall survive the First Closing for a period of two years, and the representations and warranties contained herein and relating to the Gaming Assets shall survive the Second Closing for a period of two years; provided, however, that no such termination of any such representation or warranty shall terminate, limit or otherwise affect any claim(s) made by any party hereto for breach of such representation and warranty which claim was made prior to the date of such termination. 11.7 Except as otherwise provided in subsection 2.1.2 hereof, the indemnification provided for in this Article 11 shall be the sole remedy to which the parties hereto are entitled in respect of any fact or circumstance that would give rise to such right of indemnification without regard to the proviso included in Section 11.1 hereof. Article 12. Risk of Loss. Notwithstanding the execution and delivery of this Agreement, HICN shall continue to conduct the business conducted by HICN at the Hotel/Casino, and ownership of the Assets subject hereto shall remain with Sellers, until (i) in the case of the Non-Gaming Assets, the First Closing; and, (ii) in the case of the Gaming Assets, the Second Closing. Accordingly, until such time(s), Sellers shall bear all risk of loss with respect to said assets, except as hereinafter provided to the contrary. 12.1 In the event that prior to the First Closing, the Hotel Land, any of the Hotel Improvements, the Apartment Land or any of the Apartment Improvements are destroyed or materially damaged as a result of any fire or other casualty, or in the event that Sellers receive notice that a condemnation action or proceedings in eminent domain have been or will be commenced against the Hotel Land, any of the Hotel Improvements, the Apartment Land or any of the Apartment Improvements (other than the Street Widening), Sellers shall promptly notify Buyer of the same, and Buyer thereupon shall have the right to terminate this Agreement (and the Deposit shall be promptly delivered to Buyer) by giving notice to Sellers of such termination; provided, however, that any such notice from Buyer shall be effective only if given to Sellers within 10 business days after Sellers notify Buyer of the commencement of such action or proceeding. If Buyer does not so terminate this Agreement, (i) the representations, warranties and covenants of Sellers herein shall be deemed modified to reflect such casualty or taking; and (ii) any and all insurance proceeds or award(s) payable to Sellers by reason of such casualty or taking shall be paid by Sellers (or Sellers' rights to receive the same shall be assigned by Sellers), to Buyer at the First Closing. 33 34 12.2 In the event that prior to the First Closing any material portion of the FF&E or other tangible assets or properties included in the Non-Gaming Assets is damaged or destroyed, and Sellers elect not to repair or replace the damaged or destroyed asset(s), Sellers shall promptly notify Buyer of the same and of Sellers' estimate of the aggregate cost of repairing such damage or replacing the destroyed asset(s). Buyer thereupon shall have the right to terminate this Agreement (and the Deposit shall be promptly delivered to Buyer) by giving notice to Sellers of such termination; provided, however, that any such notice from Buyer shall be effective only if given to Sellers within 10 business days after Sellers notify Buyer of such damage or destruction. If Buyer does not so terminate this Agreement, (i) the representations, warranties and covenants of Sellers herein shall be deemed modified to reflect such damage or destruction; (ii) any and all insurance proceeds payable to Sellers by reason of such casualty shall be retained by Sellers; and (iii) the amount payable to Sellers pursuant to subsection 2.1.2 and to subsection 4.3.4 hereof shall be reduced by an amount equal to the aforementioned estimate. 12.3 In the event that prior to the Second Closing any material portion of the Slot Machines or the other tangible personal property included in the Gaming Assets is damaged or destroyed, and Sellers elect not to repair or replace the damaged or destroyed asset(s), Sellers shall promptly notify Buyer of the same and of Sellers' good faith estimate of the aggregate cost of repairing such damage or replacing the destroyed asset(s). Buyer thereupon shall have the right to terminate the obligations to purchase the Gaming Assets pursuant to this Agreement by giving notice to Sellers of such termination; provided, however, that any such notice from Buyer shall be effective only if given to Sellers within 10 business days after Sellers notify Buyer of such damage or destruction. If Buyer does not so terminate this Agreement, (i) the representations, warranties and agreements of Sellers herein shall be deemed modified to reflect such damage or destruction; (ii) any and all insurance proceeds payable to Sellers by reason of such casualty shall be retained by Sellers; and (iii) the amount payable to Sellers pursuant to subsection 2.1.2 and to subsection 4A.2.2 hereof shall be reduced by an amount equal to the aforementioned estimate. Article 13. Termination. 13.1 This Agreement may be terminated at any time prior to the First Closing: 13.1.1 By mutual consent of all parties hereto; 13.1.2 By Buyer, on the one hand, or Sellers, on the other hand (in each case by notice given to the other or others), if the First Closing shall not have occurred on or before the First Closing Date provided for in Section 4.1 hereof; provided, however, that the right to terminate this Agreement under this subsection 13.1.2 shall not be available to any party whose failure to perform any obligation or comply with any covenant under this Agreement has been the cause or resulted in the failure of the First Closing to occur on or before such date; or 13.1.3 If there is a Regulatory Termination, in which event the Deposit shall be promptly delivered to Buyer. 34 35 13.2 This Agreement may be terminated at any time after the First Closing but prior to the Second Closing; 13.2.1 By mutual consent of all parties hereto; 13.2.1.1 By Buyer, on the one hand, or Sellers, on the other hand (in each case by notice given to the other(s)) if the Second Closing shall not have occurred on or before sixteen (16) months after the First Closing Date; provided, however, that the right to terminate this Agreement under this subsection 13.2.1.1 shall not be available to any party whose failure to perform any obligation or comply with any covenant under this Agreement has been the cause or resulted in the failure of the Second Closing to occur on or before such date; or 13.2.2 If there is a Regulatory Termination. 13.3 Nothing in this Article 13 shall supersede, limit or otherwise affect any right of termination granted to any party or parties hereto pursuant to Article 12 hereof or any other provision or provisions of this Agreement, including specifically Buyer's right to terminate this Agreement pursuant to Article 4D. 13.4 In the event of any termination of this Agreement pursuant to this Article 13 or otherwise: 13.4.1 If this Agreement is terminated after the First Closing has occurred, such termination shall in no way affect the sale of the Non-Gaming Assets to Buyer pursuant hereto or the rights, duties and remedies of the parties hereto arising out of or with respect to such sale; 13.4.2 This Agreement shall be of no further force or effect, and neither any of the parties hereto nor any of their respective trustees, directors, officers, employees, agents or representatives shall have any further liability or obligation hereunder, other than for willful failure to consummate the transactions contemplated hereby notwithstanding the satisfaction of all of the conditions set forth herein to such party's obligation to consummate the same; provided, however, that the provisions of Section 4D.1, this Section 13.4, the provisions of Sections 16.9 through and including 16.12 hereof, and (if the First Closing shall have occurred), the representations and warranties made by Sellers in Articles 7 and 8 hereof to the extent the same relate to the Non-Gaming Assets, the representations and warranties made by Buyer in Article 9 hereof, and the provisions of Article 11 hereof shall survive such termination and continue in full force and effect; 13.4.3 Except as otherwise provided in subsection 2.1.2 hereof, there shall be returned to each party hereto any and all documents and funds theretofore deposited by such party in the Escrow (including any income earned on any such funds); and 35 36 13.4.4 Except as otherwise provided in the proviso included in Section 4.5 hereof, Buyer and Sellers each shall pay one-half of any costs incurred for obtaining the Title Insurance Policy and the Survey and one- half of the fees and expenses of the Escrow Agent. Article 14. Brokers. Crown and Buyer represent and warrant to Sellers that other than Resort Properties of America ("Broker"), Crown and Buyer have not engaged the services of a broker, finder or investment banker in connection with this Agreement or the transactions contemplated by this Agreement. Broker's fees and expenses shall be paid by Crown and Buyer. Crown and Buyer represent and warrant that the fee paid to Broker is not one paid in consideration for the arranging or negotiation of an extension of credit intended for (a) the acquisition of an interest in a gaming establishment or registered company, or (b) to finance the gaming operations of a licensed gaming establishment. Sellers represent and warrant to Buyer that Sellers have not engaged the services of a broker, finder or investment bankers in connection with this Agreement or the transactions contemplated by this Agreement. Crown and Buyer shall, jointly and severally, indemnify and hold the Sellers harmless from and against any and all claims, liabilities or obligations that may result from any omission or inaccuracy in the foregoing representation and warranty made by Crown and Buyer. Article 15. Notices. All notices, requests, approvals, consents or other similar communications that any party hereto shall be required or desire to give to any other party under this Agreement shall be in writing and shall be delivered by hand or prepaid overnight courier service, or mailed by first-class U.S. certified or registered mail, return receipt requested, postage prepaid, or sent by facsimile, telegram or telex, provided that receipt for such facsimile, telegram or telex is verified by the sender and followed by a notice sent in accordance with one of the other provisions set forth above, in each case to the person named below or addressed as follows: If to Crown: Crown Casino Corporation 2415 West Northwest Highway, Suite 103 Dallas, Texas 75220 Attn: Mark D. Slusser, Chief Financial Officer Facsimile: 214-357-1974 If to Buyer: Crown Casino Nevada, Inc. 2415 West Northwest Highway, Suite 103 Dallas, Texas 75220 Attn: Mark D. Slusser, Chief Financial Officer Facsimile: 214-357-1974 36 37 In each case, with a copy to: T. J. Falgout, III Stumpf & Falgout 1400 Post Oak Boulevard, Suite 400 Houston, Texas 77056 Facsimile: 713-871-0408 If to the Partnership: SLT Realty Limited Partnership c/o Starwood Lodging Corporation 11845 Olympic Boulevard, Suite 550 Los Angeles, California 90064 Attn: Jeffrey C. Lapin, President Facsimile: 310-575-9512 If to HICN: Starwood Lodging Corporation 11845 Olympic Boulevard, Suite 550 Los Angeles, California 90064 Attn: Kevin Mallory, Executive Vice President Facsimile: 310-575-9512 In each case, with a copy to: Lionel Sawyer & Collins 1100 Bank of America Plaza 50 West Liberty Street Reno, Nevada 89501 Attn: Dan R. Reaser, Esq. Facsimile: 702-788-8682 or to such other person or address as the addressee may have specified in a notice duly given to the sender as provided herein. If so delivered, couriered or mailed, each such notice or other communication shall be deemed given when personally delivered, as of the first business day after the date so sent by courier, or as of the third business day after the day so sent by mail, as the case may be. Article 16. Miscellaneous. 16.1 Neither this Agreement nor any right, remedy, obligation or liability arising hereunder or by reason hereof may be assigned by any party hereto, except that (subject to compliance with applicable Nevada gaming statutes and regulations), HICN may assign any or all of its rights and remedies hereunder to Starwood Lodging Corporation, a Maryland corporation ("SLC"), or to any other direct or indirect subsidiary of SLC. 37 38 16.2 For a period of 90 days after each of the First Closing Date and the Second Closing Date, Buyer shall provide Sellers with the use of such office space at the Hotel/Casino and such use of the Hotel/Casino's computer system and staff as Sellers may reasonably request for the purpose of preparing Sellers' financial statements for the period(s) in which such closings occur. Sellers may from time to time after each of the First Closing and the Second Closing (upon reasonable prior notice to Buyer), make copies of the books and records of the Hotel/Casino with respect to the period prior to such closing(s) to the extent reasonably required by either Seller to prepare and substantiate its tax returns (including, without limitation, in connection with any audit), or to prepare for, prosecute, defend or settle any litigation pending or threatened against such Seller; provided, however, that Sellers may not remove any such books or records from the Hotel/Casino. Buyer agrees to maintain all such original books and records of the Hotel/Casino for such time periods as are required by the Internal Revenue Service and the Nevada Gaming Authorities, but in any event, not less than five (5) years. 16.3 Each of the parties hereto shall use its best efforts to bring about the transactions contemplated by this Agreement as soon as practicable (including, without limitation, by making such all such filings and taking all such other actions as are necessary or appropriate to obtain the consents and approvals referred to in Section 4A.1 hereof). Without limiting the generality of the foregoing, Sellers shall promptly, from time to time after the First Closing and the Second Closing, execute and deliver to Buyer such further bills of sale, conveyances, assignments, assurances or other instruments of transfer as Buyer shall reasonably request, in order to vest and confirm in Buyer all right, title and interest of Sellers in and to the assets acquired by Buyer pursuant to this Agreement. 16.4 This Agreement and the Exhibits attached hereto (together with the Buyer/HICN Lease), contain(s) all of the terms and conditions agreed upon by the parties hereto with respect to the subject matter hereof, and no representation or warranty not specifically made, and no covenant or agreement not specifically referred to, herein shall be deemed to exist or to bind any of the parties hereto with respect to the subject matter hereof. Without limiting the generality of the foregoing, no officer, employee or agent of either Seller has any authority to make any representation or promise not contained in this Agreement, and Buyer acknowledges that it has not executed this Agreement in reliance upon any such representation or promise. This Agreement may not be amended or supplemented except by a writing signed by the party or parties to be bound thereby. This Agreement shall inure to the benefit and be binding upon the parties hereto and their respective successors and permitted assigns. Nothing in this Agreement, expressed or implied, is intended to confer on any person other than the parties hereto and their respective successors and permitted assigns any right or remedy under or by reason of this Agreement. 16.5 Sellers may, by notice to Buyer, or Buyer may, by notice to Sellers, (i) waive or extend the time for the performance of any of the obligations or other actions of the other(s); (ii) waive any inaccuracy in the representations or warranties of the other(s) contained in this 38 39 Agreement or in any document delivered pursuant to this Agreement; or (iii) waive compliance with any of the covenants of the other(s) contained in this Agreement. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach of such provision or of any breach of any other provision hereof. 16.6 All Article headings herein have been inserted for the convenience of the parties, and shall not in any way modify, limit, construe or otherwise affect this Agreement. All references herein to Sections include all subsections of such Sections. For purposes of interpreting the phrase "HICN's operation of the Hotel/Casino" as used in this Agreement, HICN shall be deemed to operate the Hotel/Casino in substantially the same manner as the Hotel/Casino is currently operated. 16.7 This Agreement may be executed in several counterparts, each of which shall be deemed to be an original and which together shall constitute one and the same instrument. 16.8 This Agreement shall be governed and construed in accordance with the laws of the State of Nevada. 16.9 Except as may be otherwise required by applicable federal securities law or by the requirements of any national securities exchange on which securities of the Partnership, any general partner of the Partnership or Crown are listed, or as required by applicable laws governing the regulation of the Hotel/Casino by the Nevada Gaming Authorities, neither Sellers, on the one hand, nor Crown or Buyer, on the other, shall notify any third party of, or issue any press release or otherwise make any public disclosure concerning, the execution and delivery of this Agreement or the transactions contemplated hereby; provided, however, that notwithstanding the foregoing provisions of this Section 16.9, copies of this Agreement may be furnished by Crown and Buyer to those persons and entities that have agreed (or that Crown and Buyer believe may agree), to provide Buyer with equity or debt financing for Buyer's purchase of the Hotel/Casino and the Apartment Building if Crown and Buyer shall first have obtained the written agreement of each such source (or potential source), of financing to hold such information in confidence and to use such information only for the purpose of determining whether or not to provide such financing to Buyer. Crown, Buyer and Sellers will consult and cooperate with each other as to the timing and content of any announcements of the transaction contemplated hereby to the general public or to employees, customers or suppliers. Except as otherwise required by applicable law, neither party without the consent of the other will issue any press release concerning the transaction contemplated by this agreement, it being the intent of the parties that any press releases will be issued simultaneously and the contents thereof will be approved by all parties. Unless and until the First Closing has occurred, Crown and Buyer shall keep strictly confidential and not disclose to any other person or entity (other than Crown's and Buyer's auditors, attorneys, bankers and other authorized representatives), any and all Confidential 39 40 Information obtained from any financial statements or other materials provided to Crown and Buyer or their authorized representatives by or on behalf of Sellers in connection with the transactions contemplated hereby or pursuant to visitation, inspection or review rights granted hereunder. If the First Closing does not occur, Crown and Buyer shall return or cause to be returned to Sellers all written materials and all copies thereof that were supplied to Crown and Buyer by or on behalf of Sellers and that contain any Confidential Information. As used in this Agreement, "Confidential Information" means any information concerning the Hotel/Casino or its business and/or the Apartment Building, but does not include information (i) that is or becomes generally available to the public through no fault of Crown and Buyer; or, (ii) that is later acquired by Crown and Buyer on a non-confidential basis from a source other than Sellers which source is not known by Crown and Buyer to be obligated to keep such information confidential. Crown and Buyer shall cause any auditor, attorney, banker or other authorized representative of Crown and Buyer to whom any Confidential Information is disclosed by Crown and Buyer or any other authorized representative of Crown and Buyer to observe in all respects the provisions of this Section 16.9. 16.10 Crown, Buyer and Sellers each on their own behalf and on behalf of their successors hereby irrevocably submit themselves to the exclusive jurisdiction of the Eighth Judicial District Court of the State of Nevada in and for the County of Clark for the purposes of any suit or other proceeding arising out of, or relating to, this Agreement or the transactions contemplated thereby, and hereby waive the right to assert, by way of motion, as a defense, or otherwise, in any such suit action or proceeding that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper, or that this Agreement or the subject matter hereof may not be enforced in or by such court. Each Seller hereby appoints Dan R. Reaser, Esq. (whose address is set forth in Article 15 hereof) as such Sellers' agent for service of process, and Crown and Buyer each hereby appoints T.J. Falgout, Esq. (whose address also is set forth in Article 15 hereof) as their agent for service of process. 16.11 Except as otherwise expressly provided to the contrary in this Agreement, each party hereto shall pay its own expenses incidental to the negotiation and preparation of this Agreement and the carrying out and consummation of the transactions contemplated hereby. In the event suit is brought to enforce or interpret any part of this Agreement or the rights or obligations of any party to this Agreement, the prevailing party or parties shall be entitled to recover, as an element of such the costs of suit of such party or parties, and not as damages, reasonable attorneys' fees to be fixed by the court. A prevailing party shall be a party entitled to recover such party's costs of suit, whether or not the suit proceeds to final judgment. A party not entitled to recover such party's costs shall not recover attorneys' fees. No sum for attorneys' fees shall be counted in calculating the amount of a judgment for purposes of determining whether a party is entitled to recover such party's costs or attorneys' fees. 40 41 16.12 No provision of this Agreement shall be construed in favor of or against any of the parties hereto by reason of the extent to which any such party or its counsel participated in the drafting hereof or by reason of the extent to which such provision or any other provision or provisions of this Agreement is or are inconsistent with any prior draft thereof. If any provision of this Agreement is held by a court or competent jurisdiction to be invalid, illegal or unenforceable, the remaining provisions hereof shall in no way be affected and shall remain in full force and effect. 16.13 From and after the end of the Limited Inspection Period until the earlier of the Second Closing Date or the termination of this Agreement in accordance with the terms hereof, Sellers will not solicit or encourage inquiries or proposals with respect to, or furnish any information relating to, or participate in any negotiations or discussions concerning, any acquisition of the Hotel/Casino, and Sellers shall instruct their officers, directors, agents and affiliates to refrain from doing so. After the end of the Limited Inspection Period, Sellers will notify Buyer of any such serious inquiry or proposal received by Sellers, or if any such information is requested from Sellers, or any such negotiations are sought to be initiated with Sellers, and any response thereto shall be approved in advance by Buyer. 16.14 At the Second Closing Date, Seller will terminate the Employee Plans so that, after the Second Closing Date, Buyer shall not be obligated to any employees of Sellers, whether or not hired by Buyer, with respect to and under such Employee Plans. Further, Sellers shall be responsible for any continuation of coverage of group health plans for any such employees under Title X of the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"). IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first written above. Crown Casino Corporation SLT Realty Limited Partnership By: Starwood Lodging Trust, By: ------------------------------- its sole general partner Name: ------------------------------------ Title: By: ----------------------------------- -------------------------------------- Name: ------------------------------------- Title: ----------------------------------- Crown Casino Nevada, Inc. Hotel Investors Corporation of Nevada, Inc. By: By: -------------------------------------- -------------------------------------- Name: Name: ------------------------------------ -------------------------------------- Title: Title: ----------------------------------- -----------------------------------
41 42 The name "Starwood Lodging Trust" is a designation of Starwood Lodging Trust and its Trustees (as Trustees but not personally), under a Declaration of Trust dated August 25, 1969, as amended and restated as of June 6, 1988, and as further amended [February 28, 1995] and all persons dealing with Starwood Lodging Trust must look solely to Starwood Lodging Trust's property for the enforcement of any claims against Starwood Lodging Trust, as the Trustees, officers, agents and securityholders of Starwood Lodging Trust assume no personal obligations of Starwood Lodging Trust, and their respective properties shall not be subject to the claims of any persons relating to such obligations. For value received, and in consideration for and as an inducement to Crown and Buyer to enter into this Agreement, Starwood Lodging Corporation, a Maryland corporation ("SLC"), hereby joins in this Agreement for the sole purpose of guaranteeing, and SLC hereby unconditionally guarantees unto Crown and Buyer the full performance and observance of all of the obligations of HICN under Article 11 of this Agreement, including, without limitation, the indemnification obligation set forth in Section 11.1 of this Agreement. This guaranty is unconditional, and the liability of SLC shall be primary and absolute. STARWOOD LODGING CORPORATION, a Maryland corporation By: ---------------------------------------- Name: -------------------------------------- Title: ------------------------------------- 42 43 LEASE THIS LEASE is made and entered into as of the _____ day of ____________, 1995, by and between CROWN CASINO NEVADA, INC., a Nevada corporation, as lessor ("Lessor"), and HOTEL INVESTORS CORPORATION OF NEVADA, INC., a Nevada corporation, as lessee ("Lessee"), with reference to the following facts and objectives: A. Concurrently with the execution hereof, and pursuant to an Asset Purchase Agreement dated as of July 11, 1995 (the "Asset Purchase Agreement"), by and among Lessor, Crown Casino Corporation, a Texas corporation, Lessee and SLT Realty Limited Partnership, a Delaware Limited Partnership (the "Partnership"), the Partnership and Lessee are selling to Lessor that certain (i) hotel, restaurant, bar, casino and related assets commonly known as the Bourbon Street Hotel & Casino located at 120 E. Flamingo Road, Las Vegas, Nevada 89109 (the "Hotel/Casino") and (ii) real and personal property comprising a 24-unit apartment building located at 135 Albert, Las Vegas, Nevada 89109 (the "Apartment Building"). B. The Hotel/Casino has previously been leased by the Partnership to, and the Hotel/Casino has been operated by, Lessee pursuant to that certain amended and restated lease dated January 1, 1993. The Apartment Building has previously been operated by the Partnership. C. Lessor will acquire the Non-Gaming Assets (as defined in the Asset Purchase Agreement), including, without limitation, the Hotel/Casino and the Apartment Building, from Lessee and the Partnership at the First Closing (as defined in the Asset Purchase Agreement). Pending the Second Closing (as defined in the Asset Purchase Agreement), Lessee will continue to operate the Hotel/Casino and the Apartment Building with the Gaming Assets (as defined in the Asset Purchase Agreement) owned by Lessee. Accordingly, Lessor and Lessee desire to enter into this Lease pursuant to which, on the terms and subject to the conditions herein contained, Lessor will lease to Lessee, and Lessee will lease from Lessor, the Hotel/Casino and the Apartment Building. ARTICLE 1 PREMISES AND TERM 1.1 Premises: Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor, the following assets: 1.1.1 The land and all appurtenances thereto on which the Hotel/Casino is located, which land (the "Hotel Land") is more particularly described on Exhibit 1.1.1 hereto; 1.1.2 All buildings, structures, parking areas and other improvements now or hereafter located on the Hotel Land (the "Hotel Improvements"); 1.1.3 The land and all appurtenances thereto on which the Apartment Building is located, which land (the "Apartment Land" and, together with the Hotel Land, the "Land") is more particularly described on Exhibit 1.1.3 hereto; 1.1.4 All buildings, structures, parking areas and other improvements now or hereafter located on the Apartment Land (the "Apartment Improvements" and, together with the Hotel Improvements, the "Improvements"); 1.1.5 All furniture, fixtures and equipment located as of the date hereof at the Hotel/Casino and/or the Apartment Building, but excluding the Gaming Assets owned by Lessee, and owned by Lessor or which Lessor otherwise has the right to use; and 1.1.6 All other assets and properties of the Hotel/Casino and the Apartment Building owned by Lessor, other than the Gaming Assets owned by Lessee, and Lessor's rights under the contracts and commitments referred to in Section 1.1A hereof. 44 The Land and the Improvements together are hereinafter referred to as the "Premises." 1.1A Assignment of Rights: Lessor hereby assigns to Lessee the rights of Lessor under the contracts and commitments referred to in the first paragraph of subsection 2.1.4 of the Asset Purchase Agreement (the "Hotel Service Contracts"), and delegates to Lessee the obligations of Lessor thereunder or otherwise assumed by Lessor pursuant to subsection 2.1.4 of the Asset Purchase Agreement, in each case solely to the extent that such rights or obligations accrue or arise during the term of this Lease; and Lessee hereby accepts such assignment and assumes such obligations. Without limiting the generality of the foregoing, Lessee during the Lease Term (as defined in Section 1.2 below) shall make each and all of the payments called for by each agreement or arrangement listed in the Disclosure Letter (as defined in the first paragraph of Article 7 of the Asset Purchase Agreement) in response to Sections 7.9, 7.10, 8.10 or 8.11 of the Asset Purchase Agreement, as such payments may be adjusted from time to time, on the terms and subject to the conditions of such agreement or arrangement. Each such payment shall be made by Lessee directly to the lessor, vendor or other appropriate party or parties to such agreement or arrangement. Lessor and Lessee acknowledge and expressly agree that nothing in this Section 1.1A shall be deemed to assign to Lessee any right or to delegate to Lessee any obligation of Lessor arising or accruing after the expiration or earlier termination of the Lease Term. 1.2 Lease Term: The term of this Lease (the "Lease Term") shall commence on ______________, 1995 [the First Closing Date] (the "Commencement Date"), and shall end on _______________, 1996 [the six month anniversary of the Commencement Date], unless sooner terminated pursuant to Section 1.3 hereof or any other provision of this Lease or unless extended pursuant to this Section 1.2. If as of _____________, 1996 [62 days prior to the scheduled expiration of the Lease Term], Lessor has not obtained all of the licenses and approvals described in Section 1.3 hereof, Lessor at its option may extend the Lease Term for up to ten (10) additional months on all of the provisions of this Lease (other than this paragraph); provided, however, that if Lessor does so elect to extend the Lease Term, Lessor shall notify Lessee of the same not later than 62 days prior to the then scheduled expiration of the Lease Term. In no event will the Lease Term extend beyond ___________, 199___ [the sixteen (16) month anniversary of the Commencement Date], unless Lessor and Lessee agree in writing to extend the term of this Lease on such terms and conditions mutually satisfactory to each of them in their sole discretion. If Lessor and Lessee do not agree in writing to extend the term of this Lease beyond _____________, 19___ [the sixteen (16) month anniversary of the Commencement Date], this Lease will nevertheless not terminate until ___________, 199___ [eighteen (18) months and two (2) days after the Commencement Date]. 1.3 Lessor's Right to Terminate Lease: If, prior to the expiration of the Lease Term (including any extended term), Lessor obtains, or reasonably believes it will obtain, all such licenses and approvals of the Nevada gaming authorities as are in the opinion of Lessor's counsel required by applicable law for Lessor to purchase and operate the Gaming Assets (as defined in Section 1.3 of the Asset Purchase Agreement) at the Hotel/Casino, Lessor shall notify Lessee of the same, and Lessor at any time thereafter may terminate this Lease upon not less than 62 days' prior notice to Lessee. ARTICLE 2 FF&E AND INVENTORY 2.1 FF&E. Lessee (i) subject to Section 4.5 hereof, shall maintain the FF&E (as hereinafter defined) in the same operating condition and state of repair 45 as on the date hereof (ordinary wear and tear and damage to or destruction of the Premises covered by Sections 9.1, 9.2 and 9.3 hereof excepted); (ii) shall keep the same free of any security interest, chattel mortgage, pledge or other encumbrance, except for those encumbrances permitted by Sections 7.4 and 8.8 of the Asset Purchase Agreement or by the proviso to the immediately following sentence; and (iii) subject to Section 4.5 hereof, at Lessee's cost, shall replace the same when, in Lessee's reasonable business judgment, such replacement is required. All FF&E installed in or furnished to the Premises by Lessee during the Lease Term (whether pursuant to contracts or commitments entered into by Lessee prior to or after the Commencement Date), if any, shall be new and (except as otherwise provided below) shall be purchased for cash and acquired free of any security interest, chattel mortgage, pledge or other encumbrance; provided, however, that Lessee may finance the purchase of (and in connection therewith encumber) all or any portion of any FF&E purchased by Lessee pursuant to this Section 2.1 if Lessee's purchase of such item(s) is financed (through a financing lease or otherwise) by the seller of such item(s) (or an affiliate of such seller). Lessee shall obtain Lessor's prior consent to the purchase of any FF&E to be purchased and financed by Lessee pursuant to this Section 2.1 if the financed purchase price exceeds $5,000.00, with respect to individual purchases, or $25,000.00 over a period of 12 months or $37,500.00 over a period of 18 months, with respect to purchases in the aggregate. For purposes of this Lease, "FF&E" means the assets described in subsection 1.1.5 hereof and any replacements therefor acquired by Lessee pursuant to clause (iii) of the first sentence of this Section 2.1. 2.1.1 Lessee shall make, as additional rent, each and all of the payments called for by any and all financing leases or conditional sales agreements relating to FF&E and entered into by Lessee pursuant to the proviso to the second sentence of this Section 2.1, as such payments may be adjusted from time to time, in accordance with the terms of such financing leases or conditional sales agreements. Such payments shall be made by Lessee directly to the lessor or vendor under each such lease or conditional sales agreement. 2.1.2 Upon the expiration or earlier termination of the Lease Term, (i) any FF&E installed in or furnished to the Premises by Lessee after the Commencement Date shall become a part of the Premises and belong to Lessor, and (ii) Lessee shall assign to Lessor all right, title and interest of Lessee in and to, and Lessor shall assume and thereafter duly perform each and all obligations of Lessee under, each financing lease or conditional sales agreement entered into by Lessee pursuant to the second sentence of this Section 2.1. 2.2 Gaming Assets. The Gaming Assets (as defined in Section 1.3 of the Asset Purchase Agreement) located at the Hotel/Casino as of the Commencement Date shall remain at, and shall be used by Lessee in its operation of, the Hotel/Casino without additional charge to Lessor. 2.3 Disposal of FF&E: Notwithstanding the foregoing provisions of this Article 2, Lessee shall have the right, at any time or from time to time, to remove and sell, demolish or otherwise dispose of any FF&E, whether installed in or furnished to the Premises, prior to, on or after the Commencement Date, if (i) Lessee determines, in its reasonable business judgment, that such act is necessary or desirable in connection with Lessee's operation of the Premises; (ii) Lessee at its cost (either by the payment of cash or by a financing pursuant to Section 2.1) replaces the item or items so removed and disposed of, if such replacement is determined by Lessee to be necessary in connection with the operation of such business; and (iii) any proceeds from the sale or other disposition of any such FF&E are either invested by Lessee in additional FF&E or remitted by Lessee to Lessor; provided, however, Lessee shall take no such action without Lessor's prior written consent if the estimated value of such FF&E exceeds $25,000.00 over a period of 12 months or $37,500.00 over a period of 18 months. 3 46 2.4 Operating Supplies and Stock-in-Trade: Lessor is delivering to Lessee, concurrently with the execution hereof and without additional charge, the operating supplies and consumable goods used in the operation of the Premises and included in the Non-Gaming Assets (as defined by Section 1.2 of the Asset Purchase Agreement) purchased by Lessor pursuant to Section 1.1 of the Asset Purchase Agreement. Such other assets shall be utilized by Lessee in connection with its operation of the Premises, and at such times as such assets are consumed or sold to third parties, Lessee at its cost shall provide all such operating supplies and consumable goods, as in Lessee's reasonable business judgment are necessary to operate the Premises. Lessee at its cost also shall provide such stock-in-trade and inventory of the casino portion of the Hotel/Casino (the "Casino") as in Lessee's reasonable business judgment are necessary to operate the Casino. ARTICLE 3 RENT; BOOKS AND RECORDS 3.1 Rent: Lessee shall pay to Lessor monthly rent for the Premises in the amount of $62,500.00, without deduction, setoff, prior notice or demand other than as is specifically permitted or required under this Lease. Monthly rent shall be paid in advance on the first day of each calendar month, commencing on the Commencement Date and continuing during the Lease Term; provided, however, that if the Commencement Date occurs other than on the first day of a calendar month, rent for such partial calendar month shall be paid on the Commencement Date. Monthly rent for any partial month shall be prorated at the rate of 1/30th of the monthly rent per day. All rent due hereunder shall be paid to Lessor in lawful money of the United States of America and at the address of Lessor set forth in Section 15.5 hereof, or to such other person or at such other place as Lessor may from time to time designate to Lessee in writing. 3.2 Late Payment of Rent. All past due rent and additional rent hereunder shall bear interest at the Default Rate (as hereinafter defined) if not paid within ten (10) days of the date such payment is due, commencing on the due date of such payment. 3.3 Books and Records: Lessee shall maintain at the Premises or at Lessee's principal executive offices complete and accurate books and records of the operations of the Premises, which books and records shall, to the extent permitted by applicable Nevada gaming statutes and regulations, be open to inspection by Lessor or its duly authorized representative during ordinary business hours and upon reasonable prior notice to Lessee. 3.4 Financial Statements: To the extent permitted by applicable Nevada gaming statutes and regulations, Lessee shall deliver to Lessor monthly financial statements of the operations of the Premises during the Lease Term. These financial statements will be delivered to Lessor no later than the thirtieth (30th) day of each month for the operations of the immediately preceding month. The financial statements will be in substantially the same form and content as those statements prepared by Lessee before the Commencement Date. ARTICLE 4 USE; MAINTENANCE; ALTERATIONS; MECHANICS' LIENS 4.1 Use: Lessee shall use the Premises as a hotel/casino (including a restaurant and bar) and for related activities, or for any other purpose or purposes consented to by Lessor. 4 47 Subject to such closure(s) of all or a part of the Premises as from time to time may be necessary to make repairs, replacements, restorations or improvements required or permitted by this Lease, Lessee shall operate the Premises and shall keep the Premises open for business continuously during all such hours and on such days as is customary for hotel/casinos in the Las Vegas, Nevada metropolitan area. Lessee shall carry on the business of the Premises in compliance with all applicable statutes, ordinances, resolutions, rules, regulations, orders or other requirements (collectively "laws") of any governmental authority having jurisdiction over the Premises in effect on the Commencement Date or at any time during the Lease Term, including, without limitation, any regulation or order of a board of fire examiners. Without limiting the generality of the foregoing, Lessee at its cost shall obtain and maintain any and all such business licenses and permits as are required by applicable law in connection with operation of the restaurant and bar portions of the Premises, and all licenses and other approvals required by applicable Nevada gaming statutes and regulations. 4.2 Maintenance: Subject to Section 4.5 and Articles 9 and 10 hereof, Lessee at its cost shall maintain the Premises in the same operating condition and state of repair as on the Commencement Date. 4.3 Alterations: Lessee shall not make any structural or exterior additions or changes to the Premises ("alterations") without first obtaining Lessor's consent. Lessee shall have the right to make, at Lessee's cost and without Lessor's consent, such nonstructural alterations to the interior of the Premises as Lessee in its reasonable business judgment requires in order to conduct its business on the Premises. In making any such nonstructural interior alterations, Lessee shall comply with the following: 4.3.1 Lessee shall submit to Lessor, not less than 15 days before the date Lessee intends to commence such alterations, reasonably detailed final plans and specifications and working drawings of the proposed alterations and the name of Lessee's contractor. 4.3.2 Lessee shall not commence the alterations until two days after Lessor receives notice from Lessee of the date the alterations are to be commenced, so that Lessor at its option may post on the Premises an appropriate notice of nonresponsibility. 4.3.3 All permits and other approvals or authorizations of governmental authorities that Lessee is required by applicable law to obtain in connection with the making of the alterations, if any, shall be so obtained before the alterations are commenced. 4.3.4 The alterations shall be completed with due diligence and shall comply in all material respects with the plans, specifications and working drawings referred to in subsection 4.3.1 hereof and with all applicable laws. Notwithstanding the foregoing, no such non-structural interior alterations shall be made without Lessor's consent if such alterations will change the character, color schemes or theme of the Premises. In addition, in the event that after receipt of final plans and specifications of such non-structural interior alterations pursuant to subsection 4.3.1 hereof, Lessor in its sole discretion disapproves of such alterations, such alterations shall not be made and Lessor and Lessee shall cooperate with each other so that such alterations that are required shall be made in a manner mutually agreed between Lessor and Lessee. Any alterations made by Lessee pursuant to this Section 4.3 shall remain on and be surrendered with the Premises on expiration or earlier termination of the Lease Term. 5 48 4.4 Mechanics' Liens: Lessee shall pay all costs of construction done by or for Lessee on the Premises as permitted by this Lease. Lessee shall keep the Premises free and clear of any mechanics' lien resulting from any such construction; provided, however, that Lessee shall have the right to contest the correctness or validity of any such lien if, immediately on demand of Lessor, Lessee procures a bond and secures the release of the lien in accordance with NRS Section Section 108.2413 et. seq. 4.5 Maintenance, Repair and Replacement Expenditures. During the Lease Term, Lessee has certain obligations specified in this Lease to maintain, repair and/or replace certain items in the ordinary course of business and in the exercise of Lessee's reasonable business judgment, including, but not limited to (i) FF&E under clauses (i) and (iii) of the first sentence of Section 2.1 ("FF&E Maintenance") and (ii) the Premises under Section 4.2 ("Premises Maintenance" and, together with FF&E Maintenance, "Maintenance Obligations"). (a) Notwithstanding anything to the contrary in this Lease (except Articles 9 and 10 hereof), Lessee is not obligated to spend more than $75,000 (the "MRR Cap") for the Maintenance Obligations during the Lease Term, or such lesser or greater pro rata amount of the MRR Cap if the Lease Term is less or more than twelve months. If Lessee determines in its reasonable business judgment that FF&E Maintenance or Premises Maintenance is required during the Lease Term and the estimated cost thereof will exceed the MRR Cap, then Lessee shall give written notice to Lessor of the same and the date on which the estimated difference will be incurred or payable (the "MRR Due Date") within 15 days after determining that the cost of the Maintenance Obligations will exceed the MRR Cap. Lessor, within 10 days after receiving such notice, may elect to pay to Lessee the difference (the "MRR Deficiency") between the amount of the estimated cost of the Maintenance Obligations and the MRR Cap on or before the MRR Due Date, in which event Lessee shall perform the Maintenance Obligations and Lessee shall deliver to Lessor upon its request evidence that the MRR Deficiency contributed by Lessor pursuant to this Section 4.5 has been expended by Lessee in paying the Maintenance Obligations. In lieu of Lessor contributing the MRR Deficiency to Lessee, Lessor may direct Lessee to offset that amount to the rental payments due under this Lease that accrue after the MRR Due Date until contributed in full. (b) If Lessor elects to contribute the MRR Deficiency to Lessee as provided in this Section 4.5 and Lessor does not pay the MRR Deficiency to Lessee within ten (10) days after the MRR Due Date, the MRR Deficiency shall bear interest at the Default Rate from the MRR Due Date until paid. In addition, if Lessor does not elect to pay the MRR Deficiency, or if Lessor does not pay Lessee the MRR Deficiency within ten (10) days after the MRR Due Date, Lessee may elect to terminate this Lease. If this occurs, this Lease shall terminate as of the date specified in Lessee's notice of termination. (c) This Section 4.5 does not apply to the provisions of Articles 9 and 10 hereof. 4.6 Maintenance of Gaming Assets. Lessee represents that, as provided in the Asset Purchase Agreement, it is the owner or lessee of the Gaming Assets, and covenants that it will maintain the Gaming Assets at the Premises in the manner and condition as required by the Asset Purchase Agreement, and, further, that it will own or lease adequate and sufficient gaming equipment, games and devices to operate and maintain the Casino in accordance with the standards of operation in place at the Premises as of the Commencement Date. Lessee further agrees to keep and maintain all Gaming Assets, such other gaming equipment, games and gaming devices in good condition and repair, and repair or replace all damaged or broken gaming equipment, games and devices as and when needed to keep and maintain the Casino operating and in good condition. 4.7 Lessor's Rights and Obligations Regarding Alterations and Improvements. Lessor may, at its sole cost and expense, make or cause to be made such repairs, alterations, additions, improvements, remodeling, renovations, 6 49 renewals and replacements (collectively, the "Repairs") to or of the structural, mechanical, electrical, heating, ventilating, air conditioning, plumbing, vertical transportation and other elements of the Premises or any other part of the Premises or any equipment or improvements thereon, other than the Gaming Assets, as Lessor in its sole discretion shall deem to be necessary and advisable, provided, however, that any Repairs required by reason of Lessee's act or omission shall be at the sole cost and expense of Lessee, and provided further, that: (a) Lessor must give Lessee prior written notice of Lessor's intention to undertake the Repairs at least fifteen (15) days prior to undertaking such Repairs or such longer period of time as is reasonable in relation to the Repairs; (b) the Repairs must comply with all applicable laws, including any requirements of the Nevada Gaming Authorities; (c) the Repairs will not interfere or disrupt Lessee's operation of the Premises; and (d) Lessor agrees to reimburse Lessee for any necessary costs incurred by Lessee and as are reasonable in relation to the Repairs. Lessor and Lessee shall reasonably cooperate to facilitate the Repairs. 4.8 Hotel Service Contracts/Non-Gaming Assets. Except as otherwise provided in this Lease or as may otherwise be first approved by Lessor (whose approval shall not be unreasonably withheld), Lessee shall not (a) except for non-material changes in the ordinary course of business, amend, supplement or otherwise change in any material respect the terms and conditions of any Hotel Service Contracts; (b) enter into any contract or commitment, or incur any liability, with respect to the Non-Gaming Assets, except contracts and commitments entered into, and current liabilities incurred, in the ordinary course of business with third parties; or (c) sell or otherwise dispose of any Non-Gaming Asset, except for dispositions of non-material portions thereof in the ordinary course of business. ARTICLE 5 WORKING CAPITAL; UTILITIES 5.1 Working Capital: Lessee at its cost shall provide all working capital necessary in Lessee's reasonable business judgment to operate the Premises. 5.2 Utilities: Lessee shall make all necessary arrangements, if any, for, and pay for, all utilities and similar services furnished to or used by Lessee at the Premises, including, without limitation, electricity, gas, water, telephone service and trash collection. ARTICLE 6 EXCULPATION AND INDEMNITY 6.1 Exculpation: Lessor shall not be liable to Lessee for any injury, damage or loss to Lessee or Lessee's property from any cause. Lessee hereby waives any and all claims against Lessor for injury, damage or loss to any person, entity or property occurring in, on or about the Premises, other than claims resulting from the negligence or willful misconduct of Lessor. 6.2 Indemnity: Lessee shall indemnify Lessor and hold Lessor harmless from and against any and all costs and expenses incurred by Lessor as a result of any injury, damage or loss to any person or property occurring in, on or about the Premises; provided, however, that Lessor shall be liable to Lessee for injury, damage and/or loss resulting from the negligence or willful misconduct of Lessor, and Lessor shall indemnify Lessee and hold Lessee harmless from and against any cost or expense occurred by Lessee as a result of any such injury, damage or loss. A party's obligation under this Section 6.2 to indemnify and hold the other party harmless shall be limited to the amount that exceeds the amount of insurance proceeds, if any, received by the party being indemnified. 7 50 ARTICLE 7 INSURANCE 7.1 Fire Insurance: Lessee at its cost shall maintain fire and "all-risk" property damage insurance with an extended coverage endorsement insuring the Premises in an amount equal to the full replacement value of the Premises. The insurance policy shall be issued in the names of Lessor and Lessee as their interests appear, and shall provide that any proceeds shall be payable as provided in Article 9 hereof. 7.2 Liability Insurance: Lessee at its cost shall maintain public liability and property damage insurance with a single combined limit of not less than $10,000,000 insuring against any and all liability of Lessee and its agents and employees arising out of and in connection with Lessee's use or occupancy of the Premises. Both Lessor and Lessee shall be named as an additional insured, and the policy shall contain cross-liability endorsements. 7.3 Delivery of Policies: An executed copy of each policy of insurance required hereunder, or a certificate of the policy, shall be delivered to Lessor within 10 days after the Commencement Date. 7.4 Other Insurance: Lessee may also maintain at its cost such other coverages in such amounts as Lessee may determine. Policies of insurance purchased by Lessee under this Section 7.4 will be in the name of Lessee and any proceeds will be payable to Lessee. 7.5 Form of Policies. Each insurance policy and certificate shall provide, in effect, that the policy will be renewed and further renewed on substantially the same terms and conditions unless the insurer shall give Lessee and Lessor at least thirty (30) days' notice in writing of the insurer's unwillingness to renew. The insurance coverage required to be carried under this Lease shall (a) be written by companies rated "A" or better in current edition of "Best's Insurance Reports" and authorized to do business in Nevada, and (b) name any parties reasonably designated by Lessor or Lessee, as applicable, including any mortgagee, as additional insureds. 7.6 Worker's Compensation. Lessee shall be solely responsible to maintain workers' compensation insurance coverage for all of its employees working at the Premises in accordance with applicable Nevada law. ARTICLE 8 TAXES 8.1 Real Property Taxes: Lessee shall pay all real property taxes and the current portion or portions of any general and special assessments levied or assessed against the Premises during the Lease Term. Lessee's obligation to pay assessments as provided in this Section 8.1 shall be calculated on the basis of the amount due if Lessor allows the assessment to go to bond and the assessment is to be paid in installments, even if Lessor pays the assessment in full. 8.2 Taxes on Personality: Lessee shall pay before delinquency all taxes, assessments, license fees and other charges levied or assessed against personal property installed or located in or on the Premises during the Lease Term, whether such property is owned by Lessee or Lessor. 8.3 Taxes on Rent: Lessee shall pay to Lessor before delinquency any tax, fee or excise levied or assessed against Lessor on rent received by Lessor hereunder or by virtue of the letting of the Premises pursuant hereto under any law now in effect or enacted during the Lease Term; provided, however, that Lessee shall not be required to pay any income or franchise taxes or any estate, succession, inheritance or transfer taxes imposed on Lessor. 8 51 8.4 Payment of Taxes: Lessor shall notify Lessee of the taxes payable by Lessee hereunder, and immediately on receipt of the tax bill shall furnish Lessee a copy of the same. Lessee shall pay the taxes no later than the taxing authority's delinquency date or 10 days after receipt of a copy of the tax bill, whichever is later. If permitted by applicable law, Lessee may pay any tax in installments as determined by Lessee in Lessee's reasonable business judgment. 8.5 Proration: Real and personal property taxes payable pursuant to this Article 8 shall be prorated on a time basis for any partial tax year as provided in subsection 13.1.5 hereof. ARTICLE 9 DAMAGE OR DESTRUCTION 9.1 Total Destruction: If during the Lease Term the Premises are totally destroyed, this Lease shall automatically terminate as of the 30th day after such destruction. 9.2 Damage or Destruction Due to Risks Covered by Insurance: If during the Lease Term the Premises and/or the FF&E are damaged or partially destroyed from a risk covered by the insurance described in Section 7.1 hereof and such damage or destruction renders the Premises totally or partially inaccessible or unusable, such damage or destruction shall not terminate this Lease and Lessee shall restore the Premises and/or repair or replace the damaged or destroyed FF&E to substantially the same condition as they were in immediately before the damage or destruction, except that: 9.2.1 If applicable law then does not permit the restoration, either party hereto may terminate this Lease immediately by giving notice of the same to the other party; and 9.2.2 If in Lessee's reasonable business judgment the costs of the restoration (including, for purposes of this subsection 9.2.2, the costs of required repairs to or replacement of FF&E) will exceed the amount of proceeds to be received from the insurance required under Section 7.1 hereof and to be made available to Lessee, Lessee shall give written notice to Lessor of the same and the date(s) the estimated excess will be incurred or payable (the "Insurance Due Date(s)") within 15 days after determining that the restoration costs will exceed the insurance proceeds. Lessor, within 10 days after receiving such notice, may elect to pay to Lessee the difference (the "Insurance Deficiency") between the amount of insurance proceeds to be made available to Lessee and the costs of restoration on or before the Insurance Due Date(s), in which event Lessee shall restore the Premises as provided above, and Lessee shall deliver to Lessor upon its request evidence that the Insurance Deficiency contributed by Lessor pursuant to this subsection 9.2.2 has been expended by Lessee in paying the costs of restoration. If Lessor elects to contribute the Insurance Deficiency to Lessee as provided in this subsection 9.2.2 and Lessor does not pay the Insurance Deficiency to Lessee within ten (10) days after the Insurance Due Date(s), the Insurance Deficiency shall bear interest at the Default Rate from the Insurance Due Date(s) until paid. In addition, if Lessor does not elect to pay the Insurance Deficiency or if Lessor does not pay Lessee the Insurance Deficiency with ten (10) days after the Insurance Due Date(s), Lessee may elect to terminate this Lease. If this occurs, this Lease shall terminate as of the date specified in Lessee's notice of termination. 9.3 Extraordinary Repairs; Damage or Destruction Due to Uninsured Risks: If during the Lease Term Lessee will be required to make, in order to maintain the Premises in the operating condition and state of repair required by this Lease, repairs other than in the ordinary course, maintenance or repairs to the Improvements or any of their operating systems (other than the Repairs described in Section 4.7 hereof and regardless of whether the cost of such maintenance or repairs would be capitalized or expensed under generally accepted accounting 9 52 principles), or if during Lease Term the Premises and/or the FF&E are damaged or partially destroyed from a risk not covered by the insurance described in Section 7.1 hereof and such damage or destruction renders the Premises totally or partially inaccessible or unusable, neither the necessity of such maintenance or repairs nor such damage or destruction, as the case may be, shall terminate this Lease, and Lessee shall make the necessary maintenance or repairs and replacements or restore the Premises to substantially the same condition as they were immediately before the damage or destruction, except that: 9.3.1 If applicable law then does not permit the maintenance, repairs or restoration, either party hereto may terminate this Lease immediately by giving notice of the same to the other party; and 9.3.2 If the costs of making such repairs or replacements or the costs of restoration will exceed $50,000, Lessee shall give written notice to Lessor of the same and the date(s) the estimated excess will be incurred or payable (the "Extraordinary Due Date(s)") within 15 days after Lessee determines such repair or replacement or such restoration costs. Lessor, within 10 days after receiving such notice, may elect to pay to Lessee the difference (the "Extraordinary Repair Deficiency") between $50,000 and the actual repair, replacement or restoration costs on or before the Extraordinary Due Date(s), in which event Lessee shall make the necessary repairs or replacements or restore the Premises as aforesaid. Lessee shall provide to Lessor upon Lessor's request evidence that the Extraordinary Repair Deficiency contributed by Lessor pursuant to this Section 9.3 has been expended by Lessee in paying the repair, replacement or restoration costs. If Lessor elects to contribute the Extraordinary Repair Deficiency to Lessee as provided in this subsection 9.3.2 and Lessor does not pay the Extraordinary Repair Deficiency to Lessee within ten (10) days after the Extraordinary Due Date(s), the Extraordinary Repair Deficiency shall bear interest at the Default Rate from the Extraordinary Due Date(s) until paid. In addition, if Lessor does not elect to pay the Extraordinary Repair Deficiency or if Lessor does not pay Lessee the Extraordinary Repair Deficiency within ten (10) days after the Extraordinary Due Date(s), Lessee may elect to terminate this Lease. If this occurs, this Lease shall terminate as of the date specified in Lessee's notice of termination. 9.4 Restoration of Premises - Minor Loss: If during the Lease Term the Premises and/or the FF&E are damaged or destroyed from a risk covered by the insurance described in Section 7.1 hereof and the total amount of loss does not exceed $250,000, Lessee shall make the loss adjustment with the insurance company insuring the loss, and the proceeds of such insurance shall be paid directly to Lessee for the purpose of repairing or replacing the damaged or destroyed FF&E and/or restoring the Premises in accordance with Section 9.6 hereof. Lessee shall provide to Lessor upon Lessor's request evidence that all insurance proceeds have been expended by Lessee in paying the repair, replacement or restoration costs. 9.5 Restoration of Premises - Major Loss: If during the Lease Term the Premises and/or the FF&E are damaged or destroyed from a risk covered by the insurance described in Section 7.1 hereof and the total amount of loss exceeds $250,000, Lessor and Lessee jointly shall make the loss adjustment with the insurance company insuring the loss and on receipt of the proceeds shall immediately pay them to Nevada Construction Services (the "insurance trustee"). In addition, if pursuant to Sections 9.2 or 9.3 hereof Lessor is to contribute to the costs of restoring the Premises and/or repairing or replacing FF&E, Lessor shall deposit with the insurance trustee Lessor's respective contribution towards the costs of restoration, and shall pay directly to Lessee any contribution by Lessor towards the costs of making such FF&E repairs or replacements. All sums deposited with the insurance trustee shall be held for the following purposes, and the insurance trustee shall have the following rights and duties: 10 53 9.5.1 The sums shall be paid in installments by the insurance trustee to the contractor retained by Lessee as construction progresses, for payment of the costs of restoration. A 10% retention fund shall be established that will be paid to the contractor on completion of restoration, payment of all costs, expiration of all applicable lien periods, and proof that the Premises are free of all mechanics' liens and lienable claims. 9.5.2 Payment shall be made on presentation of certificate(s) or voucher(s) from the architect or engineer retained by Lessee showing the amount due. 9.5.3 If the sums held by the insurance trustee are not sufficient to pay the actual costs of restoration, Lessor shall deposit the amount of the deficiency with the insurance trustee within three days after Lessor receives a request by the insurance trustee indicating the amount of the deficiency. Any sums not disbursed by the insurance trustee after restoration has been completed and final payment has been made to Lessee's contractor shall be delivered within 15 days thereafter to Lessor. All costs and charges of the insurance trustee shall be paid one-half by Lessor and one-half by Lessee. If the insurance trustee resigns or for any reason is unwilling to act or continue to act, Lessee shall substitute a new trustee in the place of the designated insurance trustee, which new trustee shall be an institutional lender, title company or construction control company doing business in Clark County, Nevada. Both parties hereto shall promptly execute all documents and perform all other acts reasonably required by the insurance trustee to perform its obligations under this Section 9.5. 9.6 Procedure for Restoring the Premises: Within 30 days after the date it is determined that Lessee is obligated to restore the Premises, Lessee at its cost shall engage an architect and/or engineer to prepare final plans and specifications and working drawings complying with applicable law for the restoration of the Premises. The fees and costs of the architect and/or engineer for preparing the plans and specifications and working drawings shall be deemed a cost of restoration and subject to the provisions of Sections 9.4 or 9.5 hereof. The plans and specifications and working drawings shall be delivered by Lessee to Lessor for its approval, and Lessor shall have 15 days after receipt of such plans and specifications and working drawings to either approve or disapprove the same and return them to Lessee. If Lessor disapproves the plans and specifications and working drawings, Lessor shall notify Lessee of its objections and Lessor's proposed solution to each objection. The restoration shall be accomplished as follows: 9.6.1 Lessee shall commence the restoration promptly after final plans and specifications and working drawings have been approved by Lessor and by all appropriate governmental authorities and all required permits have been obtained, and shall complete the same as soon as practicable (subject, however, to an extension or extensions for delays resulting from causes beyond Lessee's reasonable control). 9.6.2 Lessee shall retain a licensed contractor that is bondable and that shall be required to carry public liability and property damage insurance, and standard fire and extended coverage insurance, during the period of construction in accordance with Sections 7.1 and 7.2 hereof. The contractor shall not commence construction until a completion bond and a labor and materials bond to insure completion of the construction have been delivered to Lessor. 11 54 9.6.3 Lessee shall notify Lessor of the date of commencement of the restoration not later than two days before commencing the same, so that Lessor at its option may post notices of nonresponsibility on the Premises. 9.6.4 On completion of the restoration, Lessee shall immediately record a notice of completion in the county in which the Premises are located. 9.6.5 Lessee shall not be required to commence the restoration unless and until sums sufficient to cover the costs of restoration are place with the insurance trustee as provided in Section 9.5 hereof. 9.7 Abatement or Reduction of Rent: There shall be an abatement or reduction of rent between the date of destruction and the date of completion of restoration, based on the extent to which the damage or destruction interferes with Lessee's use of the Premises. 9.8 Loss During Last Part of Term: Notwithstanding the prior provisions of this Article 9, if, during the 30 days preceding the then scheduled expiration of the Lease Term (including all permitted extensions thereof), Lessee will be required to make, in order to maintain the Premises and the FF&E in the operating condition and state of repair required by this Lease, repairs other than in the ordinary course, or if during such period there occurs damage to or destruction of the Premises that renders the Premises totally or partially inaccessible or unusable, either Lessor or Lessee may terminate this Lease by giving notice to the other not more than 15 days after the need for such repairs is determined or such damage or destruction occurs, and this Lease shall terminate on the date specified in the notice of termination. ARTICLE 10 EMINENT DOMAIN 10.1 Definitions: "Eminent domain" means (i) the exercise of any governmental power, whether by legal proceedings or otherwise, by a condemnor, and (ii) any sale or other transfer by Lessor to any condemnor, either under threat of condemnation or while legal proceedings or condemnation are pending. "Date of taking" means the date on which the condemnor has the right to possession of the property being condemned. "Award" means all compensation, sums or anything of value awarded, paid or received on a total or partial condemnation. "Condemnor" means any public or quasi-public authority, or private corporation or individual, having the power of condemnation. 10.2 Parties' Rights and Obligations to be Governed by Lease: If there is any taking by eminent domain of all or any part of the Premises or any interest in the Lease, the rights and obligations of the parties hereto shall be determined pursuant to this Article 10. 10.3 Total Taking: If the Premises are totally taken by eminent domain, this Lease shall terminate on the date of taking. 10.4 Partial Taking: If any portion of the Premises is taken by eminent domain, this Lease shall remain in effect, except that either Lessee or Lessor my elect to terminate this Lease if 30% or more of the total number of guest rooms on the Premises are, and/or 50% or more of the total floor area of the Casino is, taken. If either party so elects to terminate this Lease, that party shall notify the other party of the same within 30 days after the nature and extent of the taking have been finally determined. Such notice shall specify the date of termination of this Lease, which date shall not be earlier than 30 days nor later than 60 days after the date on which the termination notice is given. 10.5 Effect on Rent: If any portion of the Premises is taken by eminent domain and this Lease remains in full force and effect, then, as of the date of taking, the monthly rent shall be reduced by an amount that is in the same ratio 12 55 to the monthly rent specified in Section 3.1 hereof as the value of the portion of the Premises taken bears to the total value of the Premises immediately before the date of taking, and Lessee at its cost (subject to Section 10.6 hereof) shall make all repairs and restorations (including repairs to and replacements of FF&E) necessary in Lessee's reasonable business judgment for Lessee to continue to operate the Premises. 10.6 Award - Distribution: The award shall be divided between Lessor and Lessee based upon the value of their respective interests in the Premises as determined in the eminent domain proceedings or by an independent appraisal (the costs of which shall be paid by Lessor and Lessee in the same ratio as the award is divided); provided, however, that Lessee in all events shall be entitled to receive from the award an amount equal to Lessee's actual costs in making the repairs and restorations provided for in Section 10.5 hereof and that if, in Lessee's reasonable business judgment, the costs of making such repairs and restorations will exceed the amount of the award to be made available to Lessee, Lessee shall give written notice to Lessor of the same and the date(s) the estimated excess will be incurred or payable (the "Condemnation Due Date(s)") within 15 days after determining that such costs will exceed the amount of the award. Lessor, within 10 days after receiving such notice, may elect to pay to Lessee the difference (the "Condemnation Deficiency") between the amount of the award to be made available to Lessee and the costs of the repairs and restorations on or before the Condemnation Due Date(s), in which event Lessee shall refurbish, repair and restore the Premises as provided above, and Lessee shall deliver to Lessor upon its request evidence that the Condemnation Deficiency contributed by Lessor pursuant to this Section 10.6 has been expended by Lessee as provided in this subsection. If Lessor elects to contribute the Condemnation Deficiency to Lessee as provided in this Section 10.6 and Lessor does not pay the Condemnation Deficiency to Lessee within ten (10) days after the Condemnation Due Date(s), the Condemnation Deficiency shall bear interest at the Default Rate from the Condemnation Due Date(s) until paid. In addition, if Lessor does not elect to pay the Condemnation Deficiency or if Lessor does not pay Lessee the Condemnation Deficiency within ten (10) days after the Condemnation Due Date(s), Lessee may elect to terminate this Lease. If this occurs, this Lease shall terminate as of the date specified in Lessee's notice of termination. ARTICLE 11 ASSIGNMENT AND SUBLETTING 11.1 Lessee: Except as otherwise provided in this Section 11.1, Lessee shall not voluntarily assign, mortgage or otherwise transfer or encumber its interest in this Lease or in the Premises, or sublet all or any part of the Premises, without first obtaining Lessor's consent, which consent shall not be unreasonably withheld or delayed. Notwithstanding the foregoing provisions of this Section 11.1, Lessee shall have the right, without Lessor's consent: 11.1.1 To maintain the subleases and/or concessions of or with respect to the Premises or a part thereof in existence on the date hereof, and to enter into any one or more extensions or other amendments thereof or any one or more replacement subleases or concessions with respect to the portion(s) of the Premises subject to a sublease or concession on the date hereof, if and as long as the term of such extended or replacement sublease or concession does not extend past the scheduled expiration of the Lease Term; and/or 11.1.2 To assign Lessee's interest in this Lease to any parent or subsidiary of Lessee or any other subsidiary of Lessee's parent, to any entity with which Lessee may merge or consolidate, or to a purchaser of all or substantially all of the assets or operations of Lessee; 13 56 provided, however, that no such assignment or encumbrance shall be made in violation of any Nevada gaming statute or regulation, and Lessee shall continue to be bound by the terms and conditions of this Lease. Consent by Lessor to one sublease, assignment or encumbrance shall not be deemed to be a consent to any successive or future sublease, assignment or encumbrance, and Lessor's acceptance of rent from any person or other entity other than Lessee shall not be deemed a waiver by Lessor of any provision of this Section 11.1. No interest of Lessee in this Lease shall be assignable by operation of law. 11.2 Lessor: Lessor may not assign or otherwise transfer all or any part of its interest herein or in the Premises without first obtaining Lessee's consent, which consent will not be unreasonably withheld or delayed. Notwithstanding the foregoing provisions of this Section 11.2, Lessor shall have the right, without Lessee's consent: 11.2.1 To assign or transfer Lessor's interest in this Lease or in the Premises to any parent or subsidiary of Lessor or any other subsidiary of Lessor's parent, to any entity with which Lessor may merge or consolidate, or to a purchaser of all or substantially all of the assets or operations of Lessor; and/or 11.2.2 To mortgage or otherwise encumber its interest in this Lease or in the Premises; provided, however, that any mortgage or other encumbrance of Lessor's interest shall be made only in accordance with Section 14.1 hereof; provided, however, that no such assignment or encumbrance shall be made in violation of any Nevada gaming statute or regulation, and Lessor shall continue to be bound by the terms and conditions of this Lease. No interest of Lessor in this Lease or in the Premises shall be assignable by operation of law. ARTICLE 12 EVENTS OF DEFAULT AND REMEDIES 12.1 Event of Default: The occurrence of any one or more of the following shall constitute an "Event of Default" by Lessee: 12.1.1 Lessee shall fail to pay rent when due, if such failure continues for 10 days after written notice of the same has been given to Lessee; 12.1.2 Lessee shall abandon or vacate the Premises. For purposes of this Lease, Lessee shall be deemed to have abandoned and vacated the Premises if Lessee shall fail to occupy and operate the Premises for 15 consecutive days, other than as a result of a fire, flood, explosion, earthquake or other accident or contingency beyond Lessee's reasonable control and not caused by Lessee's negligence or willful misconduct; 12.1.3 Lessee shall fail to perform any other provision of this Lease to be performed by Lessee, if such failure continues for 30 days after written notice of the same has been given to Lessee (provided, however, that if the default cannot reasonably be cured within 30 days, Lessee shall not be in default of this Lease if Lessee commences to cure such default during such 30-day period and proceeds diligently to cure the default); 12.1.4 Lessee shall fail to possess at all times during the Lease Term all necessary licenses and findings of suitability for the operation of a casino at the Premises; or 12.1.5 Lessee shall file a voluntary petition of bankruptcy or a petition or answer seeking reorganization, arrangement, composition or similar relief under present or future federal bankruptcy laws or other applicable law 14 57 of the United States of America or any state thereof, or shall file a petition to take advantage of any present or future insolvency act or shall make an assignment for the benefit of creditors, or shall admit in writing its inability to pay its debts as they become due, or shall consent to the appointment of any receiver, trustee or liquidator of all or a substantial part of its property, or if any petition seeking any of the aforementioned relief shall be commenced against Lessee, and if such proceeding, whether commenced by or against Lessee, is not dismissed within sixty (60) days after such proceeding is commenced. 12.2 Remedies Upon Default: Upon the occurrence of an Event of Default by Lessee, Lessor shall have the following remedies: 12.2.1 Lessor may elect not to terminate Lessee's right to possession and to continue this Lease in full force and effect, in which event this Lease shall so continue unless and until Lessor so terminates Lessee's right to possession. During the period Lessee is in default, Lessor may enter the Premises and relet them, or any part of them, to one or more third parties for Lessee's account. Lessee shall pay to Lessor the rent due under this Lease on the dates the rent is due, less the rent Lessor receives from any reletting as hereinafter provided, and shall reimburse Lessor immediately upon demand for all costs and expenses Lessor incurs in so reletting the Premises as follows: If Lessor elects to relet the Premises as provided in this subsection 12.2.1, rent that Lessor receives from reletting shall be applied as follows: First, all costs, including for maintenance, incurred by Lessor in reletting; and Second, rent due and unpaid under this Lease. After deducting the payments referred to in the immediately preceding paragraphs, any sum remaining from the rent Lessor receives from reletting shall be held by Lessor and applied in payment of future rents as rent becomes due under this Lease. In no event shall Lessee be entitled to any excess rent received by Lessor. No act by Lessor permitted by this subsection 12.2.1 shall terminate this Lease unless Lessor notifies Lessee that Lessor elects to terminate this Lease. 12.2.2 Lessor may terminate Lessee's right to possession of the Premises by giving notice to Lessee of the same, whereupon this Lease shall terminate. Upon such termination, Lessor may recover from Lessee (i) the worth, at the time of award, of the unpaid rent that had been earned at the time of termination; (ii) the worth, at the time of the award, of the amount by which the unpaid rent that would have been earned after the date of termination until the time of award exceeds the amount of the rental loss that Lessee proves could have been reasonably avoided; (iii) the worth, at the time of the award, of the amount by which the unpaid rent for the balance of the Lease Term after the time of award exceeds the amount of such rental loss that Lessee proves could have been reasonably avoided; and (iv) any other amount, and court costs, necessary to compensate Lessor for all detriment proximately caused by Lessee's default. "The worth, at the time of the award," as used in clauses (i) and (ii) of the immediately preceding paragraph, is to be computed by allowing interest at the Default Rate (as defined in subsection 12.2.3 below). "The worth, at the time of the award," as used in clause (iii) of the immediately preceding paragraph, is to be computed by discounting the amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of the award, plus 1%. 12.2.3 Lessor may, at any time after Lessee commits an Event of Default, cure such default at Lessee's cost. If Lessor in connection therewith pays any sum or does any act that requires the payment of any sum, such sum, together with interest thereon at the per annum rate of interest publicly 15 58 announced from time to time by Bank of America NT&SA in San Francisco, California as its "Reference Rate" plus 5% (the "Default Rate") from the date the sum is paid by Lessor, shall be additional rent hereunder, and shall be paid by Lessee to Lessor within 10 days after Lessor renders to Lessee a bill therefor. 12.3 Non-Exclusive Remedies: The remedies afforded to Lessor by this Lease shall be cumulative and in addition to any one or more remedies now or later available by law. ARTICLE 13 SURRENDER OF POSSESSION 13.1 Surrender: Upon the expiration or within 10 days after any earlier termination of the Lease Term, Lessee shall surrender to Lessor the Premises in the same condition as on the Commencement Date, ordinary wear and tear and damage or destruction covered by Articles 9 and 10 hereof excepted. In connection with such surrender: 13.1.1 Subject to applicable provisions of the Asset Purchase Agreement, Lessee shall be entitled to remove from the Premises all Gaming Assets, Inventories (as defined in the Asset Purchase Agreement) and other personal property of Lessee then located at or installed in the Premises (except as otherwise provided in subsections 2.1.2 and 13.1.2 hereof) within the stated time, and at Lessee's cost make whatever repairs to the Premises are necessitated by the removal. 13.1.2 All operating supplies and non-inventory consumable goods, located at the Premises upon the expiration or earlier termination of the Lease Term shall (except to the extent such items are thereafter sold or consumed in the ordinary course of business) be surrendered with the Premises and shall become the property of Lessor, without additional charge. These operating supplies and non-inventory consumable goods shall not be less than 85% of the book value of the items as at the time Lessor acquired and/or valued them pursuant to the Asset Purchase Agreement. 13.1.3 Upon surrender of the Premises, Lessor shall reimburse Lessee for all cash and cash equivalents then on hand at the Premises, including cash held in house banks, change booths and/or the Slot Machines. Lessor shall also reimburse Lessee for casino chips and tokens then outstanding at the Hotel/Casino in accordance with Section 4A.3.3 of the Asset Purchase Agreement. 13.1.4 Upon surrender of the Premises, Lessee shall (a) terminate the Employee Plans (as defined in the Asset Purchase Agreement) so that, upon surrender of the Premises, Lessor shall not be obligated to any employees of Lessee, whether or not hired by Lessor, with respect to and under such Employee Plans and (b) pay to its employees at the Premises all salaries, wages and sick back pay accrued, all vacation pay earned, and all other employee benefits accrued through or earned as of the expiration or earlier termination of the Lease Term. 13.1.5 Any and all expenses (including prepaid expenses) incurred by Lessee in operating the Premises during the Lease Term (including, without limitation, pursuant to the second paragraph of Section 1.1A hereof) shall be allocated and apportioned between Lessor and Lessee as of the date the Lease Term expires or is earlier terminated, and such expenses, together with any and all expenses described in subsections 4A.4.1 and 4A.4.2 of the Asset Purchase Agreement, shall be prorated by Lessor and Lessee upon surrender of the Premises, in each case in the manner provided in subsections 4A.4.1 and 4A.4.2 of the Asset Purchase Agreement. Notwithstanding the foregoing provisions of this subsection 13.1.5, (i) Lessee shall retain or be entitled to receive all guest room rentals, all restaurant revenues, banquet and lounge food and beverage revenues and all meeting room rentals earned for the night period beginning on the day preceding 16 59 the date on which the Lease Term expires or is earlier terminated and ending at noon on such expiration or termination date; (ii) guest room deposits and any other deposits or advance rentals paid to Lessee under bookings or other confirmed reservations for the use of Hotel/Casino guest room or banquet or other Hotel/Casino facilities for any period after the above-referenced night period shall be paid to Lessor, and Lessor shall duly perform the obligations of Lessee under such agreements, bookings or reservations in accordance with their respective terms; and (iii) Lessee shall retain or be entitled to receive all other revenues of the Premises earned before such expiration or termination date, including gaming revenues evidenced by markers. 13.2 Post-Termination Deliveries: Lessor shall accept delivery of, and duly pay the vendors of such items for, any and all FF&E, Inventory and other assets delivered to the Premises after the expiration or earlier termination of the Lease Term pursuant to purchase orders made by Lessee during the Lease Term pursuant to clause (iii) of the first sentence of Section 2.1 hereof but without obtaining Lessor's prior consent; provided, however, that the aggregate amount payable by Lessor pursuant to this Section 13.2 shall not exceed $25,000 if the Lease Term was 12 months or less or $37,500 if the Lease Term was more than 12 months. 13.3 Accounts Receivable: For a period of 90 days following the date on which Lessee surrenders the Premises to Lessor, Lessor shall bill in the ordinary course of business all guests of the Premises who as of the date of such surrender owed Lessee monies for accommodations, goods or services furnished by Lessee during the Lease Term and who have checked out of the Premises prior to the date of surrender. All funds collected by Lessor as a result of such billing shall be applied in the order of the age of the outstanding accounts receivables of such payee (from the oldest to the most recent), except where due to a dispute a particular payment is designated by the payee to be applied other than to that payee's oldest account receivable, in which case such specified application shall control. All monies collected by Lessor with respect to the foregoing accounts receivable shall be accounted for and remitted by Lessor to Lessee monthly with a statement showing the collection. Lessor's sole obligation with respect to collection of the accounts receivable described in this Section 13.3 shall be the billing of such amounts in the ordinary course of Lessor's business, and after the expiration of the 90-day period referred to herein, Lessor shall have no further obligation to attempt to collect the same. ARTICLE 14 SUBORDINATION; QUIET ENJOYMENT 14.1 Subordination: This Lease is and shall be prior to any encumbrance recorded after the date hereof affecting the Premises. If, however, a lender requires that this Lease be subordinate to any mortgage or deed of trust to be granted to such lender to secure the repayment of debt owed or to be owed by Lessor to such lender, this Lease shall be subordinate to that encumbrance if Lessor first obtains from the lender a written agreement that provides substantially as follows: "As long as Lessee pays all amounts required to be paid by Lessee under this Lease, no foreclosure of, deed given in lieu of foreclosure of, or sale under, the encumbrance, and no actions taken pursuant to the encumbrance, shall affect Lessee's rights under this Lease; provided, however, this Lease may be terminated by such lender upon sixty-two (62) days written notice to Lessee." Subject to the foregoing, Lessee shall attorn to any purchaser or assignee of the Premises at any foreclosure sale, or to any grantee or transferee designated in any deed given in lieu of foreclosure, and shall execute an agreement and any other documents in form and content reasonably acceptable to Lessee required by the lender to accomplish the purposes of this Section 14.1. 17 60 14.2 Quiet Enjoyment: Lessor covenants that conditioned upon Lessee's payment of the rent and performance of the other covenants hereof to be performed by Lessee, Lessee may peaceably and quietly have, hold and enjoy the Premises in accordance with the provisions of this Lease, without hindrance from Lessor or any other person or entity. ARTICLE 15 MISCELLANEOUS 15.1 Governing Law: This Lease shall be construed in accordance with and governed by the laws of the State of Nevada. 15.2 Severability: The unenforceability, invalidity or illegality of any provision hereof shall not affect the enforceability, validity or legality of any other provision hereof, and any such unenforceable, invalid or illegal provision shall be limited only to the extent necessary to conform to applicable law and so as most closely carry out the intent of the parties hereto as expressed herein. 15.3 Construction: No provision of this Lease shall be construed in favor of or against either party hereto by reason of the extent to which such party or its counsel participated in the drafting hereof or by reason of the extent to which such provision or any other provision of this Lease is inconsistent with any prior draft hereof. 15.4 Captions: The captions of the Articles and Sections of this Lease have been inserted for convenience only, and shall not be used in any way to modify, construe or otherwise affect this Agreement. All references to Sections hereof include all subsections of such Sections. 15.5 Notices: Any and all notices that either party hereto desires or is required to give to the other party pursuant to this Lease shall be in writing and delivered in person, sent by overnight courier or sent by prepaid, registered or certified U.S. mail, addressed as follows: If to Lessor: c/o Crown Casino Corporation 2415 West Northwest Highway Suite 103 Dallas, Texas 75220 Attn: Mark D. Slusser, Chief Financial Officer With a copy to: Stumpf & Falgout 1400 Post Oak Boulevard Suite 400 Houston, Texas 77056 Attn: T. J. Falgout, III If to Lessee: c/o Starwood Lodging Corporation 11845 Olympic Boulevard Suite 550 Los Angeles, California 90064 Attn: Kevin Mallory, Executive Vice President With a copy to: Lionel Sawyer & Collins 1100 Bank of America Plaza 50 West Liberty Street Reno, Nevada 89501 Attn: Dan R. Reaser 18 61 or to such other person or place as either party hereto my designate in writing in the manner provided herein for giving notice. Each such notice so delivered, couriered or mailed shall be deemed delivered when personally delivered, as of the first business day after the date so sent by courier, or as of the third business day after the date so sent by mail, as the case may be. 15.6 Successors in Interest: Subject to Article 11 hereof, the provisions of this Lease shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Nothing in this Agreement, express or implied, is intended to confer on any person or entity other than the parties hereto and their respective successors and permitted assigns any right or remedy under or by reason of this Lease. 15.7 No Merger: The voluntary or other surrender of this Lease by Lessee or actual termination or other cancellation thereof shall not work a merger, and shall, and Lessor's sole option, either terminate any or all existing subleases or subtenancies, or operate as an assignment to Lessor of all rights of Lessee under or pursuant to such subleases or subtenancies. 15.8 Termination of Obligations: Upon the expiration or earlier termination of this Lease, neither Lessor nor Lessee shall have any further liability or obligation hereunder, except for rent or other amounts accrued and owing as of the date of such expiration or termination. 15.9 Attorneys' Fees: In the event that any action, suit or proceeding is commenced under or in connection with this Lease or for the recovery of possession of the Premises, including any insolvency or bankruptcy proceeding, the losing party shall pay to the prevailing party in any such action, suit or proceeding the reasonable attorneys' fees incurred by the prevailing party in connection therewith, together with all costs and expenses of the prevailing party. 15.10 Counterparts: This Lease may be entered into in more than one counterpart, each of which shall be deemed an original when executed, and which together shall constitute but one and the same Lease. 15.11 Further Information: From time to time after the expiration or earlier termination of the Lease Term, Lessee may, upon reasonable prior notice to Lessor, make copies of the records of the Premises with respect to the Lease Term to the extent reasonably required by Lessee (i) to prepare its financial statements for the period(s) including all or a portion of the Lease Term, (ii) to prepare and substantiate Lessee's tax returns (including, without limitation, in connection with any audit), or (iii) to prepare for, prosecute, defend or settle any litigation pending or threatened against Lessee with respect to its operation of the Premises hereunder; provided, however, that Lessee may not remove any such books and records from the Premises. Lessor shall maintain all original books and records of the Premises with respect to the Lease Term for such time periods as are required by the Internal Revenue Service and the Nevada gaming authorities. 15.12 Integration: This Lease contains all of the terms and conditions agreed upon by the parties hereto with respect to the subject matter hereof, and no representation, warranty or agreement not specifically made herein shall be deemed to exist or to bind any of the parties hereto with respect to the subject matter hereof. 15.13 Amendments: This Lease may not be amended or supplemented except by a writing signed by the party or parties to be bound thereby. 15.14 No Recordation: This Lease shall not be recorded; provided, however, that if either party hereto requests the other party to do so, the parties shall execute a memorandum of this Lease in recordable form describing expiration dates of the Lease Term, which memorandum may be recorded by either party at such party's cost. 19 62 15.15 Guaranty Agreements. Starwood Lodging Corporation, a Maryland corporation, shall guarantee the full and faithful performance of the covenants, agreements and obligations of Lessee pursuant to the terms of this Lease in accordance with the terms of a Guaranty Agreement in the form of Exhibit 15.15A attached hereto. Similarly, Crown Casino Corporation, a Texas corporation, shall guarantee the full and faithful performance of the covenants, agreements and obligations of Lessor pursuant to the terms of this Lease in accordance with the terms of a Guaranty Agreement in the form of Exhibit 15.15B attached hereto. 15.16 Entry. Lessor may enter the Premises at any time to (i) inspect the Premises, (ii) determine whether Lessee is complying with all its obligations hereunder, (iii) make Repairs in accordance with Section 4.7 hereof, and (iv) post notices of non-responsibility. Except in emergency situations, Lessor shall give Lessee at least twenty-four (24) hours prior notice of entry. In no event shall Lessor have access to any area for which access is restricted in accordance with Nevada gaming laws, except pursuant to such laws. IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the date first written above. LESSOR: LESSEE: CROWN CASINO NEVADA, INC., a HOTEL INVESTORS CORPORATION Nevada corporation OF NEVADA, INC., a Nevada corporation By: _________________________ By: ________________________ Name: _______________________ Name: ______________________ Title: ______________________ Title: _____________________
20 63 The Hotel Land ALL THAT REAL PROPERTY SITUATED IN THE COUNTY OF CLARK, STATE OF NEVADA, DESCRIBED AS FOLLOWS: THOSE PORTIONS OF THE SOUTHEAST QUARTER (SE 1/4) OF THE SOUTHWEST QUARTER (SW 1/4) OF SECTION 16 AND THE NORTH HALF (N 1/2) OF THE NORTH HALF (N 1/2) OF SECTION 21, TOWNSHIP 21 SOUTH, RANGE 61 EAST, M.D.M., FURTHER DESCRIBED AS FOLLOWS: PARCEL ONE LOTS SEVENTY-FIVE (75) AND SEVENTY SIX (76) IN BLOCK FOUR (4) OF FLAMINGO ESTATES, AS SHOWN BY MAP THEREOF ON FILE IN BOOK 5 OF PLATS, PAGE 22, IN THE OFFICE OF THE COUNTY RECORDER OF CLARK COUNTY, NEVADA. PARCEL TWO LOTS ONE HUNDRED TWO (102) AND ONE HUNDRED THREE (103) IN BLOCK FIVE (5) OF FLAMINGO ESTATES, AS SHOWN BY MAP THEREOF ON FILE IN BOOK 5 OF PLATS, PAGE 22, IN THE OFFICE OF THE COUNTY RECORDER OF CLARK COUNTY, NEVADA. PARCEL THREE LOT ONE HUNDRED FIVE (105) IN BLOCK FIVE (5) OF FLAMINGO ESTATES, AS SHOWN BY MAP THEREOF ON FILE IN BOOK 5 OF PLATS, PAGE 22, IN THE OFFICE OF THE COUNTY RECORDER OF CLARK COUNTY, NEVADA. EXCEPTING THEREFROM THE SOUTHERLY TEN (10) FEET AS CONVEYED TO THE COUNTY OF CLARK, BY DOCUMENT NO. 658664 IN BOOK 699 OF OFFICIAL RECORDS, CLARK COUNTY, NEVADA. PARCEL FOUR LOT ONE HUNDRED FOUR (104) IN BLOCK FIVE (5) OF FLAMINGO ESTATES, AS SHOWN BY MAP THEREOF ON FILE IN BOOK 5 OF PLATS, PAGE 22, IN THE OFFICE OF THE COUNTY RECORDER OF CLARK COUNTY, NEVADA. EXCEPTING THE SOUTHERLY TEN (10) FEET AND THAT CERTAIN SPANDREL AREA AT THE SOUTHWESTERLY CORNER (SW COR.) OF SAID LOT 104 BOUNDED ON THE WEST BY THE EASTERLY RIGHT-OF-WAY OF AUDRIE STREET (60.00 FEET WIDE), BOUNDED ON THE SOUTH BY THE NORTHERLY RIGHT-OF-WAY OF FLAMINGO ROAD (50.00 FEET FROM THE CENTERLINE) AND ON THE NORTHEAST BY A CURVE CONCAVE NORTHEASTERLY WITH A RADIUS OF 22.00 FEET. PARCEL FIVE LOT ONE HUNDRED SIX (106) IN BLOCK FIVE (5) OF FLAMINGO ESTATES, AS SHOWN BY MAP THEREOF ON FILE IN BOOK 5 OF PLATS, PAGE 22, IN THE OFFICE OF THE COUNTY RECORDER OF CLARK COUNTY, NEVADA. EXCEPTING THEREFROM THE SOUTHERLY TEN (10) FEET, THE EASTERLY FOURTEEN (14) FEET FURTHER EXCEPTING THE WESTERLY TWENTY (20) FEET OF THE EASTERLY THIRTY-FOUR (34) FEET, NOT INCLUDING THE SOUTHERLY 135.50 FEET. 64 The Apartment Land ALL THAT REAL PROPERTY SITUATED IN THE COUNTY OF CLARK, STATE OF NEVADA, DESCRIBED AS FOLLOWS: THOSE PORTIONS OF THE SOUTHEAST QUARTER (SE 1/4) OF THE SOUTHWEST QUARTER (SW 1/4) OF SECTION 16 AND THE NORTH HALF (N 1/2) OF THE NORTH HALF (N 1/2) OF SECTION 21, TOWNSHIP 21 SOUTH, RANGE 61 EAST, M.D.M., FURTHER DESCRIBED AS FOLLOWS: LOTS ONE HUNDRED (100) AND ONE HUNDRED ONE (101) IN BLOCK FIVE (5) OF FLAMINGO ESTATES, AS SHOWN BY MAP THEREOF ON FILE IN BOOK 5 OF PLATS, PAGE 22, IN THE OFFICE OF THE COUNTY RECORDER OF CLARK COUNTY, NEVADA. EXCEPTING THEREFROM GAS & OIL RIGHTS AS RESERVED IN DOCUMENT NO. 381100 RECORDED FEBRUARY 19, 1952 AND AS CONVEYED BY DOCUMENT NO. 102052 RECORDED MARCH 25, 1957, ALL IN CLARK COUNTY, NEVADA RECORDS. 65 Guaranty Agreement - Starwood Lodging Corporation [To be attached] 66 Guaranty Agreement - Crown Casino Corporation [To be attached] EX-10.11 6 MANAGEMENT AGREEMENT 1 EXHIBIT 10.11 MANAGEMENT AGREEMENT THIS MANAGEMENT AGREEMENT (this "Management Agreement") is made effective as of March 2, 1995 (the "Effective Date"), by and between RIVERBOAT SERVICES, INC., an Iowa corporation, ("Manager") and ST. CHARLES GAMING COMPANY, INC., a Louisiana Corporation ("Owner"). RECITALS A. Owner proposes to lease and/or acquire, construct, develop, equip, and operate certain gaming facilities, including land, an interim and/or permanent gaming boat or boats and/or a floating gaming pavilion, a dock or mooring facility, land-based facilities to provide for activities which are ancillary or complimentary to the gaming business, including but not limited to food and beverage, gift shop, entertainment, parking, and all other permitted and related activities ("Gaming Facilities"), all such facilities being located on (or adjacent to) land in Calcasieu Parish, Louisiana to be leased by the Owner (hereinafter defined as the "Business"). B. Owner desires to have Manager manage its business and Manager desires to manage Owner's business, all upon the terms and conditions of this Management Agreement. NOW, THEREFORE, in consideration of the mutual promises and covenants herein contained, Owner and Manager, agree as follows: 1. DEFINITIONS AND REFERENCES. 1.1 Definitions. As used herein, the following terms shall have the respective meanings indicated below: (a) Annual Plan - The Annual Plan (which shall include a budget) to be prepared by Manager and approved by Owner in accordance with the provisions of Section 6.2 hereof. (b) Commencement Date - The date upon which Owner first opens the Gaming Facilities to the public for business, which date shall be confirmed in writing by Owner and Manager. (c) Compensation - The direct salaries and wages paid to, or accrued for the benefit of, any executive or other employee, including, without limitation, employer's contributions under F.I.C.A., unemployment compensation or other employment taxes, pension fund contributions, worker's compensation, group life, accident, health and other insurance premiums, profit sharing, and retirement plans, disability and other similar benefits. 2 (d) Fiscal Year - The period beginning on May 1 and ending on the following April 30 of each calendar year. 2. SCOPE OF AGREEMENT; RESPONSIBILITIES. 2.1 Authority of Owner. The Owner, acting by and through the board of directors or other duly appointed committee or representative, shall determine the general policy with respect to the Business and shall have all other decision making powers afforded to an executive management committee. Among other things, Owner, after consultation with Manager, shall establish the length and frequency of cruises. 2.2 Authority of Manager. Subject to the foregoing general authority of Owner, and subject to the terms of this Management Agreement, Manager shall exclusively supervise and direct the management and operation of the day-to-day activities of the Business for the account of Owner. Manager shall have the authority and responsibility, subject to budget limitations and Owner's general policy, (i) to determine operating policy, standards of operation, quality of service, the maintenance and physical appearance of the Gaming Facilities and any other matters affecting operations and maintenance; (ii) to supervise and direct all phases of advertising, sales and business promotion for the Business; and (iii) to carry out all programs contemplated by the Annual Plan. Owner agrees that it will cooperate with Manager in every reasonable and proper way to permit and assist Manager to carry out its duties hereunder and comply with any conditions or restrictions, if any, placed upon Manager by any gaming authority. 2.3 Duties and Obligations of Manager. Manager shall take all actions which may be reasonably necessary or appropriate in connection with the authority granted to it in accordance with the provisions of this Management Agreement. Manager shall devote to its responsibilities hereunder such time as may be reasonably necessary for the proper performance of all duties hereunder. The standard of performance by Manager in managing the Business shall be measured by what a reasonably prudent person would do consistent with good business practices and policies. 2.4 Consultation with Owner. Notwithstanding the foregoing, Manager shall at all times keep Owner apprised and aware of all operating policies. Manager agrees to consult with Owner as frequently as Owner shall request to review operating policies and other matters referred to herein. Owner shall, at all times, have the right to enter the Boat for the purpose of inspecting same and reviewing the operations. Owner agrees that it and its representatives will, at no time, act in a manner which derogates from the authority granted to Manager. - 2 - 3 3. CONDITIONS PRECEDENT TO IMPLEMENTATION OF AGREEMENT. Owner and Manager shall use their best efforts to apply for and maintain any and all licenses and approvals required in order to implement the provisions of this Management Agreement. 4. TERM. The term of this Agreement shall continue until December 31, 2094, unless sooner terminated as hereinafter set forth. 5. PRE-COMMENCEMENT DATE RESPONSIBILITIES. 5.1 Owner's Responsibilities. Owner, without cost or expense to Manager, has designed, acquired, constructed and equipped a boat and will develop the remaining Gaming Facilities. All expenses and fees incident thereto shall be paid by Owner. The extent of the Gaming Facilities shall be within the sole discretion of Owner. 5.2 Manager's Responsibilities. From the Effective Date to the Commencement Date, Manager shall assist Owner in designing, acquiring, constructing and equipping all assets to be used by Owner in the operation of the Business. Manager shall, at Owner's expense, also be responsible for the development and implementation of all pre-opening activities in accordance with a pre-opening budget. 6. OPERATION OF THE BUSINESS. 6.1 Permits. Manager and Owner shall use their best efforts to timely apply for, obtain and maintain all licenses and permits required to operate the Business. 6.2 Annual Plan. 6.2.1 Preparation. With such cooperation and assistance of Owner as Manager may request, Manager shall prepare in reasonable detail for Owner's review and approval not less than sixty (60) days in advance of each Fiscal Year, an Annual Plan for the Business: (a) a forecast comprised of estimated income and expenses by month for the coming Fiscal Year; (b) an estimated cash flow projection by month, and an estimate as to the amount of funds needed for working capital requirements; (c) a budget covering estimated expenditures for capital improvements; (d) an annual marketing plan in reasonable detail; and - 3 - 4 (e) an organizational chart listing all employees' names, positions and compensation (including key employees whether employees of Owner or charged to Owner). Manager shall not be deemed to have made any guarantee or warranty in connection with the results of performance set forth in the Annual Plan since the parties acknowledge that the Annual Plan is intended to set forth objectives and goals based upon Manager's best judgment of the facts and circumstances known by Manager at the time of preparation. 6.2.2 Owner's Review and Approval. The Annual Plan will be subject to the approval of the Owner, which approval will not be unreasonably withheld or delayed. Owner shall approve or disapprove the Annual Plan, or portions thereof, within sixty (60) days after submission to Owner. If Owner fails to provide written notice to Manager of any specific objections to a proposed Annual Plan within such sixty (60) day period, such Annual Plan shall be deemed to have been approved by Owner as submitted. In the event Owner disapproves or raises any objections to the proposed Annual Plan or any revisions thereto, Owner and Manager agree to cooperate with each other in good faith to resolve the dispute. Owner agrees consistent with the Annual Plan to provide the funds necessary to operate the Business. Owner reserves the right to modify the Annual Plan throughout the applicable year after consultation with the Manager. 6.2.3 Compliance. Manager shall use all reasonable efforts to comply with the Annual Plan and shall not deviate in any substantial respect therefrom. In the event Manager encounters circumstances which require unexpected expenditures not foreseen at the time of preparation of the Annual Plan and which Manager deems reasonably necessary, Manager may without Owner's approval, make or cause to be made on account of Owner, such expenditures. Manager, without Owner's approval, on a monthly basis with full reporting to Owner, shall be entitled to increase the total expenses budgeted within the Annual Plan by a percentage approved annually by the Owner to cover any expenditures that were underestimated at the time the Annual Plan was prepared and that are reasonably necessary in Manager's sole discretion, to carry out the provisions of this Agreement. Manager shall not be entitled to make any expenditures in excess of the Annual Plan without first obtaining the prior written approval of Owner, which approval shall not be unreasonably delayed or withheld. Owner and Manager agree to cooperate with each other in good faith in resolving disputes. Policy changes not anticipated in the Annual Plan shall be submitted to Owner for approval, which approval shall not be unreasonably delayed or withheld. - 4 - 5 6.2.4 Specific Matters. The description of specific matters hereinafter stated are in every respect subject to the prior approval of Owner as part of its approval of the Annual Plan. 6.3 Personnel. 6.3.1 General. Manager, for the account of Owner, shall hire, supervise, direct, discharge and determine terms of employment of all personnel working for the Business. The determination of compensation for all employees shall be part of the Annual Plan approved by Owner. 6.3.2 Key Employees. The key employees include but are not limited to the general manager, boat captain, director of gaming, director of food, beverage and entertainment and comptroller and all other managerial employees at the director level and shift managers, may, at the option of Manager and with prior approval of Owner, be employees of Manager. Owner shall reimburse Manager for the reasonable Compensation of these employees. 6.3.3 Other Employees. Subject to the above, it is expressly understood and agreed that all other personnel are in the sole employ of Owner. 6.3.4 Professional and Other Specialists. Manager shall have the right to retain legal counsel and such other professionals, consultants and specialists as Manager deems necessary or appropriate in connection with the operation of the Business. The selection of all professional firms shall be subject to Owner's prior approval. 6.4 Sales, Marketing and Advertising. Manager shall advertise and promote the Business for Owner's account and shall institute and supervise a sales and marketing program and coordinate and cooperate with tour programs marketed by airlines, travel agents and government tourist departments when Manager deems the same to be advisable. Manager, in its sole discretion, may cause participation in sales and promotional campaigns ad activities involving complimentary passage, food and beverages to travel agents, tourist officials and airline representatives. 6.5 Other Services Provided by Manager. Other services, such as data processing, reservation system, internal audit, etc., may be provided by Manager to Owner at an additional cost or contracted for separately; however, these services (whether provided by an affiliate of Manager or unaffiliated third party) must be placed out for competitive bid and approved by Owner. - 5 - 6 6.6 Maintenance and Repairs. Owner shall be responsible for maintaining the property utilized in the Business in good repair and condition. To implement Owner's responsibility, Manager shall, on behalf of Owner, and at Owner's expense, make or cause to be made all repairs, replacements, corrections and maintenance items as shall be required in the normal and ordinary course of operation of the Business. 6.7 Capital Expenditures. Owner recognizes the necessity of capital improvements and shall expend such amount for capital improvements as shall be required in the normal and ordinary course of operation of the Business in conformity with the amounts approved as part of the Annual Plan. 6.8 Reimbursement. In addition to the Compensation provided for in Section 9, Manager shall be entitled to be reimbursed for the reasonable travel and entertainment expenses of all officers and employees of Manager incurred in performing its duties hereunder in connection with any phase of the operation of the Business. In addition, if employees of Manager on a specific assignment for the benefit of the Business are in a position that would otherwise be filled by an employee of Owner, then Manager shall be entitled to be reimbursed by Owner for the reasonable Compensation payable to such employees while working at the Business. Manager shall be entitled to make all reimbursements authorized under this Section 6.8, or under any other provision of this Agreement, provided that all such reimbursements shall be made in a manner which is consistent with the provisions of the Annual Plan or as otherwise agreed with Owner. 7. FISCAL MATTERS. 7.1 Accounting Matters and Fiscal Periods. 7.1.1 Books and Records. Manager shall maintain, or cause to be maintained, at Owner's expense, full and complete books of account and such other records as are necessary to reflect the operation of the Business. Manager shall also prepare and file for Owner, at Owner's expense, all informational and/or tax returns which may be required by any governmental authorities. 7.1.2 Reports to Owner. Within thirty (30) days after the end of each month, Manager, at Owner's expense, will deliver or cause to be delivered to Owner monthly financial statements with sufficient content to meet the public disclosure requirements of the shareholders of the Owner or their affiliates. 7.1.3 Owner's Right to Audit. Owner and its shareholders reserve the right upon reasonable prior notice, to perform any and all additional audit tests relating to the Business - 6 - 7 where accounting books and records are kept, at Owner's or shareholders' costs. 7.2 Bank Accounts. All bank accounts for the Business shall be in the name of Manager, as agent for Owner. Owner and Manager shall agree on the procedures for withdrawals and deposits of funds. Manager shall have the right to designate individuals to disburse funds from the Business bank accounts to pay all costs and expenses of managing, operating and maintaining the Business and its properties, including authorized capital expenditures and management fees due to Manager. Owner agrees that at all times during the term of this Agreement, a bank balance as approved in the Annual Plan shall be maintained in an amount necessary to provide sufficient working capital to assure the uninterrupted and efficient operation of the Business. Excess funds shall be disbursed to Owner on a regular basis and at least quarterly. 8. TITLE; OTHER MATTERS. 8.1 Covenant of Title. Owner shall enable Manager to peaceably and quietly operate the Business in accordance with the terms of this Management Agreement. 8.2 Proprietary Information. All specifically identifiable information developed by Manager for Owner shall be the property of both Manager and Owner. All existing information of Manager previously developed by Manager at Manager's expense, including, without limitation, all customer lists, gaming and marketing strategies and other similar information, shall be the property of Manager and not Owner and neither Owner nor any of its affiliates or successors may use such proprietary information without the consent of Manager. The parties agree that proprietary information does not include information which is available in the public domain. 8.3 Names. The Business shall be operated under the name "Isle of Capri"; provided, however, that Manager shall retain all rights, title and interest in and to and control over the use of this name and of any and all related names, marks, trade names, trademarks and service marks which may be used by Manager, and neither any such use nor this Management Agreement shall constitute an agreement thereof or create any interest in or right thereto in favor of Owner or any other person or entity. Upon termination of this Management Agreement for any reason, the use of the name heretofore determined prior to the Commencement Date and related names or marks will also terminate unless Manager shall otherwise consent or agree in writing, in the absolute and sole discretion of Manager. - 7 - 8 8.4 Outside Activities of Parties. This Management Agreement shall be limited to the purposes set forth herein and nothing in this Agreement, whether by implication or otherwise, shall be construed to extend the relationship of the parties beyond such purposes. Each party acknowledges that the other party and their respective affiliates are or may hereafter become interested, directly or indirectly, by ownership, contract, agency or otherwise, in business opportunities which are not within the purpose of this Management Agreement and which may compete with or otherwise affect all or some aspects of the Business. However, both parties agree that they will not compete in any riverboat activities, within a one hundred (100) mile radius of the casino of the Business on the Site during the Term. 9. COMPENSATION OF MANAGER. 9.1 In consideration for the services to be performed by Manager after the Commencement Date, Manager shall be entitled to an annual management fee for each Fiscal Year (or part thereof) equal to two percent (2%) of Revenues (as defined below) plus ten percent (10%) of Operating Income (as defined below), but the total annual management fee shall not exceed four percent (4%) of Revenues in the aggregate. (a) "Revenues" means all revenues, less sales tax on such revenues, determined on an annual basis for each Fiscal Year (or part thereof) received from the following sources: (i) gross gaming revenues (gross gaming receipts less amounts paid out as winnings) from the Business, less applicable gaming taxes from the operation of gaming; (ii) admission fees, less any applicable admission tax (whether or not there are any admission fees); (iii) food and beverage operations (net of complimentary items); (iv) all revenues generated at or in connection with the pavilion; (v) all parking fees; (vi) all revenues generated from gift shops and arcades; (vii) other revenues, fees and income, which are attributable to the operation of the Business. Revenues derived from non-operating activities, such as the sale of capital assets, are excluded from the definition of revenues. (b) "Operating Income" means the income of the Business before any management fee paid to Manager, salaries paid to officers, directors and/or members of Owner, interest, depreciation, amortization and write-off of start-up and pre-opening type expenses and income taxes. (c) The fee shall become due and payable ten (10) days after the end of each month based upon the increase in cumulative Revenues for the previous month, and shall be, subject to an annual adjustment, if necessary, within ninety (90) days after the end of each Fiscal Year. Payment of such compensation may be paid to - 8 - 9 Manager by withholding Revenues it has received for Owner's account; provided, however, that the fee shall be accrued as a liability and not paid to the extent that Owner has not generated sufficient cash flow to pay such fee. For these purposes, cash flow shall be determined before capital expenditures and shareholder salaries and distributions. (d) In the event that the beneficial owner of Manager sells more than 80% of its interest in Owner, if requested by the purchaser of the interest, Manager shall, concurrently with the sale of the interest, sell to Purchaser or otherwise terminate the Management Agreement upon the same terms paid for the interest, at a price determined as follows: (1) Sales price for / Owner's Earnings * = Multiple the interest sold before interest, taxes, depreciation and amortization (2) Management Fee * X Multiple = Sales price for Management Agreement * In each case for the period used in determining the sales price for the interest sold. In the event that less than 100% of the Owner is being sold, the EBITDA shall be adjusted proportionately. Provided, however, that in no event shall the sales (or termination) price for the Management Agreement exceed 12.5% of the sales price for the interest sold. 10. INSURANCE. 10.1 Coverage. Owner, for the benefit of both Owner and Manager, will maintain adequate insurance during the term of this Agreement. The type and amount of coverage shall be approved by Owner. 10.2 Policies and Endorsements. 10.2.1 Policies. All insurance coverage provided for hereunder shall be effected by policies issued by insurance companies with sound and adequate financial responsibility. Either party shall be entitled to object to an insurance company. Owner shall deliver to the Manager duplicate copies of the insurance policies or certificates of insurance with respect to all of the policies of insurance so procured, including existing, additional and renewal policies, and in the case of insurance about to expire, shall deliver duplicate copies of the insurance policies or - 9 - 10 insurance certificates with respect to the renewal policies to the other party not less than thirty (30) days prior to the respective dates of expiration. 10.2.2 Endorsement. All insurance shall, to the extent obtainable, have attached thereto: (a) an endorsement that such policy shall not be canceled or materially changed without at least thirty (30) days' prior written notice to Owner and Manager; and (b) an endorsement to the effect that no act or omission of Owner or Manager shall affect the obligation of the insurer to pay the full amount of any loss sustained. 10.2.3 Named Insureds. All policies of insurance shall be carried in the name of Owner and Manager. All liability policies shall name Owner and Manager, and in each case any affiliates which either may specify, and their respective directors, officers, agents and employees, as additional insureds. 11. INDEMNIFICATION. 11.1 Indemnification. Manager agrees to indemnify and hold Owner free and harmless from any loss, liability, claim, demand, legal proceeding or cost (including attorneys' fees, costs, expenses and other charges) which is not covered by insurance proceeds and which Owner may sustain, incur or assume as a result of, or relative to, any allegation, claim, civil or criminal action, proceeding, charge or prosecution, including but not limited to, injuries to persons or damage to property or the Business or any matters arising out of the employment or compensation of employees or former employees of Manager (collectively "Claims") which may be alleged, made, instituted or maintained against Manager or Owner, jointly or severally, arising out of or based upon the management, operation, condition or use of the Business; the performance or non-performance of this Management Agreement by Manager, its agents or employees; or acts or failures to act of Manager, its employees, agents or general contractors; provided, notwithstanding the foregoing, Manager shall not be liable to indemnify and hold Owner harmless from any such loss, liability or cost which results from the negligence or misconduct of Owner, its agents or employees. 11.2 Related Matters. 11.2.1 Legal Fees, Etc., Procedures. Manager shall reimburse Owner for any legal fees and costs, including attorneys' fees and other litigation expenses, incurred by Owner in respect to which indemnity is granted hereunder. If Claims are asserted or - 10 - 11 threatened, of if any action or suit is commenced or threatened with respect thereto, for which indemnity may be sought against Manager hereunder, Owner shall notify Manager in writing within thirty (30) days after Owner shall have had actual knowledge of the threat, assertion or commencement of the Claims, which notice shall specify in reasonable detail the matter for which indemnity may be sought. Manager shall have the right, upon notice to Owner given within thirty (30) days of its receipt of Owner's notice, to take primary responsibility for the prosecution, defense or settlement of such matter and payment or expenses in connection therewith. Owner shall provide, without cost to Manager, all relevant records and information reasonably required by Manager for such prosecution, defense or settlement and shall cooperate with Manager to the fullest extent possible. Owner, at Owner's sole cost and expense, shall have the right to employ its own counsel in any such matter with respect to which Manager has elected to take primary responsibility for prosecution, defense or settlement. 11.2.2 Indemnified Parties. The indemnities contained in this Section 11 shall run to the benefit of both Owner and its affiliates, and its directors, officers, shareholders and employees. 11.2.3 Survival. The provisions of this Section 11 shall survive any cancellation, termination or expiration of this Management Agreement and shall remain in full force and effect until such time as the applicable statute of limitation shall cut off all claims which are subject to the provisions of this Section 11. 12. DAMAGE TO AND DESTRUCTION OF THE BUSINESS. 12.1 Restoration. Provided that there is sufficient insurance proceeds, in the event fire or other casualty shall damage or destroy the property used in the Business, Owner may, at its option, repair, restore or replace the same to the extent as may be limited by insurance proceeds. If there are not sufficient insurance proceeds or if Owner no longer desires to operate the Business, Owner may retain all insurance proceeds; however, Manager shall have the option, exercisable within ninety (90) days of the decision by the Owner not to operate the Business, to obtain the license to operate the Business for the Manager's benefit, subject to appropriate regulatory approval. In such event, this Management Agreement shall terminate. Owner shall use its best efforts to assist Manger in obtaining the license. 13. DEFAULT AND TERMINATION. 13.1 Events of Default. It shall be an event of default hereunder (an "Event of Default") if Manager or Owner (the - 11 - 12 "Defaulting Party") fails to keep, perform or observe any material covenant, obligation or agreement required to be kept, performed or observed by such party under the terms of this Management Agreement, followed by written notice of such breach, default or non-compliance from the other party (the "Non-Defaulting Party") to the Defaulting Party and the Defaulting Party fails to remedy or correct such breach, default or non-compliance within thirty (30) days after receipt of such notice. If the breach, default or non-compliance is other than payment of money and is of a nature such that it cannot reasonably be cured within such thirty (30) day period, the period for curing the default shall be extended so long as the Defaulting Party in good faith commences immediately and proceeds expediently to cure the breach, default or non-compliance within such thirty (30) day period. 13.2 Termination. 13.2.1 General. If an Event of Default occurs and has not been cured, this Management Agreement shall terminate at the election of the Non-Defaulting Party. Notice of termination pursuant to this Section 13 may be given by the Non-Defaulting Party to the Defaulting Party at any time prior to the curing of such Event of Default, and such termination shall be effective as of the date specified in such notice of termination, which date shall be not less than thirty (30) nor more than one hundred twenty (120) days after the date of such notice. Notwithstanding the foregoing, if the Event of Default pertains to the payments of money, Manager may cease the discharge of its responsibilities hereunder effective upon the expiration of the thirty (30) day notice referenced in Section 13.1 hereof. Manager shall receive all funds due to it at the time of Termination. 13.2.2 Termination. In addition to the foregoing, this Management Agreement shall terminate upon any of the following events: (a) The mutual agreement of the parties; or (b) The inability of either party to receive or maintain the licenses or permits to perform their obligations hereunder; or (c) Manager shall (i) apply for or consent to the appointment of, or taking possession by, a receiver, custodian, trustee, liquidator or other similar official of all of its assets; (ii) make a general assignment for the benefit of creditors; (iii) be adjudicated a bankrupt or insolvent or have an order for relief entered with respect thereto; or (iv) file a voluntary petition, commence a voluntary case under the federal bankruptcy laws as now or hereafter constituted or file a petition or an answer seeking reorganization or any arrangement with creditors or take advantage - 12 - 13 of any bankruptcy, reorganization, insolvency, readjustment of debts, dissolution or liquidation law or statute. (d) After two (2) full years of operation following the Commencement Date, upon sixty (60) days notice, at the option of either party, if the Business in the next year or any subsequent year does not produce a net income of One Million Dollars ($1,000,000) before income taxes, amortization of pre-opening type expenses and distributions to Owner, determined in accordance with generally accepted accounting principles consistently applied. (e) If Louisiana Riverboat Gaming Partnership ("LRGP") does not acquire fifty percent (50%) interest in the issued and outstanding capital stock of the Company from Crown Casino Corporation ("Crown") pursuant to the Stock Purchase Agreement, dated the date hereof, by and among Crown, the Company and LRGP (the "Stock Purchase Agreement"). (f) Crown (or its assigns) shall reacquire all of the outstanding capital stock of the Company owned by LRGP as a result of a default by LRGP under the Purchase Money Note (as defined in the Stock Purchase Agreement) issued by LRGP to Crown pursuant to the Stock Purchase Agreement. (g) If the Manager exercises its option to obtain the license to operate the business for Manager's benefit pursuant to Section 12.1 hereof. 13.2.3 Waiver. The waiver of any one Event of Default shall not be construed as the waiver of any other Event of Default. 13.3 Remedies Cumulative. Except as herein provided to the contrary, the termination of this Management Agreement by the Non-Defaulting Party upon an Event of Default shall be without prejudice to any right the Non- Defaulting Party may have to damages, injunctions, specific performance or other legal or equitable remedies by reason of any breach, default or non-compliance by the Defaulting Party with such Defaulting Party's covenants, obligations and agreements hereunder. 14. NOTICES. 14.1 Notices. Every notice, demand, consent, approval or other document or instrument required or permitted to be served upon any of the parties hereto shall be in writing and shall be deemed to have been duly served on the day of mailing, and shall be sent by registered or certified United States Mail, postage prepaid, return receipt requested, addressed to the respective parties at the addresses stated below: - 13 - 14 If to Manager: Riverboat Services, Inc. c/o Casino America, Inc. 711 Washington Loop Biloxi, Mississippi 39530 Attention: Ms. Julie K. Watt Vice President, Chief Financial Officer and Treasurer with a copy to: Allan B. Solomon, Esq. Chairman of the Executive Committee Casino America, Inc. 2200 Corporate Blvd., N.W., Suite 310 Boca Raton, Florida 33431 If to Owner: St. Charles Gaming Company, Inc. c/o Crown Casino Corporation 2415 West Northwest Highway, Suite 103 Dallas, Texas 75220 Attention: Mr. Mark D. Slusser Vice President - Finance Crown Casino Corporation 2415 West Northwest Highway, Suite 103 Dallas, Texas 75220 Attention: Mr. Mark D. Slusser Vice President - Finance with a copy to: T. J. Falgout, III, Esq. Stumpf & Falgout 1400 Post Oak Boulevard, Suite 400 Houston, Texas 77056 or to such other address as either Manager or Owner may have specified in a notice duly given as required herein to the other. 15. RELATIONSHIP, AUTHORITY AND FURTHER ACTIONS. 15.1 Relationship. Manager and Owner shall not be construed as joint venturers or partners of each other by reason of this Management Agreement and neither shall have the power to bind or obligate the other except as specifically authorized and set forth in this Management Agreement. Nevertheless, Manager is granted - 14 - 15 such authority and powers as may be reasonably necessary for it to carry out the provisions of this Management Agreement. This Management Agreement, either alone or in conjunction with any other documents, shall not be deemed to constitute or create a lease of all or any portion of the Business. 15.2 Contractual Authority. Subject to the limitations thereon set forth in this Management Agreement, and in conformity with the Annual Plan, Manager is authorized to make, enter into and perform in the name of, for the account of, on behalf of and at the expense of the Owner any contracts and agreements (including, but not limited to bank accounts) which are reasonably necessary and appropriate to carry out and place in effect the terms and conditions of this Management Agreement. Copies of all executed contracts promptly shall be furnished to Owner. 15.3 Further Actions. Owner and Manager agree to execute all contracts, agreements and documents and to take all actions necessary to comply with the provisions of this Management Agreement and the intent hereof. Manager shall not enter into contracts (i) having a duration of more than one year and requiring Owner's or Manager's expenditure of more than $250,000 per year or (ii) having a duration of one year or less and requiring Owner's or Manager's expenditure of more than $500,000, without the consent of Owner, unless such contracts or expenditures are provided for in the Annual Plan. 16. APPLICABLE LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Louisiana. If any of the terms and provisions hereof shall be held invalid or unenforceable for any reason, such validity or unenforceability shall in no event affect any of the other terms or provisions hereof, all such other terms and provisions to be held valid and enforceable to the fullest extent permitted by law; provided, however, that in the event any material part of Owner's obligations under this Management Agreement shall be declared invalid or unenforceable, Manager shall have the option to terminate this Management Agreement. 17. MISCELLANEOUS. 17.1 Successors and Assigns. Manager shall not assign the whole or any portion of this Agreement or any payments due Manager hereunder, without Owner's consent which consent will not be unreasonably withheld. No prohibited assignment, whether voluntary or involuntary, by operation of law, under legal process or proceedings, by receivership, in bankruptcy or otherwise, shall be valid or effective. Owner shall not assign the whole or any portion of this Agreement, except to an affiliate without Manager's consent, which consent will not be unreasonably withheld, except as - 15 - 16 collateral for any financing obtained in connection with the development and/or operation of the Business. If the Agreement is assigned to an affiliate, Manager shall continue to be responsible under this Agreement. 17.2 Force Majeure. If at any time it becomes necessary in Manager's or Owner's reasonable opinion to cease operation of all or part of the Business to protect the Business or the health, safety or welfare of guests or employees of the Business for reasons of force majeure, such as, but not limited to, weather, river conditions, acts of war, insurrection, civil strife and commotion, labor unrest, contagious illness, catastrophic events, or acts of God, then in such event Manager or Owner may close and cease operations of all or part of the Business, reopening and commencing operation when Manager and Owner determine in good faith that such may be done without jeopardy to the Business, its guests and employees. Neither party shall be liable for failure to perform any obligation hereunder (other than to pay money) when prevented by any force majeure cause not reasonably within the control of such party, such as strike, lockout, breakdown, accident, order or regulation of or by any governmental authority, failure of supply or inability, by the exercise of reasonable diligence, to obtain supplies, parts or employees necessary to perform such obligation to which such force majeure applies, and this Agreement shall be extended for a period of time equivalent to the delay from such cause. 17.3 Authorization. Owner and Manager represent to the other that it has full power and authority to execute this Management Agreement and to be bound by and perform the terms hereof. On request, each party shall furnish the other evidence of such authority. 17.4 Interest. Any amount payable to a party hereunder which shall not be paid when due, shall accrue interest until paid at the prime rate of the First National Bank of Chicago then in effect. 17.5 Entire Agreement; Amendments. This Agreement sets forth the entire and only agreement or understanding between Owner and Manager relating to the subject matter hereof and supersedes and cancels all previous agreements, negotiations, commitments and representations in respect hereof among them. Owner has not relied on any projection of earnings, statements as to the possibility of future success or other similar matters which may have been prepared by Manager or Owner, or any of their respective affiliates, and understands that no guaranty is made or implied by Manager or its affiliates as to the cost or the future financial success of the operations being managed hereunder. This Agreement may not be amended in any respect except by an instrument in writing signed by the Owner and Manager. - 16 - 17 17.6 No Waiver. No waiver by either party of a breach by the other party of any of the terms, covenants or conditions of this Agreement, shall be construed or held to be a waiver of any other breach of the same or any other term, covenant or condition herein contained. No waiver of any default of either party hereunder shall be implied from any omission by the other party to take any action on account of such default if such default persists or is repeated, and no express waiver shall affect default other than as specified in said waiver. 17.7 Compliance. In performing its obligations under this Agreement, Manager shall comply with all present and future laws, ordinances and all rules and regulations, requirements and orders of all governmental authorities and shall obtain all licenses and permits required to perform such obligations and shall file all returns and reports lawfully required of Manager in connection with its duties hereunder, including, but not limited to, income tax withholding returns, Federal Insurance Contributions Act returns and reports, Federal Unemployment Tax Act and worker's compensation returns and reports, sales and use tax returns (and shall timely pay all contributions, taxes, costs and other amounts due thereunder). All of the foregoing returns and reports shall be maintained as a part of the books and records of Manager. 17.8 Headings. The headings hereunder are used for convenience only and shall not affect the construction or interpretation of any provision hereof. 17.9 Counterparts. For the convenience of the parties hereto, this Agreement may be executed in several original counterparts, each of which shall be deemed an original for all purposes and all such counterparts shall constitute but one and the same agreement. IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Management Agreement as of the date and year first above written. OWNER: ST. CHARLES GAMING COMPANY, INC. By:/s/ Mark D. Slusser ----------------------------------- Name: Mark D. Slusser Title: Chief Financial Officer - 17 - 18 MANAGER: RIVERBOAT SERVICES, INC. By:/s/ Allan B. Solomon ----------------------------------- Name: Allan B. Solomon Title: Secretary and Treasurer - 18 - EX-10.16 7 DEVELOPMENT AGREEMENT 1 EXHIBIT 10.16 DEVELOPMENT AGREEMENT STATE OF LOUISIANA PARISH OF CALCASIEU BE IT KNOWN, that on the date hereinafter set forth, before the undersigned Notaries public, duly commissioned and qualified in and for the state and parish aforesaid, and in the presence of the undersigned competent witnesses, personally came and appeared ST. CHARLES GAMING COMPANY, INC., a Louisiana corporation (herein called "St. Charles"), herein represented by Edward R. McMurphy, its duly authorized president, and the CALCASIEU PARISH POLICE JURY (hereinafter called the "Parish"), herein represented by Ray Campbell, its duly authorized president, who declared that: ST. CHARLES is the owner of a riverboat gaming vessel currently known as the "Crown Casino" (the "Casino"). ST. CHARLES is currently licensed (the "License") to operate the Casino in the State of Louisiana by the Louisiana Riverboat Gaming Enforcement Division of the Gaming Enforcement Section of the Office of State Police, Department of Public Safety and Corrections (the "Division"). ST. CHARLES has received the approval of the Louisiana Riverboat Gaming Commission (the "Commission") to locate the berthing site for its Casino at a location in the unincorporated area of Calcasieu Parish, Louisiana commonly known as the "Burton Shell Yard" (the "Site"). ST. CHARLES has requested that the Parish cooperate with and assist St. Charles in its efforts to locate the Casino at the Site and develop the Site as the location for the Casino and related entertainment and dining facilities. NOW, THEREFORE, for and in consideration of the mutual and dependent agreements of the Parish and St. Charles hereinafter set forth, St. Charles and the Parish agree to the following: ARTICLE I MONETARY OBLIGATIONS OF ST. CHARLES Section 1.1. Initial Cash Payment. St. Charles shall pay to the Parish the cash sum of ONE MILLION AND NO/100 DOLLARS ($1,000,000.00) on the Opening Date (as hereinafter defined) of the Casino at the Site (the "Initial Cash Payment"). The term "Opening Date" shall mean the first (1st) date a revenue-paying customer is admitted to the Casino at the Site. 2 Section 1.2. Annual Cash Payments. St. Charles shall pay to the Parish the cash sum of ONE MILLION AND NO/100 DOLLARS ($1,000,000.00) in each consecutive twelve (12) month period from and after the Opening Date for so long as St. Charles continues to operate the Casino at the Site (the "Annual Cash Payment"). The Annual Cash Payment shall be payable in equal quarterly installments of TWO HUNDRED FIFTY THOUSAND AND NO/100 ($250,000.00) DOLLARS, commencing on the first (1st) day of the second month immediately following the Opening Date, and continuing on the first (1st) day of each third month thereafter for so long as St. Charles continues to operate the Casino at the Site. Such Annual Cash Payments may be shared with other governmental authorities, in the Parish's discretion, which are affected or impacted by the operation of the Casino. Section 1.3. Payment of Certain Sums. St. Charles hereby unconditionally agrees to pay to the Parish the Initial Cash Payment and the Annual Cash Payments for a minimum of six (6) years, when due as specified in Paragraphs 1.1 and 1.2 hereof, up to the aggregate sum of SEVEN MILLION AND NO/100 ($7,000,000.00) DOLLARS, which aggregate sum shall be payable by St. Charles notwithstanding the cessation of the operation of the Casino by St. Charles at the Site at any time during its first six (6) years of operations. Section 1.4. Legally Mandated Boarding Fees. In accordance with Section 552A of the Louisiana Riverboat Economic Development and Gaming Control Act (the "Act"), St. Charles shall pay to the Parish a fee of $2.50 per passenger boarding the Casino (the "Boarding Fee Payment"), for so long as the Casino is located and operated at the Site. The Boarding Fee Payment shall be paid monthly, on or before the twentieth (20th) day of each month for boardings during the prior month. St. Charles and the Parish may, in the future, agree to a substitute for the Boarding Fee Payment. Such substitute payment may take the form of a payment based upon a mutually agreed upon percentage of the St. Charles' gross gaming revenues (as defined in the Act) generated by the Casino. ARTICLE II INFRASTRUCTURE EXPENDITURES, SPECIFICATIONS Section 2.1. Payment. St. Charles shall pay or cause to be paid to or spent for the benefit of the Parish and other state, local and federal authorities, the costs of the initial infrastructure, capital and other public safety improvements (collectively, the "Offsite Improvements") in the vicinity of the Site which are necessitated by the location of the Casino at the Site, including without limitation, traffic lights, street lights, road construction, water, sewer and other utility improvements. The Offsite Improvements shall be subject to the mutual agreement of St. Charles, the Parish and all other applicable governmental entities. Section 2.2. Specifications. All such Offsite Improvements shall be designed and constructed pursuant to and in accordance with Parish building code or other applicable standards and completed in a good and workmanlike manner, with due dispatch. During the course of all work pursuant to this Article, St. Charles shall comply with all current 2 3 federal, state, Parish and applicable municipal laws, ordinances and regulations in the construction of the Offsite Improvements and apply for all applicable federal, state, Parish and applicable municipal permits. In connection herewith, St. Charles shall timely submit all infrastructure improvement plans affecting Parish roads to the Parish Engineer. ARTICLE III SITE IMPROVEMENTS TO BE MADE BY ST. CHARLES Section 3.1. St. Charles shall use its best efforts to commence and complete the following improvements (the "Improvements") to the Site: (a) a slip in which the Casino shall be moored during those periods of time when not cruising; (b) a terminal building, including a restaurant(s), a gift shop, passenger and patron amenities, and administrative offices and other related facilities; and (c) a multi-level parking garage and adequate surface parking facilities, together with appropriate landscaping and outdoor amenities for patrons and passengers. Section 3.2. Dependent on market factors, the availability of financing and the satisfactory completion and positive analysis of marketing studies, it is the further intent of St. Charles to construct a hotel on a tract of land adjacent to the Site. Section 3.3. The Improvements shall be constructed by St. Charles in accordance with designs, plans and specifications prepared for, and approved by, St. Charles, in its sole discretion, provided, however, all of such Improvements shall be built in accordance with applicable laws and regulations and pursuant to applicable federal, state and Parish permits. ARTICLE IV ANNEXATION St. Charles agrees to lawfully oppose the annexation of the Site by any municipality or other governmental authority and use its best efforts to persuade its landlord to also oppose the annexation of the Site by any governmental municipality or other governmental authority. ARTICLE V OBLIGATIONS OF THE PARISH The Parish hereby agrees to cooperate with and assist St. Charles to the fullest possible extent and in an expeditious manner in its efforts to develop the Site and operate 3 4 the Casino, provided, however, such cooperation and assistance shall not interfere with or impair the Parish from setting or making Parish policy. Furthermore, the Parish shall assist St. Charles in the coordination of all applicable federal, state and local authorities and adjacent municipalities to resolve access, infrastructure and other issues arising during the course of St. Charles' development of the Site and operation of the Casino. ARTICLE VI CONDITIONS TO OBLIGATIONS OF ST. CHARLES The obligations of St. Charles set forth herein are and shall be subject to the opening of the Casino for business at the Site and the receipt by St. Charles of any and all required approvals from all regulatory authorities having jurisdiction over St. Charles, the operations of the Casino and the location of the Casino at the Site, including without limitation, the Commission, the Division and the U.S. Army Corp of Engineers. ARTICLE VII GOVERNING LAW/VENUE This Agreement shall be governed by the laws of the State of Louisiana. This Agreement is enforceable in the Fourteenth Judicial District Court, Parish of Calcasieu, State of Louisiana. ARTICLE VIII BENEFIT - SUCCESSORS AND ASSIGNS This Agreement and the rights and obligations contained herein shall be binding upon, and inure to the benefit of, the respective successors and assigns of the parties hereto. ARTICLE IX ATTORNEYS' FEES In the event of a judicial proceeding brought by one party to this Agreement against the other party to this Agreement for enforcement or for breach of any provision of this Agreement, the prevailing party in such judicial proceeding shall be entitled to reimbursement from the unsuccessful party of all costs and expenses, including reasonable attorneys' fees incurred in connection with such judicial proceeding. ARTICLE X RENEGOTIATION OF MONETARY OBLIGATIONS Section 9.1. St. Charles and the Parish acknowledge and agree that the obligations of St. Charles set forth in Section 1.2 hereof are based upon, and the parties have acted in 4 5 reliance upon, the competitive situation with respect to casino gaming in Calcasieu Parish and elsewhere, and the current taxes and fees assessed by the State of Louisiana on riverboat casino gaming. In recognition that such competitive factors may change subsequent to the date hereof, and the State of Louisiana may increase fees and taxes impacting the riverboat casino gaming industry, St. Charles and the Parish agree that the obligations of St. Charles set forth in Section 1.2 hereof shall be subject to renegotiation by St. Charles and the Parish in the event of the occurrence of any of the following: (a) if a riverboat, barge and/or a land-based casino (a "Competitive Casino") is allowed within a one hundred (100) mile radius of Calcasieu Parish, excepting only the two (2) riverboats operated by Players International, Inc. in Lake Charles, Louisiana, and the land-based casino operated by Grand Casino, Inc. in Kinder, Louisiana; or (b) if a Competitive Casino is allowed in the State of Texas that has a material adverse impact on St. Charles; or (c) if the State of Louisiana increases, or passes legislation to increase, fees or taxes impacting the riverboat casino gaming industry in the State of Louisiana or laws change that directly or indirectly prohibit St. Charles from lawfully operating the Casino at the Site. Section 9.2. In the event of the occurrence of any of the matters set forth in Section 9.1 hereof, St. Charles and the Parish agree to renegotiate in good faith the financial obligations of St. Charles as set forth in Section 1.2 hereof. Section 9.3. In the event of the occurrence of any of the matters set forth in Section 9.1 hereof, the Parish, in its sole discretion, may choose to reduce the Boarding Fee Payments set forth in Section 1.4 hereof. ARTICLE XI APPROVALS St. Charles and the Parish each represent and warrant to the other that the execution of this Agreement has been fully authorized by all necessary action, corporate or otherwise, in order that the terms hereof constitute their respective legal, valid and binding obligations. ARTICLE XII MODIFICATION AND AMENDMENT This Agreement shall not be amended or otherwise modified in any manner except by an instrument in writing executed by both parties hereto. 5 6 ARTICLE XIII UNDERSTANDINGS AND AGREEMENTS This Agreement contains the entire agreement between the parties with respect to the matters contained herein and supersedes all prior agreements. ARTICLE XIV NOTICES All notices, demands and requests which may be given or which are required to be given by any party to the others, shall be in writing and shall be deemed effective when either: (a) personally delivered to the intended recipient; (b) sent by certified or registered mail, return receipt requested, addressed to the intended recipient at the address specified below; (c) delivered in person to the address set forth below for the party to which the notice was given; (d) deposited into the custody of a nationally recognized overnight delivery service such as Federal Express Corporation, Airborne, Emery or Purolator, addressed to such party at the address specified below; or (e) sent by facsimile, telegram or telex, provided that receipt for such facsimile, telegram or telex is verified by the sender and followed by a notice sent in accordance with one of the other provisions set forth above. Notices shall be effective on the date of delivery or receipt or, if delivery is not accepted, on the earlier of the date that delivery is refused or three (3) days after the date the notice is mailed. For purposes of this Section, the addresses of the parties for all notices are as follows (unless changes by similar notice in writing are given by the particular person whose address is to be changed): If to St. Charles, to St. Charles Gaming Company, Inc., 2415 West Northwest Highway, Suite 103, Dallas, Texas 75220; Attention: Edward R. McMurphy, President; With a copy to: T. J. Falgout, III, Stumpf & Falgout, 1400 Post Oak Boulevard, Suite 400, Houston, Texas 77056; If to the Parish, to the Calcasieu Parish Police Jury, PO Box 1583, Lake Charles, Louisiana 70602-1583; Attention: President; With a copy to: Mark McMurry, Parish Administrator, Calcasieu Parish Police Jury, PO Box 1583, Lake Charles, Louisiana 70602-1583. Any party hereto may designate a different address by notice given to the other party. 6 7 ARTICLE XV SEVERABILITY If any provision of this Agreement is held to be invalid, illegal or unenforceable, that shall not affect or impair, in any way, the validity, legality or enforceability of the remainder of this Agreement. THUS DONE AND SIGNED in ____________________________, _____________ _______, in the presence of the undersigned competent witnesses, on this __________ day of June, 1995. WITNESSES: ST. CHARLES GAMING COMPANY, INC. ------------------------------ By: --------------------------- Name: ------------------------------ ------------------------- Title: ------------------------ ---------------------------------------- NOTARY PUBLIC THUS DONE AND SIGNED in Lake Charles, Louisiana, in the presence of the undersigned competent witnesses, on this ____________ day of June, 1995. WITNESSES: CALCASIEU PARISH POLICE JURY ------------------------------ By: --------------------------- Ray Campbell, President ------------------------------ ---------------------------------------- NOTARY PUBLIC EX-10.16.1 8 FIRST AMENDMENT TO DEVELOPMENT AGREEMENT 1 EXHIBIT 10.16.1 FIRST AMENDMENT TO DEVELOPMENT AGREEMENT STATE OF LOUISIANA PARISH OF CALCASIEU BE IT KNOWN, that on the date hereinafter set forth, before the undersigned Notaries Public, duly commissioned and qualified in and for the State and Parish aforesaid, and in the presence of the undersigned competent witnesses, personally appeared ST. CHARLES GAMING COMPANY INC., a Louisiana corporation (hereinafter called "St. Charles"), herein represented by ___________________, its duly authorized officer, and the Calcasieu Parish Policy Jury (hereinafter called the "Parish"), herein represented by Ray Campbell, its duly authorized President who declared that: Effective as of June 9, 1995, St. Charles and the Parish entered into that certain Development Agreement, (the "Development Agreement") with respect to the operation by St. Charles of its riverboat gaming vessel in the Parish. St. Charles and the Parish have agreed to modify and amend the terms and provisions of the Development Agreement and desire to set forth such agreement in writing. All capitalized terms used herein shall the same meanings set forth in the Development Agreement. NOW, THEREFORE, for and in consideration of the mutual and dependent agreements of the Parish and St. Charles hereinafter set forth, St. Charles and the Parish agree to the following: 1. Section 1.4 of the Development Agreement is deleted in its entirety and the following is substituted therefor: Section 1.4. Legally Mandated Boarding Fees. From and after the Opening Date, in accordance with Section 552A of the Louisiana Riverboat Economic Development and Gaming and Control Act (the "Act"), St. Charles shall pay to the Parish a fee (the "Boarding Fee") for so long as the Casino is located and operated at the Site, which Boarding Fee shall be equal to the greater 2 of (a) $2,500,000 per annum (the "Guarantee Amount") or (b) 3.2 % (the "Applicable Percentage") of the gross gaming revenues, as defined in LSA R.S. 4:605 (17) ("Gross Gaming Revenues"), of St. Charles. The Boarding Fee shall be paid monthly on or before the 20th day of each month based upon the Gross Gaming Revenues generated by the Casino during the immediately preceding month. At such time as the Parish levies and is legally authorized to collect a fee of $.50 per passenger boarding the Casino pursuant to Act No. 743, of the 1995 Regular Session ("Act 743"), the Applicable Percentage shall be 3.84% (instead of 3.2%) and the Guarantee Amount shall be $3,000,000. The parties agree that the Guarantee Amount shall be subject to adjustment from time to time as provided below. At April 1, 1999, the Guarantee Amount shall be increased or decreased by the same percentage that the Consumer Price Index for Calcasieu Parish (the "CPI") increases or decreases from July 1, 1995 to April 1, 1999, but in no event increased or decreased by more than ten (10%) percent. At April 1, 2004 and each date which is a multiple of five (5) years thereafter (i.e. April 1, 2009, April 1, 2014, etc.) (the "Adjustment Date"), the then current Guarantee Amount shall be increased or decreased by the same percentage that the CPI increases or decreases from the date which is five (5) years prior to that Adjustment Date to that Adjustment Date (i.e., a five year period), but in no event increased or decreased by more than ten (10%) percent on any Adjustment Date. 2. There shall be added to the Development Agreement a new Section 1.5 which shall read as follows: Section 1.5. Adjustment to Boarding Fee. Notwithstanding the provisions of Section 1.4 hereof, the Applicable Percentage shall be increased for any month for which the Boarding Fee is payable up to an amount equal to the Player's Boarding Fee Percentage (as hereinafter defined) for such month plus .025% (.015% if Player's converts to a percentage of Gross Gaming Revenues boarding fee payment) if such amount is greater than the Applicable Percentage calculated pursuant to Section 1.4 hereof. The term "Player's Boarding Fee Percentage" shall mean the percentage obtained by dividing the aggregate boarding fees paid by Player's International, Inc. ("Players") pursuant to Section 552A of the Act to the City of Lake Charles, Louisiana (the "City") for its two casino riverboats located in the City, by the aggregate Gross Gaming Revenues of Players generated at its two casino riverboats located in the City. Any adjustment to the Boarding Fee shall be paid by St. Charles to the Parish on or before the thirtieth (30th) day of each month with respect to the Boarding Fee for the immediately preceding month. In the event Players and the City modify the method of calculating boarding fees due by Players to the City from a per head calculation to a percentage of Gross Gaming Revenues, then the Player's Boarding Fee Percentage shall be equal to the percentage of Gross Gaming Revenues paid by Players to the City solely on account of boarding fee payments. 3. There shall be added to the Development Agreement a new Section 1.6 which shall read as follows: Section 1.6. Option to Revert To Per Passenger Head Tax. The parties to this Development Agreement acknowledge that pursuant to Section 552A of the Act, St. Charles has the right to convert from a percentage based boarding fee payment to a per head based boarding fee at any time. Accordingly, St. Charles shall have the option at any time upon thirty (30) days prior written notice during the term of the Development Agreement to modify the computation of 2 3 the Boarding Fee from a percentage of Gross Gaming Revenues, as set forth above, to a fee of $2.50 per passenger boarding the Casino, or to a fee of $3.00 per passenger boarding the Casino if the Parish is currently levying and is authorized to collect an additional $.50 per passenger pursuant to Act 743 referenced above. 4. Article X of the Development Agreement is deleted in its entirety. No other modification or amendment is made or intended to be made hereby, and, except as amended by this instrument, the Development Agreement is hereby ratified, confirmed and reaffirmed by the Parish and St. Charles. THUS DONE AND SIGNED in Dallas, Texas in the presence of the undersigned competent witnesses on this ___ day of ____________, 1995. WITNESSES: ST. CHARLES GAMING COMPANY, INC. __________________________________ By: _______________________________ Name: _____________________________ __________________________________ Title: ____________________________ ______________________________ NOTARY PUBLIC THUS DONE AND SIGNED in Lake Charles, Louisiana, in the presence of the undersigned competent witnesses, on this ___ day of _____________, 1995. WITNESSES: CALCASIEU PARISH POLICE JURY __________________________________ By: _______________________________ Name: _____________________________ __________________________________ Title: ____________________________ ______________________________ NOTARY PUBLIC 3 EX-10.17 9 LEASE DATED 3/24/95 1 EXHIBIT 10.17 STATE OF LOUISIANA S PARISH OF CALCASIEU LEASE THIS AGREEMENT OF LEASE (hereinafter "the Lease" or "this Lease") made this ______ day of ______________________1995, between PORT RESOURCES, INC., a Louisiana corporation, and CRU, INC., a Louisiana corporation, (hereinafter collectively, "LANDLORD"), and ST. CHARLES GAMING COMPANY, INC., a Louisiana corporation, (hereinafter, "TENANT"). WITNESSETH 1. LEASED PROPERTY. LANDLORD leases to TENANT and TENANT leases from LANDLORD the following described property with all improvements and appurtenances thereto located in the Parish of Calcasieu and State of Louisiana (hereinafter sometimes referred to as "Leased Property"): That certain tract or parcel of land described as Blocks 41 and 42 of the Old Townsite of Westlake, that portion of Landry Street lying East of Westlake Avenue, abandoned by document bearing file number 1495741 in the records of Calcasieu Parish, Louisiana, and that portion of land lying between the South line of said Blocks 41 and 42 and the North line of property belonging to Lake Charles Harbor and Terminal District, all lying within Section 36, Township 9 South, Range 9 West, Calcasieu Parish, Louisiana, being more particularly described as follows to-wit: Beginning at the Southwest Corner of Block 21 of the Old Townsite of Westlake, said point also being the Northwest Corner of Landry Street, abandoned as per document bearing file number 1495741 records of Calcasieu Parish, Louisiana, in Section 36, Township 9 South, Range 9 West, Calcasieu Parish, Louisiana; Thence South 88 degrees 50' 45" East, along the South line of Blocks 21 and 29 of the Old Townsite of Westlake, for a distance of 517.50 feet to the top West bank of the Calcasieu River; Thence Southerly, following the meander of the top West bank or right descending bank of said Calcasieu River, for a distance of 929.84, more or less, to the North line of property belonging to the Lake Charles Harbor and Terminal District; Thence North 89 degrees 45' 09" West, along said North property line for a distance of 563.00 feet to an existing 2 1/2" cap pipe, marking the Northwest Corner of Lake Charles Harbor and Terminal District property, said point also being on the West line of the aforesaid Section 36; Thence North 00 degrees 14' 51" East, along the West line of said Section 36, for a distance of 862.42 feet to the point of beginning. Herein described tract is possibly subject to a 28.00 foot right-of-way on the South side of Blocks 41 and 42. Herein described tract containing 10.44 acres more or less, and as depicted as Tract 2 on the attached plat attached hereto as "Exhibit To 1 2 Lease". The Leased Property generally encompasses a portion of the area known as the Burton Shellyard on the west bank of the Calcasieu River south of Interstate 10. Notwithstanding the information depicted on the attached Exhibit To Lease, TENANT confirms it has inspected the Leased Property and its apparent boundaries and is satisfied that its size, boundaries, encroachments, if any, and configuration are adequate for the uses intended under this Lease and hereby accepts the Leased Property in the condition presented. 2. TERM. The initial term of this Lease shall be five (5) years (hereinafter, the "initial term"), to commence _____________, 1995. TENANT shall have the option to renew this Lease for three (3) additional five (5) year terms (hereinafter, the "renewal terms") under the same terms and conditions of this Lease and as further provided below. TENANT shall notify LANDLORD of its intention to exercise its option to renew at least six (6) months prior to the expiration of the initial term and any renewal term of this Lease. 3. RENTAL. (A) Initial Term. TENANT covenants and agrees to pay to LANDLORD annual rent of Seven Hundred Fifty Thousand and 00/100 Dollars ($750,000.00), payable monthly in advance without demand, deduction, abatement or set off on the first day of each and every month of said initial term in two separate, equal payments of Thirty-one Thousand Two Hundred Fifty and 00/100 Dollars ($31,250.00) each payable to Port Resources, Inc. and to CRU, Inc. (B) First Renewal Term. The rent during the first renewal term shall increase over the rent during the initial term in annual increments of five (5%) per cent per annum or the percentage increase in the average consumer price index for Calcasieu Parish, Louisiana for the previous twelve (12) month period, whichever is higher, computed on the total rent due for the prior twelve (12) month rental period. (C) Second and Third Renewal Terms. During the second and third renewal terms, the Rent shall be not less than the rent for the last year of the preceding term subject to the following adjustments: In the event TENANT exercises its option to extend the term of this Lease, Rent shall be increased as of the commencement date of the Renewal term (the "Rent Adjustment Date") as follows: (a) Commencing at the beginning of the month which is three (3) months prior to the Rent Adjustment Date, Landlord and Tenant shall attempt to agree upon an increase in Rent for the Leased Property for the Renewal term, such Rent to equal one hundred percent (100%) of rent paid by other riverboat gaming operators in Louisiana and Mississippi for comparable property usages. If the parties are unable to agree upon the Rent for the Renewal term prior to the end of such month, then within ten (10) days thereafter each party, at its own cost and by giving notice to the other party, shall appoint a real estate appraiser with at least five (5) years full-time commercial real estate appraisal experience in the area in which the Leased Property is located to appraise and set Rent for the Renewal term. If a party does not appoint an appraiser within ten (10) days after the other party has given notices of the name of its appraiser, the single appraiser appointed shall be the sole appraiser and shall set the Rent for the Renewal term. If each party shall have so appointed an appraiser, the two appraisers shall meet promptly and attempt to set the Rent for the Renewal term. If the two appraisers are unable to agree within thirty (30) days after the second appraiser has been appointed, they shall attempt to select a third appraiser meeting the qualifications herein stated within ten (10) days after the last day the two appraisers are given to set the Rent. If the two appraisers are unable to agree on the third appraiser within such ten (10) days period, either of the parties to this Lease, by giving ten (10) days notice to the other party, may apply to the President of the Louisiana Real Estate Commission for the selection of a third appraiser meeting the qualifications stated in this paragraph. Each of the parties shall bear 2 3 one-half (1/2) of the cost of appointing the third appraiser and of paying the third appraiser's fee. The third appraiser, however selected, shall be a person who has not previously acted in any capacity for either party. (b) Within thirty (30) days after the selection of the third appraiser, a majority of the appraisers shall set the Rent for the Renewal term. If a majority of the appraisers are unable to set the Rent within the stipulated period of time, the three appraisals shall be added together and their total divided by three (3). The resulting quotient shall be the annual Rent for the Leased Property during the Renewal term. If, however, the low appraisal and/or the high appraisal is/are more that five percent (5%) lower and/or higher than the middle appraisal, the low appraisal and/or the high appraisal shall be disregarded. If only one (1) appraisal is disregarded, the remaining two (2) appraisals shall be added together and their total divided by two (2), and the resulting quotient shall be the Rent for the Leased Property during the Renewal term. If both the low appraisal and the high appraisal are disregarded as stated in this paragraph. The middle appraisal shall be the Rent for the Leased Property during the Renewal term. (c) After the Rent for the Renewal term has been set, the appraisers shall immediately notify the parties hereto in writing by certified mail, return receipt requested. (D) Proration. Rent for any period of occupancy of less than one month shall be prorated in proportion to the number of days of occupancy in that month. (E) Payment. All rent shall be paid to Port Resources, Inc. at Suite 1700, CM Tower, One Lakeshore Drive, Lake Charles, Louisiana 70602 and to CRU, Inc. at 101 North Huntington Street, Sulphur, Louisiana 70663-2601 or at such other address or addresses as LANDLORD, or either of them, may from time to time designate in writing. 4. USE. The Leased Property shall be used and occupied as a riverboat gaming facility and any other lawful purpose relating thereto and for no other purpose without the prior written consent of LANDLORD. The riverboat gaming facility shall be constructed and operated in accordance with the laws and regulations of the State of Louisiana and any other political subdivision having jurisdiction. 5. ZONING. LANDLORD does not warrant that any covenant, restriction, easement, zoning and other governmental laws or regulation in effect as of the date hereof permit the use of the Leased Property for docking or operation of a riverboat gaming facility and uses incidental thereto. 6. SERVICES. LANDLORD shall furnish no services. TENANT shall be responsible for and shall pay for all utilities including any sewerage or drainage charges. 7. CONDITION OF LEASED PROPERTY. TENANT acknowledges that the Leased Property was previously used as a stone and aggregate off loading facility and a storage, sale and distribution yard for stone and aggregate. LANDLORD is relieved of any obligations of repair including but not limited to those obligations found in Section 2, Chapter 2 of Title IX Of Lease, of the Louisiana Civil Code. TENANT undertakes all of these obligations of repair and maintenance and otherwise assumes all obligations and responsibility for the condition of the Leased Property and indemnifies and holds LANDLORD harmless for any claim, demand or damage arising occasioned to anyone from said condition. 8. ALTERATIONS AND IMPROVEMENTS. (A) TENANT may, from time to time during this Lease or any renewal or extension thereof, at its own expense make, install or construct such alterations and improvements, structural or otherwise, and install such identifications, signs, furniture, fixtures and equipment in or on the Leased Property as will, in the judgment of TENANT, adapt the same to the purposes of its business. 3 4 However, no underground storage tanks shall be installed. Any dredging, excavations, bulkheads or alterations to the shoreline or construction of docking facilities or marinas shall require the prior written consent of LANDLORD. LANDLORD's consent shall not be unreasonably withheld or delayed after TENANT has fully disclosed such plans to LANDLORD. (B) All improvements and alterations made by TENANT (other than TENANT's personal property and trade fixtures) shall become, upon the expiration or termination of this Lease, the property of LANDLORD and shall remain on the Leased Property. Not later than the last day of the term or upon termination of this Lease, and provided TENANT is not in default, TENANT will remove all of its personal property, equipment, trade fixtures and signs and repair all damage resulting from such removal. 9. COVENANT AGAINST LIENS. At its cost and expense (whether by payment, by filing the necessary bond, by order of a court of competent jurisdiction or otherwise), TENANT shall promptly remove and discharge of record all liens, encumbrances and charges upon the Leased Property, or TENANT's Leasehold interest therein, which arise as a result of any act or omission by TENANT, including all such liens, encumbrances and charges that either arise out of the possession, use, occupancy, maintenance, repair or rebuilding of the Leased Property or arise by reason of labor or materials furnished or claimed to have been furnished to TENANT or otherwise. Prior to commencement of any construction activities, TENANT shall provide a surety bond or bonds in a company or companies and in a form satisfactory to LANDLORD in an aggregate amount of not less than one hundred fifty (150%) percent of the contract amount, guaranteeing TENANT's performance under the terms of this covenant and to protect and indemnify LANDLORD against any mechanic's liens, materialman's liens, architect's lien, builder's lien or any other lien arising out of any construction or repair activities conducted on the Leased Property; provided, however, that TENANT may contest the validity of any lien or claim having first posted the bond required hereinabove to insure that, upon final determination of such claim, it shall immediately pay any judgment rendered against it with all proper costs and charges, and have such lien released without cost to LANDLORD. 10. COVENANT AGAINST MORTGAGE. TENANT shall not grant any mortgage or otherwise encumber the Leased Property without the prior written consent of LANDLORD. 11. SUBORDINATION. LANDLORD represents and warrants to TENANT that, upon execution and delivery of the Lease, the Leased Property will be free and clear of all mortgages, deeds of trust and other similar instruments encumbering the Leased Property. TENANT will accept the Lease subject to any mortgages, deeds of trust and other similar instruments hereinafter encumbering the Leased Property ("future mortgages") provided that the holder of any such future mortgage agrees in such future mortgage or separate instrument not to disturb TENANT's occupancy of the Leased Property so long as TENANT performs its obligations under the Lease on the condition that TENANT, when requested by the future mortgagee, shall execute an attornment agreement to the future mortgagee should the future mortgagee succeed to the rights of LANDLORD under the Lease. 12. SUBLETTING AND ASSIGNMENT. (A.) During the initial term of this Lease, TENANT may not, without the prior written consent of LANDLORD, assign this Lease or sublet the whole or any part of the Leased Property. For purposes of this paragraph a conveyance or sale, regardless of how structured, of fifty-one percent (51%) or greater of TENANT's interest in the riverboat gaming operation conducted or to be conducted on the Leased Property shall be considered as an assignment or subletting requiring the consent of LANDLORD. LANDLORD specifically reserves its right to withhold consent. LANDLORD hereby consent to an assignment of not more than fifty percent (50%) of TENANT's stock in the riverboat gaming operation to be conducted on the Leased Property to Casino America, Inc. or its affiliated entity. (B.) During any Renewal term of this Lease TENANT may not, without the prior written consent of LANDLORD, assign the Lease or sublet the whole or any part of the Leased Property. Notwithstanding the foregoing, LANDLORD shall not unreasonably withhold its consent to any assignment of subletting of the Leased Property during any Renewal term if: 4 5 (a) At the time of the proposed assignment or sublease, the assignee or sublessee is financially capable of operating a casino and/or riverboat gaming facility of the type located at the Leased Property; (b) The proposed assignee or sublessee has casino gaming operating experience comparable to, or greater than, TENANT's experience, or has contracted with a casino and/or riverboat gaming operator with experience comparable to, or greater than, TENANT's; (c) The proposed use of the Leased Property by such proposed assignee or sublessee is as a riverboat (or dockside) gaming facility site of a similar type and quality of TENANT's use under the terms of this Lease; (d) The proposed assignee has all requisite licenses in the State of Louisiana to operate a casino and/or riverboat gaming facility, the proposed assignee is not under current investigation or has not been suspended or declined a similar license, in another state, and is of suitable moral character reasonably satisfactory to LANDLORD; and (e) The proposed assignee or sublessee executes an agreement in form and substance satisfactory to LANDLORD assuming and agreeing to perform all obligations of TENANT under this Lease; (f) The TENANT, and/or present party TENANT, shall remain responsible and liable for all of the obligations of TENANT under the Lease. (C.) Each and every assignee, whether as assignee or as successor in interest of any assignee of TENANT, shall, immediately be and become and remain liable for the payment of the Rent and other charges payable under this Lease, and for the due performance of all the covenants, agreements, terms and provisions of this lease, on TENANT's part to be performed, and each and every provision of this Lease applicable to TENANT prior to such assignment shall also apply to and bind every such assignee with the same force and effect as though such assignee were the party named originally as TENANT in the Lease. 13. EMINENT DOMAIN. (A) If all or part of the Leased Property or any improvements thereon be taken by right of eminent domain, this Lease shall terminate as to the property so taken and the rent and all other charges which are TENANT's responsibility shall be proportionately reduced during the unexpired portion of this Lease, effective as of the date of taking. If as a result of the taking, the Leased Property is no longer suitable by reason of its resulting size, shape or configuration for the purposes of this Lease, this Lease shall terminate as to all of the Leased Property. (B) TENANT shall only be entitled to share in the compensation awarded expressly for the loss of its business and improvements. LANDLORD shall be entitled to all other compensation. TENANT shall not assert or be entitled to any Leasehold advantage. 14. DEFAULT. (A) If TENANT defaults in the performance of any of the covenants or conditions on its part to be performed, LANDLORD may give TENANT written notice of such default and if TENANT does not cure such default within twenty (20) days after receipt of such notice (or, if such default is of such a nature that it cannot be cured within the twenty (20) days, if TENANT does not commence such cure within said twenty (20) day period and thereafter proceed with diligence to cure the default) or if TENANT enters into any transaction or series of transactions in which any or substantially all of TENANT's assets are disposed of, or if TENANT is adjudicated bankrupt, or a receiver of its property is appointed, TENANT shall be in breach of this Lease and LANDLORD may at its option elect either of the following remedies: (i) LANDLORD may terminate this Lease on a date not less than five (5) days after 5 6 TENANT's receipt of written notice of such termination, and on the date specified in said notice, this Lease shall terminate, and TENANT shall quit and surrender the Leased Property to LANDLORD. In the event of such termination, LANDLORD shall be entitled to damages equal to any sums owed and unpaid as of the date of such default and TENANT shall also remain liable for the annual rental to become due during the balance of the Lease term, the same to be paid by TENANT to LANDLORD on the regular days stipulated for the payment of rent; provided, however that LANDLORD shall be obligated to use commercially reasonable efforts to relet the Leased Property, and if the Leased Property is relet in whole or in part, TENANT shall be entitled to a credit in the net amount of any rental payments received by LANDLORD as a result of such reletting (after deducting reasonable expenses for reletting, including any necessary costs of repair of the Leased Property). Further, in the event of termination of this Lease as aforesaid, LANDLORD shall have the right to remove therefrom any part of TENANT's personal property, equipment and trade fixtures located therein and place the same in storage at the expense of TENANT; or (ii) LANDLORD may cure such breach by performing the obligation(s) of TENANT giving rise to the default and, in such event, the reasonable amount of all expenses thereby incurred by LANDLORD shall be deemed payable by TENANT with the next monthly installment(s) of rent. (iii) The full amount of the cost and expense incurred by LANDLORD, together with the amount of any attorney's fees in instituting, prosecuting or defending any action or proceeding by reason of any default of TENANT hereunder, shall be paid by TENANT to LANDLORD with interest at the maximum permissible legal rate thereon. 15. LANDLORD'S RIGHT OF ENTRY. (A) LANDLORD has the right to enter the Leased Property at any reasonable time for the purpose of inspection or to confirm compliance by TENANT with the Lease or to perform other authorized acts; provided, however, that LANDLORD shall not unduly interfere with the business of TENANT on the Leased Property. (B) LANDLORD may show the Leased Property to prospective purchasers and mortgagees, and, during the sixty (60) days prior to expiration of this Lease or applicable renewal or extension period to prospective tenants. 16. TAXES. LANDLORD shall pay all real estate taxes on the unimproved value of the Leased Property, however, LANDLORD shall never pay more than the amount of said taxes at the time of entering this Lease. TENANT shall pay that portion of the real estate taxes on the unimproved value of the Leased Property not paid by LANDLORD. TENANT shall pay any special assessments, including paving, drainage or other assessments, assessed or payable during the term of this Lease, or any renewal periods, levied upon the Leased Property. TENANT shall pay any and all taxes on the buildings, improvements, alterations or fixtures thereon, including TENANT's personal property or trade fixtures. TENANT shall have the right to contest by appropriate legal proceedings, diligently conducted in good faith, the validity or amount of any tax, assessment or utility charge provided no civil or criminal penalty be incurred by LANDLORD and no lien be imposed upon the Leased Property. 17. INSURANCE. (A) Liability Insurance. TENANT, at its expense, shall obtain and keep in force during the term of this Lease, for the protection of TENANT, LANDLORD and LANDLORD's agents and employees, as their interest may appear Commercial General Liability Insurance with limits of not less than $50,000,000.00 combined single limit per occurrence with an insurance company reasonably acceptable to LANDLORD. LANDLORD shall be named as an additional named insured under such policy or policies and TENANT shall supply to LANDLORD evidence of such insurance. (B) Property Insurance. TENANT, at its expense, shall obtain and keep in force during the term of this Lease a policy or policies of insurance covering loss or damage to the Leased 6 7 Property, in the amount of the full replacement value of all improvements thereof, providing protection against all perils included within the classifications of fire, flood, extended coverage, vandalism, and malicious mischief. 18. INDEMNITY. This Lease is made upon the express condition that LANDLORD shall be free from any and all liabilities and claims for damages and/or suits for or by reason of any injury or injuries or death to any person or persons or damage to property or loss of property of any kind whatsoever, whether the person or property of TENANT, its agents or employees, or third persons from any cause or causes whatsoever while in or upon the Leased Property, or any part thereof, or on any facility used as a result of or in connection with TENANT's riverboat gaming operation, during the term of this Lease, or any renewal thereof, or occasioned by any occupancy or use of the Leased Property , or any activity carried on by TENANT in connection therewith. TENANT hereby covenants and agrees to indemnify and save harmless LANDLORD from all losses, damages, liabilities, charges, expenses, fines, penalties, attorney's fees and costs on account of or by reason of any such injuries, liabilities, claims, suits or losses however occurring, or damages growing out of same. This indemnity shall apply regardless of whether said loss, damage, liability, claims, demands, fines, penalties, or suits are occasioned, brought about or caused, in whole or in part, by the negligence of LANDLORD, its agents, directors, officers, employees or servants and regardless of whether such negligence be active or passive, primary or secondary. This indemnity shall also apply regardless of whether said loss, damage, liability, claims, demand or suits are occasioned, brought about or caused, in whole or in part, by the strict liability of LANDLORD, its agents, directors, officers, employees or servants, it being the intention of the parties hereto that LANDLORD be indemnified by TENANT against the consequences of its strict liability. This indemnity shall inure, by stipulation pour autrui, to the benefit of agents, directors, officers, employees and servants of LANDLORD, and any one of them may exercise this right of indemnity against TENANT independently of LANDLORD or of others. 19. WAIVER OF SUBROGATION. Whenever (I) any loss, cost, damage or expense resulting from any peril covered by fire insurance, with standard extended coverage, is incurred by any party to this Lease in connection with the Leased Property, any party to this Lease in connection with the Leased Property or any property located thereon, and (II) such party is then covered in whole or in part by insurance with respect to such loss, cost, damage, or expense, then the party so insured hereby releases the other party from any liability it may have on account of such loss, cost, damage, or expense to the extent of any amount recovered by reason of such insurance and waives any right of subrogation which might otherwise exist in or accrue to any person or account thereof. 20. HOLDING OVER. Should TENANT remain in possession of the Leased Property or part thereof, after the expiration of this Lease, without the execution of a new Lease by LANDLORD and TENANT, TENANT shall become a tenant from month-to-month of the property, or part thereof, under all the terms, conditions, provisions and obligations of this Lease and such month-to-month tenancy may be terminated by either LANDLORD or TENANT as of the end of any calendar month upon thirty (30) days prior written notice. 21. QUIET ENJOYMENT. LANDLORD covenants that if and for so long as TENANT pays the rent and performs the covenants and conditions hereof, TENANT shall peaceably and quietly have, hold and enjoy the Leased Property for the full term of this Lease and any renewals thereof. 22. LANDLORD'S REPRESENTATION. LANDLORD represents and warrants that it has full right, power and authority to execute and perform this Lease and to grant the estate demised herein. The signatory on behalf of LANDLORD represents and warrants that it has the authority to enter into this Lease without the consent or approval of any other person or entity and makes the representations included herein knowing that TENANT will rely thereon. 23. SURRENDER OF PREMISES. Upon termination of this Lease, TENANT shall surrender the Leased Property in good order and condition, ordinary wear and tear, alterations and improvements and the elements excepted. 7 8 24. ATTORNEY'S FEES. In the event LANDLORD institutes legal proceedings against TENANT for breach of any of the terms, conditions or covenants of this Lease, the TENANT shall pay all costs, charges and expenses relative thereto, including reasonable attorney's fees. 25. NOTICES. Any notice by either party to the other shall be in writing and shall be deemed to be duly given only if delivered personally or mailed by registered or certified mail, return receipt requested or by overnight mail (e.g. Federal Express, Airborne Express, etc.), and received or rejected by the other party. IF TO TENANT: St. Charles Gaming Company, Inc. With a copy to: 2415 West Northwest Highway T. J. Falgout, III Suite 103 Stumpf & Falgout Dallas, TX 75220-4446 1400 Post Oak Blvd Suite 400 Houston, TX 77056 IF TO LANDLORD: Port Resources, Inc. and CRU, Inc. Suite 1700 101 North Huntington CM Tower Sulphur, Louisiana 70663-2601 One Lakeshore Drive Lake Charles, Louisiana 70602
26. ENTIRE AGREEMENT. This Lease constitutes the entire agreement between the parties, there being no other terms, oral or written, except as herein expressed. No modification of this Lease shall be binding on the parties unless it is in writing and signed by all parties hereto. 27. RECORDABLE MEMORANDUM. LANDLORD and TENANT agree not to record this Lease, but each party agrees, upon request by the other, to execute a memorandum of this Lease in a recordable form and in compliance with applicable law. 28. SUCCESSORS AND ASSIGNS. The provisions of this Lease shall apply to, bind and inure to the benefit of LANDLORD and TENANT, and their respective successors and legal representatives. 29. LEGAL INTERPRETATION. This Lease and the right and obligations of the parties hereto shall be interpreted, construed and enforced in accordance with the laws of the State of Louisiana. 30. ENVIRONMENTAL POLLUTION AND HAZARDOUS SUBSTANCES. (A) LANDLORD's Representations. LANDLORD makes absolutely no warranty nor representation as to the condition of the Leased Property, including any environmental condition. TENANT assumes this Lease subject to the conditions herein and specifically assumes all liability with respect thereto. (B) TENANT's Warranties and Representations. TENANT warrants that prior to commencement of business, it shall have obtained all permits, licenses, and other documentation required in connection with the development, improvement, use, operation and maintenance of the property (movable or immovable) conducted under this Lease, and that no such development, improvement, use, operations or maintenance of the Leased Property shall give rise to any liability to LANDLORD. TENANT shall not allow the placement, use or storage on the Leased Property of any toxic, hazardous or harmful materials, substances, contaminants, or waste products, as defined by any state, 8 9 federal or local law or regulation. Any liability which may be imposed upon LANDLORD as owner of the Leased Property , which arises out of the presence and/or release of any toxic, hazardous or harmful material, waste, substance or product placed or knowingly permitted to be put or placed on the Leased Property after the effective date of this Lease is hereby specifically assumed by TENANT. (C) TENANT's Indemnification. TENANT shall indemnify and hold harmless LANDLORD, its officers, directors, shareholders, employees, agents, successors, and assigns against any damages, claims, losses, liabilities and expenses which may be imposed upon, incurred by, or assessed against LANDLORD by any other party, including a government entity, relating in any way to any environmental condition or contamination on the Leased Property arising out of the direct or indirect result of TENANT's presence on the property, even if not discovered until after termination of the Lease. TENANT's indemnification shall include reimbursement to LANDLORD for all costs or expenses, damages, claims, fines, fees, including attorney and consultant fees, civil or criminal fines and penalties, contract charges, government expenses, accounting, engineering or other fees. Such indemnity shall survive the Lease term. Should TENANT fail to promptly comply with any order or directive of any governmental agency or court regarding corrective action or remediation of the Leased Property, LANDLORD may take such action as has been ordered or directed and TENANT shall promptly pay to LANDLORD all reasonable expenses and costs incurred by LANDLORD, including those described above. 31. COMPLIANCE WITH LAWS. TENANT shall comply with all laws, ordinances, rules and regulations in so far as they pertain solely to the particular manner in which the TENANT shall use the Leased Property and TENANT represents and warrants that its particular use and occupancy of the Leased Property (other than as contemplated by this Lease) shall comply fully with all private covenants, conditions and restrictions applicable to the Leased Property. 32. NO IMPLIED WAIVER. The failure of a party to insist upon the strict performance of the Lease or to exercise any remedy for an event of default shall not be construed as waiver. The waiver of any event of default shall not prevent a subsequent similar event from being a default. No waiver shall be effective unless expressed in writing signed by the waiving party. No waiver shall effect any condition other than the one specified in the waiver, and then only for the time and the manner stated. 33. TIME IS OF THE ESSENCE. In all instances where either party is required to pay any sum or do any other act at a particular time or within a specified period, it is understood that time is of the essence. 34. SEVERABILITY. The headings or titles in this Lease are inserted for convenience only and are not to be given any effect in its construction. Wherever appropriate in this Lease, personal pronouns shall be deemed to include the other genders and the singular to include the plural. If any provision of this Lease is invalid or unenforceable, the remainder of this Lease shall not be affected. Each separate provision of this Lease shall be valid and enforceable to the fullest extent permitted by law. If for any reason and at any time any law applicable to TENANT's operation prohibits gaming or the operation of the contemplated riverboat hereunder, this Lease shall nevertheless remain in full force and effect for its designated term and all rights and obligations thereunder shall be complied with. 35. GUARANTY. An now into these premises comes Crown Casino Corporation and Casino America, Inc. which declare that in consideration of LANDLORD granting this Lease to St. Charles Gaming Company, Inc., the wholly owned subsidiary, Crown Casino Corporation do hereby guarantee all and singular of the obligations of TENANT under this Lease. 36. CONFIDENTIALITY. LANDLORD shall not make any public announcement or press 9 10 release concerning this transaction unless it has received TENANT's written consent. Notwithstanding anything herein to the contrary, LANDLORD is entitled to take any and all steps necessary and/or prudent, in LANDLORD's sole judgment and discretion, to protect LANDOWNER's interest in this Lease and/or in the Leased Property, said steps including but not limited to inquiries, investigations, reports, disclosures, communications, notices and/or filings as the situation may require. IN WITNESS WHEREOF, the parties hereto have duly executed this Lease as of the day and year first above written. WITNESSES: Port Resources, Inc. ______________________________ BY:_____________________________________ William T. Drost, Vice President ______________________________ CRU, Inc. ______________________________ BY:_____________________________________ Jack E. Lawton, Jr., President ______________________________ St. Charles Gaming Company, Inc. ______________________________ BY:_____________________________________ Edward R. McMurphy, President ______________________________ Crown Casino Corporation ______________________________ BY:_____________________________________ Edward R. McMurphy, President ______________________________ Casino America, Inc. ______________________________ BY:______________________________________ ______________________________
10 EX-10.17.1 10 AMENDMENT 1 EXHIBIT 10.17.1 AMENDMENT TO LEASE S STATE OF LOUISIANA PARISH OF CALCASIEU THIS AMENDMENT TO LEASE made this _______ day of _________________, 1995, between PORT RESOURCES, INC., a Louisiana corporation, and CRU, INC., a Louisiana corporation (hereinafter collectively, "LANDLORD"), and ST. CHARLES GAMING COMPANY, INC., a Louisiana corporation (hereinafter "TENANT"). W I T N E S S E T H: A. Effective as of the 24th day of March, 1995, LANDLORD and TENANT entered into that certain Lease (the "Lease"), covering the property situated in Calcasieu Parish, Louisiana, as more fully described therein (the "Leased Property"). B. LANDLORD and TENANT have agreed to further modify and amend certain terms and conditions of the Lease and desire to set forth such agreement in writing. C. All capitalized terms herein shall have the same meanings set forth in the Lease. NOW, THEREFORE, for and in consideration of the sum of $10.00 cash to each the other in hand paid, the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, LANDLORD and TENANT hereby agree as follows: 1. Term. Paragraph 2 of the Lease is deleted in its entirety and the following is substituted therefor: 2. Term. The initial term of this Lease shall be for five (5) years (hereinafter, the "initial term"), to commence March 24, 1995. TENANT shall have the option to renew this Lease for seven (7) additional five (5) year terms (hereinafter, the "Renewal term") under the same terms and conditions of this Lease and as further provided below. TENANT shall notify LANDLORD of its intention to exercise its option to renew at least six (6) months prior to the expiration of the initial term and any Renewal term of this Lease. 2. Paragraph 3(A) of the Lease is deleted in its entirety and the following is substituted therefor: (A) Initial Term. TENANT covenants and agrees to pay to LANDLORD annual rent of Seven Hundred Fifty Thousand and 00/100 Dollars ($750,000.00), payable monthly in advance without demand, deduction, abatement or set off on the first day of each and every month for the first four (4) years of said initial term in two separate, equal payments of Thirty-One Thousand Two Hundred Fifty and 00/100 Dollars ($31,250.00) each payable to Port Resources, Inc. and to CRU, Inc. TENANT covenants and agrees to pay to LANDLORD annual rent of Nine Hundred Thousand and 00/100 Dollars ($900,000.00), payable monthly in advance without demand, deductions, abatement or set off on the first day of each and every month for the fifth (5th) year of said initial term in two separate, equal payments of Thirty-Seven Thousand Five Hundred and 00/100 Dollars ($37,500.00) each payable to Port Resources, Inc. and to CRU, Inc. 3. Rental. Paragraph 3(C) of the Lease is deleted in its entirety and the following is substituted therefor: 2 (C) Second through all subsequent Renewal Terms. During the second through all subsequent Renewal terms, inclusive, the Rent shall be not less than the rent for the last year of the preceding term subject to the following adjustments: In the event TENANT exercises its option to extend the term of this Lease, Rent shall be increased as of the commencement date of the Renewal term (the "Rent Adjustment Date") as follows: (a) Commencing at the beginning of the month which is three (3) months prior to the Rent Adjustment Date, LANDLORD and TENANT shall attempt to agree upon an increase in Rent for the Leased Property, for the Renewal term, such Rent to equal one hundred (100%) percent of rent paid by other riverboat gaming operators in Louisiana and Mississippi for comparable property usages. The parties expressly recognize that the Rent to be paid hereunder by TENANT shall be only for the Leased Property and that in calculating Rent for the second through all subsequent Renewal terms, TENANT shall not pay rent on improvements constructed by TENANT. If the parties are unable to agree upon the Rent for the Renewal term prior to the end of such month, then within ten (10) days thereafter each party, at its own cost and by giving notice to the other party, shall appoint a real estate appraiser with at least five (5) years full-time commercial real estate appraisal experience in the area which the Leased Property is located to appraise and set Rent for the Renewal term. If a party does not appoint an appraiser within ten (10) days after the other party has given notices of the name of its appraiser, the single appraiser appointed shall be the sole appraiser and shall set the Rent for the Renewal term. If each party shall have so appointed an appraiser, the two appraisers shall meet promptly and attempt to set the Rent for the Renewal term. If the two appraisers are unable to agree within thirty (30) days after the second appraiser has been appointed, they shall attempt to select a third appraiser meeting the qualifications herein stated within ten (10) days after the last day the two appraisers are given to set the Rent. If the two appraisers are unable to agree on the third appraiser within such ten (10) day period, either of the parties to this Lease, by giving ten (10) days notice to the other party, may apply to the President of the Louisiana Real Estate Commission for the selection of a third appraiser meeting the qualifications stated in this paragraph. Each of the parties shall bear one-half (1/2) of the cost of appointing the third appraiser and of paying the third appraiser's fee. The third appraiser, however selected, shall be a person who has not previously acted in any capacity for either party. (b) Within thirty (30) days after the selection of the third appraiser, a majority of the appraisers shall set the Rent for the Renewal term. If a majority of the appraisers are unable to set the Rent within the stipulated period of time, the three appraisals shall be added together and their total divided by three (3). The resulting quotient shall be the annual Rent for the Leased Property during the Renewal term. If, however, the low appraisal and/or the high appraisal is/are more than five (5%) percent lower and/or higher than the middle appraisal, the low appraisal and/or the high appraisal shall be disregarded. If only one appraisal is disregarded, the remaining two (2) appraisals shall be added together and their total divided by two (2), and the resulting quotient shall be the Rent for the Leased Property during the Renewal term. If both the low appraisal and the high appraisal are disregarded as stated in this paragraph, the middle appraisal shall be the Rent for the Leased Property during the Renewal term. 3 (c) After the Rent for the Renewal term has been set, the appraisers shall immediately notify the parties hereto in writing by certified mail, return receipt requested. Notwithstanding the foregoing, the Rent during the fourth and all subsequent Renewal terms shall not be less than One Million Five Hundred Thousand and 00/100 ($1,500,000.00) Dollars per year. 4. Assignment of Lease to Lender. (A) If requested by TENANT's lender (the "Lender"), LANDLORD agrees to consent to the collateral assignment to the Lender of TENANT's leasehold interest in the Lease, subject to the terms of the Lease. The consent of LANDLORD is further conditioned upon LANDLORD's approval of the terms and provisions of the instrument evidencing such assignment, which approval will not be unreasonably withheld. (B) The provisions of paragraph 12 (B) and (C) shall apply to any assignment or sublease by Lender of TENANT's leasehold interest in the Lease. However, LANDLORD expressly reserves the right to approve any such assignment or sublease which approval will not be unreasonably withheld. 5. Louisiana Riverboat Gaming Partnership. LANDLORD hereby consents to the assignment by TENANT of fifty (50%) percent of TENANT's capital stock to Louisiana Riverboat Gaming Partnership ("LRGP"), a Louisiana partnership comprised of Louisiana Riverboat Site Development, Inc., a Louisiana corporation wholly owned by Louisiana Downs, Inc. (50%), and 1CSNO, Inc., a Louisiana corporation wholly owned by Casino America, Inc. (50%). 6. Additional Tenants. LRGP joins herein as a party TENANT and acknowledges and agrees to faithfully perform all of the covenants, agreements, terms and provisions of this Lease, on TENANT's part to be performed. 7. Ratification of Lease. No other amendment to the Lease is made or intended to be made hereby and, except as amended by this instrument, the Lease is hereby ratified, confirmed and reaffirmed by the parties. EXECUTED effective as of the date set forth above, in multiple original counterparts, each of which shall be an original, but all of which together shall constitute but one and the same instrument. LANDLORD: WITNESSES: PORT RESOURCES, INC. ____________________________________ By:____________________________________ Name: _________________________________ ____________________________________ Title: ________________________________ ACKNOWLEDGMENT STATE OF LOUISIANA PARISH OF CALCASIEU On this _______ day of ______________________, 1995, before me personally appeared ______________________________, to me personally known, who being by me duly sworn, did say that he is the ____________________________, of PORT RESOURCES, INC., and said appearer acknowledged to me, Notary, in the presence of the undersigned competent witnesses, that the foregoing instrument was signed on behalf of said corporation by authority of its Board of Directors, and said appearer acknowledged said instrument to be the free act and deed of said 4 corporation. IN WITNESS WHEREOF, said appearer has executed these presents together with me, Notary, and the undersigned competent witnesses, in the Parish/County and State aforesaid, on the date first above written. WITNESSES: ____________________________________ _______________________________________ ____________________________________ ____________________________________ NOTARY PUBLIC WITNESSES: CRU, INC. ____________________________________ By:____________________________________ Name: _________________________________ ____________________________________ Title: ________________________________ ACKNOWLEDGMENT STATE OF LOUISIANA PARISH OF CALCASIEU On this _______ day of ______________________, 1995, before me personally appeared ______________________________, to me personally known, who being by me duly sworn, did say that he is the ____________________________, of CRU, INC., and said appearer acknowledged to me, Notary, in the presence of the undersigned competent witnesses, that the foregoing instrument was signed on behalf of said corporation by authority of its Board of Directors, and said appearer acknowledged said instrument to be the free act and deed of said corporation. IN WITNESS WHEREOF, said appearer has executed these presents together with me, Notary, and the undersigned competent witnesses, in the Parish/County and State aforesaid, on the date first above written. WITNESSES: ____________________________________ _______________________________________ ____________________________________ ____________________________________ NOTARY PUBLIC TENANT: WITNESSES: ST. CHARLES GAMING COMPANY, INC. ____________________________________ By:____________________________________ Name: _________________________________ ____________________________________ Title: ________________________________ 5 ACKNOWLEDGMENT STATE OF________________________ PARISH/COUNTY OF__________________________ On this _______ day of ______________________, 1995, before me personally appeared ______________________________, to me personally known, who being by me duly sworn, did say that he is the ____________________________, of ST. CHARLES GAMING COMPANY, INC., and said appearer acknowledged to me, Notary, in the presence of the undersigned competent witnesses, that the foregoing instrument was signed on behalf of said corporation by authority of its Board of Directors, and said appearer acknowledged said instrument to be the free act and deed of said corporation. IN WITNESS WHEREOF, said appearer has executed these presents together with me, Notary, and the undersigned competent witnesses, in the Parish/County and State aforesaid, on the date first above written. WITNESSES: ____________________________________ _______________________________________ ____________________________________ ____________________________________ NOTARY PUBLIC WITNESSES: CROWN CASINO CORPORATION ____________________________________ By:____________________________________ Name: _________________________________ ____________________________________ Title: ________________________________ ACKNOWLEDGMENT STATE OF _____________________________ PARISH/COUNTY OF __________________________ On this _______ day of ______________________, 1995, before me personally appeared ______________________________, to me personally known, who being by me duly sworn, did say that he is the ____________________________, of CROWN CASINO CORPORATION, and said appearer acknowledged to me, Notary, in the presence of the undersigned competent witnesses, that the foregoing instrument was signed on behalf of said corporation by authority of its Board of Directors, and said appearer acknowledged said instrument to be the free act and deed of said corporation. IN WITNESS WHEREOF, said appearer has executed these presents together with me, Notary, and the undersigned competent witnesses, in the Parish/County and State aforesaid, on the date first above written. WITNESSES: ____________________________________ _______________________________________ ____________________________________ ____________________________________ NOTARY PUBLIC 6 WITNESSES: LOUISIANA RIVERBOAT GAMING PARTNERSHIP ____________________________________ By:____________________________________ Name: _________________________________ ____________________________________ Title: ________________________________ ACKNOWLEDGMENT STATE OF _____________________________ PARISH/COUNTY OF ___________________________ On this _______ day of ______________________, 1995, before me personally appeared ______________________________, to me personally known, who being by me duly sworn, did say that he is the ____________________________, of LOUISIANA RIVERBOAT GAMING PARTNERSHIP, and said appearer acknowledged to me, Notary, in the presence of the undersigned competent witnesses, that the foregoing instrument was signed on behalf of said partnership by authority of its members, and said appearer acknowledged said instrument to be the free act and deed of said partnership. IN WITNESS WHEREOF, said appearer has executed these presents together with me, Notary, and the undersigned competent witnesses, in the Parish/County and State aforesaid, on the date first above written. WITNESSES: ____________________________________ _______________________________________ ____________________________________ ____________________________________ NOTARY PUBLIC EX-10.17.2 11 SECOND AMENDMENT TO LEASE 1 EXHIBIT 10.17.2 SECOND AMENDMENT TO LEASE S STATE OF LOUISIANA PARISH OF CALCASIEU THIS SECOND AMENDMENT TO LEASE made this _______ day of _________________, 1995, between PORT RESOURCES, INC., a Louisiana corporation, and CRU, INC., a Louisiana corporation (hereinafter collectively, "LANDLORD"), and ST. CHARLES GAMING COMPANY, INC., a Louisiana corporation (hereinafter "TENANT"). W I T N E S S E T H: A. Effective as of the 24th day of March, 1995, LANDLORD and TENANT entered into that certain Lease (the "Lease"), covering the property situated in Calcasieu Parish, Louisiana, as more fully described therein (the "Leased Property"). B. LANDLORD and TENANT have agreed to further modify and amend certain terms and conditions of the Lease and desire to set forth such agreement in writing. C. All capitalized terms herein shall have the same meanings set forth in the Lease. NOW, THEREFORE, for and in consideration of the sum of $10.00 cash to each the other in hand paid, the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, LANDLORD and TENANT hereby agree as follows: Paragraph 35 of the Lease is deleted in its entirety and the following is substituted therefor: 35. Guarantee. And now unto these premises comes Crown Casino Corporation which declares that in consideration of LANDLORD granting this Lease to St. Charles Gaming Company, Inc., a wholly owned subsidiary of Crown Casino Corporation, Crown Casino Corporation does hereby guarantee all and singular of the obligations of TENANT under this Lease. Ratification of Lease. No other amendment to the Lease is made or intended to be made hereby and, except as amended by this instrument, the Lease is hereby ratified, confirmed and reaffirmed by the parties. EXECUTED effective as of the date set forth above, in multiple original counterparts, each of which shall be an original, but all of which together shall constitute but one and the same instrument. LANDLORD: WITNESSES: PORT RESOURCES, INC. ____________________________________ By:____________________________________ Name: _________________________________ ____________________________________ Title: ________________________________
ACKNOWLEDGMENT STATE OF LOUISIANA PARISH OF CALCASIEU On this _______ day of ______________________, 1995, before me personally appeared 2 ______________________________, to me personally known, who being by me duly sworn, did say that he is the ____________________________, of PORT RESOURCES, INC., and said appearer acknowledged to me, Notary, in the presence of the undersigned competent witnesses, that the foregoing instrument was signed on behalf of said corporation by authority of its Board of Directors, and said appearer acknowledged said instrument to be the free act and deed of said corporation. IN WITNESS WHEREOF, said appearer has executed these presents together with me, Notary, and the undersigned competent witnesses, in the Parish/County and State aforesaid, on the date first above written. WITNESSES: ____________________________________ _______________________________________ ____________________________________
____________________________________ NOTARY PUBLIC WITNESSES: CRU, INC. ____________________________________ By:____________________________________ Name: _________________________________ ____________________________________ Title: ________________________________
ACKNOWLEDGMENT STATE OF LOUISIANA PARISH OF CALCASIEU On this _______ day of ______________________, 1995, before me personally appeared ______________________________, to me personally known, who being by me duly sworn, did say that he is the ____________________________, of CRU, INC., and said appearer acknowledged to me, Notary, in the presence of the undersigned competent witnesses, that the foregoing instrument was signed on behalf of said corporation by authority of its Board of Directors, and said appearer acknowledged said instrument to be the free act and deed of said corporation. IN WITNESS WHEREOF, said appearer has executed these presents together with me, Notary, and the undersigned competent witnesses, in the Parish/County and State aforesaid, on the date first above written. WITNESSES: ____________________________________ _______________________________________ ____________________________________
____________________________________ NOTARY PUBLIC 3 TENANT: WITNESSES: ST. CHARLES GAMING COMPANY, INC. ____________________________________ By:____________________________________ Name: _________________________________ ____________________________________ Title: ________________________________
ACKNOWLEDGMENT STATE OF________________________ PARISH/COUNTY OF__________________________ On this _______ day of ______________________, 1995, before me personally appeared ______________________________, to me personally known, who being by me duly sworn, did say that he is the ____________________________, of ST. CHARLES GAMING COMPANY, INC., and said appearer acknowledged to me, Notary, in the presence of the undersigned competent witnesses, that the foregoing instrument was signed on behalf of said corporation by authority of its Board of Directors, and said appearer acknowledged said instrument to be the free act and deed of said corporation. IN WITNESS WHEREOF, said appearer has executed these presents together with me, Notary, and the undersigned competent witnesses, in the Parish/County and State aforesaid, on the date first above written. WITNESSES: ____________________________________ _______________________________________ ____________________________________
____________________________________ NOTARY PUBLIC WITNESSES: CROWN CASINO CORPORATION ____________________________________ By:____________________________________ Name: _________________________________ ____________________________________ Title: ________________________________
ACKNOWLEDGMENT STATE OF _____________________________ PARISH/COUNTY OF __________________________ On this _______ day of ______________________, 1995, before me personally appeared ______________________________, to me personally known, who being by me duly sworn, did say that he is the ____________________________, of CROWN CASINO CORPORATION, and said appearer acknowledged to me, Notary, in the presence of the undersigned competent witnesses, that the foregoing instrument was signed on behalf of said corporation by authority of its Board of Directors, and said appearer acknowledged said instrument to be the free act and deed of said corporation. IN WITNESS WHEREOF, said appearer has executed these presents together with me, Notary, and the undersigned competent witnesses, in the Parish/County and State aforesaid, on the date first above written. 4 WITNESSES: ____________________________________ _______________________________________ ____________________________________
____________________________________ NOTARY PUBLIC WITNESSES: LOUISIANA RIVERBOAT GAMING PARTNERSHIP ____________________________________ By:____________________________________ Name: _________________________________ ____________________________________ Title: ________________________________
ACKNOWLEDGMENT STATE OF _____________________________ PARISH/COUNTY OF ___________________________ On this _______ day of ______________________, 1995, before me personally appeared ______________________________, to me personally known, who being by me duly sworn, did say that he is the ____________________________, of LOUISIANA RIVERBOAT GAMING PARTNERSHIP, and said appearer acknowledged to me, Notary, in the presence of the undersigned competent witnesses, that the foregoing instrument was signed on behalf of said partnership by authority of its members, and said appearer acknowledged said instrument to be the free act and deed of said partnership. IN WITNESS WHEREOF, said appearer has executed these presents together with me, Notary, and the undersigned competent witnesses, in the Parish/County and State aforesaid, on the date first above written. WITNESSES: ____________________________________ _______________________________________ ____________________________________
____________________________________ NOTARY PUBLIC EX-13.1 12 ANNUAL REPORT 1 EXHIBIT 13.1 MANAGEMENT'S DISCUSSION AND ANALYSIS OF CROWN CASINO CORPORATION FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the Company's consolidated financial statements appearing elsewhere in this annual report. OVERVIEW The Company owns a 50% interest in a riverboat gaming casino located in Calcasieu Parish, Louisiana that opened in July 1995, owns an 18.6 acre tract of land in the gaming district of Las Vegas, Nevada which is being held for development of a hotel and casino, and in July 1995 entered into a definitive purchase agreement to acquire the Bourbon Street Hotel and Casino located in Las Vegas, Nevada. The Company is also actively pursuing other gaming opportunities in these and other jurisdictions. Prior to March 1994 the Company had been engaged in various facets of the cable and related programming businesses. In June 1993, the Company completed the acquisition of 100% of the outstanding common stock of St. Charles Gaming Company, Inc. ("SCGC"), a Louisiana corporation, which had received preliminary approval from the Louisiana Riverboat Gaming Commission to construct and operate a riverboat gaming casino. In March 1994, SCGC received a license with certain conditions from the Louisiana Riverboat Gaming Enforcement Division of the Office of State Police. In January 1995, SCGC made the strategic decision to relocate the site for its planned Louisiana riverboat casino from St. Charles Parish to Calcasieu Parish in the southwest part of the state near the Texas border. In March 1995, the Company entered into an agreement with Louisiana Riverboat Gaming Partnership ("LRGP") to form a joint venture to develop the Calcasieu Parish project. LRGP, a joint venture owned 50% by Casino America, Inc. ("Casino America") and 50% by Louisiana Downs, Inc., owns the Isle of Capri(SM) dockside riverboat casino in Bossier City, Louisiana. Pursuant to the joint venture agreement, on June 9, 1995 the Company sold 50% of the outstanding common stock of SCGC for (i) a five-year $20 million note (the "LRGP Note"), (ii) $1 million cash, and (iii) a warrant (which may only be exercised by converting a portion of the LRGP Note) to purchase 416,667 shares of Casino America common stock at $12 per share. In July 1995 SCGC's riverboat casino opened for business in Calcasieu Parish, Louisiana, as an Isle of CapriSM themed property. In December 1993, the Company acquired 100% of the outstanding common stock of Gaming Entertainment Management Services, Inc. ("GEMS"), a Nevada corporation, which was organized for the purpose of developing a hotel and casino in Las Vegas, Nevada known as the Desert Winds Hotel and Casino (the "Desert Winds"). GEMS' primary asset was its option to purchase an 18.6 acre tract of land in the gaming district of Las Vegas. In June 1994 the option was exercised for $10 million and the land was purchased. The Company may develop such property by itself or on a joint venture basis. In July 1995, the Company entered into a definitive stock purchase agreement to acquire the Bourbon Street Hotel and Casino (the "Bourbon Street Casino") located in Las Vegas, Nevada for a purchase price of $10 million. The Bourbon Street Casino has reported annual revenues of approximately $12 million. Closing is expected to occur by October 1995. As a result of the Company's acquisition of SCGC and the resulting entry into the gaming industry in June 1993, the Company made the decision to discontinue operations in the cable industry and focus all its efforts on gaming. During fiscal 1994 the Company sold all its remaining cable related assets and operations. RESULTS OF OPERATIONS As a result of the Company's decision to exit the cable industry, all revenues, costs and expenses directly related to cable operations have been reclassified to discontinued operations. Continuing operations principally consist of corporate general and administrative expenses, gaming pre-opening and development costs, interest expense, and other charges related to its prior Louisiana riverboat casino site and the buy out of its riverboat casino management agreement. The Company's results from discontinued operations for fiscal 1994 and 1993 are not readily comparable. Fiscal 1994 discontinued operations reflect the loss on the sale of the Company's remaining cable assets and only nine months of cable operations whereas fiscal 1993 discontinued operations did not include any sales of cable assets and had a full twelve months of cable operations. The following discussion focuses on results from continuing operations. 10 2 FISCAL YEAR 1995 COMPARED TO FISCAL YEAR 1994 General and administrative expenses for fiscal 1995 increased $583,006 compared to fiscal 1994. The increase was primarily attributable to increased professional fees, personnel and travel costs associated with the development of the Company's Louisiana riverboat casino project. Gaming pre-opening and development costs for fiscal 1995 increased $7,208,553 compared to fiscal 1994. The increase was the result of greater personnel, advertising, legal, consulting and training costs incurred in connection with the anticipated opening of the Louisiana riverboat casino, and development efforts outside of Louisiana which began in fiscal 1995. In addition, fiscal 1995 reflects development activities for a full year, whereas in fiscal 1994 the Company was only in the early stages of developing its Louisiana riverboat casino project. In January 1995, SCGC made the decision to abandon its site in St. Charles Parish, Louisiana in favor of a new site in Calcasieu Parish, Louisiana. As a result of this decision, the Company recorded a charge of approximately $3.1 million which represents the write-off of previously capitalized costs specific to the St. Charles Parish site. Also, in March 1995, in connection with the stock purchase agreement with LRGP, SCGC paid $4 million to buy out its casino management agreement and entered into a new management agreement with Casino America. Interest expense amounted to $6,826,538 in fiscal 1995, principally attributable to the issuance of the Senior Note in June 1994, with no comparable amount in the prior fiscal period. Included in fiscal 1995 interest expense is $3,376,392 of amortization of debt issuance costs and the discount from the issuance of the Senior Note. FISCAL YEAR 1994 COMPARED TO FISCAL YEAR 1993 General and administrative expenses for fiscal 1994 increased $814,309 compared to fiscal 1993. The increase was primarily attributable to increased professional fees, personnel and travel costs associated with the development of the Company's riverboat casino in St. Charles Parish, Louisiana and an increase in bad debt expense. In addition, the Company incurred nearly $1 million of gaming pre-opening and development expenses during fiscal 1994 in connection with the development of the riverboat casino with no comparable amount in fiscal 1993. Interest expense for fiscal 1994 increased $574,434 over fiscal 1993 due to the write-off of $321,760 of deferred financing costs and the sale of certain notes receivable at an aggregate discount of $245,086. The deferred financing costs write-off occurred as a result of the Company's decision to abandon a prior financing commitment in favor of a more attractive financing which closed in June 1994. Interest income for fiscal 1994 declined $57,816 from fiscal 1993 as a result of the sale of certain notes receivable during fiscal 1994 that were generating interest income prior to their sale. LIQUIDITY AND CAPITAL RESOURCES Since entering into the joint venture agreement in March 1995, LRGP and its affiliate, Casino America, have been providing capital to develop the Calcasieu Parish project which opened in July 1995. Subsequent to opening, the Company anticipates an additional $45 million will be spent to (i) complete the parking garage and permanent terminal facility, (ii) construct a 300 room hotel, and (iii) complete certain road improvements and retire project related payables. The Company expects that the additional capital necessary to complete the Calcasieu Parish project will come from LRGP, Casino America or a financing source arranged by either of them, and cash flows from operating the Calcasieu Parish project. During fiscal 1995, pursuant to a private placement and public equity offering, the Company raised approximately $7.4 million, net of transaction costs, through the sale of 1,701,700 shares of its common stock. As of July 31, 1995 the Company had an additional 1,085,000 shares of its common stock available for sale pursuant to its registration statement. In June 1994 SCGC completed a private placement of a $28 million Senior Secured Increasing Rate Note (the "Senior Note") to an institutional investor. The Senior Note was issued to finance a portion of SCGC's riverboat casino project, to acquire certain land in Las Vegas, Nevada (which land was acquired in June 1994) upon which an additional casino facility may be built, and for general working capital purposes. SCGC repaid $6.5 million of the Senior Note in October 1994. The balance of the Senior Note was repaid in August 1995 from a portion of the proceeds from the issuance of $38.4 million of Senior Secured Increasing Rate Notes due August 1996 (the "New 11 3 Notes") issued jointly by SCGC and LRGP to the same institutional lender. Neither the Company, nor any of its subsidiaries, are guarantors of the New Notes. In connection with the acquisition of the Bourbon Street Casino, the Company anticipates raising the $10 million purchase price from (i) conversion of $5 million of the LRGP Note into 416,667 shares of Casino America common stock and the subsequent sale of such shares, (ii) the public or private sale of the Company's common stock, including 1,085,000 shares available for sale pursuant to the Company's registration statement, and/or (iii) the issuance of debt. Management of the Company is evaluating the design and scope of the Desert Winds project and the anticipated capital requirements related thereto. Management is considering a variety of scenarios with respect to the operation and ownership of the proposed hotel and casino, including a potential joint venture relationship. In connection with the joint venture agreement with LRGP, the Company granted LRGP a right of first refusal to develop the Desert Winds project with the Company in the event the Company chooses to develop such project on a joint venture basis. CHANGE IN ACCOUNTANTS On October 26, 1993, Ernst & Young LLP, the independent auditors for the Company, resigned. Ernst & Young LLP advised the Company that a primary reason for their resignation was due to the Company's change in business from cable programming to casino gaming. Ernst & Young LLP advised the Company that the local Dallas office did not have sufficient expertise in this area and that substantial additional educational requirements would have to be met in order for the local office to continue the engagement. Ernst & Young LLP's report on the financial statements of the Company for the fiscal year ended April 30, 1993 did not contain an adverse opinion or a disclaimer of opinion, and was not qualified or modified as to uncertainty, audit scope or accounting principles. During the fiscal year ended April 30, 1993 and the subsequent interim period preceding the resignation of Ernst & Young LLP, there were no disagreements with Ernst & Young LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure. No event listed in Paragraphs (A) through (D) of Item 304 a(1)(v) of Regulation S-K occurred during the fiscal year ended April 30, 1993 and the subsequent interim period prior to Ernst & Young LLP's resignation. Ernst & Young LLP provided the Company with a letter indicating its agreement with the foregoing statements made by the Company. On April 28, 1994, the Company engaged Coopers & Lybrand L.L.P. as its independent accountants. During the Company's fiscal year ended April 30, 1993 and the subsequent interim period prior to engaging Coopers & Lybrand L.L.P., the Company did not consult with Coopers & Lybrand L.L.P. regarding either the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company's financial statements. There were no disagreements with or a reportable event related to the engagement of the Company's prior independent accountants. 12 4
Consolidated Balance Sheets Crown Casino Corporation April 30, 1995 1994 ----------------------------------------------------------------------------------------------------------- ASSETS Current assets: Cash and cash equivalents $ 1,692,440 $ 1,778,939 Receivables, net 1,041,243 Prepaid expenses 931,935 155,082 ------------ ----------- Total current assets 2,624,375 2,975,264 ------------ ----------- Property and equipment: Land deposit and site costs 1,286,223 Construction in progress 1,565,739 Furniture, fixtures and equipment 8,887,241 1,842,118 Riverboat and barges 15,256,140 9,329,024 ------------ ----------- Land held for development 16,608,555 42,317,675 12,457,365 Less accumulated depreciation (223,055) (75,007) ------------ ----------- 42,094,620 12,382,358 ------------ ----------- Other assets: Non-compete agreement, net 316,674 416,670 Debt issuance costs, net 345,963 Land purchase option 6,075,000 License costs 9,125,000 9,125,000 ------------ ----------- 9,787,637 15,616,670 ------------ ----------- $ 54,506,632 $30,974,292 ============ =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 999,611 $ 215,334 Accrued liabilities 1,038,587 152,809 Advances from LRGP 2,179,083 Capital lease obligations 2,876,632 Notes payable 26,511,603 ------------ ----------- Total current liabilities 33,605,516 368,143 ------------ ----------- Capital lease obligations, less current portion 2,271,477 Deferred income taxes 500,000 4,440,000 Common stock pending issuance 200,000 1,500,000 Common stock subject to redemption 829,500 Commitments and contingencies Stockholders' equity: Preferred stock, par value $.01 per share, 1,000,000 shares authorized; none issued or outstanding Common stock, par value $.01 per share, 50,000,000 shares authorized; 11,678,459 issued and outstanding (9,686,319 issued and 8,998,925 outstanding in 1994) 116,785 96,863 Additional paid-in capital 41,859,407 28,049,381 Accumulated deficit (24,046,553) (3,721,708) Treasury stock, at cost (587,887) ------------ ----------- Total stockholders' equity 17,929,639 23,836,649 ------------ ----------- $ 54,506,632 $30,974,292 ============ ===========
See accompanying notes to consolidated financial statements. 13 5
CONSOLIDATED STATEMENTS OF OPERATIONS Crown Casino Corporation Years Ended April 30, 1995 1994 1993 ---------------------------------------------------------------------------------------------------------- Revenues $ -- $ -- $ -- Costs and expenses: General and administrative 2,008,319 1,425,313 611,004 Gaming pre-opening and development 8,189,802 981,249 Buy-out of management contract 4,000,000 St. Charles Parish site abandonment 3,131,359 Depreciation and amortization 248,044 370,885 36,591 ------------ ----------- --------- 17,577,524 2,777,447 647,595 ------------ ----------- --------- Net interest (income) expense: Interest expense 6,826,538 578,320 3,886 Interest income (176,889) (197,447) (255,263) ------------ ----------- --------- 6,649,649 380,873 (251,377) ------------ ----------- --------- Loss from continuing operations before income taxes (24,227,173) (3,158,320) (396,218) Benefit for income taxes (3,902,328) (1,105,933) (133,104) ------------ ----------- --------- Loss from continuing operations (20,324,845) (2,052,387) (263,114) ------------ ----------- --------- Discontinued operations, net of taxes: Income (loss) from discontinued operations 2,949 (144,953) Loss on disposition of discontinued operations (179,755) ------------ ----------- --------- (176,806) (144,953) ------------ ----------- --------- Net loss $(20,324,845) $(2,229,193) $(408,067) ============ =========== ========= Loss per share: From continuing operations $ (2.01) $ (.34) $ (.07) From discontinued operations (.03) (.04) ------------ ----------- --------- $ (2.01) $ (.37) $ (.11) ============ =========== ========= Weighted average common and common equivalent shares outstanding 10,103,993 5,988,963 3,611,547 ------------ ----------- ---------
See accompanying notes to consolidated financial statements. 14 6
CONSOLIDATED STATEMENTS OF CASH FLOWS Crown Casino Corporation YEARS ENDED APRIL 30, 1995 1994 1993 ----------------------------------------------------------------------------------------------------------- Operating activities: Loss from continuing operations $(20,324,845) $(2,052,387) $ (263,114) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation and amortization 248,044 370,885 36,591 Amortization of debt issuance costs/discount 3,376,392 Write-down of assets 3,131,359 421,760 Discount on notes sold 245,086 Deferred income taxes (3,940,000) (1,147,500) (115,000) Equity securities issued for services 1,562,500 Changes in assets and liabilities, net of acquisitions: Receivables, net 592,447 344,534 764,777 Prepaid expenses (902,259) (113,082) Accounts payable and accrued liabilities 1,611,415 96,673 (245,229) Income taxes payable (242,850) Net effect of discontinued operations 322,357 (338,805) ------------ ----------- ---------- Net cash used by operating activities (14,644,947) (1,511,674) (403,630) ------------ ----------- ---------- Investing activities: Purchases of assets (18,897,910) (7,452,047) (6,578) Sale of assets 1,331,374 2,700 Acquisitions, net (869,519) Net effect of discontinued operations 869,623 (24,060) ------------ ----------- ---------- Net cash used by investing activities (18,897,910) (6,120,569) (27,938) ------------ ----------- ---------- Financing activities: Issuance of common stock 7,403,490 13,298,463 Purchase of common stock (55,000) (2,208,000) (77,100) Issuance of debt and warrants 32,700,000 700,000 Debt issuance costs (1,633,407) Advances from LRGP 2,179,083 Payments of debt and capital lease obligations (7,137,808) (2,500,000) Net effect of discontinued operations (17,667) ------------ ----------- ---------- Net cash provided (used) by financing activities 33,456,358 9,290,463 (94,767) ------------ ----------- ---------- Increase (decrease) in cash and cash equivalents (86,499) 1,658,220 (526,335) Cash and cash equivalents at: Beginning of year 1,778,939 120,719 647,054 ------------ ----------- ---------- End of year $ 1,692,440 $ 1,778,939 $ 120,719 ============ =========== ==========
See accompanying notes to consolidated financial statements. 15 7
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Crown Casino Corporation FOR THE THREE YEARS COMMON STOCK TREASURY STOCK IN THE PERIOD ENDED APRIL 30, 1995 SHARES AMOUNT SHARES AMOUNT ----------------------------------------------------------------------------------------------------------- Balance at April 30, 1992 4,211,230 $ 42,112 522,729 $(510,787) Purchase of common stock 164,665 (77,100) Net loss ---------- -------- -------- ---------- Balance at April 30, 1993 4,211,230 42,112 687,394 (587,887) Issuance of common stock 5,608,389 56,084 Issuance of warrants Purchase of common stock (220,800) (2,208) Stock options exercised 87,500 875 Tax benefit of stock options Net loss ---------- -------- -------- ---------- Balance at April 30, 1994 9,686,319 96,863 687,394 (587,887) Issuance of common stock 2,650,034 26,501 Issuance of warrants Purchase of common stock 10,000 (55,000) Stock options exercised 39,500 395 Cancellation of treasury stock (697,394) (6,974) (697,394) 642,887 Net loss ---------- -------- -------- ---------- Balance at April 30, 1995 11,678,459 $116,785 -- $ -- ========== ======== ======== ==========
See accompanying notes to consolidated financial statements. 16 8
RETAINED ADDITIONAL EARNINGS TOTAL PAID-IN (ACCUMULATED STOCKHOLDERS' CAPITAL DEFICIT) EQUITY ----------------------------------------------------------------------------------------------------------- Balance at April 30, 1992 $ 4,313,708 $ 350,752 $ 4,195,785 Purchase of common stock (77,100) Net loss (408,067) (408,067) ----------- ------------ ------------ Balance at April 30, 1993 4,313,708 (57,315) 3,710,618 Issuance of common stock 23,347,585 23,403,669 Issuance of warrants 951,664 951,664 Purchase of common stock (770,592) (1,435,200) (2,208,000) Stock options exercised 67,016 67,891 Tax benefit of stock options 140,000 140,000 Net loss (2,229,193) (2,229,193) ----------- ------------ ------------ Balance at April 30, 1994 28,049,381 (3,721,708) 23,836,649 ----------- ------------ ------------ Issuance of common stock 12,418,442 12,444,943 Issuance of warrants 1,989,845 1,989,845 Purchase of common stock (55,000) Stock options exercised 37,652 38,047 Cancellation of treasury stock (635,913) Net loss (20,324,845) (20,324,845) ----------- ------------ ------------ Balance at April 30, 1995 $41,859,407 $(24,046,553) $ 17,929,639 =========== ============ ============
17 9 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Crown Casino Corporation A - HISTORY AND DESCRIPTION OF BUSINESS Crown Casino Corporation, formerly Skylink America Incorporated, and subsidiaries (the "Company") owns a 50% interest in a riverboat gaming casino located in Calcasieu Parish, Louisiana that opened in July 1995, owns an 18.6 acre tract of land in the gaming district of Las Vegas, Nevada which is being held for development of a hotel and casino, and in July 1995 entered into a definitive purchase agreement to acquire the Bourbon Street Hotel and Casino (the "Bourbon Street Casino") located in Las Vegas, Nevada. The Company is also actively pursuing other gaming opportunities in these and other jurisdictions. Prior to March 1994, the Company had been engaged in various facets of the cable programming business. B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The consolidated financial statements include the accounts of Crown Casino Corporation and all of its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. Cash and Cash Equivalents The Company considers cash and all highly liquid investments with an original maturity of three months or less to be cash equivalents. Casino Pre-opening and Development Costs All casino pre-opening and development costs are expensed as incurred. Pre-opening and development costs consist principally of personnel costs, advertising, insurance, travel, consulting and professional fees. Property and Equipment Property and equipment are stated at cost. Expenditures for additions, renewals and improvements are capitalized. Interest costs during construction of facilities are capitalized. Costs of repairs and maintenance are expensed as incurred. Depreciation will be charged on gaming related equipment and facilities beginning in July 1995 (commencement of operations). Depreciation is computed using the straight-line method over the following estimated useful lives: Furniture, fixtures and equipment 5 to 10 years Riverboat and barges 15 years Non-Compete Agreement In connection with the acquisition of St. Charles Gaming Company, Inc. ("SCGC"), the seller agreed not to compete with the Company within the Louisiana market for a period of five years. The costs allocated to such agreement are being amortized over a five year period using the straight-line method. At April 30, 1995 accumulated amortization amounted to $183,326. Debt Issuance Costs In connection with the issuance of the Senior Note and amendments to the agreement governing the Senior Note, the Company incurred debt issuance costs of approximately $2.5 million. These costs are being amortized over the term of the Senior Note using the effective interest method. 18 10 License Costs License costs principally represent the excess purchase price of acquiring SCGC over the net identifiable tangible assets (see Note D). These costs will be amortized beginning in July 1995 (commencement of operations) over the remaining license term using the straight-line method. The Louisiana license was issued on March 29, 1994 and has a five year initial term, which is subject to renewal. Income Taxes Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Treasury Stock During fiscal 1995 the Company formally canceled all of its shares held in treasury. The amount credited to additional paid-in capital upon the original issuance of such shares was estimated to be equal to or greater than the Company's cost of reacquiring such shares. Accordingly, the carrying value in excess of the par value of such shares was charged to additional paid-in capital upon such cancellation. Loss Per Share Loss per share has been calculated using the weighted average number of shares outstanding. Reclassifications Certain prior year amounts in the accompanying financial statements have been reclassified to conform to the fiscal 1995 presentation. Amounts associated with cable activities have been reclassified to discontinued operations. C - SALE OF 50% OF LOUISIANA PROJECT On June 9, 1995 pursuant to a definitive Stock Purchase Agreement ("Stock Purchase Agreement") the Company sold a 50% interest in SCGC to Louisiana Riverboat Gaming Partnership ("LRGP"), a joint venture owned 50% by Casino America, Inc. ("Casino America") and 50% by Louisiana Downs, Inc. LRGP owns the Isle of CapriSM dockside riverboat casino in Bossier City, Louisiana. The purchase price consists of (i) a five-year $20 million note (the "LRGP Note"), (ii) $1 million cash, and (iii) a warrant (which may only be exercised by converting a portion of the LRGP Note) to purchase 416,667 shares of Casino America common stock at $12 per share. The LRGP Note bears interest at 11.5% per annum, payable monthly, and is secured by LRGP's 50% interest in SCGC. Principal is payable in seventeen equal quarterly installments beginning in June 1996. If the distributions from SCGC to LRGP during any quarter are less than the principal installment due for such quarter, LRGP will only be obligated to pay the amount of such distribution and any deficiency will be deferred to the next installment due under the LRGP Note. All principal and interest not previously paid will be due and payable in June 2000. In June 1995, as a result of the sale of a 50% interest in SCGC, the Company recorded a gain before income taxes of approximately $22 million. However, the majority of the gain has been deferred until such time as its realization is reasonably assured. Realization of such deferred gain is dependent on the collection of the LRGP Note, which is principally dependent on SCGC's future operating profits. Prior to maturity, the principal payments on the LRGP Note are limited to the amount of distributions received by LRGP from SCGC's operations, and principal payments on the LRGP Note are not guaranteed by LRGP. 19 11 Also, pursuant to the Stock Purchase Agreement, LRGP will lend funds, or will provide a financing source for SCGC, to provide for the development of the Calcasieu Parish project and the payment of interest on SCGC's senior debt, in amounts to be agreed upon between LRGP and the Company. The maximum amount of all loans funded or guaranteed by LRGP will not exceed $45 million, unless agreed to by the parties. At April 30, 1995 Casino America and LRGP had loaned or advanced SCGC a total of approximately $6.9 million. In August 1995 SCGC and LRGP jointly issued $38.4 million of senior secured increasing rate notes whose proceeds were used to retire all of SCGC's senior debt ($21.9 million) and certain LRGP obligations ($8.4 million). The balance of the proceeds will be used in the development of the Calcasieu Parish project (see Note G). In connection with the Stock Purchase Agreement, SCGC bought out its prior casino management agreement for $4 million and entered into a new casino management agreement with Casino America. The Casino America management agreement has a term of 99 years and provides for a management fee of (i) 2% of "Revenues," as defined in the agreement (generally net gaming revenues less gaming and admission taxes plus all other operating revenues), plus (ii) 10% of "Net Operating Income," as defined in the agreement, provided however, the total management fee shall not exceed 4% of "Revenues." In the event the LRGP Note goes in default and the Company reacquires LRGP's 50% interest in SCGC, SCGC will have the right to terminate the Casino America management agreement. In addition to the foregoing, the Company granted LRGP a right of first refusal to jointly develop its 18.6 acre tract of land in the gaming district of Las Vegas in the event the Company chooses to develop such project on a joint venture basis. At April 30, 1995 SCGC had assets, liabilities and shareholder's deficit of approximately $35 million, $38 million and $3 million, respectively. SCGC's condensed results of operations for the year ended April 30, 1995 and the period from June 25, 1993 (date of acquisition) through April 30, 1994 were as follows (in thousands):
1995 1994 ----------------------------------------------------------------------------------------- Revenue $ -- $ -- Costs and expenses 21,730 1,516 Benefit for income taxes (2,828) (573) -------- ------ Net loss $(18,902) $ (943) ======== ======
D - ACQUISITIONS In June 1993 the Company acquired 100% of the outstanding common stock of SCGC, a Louisiana corporation which was organized in January 1993 for the purpose of developing a riverboat casino project in St. Charles Parish, Louisiana. The Company paid $500,000 and issued 1.2 million shares of restricted common stock to the seller in exchange for all of the issued and outstanding common stock of SCGC and for the seller's agreement not to compete with the Company. In addition, in connection with the transaction, the Company issued 400,000 shares of restricted common stock as a finder's fee to a company which has a principal shareholder who is a director of the Company. In December 1993 the Company acquired 100% of the outstanding common stock of Gaming Entertainment Management Services, Inc. ("GEMS"), a Nevada corporation which was organized in September 1992 for the purpose of developing a hotel and casino project in Las Vegas, Nevada known as the Desert Winds Hotel and Casino. GEMS' primary asset was its option to purchase an 18.6 acre tract of land in the gaming district of Las Vegas located on the southeast corner of the intersection of Flamingo and Arville. The option was exercised and the land was purchased in June 1994. GEMS has no operations other than its development of the Desert Winds project. In 20 12 connection with the transaction the Company issued 850,000 shares of restricted common stock to the shareholders of GEMS and issued 35,000 shares of restricted common stock to an unrelated company as a finder's fee. Prior to the acquisition, the Company loaned GEMS $500,000 which was assumed in the purchase. The acquisitions have been accounted for using the purchase method of accounting. The purchase price and purchase price allocations are as follows (in thousands):
SCGC GEMS ------------------------------------------------------------------------------------------- Purchase price: Cash $ 500 Stock issued 5,600 $ 3,982 Other transaction costs 50 20 Liabilities assumed 25 585 --------- -------- $ 6,175 $ 4,587 ========= ======== Purchase price allocation: Cash $ 50 $ 80 Non-compete agreement 500 Land purchase option 6,075 License costs 9,025 Deferred income taxes (3,400) (1,568) --------- -------- $ 6,175 $ 4,587 ========= ========
The shares issued were valued based upon the trading price of the Company's stock on the earlier of the date when all material contingencies to the acquisition were removed or upon closing, discounted to reflect the restricted nature of the securities. The Company recorded a deferred tax liability to reflect the difference in basis of the acquired assets and liabilities for income tax and financial reporting purposes. The activities of SCGC and GEMS have been included in the Company's results of operations from their respective dates of acquisition. Pro forma results of operations have not been presented for the fiscal year ended April 30, 1994 as such results are not materially different from the actual results of operations for such period. In July 1995, the Company entered into a definitive asset purchase agreement to acquire the Bourbon Street Hotel and Casino located in Las Vegas, Nevada for $10 million (see Note P). E - LICENSING In March 1994 SCGC received a license with certain conditions from the Louisiana Riverboat Gaming Enforcement Division (the "Enforcement Division"). The license has an initial term of five years and is thereafter subject to renewal. In connection with the proposed acquisition of the Bourbon Street Hotel and Casino, the Company intends to apply for a Nevada gaming license. F - LAND HELD FOR DEVELOPMENT In connection with the acquisition of GEMS (see Note D) the Company acquired an option to purchase an 18.6 acre tract of land in the gaming district of Las Vegas, Nevada located on the southeast corner of the intersection of Flamingo and Arville. In June 1994 the Company exercised its option and closed the purchase of the 21 13 Las Vegas land. Upon such purchase amounts previously capitalized as land purchase option costs were reclassified to land held for development. In February 1994 the Las Vegas land under option was appraised for approximately $20.3 million. G - DEBT At April 30, 1995 SCGC had the following debt: --------------------------------------------------------------------------- Senior Note, net of discount of $118,397 $21,811,603 Notes payable to Casino America 4,700,000 ----------- $26,511,603 ===========
In June 1994 SCGC issued a $28 million Senior Secured Increasing Rate Note (the "Senior Note") to an institutional investor. The Senior Note was initially due on June 3, 1995, but was subsequently extended to August 31, 1995 and carried a 12% coupon increasing 67 basis points each quarter up to a maximum interest rate of 14%. The Senior Note was issued with a five year warrant to purchase 508,414 shares of the Company's common stock at an original exercise price of $6.00 per share, which was adjusted to $3.00 per share in December 1994 pursuant to an amendment to the warrant. The proceeds from the private placement were allocated between the Senior Note ($26.7 million) and the warrant ($1.3 million) based upon the relative fair value of each of the securities at the time of issuance. The resulting original issue discount has been amortized over the life of the Senior Note using the effective interest method. In August 1995 the Senior Note was paid off from the proceeds of $38.4 million of Senior Secured Increasing Rate Notes (the "New Notes"), issued jointly by SCGC and LRGP. The New Notes initially become due in August 1996, but can be extended up to an additional twelve months at the option of the issuers, and carry a 12% coupon increasing 25 basis points each quarter until maturity, and provide for contingent interest beginning in June 1996 equal to 7.5% of SCGC's and LRGP's consolidated cash flow, as defined. The New Notes are collaterlized by substantially all the assets of SCGC and LRGP and contain covenants relating to certain business, operational and financial matters including limitations on (i) incurring additional debt, (ii) paying dividends, (iii) merging or consolidating with others, (iv) changes in control, (v) capital expenditures, (vi) investments and joint ventures, and (vii) the sale of assets. The New Notes are not guaranteed by the Company or any of its subsidiaries. In March 1995, pursuant to the Stock Purchase Agreement, SCGC issued promissory notes aggregating $4.7 million to Casino America (the "Casino America Notes"). The Casino America Notes bear interest at 11.5% per annum and are due three business days after the New Notes are paid in full. The Casino America Notes are not guaranteed by the Company or any of its subsidiaries. H - SALES AND ISSUANCES OF COMMON STOCK During fiscal 1994 the Company conducted a private placement offering under Regulation D of the Securities Act of 1933 ("Securities Act") whereby the Company sold 2,690,056 shares of its common stock to accredited investors which resulted in gross proceeds of approximately $14.0 million. In connection with such private placement, the Company paid cash finder's fees of approximately $770,000. In May 1994 the Company sold an additional 636,700 shares of its common stock in the private placement offering which resulted in gross proceeds of approximately $3.7 million. 22 14 In connection with the purchase of SCGC's riverboat the Company issued 433,333 shares of its common stock during fiscal 1994 to Kehl River Boats, Inc. ("KRB"). During fiscal 1995, after KRB was found suitable by the Louisiana gaming regulatory authorities, the Company issued KRB the remaining 623,334 shares of its common stock due under the vessel purchase agreement (see Note L). During fiscal 1995 the Company filed a registration statement with the Securities and Exchange Commission, which became effective in November 1994, to register a total of 10,121,869 shares of its common stock. The registration statement includes (i) 6,937,623 shares on behalf of certain selling shareholders, (ii) 1,184,246 shares representing the underlying shares of outstanding common stock purchase warrants, and (iii) 2,000,000 shares on behalf of the Company. Through April 30, 1995 the Company had sold 915,000 of the 2,000,000 shares included in the registration statement resulting in net proceeds of $3,545,500. In addition, during fiscal 1995 the Company (i) sold 150,000 shares of its common stock to foreign investors under the provisions of Regulation S under the Securities Act resulting in net proceeds of $461,406, and (ii) issued a total of 325,000 shares of its common stock for services rendered and the termination of a certain letter agreement pertaining to a proposed casino site in Lake Charles, Louisiana that was ultimately not pursued. I - STOCK OPTIONS AND WARRANTS Options The Company has two stock option plans, the 1986 Incentive Stock Option Plan ("1986 Plan") for employees covering 1,250,000 shares of common stock and the 1991 Non-Qualified Stock Option Plan ("1991 Plan") for directors and key employees covering 250,000 shares of common stock. Under the 1991 Plan each non-employee director is entitled to an automatic annual grant to purchase 2,500 shares of common stock. Under the terms of the Plans, the purchase price of the shares will not be less than the fair market value of such shares on the date of grant. Options granted under the Plans expire in the years 1998 through 2005 and generally are exercisable on the date of grant, with the exception of options to purchase 325,000 shares which become exercisable from 1996 through 1999. At April 30, 1995, there were 223,575 and 135,000 shares of common stock available for grant in the 1986 Plan and 1991 Plan, respectively. The following is an aggregate summary of the 1986 Plan and 1991 Plan activity since April 30, 1992:
Number Option Price Proceeds of Shares per Share on Exercise --------------------------------------------------------------------------------------------- Outstanding at April 30, 1992 268,143 $ .63 to $ .72 $ 174,313 Granted 7,500 $ .41 3,047 Canceled (38,500) $ .63 to $ .72 (24,547) -------- ------------ Outstanding at April 30, 1993 237,143 $ .41 to $ .72 152,813 Granted 507,500 $1.41 to $7.38 2,903,125 Exercised (77,500) $ .63 to $1.41 (62,891) -------- ------------ Outstanding at April 30, 1994 667,143 $ .41 to $7.38 2,993,047 Granted 480,000 $3.31 to $4.03 1,671,094 Exercised (39,500) $ .41 to $1.41 (38,047) Canceled (310,000) $7.31 (2,266,875) -------- ------------ Outstanding at April 30, 1995 797,643 $ .41 to $7.31 $ 2,359,219 ======== ============
23 15 Warrants During fiscal 1994 and 1995 the Company issued common stock purchase warrants to a variety of parties in connection with (i) the issuance of debt (558,414 underlying shares), (ii) finder's fees for private placements of common stock (314,952 underlying shares), (iii) a commitment fee for the issuance of a commitment letter (160,880 underlying shares), (iv) the purchase of its riverboat (100,000 underlying shares), and (v) a certain joint venture agreement (50,000 underlying shares). The warrants issued were valued based upon a composite of commonly accepted warrant valuation models. The following is an aggregate summary of warrant activity since April 30, 1993:
NUMBER OF UNDERLYING EXERCISE PRICE PROCEEDS SHARES PER SHARE ON EXERCISE ---------------------------------------------------------------------------------------- Outstanding at April 30, 1993 -- $ -- Issued 475,832 $6.00 to $12.00 3,327,420 --------- ----- ------ ---------- Outstanding at April 30, 1994 475,832 $6.00 to $12.00 3,327,420 Issued 708,414 $3.00 to $7.25 2,793,992 --------- ----- ------ ---------- Outstanding at April 30, 1995 1,184,246 $3.00 to $12.00 $6,121,412 --------- ----- ------ ----------
All of the warrants became exercisable upon their issuance. The warrants expire between 1997 and 1999, contain certain anti-dilution provisions and provide the holders with certain registration rights relative to the underlying shares. J - INCOME TAXES The provision (benefit) for income taxes from continuing operations was as follows for the three fiscal years in the period ended April 30, 1995:
FISCAL FISCAL FISCAL 1995 1994 1993 ----------------------------------------------------------------------------------------- Provision (benefit) for income taxes: Current $ 37,672 $ (43,359) $ 125,626 Deferred (3,940,000) (1,062,574) (258,730) ----------- ----------- --------- $(3,902,328) $(1,105,933) $(133,104) =========== =========== =========
The provision (benefit) for income taxes from continuing operations is different from the amount computed by applying the statutory federal income tax rate to loss from continuing operations before income taxes for the following reasons:
FISCAL FISCAL FISCAL 1995 1994 1993 ----------------------------------------------------------------------------------------- Federal statutory rate (34)% (34)% (34)% State income tax, net of federal benefit (5) (3) Valuation allowance 23 Other 2 --- --- --- (16)% (35)% (34)% === === ===
24 16 Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax liabilities and assets were as follows:
APRIL 30, 1995 1994 ----------------------------------------------------------------------------------------- Deferred tax liabilities: License costs $ 3,442,030 $3,442,030 Land held for development 1,792,255 1,792,255 Other 19,975 165,475 --------- --------- Total deferred tax liabilities 5,254,260 5,399,760 --------- --------- Deferred tax assets: Pre-opening expenses 6,471,000 692,530 Net operating loss carryforward 3,589,150 195,600 Barge reserve 269,000 Bad debt expense 47,525 68,000 Other 9,779 3,630 Total deferred tax assets 10,386,454 959,760 --------- --------- Valuation allowance (5,632,194) --------- Net deferred tax liability $ 500,000 $4,440,000 ========= =========
The Company recorded a valuation allowance for the year ended April 30, 1995 to reduce the carrying value of deferred tax assets. The valuation allowance relates to management's estimate of the realization of such deferred tax assets. At April 30, 1995 the Company had a net operating loss carryforward for tax purposes of approximately $9,477,000 which expires in 2009 and 2010. K - LEASES In March and July 1995, SCGC entered into agreements to lease the two parcels of land that comprise the Calcasieu Parish riverboat casino site. The leases have an initial term of five years with seven five year renewal options. During the initial term, the leases require annual aggregate rental payments of $850,000 in years one through four, and $1,000,000 in year five, payable monthly. During the first renewal term, the rent will be increased annually by the greater of (i) 5%, or (ii) the percentage increase in the average consumer price index for Calcasieu Parish, Louisiana for the previous twelve month period. During the second through seventh renewal terms, the lessor and SCGC will attempt to set the rent equal to 100% of the rent paid by other riverboat gaming operators in Louisiana and Mississippi for comparable property usages, or if no agreement can be made, then the parties will appoint real estate appraisers to set the rent for such renewal term. However, in no event shall the annual rent be less than $1.6 million during the fourth and all subsequent renewal terms. In addition, SCGC will pay all real estate taxes, except for taxes due on the unimproved value of the property. The Company has guaranteed the obligations of SCGC under these leases. In addition to the Calcasieu Parish site leases, the Company has also entered into various operating leases for equipment and office facilities. The aggregate rentals due under such leases were not significant at April 30, 1995. 25 17 Rent expense for all operating leases during the last three fiscal years was as follows:
FISCAL FISCAL FISCAL 1995 1994 1993 ----------------------------------------------------------------------------------------- Continuing operations $93,888 $39,483 $35,970 Discontinued operations 23,727 46,105 ------- ------- ------- $93,888 $63,210 $82,075 ======= ======= =======
The Company has also entered into various capital leases for equipment. As of April 30, 1995 future minimum lease payments under capital leases were as follows:
FISCAL YEAR AMOUNT ----------------------------------------------------------------- 1996 $ 3,294,610 1997 2,234,605 1998 84,420 1999 79,476 2000 6,622 ---------- Total minimum lease payments 5,699,733 Less amount representing interest (551,624) ---------- Present value of future minimum lease payments 5,148,109 Less current portion (2,876,632) ---------- Capital lease obligations, less current portion $ 2,271,477 ==========
L - COMMITMENTS AND CONTINGENCIES Common Stock Pending Issuance In February, 1995 the Company made a commitment to issue 50,000 shares of its common stock (representing $200,000) to a consultant upon commencement of SCGC's riverboat gaming operations in Calcasieu Parish, Louisiana. In July 1995 such operations commenced and subsequently the shares due were issued. At April 30, 1994 the Company was committed to issue 333,334 shares of its common stock (representing $1,500,000) to KRB, the Company's riverboat contractor, upon KRB being found suitable as a 5% or greater shareholder of the Company by the Louisiana gaming regulatory authorities. In December 1994, KRB was found suitable and the Company issued the total shares then due (623,334) to KRB. Common Stock Subject to Redemption At April 30, 1994 the Company was required to make recission offers to certain investors covering 151,000 shares of its common stock (representing $829,500) to satisfy securities laws in certain states in which the Company conducted a private placement offering of its securities. The recission offers expired at various times through September 1994, at which time the respective amounts included in common stock subject to redemption were reclassified to additional paid-in capital. 26 18 Litigation On September 21, 1994, an action was filed against the Company and SCGC in the 24th Judicial District Court for the Parish of Jefferson, Louisiana by Avondale Industries, Inc. ("Avondale"). In this action, Avondale alleges that the Company was contractually obligated to Avondale for the construction of SCGC's riverboat vessel based upon a letter of intent (allegedly reaffirming a previous agreement entered into between Avondale and the Company). Avondale alleges that the Company breached a duty to negotiate in good faith toward the execution of a definitive vessel construction contract. Alternatively, Avondale alleges that a separate oral contract for the construction of the vessel existed and that the Company committed unspecified unfair trade practices and made certain misrepresentations. Avondale seeks unspecified damages including "all lost profits and lost overhead" and attorneys fees. The Company intends to vigorously contest liability in this matter. Commitments to Calcasieu Parish In January 1995, SCGC made a commitment to Calcasieu Parish to provide certain payments to the Parish above and beyond the statutory admissions tax. SCGC committed to a $1 million initial payment, which was paid upon the opening of the casino, and a $1 million annual payment for as long as the casino is operating at its site in the Parish, but in no event less than six years. In June 1995 SCGC and the Parish entered into a definitive development agreement whereby, in consideration for the payments to be made by SCGC to the Parish, the Parish is required to cooperate with and provide assistance to SCGC in obtaining and maintaining necessary permits and approvals to operate its riverboat gaming casino. Teaming Agreement In June 1994 the Company entered into a teaming agreement with a group of individuals for the purpose of pursuing a gaming license in the State of Illinois. The agreement requires the Company to issue warrants to purchase up to 250,000 shares of the Company's common stock, and to make certain payments in cash upon the occurrence of specified events, including the issuance of a gaming license. M - RELATED PARTY TRANSACTIONS During fiscal 1994, in connection with the acquisition of SCGC (see Note D), the Company issued 400,000 shares of restricted common stock as a finder's fee to a company whose principal shareholder is a director of the Company. In March 1995, this director became an executive officer of the Company. The Company incurred legal fees of approximately $259,000 and $218,000 during fiscal 1995 and 1994, respectively, from a law firm of which a director of the Company was a partner. In March 1995, this director became an executive officer of the Company. During fiscal 1994 the Company paid $24,000 for investment banking services to a company of which an outside director of the Company is an officer. During fiscal 1994 the Company borrowed an aggregate of $700,000 on a short-term basis from an individual who was a major beneficial shareholder of the Company at the time of such loan. During fiscal 1995 the Company entered into a teaming agreement (see Note L) with an individual who subsequently became a director of the Company. Pursuant to such agreement, the Company issued warrants to purchase 50,000 shares of the Company's common stock. 27 19 N - DISCONTINUED OPERATIONS In July 1993 the Company made the decision to focus all its efforts in the gaming industry and discontinue operating in the cable programming industry. As a result, during fiscal 1994 the Company sold all its remaining cable assets for total consideration of $1,125,000. The loss on disposal of the Company's cable operations was as follows:
LOSS BEFORE INCOME INCOME TAXES TAX BENEFIT NET LOSS ----------------------------------------------------------------------------------------- Loss on disposal of cable operations $(239,925) $(81,575) $(158,350) Operating loss from July 1993 to February 1994 (disposal date) (32,432) (11,027) (21,405) --------- -------- --------- $(272,357) $(92,602) $(179,755) ========= ======== =========
The identifiable revenues and expenses from cable operations have been reclassified on the accompanying statements of operations from their historical classification to separately identify them as the net results of discontinued operations. Discontinued operations include allocations of general and administrative expenses that were determined to be directly related to such operations. The condensed statements of operations for discontinued operations for fiscal years 1994 and 1993 were as follows:
Fiscal 1994 ---------------------------------- May-June July-April (Pre-measure- (Post-measure- Fiscal ment Date) ment Date) 1993 ----------------------------------------------------------------------------------------- Revenues $192,313 $ 412,050 $1,346,912 Costs and expenses 187,845 444,482 1,615,248 Loss on disposal of cable operations 239,925 ---------- --------- ---------- Income (loss) before income taxes 4,468 (272,357) (268,336) Provision (benefit) for income taxes 1,519 (92,602) (123,383) ---------- --------- ---------- Net income (loss) $ 2,949 $(179,755) $ (144,953) ========== ========= ==========
28 20 O - SUPPLEMENTAL CASH FLOW INFORMATION Supplemental cash flow disclosures are as follows for the three fiscal years in the period ended April 30, 1995:
FISCAL FISCAL FISCAL 1995 1994 1993 ----------------------------------------------------------------------------------------- Continuing operations: Common stock issued in acquisitions $9,582,500 Common stock issued for equipment $1,450,000 550,000 Common stock issued for services and other 1,300,000 Equipment acquired under capital leases 5,778,767 Equipment acquired with debt 5,000,000 Note payable converted to common stock 3,000,000 Note payable exchanged for land 471,465 Retirement of debt with property 200,000 Warrants issued for equipment and services 337,500 951,664 Interest paid, net of amount capitalized 6,132,059 11,474 $ 3,886 Income taxes paid, net of refunds (124,328) (141,359) 226,351 Discontinued operations: Cable assets sold for note receivable 250,000
P - SUBSEQUENT EVENTS On June 9, 1995 the Company sold a 50% interest in SCGC to LRGP for approximately $22 million total consideration (see Note C). On July 14, 1995 the Company entered into a definitive asset purchase agreement to acquire the Bourbon Street Casino located in Las Vegas, Nevada for a purchase price of $10 million. The Bourbon Street Casino has approximately 430 slot machines and 15 table games over its 15,000 square feet of gaming space, 166 hotel rooms, including 16 suites, and has reported annual revenues of approximately $12 million. Closing is expected to occur by October 1995. On July 29, 1995 SCGC's riverboat casino commenced gaming operations in Calcasieu Parish, Louisiana. On August 7, 1995 SCGC and LRGP jointly issued $38.4 million of senior secured increasing rate notes and paid off SCGC's Senior Note (see Note G). 29 21 REPORT OF INDEPENDENT AUDITORS Crown Casino Corporation REPORT OF INDEPENDENT ACCOUNTANTS Stockholders and Board of Directors Crown Casino Corporation We have audited the accompanying consolidated balance sheets of Crown Casino Corporation and subsidiaries as of April 30, 1995 and 1994, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the two years in the period ended April 30, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Crown Casino Corporation and subsidiaries as of April 30, 1995 and 1994, and the consolidated results of their operations and their cash flows for each of the two years in the period ended April 30, 1995 in conformity with generally accepted accounting principles. Dallas, Texas Coopers & Lybrand L.L.P. August 7, 1995 REPORT OF INDEPENDENT AUDITORS Stockholders and Board of Directors Crown Casino Corporation (formerly Skylink America Incorporated) We have audited the accompanying consolidated statements of operations, stockholders' equity, and cash flows of Crown Casino Corporation (formerly Skylink America Incorporated) and subsidiaries for the year ended April 30, 1993. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated results of operations and cash flows of Crown Casino Corporation (formerly Skylink America Incorporated) and subsidiaries for the year ended April 30, 1993, in conformity with generally accepted accounting principles. Dallas, Texas Ernst & Young LLP June 11, 1993 30 22 COMMON STOCK INFORMATION, DIVIDENDS AND RELATED STOCKHOLDER MATTERS Crown Casino Corporation The Company's common stock is authorized for quotation on the National Association of Securities Dealers Automated Quotation System ("NASDAQ") under the NASDAQ symbol DICE. The following table sets forth, by fiscal quarter, the high and low bid prices reported by NASDAQ for the Company's common stock for the periods indicated. The bid quotation information presented represents prices between dealers and does not include retail mark-ups, mark-downs, or other fees or commissions and may not represent actual transactions.
1995 BID PRICES 1994 BID PRICES HIGH LOW HIGH LOW ---------------------------------------------------------------------- First quarter $7 1/2 $5 5/8 $7 3/4 $ 1/2 Second quarter 8 3/8 4 1/8 8 4 3/8 Third quarter 7 2 7/8 7 1/2 5 Fourth quarter 5 3/4 3 1/4 11 6 5/8
As of July 21, 1995 there were approximately 1,866 stockholders of record. This number excludes individual stockholders holding stock under nominee security position listings. Since its inception, the Company has paid no dividends on its common stock. The Company currently intends to follow a policy of retaining earnings to finance future growth. Payment of dividends in the future will be determined by the Company's Board of Directors and will depend upon, among other things, the Company's future earnings, operations, capital requirements and surplus, general financial condition, and contractual restrictions that may exist, and such other factors as the Board of Directors may deem relevant. SELECTED FINANCIAL DATA The financial data set forth below was derived from the audited consolidated financial statements of the Company and should be read in conjunction with the consolidated financial statements and related notes thereto, and Management's Discussion and Analysis of Financial Condition and Results of Operations contained elsewhere herein. (In thousands, except per share amounts.)
YEARS ENDED APRIL 30, 1995 1994 1993 1992 1991 ---------------------------------------------------------------------------------------------------------- Revenues from: Continuing operations $ -- $ -- $ -- $ -- $ -- Discontinued operations -- 604 1,347 11,618 13,602 Income (loss) from: Continuing operations $ (20,325) $ (2,052) $ (263) $ (380) $ (581) Discontinued operations (177) (145) 2,701) (a) (614) --------- -------- ------- ------- ------- $ (20,325) $ (2,229) $ (408) $ 2,321 $(1,195) --------- -------- ------- ------- ------- Income (loss) per share: Continuing operations $ (2.01) $ (.34) $ (.07) $ (.10) $ (.16) Discontinued operations (.03) (.04) .73 (.16) --------- -------- ------- ------- ------- $ (2.01) $ (.37) $ (.11) $ .63 $ (.32) --------- --------- ------- ------- ------- Total assets (b) $ 54,507 $ 30,974 $ 4,388 $ 5,477 $ 2,148 Long-term obligations 2,271 2,330 -- -- 6,009 Stockholders' equity 17,930 23,837 3,711 4,196 1,875 Shares outstanding 11,678 8,999 3,524 3,689 3,697
(a) - Includes a gain on the sale of certain cable assets of $5.7 million before income taxes. (b) - Assets related to discontinued operations are shown net of related liabilities. 31 23
CORPORATE INFORMATION Crown Casino Corporation DIRECTORS 10-K Information Edward R. McMurphy Additional information is included in the Company's Chairman of the Board, Chief Executive Officer and President report to the Securities and Exchange Commission on Crown Casino Corporation Form 10-K. Copies of Form 10-K are available at no charge to stockholders upon written request to: John David Simmons President Edward R. McMurphy Condomart, Inc. 2415 W. Northwest Hwy., Suite 103 Dallas, Texas 75220 David J. Douglas (214) 352-7561 Managing Director Triple S Capital Corporation Corporate Offices T. J. Falgout, III 2415 W. Northwest Hwy. Executive Vice President and General Counsel Suite 103 Crown Casino Corporation Dallas, Texas 75220 (214) 352-7561 Gerald L. Adams President Annual Meeting River Development, Inc. The annual meeting of stockholders of Crown Casino Gerard M. Jacobs Corporation will be held at the Four Seasons Hotel and President Resort, 4150 N. MacArthur Blvd., Irving, Texas at Environmental Waste Funding Corporation 9:30 a.m. on Friday, September 29, 1995. Robert J. Kehl Transfer Agent and Registrar President Kehl River Boats, Inc. Securities Transfer Corporation Dallas, Texas (214) 248-1922 OFFICERS Independent Accountants Edward R. McMurphy Coopers & Lybrand L.L.P. Chairman of the Board, Chief Executive Officer and President Dallas, Texas T. J. Falgout, III General Counsel Executive Vice President and General Counsel Smith, Gambrell & Russell Mark D. Slusser Atlanta, Georgia Chief Financial Officer, Vice President Finance and Secretary Stumpf & Falgout Edward J. Preuss, Jr. Houston, Texas Vice President Project Development Leslie M. Clavir Vice President Gaming Michael B. Cloud Controller and Assistant Secretary
EX-23.1 13 CONSENT OF COOPERS & LYBRAND 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the registration statements of Crown Casino Corporation and subsidiaries on Form S-1 (File No. 33-79484) and Form S-8 (File No. 33-59519 and File No. 33-59527) of our report, dated August 7, 1995, on our audits of the consolidated financial statements of Crown Casino Corporation and subsidiaries as of April 30, 1995 and 1994, and for the years ended April 30, 1995 and 1994, which report is incorporated by reference in this Annual Report on Form 10-K. Coopers & Lybrand L.L.P. Dallas, Texas August 11, 1995 EX-23.2 14 CONSENT OF ERNST & YOUNG 1 EXHIBIT 23.2 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in this Annual Report (Form 10-K) of Crown Casino Corporation (formerly Skylink America Incorporated) of our report dated June 11, 1993, included in the 1995 Annual Report to Stockholders of Crown Casino Corporation. Our audits also included the financial statement schedule of Skylink America Incorporated listed in Item 14 (a). This schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. We also consent to the incorporation by reference in the Registration Statements (Form S-8 No. 33-22590 and No. 33-41960) pertaining to the 1986 Incentive Stock Option Plan and 1991 Non-Qualified Stock Option Plan of Skylink America Incorporated and subsidiaries and in the related Prospectuses of our report dated June 11, 1993, with respect to the consolidated financial statements of Skylink America Incorporated incorporated by reference in this 1995 Annual Report (Form 10-K) for the year ended April 30, 1993 and the financial statement schedule included herein, filed with the Securities and Exchange Commission. /s/Ernst & Young LLP -------------------- ERNST & YOUNG LLP Dallas, Texas August 9, 1995 EX-24.1 15 POWER OF ATTORNEY 1 EXHIBIT 24.1 STATE OF TEXAS COUNTY OF DALLAS POWER OF ATTORNEY Know all men by these presents that I, EDWARD R. MCMURPHY, a Director of CROWN CASINO CORPORATION, a Texas corporation, do constitute and appoint MARK D. SLUSSER my true and lawful attorney-in-fact, with full power of substitution, for me in any and all capacities, to sign, pursuant to the requirements of the Securities and Exchange Act of 1934, the Annual Report on Form 10-K for CROWN CASINO CORPORATION, for the fiscal year ended April 30, 1995, and to file the same with the Securities and Exchange Commission and the National Association of Securities Dealers, Inc., together with all exhibits thereto and other documents in connection therewith, and to sign on my behalf and in my stead, in any and all capacities, any amendments to said Annual Report, incorporating such changes as my said attorney-in-fact deems appropriate, hereby ratifying and confirming all that said attorney-in-fact, or his substitute, may do or cause to be done by virtue thereof. In witness whereof, I have hereunto set my hand and seal this 3rd day of August, 1995. /s/ Edward R. McMurphy ---------------------- EDWARD R. MCMURPHY ACKNOWLEDGEMENT Before me this 3rd day of August, 1995, came EDWARD R. MCMURPHY, personally known to me, who in my presence did sign and seal the above and foregoing Power of Attorney and acknowledged the same as his true act and deed. [SEAL] RUTH A. BOOTHE /s/ Ruth A. Boothe Notary Public State of Texas ----------------------------- My Commission Expires 4-07-99 Notary Public, State of Texas EX-24.2 16 POWER OF ATTORNEY 1 EXHIBIT 24.2 STATE OF TEXAS COUNTY OF DALLAS POWER OF ATTORNEY Know all men by these presents that I, T. J. FALGOUT, III, a Director of CROWN CASINO CORPORATION, a Texas corporation, do constitute and appoint EDWARD R. MCMURPHY and MARK D. SLUSSER, jointly and severally, my true and lawful attorneys-in-fact, each with full power of substitution, for me in any and all capacities, to sign, pursuant to the requirements of the Securities and Exchange Act of 1934, the Annual Report on Form 10-K for CROWN CASINO CORPORATION, for the fiscal year ended April 30, 1995, and to file the same with the Securities and Exchange Commission and the National Association of Securities Dealers, Inc., together with all exhibits thereto and other documents in connection therewith, and to sign on my behalf and in my stead, in any and all capacities, any amendments to said Annual Report, incorporating such changes as any of the said attorneys-in-fact deems appropriate, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue thereof. In witness whereof, I have hereunto set my hand and seal this 3rd day of August, 1995. /s/ T. J. Falgout, III ---------------------- T. J. FALGOUT, III ACKNOWLEDGEMENT Before me this 3rd day of August, 1995, came T. J. FALGOUT, III, personally known to me, who in my presence did sign and seal the above and foregoing Power of Attorney and acknowledged the same as his true act and deed. [SEAL] RUTH A. BOOTHE /s/ Ruth A. Boothe Notary Public State of Texas ----------------------------- My Commission Expires 4-07-99 Notary Public, State of Texas EX-24.3 17 POWER OF ATTORNEY 1 EXHIBIT 24.3 STATE OF ILLINOIS COUNTY OF COOK POWER OF ATTORNEY Know all men by these presents that I, GERARD M. JACOBS, a Director of CROWN CASINO CORPORATION, a Texas corporation, do constitute and appoint EDWARD R. MCMURPHY and MARK D. SLUSSER, jointly and severally, my true and lawful attorneys-in-fact, each with full power of substitution, for me in any and all capacities, to sign, pursuant to the requirements of the Securities and Exchange Act of 1934, the Annual Report on Form 10-K for CROWN CASINO CORPORATION, for the fiscal year ended April 30, 1995, and to file the same with the Securities and Exchange Commission and the National Association of Securities Dealers, Inc., together with all exhibits thereto and other documents in connection therewith, and to sign on my behalf and in my stead, in any and all capacities, any amendments to said Annual Report, incorporating such changes as any of the said attorneys-in-fact deems appropriate, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue thereof. In witness whereof, I have hereunto set my hand and seal this 4th day of August, 1995. /s/ Gerard M. Jacobs -------------------- GERARD M. JACOBS ACKNOWLEDGEMENT Before me this 4th day of August, 1995, came GERARD M. JACOBS, personally known to me, who in my presence did sign and seal the above and foregoing Power of Attorney and acknowledged the same as his true act and deed. OFFICIAL SEAL /s/ Denise D. Owens DENISE D. OWENS ------------------- NOTARY PUBLIC, STATE OF ILLINOIS Notary Public MY COMMISSION EXPIRES 10-20-97 State of Illinois -------- My Commission Expires: 10-20-97 -------- EX-24.4 18 POWER OF ATTORNEY 1 EXHIBIT 24.4 STATE OF TEXAS COUNTY OF DALLAS POWER OF ATTORNEY Know all men by these presents that I, DAVID J. DOUGLAS, a Director of CROWN CASINO CORPORATION, a Texas corporation, do constitute and appoint EDWARD R. MCMURPHY and MARK D. SLUSSER, jointly and severally, my true and lawful attorneys-in-fact, each with full power of substitution, for me in any and all capacities, to sign, pursuant to the requirements of the Securities and Exchange Act of 1934, the Annual Report on Form 10-K for CROWN CASINO CORPORATION, for the fiscal year ended April 30, 1995, and to file the same with the Securities and Exchange Commission and the National Association of Securities Dealers, Inc., together with all exhibits thereto and other documents in connection therewith, and to sign on my behalf and in my stead, in any and all capacities, any amendments to said Annual Report, incorporating such changes as any of the said attorneys-in-fact deems appropriate, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue thereof. In witness whereof, I have hereunto set my hand and seal this 7th day of August, 1995. /s/ David J. Douglas -------------------- DAVID J. DOUGLAS ACKNOWLEDGEMENT Before me this 7th day of August, 1995, came DAVID J. DOUGLAS, personally known to me, who in my presence did sign and seal the above and foregoing Power of Attorney and acknowledged the same as his true act and deed. /s/ Ruth A. Boothe ------------------ [SEAL] RUTH A. BOOTHE Notary Public Notary Public State of Texas My Commission Expires 4-07-99 State of Texas ----- My Commission Expires: 4-7-99 ------ EX-24.5 19 POWER OF ATTORNEY 1 EXHIBIT 24.5 STATE OF ALABAMA COUNTY OF JEFFERSON POWER OF ATTORNEY Know all men by these presents that I, JOHN DAVID SIMMONS, a Director of CROWN CASINO CORPORATION, a Texas corporation, do constitute and appoint EDWARD R. MCMURPHY and MARK D. SLUSSER, jointly and severally, my true and lawful attorneys-in-fact, each with full power of substitution, for me in any and all capacities, to sign, pursuant to the requirements of the Securities and Exchange Act of 1934, the Annual Report on Form 10-K for CROWN CASINO CORPORATION, for the fiscal year ended April 30, 1995, and to file the same with the Securities and Exchange Commission and the National Association of Securities Dealers, Inc., together with all exhibits thereto and other documents in connection therewith, and to sign on my behalf and in my stead, in any and all capacities, any amendments to said Annual Report, incorporating such changes as any of the said attorneys-in-fact deems appropriate, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue thereof. In witness whereof, I have hereunto set my hand and seal this 7th day of August, 1995. /s/ John David Simmons ---------------------- JOHN DAVID SIMMONS ACKNOWLEDGEMENT Before me this 7th day of August, 1995, came JOHN DAVID SIMMONS, personally known to me, who in my presence did sign and seal the above and foregoing Power of Attorney and acknowledged the same as his true act and deed. /s/ ----------------------------- Notary Public State of Alabama ------- My Commission Expires: 4/21/96 ------- EX-24.6 20 POWER OF ATTORNEY 1 EXHIBIT 24.6 STATE OF ) ------------- ) COUNTY OF ) ------------ POWER OF ATTORNEY Know all men by these presents that I, ROBERT J. KEHL, a Director of CROWN CASINO CORPORATION, a Texas corporation, do constitute and appoint EDWARD R. MCMURPHY and MARK D. SLUSSER, jointly and severally, my true and lawful attorneys-in-fact, each with full power of substitution, for me in any and all capacities, to sign, pursuant to the requirements of the Securities and Exchange Act of 1934, the Annual Report on Form 10-K for CROWN CASINO CORPORATION, for the fiscal year ended April 30, 1995, and to file the same with the Securities and Exchange Commission and the National Association of Securities Dealers, Inc., together with all exhibits thereto and other documents in connection therewith, and to sign on my behalf and in my stead, in any and all capacities, any amendments to said Annual Report, incorporating such changes as any of the said attorneys-in-fact deem appropriate, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue thereof. In witness whereof, I have hereunto set my hand and seal this 11th day of August, 1995. /s/ Robert J. Kehl ---------------------- ROBERT J. KEHL ACKNOWLEDGEMENT Before me this 11th day of August, 1995, came ROBERT J. KEHL, personally known to me, who in my presence did sign and seal the above and foregoing Power of Attorney and acknowledged the same as his true act and deed. [SEAL] KAREN A. DEMUTH /s/ Karen A. DeMuth MY COMMISSION EXPIRES ------------------------------ 9/26/97 Notary Public State of Iowa --------------------- My Commission Expires: 9/26/97 ------- EX-27 21 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF CROWN CASINO CORPORATION FOR THE YEAR ENDED APRIL 30, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR APR-30-1995 MAY-01-1994 APR-30-1995 1,692,440 0 0 0 0 2,624,375 42,317,675 (223,055) 54,506,632 33,605,516 26,511,603 116,785 0 0 17,812,854 54,506,632 0 0 0 0 17,577,524 0 6,826,538 (24,227,173) (3,902,328) (20,324,845) 0 0 0 (20,324,845) (2.01) (2.01)