UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______TO______
Commission File No. 0-22088
NEVADA 88-0300760
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1175 W. MOANA LANE, SUITE 200
RENO, NEVADA 89509
(Address of principal (Zip code)
executive offices)
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Name of each exchange
Title of each class on which registered
------------------- -------------------
None None
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SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, $0.01 PAR VALUE
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of voting stock held by nonaffiliates of the Registrant as of March 19, 1999, based on the closing price as reported on The Nasdaq Stock Market(SM) of $7.688 per share, was approximately $17,875,945.
As of March 29, 1999, Registrant had outstanding 9,436,275 shares of Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for Registrant's 1999 Annual Meeting of Stockholders, which Proxy Statement shall be filed with the Commission not later than 120 days after the end of the fiscal year covered by this report, are incorporated by reference into Part III.
STATEMENTS IN THIS ANNUAL REPORT ON FORM 10-K WHICH EXPRESS THE "BELIEF", "ANTICIPATION", "INTENTION", "EXPECTATION", OR "SCHEDULES" AS WELL AS OTHER STATEMENTS WHICH ARE NOT HISTORICAL FACT, AND STATEMENTS AS TO BUSINESS OPPORTUNITIES, MARKET CONDITIONS, COST ESTIMATIONS AND OPERATING PERFORMANCE INSOFAR AS THEY MAY APPLY PROSPECTIVELY, ARE FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934 AND INVOLVE RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE PROJECTED.
PART I
ITEM 1. BUSINESS
Monarch Casino & Resort, Inc., through its wholly-owned subsidiary Golden Road Motor Inn, Inc. ("Golden Road"), owns and operates the tropically-themed Atlantis Casino Resort in Reno, Nevada (the "Atlantis"). Unless otherwise indicated, "Monarch" or the "Company" refers to Monarch Casino & Resort, Inc. and its subsidiaries Golden Road, Dunes Marina Resort & Casino, Inc. ("Dunes Marina"), and Sea World Processors, Inc. ("Sea World"). Monarch was incorporated in 1993 under Nevada law for the purpose of acquiring all of the stock of Golden Road. The principal asset of Monarch is the stock of Golden Road, which holds substantially all of the assets of the Atlantis. The Company's principal executive offices are located at 1175 West Moana Lane, Suite 200, Reno, Nevada 89509, telephone (775) 825-3355.
THE ATLANTIS CASINO RESORT
Through Golden Road, the Company owns and operates the tropically-themed Atlantis, which is located approximately three miles south of downtown Reno in the generally more affluent southwest area of Reno. In the 1998 second quarter, the Company began construction of a major expansion of the Atlantis (the "Atlantis Expansion") that when completed, will represent an increase of approximately 85% in the Company's investment in property and equipment at the Atlantis. The Atlantis expansion is currently scheduled for completion in the 1999 second quarter. All descriptions in this report which reference "following completion of the Atlantis Expansion" assume that the Atlantis Expansion will be completed and opened to the public for business as scheduled. Based on current construction progress, the Company believes that the Atlantis Expansion will be able to open for business in the 1999 second quarter, but due to the possibility of the occurrence of unanticipated events, there is no assurance that all portions of the Atlantis Expansion will be opened as currently expected.
The two primary components of the Atlantis Expansion are a new 27-story hotel tower with approximately 392 new hotel rooms and suites with an adjoining new low rise structure containing additional casino and public space (the "Hotel Tower Project"), and an enclosed overhead "skywalk" structure connecting the Atlantis with a 16 acre site across South Virginia Street from the Atlantis, which contains approximately 8,000 square feet of casino and public space (the "Skywalk"). The Skywalk was officially opened to the public on March 18, 1999.
Following completion of the Atlantis Expansion scheduled in the 1999 second quarter, the Atlantis will feature approximately 51,000 square feet of casino space interspersed with waterfalls and water features, giant artificial palm trees, thatched-roof huts and other tropical features; a hotel and a motor lodge; eight food outlets; a nightclub; pool, health club and salon facilities; retail outlets featuring traditional "gift shop" merchandise as well as clothing and other merchandise adorned with the Atlantis logo; an 8,000 square- foot family entertainment center; and approximately 25,000 square feet of banquet, convention and meeting room space. The Atlantis is the closest hotel casino to the 370,000 square-foot Reno Sparks Convention Center (the "Convention Center"), and the only hotel casino located within easy walking distance of the Convention Center.
Casino. Following completion of the Atlantis Expansion, the Atlantis' casino will feature approximately 40 table games, including blackjack, craps, roulette, mini-baccarat, "Let it Ride(TM)", "Three Card Poker(TM)", "Fortune Pai Gow Poker(TM)", and "Royal Match(TM)"; approximately 1,600 slot and video poker machines; a race and sports book (which is operated by an independent third party pursuant to a lease arrangement with the Company); and keno. During the year ended December 31, 1998, 76% of the Atlantis' casino revenue was from slot and video poker machines, 22% was from table games, and the remaining 2% was from keno.
The Atlantis offers what the Company believes to be higher-than-average payout rates on slot machines and has adopted liberal rules for its blackjack games which include using mostly single decks of cards at its tables and allowing the player to "double down" on the first two cards. The Company's present policy is to extend gaming credit only to a limited number of qualified customers.
Lodging. Following completion of the Atlantis Expansion, the Atlantis will feature three contiguous high-rise hotel towers offering a total of 835 rooms and suites, and a low-rise motor lodge offering another 149 rooms, for a total guest room count of 984. The first of the three hotel towers was completed in April 1991, and contains 160 rooms and suites in 13 stories. The second hotel tower was completed in September 1994 and contains 283 rooms and suites in 19 stories. The third tower, which is part of the Atlantis Expansion, is scheduled to be completed in the 1999 second quarter and will contain 392 rooms and suites in 27 stories; the top seven floors in the newest tower are five feet wider on each side than the lower floors, enlarging standard guest rooms on these floors be nearly 20% over the standard guest rooms on the lower floors. The rooms in these top seven floors will feature premium appointments in addition to their larger square footage, and they will be serviced by dedicated elevators and a dedicated concierge service in order to accommodate guests seeking more upscale accommodations, as well as convention and trade show visitors seeking upscale convention market amenities.
The Atlantis' hotel rooms feature fresh, colorful interior decorations and furnishings consistent with the Atlantis' tropical theme, as well as nine-foot ceilings (most standard hotel rooms feature eight-foot ceilings), which give the rooms an open and spacious feel. Following completion of the Atlantis Expansion, the hotel will feature a four story waterfall with an adjacent swimming pool in a climate controlled, five story glass enclosure which shares an outdoor third floor pool deck with an outdoor swimming pool and whirlpool, as well as health club and salon facilities. The hotel also features glass elevators rising the full 19 and 27 stories of the two taller hotel towers, providing panoramic views of the northern Reno valley and the Sierra Nevada mountains.
The two-story, 149-room motor lodge, which has been operated by the Company since 1973, is located on the back half of the Atlantis' 13-acre site. The motor lodge rooms, which are also decorated and furnished consistently with the Atlantis' tropical theme, contain less average square footage than the hotel rooms and have standard eight-foot ceilings. The Company believes the motor lodge rooms appeal to value conscious travelers who still want to enjoy the experience of and amenities associated with a stay at a first-class hotel casino resort. The Company renovated all of the motor lodge units in early 1996.
The average occupancy rate at the Atlantis for fiscal years 1998, 1997, and 1996 was 88.0%, 85.9%, and 88.7%, respectively.
Dining. Following completion of the Atlantis Expansion, the Atlantis will feature eight food outlets, including a large buffet restaurant featuring a wide variety of standard hot food line selections, salads and seafood, and specialty substations featuring Mongolian Barbecue made to order, fresh Mexican food, meats roasted in French Rotisserie ovens, and caesar and spinach salads made to order; an upscale steak and seafood restaurant in an "under the sea" atmosphere; an upscale, intimate Italian restaurant featuring a centrally located wine "cellar" room and seasonal outdoor terrace seating; a twenty-four hour coffee shop; a cafe restaurant featuring pizzas from a wood-fired brick oven; a snack bar and soda fountain; an oyster bar, located on the skywalk, featuring seafood flown in daily and soups and bisques made to order; and a gourmet coffee bar, also located on the skywalk, featuring fine specialty coffee drinks and pastries and desserts made fresh on property daily.
The Skywalk. The Skywalk is a one-of-a-kind structure, with a diamond- shaped blue glass body rising approximately 55 feet from street level and spanning 160 feet across South Virginia Street with no intermediate support pillars. It is supported at each end by two 100 foot tall Grecian columns which erupt in flames at regular intervals. The tropically-themed interior of the Skywalk contains an oyster bar and a gourmet coffee bar with adjacent table seating, a video poker bar and numerous banks of slot machines, and a lounge area featuring oversized leather sofas and chairs. The Skywalk connects the Atlantis with additional parking on a 16 acre site owned by the Company across South Virginia Street from the Atlantis.
Capital expenditures (including those financed with debt and capitalized lease obligations) at the Atlantis totaled approximately $27.2 million, $2.3 million, and $2.8 million in fiscal years 1998, 1997, and 1996, respectively. Capital expenditures during 1998 primarily reflect construction costs associated with the Atlantis Expansion, and the expenditures for 1997 and 1996 were primarily directed toward ongoing refurbishments and enhancements to the Atlantis, including equipment replacements. During 1996, the Company also renovated all of the Atlantis' motor lodge rooms at a total cost of approximately $690 thousand.
Operations at the Atlantis are conducted 24 hours a day, every day of the year. The Atlantis' business is moderately seasonal in nature, with its highest revenues typically occurring in the summer months and lower amounts generally in the winter months.
MARKETING
The Company's revenues and operating income are largely dependent on the level of gaming activity at the Atlantis' casino; therefore, the Company's predominant marketing goal is to attract gaming customers to its casino. The Company's primary objective for its hotel, food and beverage outlets, and other amenities is to utilize those facilities to generate additional casino play, although as a secondary goal the Company also seeks to maximize revenues from those areas.
The Company's marketing efforts are directed toward three broad consumer groups: Reno area residents, non-conventioneer visitors to the Reno area, and conventioneers. The Company believes that the Atlantis' location outside the
downtown area and near the Convention Center makes the property appealing to all three groups.
Reno area residents. The Atlantis' proximity to rapidly growing, generally more affluent southwestern Reno residential areas provides a significant source of middle to upper-middle income gaming customers. The Company markets to Reno area residents ("Locals") primarily on the basis of the Atlantis' location and accessibility, the quality and ambiance of the Atlantis facility, friendly efficient service, the quality and relative value of its food and beverage offerings, entertainment offerings, promotions, and gaming values. The Company believes that Locals as a group tend to prefer slot and video poker machines over table games, and tend to prefer video poker machines over reel-spinning (or electronically simulated reel-spinning) slot machines. Accordingly, the Atlantis provides a large, diverse selection of video poker machines. Moreover, the Company believes that Locals tend to seek out and frequent those casinos with higher-than-average payout rates on slot and video poker machines and liberal rules on table games. The Company believes that the Atlantis offers higher-than-average payout rates on slot machines, and has adopted liberal rules for its blackjack games which include using mostly single decks of cards at its tables and allowing players to "double down" on the first two cards.
Non-conventioneer Visitors. Reno is a popular gaming and vacation destination which enjoys direct freeway access to nearly all major northern California population centers, and non-stop air service from most large cities in the western United States as well as many midwest and southern population centers such as Chicago, Dallas, Minneapolis and St. Louis. The principal segments of Reno's non-conventioneer visitor market are leisure travelers, package tour and travel customers, and higher-level wagerers. The Company attempts to maximize its gaming revenues and hotel occupancy through a balanced marketing approach addressing each market segment.
Leisure travelers are not affiliated with groups and make their reservations directly with hotels of their choice or through independent travel agents. The Company believes that this segment is largely comprised of individuals driving, and to a lesser extent, flying to Reno from a regional market, primarily California and to a lesser extent, the Pacific Northwest. The Company strives to attract the middle to upper-middle income strata of this segment through advertising and direct marketing in select markets. This segment represents a significant portion of the Atlantis' customers, especially those customers visiting on weekends.
The package tour and travel segment consists of visitors who utilize travel "packages" produced by wholesale operators. The Company markets to this segment through relationships with select wholesalers, primarily to generate customer visits and supplement occupancy mid-week.
The Company selectively markets to higher-level wagerers through direct sales. The Company utilizes complimentary rooms, food and beverage, special events and the extension of gaming credit to attract higher-level wagerers.
Conventioneers. Convention business, like package tour and travel, generates mid-week customer visits and supplements occupancy during low-demand periods. Conventioneers typically also pay higher average room rates than non- conventioneers. The Company seeks those convention and meeting groups which it believes will materially enhance the Atlantis' average occupancy rate and average daily room rates, as well as those the Company believes will be
more likely to gamble. As the only hotel casino within easy walking distance of the Convention Center, the Company believes the Atlantis is uniquely positioned to capitalize on this segment. The Company believes that this market segment is presently underserved in the Reno area, and that the additional rooms and amenities added with the Atlantis Expansion will enhance the Company's ability to realize the potential of this market segment.
The Company markets to all customer segments, including conventioneers, on the basis of the quality and ambiance of the Atlantis facility, friendly efficient service, the quality and relative value of its rooms and food and beverage offerings, entertainment offerings, promotions, and gaming values.
The Company has instituted a frequent player club, "Club Paradise", which allows the Atlantis' customers to earn rewards and special privileges based on the amount of their play, while at the same time allowing the Company to track the play of those customers utilizing a computerized player tracking system. The Company uses this information to determine appropriate levels of complimentary awards, and also in its direct marketing efforts. The Company believes that Club Paradise significantly enhances the Company's ability to build customer loyalty and generate repeat customer visits.
COMPETITION
Competition in the Reno area gaming market is intense. Based on information obtained from the December 31, 1998 Gaming Revenue Report published by the Nevada State Gaming Control Board and Company estimates, the Company believes that there are approximately 16 casinos in the Reno area which generate more than $12 million each annually in gaming revenues, approximately nine of which are located in downtown Reno.
The Company believes that the Atlantis' competition for Locals comes primarily from other large-scale casinos located outside of downtown Reno that offer amenities that appeal to middle to upper-middle income customers, and secondarily with those casinos located in downtown Reno which offer similar amenities. The Company competes for Locals primarily on the basis of the desirability of its location, the quality and ambiance of the Atlantis facility, friendly efficient service, the quality and relative value of its food and beverage offerings, entertainment offerings, promotions, and gaming values. The Company believes its proximity to residential areas in southwest and southeast Reno and its abundant surface parking afford it an advantage over the casinos located in downtown Reno in attracting Locals.
The Company believes that the Atlantis' primary competition for non- conventioneer visitors comes from other large-scale casinos, including those located in downtown Reno and those located away from downtown Reno, that offer amenities that appeal to middle to upper-middle income customers. The Company competes for non-conventioneer visitors on the basis of the desirability of its location, the quality and ambiance of the Atlantis facility, friendly efficient service, the quality and relative value of its rooms and food and beverage offerings, entertainment offerings, promotions, and gaming values. The Company believes that its location away from downtown Reno is appealing to many customers who prefer to avoid the more congested downtown Reno area; however, the Atlantis' location is a disadvantage in that it does not afford the Company the ability to generate walk-in traffic, which is a significant source of customers for some casinos located in downtown Reno.
The Company believes that the Atlantis' primary competition for conventioneers comes from other large-scale hotel casinos in the Reno area that actively target the convention market segment, and secondarily from other cities on the U.S. west coast with large convention facilities and substantial hotel capacity, including Las Vegas. The Company competes for conventioneers based on the desirability of its location, the quality and ambiance of the Atlantis facility, meeting and banquet rooms designed to appeal to conventions and groups, friendly efficient service, and the quality and relative value of its rooms and food and beverage offerings. The Company believes that the Atlantis' proximity to the Convention Center affords it a distinct competitive advantage in attracting conventioneers.
The Atlantis also competes for gaming customers with hotel casino operations located in other parts of Nevada, especially Las Vegas and Lake Tahoe, and with hotel casinos, Indian casinos, and riverboat casinos located elsewhere throughout the United States and the world. The Company believes that the Atlantis also competes to a lesser extent with state-sponsored lotteries, off-track wagering, card parlors, and other forms of legalized gaming, particularly in California and the Pacific Northwest.
The Company believes that the legalization of unlimited land-based casino gaming in or near any major metropolitan area in the Atlantis' key marketing areas, such as San Francisco or Sacramento, could have a material adverse effect on its business.
REGULATION AND LICENSING
Nevada Gaming Regulation
The ownership and operation of casino gaming facilities in Nevada are subject to: (i) the Nevada Gaming Control Act and the regulations promulgated thereunder (collectively, the "Nevada Act"); and (ii) various local regulations. The Company's gaming operations are subject to the licensing and regulatory control of the Nevada Gaming Commission (the "Nevada Commission"), the Nevada State Gaming Control Board (the "Nevada Board"), and the Reno City Council (the "Reno Board"). (The Nevada Commission, the Nevada State Gaming Control Board, and the Reno Board are collectively hereinafter referred to as the "Nevada Gaming Authorities.")
The laws, regulations and supervisory procedures of the Nevada Gaming Authorities are based upon declarations of public policy which are concerned with, among other things: (i) the prevention of unsavory or unsuitable persons from having a direct or indirect involvement with gaming at any time or in any capacity; (ii) the establishment and maintenance of responsible accounting practices and procedures; (iii) the maintenance of effective controls over the financial practices of licensees, including the establishment of minimum procedures for internal fiscal affairs and the safeguarding of assets and revenues, providing reliable record keeping and requiring the filing of periodic reports with the Nevada Gaming Authorities; (iv) the prevention of cheating and fraudulent practices; and (v) providing a source of state and local revenues through taxation and licensing fees. Changes in such laws, regulations and procedures could have an adverse effect on the Company's gaming operations.
Golden Road, which operates the Atlantis, is required to be licensed by the Nevada Gaming Authorities. The gaming license requires the periodic payment of fees and taxes and is not transferable. The Company is registered
by the Nevada Commission as a publicly traded corporation ("Registered Corporation") and as such, it is required periodically to submit detailed financial and operating reports to the Nevada Commission and furnish any other information which the Nevada Commission may require. No person may become a stockholder of, or receive any percentage of profits from, Golden Road without first obtaining licenses and approvals from the Nevada Gaming Authorities. The Company and Golden Road have obtained from the Nevada Gaming Authorities the various registrations, approvals, permits and licenses required in order to engage in gaming activities in Nevada.
The Nevada Gaming Authorities may investigate any individual who has a material relationship to, or material involvement with, the Company or Golden Road in order to determine whether such individual is suitable or should be licensed as a business associate of a gaming licensee. Officers, directors and key employees of Golden Road must file applications with the Nevada Gaming Authorities and may be required to be licensed or found suitable by the Nevada Gaming Authorities. Officers, directors and key employees of the Company who are actively and directly involved in gaming activities of Golden Road may be required to be licensed or found suitable by the Nevada Gaming Authorities. The Nevada Gaming Authorities may deny an application for licensing for any cause which they deem reasonable. A finding of suitability is comparable to licensing, and both require submission of detailed personal and financial information followed by a thorough investigation. The applicant for licensing or a finding of suitability must pay all the costs of the investigation. Changes in licensed positions must be reported to the Nevada Gaming Authorities and in addition to their authority to deny an application for a finding of suitability or licensure, the Nevada Gaming Authorities have jurisdiction to disapprove a change in a corporate position.
If the Nevada Gaming Authorities were to find an officer, director or key employee unsuitable for licensing or unsuitable to continue having a relationship with the Company or Golden Road, the companies involved would have to sever all relationships with such person. In addition, the Nevada Commission may require the Company or Golden Road to terminate the employment of any person who refuses to file appropriate applications. Determinations of suitability or of questions pertaining to licensing are not subject to judicial review in Nevada.
The Company and Golden Road are required to submit detailed financial and operating reports to the Nevada Commission. Substantially all material loans, leases, sales of securities and similar financing transactions by Golden Road must be reported to, or approved by, the Nevada Commission.
If it were determined that the Nevada Act was violated by Golden Road, the
gaming licenses it holds could be limited, conditioned, suspended or revoked,
subject to compliance with certain statutory and regulatory procedures. In
addition, Golden Road, the Company, and the persons involved could be subject
to substantial fines for each separate violation of the Nevada Act at the
discretion of the Nevada Commission. Further, a supervisor could be appointed
by the Nevada Commission to operate the Company's gaming properties and, under
certain circumstances, earnings generated during the supervisor's appointment
(except for the reasonable rental value of the Company's gaming properties)
could be forfeited to the State of Nevada. Limitation, conditioning or
suspension of any gaming license or the appointment of a supervisor could (and
revocation of any gaming license would) materially adversely affect the
Company's gaming operations.
Any beneficial holder of the Company's voting securities, regardless of the number of shares owned, may be required to file an application, be investigated, and have his suitability as a beneficial holder of the Company's voting securities determined if the Nevada Commission has reason to believe that such ownership would otherwise be inconsistent with the declared policies of the State of Nevada. The applicant must pay all costs of investigation incurred by the Nevada Gaming Authorities in conducting any such investigation.
The Nevada Gaming Act requires any person who acquires more than 5% of the Company's voting securities to report the acquisition to the Nevada Commission. The Nevada Act requires that beneficial owners of more than 10% of the Company's voting securities apply to the Nevada Commission for a finding of suitability within 30 days after the Chairman of the Nevada Board mails the written notice requiring such filing. Under certain circumstances, an "institutional investor," as defined in the Nevada Act, which acquires more than 10%, but not more than 15%, of the Company's voting securities may apply to the Nevada Commission for a waiver of such finding of suitability if such institutional investor holds the voting securities for investment purposes only. An institutional investor shall not be deemed to hold voting securities for investment purposes unless the voting securities were acquired and are held in the ordinary course of business as an institutional investor and not for the purpose of causing, directly or indirectly, the election of a majority of the members of the board of directors of the Company, any change in the Company's corporate charter, bylaws, management, policies or operations of the Company, or any of its gaming affiliates, or any other action which the Nevada Commission finds to be inconsistent with holding the Company's voting securities for investment purposes only. Activities which are not deemed to be inconsistent with holding voting securities for investment purposes only include: (i) voting on all matters voted on by stockholders; (ii) making financial and other inquiries of management of the type normally made by securities analysts for informational purposes and not to cause a change in its management, policies or operations; and (iii) such other activities as the Nevada Commission may determine to be consistent with such investment intent. If the beneficial holder of voting securities who must be found suitable is a corporation, partnership or trust, it must submit detailed business and financial information including a list of beneficial owners. The applicant is required to pay all costs of investigation.
Any person who fails or refuses to apply for a finding of suitability or a license within 30 days after being ordered to do so by the Nevada Commission or the Chairman of the Nevada Board, may be found unsuitable. The same restrictions apply to a record owner if the record owner, after request, fails to identify the beneficial owner. Any stockholder found unsuitable and who holds, directly or indirectly, any beneficial ownership of the common stock of a Registered Corporation beyond such period of time as may be prescribed by the Nevada Commission may be guilty of a criminal offense. The Company is subject to disciplinary action if, after it receives notice that a person is unsuitable to be a stockholder or to have any other relationship with such Company or Golden Road, the Company (i) pays that person any dividend or interest upon voting securities of the Company, (ii) allows that person to exercise, directly or indirectly, any voting right conferred through securities held by that person, (iii) pays remuneration in any form to that person for services rendered or otherwise, or (iv) fails to pursue all lawful efforts to require such unsuitable person to relinquish his voting securities for cash at fair market value.
The Nevada Commission may, in its discretion, require the holder of any debt security of a Registered Corporation to file applications, be investigated and be found suitable to own the debt security of a Registered Corporation. If the Nevada Commission determines that a person is unsuitable to own such security, then pursuant to the Nevada Act, the Registered Corporation can be sanctioned, including the loss of its approvals, if without the prior approval of the Nevada Commission, it: (i) pays to the unsuitable person any dividend, interest, or any distribution whatsoever; (ii) recognizes any voting right by such unsuitable person in connection with such securities; (iii) pays the unsuitable person remuneration in any form; or (iv) makes any payment to the unsuitable person by way of principal, redemption, conversion, exchange, liquidation or similar transaction.
The Company is required to maintain a current stock ledger in Nevada which may be examined by the Nevada Gaming Authorities at any time. If any securities are held in trust by an agent or by a nominee, the record holder may be required to disclose the identity of the beneficial owner to the Nevada Gaming Authorities. A failure to make such disclosure may be grounds for finding the record holder unsuitable. The Company is also required to render maximum assistance in determining the identity of the beneficial owner. The Nevada Commission has the power to require the Company's stock certificates to bear a legend indicating that the securities are subject to the Nevada Act.
The Company may not make a public offering of its securities without the prior approval of the Nevada Commission if the securities or proceeds therefrom are intended to be used to construct, acquire or finance gaming facilities in Nevada, or to retire or extend obligations incurred for such purposes. Such approval does not constitute a finding, recommendation or approval by the Nevada Commission or the Nevada Board as to the accuracy or adequacy of the prospectus or the investment merits of the securities. Any representation to the contrary is unlawful.
Changes in control of the Company through merger, consolidation, stock or asset acquisitions, management or consulting agreements, or any act or conduct by a person whereby he obtains control, may not occur without the prior approval of the Nevada Commission. Entities seeking to acquire control of a Registered Corporation must satisfy the Nevada Board and Nevada Commission in a variety of stringent standards prior to assuming control of such Registered Corporation. The Nevada Commission may also require controlling stockholders, officers, directors and other persons having a material relationship or involvement with the entity proposing to acquire control, to be investigated and licensed as part of the approval process relating to the transaction.
The Nevada legislature has declared that some corporate acquisitions opposed by management, repurchases of voting securities and corporate defense tactics affecting Nevada gaming licensees, and Registered Corporations that are affiliated with those operations, may be injurious to stable and productive corporate gaming. The Nevada Commission has established a regulatory scheme to ameliorate the potentially adverse effects of these business practices upon Nevada's gaming industry and to further Nevada's policy to: (i) assure the financial stability of corporate gaming operators and their affiliates; (ii) preserve the beneficial aspects of conducting business in the corporate form; and (iii) promote a neutral environment for the orderly governance of corporate affairs. Approvals are, in certain circumstances, required from the Nevada Commission before the Company can make exceptional repurchases of voting securities above the current market price thereof and before a corporate acquisition opposed by management can be
consummated. The Nevada Act also requires prior approval of a plan of recapitalization proposed by the Company's Board of Directors in response to a tender offer made directly to the Registered Corporation's stockholders for the purposes of acquiring control of the Registered Corporation.
Licensee fees and taxes computed in various ways depending on the type of gaming or activity involved, are payable to the State of Nevada and to the counties and cities in which the Nevada licensee's respective operations are conducted. Depending upon the particular fee or tax involved, these fees and taxes are payable either monthly, quarterly or annually and are based upon either: (i) a percentage of the gross revenues received; (ii) the number of gaming devices operated; or (iii) the number of table games operated. A casino entertainment tax is also paid by casino operations where entertainment is furnished in connection with the selling of food or refreshments. Nevada licensees that hold a license as an operator of a slot route, a manufacturer or a distributor also pay certain fees and taxes to the State of Nevada.
Any person who is licensed, required to be licensed, registered, required to be registered, or is under common control with such persons (collectively, "Licensees"), and who proposes to become involved in a gaming venture outside of Nevada is required to deposit with the Nevada Board, and thereafter maintain, a revolving fund in the amount of $10,000 to pay the expenses of investigation of the Nevada Board of their participation in such foreign gaming. The revolving fund is subject to increase or decrease in the discretion of the Nevada Commission. Thereafter, Licensees are required to comply with certain reporting requirements imposed by the Nevada Act. A licensee is also subject to disciplinary action by the Nevada Commission if it knowingly violates any laws of the foreign jurisdiction pertaining to the foreign gaming operation, fails to conduct the foreign gaming operation in accordance with the standards of honesty and integrity required of Nevada gaming operations, engages in activities that are harmful to the State of Nevada or its ability to collect gaming taxes and fees, or employs a person in the foreign operation who has been denied a license or finding of suitability in Nevada on the ground of personal unsuitability.
EMPLOYEES
As of March 19, 1999, the Company had approximately 1,424 employees. None of the Company's employees are covered by collective bargaining agreements. The Company believes that its relationship with its employees is good.
ITEM 2. PROPERTIES
The Company's properties consist of:
(a) The approximately 13 acre site in Reno, Nevada on which the Atlantis is situated, including the hotel towers, casino, restaurant facilities and surrounding parking. These 13 acres are, in part or in whole, held subject to trust deed encumbrances in favor of financial institutions totaling approximately $67.9 million as of March 19, 1999.
(b) An approximately 16 acre site in Reno, Nevada adjacent to the Atlantis and now connected to the Atlantis by the Skywalk, approximately seven acres of which is paved and used for customer, employee and valet parking and the remainder of which is undeveloped. This site is suitable and available for future expansion of the Atlantis facilities, parking, or
complimentary resort and/or entertainment amenities. The Company has not determined what the ultimate use of this site will be. These 16 acres are held subject to a trust deed encumbrance in the approximate amount of $66.1 million as of March 19, 1999, which amount is also secured by the 13 acre site.
ITEM 3. LEGAL PROCEEDINGS
On April 26, 1994 and May 10, 1994, complaints in purported class action lawsuits (William Poulos v. Caesars World, Inc. et al., Case No. 94-478-Civ- Orl-22, and William H. Ahern v. Caesars World, Inc. et al., Case No. 94-532- Civ-Orl-22, respectively) were filed in the United States District Court for the Middle District of Florida (the "Florida Complaints") and were subsequently transferred to the United States District Court for the District of Nevada, Southern Division (the "Nevada District Court"). On September 26, 1995, a complaint in a purported class action lawsuit (Larry Schrier v. Caesars World, Inc. et al., Case No. 95-923-LDG (RJJ)) was filed in Nevada District Court (along with the Florida Complaints, the "Complaints"). The Complaints allege that manufacturers, distributors and casino operators of video poker and electronic slot machines, including the Company, have engaged in a course of conduct intended to induce persons to play such games based on a false belief concerning how the gaming machines operate, as well as the extent to which there is an opportunity to win on a given play. The Complaints charge Defendants with violations of the Racketeer Influenced and Corrupt Organizations Act, as well as claims of common law fraud, unjust enrichment and negligent misrepresentation, and seek damages in excess of $1 billion without any substantiation of that amount. The Nevada District Court consolidated the actions (and one other action styled William Poulos v. American Family Cruise Line, N.V. et al., Case No. CV -S-95-936-LDG (RLH), in which the Company is not a named defendant). The parties are currently awaiting a decision from the Nevada U.S. District Court on the issue of class certification. Management believes that the substantive allegations in the Complaints are without merit and intends vigorously to defend the allegations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of the Company's security holders during the fourth quarter of fiscal 1998.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) The Company's common stock trades on The Nasdaq Stock Market(SM) under the symbol MCRI. The following table sets forth the high and low sales prices of the Company's common stock, as reported by The Nasdaq Stock Market(SM), during the periods indicated.
1998 1997
-------------- --------------
High Low High Low
------ ------ ------ ------
First quarter........... 7 3/4 4 3/4 2 1/2 2
Second quarter.......... 7 5 3/8 4 3/8 2 1/4
Third quarter........... 6 1/2 5 3/8 8 3/8 3 5/8
Fourth quarter.......... 6 4 3/4 7 3/8 4 1/2
|
(b) As of March 19, 1999, there were approximately 140 holders of record of the Company's common stock, and approximately 978 beneficial stockholders.
(c) The Company paid no dividends in 1998 or 1997. The Company
presently intends to retain earnings to finance the operation and expansion of
its business and does not anticipate declaring cash dividends in the
foreseeable future. The Company's bank loan agreement also contains provisions
which limit Monarch's ability to pay dividends to its stockholders. See Item
8, "FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA, Notes to Consolidated
Financial Statements."
ITEM 6. SELECTED FINANCIAL DATA
Years ended December 31,
--------------------------------------------
(In thousands except per share amounts) 1998<F1> 1997<F2> 1996<F3> 1995<F4> 1994
----------------------------------------------------------------------------------------
OPERATING RESULTS
Casino revenues $40,717 $37,254 $31,836 $30,072 $20,306
Other revenues 31,802 30,365 29,476 30,099 21,482
--------------------------------------------
Gross revenues 72,519 67,619 61,312 60,171 41,788
Promotional allowances (10,009) (8,504) (7,676) (6,772) (5,348)
--------------------------------------------
Net revenues 62,511 59,115 53,636 53,399 36,440
Income from operations 8,859 8,975 6,049 6,351 636
Income (loss) before income
taxes and extraordinary item 5,681 5,722 1,298 2,323 (1,393)
Income (loss) before
extraordinary item 3,760 3,710 830 1,564 (722)
Net income (loss) 3,760 3,526 830 1,564 (722)
----------------------------------------------------------------------------------------
INCOME PER SHARE OF COMMON STOCK
Income (loss) before extraordinary item
Basic $ 0.40 $ 0.39 $ 0.09 $ 0.16 $ (0.08)
Diluted $ 0.40 $ 0.39 $ 0.09 $ 0.16 $ (0.08)
Net income (loss)
Basic $ 0.40 $ 0.37 $ 0.09 $ 0.16 $ (0.08)
Diluted $ 0.40 $ 0.37 $ 0.09 $ 0.16 $ (0.08)
Weighted average number of common shares
and potential common shares outstanding
Basic 9,436 9,444 9,502 9,536 9,536
Diluted 9,502 9,479 9,502 9,536 9,536
----------------------------------------------------------------------------------------
OTHER DATA
EBITDA<F5> 13,458 13,284 10,191 10,370 3,372
Depreciation and amortization 4,617 4,309 4,142 4,020 2,736
Interest expense 2,222 3,253 3,627 4,087 2,330
Capital expenditures<F6> 27,206 2,270 2,838 2,148 31,384
----------------------------------------------------------------------------------------
BALANCE SHEET DATA
Total assets $89,456 $67,828 $67,379 $69,269 $69,344
Current maturities of long-term debt 850 2,244 3,487 3,993 5,387
Long-term debt, less current maturities 52,310 32,908 37,602 39,069 41,357
Stockholders' equity<F7> 26,453 22,694 19,001 18,435 16,871
<F1> 1998 includes a non-cash disposal of fixed assets charge of $956 thousand.
<F2> 1997 includes a $185 thousand non-cash extraordinary loss on early retirement of
debt, net of applicable income tax benefit.
<F3> 1996 includes non-cash fixed asset impairment charges of $1.3 million (before
minority interests).
<F4> 1995 includes a $433 thousand provision for litigation expenses related to two
unfavorable judgments rendered in unrelated cases, and a $459 thousand charge
for asset impairment associated with changing the name of the Company's hotel
casino to the Atlantis Casino Resort.
<F5> "EBITDA" consists of income from operations plus depreciation and amortization.
EBITDA should not be construed as an alternative to operating income (as determined
in accordance with generally accepted accounting principles) as an indicator of the
Company's operating performance, or as an alternative to cash flows from operating
activities (as determined in accordance with generally accepted accounting
principles) as a measure of liquidity. This item enables comparison of the
Company's performance with the performance of other companies that report EBITDA.
<F6> Includes amounts financed with debt or capitalized lease obligations.
<F7> The Company paid no dividends during the five year period ended December 31, 1998.
|
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
STATEMENT ON FORWARD-LOOKING INFORMATION
Certain information included herein contains statements that may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, such as statements relating to anticipated expenses, capital spending and financing sources. Such forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future and, accordingly, such results may differ from those expressed in any forward-looking statements made herein. These risks and uncertainties include, but are not limited to, those relating to competitive industry conditions, Reno-area tourism conditions, dependence on existing management, leverage and debt service (including sensitivity to fluctuations in interest rates), the regulation of the gaming industry (including actions affecting licensing), outcome of litigation, domestic or global economic conditions and changes in federal or state tax laws or the administration of such laws.
RESULTS OF OPERATIONS
1998 Compared with 1997
For the year ended December 31, 1998, the Company earned $3.8 million, or $.40 per share, on net revenues of $62.5 million, compared to earnings of $3.5 million, or $.37 per share, on net revenues of $59.1 million for the year ended December 31, 1997. The Company's income from operations totaled $8.9 million for 1998 compared to $9.0 million for 1997. The Company believes the Atlantis continued to benefit in 1998 from the rapid growth occurring in the residential and industrial communities south of the Atlantis in Reno, and from the increasing popularity of the Atlantis with visitors to the Reno area. The Company also believes its results were positively impacted in 1998 by the American Bowling Congress tournament, which ran from March through June 1998 at the National Bowling Stadium in downtown Reno and which brought approximately 90,000 visitors to the Reno area. However, the Company also believes its results were detrimentally impacted in 1998 by unusually severe winter weather in the first quarter of the year and by disruptions associated with the Atlantis Expansion, which involved major construction activity on both sides of the Atlantis during the third and fourth quarters of the year.
Casino revenues totaled $40.7 million in 1998, up 9% from $37.3 million in 1997, driven by increases in both slot and table game win. Revenue from slot and video poker machines ("slot machines") increased approximately 8% in 1998 compared to 1997 due to an increase in the average daily win per slot machine. Table game win increased approximately 16% in 1998 compared to 1997 due to an increase in table game drop and an improvement in table game hold. Casino operating expenses amounted to 43.7% of casino revenues in 1998, compared to 43.1% in 1997, primarily as a result of higher promotional allowance costs in 1998.
Food and beverage revenues were up slightly in 1998, rising approximately 2% to $18.2 million from $17.8 million in 1997. Food and beverage operating expenses were basically unchanged, amounting to 54.2% of food and beverage revenues in 1998 compared to 54.3% in 1997.
Hotel revenues totaled $10.9 million in 1998, up more than 7% from $10.2 million in 1997, driven by a 2.1 point improvement in the Atlantis' average occupancy rate and a 5% increase in the Atlantis' average daily room rate ("ADR"). The Atlantis' ADR was $56.23 in 1998, compared to $53.50 in 1997. The average occupancy rate at Atlantis was 88.0% in 1998 compared to 85.9% in 1997. Hotel operating expenses amounted to 32.6 % of hotel revenues in 1998, compared to 36.4% in 1997, with the improvement reflecting increased operating efficiencies and a higher level of revenue from which to offset the relatively high level of fixed costs of the hotel operation.
Other revenues increased approximately 15% in 1998 to $2.7 million from $2.3 million in 1997, primarily reflecting increased revenues from the Atlantis' retail outlet. Other expenses equaled 18.0% of other revenues in 1998, down slightly from 18.5% in 1997.
Selling, general and administrative ("SG&A") expenses totaled 27.7% of net revenues in 1998, compared to 27.0% in 1997, with the increase primarily reflecting higher personnel costs and higher marketing costs in 1998. This increase in part reflects additional marketing and administrative staff added in preparation for the 1999 opening of the Atlantis Expansion, as well as additional operating expenses associated with the Atlantis Expansion.
Interest expense for 1998 totaled $2.2 million, down from $3.3 million in 1997, reflecting lower average interest rates on the Company's debt and the capitalization of certain interest costs in 1998. In 1998, the Company capitalized approximately $433 thousand in interest costs related to construction activities at the Atlantis. During 1997, there was no capitalized interest.
The Company incurred a non-cash expense of $956 thousand in the fourth quarter of 1998 for the disposal of certain fixed assets in conjunction with the Atlantis Expansion, including certain exterior walls, door and windows that had to be removed to make way for the expanded facilities.
1997 Compared with 1996
For the year ended December 31, 1997, the Company generated earnings before extraordinary items of $3.7 million, or $.39 per share, compared to $830 thousand, or $.09 per share, for the year ended December 31, 1996. After giving effect to a non-cash extraordinary loss on the early retirement of debt (net of an applicable income tax benefit) of $(185) thousand, or $(.02) per share, the Company reported net income of $3.5 million or $.37 per share for the fiscal year ended December 31, 1997, compared to $830 thousand, or $.09 per share for the fiscal year ended December 31, 1996.
Net revenues for 1997 totaled $59.1 million, up 10% from $53.6 million in 1996, while operating costs and expenses rose 5% to $50.1 million in 1997 from $47.6 million in 1996. The Company's operating expense margin (operating expenses as a percentage of net revenues) for 1997 was 84.8%, compared to 88.7% for 1996, resulting in a 48% increase in income from operations to $9.0 million in 1997 from $6.0 million in 1996. The Company believes the increases in revenue and profitability in 1997 compared to 1996 resulted from the increasing popularity of the Atlantis and its south Reno location with patrons from the rapidly growing residential and business communities south of the Atlantis in Reno, as well as with visitors to the Reno area. The Company also credits effective casino marketing programs, and a continued emphasis on cost control.
-17
Casino revenues increased 17% in 1997 compared to 1996, driven by growth in both slot and table game win. Revenue from slot machines increased approximately 20% in 1997 compared to 1996, due to an increase in the average daily win per slot machine, and contributed approximately 77% of casino revenue in 1997, compared to 75% in 1996. Table game win increased approximately 6% in 1997 compared to 1996, due to an approximately 17% increase in table game drop, which was partially offset by a moderate decline in table game hold.
Casino operating expenses amounted to 43.1% of casino revenues during 1997, compared to 45.3% in 1996, with the higher expense levels during 1996 due primarily to higher levels of promotional allowance costs (relative to gaming revenues) during 1996.
Food and beverage revenues increased approximately 2% in 1997, rising to $17.8 million from $17.4 in 1996, due primarily to higher average tickets at the Atlantis' food and beverage outlets. Food and beverage operating expenses during 1997 amounted to 54.3% of food and beverage revenues, compared to 55.8% in 1996, with the improvement due to lower food costs and improved operating efficiency.
Hotel revenues increased 4% in 1997 compared to 1996, with a 7% increase in the Atlantis' ADR more than offsetting a 2.8 point decline in the Atlantis' average occupancy rate. The Atlantis' ADR in 1997 was $53.50, compared to $49.90 in 1996. The average occupancy rate at Atlantis was 85.9% in 1997 compared to 88.7% in 1996. During 1996, the Atlantis' hotel revenues were adversely impacted by unusually severe price competition in the Reno area lodging market, which the Company believes also negatively impacted the hotel revenues of the Atlantis' primary competitors. The Company believes that the decline in the Atlantis' average occupancy in 1997 was partly due to the approximately 26% increase in hotel room capacity added to the Reno market during 1995 and 1996 which the Company believes has not yet been fully absorbed, and partly due to a concerted effort by the Company to increase the Atlantis' ADR. Hotel operating expenses in 1997 equaled 36.4% of hotel revenues, essentially unchanged from 36.6% in 1996.
SG&A expenses amounted to 27.0% of net revenues in 1997, compared to 28.6% in 1996. The improvement primarily reflects the higher net revenues generated in 1997, which more than offset the incremental increase in actual SG&A outlays. The Company's 1996 SG&A expenses were also adversely affected by name change costs and increased marketing costs necessitated by the name change and an intensified competitive environment.
Interest expense declined by approximately 10% in 1997 compared to 1996, falling to $3.3 million from $3.6 million. The decrease reflects lower average outstanding debt during 1997.
In 1997, the Company incurred a non-cash extraordinary loss on the early retirement of debt, net of an applicable income tax benefit, of $(185) thousand, or $(.02) per share. The extraordinary charge was incurred in the 1997 fourth quarter when the Company refinanced its long-term debt with a new bank credit facility, resulting in the write-off of approximately $280 thousand in unamortized loan origination costs. In 1996, the Company recorded non-cash fixed asset impairment loss charges totaling $(1.3) million, which were offset by a minority interest in the net loss of a consolidated subsidiary of $206 thousand. The impairment losses were recognized on a
marine vessel owned by a subsidiary of the Company, which the Company had intended to use as a riverboat gaming vessel.
OTHER FACTORS AFFECTING CURRENT AND FUTURE RESULTS
In July 1998, the Company commenced construction of the Hotel Tower Project, which will add 392 rooms, additional casino space and other amenities to the Atlantis. The Hotel Tower Project is expected to be completed in the second quarter of 1999. The Company carefully planned the Hotel Tower Project to mitigate the disruptive effects of construction by redirecting traffic flows, creating alternative access points at the Atlantis, and restricting construction crews, materials and vehicles to specified areas. Following the very disruptive construction mobilization process in July 1998, the Company believes these steps have been effective in reducing the disruptive effect of the construction activities; however, the Company believes that some disruption is occurring and will continue to occur until the project is completed.
With the Hotel Tower Project, the Company is subject to certain risks typically associated with large-scale construction projects, including the risks of delay, shortages of materials or skilled labor, unforeseen engineering, environmental and/or geological problems, work stoppages, weather interference and unanticipated cost increases.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically funded its daily hotel and casino activities with net cash provided by operating activities. For the years 1998, 1997, and 1996, net cash provided by operating activities totaled $8.6 million, $9.6 million, and $5.3 million, respectively. During each of the three years, net cash provided by operating activities was sufficient to fund the day to day operating expenses of the Company.
Net cash used in investing activities, which consisted entirely of acquisitions of property and equipment, totaled $26.1 million, $1.7 million, and $1.5 million in 1998, 1997,and 1996, respectively. Total capital expenditures, including amounts financed, were $27.2 million, $2.3 million, and $2.8 million in 1998, 1997, and 1996, respectively. Capital expenditures during 1998 primarily reflect construction costs associated with the Atlantis Expansion, and the expenditures for 1997 and 1996 were primarily directed toward ongoing refurbishments and enhancements to the Atlantis, including equipment replacements.
Net cash provided by financing activities in 1998 totaled $16.9 million, as the Company borrowed funds under its bank credit facilities to finance the construction of the Atlantis Expansion. Net cash used in financing activities in 1997 and 1996 totaled $6.3 million, and $3.5 million, respectively, with the funds used primarily to reduce long-term debt. The Company also used funds in 1997 and 1996 to repurchase its common stock on the open market.
In 1998, the Company entered into two separate fixed price construction contracts totaling approximately $39.5 million for the two major hard cost components of the Atlantis Expansion, the Hotel Tower Project and the Skywalk. The Company anticipates that it will expend approximately $23.5 million for Atlantis Expansion costs not included in the two fixed price construction contracts, bringing the estimated total project cost to approximately $63 million. The Company is funding the majority of these costs with available
borrowings under its $80 million Credit Facility (the principal terms of which are summarized at Note 4 of the Notes to Consolidated Financial Statements - see Item 8, "FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA, Notes to Consolidated Financial Statements"), together with other available borrowing capacity and cash flow from operations. At December 31, 1998, the outstanding balance of the Credit Facility was $50.3 million.
In addition to the funding requirements associated with the Atlantis Expansion, the Company continues to monitor expansion opportunities at its other Reno site and elsewhere in Nevada and in other jurisdictions. The decision by the Company to proceed with any substantial project will require the Company to secure adequate financing on acceptable terms. No assurances can be made that if such projects are pursued that adequate financing would be available on acceptable terms, if at all.
The Company believes that its existing cash balances, cash flow from operations and borrowings allowed under the Credit Facility will provide the Company with sufficient resources to complete the Atlantis Expansion, fund its operations, meet its debt repayment obligations and fund its other capital expenditure requirements; however, the Company's operations are subject to financial, economic, competitive, regulatory, and other factors, many of which are beyond its control. If the Company is unable to generate sufficient cash flow, it could be required to adopt one or more alternatives, such as reducing, delaying or eliminating planned capital expenditures, selling assets, restructuring debt or obtaining additional equity capital.
On April 10, 1995, the Company announced that its Board of Directors authorized the open market repurchase of up to 200,000 shares of the Company's common stock. As of March 19, 1999, the Company had repurchased 100,000 shares on the open market at a total cost of approximately $330 thousand. The Company has funded the purchases made to date and intends to fund any future repurchases from cash on hand.
YEAR 2000
In conjunction with the Atlantis Expansion, the Company has begun replacing most of the Atlantis' internal information systems (both hardware and software) in order to provide the technology needed to support the property's increased size and operating complexity. All of the systems critical to the operation of the Atlantis will be replaced and/or upgraded as part of the Atlantis Expansion. The process began in the fourth quarter of 1998 and is expected to be substantially completed in the second quarter of 1999. Although the Company did not undertake this replacement process in response to concerns regarding potential Year 2000 problems, most Year 2000 issues related to the Atlantis' internal information systems will be resolved as a result. All of the hardware and software acquired or licensed as part of this replacement process has been certified by the vendors to be Year 2000 compliant.
The Company has begun, and is continuing to assess, potential issues related to the Year 2000 other than those relating to the Company's internal information systems, such as critical supplier readiness and potential problems associated with embedded technologies, and will develop and implement plans to correct any deficiencies identified.
The costs of addressing the Company's year 2000 issues have not been fully determined, but are not currently expected to be material to the
Company's financial position. Should the Company and/or its critical suppliers fail to identify and/or correct material Year 2000 issues, such failure could impact the Company's ability to operate as it did before the Year 2000, and subsequently have a material impact on the Company's operating results or financial position. In such an event, the Company will address issues as they arise and strive to minimize any impact on the Company's operations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
BOARD OF DIRECTORS
MONARCH CASINO & RESORT, INC.
We have audited the accompanying consolidated balance sheets of Monarch Casino & Resort, Inc. as of December 31, 1998 and 1997, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Monarch Casino & Resort, Inc. as of December 31, 1998 and 1997, and the consolidated results of its operations and its consolidated cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles.
/s/Grant Thornton LLP Reno, Nevada January 29, 1999 |
MONARCH CASINO & RESORT, INC.
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31,
-------------------------------------------
1998 1997 1996
------------ ------------ ------------
Revenues
Casino................................ $ 40,716,535 $ 37,254,033 $ 31,836,177
Food and beverage..................... 18,169,375 17,841,009 17,410,800
Hotel................................. 10,948,283 10,199,911 9,811,353
Other................................. 2,685,012 2,323,885 2,253,393
------------ ------------ ------------
Gross revenues..................... 72,519,205 67,618,838 61,311,723
Less promotional allowances........... (10,008,673) (8,504,072) (7,675,567)
------------ ------------ ------------
Net revenues....................... 62,510,532 59,114,766 53,636,156
------------ ------------ ------------
Operating expenses
Casino................................ 17,800,326 16,043,256 14,422,670
Food and beverage..................... 9,850,599 9,682,253 9,714,389
Hotel................................. 3,567,021 3,710,462 3,595,239
Other................................. 479,560 430,471 394,256
Selling, general and administrative... 17,337,640 15,964,188 15,318,911
Depreciation and amortization......... 4,616,722 4,308,991 4,141,528
------------ ------------ ------------
Total.............................. 53,651,868 50,139,621 47,586,993
------------ ------------ ------------
Income from operations............. 8,858,664 8,975,145 6,049,163
------------ ------------ ------------
Other income (expense)
Interest expense...................... (2,222,089) (3,253,067) (3,626,980)
Impairment loss on fixed assets....... - - (1,330,592)
Disposal of fixed assets.............. (955,836) - -
Minority interests in net loss of
consolidated subsidiaries............ - - 206,456
------------ ------------ ------------
Total.............................. (3,177,925) (3,253,067) (4,751,116)
------------ ------------ ------------
Income before income
taxes and extraordinary item...... 5,680,739 5,722,078 1,298,047
Provision for income taxes.............. 1,920,957 2,011,930 468,179
------------ ------------ ------------
Income before extraordinary item... 3,759,782 3,710,148 829,868
Extraordinary item - loss on
early retirement of debt, net
of applicable income tax
benefit of $95,057..................... - (184,524) -
------------ ------------ ------------
Net income......................... $ 3,759,782 $ 3,525,624 $ 829,868
============ ============ ============
INCOME PER SHARE OF COMMON STOCK
Income before extraordinary item
Basic.............................. $ 0.40 $ 0.39 $ 0.09
Diluted............................ $ 0.40 $ 0.39 $ 0.09
Net income
Basic.............................. $ 0.40 $ 0.37 $ 0.09
Diluted............................ $ 0.40 $ 0.37 $ 0.09
Weighted average number of
common shares and potential
common shares outstanding
Basic.............................. 9,436,275 9,444,333 9,501,658
Diluted............................ 9,502,327 9,479,359 9,501,658
|
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
MONARCH CASINO & RESORT, INC.
CONSOLIDATED BALANCE SHEETS
December 31,
----------------------------
1998 1997
------------ ------------
ASSETS
Current assets
Cash........................................ $ 4,950,244 $ 5,527,839
Receivables, net............................ 1,274,343 837,420
Inventories................................. 476,948 570,367
Prepaid expenses............................ 1,628,717 1,333,176
Prepaid federal income tax.................. 449,226 -
Deferred income taxes....................... 432,874 1,055,000
------------ ------------
Total current assets..................... 9,212,352 9,323,802
------------ ------------
Property and equipment
Land........................................ 10,339,530 10,339,530
Buildings................................... 35,335,973 36,273,298
Furniture and equipment..................... 24,667,318 22,304,919
Improvements................................ 4,969,881 5,040,033
------------ ------------
75,312,702 73,957,780
Less accumulated
depreciation and amortization.............. (22,125,039) (17,868,111)
------------ ------------
53,187,663 56,089,669
Construction in progress.................... 25,393,665 682,047
------------ ------------
Net property and equipment............... 78,581,328 56,771,716
------------ ------------
Other assets.................................. 1,662,663 1,732,569
------------ ------------
$ 89,456,343 $ 67,828,087
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt........ $ 850,498 $ 2,243,611
Accounts payable............................ 3,441,829 4,111,457
Accrued expenses............................ 4,152,237 3,383,855
Federal income taxes payable................ - 240,970
------------ ------------
Total current liabilities................ 8,444,564 9,979,893
Long-term debt, less current maturities....... 52,309,785 32,907,530
Deferred income taxes......................... 2,248,548 2,247,000
Commitments and contingencies................. - -
Stockholders' equity
Preferred stock, $.01 par value, 10,000,000
shares authorized; none issued............. - -
Common stock, $.01 par value, 30,000,000
shares authorized; 9,536,275 issued;
9,436,275 outstanding...................... 95,363 95,363
Additional paid-in capital.................. 17,241,788 17,241,788
Treasury stock.............................. (329,875) (329,875)
Retained earnings........................... 9,446,170 5,686,388
------------ ------------
Total stockholders' equity............... 26,453,446 22,693,664
------------ ------------
$ 89,456,343 $ 67,828,087
============ ============
|
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
MONARCH CASINO & RESORT, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Common Stock
-------------------- Additional Retained
Shares Paid-in Earnings Treasury
Outstanding Amount Capital (Deficit) Stock Total
----------- -------- ------------ ----------- -------- ------------
Balance, January 1, 1996 9,536,275 $ 95,363 $ 17,008,779 $ 1,330,896 $ - $ 18,435,038
Net income - - - 829,868 - 829,868
Treasury stock acquired,
at cost (83,000) - - - (264,000) (264,000)
----------- -------- ------------ ----------- --------- ------------
Balance, December 31, 1996 9,453,275 95,363 17,008,779 2,160,764 (264,000) 19,000,906
Net income - - - 3,525,624 - 3,525,624
Treasury stock acquired,
at cost (17,000) - - - (65,875) (65,875)
Other - - 233,009 - - 233,009
----------- -------- ------------ ----------- --------- ------------
Balance, December 31, 1997 9,436,275 95,363 17,241,788 5,686,388 (329,875) 22,693,664
Net income - - - 3,759,782 - 3,759,782
----------- -------- ------------ ----------- --------- ------------
Balance, December 31, 1998 9,436,275 $ 95,363 $ 17,241,788 $ 9,446,170 $(329,875) $ 26,453,446
=========== ======== ============ =========== ========= ============
|
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
MONARCH CASINO & RESORT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31,
------------------------------------------
1998 1997 1996
------------ ------------ ------------
Cash flows from operating activities:
Net income................................... $ 3,759,782 $ 3,525,624 $ 829,868
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization.............. 4,616,722 4,308,991 4,141,528
(Gain) loss on disposal of assets.......... 955,836 (4,589) (22,862)
Impairment of assets....................... - - 1,330,592
Increase in receivables, net............... (436,923) (318,205) (15,932)
(Increase) decrease in inventories......... 93,419 (208,174) (46,637)
(Increase) decrease in prepaid expenses.... (744,767) (144,526) 26,196
(Increase) decrease in
deferred income tax asset................ 622,126 529,009 (514,000)
(Increase) decrease in other assets........ (114,034) 394,241 63,649
Increase (decrease) in accounts payable.... (669,628) 108,691 (763,703)
Increase in accrued expenses............... 527,411 980,769 247,794
Increase in deferred income tax liability.. 1,548 420,000 240,000
Decrease in minority interests............. - - (206,456)
------------ ------------ ------------
Net cash provided by
operating activities..................... 8,611,492 9,591,831 5,310,037
------------ ------------ ------------
Cash flows from investing activities:
Proceeds from sale of assets................. 8,170 188,040 142,569
Acquisition of property and equipment........ (26,145,670) (1,933,080) (1,593,865)
------------ ------------ ------------
Net cash used in investing activities..... (26,137,500) (1,745,040) (1,451,296)
------------ ------------ ------------
Cash flows from financing activities:
Proceeds from long-term borrowings........... 21,385,843 32,810,000 500,000
Principal payments on long-term debt......... (4,437,430) (39,085,029) (3,717,152)
Acquisition of treasury stock................ - (65,875) (264,000)
------------ ------------ ------------
Net cash provided by
(used in) financing activities............ 16,948,413 (6,340,904) (3,481,152)
------------ ------------ ------------
Net increase (decrease) in cash........... (577,595) 1,505,887 377,589
Cash at beginning of period.................... 5,527,839 4,021,952 3,644,363
------------ ------------ ------------
Cash at end of period.......................... $ 4,950,244 $ 5,527,839 $ 4,021,952
============ ============ ============
Supplemental disclosure of
cash flow information:
Cash paid for interest, net of
capitalized interest....................... $ 1,669,848 $ 3,406,740 $ 3,773,617
Capitalized interest......................... 432,835 - -
Cash paid for income taxes................... 1,987,479 610,000 587,542
Supplemental schedule of non-cash
investing and financing activities:
The Company financed the purchase of property
and equipment in the following amounts...... 1,060,730 336,926 1,243,878
Capitalized loan costs included
in accounts payable......................... - 1,185,000 -
|
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
MONARCH CASINO & RESORT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 1998, 1997, and 1996
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
Monarch Casino & Resort, Inc. ("Monarch") was incorporated in 1993. Golden Road Motor Inn, Inc. ("Golden Road") operates the Atlantis Casino Resort (the "Atlantis") in Reno, Nevada. Unless stated otherwise, the "Company" refers collectively to Monarch, its wholly owned subsidiary Golden Road, and majority owned subsidiaries, Dunes Marina Resort and Casino, Inc. ("Dunes Marina"), formed in December 1993, and Sea World Processors, Inc. ("Sea World"), purchased in February 1994.
The consolidated financial statements include the accounts of Monarch, Golden Road, Dunes Marina and Sea World, and eliminate intercompany balances and transactions.
Use of Estimates
In preparing these financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the year. Actual results could differ from those estimates.
Reclassifications
Certain amounts in the 1997 and 1996 consolidated financial statements have been reclassified to conform with the 1998 presentation. These reclassifications had no effect on the Company's net income.
Inventories
Inventories, consisting primarily of food, beverages, and retail merchandise, are stated at the lower of cost or market. Cost is determined on a first-in, first-out basis.
Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation and amortization. Since inception, property and equipment have been depreciated principally on an accelerated basis over the estimated service lives as follows:
Buildings..........30-40 years Furniture..........5-10 years Equipment..........5-20 years Improvements.......15-40 years |
Casino Revenues
Casino revenues represent the net win from gaming activity, which is the difference between wins and losses. Additionally, net win is reduced by a provision for anticipated payouts on progressive jackpots.
Promotional Allowances
The retail value of hotel, food and beverage services provided to customers without charge is included in gross revenue and deducted as promotional allowances. The estimated departmental costs of providing such promotional allowances are included in casino costs and expenses as follows:
Years ended December 31,
---------------------------------------
1998 1997 1996
----------- ----------- -----------
Hotel.............. $ 1,129,300 $ 401,000 $ 476,000
Food and beverage.. 5,644,800 5,393,000 5,043,000
----------- ----------- -----------
$ 6,774,100 $ 5,794,000 $ 5,519,000
=========== =========== ===========
|
Advertising Costs
All advertising costs are expensed as incurred. Advertising expense was $1,897,036, $1,940,628, and $1,558,895 for 1998, 1997, and 1996, respectively.
Income Taxes
Income taxes are recorded in accordance with the liability method specified by Statement of Financial Accounting Standards ("SFAS") No. 109. Under the asset and liability approach for financial accounting and reporting for income taxes, the following basic principles are applied in accounting for income taxes at the date of the financial statements: (a) a current liability or asset is recognized for the estimated taxes payable or refundable on taxes for the current year; (b) a deferred tax liability or asset is recognized for the estimated future tax effects attributable to temporary differences and carryforwards; (c) the measurement of current and deferred tax liabilities and assets is based on the provisions of the enacted tax law; the effects of future changes in tax laws or rates are not anticipated; and (d) the measurement of deferred taxes is reduced, if necessary, by the amount of any tax benefits that, based upon available evidence, are not expected to be realized.
Earnings Per Share
In 1997 the Company adopted the provisions of SFAS No. 128, Earnings Per Share. Earnings per share for the year ended December 31, 1996 have been restated to reflect the adoption of SFAS No. 128. SFAS No. 128 requires companies to present basic earnings per share, and, if applicable, diluted earnings per share. Basic earnings per share excludes dilution and is computed by dividing net earnings available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted
earnings per share reflects the potential dilution that could occur if options to issue common stock were exercised into common stock.
The following is a reconciliation of the number of shares (denominator) used in the basic and diluted earnings per share computations (Shares in thousands):
Years ended December 31,
------------------------------------------------------
1998 1997 1996
---------------- ---------------- ----------------
Per Share Per Share Per Share
Shares Amount Shares Amount Shares Amount
------ --------- ------ --------- ------ ---------
Income before
Extraordinary item
Basic..................... 9,436 $0.40 9,444 $0.39 9,502 $0.09
Effect of dilutive
stock options............ 66 - 35 - - -
------ --------- ------ --------- ------ ---------
Diluted................... 9,502 $0.40 9,479 $0.39 9,502 $0.09
====== ========= ====== ========= ====== =========
Net Income
Basic..................... 9,436 $0.40 9,444 $0.37 9,502 $0.09
Effect of dilutive
stock options............ 66 - 35 - - -
------ --------- ------ --------- ------ ---------
Diluted................... 9,502 $0.40 9,479 $0.37 9,502 $0.09
====== ========= ====== ========= ====== =========
|
The following options were not included in the computation of diluted earnings per share because the options' exercise price was greater than the average market price of the common shares:
1998 1997 1996
----------- ----------- -----------
Options to purchase shares of
common stock (in thousands)..... 16 26 32
Exercise prices.................. $5.88-$8.06 $4.88-$8.06 $3.50-$8.06
Expiration dates................. 6/99-5/08 9/98-6/00 9/98-6/00
|
Fair Value of Financial Instruments
The following disclosure of the estimated fair value of financial instruments is made in accordance with the requirements of SFAS No. 107 "Disclosures About Fair Value of Financial Instruments." The estimated fair value of the Company's financial instruments have been determined by the Company, using available market information and valuation methodologies. However, considerable judgment is required to develop the estimates of fair value; thus, the estimates provided herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange.
The carrying amounts of cash, receivables, accounts payable and accrued expenses, and current installments of long-term debt approximate fair value because of the short-term nature of these instruments.
The fair value of long-term debt is estimated based on the current borrowing rates offered to the Company for debt of the same remaining maturities.
It is estimated that the carrying amounts of all of the Company's financial instruments approximate fair value at December 31, 1998.
Concentrations of Credit Risk
Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of bank deposits and trade receivables. The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts. Concentrations of credit risk with respect to trade receivables are limited due to the large number of customers comprising the Company's customer base. The Company believes it is not exposed to any significant credit risk on cash and accounts receivable.
NOTE 2. ACCOUNTS RECEIVABLE
Accounts receivable consist of the following:
December 31,
-------------------------
1998 1997
----------- -----------
Casino....................... $ 975,726 $ 644,426
Hotel........................ 322,002 260,300
Other........................ 142,193 83,419
----------- -----------
1,439,921 988,145
Less allowance for
doubtful accounts........... (165,578) (150,725)
----------- -----------
$ 1,274,343 $ 837,420
=========== ===========
|
The following is a reconciliation of the allowance for doubtful accounts:
Balance, December 31, 1996 $ 123,726
Additions charged to income 201,343
Accounts written off, less recoveries (174,344)
---------
Balance, December 31, 1997 150,725
Additions charged to income 194,853
Accounts written off, less recoveries (180,000)
---------
Balance, December 31, 1998 $ 165,578
=========
|
NOTE 3. ACCRUED EXPENSES
Accrued expenses consist of the following:
December 31,
-------------------------
1998 1997
----------- -----------
Accrued salaries, wages
and related benefits........ $ 1,506,699 $ 1,063,776
Progressive slot machine
and other gaming accruals... 1,175,361 1,426,365
Accrued gaming taxes......... 174,508 101,133
Accrued interest............. 559,084 6,843
Other accrued liabilities.... 736,585 785,738
----------- -----------
$ 4,152,237 $ 3,383,855
=========== ===========
|
NOTE 4. LONG-TERM DEBT
Long-term debt consists of the following:
December 31,
---------------------------
1998 1997
------------ ------------
Amounts outstanding under bank construction and reducing
revolving credit facility, collateralized by substantially
all property and equipment of Golden Road and guaranteed
by Monarch and its three largest stockholders, with
floating interest rates tied to a base rate approximately
equal to the prime rate or LIBOR (at the Company's option)
plus a margin which fluctuates according to the Company's
ratio of funded debt to EBITDA. At December 31, 1998,
the Company's average interest rate was approximately 7.0%.
The loan matures in June 2004, with all unpaid interest
and principal due and payable at that time.................. $ 50,328,451 $ 32,810,000
Note payable to bank, collateralized by real property and
guaranteed by Monarch and its three largest stockholders,
with floating interest rates equal to the three month
LIBO rate plus a margin which fluctuates according to
the Company's ratio of funded debt to EBITDA. At
December 31, 1998, the Company's interest rate was
Approximately 6.81%. Interest and scheduled principal
payments are payable quarterly until June, 2004,
with all unpaid interest and principal due and payable
at that time................................................ 1,855,097 -
Land purchase loan to seller, collateralized by real
Property, with interest fixed at 6%. Interest only
payable monthly until September 1998, when all unpaid
principal and interest is due............................... - 1,897,597
Amounts outstanding under bank credit facility,
collateralized by furniture, fixtures and equipment and
guaranteed in full by Monarch and in part by Monarch's
three largest stockholders, with interest rates on
advances fixed at a margin over five year U.S. Treasury
notes. At December 31, 1998, the Company's average
interest rate was 6.8%. Each advance under the credit
facility is repaid in 60 monthly installments of
principal and interest. The Company may borrow up to
$4,500,000 on this credit facility through June 30, 1999.... 339,795 -
Slot purchase contracts, collateralized by equipment,
maturing in 1999............................................ 515,736 215,668
-31-
|
Notes payable, collateralized by equipment, with
principal and interest due monthly through 2000............. 121,204 227,876
------------ ------------
$ 53,160,263 $ 35,151,141
Less current maturities...................................... (850,498) (2,243,611)
------------ ------------
$ 52,309,785 $ 32,907,530
============ ============
|
THE CREDIT FACILITY. The Company has a $80 million construction and reducing revolving bank credit facility (the "Credit Facility") with a consortium of banks. The Credit Facility is a direct obligation of Golden Road, and is guaranteed by Monarch. The Credit Facility is also guaranteed by John Farahi, Co-Chairman of the Board, Chief Executive Officer and Chief Operating Officer of Monarch and Golden Road and General Manager of the Atlantis; Behrouz Ben Farahi, Co-Chairman of the Board, Chief Financial Officer, Secretary and Treasurer of Monarch and Golden Road; and Bahram (Bob) Farahi, Co-Chairman of the Board and President of Monarch and Golden Road, individually.
The Company can borrow up to $80 million under the Credit Facility for construction costs related to the Atlantis Expansion. The Credit Facility may be used only for construction of the Atlantis Expansion until the project is completed, and during this period, draws under the Credit Facility are subject to the satisfaction of various conditions typically applicable to construction loans. Following completion of the Atlantis Expansion, the Credit Facility will convert from a construction loan to a reducing revolving term loan, and the Company will be able to utilize proceeds from the Credit Facility for working capital needs and general corporate purposes relating to the Atlantis and for ongoing capital expenditure requirements at the Atlantis.
At the Company's option, borrowings under the Credit Facility can accrue interest at a rate designated by the agent bank as its base rate (the "Base Rate") or at the London Interbank Offered Rate ("LIBOR") for one, two, three or six month periods. The rate of interest paid by the Company will include a margin added to either the Base Rate or to LIBOR that is tied to the Company's ratio of funded debt to EBITDA (the "Leverage Ratio"). Depending on the Company's Leverage Ratio, this margin can vary between 0.00 percent and 2.00 percent above the Base Rate, and between 1.50 percent and 3.50 percent above LIBOR. At December 31, 1998, the applicable margin was the Base Rate plus 0.50%, and the applicable LIBOR margin was LIBOR plus 2.0%. The Base Rate at December 31, 1998 was 7.75%, and the one month LIBOR was approximately 5.1%. At December 31, 1998, the Company had Base Rate loans outstanding of approximately $577 thousand and LIBOR loans outstanding of approximately $49.7 million.
The maturity date of the Credit Facility is June 30, 2004. Beginning July 1, 2000, the maximum principal available under the Credit Facility will reduce quarterly from $80 million by an aggregate of $40 million in increasing increments ranging from $1.5 million to $6 million. The Company may prepay borrowings under the Credit Facility without penalty (subject to certain charges applicable to the prepayment of LIBOR borrowings prior to the end of the applicable interest period) so long as the amount repaid is at least $200 thousand and a multiple of $10 thousand. Following completion of the Atlantis Expansion, amounts prepaid under the Credit Facility may be reborrowed so long as the total borrowings outstanding do not exceed the maximum principal available. The Company may also permanently reduce the maximum principal
available under the Credit Facility at any time so long as the amount of such reduction is at least $500 thousand and a multiple of $50 thousand.
The Credit Facility is secured by liens on substantially all of the real and personal property of Golden Road, as well as by the aforementioned parent and personal guarantees. The Credit Facility contains covenants customary and typical for a facility of this nature, including, but not limited to, covenants requiring the preservation and maintenance of the Company's assets (including provisions requiring that a minimum amount equal to two percent of the Company's gaming revenues each year must be expended on capital expenditures at the Atlantis), and covenants restricting the Company's ability to merge, transfer ownership of Golden Road, incur additional indebtedness, encumber assets, and make certain investments. The Credit Facility also contains covenants requiring the Company to maintain certain financial ratios, and provisions restricting transfers between Golden Road and Monarch and between Golden Road and other specified persons. The Credit Facility also contains provisions requiring the achievement of certain financial ratios before the Company can repurchase its common stock or pay or declare dividends.
Following completion of the Atlantis Expansion, the Credit Facility also provides for certain swingline loans to the Company, generally to provide short-term financing pending the funding of a draw by the lenders under the Credit Facility. Such swingline loans will accrue interest at the Base Rate in the same manner as other borrowings under the Credit Facility.
The Company paid various fees and other loan costs upon the closing of the Credit Facility that are being amortized over the term of the Credit Facility. Following completion of the Atlantis Expansion, the Company will be required to pay a fee equal to three eighths of one percent per annum on the average unused portion of the Credit Facility.
Annual maturities of long-term debt as of December 31, 1998, are as follows:
Years ending
December 31,
------------
1999.......... $ 850,498
2000.......... 248,909
2001.......... 471,726
2002.......... 476,476
2003 481,184
Thereafter 50,631,470
-------------
$ 53,160,263
=============
|
NOTE 5. INCOME TAX
Income tax expense consists of the following:
Years ended December 31,
---------------------------------------
1998 1997 1996
----------- ----------- -----------
Current expense....................... $ 1,297,283 $ 1,062,921 $ 694,747
Deferred expense (benefit)............ 623,674 949,009 (226,568)
----------- ----------- -----------
$ 1,920,957 $ 2,011,930 $ 468,179
=========== =========== ===========
|
The difference between the Company's provision for federal income taxes as presented in the accompanying Consolidated Statements of Income, and the provision for income taxes computed at the statutory rate is comprised of the items shown in the following table as a percentage of pre-tax earnings.
Years ended December 31,
---------------------------------------
1998 1997 1996
----------- ----------- -----------
Income tax at the statutory rate...... 34.0% 34.0% 34.0%
Non-deductible expenses............... 1.7% 1.2% 3.1%
Tax credits........................... (1.2)% - -
Other, net............................ (0.7)% - (1.0)%
----------- ----------- -----------
33.8% 35.2% 36.1%
=========== =========== ===========
|
The components of the deferred income tax assets and liabilities at December 31, 1998 and 1997, as presented in the Consolidated Balance Sheets, are as follows:
1998 1997
----------- -----------
CURRENT ASSETS
Compensation and benefits............ $ 88,319 $ 73,000
Bad debt reserves.................... 56,297 51,000
Accrued gaming liabilities........... 71,406 136,000
Accrued other liabilities............ - 51,000
Alternative minimum tax credit....... 216,852 506,000
General business tax credit.......... - 238,000
----------- -----------
Deferred income tax asset $ 432,874 $ 1,055,000
=========== ===========
NONCURRENT LIABILITIES
Impairment of assets................. (70,195) (70,000)
Depreciation......................... (1,900,810) (1,899,000)
Land basis........................... (277,543) (278,000)
----------- -----------
Deferred income tax liability $(2,248,548) $(2,247,000)
=========== ===========
|
NOTE 6. BENEFIT PLANS
Self Insurance - The Company is self-insured for health care claims for eligible active employees. Benefit plan administrators assist the Company in determining its liability for self-insured claims, and such claims are not discounted. The Company is also self-insured for workman's compensation. Both plans limit the Company's maximum liability under stop-loss agreements with insurance companies.
Savings Plan - Effective November 1, 1995, the Company adopted a savings plan, which qualifies under Section 401(k) of the Internal Revenue Code. Under the plan, participating employees may defer up to 15% of their pre-tax compensation, but not more than statutory limits. The Company contributes twenty five cents for each dollar contributed by a participant, with a maximum contribution of 4% of a participant's compensation. The Company's matching contribution was approximately $19,300 in 1998 and $17,000 in 1997 and 1996.
Stock Option Plans - The Company maintains three stock option plans, consisting of the Directors' Stock Option Plan, the Executive Long Term Incentive Plan, and the Employee Stock Option Plan, which collectively provide for the granting of up to 425,000 common shares. The exercise price of stock options granted under the plans is established by the respective plan committees, but the exercise price may not be less than the market price of the Company's common stock on the date the option is granted. Options expire five to ten years from the grant date.
The Company has adopted the disclosure-only provisions of SFAS No. 123, Accounting For Stock-Based Compensation, but applies Accounting Principles Board Opinion No. 25 and related interpretations in accounting for its plans. If the Company had elected to recognize compensation cost on the fair market value at the grant dates for awards under the stock option plans, consistent with the method prescribed by SFAS No. 123, net income and income per share would have been changed to the pro forma amounts indicated below:
Years ended December 31,
---------------------------------------
1998 1997 1996
----------- ----------- -----------
Income before
extraordinary item As reported $ 3,759,782 $ 3,710,148 $ 829,868
Pro forma 3,728,019 3,515,191 829,145
Net income As reported 3,759,782 3,525,625 829,868
Pro forma 3,728,019 3,330,668 829,145
Basic earnings per share
before extraordinary item As reported 0.40 0.39 0.09
Pro forma 0.40 0.37 0.09
Basic earnings per share As reported 0.40 0.37 0.09
Pro forma 0.40 0.35 0.09
Diluted earnings per share
before extraordinary item As reported 0.40 0.39 0.09
Pro forma 0.39 0.37 0.09
Diluted earnings per share As reported 0.40 0.37 0.09
Pro forma 0.39 0.35 0.09
|
The fair value of the Company's stock options was estimated as of the grant date using the Black-Scholes option pricing model with the following weighted average assumptions for 1998, 1997 and 1996: dividend yield of 0.0%; expected volatility of 60.0%, 35.0% and 55.0%, respectively; a weighted average risk free interest rate of 4.90%, 6.61% and 6.25%, respectively; and an expected holding period of three to seven years.
Presented below is a summary of the status of the Company's stock options and the related transactions.
Weighted Average
Shares Exercise Price
-------- ----------------
Outstanding at December 31, 1995.... 26,900 $ 7.02
Granted............................ 5,800 3.91
Exercised.......................... - -
Forfeited/expired.................. (1,000) (7.50)
-------
Outstanding at December 31, 1996.... 31,700 6.44
Granted............................ 233,700 3.21
Exercised.......................... - -
Forfeited/expired.................. (2,500) (2.88)
-------
Outstanding at December 31, 1997.... 262,900 $ 3.60
Granted....................... 14,600 5.98
Exercised..................... - -
Forfeited/expired............. (25,300) (6.27)
--------
Outstanding at December 31, 1998..... 252,200 $ 3.47
========
Weighted average fair value of
options granted during 1998......... $ 2.18
========
1997......... $ 1.28
========
1996......... $ 0.26
========
|
Stock Options Outstanding Stock Options Exercisable
------------------------- -------------------------
Weighted Weighted Weighted
Average Average Average
Range of Contractual Exercise Exercise
Exercise Prices Shares Life Price Shares Price
---------------- ------- -------- --------- ------- --------
$2.25 to $3.50 162,400 6.67 $ 2.72 52,400 $ 2.37
$4.00 to $5.00 60,600 1.60 4.50 59,600 4.49
$5.75 to $8.13 17,000 5.13 6.28 9,800 6.46
------- -------
Total 240,000 121,800
======= =======
|
NOTE 7. RELATED PARTY TRANSACTION
The Company purchased water rights for the Atlantis Expansion during 1998 for $358,000 from a partnership in which three major stockholders of the Company are general partners. These stockholders are also directors of the
Company. The water rights were purchased at the prevailing price at the time of the transaction.
NOTE 8. LEGAL PROCEEDINGS
The Company is a defendant in various pending legal proceedings. In the opinion of management, all pending claims in such litigation will not, in the aggregate, have a material adverse effect on the Company's financial position or results of operations.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
This information is incorporated by reference to the Company's Proxy Statement to be filed with the Commission in connection with the Annual Meeting of Stockholders on June 9, 1999.
ITEM 11. EXECUTIVE COMPENSATION
This information is incorporated by reference to the Company's Proxy Statement to be filed with the Commission in connection with the Annual Meeting of Stockholders on June 9, 1999.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
This information is incorporated by reference to the Company's Proxy Statement to be filed with the Commission in connection with the Annual Meeting of Stockholders on June 9, 1999.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
This information is incorporated by reference to the Company's Proxy Statement to be filed with the Commission in connection with the Annual Meeting of Stockholders on June 9, 1999.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
Included in Part II of this report:
Consolidated Statements of Income for the years ended December 31, 1998, 1997, and 1996.
Consolidated Balance Sheets at December 31, 1998 and 1997.
Consolidated Statements of Stockholders' Equity for the years ended December 31, 1998, 1997 and 1996.
Consolidated Statements of Cash Flows for the years ended December 31, 1998, 1997 and 1996.
Notes to Consolidated Financial Statements.
2. Schedules are omitted because of the absence of conditions under which they are required or because the required information is provided in the financial statements or notes thereto.
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the 1998
fourth quarter.
(c) Exhibits
Number Exhibit Description
------ -------------------
3.01 Articles of Incorporation of Monarch Casino & Resort, Inc., filed
June 11, 1993 are incorporated herein by reference from the
Company's Form S-1 registration statement (SEC File 33-64556),
Part II, Item 16, Exhibit 3.01.
3.02 Bylaws of Monarch Casino & Resort, Inc., adopted June 14, 1993
are incorporated herein by reference from the Company's Form S-1
registration statement (SEC File 33-64556), Part II, Item 16,
Exhibit 3.02.
3.03 Articles of Incorporation of Golden Road Motor Inn, Inc. filed
March 6, 1973; Certificate Amending Articles of Incorporation of
Golden Road Motor Inn, Inc. filed August 29, 1973; and
Certificate of Amendment of Articles of Incorporation filed April
5, 1984 are incorporated herein by reference from the Company's
Form S-1 registration statement (SEC File 33-64556), Part II,
Item 16, Exhibit 3.03.
3.04 Bylaws of Golden Road Motor Inn, Inc., adopted March 9, 1973 are
incorporated herein by reference from the Company's Form S-1
registration statement (SEC File 33-64556), Part II, Item 16,
Exhibit 3.04.
4.01 Specimen Common Stock Certificate for the Common Stock of Monarch
Casino & Resort, Inc. is incorporated herein by reference from
the Company's Form S-1 registration statement (SEC File 33-
64556), Part II, Item 16, Exhibit 4.01.
4.02 Amended and Restated Monarch Casino & Resort, Inc. 1993 Directors'
Stock Option Plan.
4.03 Amended and Restated Monarch Casino & Resort, Inc. 1993 Executive
Long Term Incentive Plan is incorporated herein by reference to
the Company's Form 10-K report (SEC File 0-22088) for the fiscal
year ended December 31, 1997, Item 14(c), Exhibit 4.03.
4.04 Amended and Restated Monarch Casino & Resort, Inc. 1993 Employee
Stock Option Plan is incorporated herein by reference to the
Company's Form 10-K report (SEC File 0-22088) for the fiscal year
ended December 31, 1997, Item 14(c), Exhibit 4.04.
10.01 Construction and Reducing Revolving Credit Agreement, dated as of
December 29, 1997, among Golden Road Motor Inn, Inc. as Borrower,
Monarch Casino & Resort, Inc., John Farahi, Bahram Farahi, and
Behrouz Farahi as guarantors, the Lenders as defined therein, and
Wells Fargo Bank as administrative and collateral Agent for the
Lenders and Swingline Lender is incorporated herein by reference
-39-
|
to the Company's Form 8-K report (SEC File 0-22088) dated January
14, 1998, Exhibit 10.01.
10.02 First Amendment to Construction and Reducing Revolving Credit
Agreement, dated as of January 9, 1998, among Golden Road Motor
Inn, Inc. as Borrower, Monarch Casino & Resort, Inc., John Farahi,
Bahram Farahi, and Behrouz Farahi as guarantors, the Lenders as
defined therein, and Wells Fargo Bank as administrative and
collateral Agent for the Lenders, Swingline Lender and L/C Issuer
is incorporated herein by reference to the Company's Form 10-K
report (SEC File 0-22088) for the fiscal year ended December 31,
1997, Item 14(c), Exhibit 10.02.
10.03 Second Amendment to Construction and Reducing Revolving Credit
Agreement, dated as of June 12, 1998, among Golden Road Motor Inn,
Inc. as Borrower, Monarch Casino & Resort, Inc., John Farahi,
Bahram Farahi, and Behrouz Farahi as guarantors, the Lenders as
defined therein, and Wells Fargo Bank as administrative and
collateral Agent for the Lenders, Swingline Lender and L/C Issuer
is incorporated herein by reference to the Company's Form 10-Q
report (SEC File 0-22088) for the fiscal quarter ended June 30,
1998, Item 6(a), Exhibit 10.01.
10.04 Term Loan Agreement, entered into as of the 23rd day of July,
1998, by and among Golden Road Motor Inn, Inc., as Borrower,
Monarch Casino & Resort, Inc., John Farahi, Bahram Farahi and
Behrouz Farahi as guarantors, and U.S. Bank National Association
as Term Lender is incorporated herein by reference to the
Company's Form 10-Q report (SEC File 0-22088) for the fiscal
quarter ended September 30, 1998, Item 6(a), Exhibit 10.01.
10.05 Schedule to Master Loan Agreement, dated as of December 16, 1998;
Master Loan Agreement, dated as of October 3, 1998; and
Guaranties, dated as of September 9, 1998, by and among Golden
Road Motor Inn, Inc., as Borrower, Monarch Casino & Resort, Inc.,
John Farahi, Bahram Farahi and Behrouz Farahi as guarantors, and
U.S. Bank Leasing and Financial as Lender.
10.06 Agreement dated April 20, 1998, between Golden Road Motor Inn,
Inc. and Krump Construction, Inc. is incorporated herein by
reference to the Company's Form 10-Q report (SEC File 0-22088) for
the fiscal quarter ended March 31, 1998, Item 6(a), Exhibit 10.01.
10.07 Agreement dated June 12, 1998, between Golden Road Motor Inn, Inc.
and Perini Building Company, Inc. is incorporated herein by
reference to the Company's Form 10-Q report (SEC File 0-22088) for
the fiscal quarter ended June 30, 1998, Item 6(a), Exhibit 10.02.
10.08 Lease, by and between Sierra Development Company, dba Club Cal-
Neva, Tenant, and Golden Road Motor Inn, Inc., dba Clarion Hotel
and Casino, Landlord, dated June 10, 1991 is incorporated herein
by reference from the Company's Form S-1 registration statement
(SEC File 33-64556), Part II, Item 16, Exhibit 10.03.
10.09 Agreement for Purchase of Real Property between Marcelle M.
Caramella, a widow, individually and Marcelle Margaret Caramella,
as trustee of the Trust created under the Last Will and Testament
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of Ernest John Caramella, deceased, Ben A. Caramella and Cecile
D. Caramella, as trustees of the Caramella Family Trust Agreement
dated December 1, 1989, Marcelle Margaret Caramella, Erma V.
Pezzi, Trustee of the Erma V. Pezzi Trust Agreement dated
November 21, 1991, Golden Road Motor Inn, Inc. and Farahi
Investment Company, dated June 1, 1993 is incorporated herein by
reference from the Company's Form S-1 registration statement (SEC
File 33-64556), Part II, Item 16, Exhibit 10.04.
10.10 Agreement between Monarch Casino & Resort, Inc. and Peter Wilday
dated May 13, 1994; First Amendment to Agreement between Monarch
Casino & Resort, Inc. and Peter Wilday dated June 8, 1994; and
Second Amendment to Agreement between Monarch Casino & Resort,
Inc. and Peter Wilday dated March 23, 1995 are incorporated
herein by reference from the Company's Form 10-K report (SEC File
0-22088) for the fiscal year ended December 31, 1994, Item
14(a)(3), Exhibit 10.20.
10.11 Nonstandardized 401(k) Plan Adoption Agreement between Monarch
Casino & Resort, Inc. and Smith Barney Shearson dated November 7,
1995 is incorporated herein by reference to the Company's Form
10-K report (SEC File 0-22088) for the fiscal year ended December
31, 1995, Item 14(a)(3), Exhibit 10.21.
10.12 Recordkeeping Service Agreement between Monarch Casino & Resort,
Inc. and Travelers Recordkeeping dated June 29, 1995 is
incorporated herein by reference to the Company's Form 10-K
report (SEC File 0-22088) for the fiscal year ended December 31,
1995, Item 14(a)(3), Exhibit 10.22.
10.13 Trademark Agreement between Golden Road Motor Inn, Inc. and
Atlantis Lodge, Inc., dated February 3, 1996 is incorporated
herein by reference to the Company's Form 10-K report (SEC File
0-22088) for the fiscal year ended December 31, 1995, Item
14(a)(3), Exhibit 10.23.
21.01 List of Subsidiaries of Monarch Casino & Resort, Inc. is
incorporated by reference from the Company's Form 10-K report
(SEC File 0-22088) for the fiscal year ended December 31, 1993,
Item 14(a)(3), Exhibit 21.01.
27.01 Financial Data Schedule
|
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
MONARCH CASINO & RESORT, INC.
(Registrant)
Date: March 30, 1999 By: /s/ BEN FARAHI
------------------------------------
Ben Farahi, Co-Chairman of the Board,
Secretary, Treasurer and Chief
Financial Officer(Principal Financial
Officer and Duly Authorized Officer)
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature Title Date
------------------ ----------------------------------- ----
/s/ JOHN FARAHI Co-Chairman of the Board of Directors, March 30, 1999
------------------ Chief Executive Officer (Principal
John Farahi Executive Officer) and Director
/s/ BOB FARAHI Co-Chairman of the Board of Directors, March 30, 1999
------------------ President, and Director
Bob Farahi
/s/ BEN FARAHI Co-Chairman of the Board of Directors, March 30, 1999
------------------ Secretary, Treasurer, Chief Financial
Ben Farahi Officer (Principal Financial Officer
and Principal Accounting Officer) and
Director
/s/ CRAIG F.
SULLIVAN Director March 30, 1999
------------------
Craig F. Sullivan
/s/FRANK A. MODICA Director March 30, 1999
------------------
Frank A. Modica
|
EXHIBIT INDEX
Exhibit Page
Number Description Number
----------- ------------------------------------------------------------------ --------
3.01 Articles of Incorporation of Monarch Casino & Resort, Inc., filed
June 11, 1993 are incorporated herein by reference from the
Company's Form S-1 registration statement (SEC File 33-64556),
Part II, Item 16, Exhibit 3.01.
3.02 Bylaws of Monarch Casino & Resort, Inc., adopted June 14, 1993
are incorporated herein by reference from the Company's Form S-1
registration statement (SEC File 33-64556), Part II, Item 16,
Exhibit 3.02.
3.03 Articles of Incorporation of Golden Road Motor Inn, Inc. filed
March 6, 1973; Certificate Amending Articles of Incorporation of
Golden Road Motor Inn, Inc. filed August 29, 1973; and
Certificate of Amendment of Articles of Incorporation filed April
5, 1984 are incorporated herein by reference from the Company's
Form S-1 registration statement (SEC File 33-64556), Part II,
Item 16, Exhibit 3.03.
3.04 Bylaws of Golden Road Motor Inn, Inc., adopted March 9, 1973 are
incorporated herein by reference from the Company's Form S-1
registration statement (SEC File 33-64556), Part II, Item 16,
Exhibit 3.04.
4.01 Specimen Common Stock Certificate for the Common Stock of Monarch
Casino & Resort, Inc. is incorporated herein by reference from
the Company's Form S-1 registration statement (SEC File 33-
64556), Part II, Item 16, Exhibit 4.01.
4.02 Amended and Restated Monarch Casino & Resort, Inc. 1993 Directors' 46
Stock Option Plan.
4.03 Amended and Restated Monarch Casino & Resort, Inc. 1993 Executive
Long Term Incentive Plan is incorporated herein by reference to
the Company's Form 10-K report (SEC File 0-22088) for the fiscal
year ended December 31, 1997, Item 14(c), Exhibit 4.03.
4.04 Amended and Restated Monarch Casino & Resort, Inc. 1993 Employee
Stock Option Plan is incorporated herein by reference to the
Company's Form 10-K report (SEC File 0-22088) for the fiscal year
ended December 31, 1997, Item 14(c), Exhibit 4.04.
10.01 Construction and Reducing Revolving Credit Agreement, dated as of
December 29, 1997, among Golden Road Motor Inn, Inc. as Borrower,
Monarch Casino & Resort, Inc., John Farahi, Bahram Farahi, and
Behrouz Farahi as guarantors, the Lenders as defined therein, and
Wells Fargo Bank as administrative and collateral Agent for the
Lenders and Swingline Lender is incorporated herein by reference
to the Company's Form 8-K report (SEC File 0-22088) dated January
14, 1998, Exhibit 10.01.
10.02 First Amendment to Construction and Reducing Revolving Credit
Agreement, dated as of January 9, 1998, among Golden Road Motor
Inn, Inc. as Borrower, Monarch Casino & Resort, Inc., John Farahi,
Bahram Farahi, and Behrouz Farahi as guarantors, the Lenders as
defined therein, and Wells Fargo Bank as administrative and
collateral Agent for the Lenders, Swingline Lender and L/C Issuer
is incorporated herein by reference to the Company's Form 10-K
report (SEC File 0-22088) for the fiscal year ended December 31,
1997, Item 14(c), Exhibit 10.02.
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10.03 Second Amendment to Construction and Reducing Revolving Credit
Agreement, dated as of June 12, 1998, among Golden Road Motor Inn,
Inc. as Borrower, Monarch Casino & Resort, Inc., John Farahi,
Bahram Farahi, and Behrouz Farahi as guarantors, the Lenders as
defined therein, and Wells Fargo Bank as administrative and
collateral Agent for the Lenders, Swingline Lender and L/C Issuer
is incorporated herein by reference to the Company's Form 10-Q
report (SEC File 0-22088) for the fiscal quarter ended June 30,
1998, Item 6(a), Exhibit 10.01.
10.04 Term Loan Agreement, entered into as of the 23rd day of July,
1998, by and among Golden Road Motor Inn, Inc., as Borrower,
Monarch Casino & Resort, Inc., John Farahi, Bahram Farahi and
Behrouz Farahi as guarantors, and U.S. Bank National Association
as Term Lender is incorporated herein by reference to the
Company's Form 10-Q report (SEC File 0-22088) for the fiscal
quarter ended September 30, 1998, Item 6(a), Exhibit 10.01.
10.05 Schedule to Master Loan Agreement, dated as of December 16, 1998; 53
Master Loan Agreement, dated as of October 3, 1998; and
Guaranties, dated as of September 9, 1998, by and among Golden
Road Motor Inn, Inc., as Borrower, Monarch Casino & Resort, Inc.,
John Farahi, Bahram Farahi and Behrouz Farahi as guarantors, and
U.S. Bank Leasing and Financial as Lender.
10.06 Agreement dated April 20, 1998, between Golden Road Motor Inn,
Inc. and Krump Construction, Inc. is incorporated herein by
reference to the Company's Form 10-Q report (SEC File 0-22088) for
the fiscal quarter ended March 31, 1998, Item 6(a), Exhibit 10.01.
10.07 Agreement dated June 12, 1998, between Golden Road Motor Inn, Inc.
and Perini Building Company, Inc. is incorporated herein by
reference to the Company's Form 10-Q report (SEC File 0-22088) for
the fiscal quarter ended June 30, 1998, Item 6(a), Exhibit 10.02.
10.08 Lease, by and between Sierra Development Company, dba Club Cal-
Neva, Tenant, and Golden Road Motor Inn, Inc., dba Clarion Hotel
and Casino, Landlord, dated June 10, 1991 is incorporated herein
by reference from the Company's Form S-1 registration statement
(SEC File 33-64556), Part II, Item 16, Exhibit 10.03.
10.09 Agreement for Purchase of Real Property between Marcelle M.
Caramella, a widow, individually and Marcelle Margaret Caramella,
as trustee of the Trust created under the Last Will and Testament
of Ernest John Caramella, deceased, Ben A. Caramella and Cecile
D. Caramella, as trustees of the Caramella Family Trust Agreement
dated December 1, 1989, Marcelle Margaret Caramella, Erma V.
Pezzi, Trustee of the Erma V. Pezzi Trust Agreement dated
November 21, 1991, Golden Road Motor Inn, Inc. and Farahi
Investment Company, dated June 1, 1993 is incorporated herein by
reference from the Company's Form S-1 registration statement (SEC
File 33-64556), Part II, Item 16, Exhibit 10.04.
10.10 Agreement between Monarch Casino & Resort, Inc. and Peter Wilday
dated May 13, 1994; First Amendment to Agreement between Monarch
Casino & Resort, Inc. and Peter Wilday dated June 8, 1994; and
Second Amendment to Agreement between Monarch Casino & Resort,
Inc. and Peter Wilday dated March 23, 1995 are incorporated
herein by reference from the Company's Form 10-K report (SEC File
0-22088) for the fiscal year ended December 31, 1994, Item
14(a)(3), Exhibit 10.20.
10.11 Nonstandardized 401(k) Plan Adoption Agreement between Monarch
Casino & Resort, Inc. and Smith Barney Shearson dated November 7,
1995 is incorporated herein by reference to the Company's Form
10-K report (SEC File 0-22088) for the fiscal year ended December
31, 1995, Item 14(a)(3), Exhibit 10.21.
10.12 Recordkeeping Service Agreement between Monarch Casino & Resort,
Inc. and Travelers Recordkeeping dated June 29, 1995 is
incorporated herein by reference to the Company's Form 10-K
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|
report (SEC File 0-22088) for the fiscal year ended December 31,
1995, Item 14(a)(3), Exhibit 10.22.
10.13 Trademark Agreement between Golden Road Motor Inn, Inc. and
Atlantis Lodge, Inc., dated February 3, 1996 is incorporated
herein by reference to the Company's Form 10-K report (SEC File
0-22088) for the fiscal year ended December 31, 1995, Item
14(a)(3), Exhibit 10.23.
21.01 List of Subsidiaries of Monarch Casino & Resort, Inc. is
incorporated by reference from the Company's Form 10-K report
(SEC File 0-22088) for the fiscal year ended December 31, 1993,
Item 14(a)(3), Exhibit 21.01.
27.01 Financial Data Schedule
|
Amended and Restated
MONARCH CASINO & RESORT, INC.
1993 Directors' Stock Option Plan
Adopted by the Board of Directors June 15, 1993 Amended by the Board of Directors September 14, 1993 Approved by the Stockholders June 15, 1994 Amended by the Board of Directors May 14, 1997 Amended by the Board of Directors September 17, 1998
1. Purpose
The Monarch Casino & Resort, Inc. 1993 Directors' Stock Option Plan (the "Plan") is intended to promote the interests of Monarch Casino & Resort, Inc. (the "Corporation") and its subsidiaries by offering members of the Board of Directors of the Corporation who are not employed as regular salaried officers or employees of the Corporation or any of its subsidiaries (hereinafter referred to as "Non-Employee Directors" or "Optionees") the opportunity to participate in a stock option plan in order to encourage Non-Employee Directors to take a long term view of the affairs of the Corporation; to attract and retain new top-notch Non-Employee Directors; and to aid in rewarding Non-Employee Directors for their services to the Corporation.
2. Administration
The Plan shall be administered by a Committee (the "Committee") of not less than two Directors of the Corporation who are not eligible to participate under the Plan, selected by and serving at the pleasure of its Board of Directors (the "Board").
The Committee shall have the authority to otherwise interpret the Plan and make all determinations necessary or advisable for its administration.
The Committee's decisions under the Plan shall be subject to the approval of the Board
3. Eligibility
Only Non-Employee Directors will be eligible to be granted awards.
4. Stock Subject to the Plan
The stock from which awards may be granted shall be the Corporation's $.01 par value Common Stock ("Common Stock"). When options are exercised, the Corporation may either issue authorized but unissued shares of Common Stock or transfer issued shares of Common Stock held in its treasury. The total number of shares of Common Stock which may be granted as stock options shall not exceed 75,000. If an option expires, or is otherwise terminated prior to its exercise, the Common Stock covered by such an option immediately prior to such expiration or other termination shall continue to be available for grant under the Plan.
5. Grant and Amount of Options
5.1. Basic Grant
The date of the initial option grant for a Non-Employee Director serving his or her term upon approval of the Plan shall be the date that the Plan is approved by the stockholders. The date of the initial option grant for a Non- Employee Director commencing his or her term shall be the date that he or she becomes a member of the Board of Directors.
The initial option grant shall be to purchase 2 400 shares of Common Stock (subject to adjustment per Section 7). Each Non-Employee Director serving as the chairman of a committee of the Board shall receive an additional option grant to purchase 650 shares for each committee chaired.
All annual awards of options shall be granted immediately following the close of the annual stockholders' meeting, with the first annual grant effective at the 1994 annual stockholders' meeting. All annual awards of such option grants will be to purchase 2,400 shares of Common Stock (subject to adjustment per Section 7) for five years following election to the Board. Each Non-Employee Director serving as the Chairman of a committee of the Board shall receive an additional annual award to purchase 650 shares for each committee chaired.
5.2. Discretionary Grants
The Committee may recommend discretionary grants of options on terms deemed appropriate by the Committee, subject to the approval of the Board.
6. Terms and Conditions of Options
Options shall be designated non-qualified options or not qualified as Incentive Stock Options under Section 422A of the Internal Revenue Code of 1986, as amended (the "Code"), and shall be evidenced by written instruments approved by the Committee. Such instruments shall conform to the following terms and conditions.
6.1. Option Price
The option price shall be not less than the fair market value of the shares of Common Stock under option. The fair market value per share shall be the last reported sale price of the stock on such date on the NASDAQ National Market System, or on such other stock exchange that the stock may be listed from time to time. The option price shall be paid (i) in cash or (ii) in shares of Common Stock of the Corporation having a fair market value equal to such option price or (iii) in a combination of cash and shares of Common Stock. The fair market value of shares of Common Stock delivered to the Corporation pursuant to the immediately preceding sentence shall be determined on the basis of the last reported sale price of the stock on the NASDAQ National Market System on the day next preceding the day of exercise on which there was such a sale.
6.2. Exercise and term of options
Each option shall be exercisable six months and one day after the date of grant.
Except in special circumstances or as provided in Discretionary Grants pursuant to Section 5.1 hereof, each option shall expire the latter of the fifth anniversary of the date of its grant or nine months after the Non- Employee Director retires, whichever occurs first.
After becoming exercisable, each option shall remain exercisable until expiration or termination of the option. After becoming exercisable an option may be exercised by the Optionee from time to time, in whole or part, up to the total number of shares with respect to which it is then exercisable. The Committee may provide that payment of the option exercise price may be made following delivery of the certificate for the exercised shares.
Upon the exercise of a stock option, the purchase price will be payable in full in cash or its equivalent in property acceptable to the Corporation. In the discretion of the Committee, the purchase price may be paid by the assignment and delivery to the Corporation of shares of Common Stock or a combination of cash and such shares equal in value to the purchase price. Any shares of Common Stock so assigned and delivered to the Corporation in payment or partial payment of the purchase price will be valued at Fair Market Value on the exercise date. Upon the exercise of a non-qualified stock option, the Corporation shall withhold from the shares of Common Stock to be issued to the eligible Optionee the number of shares necessary to satisfy the Corporation's obligation to withhold Federal taxes, such determination to be based on the shares' Fair Market Value on the date of exercise.
6.3. Termination of Directorship
If an Optionee ceases, other than by reason of death or retirement to be
elected to serve on the Board of Directors, all options granted to such
Optionee and exercisable on the date of termination of Directorship shall
expire on the earlier of (i) the fifth anniversary after the date of grant or
(ii) nine months after the day such Optionee's term ends.
6.4. Exercise upon death of optionee
If an Optionee dies, the option may be exercised, to the extent of the number of shares that the Optionee could have exercised on the date of such death, by the Optionee's estate, personal representative or beneficiary who acquires the option by will or by the laws of descent and distribution. Such exercise may be made at any time prior to the earlier of (i) the fifth anniversary after the date of grant or (ii) the second anniversary of such Optionee's death. On the earlier of such dates, the option shall terminate. The Committee may approve all cash payments to the estate of an Optionee if circumstances warrant such a decision.
6.5. Assignability
No option shall be assignable or transferable by the Optionee except by will or by the laws of descent and distribution and during the lifetime of the Optionee the option shall be exercisable only by such Optionee.
7. Capital Adjustments
The number and price of shares of Common Stock covered by each award of options and the total number of shares that may be granted under the Plan shall be proportionally adjusted to reflect, as deemed equitable and appropriate by the Committee and subject to any required action by the stockholders, any stock dividend or split, recapitalization, merger, consolidation, spin-off, reorganization, combination or exchange of shares or other similar corporate change.
8. Change of Control
Notwithstanding the provisions of Section 6, in the event of a change of control, all vesting on all unexercised stock options will accelerate to the change of control date. For purposes of this Plan, a "Change of Control" of the Corporation shall be deemed to have occurred at such time as (a) any "person" (as the term is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934 ("Exchange Act")) becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing 25 0% or more of the combined voting power of the Corporation's outstanding securities ordinarily having the right to vote at the election of directors; or (b) individuals who constitute the Board of Directors on the date hereof (the "Incumbent Board") cease for any reason to constitute at least a majority thereof, provided that any person becoming a director subsequent to the date hereof whose election was approved by at least a majority of the directors comprising the Incumbent Board, or whose nomination for election was approved by a majority of the Board of Directors of the Corporation serving under an Incumbent Board, shall be, for purposes of this clause (b), considered as he or she were a member of the Incumbent Board; or (c) merger, consolidation or sale of all or substantially all the assets of the Corporation occurs, unless such merger or consolidation shall have been affirmatively recommended to the Corporation's stockholders by a majority of the Incumbent Board; or (d) a proxy statement soliciting proxies from stockholders of the Corporation by someone other than the current management of the Corporation seeking stockholder approval of a plan or reorganization, merger or consolidation of the Corporation with one or more corporations as a result of which the outstanding shares of the Corporation's securities are actually exchanged for or converted into cash or property or securities not issued by the Corporation unless the reorganization, merger or consolidation shall have been affirmatively recommended to the Corporation's stockholders by a majority of the Incumbent Board.
9. Approvals
The issuance of shares pursuant to this Plan is expressly conditioned upon obtaining all necessary approvals from the Nevada Gaming Commission and upon obtaining stockholder approval of the Plan.
10. Effective Date of Plan
The effective date of the Plan is June 14, 1993.
11. Term: Amendment of Plan
This Plan shall expire on June 13, 2003 (except to options outstanding on that date). The Board may terminate the Plan at any time. The Board may amend the Plan at any time, provided however, the provisions of Section 5 pertaining to the amount of options to be granted and the timing of such option grants and the provisions of Section 6.1 pertaining to the option price of the Common Stock under option shall not be amended more than once every six months, other than to comport with changes in the Internal Revenue Code or the rules thereunder. Further provided however, that, without the approval of the holders of a majority of the outstanding shares of Common Stock; the total number of shares that may be sold, issued or transferred under the Plan may not be increased (except by adjustment pursuant to Section 7); the provisions of Section 3 regarding eligibility may not be modified; the purchase price at which shares may be offered pursuant to options may not be reduced (except by adjustment pursuant to Section 7); and the expiration date of the Plan may not be extended and no change may be made which would cause the Plan not to comply with Rule 1 6b-3 of the Exchange Act, as amended from time to time. No action of the Board or stockholders, however, may, without the consent of an Optionee, alter or impair such Optionee's rights under any option previously granted.
12. Withholding Taxes
The Corporation shall have the right to deduct withholding taxes from any payments made pursuant to the Plan or to make such other provisions as it deems necessary or appropriate to satisfy its obligations to withhold Federal, state or local income or other taxes incurred by reason of payments or the issuance of shares of Common Stock under the Plan. Whenever under the Plan, shares of Common Stock are to be delivered upon exercise of an option, the Committee shall be entitled to require as a condition of delivery that the grantee remit an amount sufficient to satisfy all Federal, state and other government withholding tax requirements related thereto.
13. Plan Not A Trust
Nothing contained in the Plan and no action taken pursuant to the Plan shall create or be construed to create a trust of any kind, or a fiduciary relationship, between the Corporation and any Optionee, the executor, administrator or other personal representative, or designated beneficiary of such Optionee, or any other persons. Any reserves that may be established by the Corporation in connection with the Plan shall continue to be part of the general funds of the Corporation and no individual or entity other than the Corporation shall have any interest in such funds until paid to an Optionee. If and to the extent that any Optionee or such Optionee's executor, administrator or other personal representative, as the case may be, acquires a right to receive any payment from the Corporation pursuant to the Plan, such right shall be no greater than the right of an unsecured general creditor of the Corporation.
14. Notices
Each Optionee shall be responsible for furnishing the Committee with the current and proper address for the mailing of notices and delivery of agreements, Common Stock and cash pursuant to the Plan. Any notices required or permitted to be given shall be deemed given if directed to the person to whom addressed at such address and mailed by regular United States mail, first-class and prepaid. If any item mailed to such address is returned as undeliverable to the addressee, mailing will be suspended until the Optionee furnishes the proper address. This provision shall not be construed as requiring the mailing of any notice or notification if such notice is not required under the terms of the Plan or any applicable law.
15. Separability of Provisions
If any provision of this Plan shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions hereof, and this Plan shall be construed and enforced as if such provisions had not been included.
16. Payment to Minors, etc.
Any benefit payable to or for the benefit of a minor, an incompetent person or other person incapable of receipting therefor shall be deemed paid when paid to such person's guardian or to the party providing or reasonably appearing to provide for the care of such person, and such payment shall fully discharge the Committee, the Corporation and other parties with respect thereto.
17. Headings and Captions
The headings and captions herein are provided for reference and convenience only, shall not be considered part of the Plan, and shall not be employed in the construction of the Plan.
18. Controlling Law
This Plan shall be construed and enforced according to the laws of the State of Nevada to the extent not preempted by Federal law, which shall
otherwise control.
SCHEDULE TO MASTER LOAN AGREEMENT
Golden Road Motor Inn, Inc. dba Atlantis Hotel and Casino
1175 W. Moana Lane, Suite 200
Reno, Nevada 89509
$339,794.60 Effective Date _____ Loan Transaction Number
1. THIS SCHEDULE is made between Golden Road Motor Inn, Inc. dba Atlantis Hotel and Casino, as Debtor, and U.S. BANCORP LEASING & FINANCIAL (which, together with its successor and assigns, will be called the "Secured Party") pursuant to the Master Loan Agreement dated as of September 22, 1998 (the "Loan Agreement"), the terms of which (including the definitions) are incorporated herein. If any terms hereof are inconsistent with the terms of the Loan Agreement, the terms hereof shall prevail.
2. FOR VALUE RECEIVED, Debtor hereby promises to pay to the order of Secured Party the principal amount of Three Hundred Thirty-Nine Thousand, Seven Hundred Ninety-Four and 60/100 Dollars ($339,794.60) with interest on any outstanding principal balance at the rate(s) specified herein from the Effective Date hereof until this Schedule shall have been paid in full in accordance with the following payment schedule: sixty (60) installments of $6,696.45 each, including the entire amount of interest accrued on this Schedule at the time of payment of each installment. The first payment shall be due on January 20, 1999 and a like payment shall be due on the same day of each succeeding month thereafter until the entire principal and interest have been paid. At the time of the final installment hereon, all unpaid principal and interest shall be due and owing. Each payment shall be applied first to accrued and unpaid interest, and the balance to the outstanding principal hereof. As a result, such final installment may be substantially more or substantially less than the installments specified herein.
3. The Debtor promises to pay interest on the principal balance outstanding at a rate of 6.77 percent per annum.
4. The Debtor may prepay this Schedule, in whole or in part, by paying
simultaneously with an in addition to the prepayment, a premium for such
prepayment privilege equal to the specified percent of the amount prepaid in
accordance with the following schedule, one (1) to twelve (12) months; five
(5.00)%, thirteen (13) to twenty-four (24) months; one (1.00)%, thereafter;
zero co:
Notwithstanding the foregoing, payments made within 30 days of the date an installment is due which do not exceed the scheduled amount of such installment shall not be considered prepayments.
5. Each of Debtor, if more than one, and all other parties who at any time may be liable hereon in any capacity, hereby jointly and severally waive diligence, demand, presentment, presentment for payment, protest, notice of protest and notice of dishonor of this Schedule, and authorize the Secured Party, without notice, to grant extensions in the time of payment of and reductions in the rate of interest on any moneys owing on this Schedule.
6. The following property is hereby made Collateral for all purposes under the Loan Agreement:
Various items of Hotel fixtures, furniture, and equipment located at the Golden Road Motor Inn, Inc. dba Atlantis Hotel and Casino at 3800 S. Virginia St., Reno, Nevada 89502; Washoe County and including but not limited to, all property improvements, miscellaneous upgrades, non-salvageable material, slot machines, buffet kitchen, casino bars, buffet bars, furniture, room accessories and partitions, ice machines, and spas.
Whether any of the foregoing is owned now or acquired later; all accessions, additions, replacements, and substitutions relating to any of the foregoing; all records of any kind relating to any of the foregoing; all proceeds relating to any of the foregoing (including insurance, general intangibles and accounts proceeds).
7. The Collateral hereunder shall be based at the following location(s):
3800 S. Virginia Street
Reno, NV 89502
COUNTY: Washoe
IN WITNESS WHEREOF, Debtor has executed this Schedule this 16th day of December, 1998.
Golden Road Motor Inn, Inc. dba Atlantis Hotel and Casino
By /s/Ben Farahi Name: Ben Farahi Title: CFO |
MASTER LOAN AGREEMENT |
1.0 PARTIES, COLLATERAL AND OBLIGATIONS
1.1 This Agreement is dated as of September 22, 1998. For valuable consideration, the receipt and sufficiency of which are hereby acknowledge, Golden Road Motor Inn, Inc. dba Atlantis Hotel and Casino (hereinafter call "Debtor") with offices at 1175 W. Moana Lane, Suite 200, Reno, Nevada 89509 intending to be legally bound, hereby promises to pay to U.S. BANCORP LEASING & FINANCIAL, an Oregon corporation having offices at P.O. Box 2177, 7659 S.W. Mohawk Street, Tualatin, Oregon 97062-2177 (hereinafter called "Secured Party"), any amounts set forth on any Schedule to Master Loan Agreement hereunder (the "Schedule(s)", all the terms of which are incorporated herein) and grants a security interest in and assigns, transfers and sets over to and to the successors and assigns thereof, the property specified in any Schedule hereunder wherever located, and any and all proceeds thereof, insurance recoveries, and all replacements, additions, accessions, accessories and substitutions thereto or therefor (hereunder called the "Collateral"). The security interest granted hereby is to secure payment of any and all liabilities or obligations of Debtor to the Secured Party, matured or unmatured, direct or indirect, absolute or contingent, heretofore arising, now existing or hereafter arising, and whether under this Agreement or under any other writing between Debtor and Secured Party) (all hereinafter called the "obligations" and/or the "liabilities").
1.2 Joint and Several Liability; Payment Terms. In the event there is more than one Debtor, all obligations shall be considered as joint and several obligations of all Debtors regardless of the source of Collateral or the particular Debtor with which the obligation originated. Interest shall be calculated on the basis of a 360-day year. All payments on any Schedule hereunder shall be made in lawful money of the United States at the post office address of the Secured Party or at such other place as the Secured Party may designate to Debtor in writing from time to time. In no event shall any Schedule hereunder be enforced in any way which permits Secured Party to collect interest in excess of the maximum lawful rate. Should interest collected exceed such rate, Secured Party shall refund such excess interest to Debtor. In such event, Debtor agrees that the Secured Party shall not be subject to any penalties for contracting for or collecting interest in excess of the maximum lawful rate.
1.3 Late Charge. If any of the obligations remains overdue for more than ten
(10) days, Debtor hereby agrees to pay on demand, as a late charge, an amount
equal to the lesser of (i) five percent (5.0) of each such overdue amount; or
(ii) the maximum percentage of any such overdue amount permitted by
applicable law as a late charge. Debtor agrees that the amount of such late
charge represents a reasonable estimate of the cost to secured Part of
processing a delinquent payment and that the acceptance of any late charge
shall not constitute a waiver of default with respect to the overdue amount
or prevent Secured Party from exercising any other available rights and
remedies.
2.0 WARRANTIES AND COVENANTS OF DEBTOR Debtor hereby represents, warrants and covenants that:
2.1 Business Organization Status and Authority. (i) Debtor is duly organized, validly existing and in good standing under the laws of the state of its organization and is qualified to do business in all states and countries in which such qualification is necessary; (ii) Debtor has the lawful power and authority to own its assets and to conduct the business in which it is engaged; and to execute and comply with the provisions of this Agreement and any related documents; (iii) the execution and delivery of this Agreement and any related documents have been duly authorized by all necessary action; (iv) no authorization, consent, approval, license or exemption of, or filing or registration with, any or all of the owners of Debtor or any governmental entity was, is or will be necessary to the valid execution, delivery, performance or full enforceability of this Agreement and any related documents. Except as specifically disclosed to Secured Party, Debtor utilizes no trade names in the conduct of its business and/or has not changed its name within the past five years.
2.2 Merger; Transfer of Assets. Debtor will not consolidate or merge with or into any other entity, liquidate or dissolve, distribute, sell, lease, transfer or dispose of all of its properties or assets or any substantial portion thereof other than in the ordinary course of its business, unless the Secured Party shall give its prior written consent, and the surviving, or successor entity or the transferee of such assets, as the case may be, shall assume, by a written instrument which is legal, valid and enforceable against such surviving or successor entity or transferee, all of the obligations of Debtor to Secured Party or any affiliate of Secured Party.
2.3 No Violation of Covenants or Laws. Debtor is not party to any agreement or subject to any restriction which materially and adversely affects its ability to perform its obligations under this Agreement and any related documents. The execution of and compliance with the terms of this Agreement and any related documents does not and will not (i) violate any provision of law, or (ii) conflict with or result in a breach of any order, injunction, or decree of any court of governmental authority or the formation documents of Debtor, or (iii) constitute or result in a default under any agreement, bond or indenture by which Debtor is bound or to which any of its property is subject, or (iv) result in the imposition of any lien or encumbrance upon any of Debtor's assets, except for any liens created hereunder or under any related documents.
2.4 Accurate Information. All financial information submitted to the Secured Party in regard to Debtor, was prepared in accordance with generally accepted accounting principles, consistently applied, and fairly and accurately depicts the financial position and results of operations of Debtor or such other person, as of the respective dates or for the respective periods, to which such information pertains. Debtor had good, valid and marketable title to all the properties and assets reflected as being owned by it on any balance sheets of Debtor submitted to Secured Party as of the dates thereof.
2.5 Judgments; Pending Legal Action. There are no judgments outstanding against Debtor, and there are no actions or proceedings pending or, to the best knowledge of Debtor, threatened against or affecting Debtor or any of its properties in any court or before any governmental entity which, if determined adversely to Debtor, would result in any material adverse change in the business, properties or assets, or in the condition, financial or otherwise, of Debtor or would materially and adversely affect the ability of Debtor to satisfy its obligations under this Agreement and any related documents.
2.6 No Breach of Other Agreements; Compliance with Applicable Laws. Debtor is not in breach of or in default under any loan agreement, indenture, bond, note or other evidence of indebtedness, or any other material agreement or any court order, injunction or decree or any lien, statute, rule or regulation. The operations of Debtor comply with all laws, ordinances and governmental rules and regulations applicable to them. Debtor has filed all Federal, state and municipal income tax returns which are required to be filed and has paid all taxes as shown on said returns and on all assessments billed to it to the extent that such taxes or assessments have become due. Debtor does not know of any other proposed tax assessment against it or of any basis for one.
2.7 Sale Prohibited. Debtor will not sell, dispose of or offer to sell or otherwise transfer the Collateral or any interest therein without the prior written consent of Secured Party.
2.8 Location of Collateral. The Collateral will be kept at the location(s) shown on the Schedule(s) hereunder and Debtor will promptly notify Secured Party of any change in the location(s) of the Collateral. Debtor will not remove the collateral from said location(s) without the prior written consent of Secured Party.
2.9 Collateral not a Fixture. Notwithstanding any presumption of applicable law, and irrespective of any manner of attachment, the Collateral shall not be deemed real property but shall retain its character as personal property. However, Debtor will at the option of Secured Party furnish the latter with a waiver or waivers in recordable form, signed by all persons having an interest in the real estate, of any interest in the Collateral which is or might be deemed to be prior to Secured Party's interest.
2.10 Perfection of Security Interest. Except for (i) the security interest granted hereby and (ii) any other security interest previously disclosed by Debtor to Secured Party in writing, Debtor is the owner of the Collateral free from any adverse lien, security interest or encumbrance. Debtor will defend the Collateral against all claims and demands of all persons at any time claiming any interest therein. Except as previously disclosed in writing to Secured Party, no financing statement covering any Collateral or any proceeds thereof is on file in any public office. At the request of Secured Party, Debtor will execute, acknowledge and deliver to Secured Party in recordable or fileable form, any document or instrument required by Secured Party to further the purposes of this Agreement, or to perfect its interest in the Collateral or to maintain such perfected interest in full force and effect, including (without limitation) any fixture filings and financial statements and any amendments and continuation statements thereto pursuant to the Uniform Commercial Code, in form satisfactory to Secured Party, and will pay the cost of filing the same or filing or recording this Agreement in all public offices wherever filing or recording is deemed by Secured Party to be necessary or desirable. Debtor hereby agrees that this Agreement shall be and constitute a financing statement for purposes of the Uniform Commercial Code.
2.11 Insurance. Unless otherwise agreed, Debtor will have and maintain insurance from financially sound carriers at all times with respect to all Collateral against risks of fire (including so-called extended coverage), theft, collision, "mysterious disappearance" and other such risks as Secured Party may require, containing such terms, in such form, for such periods and written by such companies as may be satisfactory to Secured Party; each insurance policy shall name Secured Party as loss payee and shall be payable to Secured Party and Debtor as their interest may appear; all policies of insurance shall provide for ten days' written minimum cancellation notice to Secured Party; Debtor shall furnish Secured Party with certificates or other evidence satisfactory to Secured Party of compliance with the foregoing insurance provisions.
2.12 Use of the Collateral. Debtor will use the Collateral for business purposes only and operate it by qualified personnel in accordance with applicable manufacturers' manuals. Debtor will keep the Collateral free from any adverse lien or encumbrance and in good working order, condition and repair and will not waste or destroy the Collateral or any part thereof; Debtor will keep the Collateral appropriately protected from the elements, and will furnish all required parts and servicing (including any contract service necessary to maintain the benefit of any warranty of the manufacturer); Debtor will not use the Collateral in violation of any statute, ordinance, regulation or order; and Secured Party may examine and inspect the Collateral and any and all books and records of Debtor during business hours at any tome; such right of inspection shall include the right to copy Debtor's books and records and to converse with Debtor's officers, employees, agents, and independent accountants.
2.13 Taxes and Assessments. Debtor will pay promptly when due all taxes, assessments, levies, imposts, duties and charges, of any kind or nature, imposed upon the Collateral or for its use or operation or upon this Agreement or upon any instruments evidencing the obligations.
2.14 Financial Statements. Debtor shall furnish Secured Party within ninety
(90) days after the close of each fiscal year of Debtor, its financial
statements (including, without limitation, a balance sheet, a statement of
income and surplus account and a statement of changes in financial position)
for the immediately preceding fiscal year, setting forth the corresponding
figures for the prior fiscal year in comparative form, all in reasonable
detail without any qualification or exception deemed material by Secured
Party. Such financial statements shall be prepared at least as a review by
Debtor's independent certified accountants and, if prepared as an audit,
shall be certified by such accountants. Debtor shall also furnish Secured
Party with any other financial information deemed necessary by Secured Party.
Each financial statement submitted by Debtor to Secured Party shall be
accompanied by a certificate signed by the chief executive officer, the chief
operating officer or the chief financial officer of Debtor, certifying that
(i) such financial statement was prepared in accordance with the generally
accepted accounting principles consistently applied and fairly and accurately
presents the Debtor's financial condition and results of operations for the
period to which it pertains, and (ii) no event of default has occurred under
this Agreement during the period to which such financial statements pertains.
3.0 EVENTS OF DEFAULT
3.1 the following shall be considered events of default: (i) failure on the part of Debtor to promptly perform in complete accordance with its representations, warranties and covenants made in this Agreement or in any other agreement with Secured Party, including, but not limited to, the payment of any liability, with interest, when due, or default by Debtor under the provisions of any other material agreement to which Debtor is party; (ii) the death of Debtor of an individual or the dissolution of Debtor if a business organization; (iii) more than one of the present officers of Debtor leave the business except for reason of the death or disability of an individual; (iv) the filing of any petition or complain under the Federal Bankruptcy Code or other federal or state acts of similar nature, by or against Debtor; or an assignment for the benefit of creditors by Debtor; (v) an application for or the appointment of a Receiver, Trustee or Conservator, voluntary or involuntary, by or against Debtor or for any substantial assets of Debtor, (vi) insolvency of Debtor under either the Federal Bankruptcy Code or applicable principles of equity; (vii) entry of judgment, issuance of any garnishment or attachment, or filing of any lien, claim or government attachment against the Collateral or which, in Secured Party's sole discretion, might impair the Collateral; (viii) the determination by Secured Party that a material misrepresentation of fact has been made by Debtor in this Agreement or in any writing supplementary or ancillary hereto; (ix) a determination by Secured Party that Debtor has suffered a material adverse change in its financial condition from the date of this Agreement; or (x) bankruptcy, insolvency, termination, dissolution or default of any guarantor for Debtor.
4.0 REMEDIES
4.1. Upon the happening of any event of default which is not cured within ten
(10) days, or at any time thereafter: (i) all liabilities of Debtor shall, at
the option of Secured Party, become immediately due and payable; (ii) Secured
Party shall have and may exercise all of the rights and remedies granted to a
Secured Party under the Uniform Commercial Code; (iii) Secured Party shall
have the right, immediately, and without notice or other action, to set-off
against any of Debtor's liabilities to Secured Party any money owed by
Secured Party in any capacity to Debtor, whether or not due, and Secured
Party shall be deemed to have exercised such right of set-off and to have
made a charge against any such money immediately upon the occurrence of such
default event though actual book entries may be made at some time subsequent
thereto; (iv) Secured Party may proceed with or without judicial process to
take possession of all or any part of the Collateral; Debtor agrees that upon
receipt of notice of Secured Party's intention to take possession of all or
any part of said Collateral, Debtor will do everything necessary to make same
available to Secured Party (including, without limitation, assembling the
Collateral and making it available to Secured Party at a place designated by
Secured Party which is reasonably convenient to Debtor and Secured Party);
and so long as Secured Party acts in a commercially reasonable manner, Debtor
agrees to assign, transfer and deliver at any time the whole or any portion
of the Collateral or any rights or interest therein in accordance with the
Uniform Commercial Code and without limiting the scope of Secured Party's
rights thereunder, (v) Secured Party may sell the Collateral at public or
private sale or in any other commercially reasonable manner and, at the
option of Secured Party, in bulk or in parcels and with or without having the
Collateral at the sale or other disposition, and Debtor agrees that in case
of sale or other disposition of the Collateral, or any portion thereof,
Secured Party shall apply all proceeds first to all costs and expenses of
disposition, including attorneys' fees, and then to Debtor's obligations to
Secured Party, (vi) Secured Party may elect to retain the Collateral or any
part thereof in satisfaction of all sums due from Debtor upon notice to
Debtor and any other party as may be required by the Uniform Commercial Code.
All remedies provided in this paragraph shall be cumulative. Secured Party
may exercise any one or more of such remedies in addition to any and all
other remedies Secured Party may have under any applicable law or in equity.
4.2 Expenses; Disposition. Upon default, all amounts due and to become due hereunder shall, without notice, bear interest at the lesser of (i) twelve percent (12%) per annum or (ii) the maximum rate per annum which Secured Party is permitted by law to charge from the date such amounts are due until paid. Debtor shall pay all reasonable expenses of realizing upon the Collateral hereunder upon default and collecting all liabilities of Debtor to Secured Party, which reasonable expenses shall include attorneys' fees, whether or not litigation is commenced and whether incurred at trial, on appeal, or in any other proceeding. Any notification of a sale or other disposition of Collateral or of other action by Secured Party required to be given by Secured Party, will be sufficient if given personally, mailed, or delivered by facsimile machine or overnight carrier not less than five (5) days prior to the day on which such sale or other disposition will be made or action taken, and such notification shall be deemed reasonable notice.
5.0 MISCELLANEOUS
5.1 No Implied Waivers; Entire Agreement. The waiver by Secured Party of any default hereunder or of any provisions hereof shall not discharge any party hereto from liability hereunder and such waiver shall be limited to the particular event of default and shall not operate as a waiver of any subsequent default. This Agreement and any Schedule hereunder are non- cancelable. No modification of this Agreement or waiver of any right of Secured Party, hereunder shall be valid unless in writing and signed by an authorized officer of Secured Party. No failure on the part of Secured Party to exercise, or delay in exercising, any right or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right or remedy. The provisions of this Agreement and the rights and remedies granted to Secured Party herein shall be in addition to, and not in limitation of those of any other agreement with Secured Party or any other evidence of any liability held by Secured Party. This Agreement and any Schedule hereunder (a "Transaction") embody the entire agreement between the parties and supersede all prior agreements and understandings relating to the same subject matter, except in any case where the Secured Party takes an assignment from a vendor of its security interest in the same Collateral, in which case the terms of the Transaction shall be incorporated into the assigned agreement and shall prevail over any inconsistent terms therein but shall not be construed to create a new contract.
5.2. Choice of Law. This Agreement and the rights of the parties hereto shall be governed by applicable Federal law and the laws of the State of Nevada. Any action arising out of this Agreement may be litigated under the laws of Nevada and submitted to the jurisdiction of Nevada, and that service of process by certified mail, return receipt requested, will be sufficient to confer personal jurisdiction over the Debtor.
5.3. Protection of the Collateral. At its option, Secured Party may discharge taxes, liens or other encumbrances at any time levied or placed on the Collateral, may pay for insurance on the Collateral and may pay for the maintenance and preservation of the Collateral. Debtor agrees to reimburse Secured Party on demand for any payment made or any expense incurred by Secured Party pursuant to the foregoing authorization. Any payments made by Secured Party shall be immediately due and payable by Debtor and shall bear interest at the rate of fifteen percent (15%) per annum. Until default, Debtor may retain possession of the Collateral and use it in any lawful manner not inconsistent with the provisions of this Agreement and any other agreement between Debtor and Secured Party, and not inconsistent with any policy of insurance thereon.
5.4. Binding Agreement; Time of the Essence. This Agreement shall take effect as a sealed instrument and shall be binding upon and shall inure to the benefit of the parties hereto, their respective heirs, executors, administrators, successors, and assigns. Time is of the essence with respect to the performance of Debtors obligations under this Agreement and any other agreement between Debtor and Secured Party.
5.5 Enforceability. Any term, clause or provision of this Agreement or of any evidence of indebtedness from Debtor to Secured Party which is unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective only to the extent of such prohibition or unenforceability without invalidating the remaining terms or clauses of such provision or the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such term, clause or provision in any other jurisdiction.
5.6 Notices. Any notices or demands required to be given herein shall be given to the parties in writing by United States first class mail (express, certified or otherwise) at the addresses set forth on page I of this Agreement or to such other addresses as the parties may hereafter substitute by written notice given in the manner prescribed in this paragraph.
5.7 Additional Security. If there shall be any other collateral for any of the obligations, or for the obligations of any guarantor thereof, Secured Party may proceed against and/or enforce any or all of the Collateral and such collateral in whatever order it may, in its sole discretion, deem appropriate. Any amount(s) received by Secured Party from whatever source and applied by it to any of the obligations shall be applied in such order of application as Secured Party shall from time to time, in its sole discretion, elect.
6.0 ASSIGNMENT
6.1 SECURED PARTY MAY SELL OR ASSIGN ANY AND ALL RIGHT, TITLE AND INTEREST IT HAS IN THE COLLATERAL AND/OR ARISING UNDER THIS AGREEMENT TO A FINANCIAL INSTITUTION. DEBTOR SHALL, UPON THE DIRECTION OF SECURED PARTY: 1) EXECUTE ALL DOCUMENTS NECESSARY TO EFFECTUATE SUCH ASSIGNMENT AND, 2) PAY DIRECTLY AND PROMPTLY TO SECURED PARTYS ASSIGNEE WITHOUT ABATEMENT, DEDUCTION OR SET- OFF, ALL AMOUNTS WHICH HAVE BECOME DUE UNDER THE ASSIGNED AGREEMENTS. SECURED PARTY'S ASSIGNEE SHALL HAVE ANY AND ALL RIGHTS, IMMUNITIES AND DISCRETION OF SECURED PARTY HEREUNDER AND SHALL BE ENTITLED TO EXERCISE ANY REMEDIES OF SECURED PARTY HEREUNDER. ALL REFERENCES HEREIN TO SECURED PARTY SHALL INCLUDE SECURED PARTYS ASSIGNEE (EXCEPT THAT SAID ASSIGNEE SHALL NOT BE CHARGEABLE WITH ANY OBLIGATIONS OR LIABILITIES HEREUNDER OR IN RESPECT HEREOF). DEBTOR WILL NOT ASSERT AGAINST SECURED PARTY'S ASSIGNEE ANY DEFENSE, COUNTERCLAIM OR SET-OFF WHICH DEBTOR MAY HAVE AGAINST SECURED PARTY.
6.2 DEBTOR SHALL NOT ASSIGN OR IN ANY WAY DISPOSE OF ALL OR ANY OF ITS RIGHTS OR OBLIGATIONS UNDER THIS AGREEMENT OR ENTER INTO ANY AGREEMENT REGARDING OF ALL OR ANY PART OF THE COLLATERAL WITHOUT THE PRIOR WRITTEN CONSENT OF SECURED PARTY WHICH SHALL NOT BE UNREASONABLY WITHHELD. IN CONNECTION WITH THE GRANTING OF SUCH CONSENT AND THE PREPARATION OF NECESSARY DOCUMENTATION, A FEE SHALL BE ASSESSED EQUAL TO ONE PERCENT (1%) OF THE TOTAL REMAINING BALANCE THEN DUE HEREUNDER.
7.0 POWER OF ATTORNEY
7.1 Secured Party is hereby appointed Debtor's attorney-in-fact to sign Debtor's name and to make non-material amendments (including completing and conforming the description of the Collateral) on any document in connection with this Agreement (including any financing statement) and to obtain, adjust, settle, and cancel any insurance required by this Agreement and to endorse any drafts in connection with such insurance.
In Witness Whereof, the parties hereto have caused this Agreement to be duly executed the 3rd day of Oct., 1998.
U.S. BANCORP LEASING & FINANCIAL Golden Road Motor Inn, Inc.
dba Atlantis Hotel and Casino (Debtor)
By: By: /s/ Ben Farahi
An authorized officer thereof Authorized Corporate Officer
|
By: Authorized Corporate Officer
GUARANTY
In order to induce U.S. BANCORP LEASING & FINANCIAL (the "Creditor") to enter into one or more financing arrangements in the form of lease(s) or loan(s) (referred to herein as the "Transaction") with, or otherwise directly or indirectly making property available to GOLDEN ROAD MOTOR INN, INC. dba Atlantis Hotel & Casino (the "Obligor) and/or to induce Creditor to grant to Obligor such renewals, extensions, forbearances, releases of collateral or other relinquishments of rights, whether in connection with the Transaction(s) or otherwise, as Creditor may in its sole discretion deem advisable, and in consideration of any agreements heretofore or hereafter entered into between Creditor and Obligor (any and all such notes, security agreements, loan agreements, lease agreements, entered into between Obligor and Creditor together with any and all schedules and riders thereto and any and all other instruments or agreements including, without limitation, pledge agreements and assignments, executed and delivered by Obligor in connection therewith, being hereinafter collectively called the "Agreements"), and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, EACH OF THE UNDERSIGNED (EACH OF WHOM IS HEREINAFTER CALLED A "GUARANTOR"), INTENDING TO BE LEGALLY BOUND, HEREBY JOINTLY AND SEVERALLY GUARANTEES THE FULL, PROMPT, COMPLETE AND FINAL PAYMENT AND PERFORMANCE OF ALL THE OBLIGOR'S OBLIGATIONS PURSUANT TO THE AGREEMENTS OR IN ANY WAY ARISING THEREFROM AND ANY AND ALL OTHER OBLIGATIONS AND LIABILITIES OF OBLIGOR TO CREDITOR, WHETHER NOW IN EXISTENCE OR ARISING HEREAFTER, AND WHETHER DIRECT OR INDIRECT, CONTINGENT OR ABSOLUTE, MATURED OR UNMATURED, SECURED OR UNSECURED, AND HOWEVER CONTRACTED OR ARISING (ALL SUCH OBLIGATIONS AND LIABILITIES BEING HEREINAFTER CALLED THE "OBLIGATIONS").
Each Guarantor hereby promises to pay Creditor when due, on demand, all indebtedness of any kind or nature emanating from the Agreements (including, without limitation, if an event of default shall occur under the Agreements, payment on demand of all unpaid sums to become due under the defaulted Agreements for the entire term thereof), whether now or hereafter arising and however and whenever evidenced; and each Guarantor agrees to indemnify and hold Creditor harmless from and against any and all losses, liabilities and costs emanating from any failure of Obligor to fully, promptly and completely satisfy the Obligations. For purposes hereof, (i) "losses, liabilities and costs" shall include (without limitation), all losses, liabilities, obligations, claims, demands, judgments, costs and expenses of whatever kind or nature (including, without limitation, attorneys' fees) and (ii) "emanating" from an event or cause shall include (without limitation) in any way directly or indirectly being caused by or in any other way arising out of such event or cause.
Each Guarantor hereby waives any notice of default or nonpayment or of late or inadequate satisfaction in regard to the Obligations. In particular (and not in limitation of the foregoing), each Guarantor hereby agrees that, in enforcing this Guaranty, Creditor shall not be required (i) to demand payment of the amount due (known as "demand"); (ii) to present for payment any evidence of the Obligations (known as "presentment" or "presentment for payment"), (iii) to give notice that amounts due have not been paid (known as "notice of dishonor"); or (iv) to obtain an official certification of nonpayment (known as "protest") or to give any Guarantor notice of any such "protest;" and each Guarantor hereby waives demand, presentment, presentment for payment, notice of dishonor, protest and notice of protest, as aforesaid. Each Guarantor hereby further waives notice of acceptance hereof and any and all other notices to which such Guarantor may be entitled.
Each Guarantor hereby consents and agrees that without any further notice to, or assent by Guarantor, the liability of Obligor or any other guarantor of the Obligations may from time to time, in whole or in part, be extended, renewed, continued, amended modified, composed, accelerated, supplemented, compromised, settled or released in Creditor's sole discretion, and that any collateral for any of the Obligations or for any guaranty thereof (including this Guaranty) may from time to time, in whole or part, be exchanged, sold or surrendered in Creditor's sole discretion. Each Guarantor hereby agrees that no such extension, renewal, continuation, amendment, modification, composition, acceleration, supplement, compromise, settlement, release, exchange, sale or surrender shall in any way impair, affect or release the liability of any Guarantor hereunder or constitute a waiver of any of Creditor's rights hereunder.
This Guaranty is unlimited, absolute, irrevocable and unconditional and shall continue in full force and effect until all the Obligations shall have been fully, completely and finally satisfied and paid. The obligations of each Guarantor hereunder shall continue and survive the repossession of any property or other property leased pursuant to the Agreements (or any property in which Creditor has a security interest securing any of the Obligations) whether or not any such repossession constitutes an "election of remedies" against the Obligor or any other person. Each Guarantor agrees to be obligated hereunder notwithstanding any termination of the Agreements in whole or part by operation of law or any unenforceability or invalidity of the Agreements for any reason whatsoever (including, without limitation invalidity or voidness ab initio and/or partial or complete unenforceability as a result of impossibility or impracticability of performance or frustration of the purpose of the Agreements). The obligations of the Guarantors hereunder are joint and several and shall not be subject to any abatement, setoff, defense or counterclaim for any cause whatsoever.
Each Guarantor hereby agrees that its obligations hereunder are direct and primary and that Creditor may proceed directly and in the first instance against each or any Guarantor or combination of Guarantors and have its remedy hereunder without first being obliged to resort to any other right or remedy or security for any of the Obligations. Each Guarantor hereby waives any right to require Creditor to proceed against the Obligor or to proceed against any other Guarantor or to proceed against any other guarantor of the Obligations. If there shall be any securities for any of the Obligations, or for the obligations of any Guarantor hereunder, or for the obligations of any other guarantor of any of the Obligations, Creditor may proceed against and/or enforce any or all of such securities in whatever order it may, in its sole discretion deem appropriate. Any amount(s) received by Creditor from whatever source and applied by it to any of the Obligations shall be applied in such order of application as Creditor shall, in its sole discretion, elect.
In the event of any default in regard to any Guarantor's obligations hereunder, or in the event of death, incompetency, termination, dissolution or insolvency of the Obligor, or if a receiver, liquidator or conservator be appointed for any part of the property or assets of the Obligor, or if the Obligor makes an assignment for the benefit of creditors, or if the Obligor shall file a voluntary petition in bankruptcy or any involuntary petition in bankruptcy shall be filed against it then, and in any such case, each Guarantor agrees to pay to Creditor, upon demand, the full amount which would be payable hereunder by such Guarantor if all the Obligations and indebtedness including, but not limited to, any remaining payments owing pursuant to the Agreements or any of the other guaranteed Agreement, were then due and payable.
Notwithstanding any provision hereof or any provision of any other instrument or agreement, or any presumption of applicable law or principle of legal construction to the contrary: (i) nothing shall discharge or satisfy any Guarantor's obligations hereunder except full, complete and final payment and satisfaction of all the Obligations, Indebtedness and Indemnities; (ii) each Guarantor hereby waives any and all defenses to its obligations hereunder including, without limitation, any defense arising by reason of any cessation of the Obligor's business or any bankruptcy, insolvency or business failure of the Obligor or any other person; and (iii) no Guarantor shall have any right of subrogation against the Obligor, and each Guarantor hereby waives any and all rights of subrogation it may have against the Obligor, to enforce any right or remedy which Creditor has or may hereafter have against the Obligor, and waives the benefits of, and any and all rights to participate in, any security or securities now or hereafter held by Creditor. It is expressly understood by each Guarantor that payments received by Creditor from or on behalf of Obligor shall be solely for the benefit of Creditor and shall not benefit the Guarantor in any way. Each Guarantor hereby further acknowledges that such Guarantor is not and shall be construed as a "Creditor" of Obligor by virtue of this Guaranty.
Each Guarantor hereby represents and warrants to Creditor that all information concerning such Guarantor, including (without limitation) financial statements and other financial information, furnished to Creditor in connection with the Agreements or any of the other Guaranteed Agreements, was true, complete and accurate as of the date of delivery thereof to Creditor, and that all such information remains true, complete and accurate, and that there have been no material adverse changes in such Guarantor's financial condition as of the date hereof. In the event of any breach of any Guarantor's representations and warranties herein or any material adverse change in the financial condition of any Guarantor, upon the request of Creditor, such Guarantor shall promptly furnish to Creditor such additional security for the performance of such Guarantor's obligations hereunder as Creditor may reasonably request.
No notice of termination of this Guaranty shall be effective unless and until such notice shall be in writing and executed by Guarantor and shall have been received at Creditor's principal corporate headquarters at P.O. Box 2177, 7659 S.W. Mohawk Street, Tualatin, Oregon 97062-2177; provided, however, that in the event of such notice, this Guaranty shall continue in full force and effect with regard to all Obligations created, existing or arising prior to the date of such receipt. No modification hereof or amendment hereto and no waiver of any term or provision hereof shall be valid unless in writing and signed by an authorized officer of Creditor. No delay or failure on the part of Creditor in the exercise of any right or remedy shall operate as a waiver thereof, and no single or partial exercise by Creditor of any right or remedy shall preclude any other or further exercise thereof or the exercise of any other right or remedy. No action of Creditor permitted hereunder shall invalidate or in any way impair this Guaranty. No waiver of any right or remedy hereunder shall constitute a waiver of any other or further right or remedy hereunder.
Each Guarantor hereby consents and agrees that without any further notice to, or assent by Guarantor, this Guaranty may be assigned by Creditor and reassigned, in the sole discretion of Creditor or its assignee. As used herein, the term "Creditor" includes Creditor and any successor or assign of Creditor. This Guaranty shall be binding upon each Guarantor, and upon the legal successors, representatives, and assigns of such Guarantor. Each and every waiver made herein by any Guarantor is and shall be deemed to be and construed as an absolute, irrevocable and unconditional waiver of the right waived.
This Guaranty is intended to be legal, valid, binding and enforceable in accordance with its terms. Whenever possible, each term and provision of this Guaranty shall be interpreted so as to be effective and to effectuate its intent under applicable law. If any term or provision of this Guaranty shall be unenforceable, invalid or prohibited in any jurisdiction under applicable law, such term or provision shall be ineffective in such jurisdiction but only to the extent of such unenforceability, invalidity or prohibition, and the remainder of such term or provision, and the other terms and provisions of the Guaranty, shall not thereby be affected or impaired in such jurisdiction, nor shall any of the terms or provisions of the Guaranty be thereby affected or impaired in any way in any other jurisdiction.
This Guaranty shall be governed by the construed in accordance with Federal Law and the laws of the State of Nevada and that service of process by certified mail, return receipt requested, will be sufficient to confer personal jurisdiction over such Guarantor for purposes of litigating any actions arising hereunder in the courts of such State. This Guaranty is in addition to, and not in limitation or derogation of, any and all other guaranties of the Obligations executed by any Guarantor. In the event of any conflict between the provisions of this Guaranty and those of any such other guaranty, the provisions of this Guaranty shall govern. Each Guarantor hereby agrees and acknowledges that time is of the essence with regard to the performance of such Guarantor's obligations hereunder. This Guaranty shall take effect as a sealed instrument.
NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, THE OBLIGATION OF THE GUARANTORS TOGETHER HEREUNDER IS LIMITED TO $1,000,000.00, AND IS JOINT AND SEVERAL.
IN WITNESS WHEREOF, each of the undersigned has caused this Guaranty to be duly executed and delivered as of 9th day of Sept., 1998.
Witness: Behrouz Ben Farahi /s/ John Bydalek /s/Behrouz Ben Farahi Print Name: John Bydalek an individual Address: 1175 W. Moana Ln. SS# #200, Reno, NV 89509 Witness: Bahram Bob Farahi /s/ John Bydalek /s/Bahram Bob Farahi Print Name: John Bydalek an individual Address: SS# Witness: John Farahi /s/ John Bydalek /s/John Farahi Print Name: John Bydalek an individual Address: SS# 000-00-0000 |
GUARNATOR'S SIGNATURE MAY NOT BE WITNESSED BY GUARANTOR'S SPOUSE OR OTHER FAMILY MEMBER
GUARANTY
In order to induce U.S. BANCORP LEASING & FINANCIAL (the "Creditor") to enter into one or more financing arrangements in the form of lease(s) or loan(s) (referred to herein as the "Transaction") with, or otherwise directly or indirectly making property available to GOLDEN ROAD MOTOR INN, INC. dba Atlantis Hotel & Casino (the "Obligor) and/or to induce Creditor to grant to Obligor such renewals, extensions, forbearances, releases of collateral or other relinquishments of rights, whether in connection with the Transaction(s) or otherwise, as Creditor may in its sole discretion deem advisable, and in consideration of any agreements heretofore or hereafter entered into between Creditor and Obligor (any and all such notes, security agreements, loan agreements, lease agreements, entered into between Obligor and Creditor together with any and all schedules and riders thereto and any and all other instruments or agreements including, without limitation, pledge agreements and assignments, executed and delivered by Obligor in connection therewith, being hereinafter collectively called the "Agreements"), and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, EACH OF THE UNDERSIGNED (EACH OF WHOM IS HEREINAFTER CALLED A "GUARANTOR"), INTENDING TO BE LEGALLY BOUND, HEREBY JOINTLY AND SEVERALLY GUARANTEES THE FULL, PROMPT, COMPLETE AND FINAL PAYMENT AND PERFORMANCE OF ALL THE OBLIGOR'S OBLIGATIONS PURSUANT TO THE AGREEMENTS OR IN ANY WAY ARISING THEREFROM AND ANY AND ALL OTHER OBLIGATIONS AND LIABILITIES OF OBLIGOR TO CREDITOR, WHETHER NOW IN EXISTENCE OR ARISING HEREAFTER, AND WHETHER DIRECT OR INDIRECT, CONTINGENT OR ABSOLUTE, MATURED OR UNMATURED, SECURED OR UNSECURED, AND HOWEVER CONTRACTED OR ARISING (ALL SUCH OBLIGATIONS AND LIABILITIES BEING HEREINAFTER CALLED THE "OBLIGATIONS").
Each Guarantor hereby promises to pay Creditor when due, on demand, all indebtedness of any kind or nature emanating from the Agreements (including, without limitation, if an event of default shall occur under the Agreements, payment on demand of all unpaid sums to become due under the defaulted Agreements for the entire term thereof), whether now or hereafter arising and however and whenever evidenced; and each Guarantor agrees to indemnify and hold Creditor harmless from and against any and all losses, liabilities and costs emanating from any failure of Obligor to fully, promptly and completely satisfy the Obligations. For purposes hereof, (i) "losses, liabilities and costs" shall include (without limitation), all losses, liabilities, obligations, claims, demands, judgments, costs and expenses of whatever kind or nature (including, without limitation, attorneys' fees) and (ii) "emanating" from an event or cause shall include (without limitation) in any way directly or indirectly being caused by or in any other way arising out of such event or cause.
Each Guarantor hereby waives any notice of default or nonpayment or of late or inadequate satisfaction in regard to the Obligations. In particular (and not in limitation of the foregoing), each Guarantor hereby agrees that, in enforcing this Guaranty, Creditor shall not be required (i) to demand payment of the amount due (known as "demand"); (ii) to present for payment any evidence of the Obligations (known as "presentment" or "presentment for payment"), (iii) to give notice that amounts due have not been paid (known as "notice of dishonor"); or (iv) to obtain an official certification of nonpayment (known as "protest") or to give any Guarantor notice of any such "protest;" and each Guarantor hereby waives demand, presentment, presentment for payment, notice of dishonor, protest and notice of protest, as aforesaid. Each Guarantor hereby further waives notice of acceptance hereof and any and all other notices to which such Guarantor may be entitled.
Each Guarantor hereby consents and agrees that without any further notice to, or assent by Guarantor, the liability of Obligor or any other guarantor of the Obligations may from time to time, in whole or in part, be extended, renewed, continued, amended modified, composed, accelerated, supplemented, compromised, settled or released in Creditor's sole discretion, and that any collateral for any of the Obligations or for any guaranty thereof (including this Guaranty) may from time to time, in whole or part, be exchanged, sold or surrendered in Creditor's sole discretion. Each Guarantor hereby agrees that no such extension, renewal, continuation, amendment, modification, composition, acceleration, supplement, compromise, settlement, release, exchange, sale or surrender shall in any way impair, affect or release the liability of any Guarantor hereunder or constitute a waiver of any of Creditor's rights hereunder.
This Guaranty is unlimited, absolute, irrevocable and unconditional and shall continue in full force and effect until all the Obligations shall have been fully, completely and finally satisfied and paid. The obligations of each Guarantor hereunder shall continue and survive the repossession of any property or other property leased pursuant to the Agreements (or any property in which Creditor has a security interest securing any of the Obligations) whether or not any such repossession constitutes an "election of remedies" against the Obligor or any other person. Each Guarantor agrees to be obligated hereunder notwithstanding any termination of the Agreements in whole or part by operation of law or any unenforceability or invalidity of the Agreements for any reason whatsoever (including, without limitation invalidity or voidness ab initio and/or partial or complete unenforceability as a result of impossibility or impracticability of performance or frustration of the purpose of the Agreements). The obligations of the Guarantors hereunder are joint and several and shall not be subject to any abatement, setoff, defense or counterclaim for any cause whatsoever.
Each Guarantor hereby agrees that its obligations hereunder are direct and primary and that Creditor may proceed directly and in the first instance against each or any Guarantor or combination of Guarantors and have its remedy hereunder without first being obliged to resort to any other right or remedy or security for any of the Obligations. Each Guarantor hereby waives any right to require Creditor to proceed against the Obligor or to proceed against any other Guarantor or to proceed against any other guarantor of the Obligations. If there shall be any securities for any of the Obligations, or for the obligations of any Guarantor hereunder, or for the obligations of any other guarantor of any of the Obligations, Creditor may proceed against and/or enforce any or all of such securities in whatever order it may, in its sole discretion deem appropriate. Any amount(s) received by Creditor from whatever source and applied by it to any of the Obligations shall be applied in such order of application as Creditor shall, in its sole discretion, elect.
In the event of any default in regard to any Guarantor's obligations hereunder, or in the event of death, incompetency, termination, dissolution or insolvency of the Obligor, or if a receiver, liquidator or conservator be appointed for any part of the property or assets of the Obligor, or if the Obligor makes an assignment for the benefit of creditors, or if the Obligor shall file a voluntary petition in bankruptcy or any involuntary petition in bankruptcy shall be filed against it then, and in any such case, each Guarantor agrees to pay to Creditor, upon demand, the full amount which would be payable hereunder by such Guarantor if all the Obligations and indebtedness including, but not limited to, any remaining payments owing pursuant to the Agreements or any of the other guaranteed Agreement, were then due and payable.
Notwithstanding any provision hereof or any provision of any other instrument or agreement, or any presumption of applicable law or principle of legal construction to the contrary: (i) nothing shall discharge or satisfy any Guarantor's obligations hereunder except full, complete and final payment and satisfaction of all the Obligations, Indebtedness and Indemnities; (ii) each Guarantor hereby waives any and all defenses to its obligations hereunder including, without limitation, any defense arising by reason of any cessation of the Obligor's business or any bankruptcy, insolvency or business failure of the Obligor or any other person; and (iii) no Guarantor shall have any right of subrogation against the Obligor, and each Guarantor hereby waives any and all rights of subrogation it may have against the Obligor, to enforce any right or remedy which Creditor has or may hereafter have against the Obligor, and waives the benefits of, and any and all rights to participate in, any security or securities now or hereafter held by Creditor. It is expressly understood by each Guarantor that payments received by Creditor from or on behalf of Obligor shall be solely for the benefit of Creditor and shall not benefit the Guarantor in any way. Each Guarantor hereby further acknowledges that such Guarantor is not and shall be construed as a "Creditor" of Obligor by virtue of this Guaranty.
Each Guarantor hereby represents and warrants to Creditor that all information concerning such Guarantor, including (without limitation) financial statements and other financial information, furnished to Creditor in connection with the Agreements or any of the other Guaranteed Agreements, was true, complete and accurate as of the date of delivery thereof to Creditor, and that all such information remains true, complete and accurate, and that there have been no material adverse changes in such Guarantor's financial condition as of the date hereof. In the event of any breach of any Guarantor's representations and warranties herein or any material adverse change in the financial condition of any Guarantor, upon the request of Creditor, such Guarantor shall promptly furnish to Creditor such additional security for the performance of such Guarantor's obligations hereunder as Creditor may reasonably request.
No notice of termination of this Guaranty shall be effective unless and until such notice shall be in writing and executed by Guarantor and shall have been received at Creditor's principal corporate headquarters at P.O. Box 2177, 7659 S.W. Mohawk Street, Tualatin, Oregon 97062-2177; provided, however, that in the event of such notice, this Guaranty shall continue in full force and effect with regard to all Obligations created, existing or arising prior to the date of such receipt. No modification hereof or amendment hereto and no waiver of any term or provision hereof shall be valid unless in writing and signed by an authorized officer of Creditor. No delay or failure on the part of Creditor in the exercise of any right or remedy shall operate as a waiver thereof, and no single or partial exercise by Creditor of any right or remedy shall preclude any other or further exercise thereof or the exercise of any other right or remedy. No action of Creditor permitted hereunder shall invalidate or in any way impair this Guaranty. No waiver of any right or remedy hereunder shall constitute a waiver of any other or further right or remedy hereunder.
Each Guarantor hereby consents and agrees that without any further notice to, or assent by Guarantor, this Guaranty may be assigned by Creditor and reassigned, in the sole discretion of Creditor or its assignee. As used herein, the term "Creditor" includes Creditor and any successor or assign of Creditor. This Guaranty shall be binding upon each Guarantor, and upon the legal successors, representatives, and assigns of such Guarantor. Each and every waiver made herein by any Guarantor is and shall be deemed to be and construed as an absolute, irrevocable and unconditional waiver of the right waived.
This Guaranty is intended to be legal, valid, binding and enforceable in accordance with its terms. Whenever possible, each term and provision of this Guaranty shall be interpreted so as to be effective and to effectuate its intent under applicable law. If any term or provision of this Guaranty shall be unenforceable, invalid or prohibited in any jurisdiction under applicable law, such term or provision shall be ineffective in such jurisdiction but only to the extent of such unenforceability, invalidity or prohibition, and the remainder of such term or provision, and the other terms and provisions of the Guaranty, shall not thereby be affected or impaired in such jurisdiction, nor shall any of the terms or provisions of the Guaranty be thereby affected or impaired in any way in any other jurisdiction.
This Guaranty shall be governed by the construed in accordance with Federal Law and the laws of the State of Nevada and that service of process by certified mail, return receipt requested, will be sufficient to confer personal jurisdiction over such Guarantor for purposes of litigating any actions arising hereunder in the courts of such State. This Guaranty is in addition to, and not in limitation or derogation of, any and all other guaranties of the Obligations executed by any Guarantor. In the event of any conflict between the provisions of this Guaranty and those of any such other guaranty, the provisions of this Guaranty shall govern. Each Guarantor hereby agrees and acknowledges that time is of the essence with regard to the performance of such Guarantor's obligations hereunder. This Guaranty shall take effect as a sealed instrument.
IN WITNESS WHEREOF, each of the undersigned has caused this Guaranty to be duly executed and delivered as of 9th day of Sept., 1998.
Monarch Casino & Resort, Inc.
By: /s/ Ben Farahi Ben Farahi [Print Name] CFO [Title] 1175 West Moana Lane, Suite 200 Reno, Nevada 89509 FED ID # 88.0300760 |
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| ARTICLE 5 |
| THIS SCHEDULE CONTAINS FINANCIAL INFORMATION EXTRACTED FROM REGISTRANT'S CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 1998 AND THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND NOTES TO FINANCIAL STATEMENTS. |
| PERIOD TYPE | 12 MOS |
| FISCAL YEAR END | DEC 31 1998 |
| PERIOD END | DEC 31 1998 |
| CASH | 4,950,244 |
| SECURITIES | 0 |
| RECEIVABLES | 1,439,921 |
| ALLOWANCES | 165,578 |
| INVENTORY | 476,948 |
| CURRENT ASSETS | 9,212,352 |
| PP&E | 100,706,367 |
| DEPRECIATION | 22,125,039 |
| TOTAL ASSETS | 89,456,343 |
| CURRENT LIABILITIES | 8,444,564 |
| BONDS | 52,309,785 |
| PREFERRED MANDATORY | 0 |
| PREFERRED | 0 |
| COMMON | 95,363 |
| OTHER SE | 26,358,083 |
| TOTAL LIABILITY AND EQUITY | 89,456,343 |
| SALES | 0 |
| TOTAL REVENUES | 62,510,532 |
| CGS | 0 |
| TOTAL COSTS | 31,697,506 |
| OTHER EXPENSES | 4,616,722 |
| LOSS PROVISION | 194,853 |
| INTEREST EXPENSE | 2,222,089 |
| INCOME PRETAX | 5,680,739 |
| INCOME TAX | 1,920,957 |
| INCOME CONTINUING | 3,759,782 |
| DISCONTINUED | 0 |
| EXTRAORDINARY | 0 |
| CHANGES | 0 |
| NET INCOME | 3,759,782 |
| EPS PRIMARY | 0.40 |
| EPS DILUTED | 0.40 |