UNITED STATES
SECURITIESLease No. 025-5001341
============
FIRST SECURITY LEASING COMPANY OF NEVADA
LEASE SCHEDULE TO
MASTER EQUIPMENT LEASE AGREEMENT
This Lease Schedule to Master Equipment Lease Agreement ("Lease Schedule")
constitutes a separate Lease pursuant to the Master Equipment Lease Agreement
between FIRST SECURITY LEASING COMPANY OF NEVADA ("Lessor") and the lessee or
lessees designated below ("Lessee") dated as of November 3, 1999 (the "Master
Lease"), all terms and conditions of which are incorporated herein. Lessor and
Lessee reaffirm as of the date hereof all terms, representations and warranties
in the Master Lease. A copy of the signed Master Lease attached to the Lease
Schedule, which attachment shall adopt the copied signatures on the Master
Lease as of the date of the Lease Schedule, shall constitute an original lease.
This lease shall alone constitute the chattel paper for purposes of perfecting
a security interest.
A. Description of Equipment
ID New Invoice
or or Purchase
Quantity Vendor Description Serial # Used Price
======== ====== =========== ======== ==== ========
ONE (1) DOUBLE FACED
FULL COLOR LED DISPLAY
MATRIX SIZE 176X336 PIXELS
EACH FACE, VISIBLE AREA 10.83
FEET BY 21.67 FEET
1 Mikohn PIXELS TO USE NICHIA New $713,960.00
Lighting BLUE AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANTGREEN LED AND
& Sign HP ALLNGAP RED LEDS PIXEL
SPACING WILL BE 19MM PITCH
AND DENSITY 2770/M2 THE
DISPLAY WILL BE INSTALLED
IN EXISTING CABINET, AIR
CONDITIONING FOR LED
TOTAL INVOICE PURCHASE PRICE: $713,960.00
B. Tax:
Section 11(B) of Master Lease shall apply. Recovery Class: 7 property.
C. Term Expiration: 60 Months (the "Expiration" or "Expiration Date").
D. Rental:
1. Frequency: Monthly
2. Advanced or Arrears: Advance
3. Interim Rental equal to 0.000256 of each Item's Invoice Purchase
Price (as shown in Section A of the Lease Schedule) for each day
from (and including) its Acceptance Date to (but excluding)
=======, (the "Interim Rental Payment Date") shall be due on the
Interim Rental Payment Date.
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Lease No. 025-5001341
============
FIRST SECURITY LEASING COMPANY OF NEVADA
LEASE SCHEDULE TO
SECTION 13 OR 15(d)MASTER EQUIPMENT LEASE AGREEMENT
4. Basic Rental equal to 0.017549 of the Total Invoice Purchase Price
shall be due on each of the following Basic Rental Payment Dates:
July 3, 2000 and the same day of each Month thereafter, with the final
payment June 3, 2005.
E. Purchase Option Amount:
Fair Market Value
F. Location: The Equipment shall be located at:
Address: 3800 S. VIRGINIA STREET RENO, NV 89502
County: WASHOE
G. Security Deposit:
Not Required
H. Insurance. The minimum amount of insurance to be provided by Lessee as
required under the terms of the Master Lease shall be as follows:
1. Liability:
$1,000,000.00 each individual
$1,000,000.00 each accident
$1,000,000.00 property damage liability
2. Physical Damage and Loss: $713,960.00
3. Additional riders, exclusions or special terms required by Lessor: N/A
I. OTHER TERMS.
See Exhibit "A" for the Maintenance and Return Conditions.
J. Finance Lease.
As to an Item for which a vendor is shown, this is a UCC 2A "finance
lease." Lessee approves the purchase contract for such Item and acknowledges
that (a) it has received a copy of such contract if such contract is in
writing, (b) Lessor hereby informs it of the vendor's identity and that it may
have rights under such contract, and (c) Lessor hereby advises it to contact
the vendor for a description of such rights.
K. Execution of Financing Statements and Title Documents.
Lessee agrees to execute and deliver to Lessor such financing statements
and/or title documents as reasonably requested by Lessor to protect and
identify Lessor's interest in the Equipment. Lessee appoints Lessor, or
Lessor's agents or assigns, its true and lawful attorney-in-fact to prepare, to
execute and to sign any instrument or financing statement concerning the
Equipment, to sign the name of Lessee with the same force and effect as if
signed by Lessee, and to file the same at the locations reasonably determined
by Lessor.
L. Additional Maintenance and Return Provisions. In addition to the return
and maintenance provisions of the Master Lease, the provisions contained in the
attached exhibit are hereby incorporated into this Lease Schedule and Master
Lease by reference.
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Lease No. 025-5001341
============
FIRST SECURITY LEASING COMPANY OF THE SECURITIES
EXCHANGE ACT OF 1934
ForNEVADA
LEASE SCHEDULE TO
MASTER EQUIPMENT LEASE AGREEMENT
IN WITNESS WHEREOF, the quarterly period ended June 30, 2000
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. 0-22088parties have executed this Lease Schedule as of
November 3, 1999 and Lessee's signatories warrant their authority to sign on
Lessee's behalf.
CO-LESSEES: MONARCH CASINO & RESORT, INC. (ExactAND
GOLDEN ROAD MOTOR INN, INC. dba ATLANTIS CASINO RESORT
LESSEE: MONARCH CASINO & RESORT, INC. LESSOR: FIRST SECURITY LEASING
a(n) Nevada Corporation COMPANY OF NEVADA
BY: /S/ John Farahi BY: /S/ Jerry J. Velarde
=============== ===================
TITLE: CEO TITLE: AVP Authorized
================ Representative
================
Address: 3800 S. VIGINIA STREET ADDRESS: c/o First Security
Reno, NV 89502 Leasing Company
381 East Broadway,
2nd Floor
Salt Lake City, UT 84111
Federal ID or Social Security Number: 88-0300760
LESSEE: GOLDEN ROAD MOTOR INN, INC.
dba ATLANTIS CASINO RESORT
a(n) Nevada Corporation
BY: /S/ John Farahi
===============
TITLE: John Farahi, CEO
================
Address: 3800 S. VIRGINIA STREET
RENO, NV 89502
Federal ID or Social Security Number: 88-0117859
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First Security Leasing Company of Nevada
MASTER EQUIPMENT LEASE AGREEMENT
This Master Equipment Lease Agreement ("Master Lease") is between First
Security Leasing Company of Nevada ("Lessor") and the lessee or lessees
specified below ("Lessee").
Section 1. Intent to Lease.
Lessor agrees to pay for and lease to Lessee and Lessee agrees to lease
from Lessor the personal property (the "Equipment" or, individually, an "Item")
described in each Lease Schedule to Master Equipment Lease Agreement (a
"Schedule") pursuant hereto. Each Schedule and a copy of the Master Lease
shall be a separate lease (a "Lease). "Agreement" shall mean this Master Lease
and all Schedules.
Section 2. Term; Rental; Unconditional Obligations; Security.
A. The lease of each Item shall begin on the date of the related Schedule
(the "Acceptance Date") and end on the Expiration Date specified in the
Schedule (the "Expiration") or on the date of any earlier or later than
termination hereunder (the "Termination").
B. Lessee shall pay to Lessor Interim Rental, if applicable, and Basic
Rental ("Rental") for each Item in the amounts and on the dates ("Rental
Payment Dates") shown in the applicable Schedule. If any amount payable under
the Agreement is not paid within ten (10) days after it is due, Lessee shall
immediately pay to Lessor a late charge equal to five percent (5%) of such
amount. Lessee shall also pay to Lessor interest on all overdue amounts at the
rate of eighteen percent (18%) per annum or the maximum rate allowed by law,
whichever is less, compounded daily.
C. All Leases are net leases. Lessee's obligations under each Lease shall
all be performed at Lessee's expense and shall only terminate under the
provisions thereof. Lessee shall not be entitled to any reduction or
withholding of any amount payable under any Lease for any reason (including any
present or future claims of Lessee against Lessor, under the Lease or
otherwise, or against any manufacturer or vendor). Except as expressly
provided, Lessee's obligations shall not be affected by any defect in, damage
to, loss of, or interference with use of any Item from any cause or by any
person, entity or government, by any invalidity or unenforceability of the
Lease or any lack of authority of Lessor to enter into the Lease, or by any
other cause, notwithstanding any present or future law or regulation. Lessee
waives any rights under Sections 221, 405 and 406 of the applicable version of
Uniform Commercial Code Article 2A ("UCC 2A") and any similar laws or rights,
including rights to avoidance, allowance, allocation, modification, and notice.
D. If a Schedule specifies that a security deposit is required, upon its
execution Lessee shall deposit the amount so specified with Lessor. Lessor may
commingle such deposit with its other funds. Lessee grants Lessor a security
interest in such deposit to secure all of Lessee's obligations under the
Agreement. Within fifteen days (15) after written notice to Lessee that all or
any part of a security deposit has been used to satisfy any such obligation,
Lessee shall deposit with Lessor an amount sufficient to restore the security
deposit to the required amount. Upon Expiration or Termination,
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First Security Leasing Company of Nevada
MASTER EQUIPMENT LEASE AGREEMENT
if no Default (as defined in Section 13) exists, any unused portion of the
related security deposit will be returned to Lessee without interest.
E. Any security for Lessee's existing or future obligations under this or
any other agreements with Lessor shall secure Lessee's existing or future
obligations under all such agreements.
Section 3. Lessee Options at Expiration of Lease Term.
At least one hundred twenty (120) days, but not more than one hundred
eighty days (180), before Expiration (or, in the case of purchase or return
under clause (b) or (c) below, the renewal term, if any, of such item), Lessee
will give Lessor irrevocable written notice that it either (a) exercises its
option to renew this Lease as to all (but not less than all) Items at the Fair
Rental Value and for a single renewal term to be agreed upon by Lessor and
Lessee but in no case less than six (6) months (but this renewal option may not
be exercised if an Event of Default has occurred or if there has been a
material adverse change in Lessee's business or financial condition since the
Acceptance Date), (b) exercises its option to purchase all such Items at
Expiration or at the expiration of the renewal term, if any, for cash for their
Fair Rental Value or (c) will return all such Items to Lessor at Expiration or
at the expiration of the renewal term, if any, as described below. If such
notice is not given, Lessee shall be deemed to have elected to renew this Lease
as to all such Items at their current periodic rent and for a renewal term of
six (6) months, unless Lessor by written notice instructs Lessee to return such
Items as described below, "Fair market Value" of "Fair Market Rental" is to be
determined by agreement between Lessor and Lessee, and if they cannot agree, by
an independent appraiser selected by Lessor but acceptable to Lessee. The cost
of appraisal shall be borne by Lessee. Lessee will at its sole expense return
each Item to Lessor where designated by Lessor, in the good operating order and
condition as when delivered to Lessee, free and clear of liens or rights of
others and properly packed and crated, with freight prepaid to Lessor at such
locations as Lessor may designate to Lessee. Upon Lessor's request, Lessee
will store any Item before its return without charge at its current location
for up to one hundred twenty (120) days, during which period Lessee will remain
liable for all of its obligations under this Lease except payment of rent. If
Lessee fails to return any Item in full compliance with this Section 3, or in
full compliance with any return provision in the Agreement including, any and
all additional return provision attached to any Schedule as an exhibit, Lessor
may treat this Lease as continuing in full force and effect as to such Item and
Lessee will continue to pay the full current periodic rent for such Item, but
Lessor may at any time terminate this Lease without notice and repossess such
Item. The Fair Market Value of any Item shall be the value upon which an
informed and willing seller and informed and willing buyer (other than a used
equipment or scrap dealer) would agree, each under no compulsion to buy or
sell. Fair market Rental value for any Item shall be the value upon which and
informed and willing lessee (other than a lessee currently in possession) and
informed and willing lessor, each under no compulsion to lease, would agree.
For purposes of the Section 3 only, the value shall be determined on the
assumption that such Item had been maintained and operated in the manner
required by Section 8(B) hereof. Costs of removal from the location of current
use shall not be a deduction from such value.
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First Security Leasing Company of Nevada
MASTER EQUIPMENT LEASE AGREEMENT
Section 4. Conditions Precedent.
Lessor's obligation to pay for and lease an Item is subject to the non-
existence of any Default and to Lessee's supplying the following in form and
substance satisfactory to Lessor:
A. If Lessee is a corporation, if requested by Lessor, its articles of
incorporation, by-laws, board resolutions, and incumbency certificates, each
certified by its secretary or assistant secretary, evidencing the duly
authorized execution, delivery and performance of this Agreement and each
Lease;
B. If Lessee is not a corporation, Lessee's partnership agreement, trust
indenture, assumed name filings or such other documents as Lessor may require;
C. Evidence of compliance with the insurance provisions hereof;
D. If requested by Lessor, a favorable written opinion of Lessee's counsel
as to the matters in Section 5(B)(i)-(v) and any other matters Lessor
reasonably requests;
E. A completed and signed Schedule;
F. An invoice of the vendor of the Item; and
G. If requested by Lessor, bills of sale, financing statements, lien
waivers and any other documents reasonably necessary in Lessor's opinion. The
effectiveness of any Lease identified in the Schedule as a UCC 2A "finance
lease" is conditioned upon Lessee's approval of the contract for Lessor's
purchase of the Equipment.
Section 5. Representations and Warranties.
A. Lessor warrants that if no Default has occurred, Lessee's use of each
Item under a Lease shall not be interrupted by Lessor or anyone claiming solely
through Lessor. The foregoing is in lieu of all other written, oral or implied
warranties of Lessor, and Lessor shall not, due to this or any other document
or any other reason, be deemed to have made any other warranties. LESSOR
LEASES THE EQUIPMENT AS IS, WITHOUT WARRANTY OR REPRESENTATION, EITHER EXPRESS
OR IMPLIED, AS TO ANY MATTER WHATSOEVER, INCLUDING, (i) ITS DESIGN,
PERFORMANCE, SPECIFICATIONS OR CONDITION, (ii) ITS MERCHANTABILITY, (iii) ITS
FITNESS FOR ANY PARTICULAR PURPOSE, (iv) LESSOR'S TITLE THERETO, (v)
INTERFERENCE BY ANY PARTY OTHER THAN LESSOR WITH THE QUIET ENJOYMENT THEROF, OR
(vi) THE QUALITY OF ITS MATERIAL OR WORKMANSHIP OR ITS CONFORMITY TO THE
SPECIFICATIONS OF ANY RELATED PURCHASE DOCUMENT. AS BETWEEN LESSOR AND LESSEE,
ALL SUCH RISKS SHALL BE BORNE BY LESSEE. During the Lease, Lessee may, at its
expense, assert for Lessor's account Lessor's rights under any warranty on the
Equipment, and Lessor will cooperate with Lessee in doing so if Lessee
indemnifies and holds Lessor harmless from and against all related claims,
costs, losses and liabilities. Any warranty payment received shall be applied
to restore the Equipment to the conditions it should have been in when
delivered to Lessee, ordinary wear and tear excepted, with any balance retained
by Lessor.
Lessor shall not be responsible for special or consequential damages
relating to its obligations or performance under the Agreement.
B. Lessee represents and warrants that:
(i) Lessee, if a corporation, is duly organized and in good standing
and is qualified to do business wherever necessary for its operations;
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First Security Leasing Company of Nevada
MASTER EQUIPMENT LEASE AGREEMENT
(ii) Lessee, if an entity other than a corporation, is duly
organized, registered and validly existing under applicable law and is
qualified to business wherever necessary for its operations;
(iii) Lessee has duly authorized this Agreement, and its execution,
delivery and performance do not require any further approval or notice, do not
contravene Lessee's organizational documents or by-laws, any other agreement,
or any law or regulation;
(iv) The Agreement is Lessee's legal, valid and enforceable
obligation;
(v) There are no judgements or pending or threatened proceedings
which may materially adversely affect Lessee;
(vi) Lessee's balance sheet, income statement and statement of cash
flows for its most recent fiscal year have been given to Lessor and follow
generally accepted accounting principles consistently applied, and there has
been no material adverse change in Lessee's condition or operations since the
date thereof;
(vii) Lessee shall keep the Equipment duly registered in Lessor's
name and file timely any required reports regarding the Equipment, or, at
Lessor's request, Lessee shall give Lessor all information necessary for Lessor
to do so; and
(viii) Lessee shall not dissolve, consolidate with, or merge into any
other entity or transfer or lease substantially all of its assets without
Lessor's prior written consent.
C. "Year 2000 Compliant" shall mean, with regard to any entity, that all
software, hardware, firmware, equipment, goods or systems used by or material
to the business operations or financial condition of such entity will properly
perform date-sensitive functions before, during and after January 1, 2000.
Such date-sensitive functions shall included without limitations, (a)
interpretations of years greater than 1999, (b) process date data from, into,
and between dates before January 1, 2000, and dates on or after January 1,
2000, (c) recognizing numbers such as "99" as an actual date rather than
indefinite or an unknown information, (d) recognizing that the year 2000 is a
leap year, and (e) transferring data between systems that used the different
methods to make the system Year 2000 Compliant. Lessee represents and warrants
to Lessor that Lessee has developed a detailed plan to ensure that Lessee, it
affiliates, and all customers, suppliers and vendors that are material to the
Lessee's business, become Year 2000 Compliant on or before June 30, 1999. The
plan (a) effectively prioritizes mission-critical systems, (b) has the
involvement of executive management, (c) includes assessment of Year 2000
Compliance of the customer, supplier, and vendors, (d) includes contingency
planning to mitigate risk from Year 2000 business interruptions affecting key
vendors, suppliers, or customers, and (e) has been allocated with adequate
resources within Lessee's abilities.
Section 6. Mortgages, Liens, Personality, Etc.
Lessee will not directly or indirectly create, incur, assume or permit the
existence of any mortgage, security interest, pledge, lien, charge, encumbrance
or claim on or with respect to the Equipment, title thereto or any interest
therein except (a) the respective rights of Lessor and Lessee as herein
provided, (b) liens or encumbrances which result from claims against
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First Security Leasing Company of Nevada
MASTER EQUIPMENT LEASE AGREEMENT
Lessor except to the extent that such liens and encumbrances arise from failure
of Lessee to perform any of Lessee's obligations hereunder, and (c) liens for
taxes either not yet due or being contested in good faith and by appropriate
proceedings. Lessee will promptly, at its own expense, take such action as may
be necessary duly to discharge any such mortgage, security interest, pledge,
lien, charge encumbrance or claim not specifically excepted above. The Items
shall be personal property even if attached to the real property.
Section 7. Taxes.
Lessee agrees to pay promptly when due and to indemnify and hold Lessor
harmless from all sales, use, personal property, leasing, leasing use, stamp or
other taxes, levies, imposts, duties, charges, fees or withholding of any
nature (together with any penalties, fines or interest thereon) imposed against
Lessor, Lessee or the Equipment by any federal, state, local or foreign
government or taxing authority upon or with respect to the Equipment or upon
the purchase, ownership, delivery, leasing, possession, use operation, return
or other disposition thereof, or upon the rentals, receipts or earnings arising
therefrom, or upon or with respect to any Lease (excluding, however, federal,
state and local taxes on or measured solely by the net income of Lessor)
unless, and to the extent only, that any such tax, levy, impost, duty, charge
or withholding is being contested by Lessee in good faith and by appropriate
proceedings. In case any report or return is required to be made with respect
to any obligation of Lessee under this Section Lessee will notify Lessor of
such requirement and make such report or return in such manner as shall be
satisfactory to Lessor. Lessor agrees to cooperate fully with lessee in the
preparation of any such reports or returns. Lessee agrees to remit all
applicable sale or use taxes to Lessor promptly upon receipt of an invoice
therefor.
Section 8. Title; Use, Maintenance and Operation, Identification Marking.
A. Lessor shall retain full legal title to the Equipment notwithstanding
delivery to and possession and use thereof by Lessee. Upon delivery of the
Equipment Lessee shall cause said Equipment to be duly registered, and at all
times thereafter to remain duly registered, in the name of registrantLessor, or at
Lessor's request shall furnish to Lessor such information as specified in its charter)
-------------------------
NEVADA 88-0300760
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1175 W. MOANA LANE, SUITE 200
RENO, NEVADA 89509
(Address of principal (Zip code)
executive offices)
Registrant's telephone number, including area code: (775) 825-3355
-------------------------
NOT APPLICABLE
(Former name, former addressmay be required to
enable Lessor to make application for such registration and former fiscal
year, if changed since last report.)
Indicate by check mark whether the registrant (1) has filed allshall promptly
furnish to Lessor such information as may be required to enable Lessor to file
timely any reports required to be filed by Section 13it as Lessor under the Lease or 15(d)as
the owner of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periodEquipment with any governmental authority.
B. Lessee agrees that the registrant wasEquipment will be used solely in the conduct of
its business. Lessee further agrees to comply in all material respects with
all applicable governmental laws, regulations, requirements and rules with
respect to the use, maintenance and operation of each Item of Equipment.
Lessee agrees that each Item of Equipment (except Items which prior to the
execution of the Lease Lessee shall have advised Lessor in writing are normally
used or to be used in more than one Location) will be kept at the address shown
in the Schedules with respect to such Item unless Lessor shall first otherwise
consent in writing. Lessee will immediately give written notice to Lessor of
any change in ins principal place of business.
Lessee, at its own cost and expense, will repair and maintain the
Equipment so as to keep it in a good condition as when delivered to Lessee
hereunder, ordinary wear and tear excepted. Lessee may from time to time add
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First Security Leasing Company of Nevada
MASTER EQUIPMENT LEASE AGREEMENT
further parts or accessories to any Item of Equipment provided that such
addition does not impair the value, utility or warranties of such Item of
Equipment and is readily removable without causing material damage to such
Item.
C. Lessee agrees at its own cost and expense to place such markings,
plates or other identification on the Equipment showing Lessor's title thereto
as Lessor may from time to time request, provided such identification markings
are places so as not to interfere with the usefulness of such
Equipment. Except as above provided, Lessee will not allow the name of any
person, association or corporation to be placed on the Equipment as a
designation that might be interpreted as a claim of ownership.
D. Upon request, Lessee shall inform Lessor of each Item's location and
make each Item and Lessee's related records available for inspection at any
reasonable time.
Section 9. Loss or Destruction.
If any item is lost or stolen or becomes permanently unfit for use for any
reason (an "Event of Loss"), Lessee shall, within ten (10) days, notify Lessor
in writing and shall, at Lessor's option, either (i) replace it with property
acceptable to Lessor within thirty (30) days after the Event of Loss or (ii) on
the first Rental Payment Date at least twenty (20) days after the Event of
Loss, pay to Lessor the value its interest in the Item and the remainder of the
Lease thereof (plus compensation for the loss of Tax Benefits, if applicable),
as such value is established by Lessor from time to time, (the "Casualty
Value") and all unpaid amounts due with respect to such Item through that date.
Lessor may apply the Casualty Value payment to Lessee's obligations, whether or
not matured, in any order, at Lessor's option. Upon request, Lessor will
furnish Lessee a schedule of the Casualty Values for any Item.
If Lessee replaces such Item, the replacement shall be of like kind, be
free of all liens, encumbrances and rights of others, and have a fair market
value substantially equal to the value the replaced Item would have if it were
in the conditions required by the Lease. The replacement shall immediately
become Lessor's property and part of the Equipment for all purposes, and
Lessee's Rental obligation shall not changes. Lessee shall execute any
documents Lessor deems necessary to ensure Lessor's full title thereto. The
replaced Item shall no longer be part of the Equipment, and Lessor will
transfer its interest therein to Lessee without recourse or warranty.
If Lessee does not replace such Item, upon payment of all amounts due with
respect thereto, Lessee's Rental obligation with respect to the Item shall
cease, and Lessor will transfer its interest in the Item to Lessee, without
recourse or warranty, "as is and where is."
Section 10. Insurance
At its own expense, Lessee shall maintain comprehensive general liability,
products liability and property damage insurance acceptable to Lessor with
respect to each Item in an amount not less than the amount specified in the
Schedules relating thereto and, in any event, in an amount sufficient to
provide full coverage against all loss and liability. Each such insurance
policy shall name Lessor as an insured and as loss payee and
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First Security Leasing Company of Nevada
MASTER EQUIPMENT LEASE AGREEMENT
shall provide that it may be altered or canceled by the insurer only after
thirty (30) days prior written notice to Lessor. Lessee agrees to cause
certificates or other evidence satisfactory to Lessor showing the existence of
such insurance, the terms and conditions of each policy and payment of the
premium therefor to be delivered to Lessor upon demand thirty (30) days prior
to expiration or cancellation showing renewal or replacement of such policy.
In the event Lessee shall fail to obtain and/or maintain insurance in
accordance with the provisions of this paragraph, Lessor shall have the right
to obtain such insurance as Lessor deems necessary, and Lessee shall reimburse
Lessor for the payment by Lessor of all premiums therefor together with
interest computed from the date of Lessor's payment at the rate of eighteen
percent (18%) per annum. If (a) any insurance proceeds are received with
respect to a loss with respect to Equipment which does not constitute an Event
of Loss under Section 9, or (b) if Lessee elects to replace an Item or Items
suffering an Event of Loss under the provisions of Section 9 hereof, proceeds
will be applied in payment for repairs and replacement required pursuant to
Section 8 hereof, or to reimburse Lessee have made such payments.
Section 11. Indemnification.
A. Lessee shall indemnify and hold harmless Lessor and its assignees and
their agents and employees from and against all claims, liability (including
strict tort and strict products liability), or expenses (including attorney's
fees) relating to (i) the Equipment or any part thereof, or its construction,
purchase, delivery, installation, ownership, leasing, use, maintenance, repair,
replacement, operation, return or condition (whether defects are latent or
discoverable), (ii) Lessee's failure to accept the Equipment "as is," (iii) any
actual or alleged patent or trademark infringement or act or omission of Lessee
or its agents or employees, or (iv) Lessee's financial or tax accounting. This
Section shall be effective from the date the first Item is ordered even though
not accepted by Lessee. Lessee shall give Lessor prompt notice of any claim or
liability indemnified against.
B. (OPTIONAL. This Section 11(B) shall apply if so indicated in the
applicable Schedule.) Lessor shall be entitled to the following benefits (the
"Tax Benefits"): (i) Lessor will be the owner and lessor of each Item for all
purposes; (ii) Lessor will have a basis in each Item under Section 1012 of the
Internal Revenue Code of 1986, as amended (the "Code") equal to the invoice
purchase price indicated in the Schedule therefor; (iii) Each Item will be "3-
year," "5-year," "7-year," "10-year," "15-year," or "20-year" property (as
defined in Section 168(e) of the Code) as indicated in the Schedule, and Lessor
will be allowed 100% of the deduction with respect to each Item in each
recovery year as provided in Section 168(b) and (c) of the Code. Neither
Lessee nor any of its affiliates will at any time, take or fail to take any
action inconsistent with the Tax Benefits or which would increase the amount
Lessor is required to take into income with respect to any Item. Lessee shall
keep and make available for Lessor's inspection and copying all records
necessary to facilitate the foregoing. Lessee represents and warrants that
Lessor will be the owner of each Item on or before its Acceptance Date and that
each Item will be "placed in service" (within the meaning of the Code and
related regulations) no later than the end of the calendar year in which the
Acceptance Date occurs. If Lessor shall lose or shall not have the right to
any of the Tax Benefits for any reason other than (i) Lessor's sale of an Item
before any Event of Default, (ii) Lessor's
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First Security Leasing Company of Nevada
MASTER EQUIPMENT LEASE AGREEMENT
failure to claim the Tax Benefits, (iii) a change in the Lessor's business, or
(iv) Lessor's failure to have sufficient income to use the Tax Benefits, then
Lessee shall pay Lessor, on demand, an amount which, in Lessor's reasonable
opinion and after deduction of all related taxes, will provide Lessor with the
same net after-tax return Lessor would have had through Expiration if there had
been no such loss.
C. Lessor's rights under Section 11 shall survive Expiration or
Termination with respect to any Item. For purposes of Section 11, "Lessor"
shall include any group of which Lessor is a member which files a consolidated
income tax return.
Section 12. Assignments and Subleases.
Lessor may at any time, without notice, grant a security interest in,
transfer or assign any or all Leases, Items, or rights and remedies as Lessor
to any party, with such party assuming all, part or none of Lessor's
obligations. Lessee shall not assert against such party any defense,
counterclaim or offset Lessee may have against Lessor. Lessee acknowledges
that any such grant, transfer or assignment would not materially change
Lessee's duties, risks or interests under the Agreement.
LESSEE SHALL NOT, WITHOUT LESSOR'S PRIOR WRITTEN CONSENT, SUBLEASE OR
RELINQUISH POSSESSION OF ANY ITEM OR ASSIGN ANY OF ITS RIGHTS OR DELEGATE ANY
OF ITS OBLIGATIONS HEREUNDER. Lessee grants Lessor a security interest in any
existing or future sublease of an Item and the proceeds thereof, whether or not
such sublease is prohibited.
Section 13. Default; Remedies.
A. The following shall be Events of Default: (i) Lessee's failure to pay
any Rental when due which continues unremedied for ten (10) days; (ii) Lessee's
failure to maintain required insurance; (iii) Lessee's failure to pay any
amount other than Rental or perform any obligation under the Agreement for then
(10) days after notice of non-performance from Lessor; (iv) The failure of any
of Lessee's representations or warranties herein or in any related document to
be correct in any respect at any time; (v) Lessee's insolvency, bankruptcy, or
assignment for the benefit of creditors, or the appointment of or Lessee's
consent to the appointment of a trustee or receiver for Lessee or a substantial
part of its property; (vi) Any event of default or default as described in the
documentation executed in connection with any other credit or lease facility
extended by Lessor, or any affiliated company of Lessor, to Lessee; (vii)
Lessee's failure to perform any obligation under any agreement with Lessor or
any other creditor; (viii) The existence of any judgements or any pending or
threatened proceedings which may adversely affect Lessee; (ix) An adverse
change in Lessee's financial condition as a result of which Lessor, in good
faith, deems itself or any Item to be insecure; or (x) The occurrence of any of
the above Events of Default with regard to any guarantor of any of Lessee's
obligations under the Agreement.
B. "Default" shall mean an Event of Default or an event which would be an
Event of Default with only the passage of time or the giving of notice or both.
C. At any time after an Event of Default, Lessor may, at its option,
exercise any one or more of the following remedies and any other remedies under
applicable law: (i) By written notice, terminate any or all Leases, whereupon
Lessee's rights to possess and use the Equipment shall cease; (ii)
-26-
First Security Leasing Company of Nevada
MASTER EQUIPMENT LEASE AGREEMENT
By court action, enforce Lessee's performance of the Agreement and/or recover
damages for its breach; (iii) Whether or not a Lease is terminated, cause
Lessee to promptly return such Equipment in accordance with Section 3; (iv) At
any hour, without notice, and without liability except for malicious acts,
enter Lessee's or any other premises and take possession of or render unusable
any Item and attachments thereon, whether or not the property of Lessor; (v)
Retain, use, re-lease or sell at public or private sale the Item and
attachments thereon; (vi) Recover (a) all accrued and unpaid Rental and other
amounts payable under the Agreement (including all of Lessor's costs and any
decrease in the value of any Item resulting from Lessee's failure to maintain,
operate, remove, or deliver the Item as required by the Lease) and (b) as
liquidated damages and not as penalty, (1) the amount of each remaining Rental
payment (which otherwise would have accrued thereafter) and the Fair Market
Value of each Item (assuming its sale at Expiration) all discounted at the rate
of six percent (6%) per annum to the date the Item is returned to or recovered
by Lessor (or if it is not returned or recovered, to the date of judgment
against Lessee) minus (2) the Fair Market Value of such Item on the date of
such return, recovery or judgement; (vii) Recover (a) all of its related
expenses, collection costs and costs of remarketing the Equipment, including
employees' salaries and reasonable attorneys' fees (including fees on appeal),
(b) interest on all amounts payable under any Lease at the rate of eighteen
percent (18%) per annum or the maximum rate allowed by law, whichever is less,
compounded daily, both before and after judgement, and (c) if applicable, an
amount sufficient in Lessor's opinion to compensate Lessor for the related loss
of Tax Benefits.
D. Lessor's remedies shall be cumulative and in addition to all other
legal or equitable remedies. No express or implied waiver of any Default shall
waive any later Default. Lessor's complete or partial failure to exercise or
delay in exercising any right shall not waive or exhaust such right or any
other right.
E. To the extent allowed, Lessee waives (i) all rights under UCC 2A
Sections 508-522 or any similar laws, including rights to cancel or repudiate;
reject or revoke acceptance; claim a security interest; deduct claimed damages;
accept partial delivery; cover; recover general, special, incidental or
consequential damages; and seek specific performance, replevin, or the like and
(ii) any rights now or hereafter conferred by law requiring Lessor to sell,
lease or use any Item to mitigate damages or which might otherwise modify
Lessor's right or remedies.
F. Any action by Lessee against Lessor relating to the Agreement must be
commenced within one (1) year after any such cause of action accrues.
Section 14. Lessor's Performance for Lessee.
Lessee authorizes Lessor or Lessor's agent to sign, on Lessee's behalf,
financing statements, reports and similar documents with respect to any Item an
all related replacements, modifications, attachments and additions and the
proceeds thereof. If Lessee fails to perform any obligation under the
Agreement, Lessor may do so, but shall not be required to, make payment or
perform or comply with any covenant or agreement contained herein, and all
reasonable expenses of Lessor incurred in connection therewith shall be payable
by Lessee upon demand together with interest as set out in Section 2(B) herein.
-27-
First Security Leasing Company of Nevada
MASTER EQUIPMENT LEASE AGREEMENT
Section 15. Further Assurances; Financial Information.
Lessee will promptly execute and deliver to Lessor such documents and take
such action as Lessor may request in order to carry out the intent of the
Agreement and protect Lessor's rights. Lessee, at its sole expense, shall
deliver to Lessor a balance sheet, income statement and statement of cash flows
prepared by accountants acceptable to Lessor within one hundred twenty (120)
days after the close of each fiscal year of Lessee and within forty-five (45)
days after the close of each fiscal quarter and shall execute and deliver
financing statements with respect to the Equipment in accordance with the laws
of such jurisdictions as Lessor may from time to time deem advisable.
Section 16. Notices and Payments.
Notices and payments to Lessor shall be sent to or made at the following
address: First Security Leasing Company, 381 East Broadway, 2nd Floor, Salt
Lake City, Utah 84111, or such other address as Lessor may designate in
writing. Notices to Lessee may be sent to the address on the signature page
hereof. All required notices shall be in writing and be effective when placed
in the United States mail, first class postage prepaid.
Section 17. Year 2000.
The lessee shall take all actions that may be necessary or desirable, or
that Lessor may reasonably request, in order to ensure that the lessee, its
affiliates and all customers, suppliers and vendors that are material to the
Lessee's business, become Year 2000 Compliant on or before June 30, 1999. Such
actions shall include, without limitation, (a) performing a comprehensive
inventory, review and assessment of all the Lessee's systems and adopting a
detailed plan with, itemized budget and timetable, for the remediation,
monitoring and testing such systems, and (b) making a detailed inquiry of all
material customers, suppliers and vendors to ascertain whether such entities
are aware of the need to be Year 2000 Compliant and are taking all appropriate
steps to become Year 2000 Compliant on a timely basis. Lessee shall, promptly,
upon request, provide to Lessor such certifications or other evidence of
Lessee's compliance within the terms of this section as Lessor may, from time
to time, reasonably require.
Section 18. Execution of Financing Statements and Title Documents.
Lessee agrees to execute and deliver to Lessor such financing statements
and/or title documents as reasonably requested by Lessor to protect and
identify Lessor's interest in the Equipment. Lessee appoints Lessor, or
Lessor's agents or assigns, its true and lawful attorney-in-fact to prepare, to
execute and to sign any instrument or financing statement concerning the
Equipment, to sign the name of Lessee with the same force and effect as if
signed by Lessee, and to file such reports),the same at the locations reasonably determined
by Lessor.
Section 19. Miscellaneous.
A. If there is more than one Lessee, their liability shall be joint and
(2)several, and each Lessee has been subjectthe authority to enter into written agreements
with Lessor modifying or extending the terms of the Agreement on behalf of each
other Lessee. If used herein or in any related document, the term "Co-lessee"
or "Co-lessees" shall by synonymous with "Lessee" as defined herein.
B. Any provision of this Agreement which may be determined by competent
-28-
First Security Leasing Company of Nevada
MASTER EQUIPMENT LEASE AGREEMENT
authority to be prohibited or unenforceable in any jurisdiction shall, as to
such filing requirementsjurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction. To the
extent permitted by applicable law, Lessee hereby waives any provision of law
which renders any provision hereof prohibited or unenforceable in any respect.
C. The Agreement may only be changed by a writing signed by the party
against which enforcement of the change is sought. No third-party
manufacturer, supplier, salesperson, or broker, or any agent thereof, is
Lessor's agent or is authorized to waive or modify any provision of the
Agreement.
D. Lessee shall have no interest in any Item except as specified in the
Agreement.
E. THE AGREEMENT SHALL BE GOVERNED BY NEVADA LAW. In order to induce
Lessor to enter into the Agreement (and, if Lessee executes it outside of Utah,
in consideration for Lessor allowing Lessee to do so) Lessee agrees that ANY
PROCEEDING AGAINST LESSEE MAY BE BROUGHT IN ANY COURT OF COMPETENT JURISDICTION
IN NEVADA AND LESSEE UNCONDITIONALLY AGREES TO BE BOUND BY JUDGMENTS OF SUCH
COURTS. If Lessee is not a Utah resident, service of process upon Lessee by
mail shall be sufficient. Lessor may serve process in any other manner and
bring proceedings in any jurisdiction.
F. The word "including" as used in the past 90 days. YES _X_ NO ___
APPLICABLE ONLY TO ISSUERS INVOLVEDAgreement shall mean "including,
but not limited to."
G. The Agreement and related documents executed by the parties contain
their entire agreement, and there are no related oral agreements,
representations or warranties. The Agreement shall benefit and be binding upon
the parties' heirs, personal representatives, successors and assigns.
-29-
First Security Leasing Company of Nevada
MASTER EQUIPMENT LEASE AGREEMENT
LESSEE ACKNOWLEDGES THAT IT HAS READ THE ENTIRE MASTER LEASE.
IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whetherWITNESS WHEREOF, the registrant has filed all documents and
reports requiredparties have caused this Master Lease to be
filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. YES ___ NO ___
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock,executed as of the latest practicable date.
As of July 31, 2000, there were 9,436,275 shares of Monarch Casino & Resort,
Inc. $0.01 par value common stock outstanding.
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTSNovember 3, 1999, and Lessee's signatories warrant their
authority to sign on Lessee's behalf.
CO-LESSEES: MONARCH CASINO & RESORT, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- --------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenues
Casino........................... $ 15,501,459 $ 11,827,740 $ 29,550,188 $ 21,878,446
Food and beverage................ 7,400,521 5,802,959 14,175,898 10,364,446
Hotel............................ 4,642,868 3,415,218 8,752,129 5,778,110
Other............................ 896,375 666,772 1,706,151 1,299,828
------------ ------------ ------------ ------------
Gross revenues................ 28,441,223 21,712,689 54,184,366 39,320,830
Less promotional allowances...... (3,462,731) (3,134,502) (6,556,147) (5,809,109)
------------ ------------ ------------ ------------
Net revenues.................. 24,978,492 18,578,187 47,628,219 33,511,721
------------ ------------ ------------ ------------
Operating expenses
Casino........................... 6,386,124 5,091,534 12,220,027 9,620,009
Food and beverage................ 4,585,251 3,632,785 8,836,887 6,163,093
Hotel............................ 1,608,437 950,546 3,224,901 1,658,144
Other............................ 357,119 282,268 664,195 499,040
Selling, general and
administrative.................. 6,068,891 5,548,029 12,026,962 10,379,260
Depreciation and amortization.... 2,518,646 1,555,122 5,018,401 2,733,066
------------ ------------ ------------ ------------
Total operating expenses...... 21,524,468 17,060,284 41,991,373 31,052,612
------------ ------------ ------------ ------------
Income from operations........ 3,454,024 1,517,903 5,636,846 2,459,109
------------ ------------ ------------ ------------
Other expense
Interest expense................. 2,178,903 920,265 4,218,012 1,540,200
------------ ------------ ------------ ------------
Total other expenses.......... 2,178,903 920,265 4,218,012 1,540,200
------------ ------------ ------------ ------------
Income before income taxes.... 1,275,121 597,638 1,418,834 918,909
Provision for income taxes......... 445,301 203,197 495,809 312,429
------------ ------------ ------------ ------------
Net income.................... $ 829,820 $ 394,441 $ 923,025 $ 606,480
============ ============ ============ ============
Income per share of common stock
Net income
Basic.......................... $ 0.09 $ 0.04 $ 0.10 $ 0.06
Diluted........................ $ 0.09 $ 0.04 $ 0.10 $ 0.06
Weighted average number of common
shares and potential common
shares outstanding
Basic.......................... 9,436,275 9,436,275 9,436,275 9,436,275
Diluted........................ 9,478,796 9,493,765 9,481,390 9,497,903
The accompanying Notes to the Condensed Consolidated Financial Statements are
an integral part of these statements.
-2-AND
GOLDEN ROAD MOTOR INN, INC. dba ATLANTIS
CASINO RESORT
LESSEE: MONARCH CASINO & RESORT, INC. CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, December 31,
2000 1999
------------ ------------
(Unaudited)
ASSETS
Current assets
Cash................................................. $ 3,903,609 $ 6,367,507
Receivables, net..................................... 3,258,471 1,954,447
Related party receivables............................ 59,773 83,205
Inventories.......................................... 1,233,955 1,456,602
Prepaid expenses..................................... 2,049,791 1,600,249
Prepaid federal income taxes ........................ 443,870 443,870
Deferred income taxes................................ 1,602,772 1,174,626
------------- ------------
Total current assets.............................. 12,552,241 13,080,506
------------- ------------
Property and equipment
Land................................................. 10,339,530 10,339,530
Land improvements.................................... 3,074,414 3,034,095
Buildings............................................ 78,785,911 78,432,078
Furniture and equipment.............................. 50,332,559 49,392,494
Building improvements................................ 4,515,799 4,462,520
------------- ------------
147,048,213 145,660,717
Less accumulated depreciation and amortization....... (32,980,850) (27,964,180)
------------- ------------
114,067,363 117,696,537
Construction in progress............................. 419,042 -
------------- ------------
Net property and equipment........................ 114,486,405 117,696,537
------------- ------------
Other assets, net...................................... 774,026 877,382
------------- ------------
Total assets...................................... $ 127,812,672 $ 131,654,425
=============LESSEE: GOLDEN ROAD MOTOR INN, INC.
dba: ATLANTIS CASINO RESORT
a(n) Nevada Corporation a(n) Nevada Corporation
BY: /S/ John Farahi BY: /S/ John Farahi
================ ================
Title: CEO Title: CEO
============== ==============
Address: 3800 S. Virginia Street Address: 3800 S. Virginia Street
Reno, NV 89502 Reno, NV 89502
Federal ID or Federal ID or
Social Security Number 88-0300760 Social Security Number 88-0117859
LESSOR: First Security Leasing
Company of Nevada
BY: /S/ Jerry J. Velarde
=====================
TITLE: AVP Authorized
Representative
=========================
Address: c/o First Security Leasing
Company
381 East Broadway,
2nd Floor
Salt Lake City, Utah 84111
-30-
Lease No. 025-3003833
============
The accompanying NotesFIRST SECURITY LEASING COMPANY OF NEVADA
LEASE SCHEDULE TO
MASTER EQUIPMENT LEASE AGREEMENT
This Lease Schedule to Master Equipment lease Agreement (the "Lease
Schedule") between the signatories hereof dated as of November 3, 1999 and
constitutes a separate lease (the "Lease") thereunder.
All terms and conditions of the Agreement are hereby incorporated herein
and made a part hereof as if such terms and conditions were set forth in this
Lease Schedule at length and all capitalized terms not otherwise defined in
this Lease Schedule shall have the meaning set out in the Agreement. By their
execution and delivery of this Lease Schedule Lessor and Lessee hereby reaffirm
on and as of the date hereof all the terms, conditions, agreements,
representations and warranties contained in the Agreement. A copy of the
signed Agreement attached to the Condensed Consolidated Financial Statements areLease Schedule, which attachment shall adopt
the copied signatures on the Agreement as of the date of the Lease Schedule,
shall constitute an integral partoriginal lease. A copy of these statements.
-3-the Agreement and the Lease
Schedule shall alone constitute the chattel paper for purposes of perfecting a
security interest.
A. Description of Equipment
ID New Invoice
or or Purchase
Quantity Vendor Description Serial # Used Price
======== ====== =========== ======== ==== ========
TWO (2) SETS OF 23 FT 9 INCH
OVER ALL AREA HEIGHT ILLUMINATED
CHANNEL LETTERS
COPY "ATLANTIS" BUILT USING GRID
NEON WITH 6 INCH SPACE AND USING
2 Mikohn 60 MA TRANSFORMERS New $214,500.00
Lighting NEON WILL BE MOUNTED ON A MULT-
& Sign COLORED PAINTED METAL BACKGROUND
TO MATCH THE EXISTING BUILDING
LETTERS LOCATED ON THE LOWER
TOWER
THE LETTERS WILL HAVE GOLD
POLISHED RETURNS ANS SINGLE
WHITE NEON OUTLINE
(Tax in the amount of $14,500.00 paid directly to the
State of Nevada)
TOTAL INVOICE PURCHASE PRICE: $214,500.00
B. Term. 60 months.
C. Rental.
1. Frequency: Monthly
2. Advanced or Arrears: Advance
3. Rental Payment Dates: July 3, 2000, and on the same day of each Month
with the final payment on June 3, 2005.
-31-
Lease No. 025-3003833
============
FIRST SECURITY LEASING COMPANY OF NEVADA
LEASE SCHEDULE TO
MASTER EQUIPMENT LEASE AGREEMENT
4. Basic Rental in an amount equal to .0202716 of the total invoice
purchase price of all Items is payable on each Rental Payment Date.
5. Interim Rental in an amount equal to .000254 of the invoice purchase
price for each Item for each day from and including the date of
acceptance for such Item to but excluding the first Rental Payment Date
will be payable on the first Rental Payment Date.
D. Residual Value. 0 of the invoice purchase price of each item.
E. Location. The Equipment shall be located at:
Address: 3800 S. VIRGINIA STREET RENO, NV 89502
County: WASHOE
If required, the Equipment will be registered in NV.
F. Security Deposit. Concurrently with the execution hereof Lessee shall
deposit with Lessor the sum of N/A as a security deposit which Lessor may
use to satisfy any unpaid late charges, recording fees or other amounts
due and unpaid. Any unused portion of the deposit will be returned to
Lessee without interest upon expiration or earlier termination of the
Lease and upon payment of all sums then due and owing to Lessor, or Lessee
may, at its option, apply the unused balance of the security deposit
toward the last Rental payment.
G. Insurance. The minimum amount of insurance to be provided by Lessee as
required under the terms of the Agreement shall be as follows:
1. Liability:
$1,000,000.00 each individual
$1,000,000.00 each accident
$1,000,000.00 property damage liability
2. Physical Damage and Loss: $200,000.00
3. Additional riders, exclusions or special terms required by Lessor: N/A
-32-
EXHIBIT "A"
Maintenance & Return Conditions
===============================
03.10 Electronic Signs
======================
Maintenance, Use & Repair:
==========================
a. Lessee agrees to use the signage, "the Equipment," for the purpose for which
it was designed by the original manufacturer.
b. Lessee's use of the Equipment shall be in compliance with all federal, state
and local regulations regarding the use of such Equipment.
c. Lessee shall not move the Equipment from the location(s) as specified in the
lease without the prior written consent of the Lessor.
d. Lessee, at its own cost and expense, enter into and maintain in force a
maintenance contract with the manufacturer of the Equipment or such party as
shall be acceptable to Lessor. If Lessee has the Equipment maintained by a
party other than the manufacturer, Lessee hereby assumes and agrees to pay any
costs necessary to have the manufacturer re-certify the Equipment as eligible
for its then standard maintenance contract, at the scheduled expiration of the
lease term, which lease term shall continue upon the same terms and conditions
until such re-certification has been obtained.
e. Lessee may, upon notification to Lessor, upgrade the Equipment during the
lease term as it deems necessary. The Equipment will be maintained throughout
the term of the lease at a capacity equal to or greater than the capacity of
the Equipment at the inception of the lease agreement.
Return Conditions:
==================
a. If the Equipment is to be returned to Lessor, Lessee shall return all, but
not less than all, of the Equipment, together with all maintenance agreements,
service records, handbooks, manuals, cabling, certificates, or other
instructions and written material relating to the Equipment, to Lessor free and
clear of all liens, encumbrances or other charges. At the time of return of
the signage the lessee will pay a remarketing fee to the lessor equal to 20% of
the original equipment cost.
b. De-installation, packing and shipment is to be performed by Lessee, at its
sole cost and expense, in accordance with any manufacturer's specifications and
requirements.
c. The equipment will be delivered by Lessee, at its sole cost and expense, to
the manufacturer's location in Reno designated by Lessor in writing. There
will be no missing or damaged parts and the equipment will function as when
first delivered, except for normal wear and tear after the 60 month term.
CO-LESSEE: MONARCH CASINO & RESORT, INC. CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, December 31,
2000 1999
------------ ------------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt................. $ 8,287,476 $ 7,333,921
Accounts payable..................................... 5,797,581 7,238,084
Accounts payable-construction........................ 496,557 942,264
Accrued expenses..................................... 5,241,093 5,156,363
Federal income taxes payable......................... 580,080 213,686
------------- ------------
Total current liabilities......................... 20,402,787 20,884,318
Long-term debt, less current maturities................ 77,394,700 82,235,509
Deferred income taxes.................................. 3,223,579 2,666,017
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.................................... 9,784,330 8,861,305
------------- ------------
Total stockholders' equity........................ 26,791,606 25,868,581
------------- ------------
Total liabilities and stockholders' equity........ $127,812,672 $131,654,425
============= ============
The accompanying Notes to the Condensed Consolidated Financial Statements are
an integral part of these statements.
-4-
MONARCHCO-LESSEE: GOLDEN ROAD MOTOR INN,
INC. DBA ATLANTIS CASINO
& RESORT
INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
June 30,
----------------------------
2000 1999
------------ ------------
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net income............................................ $ 923,025 $ 606,480
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization....................... 5,109,154 2,823,559
Gain on disposal of assets.......................... (87,980) (5,294)
Deferred income taxes............................... 129,416 (97,143)
Increase in receivables, net........................ (1,280,592) (311,759)
Decrease (increase) in inventories.................. 222,647 (435,245)
(Increase) decrease in prepaid expenses............. (449,542) 352,707
Decrease in other assets............................ 10,872 19,228
(Decrease) increase in accounts payable............. (1,440,503) 1,543,214
Increase (decrease) in accrued expenses,
and federal income taxes.......................... 451,124 (203,754)
------------ ------------
Net cash provided by operating activities.......... 3,587,621 4,291,993
------------ ------------
Cash flows from investing activities:
Proceeds from sale of assets.......................... 87,980 11,268
Acquisition of property and equipment................. (1,670,529) (24,876,590)
Decrease in accounts payable construction............. (445,707) (2,056,375)
------------ ------------
Net cash used in investing activities.............. (2,028,256) (26,921,697)
------------ ------------
Cash flows from financing activities:
Proceeds from long-term debt.......................... - 23,249,498
Principal payments on long-term debt.................. (4,023,263) (746,082)
------------ ------------
Net cash (used in) provided by
financing activities.............................. (4,023,263) 22,503,416
------------ ------------
Net decrease in cash............................... (2,463,898) (126,288)
Cash at beginning of period............................. 6,367,507 4,919,143
------------ ------------
Cash at end of period................................... $ 3,903,609 $ 4,792,855
============ ============
Supplemental disclosure of
cash flow information:
Cash paid for interest,
net of capitalized interest.......................... $ 4,101,751 $ 1,642,151
Capitalized interest.................................. $ - $ 1,090,428
Supplemental schedule of non-cash
investing and financing activities:
The Company financed the purchase of property
and equipment in the following amounts............... $ 136,009 $ 6,425,760
The accompanying Notes to the Condensed Consolidated Financial Statements are
an integral part of these statements.
-5-
MONARCH CASINO & RESORT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
Monarch Casino & Resort, Inc. ("Monarch") was incorporated in 1993.
Monarch's wholly-owned subsidiary, Golden Road Motor Inn, Inc. ("Golden
Road"), owns and operates the Atlantis Casino Resort (the "Atlantis"), a
hotel/casino facility in Reno, Nevada. Unless stated otherwise, "Monarch" or
the "Company" refers to Monarch Casino & Resort, Inc. and its Golden Road
subsidiary.
The consolidated financial statements include the accounts of Monarch and
Golden Road. Intercompany balances and transactions are eliminated.
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 1999 consolidated financial statements have been
reclassified to conform with the 2000 presentation. These reclassifications
had no effect on the Company's previously reported net income.
Related Party Receivables
Receivables from officers, employees, or affiliated companies are
primarily for banquet related services and are priced at the retail value of
the goods or services provided.
NOTE 2. INTERIM FINANCIAL STATEMENTS
The accompanying condensed consolidated financial statements for the
three month and six month periods ended June 30, 2000 and June 30, 1999 are
unaudited. In the opinion of management, all adjustments, consisting of normal
recurring adjustments necessary for a fair presentation of the Company's
financial position and results of operations for such periods, have been
included. The accompanying unaudited condensed consolidated financial
statements should be read in conjunction with the Company's audited financial
statements included in its Annual Report on Form 10-K for the year ended
December 31, 1999. The results for the three month and six month periods
ended June 30, 2000 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2000, or for any other period.
-6-
NOTE 3. EARNINGS PER SHARE
In 1997, the Company adopted the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 128, "Earnings Per Share." SFAS No. 128
replaces previously reported earnings per share with "basic" earnings per
share and "diluted" earnings per share. Basic earnings per share is computed
by dividing reported net earnings by the weighted-average number of common
shares outstanding during the period. Diluted earnings per share reflects the
additional dilution for all potentially dilutive securities such as stock
options.
The following is a reconciliation of the number of shares (denominator)
used in the basic and diluted earnings per share computations (shares in
thousands):
Three Months ended June 30,
-----------------------------------
2000 1999
---------------- ----------------
Per Share Per Share
Shares Amount Shares Amount
------ --------- ------ ---------
Net Income
Basic..................... 9,436 $0.09 9,436 $0.04
Effect of dilutive
stock options............ 43 - 58 -
------ ------- ------ -------
Diluted................... 9,479 $0.09 9,494 $0.04
====== ======= ====== =======
Six Months ended June 30,
-----------------------------------
2000 1999
---------------- ----------------
Per Share Per Share
Shares Amount Shares Amount
------ --------- ------ ---------
Net Income
Basic..................... 9,436 $0.10 9,436 $0.06
Effect of dilutive
stock options............ 45 - 62 -
------ ------ ------ ------
Diluted................... 9,481 $0.10 9,498 $0.06
====== ====== ====== ======
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 and their inclusion would be
antidilutive.
-7-
Three Months ended June 30,
----------------------------
2000 1999
----------- -----------
Options to purchase shares of
common stock (in thousands)..... 19 -
Exercise prices.................. $5.25-$6.00 -
Expiration dates................. 6/03-2/10 -
Six Months ended June 30,
----------------------------
2000 1999
----------- -----------
Options to purchase shares of
common stock (in thousands)..... 19 -
Exercise prices.................. $5.25-$6.00 -
Expiration dates................. 6/03-2/10 -
-8-
ITEM 2. 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, and expansion of Indian casinos in California, 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, changes in federal or
state tax laws or the administration of such laws.
RESULTS OF OPERATIONS
Comparison of Operating Results for the Three Month
Periods Ended June 30, 2000 and 1999
For the three month period ended June 30, 2000, the Company earned $830
thousand, or $0.09 per share, on net revenues of $25.0 million, compared to
earnings of $394 thousand, or $0.04 per share, on net revenues of $18.6
million for the three months ended June 30, 1999. Income from operations for
the three months ended June 30, 2000 totaled $3.5 million, compared to $1.5
million for the 1999 second quarter. Net revenues for the second quarter of
2000 represents a new second quarter record for the Company, but net income
and earnings per share were negatively impacted primarily due to a 62.0%
increase in depreciation and amortization and a 136.8% increase in interest
expense when compared to last year's second quarter, both as a direct result
of the Atlantis expansion.
Casino revenues totaled $15.5 million in the second quarter of 2000, an
increase of 31.1% from $11.8 million in the 1999 second quarter, reflecting
increases in both slot and table game win. Slot revenues were up 23.4% in the
second quarter of 2000 compared to the second quarter of 1999 due to an
increase in the volume of slot machine play and an increase in the average
number of slot machines for the quarter. Table game revenue for the three
months ended June 30, 2000 increased 57.0% compared to the same period in
1999, primarily due to an increase in table game drop and an increase in the
average number of table games for the quarter. Casino operating expenses
amounted to 41.2% of casino revenues in the 2000 second quarter, compared to
43.0% in the 1999 second quarter, primarily due to a decrease in operating
costs.
Food and beverage revenues for the 2000 second quarter totaled $7.4
million, an increase of 27.5% from $5.8 million in the 1999 second quarter,
due primarily to the operation of one new restaurant, an additional beverage
lounge, expansion of the buffet, and an increase in the hotel guest traffic
-9-
created by the new hotel rooms. Food and beverage operating expenses remained
relatively constant as a percent of food and beverage revenue at 62.0% in the
2000 second quarter compared to 62.6% in the second quarter of 1999.
Hotel revenues increased 35.9% to $4.6 million from the 1999 second
quarter, as a result of opening 385 new hotel tower rooms, a slight decrease
in the average daily room rate, and an occupancy rate increase. The Atlantis'
average daily room rate ("ADR") was $51.73 for the 2000 second quarter
compared to $52.45 in the second quarter of 1999. The Atlantis experienced an
occupancy rate of 96.7% during the 2000 second quarter, up from an occupancy
rate of 90.8% during the same period last year. Hotel operating expenses in
the 2000 second quarter were 34.6% of hotel revenues, compared to 27.8% in the
1999 second quarter, as a result of increased payroll and operating costs for
the hotel expansion, including the new concierge tower rooms.
Other revenues totaled $896 thousand in the second quarter of 2000, up
34.4% from $667 thousand in the second quarter of 1999, primarily reflecting
the opening of a logo gift shop. Other expenses in the 2000 second quarter
were 39.8% of other revenues, compared to 42.3% in the 1999 second quarter.
Selling, general and administrative expenses were $6.1 million in the
2000 second quarter or 24.3% of net revenues, compared to $5.5 million or
29.9% of net revenues in the second quarter of 1999. The decrease in these
expenses as a percentage of revenue reflects the fact that certain payroll and
operating costs have not increased to the same extent as revenues have
increased, thereby resulting in certain economies of scale from the expansion.
Interest expense for the 2000 second quarter totaled $2.2 million, an
increase of 136.8% from $920 thousand in the second quarter of 1999. The
increase reflects the Company's increased debt incurred in connection with the
Atlantis expansion and an increase in interest rates. Because the Atlantis
expansion was in operation in the second quarter of 2000, the Company did not
capitalize any interest costs; however, during the 1999 second quarter, while
construction was still in progress, $561 thousand in interest costs were
capitalized.
Comparison of Operating Results for the Six Month
Periods Ended June 30, 2000 and 1999
For the six months ended June 30, 2000, the Company earned $923 thousand,
or $0.10 per share, on net revenues of $47.6 million, compared to earnings of
$606 thousand, or $0.06 per share, on net revenues of $33.5 million during the
six months ended June 30, 1999. Operating income for the 2000 six month
period totaled $5.6 million, compared to $2.5 million for the same period in
1999. Net revenues for the six months ended June 30, 2000 represents a new
record for the Company, but net income and earnings per share were negatively
impacted primarily due to an 83.6% increase in depreciation and amortization
and a 173.9% increase in interest expense when compared to last year's six
month period.
Casino revenues for the first six months of 2000 totaled $29.6 million, a
35.1% increase from $21.9 million for the first six months of 1999, reflecting
increases in both slot and table game win. Slot revenues were up 31.5% in the
first six months of 2000 compared to the first six months of
-10-
1999 due to an increase in the volume of slot machine play and an increase in
the average number of slot machines for the six month period. Table game
revenue for the six months ended June 30, 2000 increased 45.7% compared to the
same period in 1999, primarily due to an increase in table game drop and
an increase in the average number of table games for the six month period.
Casino operating expenses amounted to 41.4% of casino revenues for the six
months ended June 30, 2000, compared to 44.0% for the same period in 1999,
primarily due to a decrease in operating costs.
Food and beverage revenues totaled $14.2 million for the six months ended
June 30, 2000, an increase of 36.8% from the $10.4 million for the six months
ended June 30, 1999, due primarily to the addition of two new restaurants, an
additional beverage lounge, expansion of the buffet, and an increase in the
number of hotel guests in the newly expanded hotel. While food and beverage
operating margins remained relatively constant, reported food and beverage
expenses amounted to 62.3% of food and beverage revenues during the 2000 six
month period, compared to 59.5% for the same period in 1999, which was
primarily caused by classifying certain food and beverage costs in accordance
with accounting requirements prescribed by the Securities and Exchange
Commission.
Hotel revenues for the first six months of 2000 increased 51.5% to a
total of $8.8 million, up from $5.8 million for the first six months of 1999.
The increase reflects a 45.6% increase in room nights available in the first
six month period of 2000 compared to the same period for 1999 and an increased
occupancy rate. The Atlantis experienced a 91.6% occupancy rate during the
2000 six month period, compared to 89.1% for the same period in 1999. The
average daily room rate ("ADR") was $51.23 for the six month period in 2000,
down only slightly compared to $51.39 for the same period in 1999. Hotel
operating expenses in the first six months of 2000 were 36.8% of hotel
revenues, compared to 28.7% for the same period in 1999. This increase in
operating expenses as a percentage of hotel revenues resulted from increased
payroll and operating costs for the expanded hotel and additional amenities.
Other revenues were $1.7 million for the six months ended June 30, 2000,
an increase of 31.3% from $1.3 million in the same period in 1999, reflecting
the opening of a logo gift shop. Other expenses as a percentage of revenue
remained fairly constant at 38.9% and 38.4% for the six month periods ended
June 30, 2000 and 1999, respectively.
Selling, general and administrative expenses were $12.0 million in the
first six months of 2000, or 25.3% of net revenues, compared to $10.4 million
or 31.0% of net revenues in the first six months of 1999. The decrease in
these expenses as a percentage of revenue reflects the fact that certain
payroll and operating costs have not increased to the same extent as revenues
have increased, thereby resulting in certain economies of scale from the
expansion.
Interest expense for the first six months of 2000 totaled $4.2 million,
an increase of 173.9%, compared to $1.5 million for the same period one year
earlier. The increase reflects the Company's increased debt due to the
Atlantis expansion and an increase in interest rates. Because the Atlantis
expansion was in operation in the first six months of 2000, the Company did
not capitalize any interest costs; however, during the first six months of
1999, while construction was still in progress, $1.1 million in interest costs
were capitalized.
-11-
OTHER FACTORS AFFECTING CURRENT AND FUTURE RESULTS
The recent constitutional amendment approved by California voters
allowing the expansion of Indian casinos in California will have an impact on
casino revenues in Nevada in general, and many analysts have predicted the
impact will be more significant on the Reno-Lake Tahoe market. The extent of
this impact is difficult to predict, but the Company believes that the impact
on the Company will be mitigated to an extent due to the Atlantis' emphasis on
Reno area residents as a significant base of its business. However, if other
Reno area casinos suffer business losses due to increased pressure from
California Indian casinos, they may intensify their marketing efforts to Reno
area residents as well. However, the Company's numerous amenities such as a
wide array of restaurants and other venues are a key factor in the Company's
ability to attract Reno area residents which competitor facilities will not
easily be able to match.
The Company also believes that 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.
The gaming industry represents a significant source of tax revenues to
the State of Nevada. A recent proposal in Nevada, which is currently under
discussion, would increase the tax on gaming revenues from 6.25% to 11.25%.
If enacted, this proposal would have a material impact on the Company's
results of operations.
LIQUIDITY AND CAPITAL RESOURCES
For the six months ended June 30, 2000, net cash provided by operating
activities totaled $3.6 million. Net cash used in investing activities for
the same period totaled $2.0 million, which consisted primarily of
acquisitions of property and equipment at the Atlantis. Net cash used in
financing activities totaled $4.0 million as the Company used funds to reduce
long-term debt. As a result, at June 30, 2000, the Company had cash of $3.9
million, compared to $6.4 million at December 31, 1999.
The Company has an $80 million construction and reducing revolving credit
facility with a group of banks (the "Credit Facility"). The principal terms
of the Credit Facility are summarized in the Company's Annual Report on Form
10-K for the year ended December 31, 1999. At June 30, 2000, the outstanding
balance of the Credit Facility was $77.9 million.
The Company continues to monitor expansion and development 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 available under the Credit Facility will provide the
Company with sufficient resources to fund its operations, meet its existing
debt obligations and fund its 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
-12-
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.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On June 21, 2000, the Company conducted its annual meeting of stockholders in
Reno, Nevada, in which the only action taken was the election of directors
whose term expired in 2000. The results were as follows:
Votes Cast
--------------------
Against or
Name of Director Elected For Withheld
------------------------ --------------------By: /S/ John Farahi 9,349,688 14,750
Ronald R. Zideck 9,349,688 14,750
Craig F. Sullivan 9,349,688 14,750
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit No. Description
----------- -----------
EX-27.01 Financial Data Schedule
(b) Reports on Form 8-K
None
-13-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MONARCH CASINO & RESORT, INC.
(Registrant)
Date: August 11, 2000 By: /s/ BEN FARAHI
------------------------------------
Ben Farahi, Co-Chairman of the Board,
Secretary, Treasurer and Chief
Financial Officer(Principal Financial
Officer and Duly Authorized Officer)
-14-
EXHIBIT INDEX
Exhibit No. Description Page
No.
- ----------- ----------- --------
EX-27.01 Financial Data Schedule 16
-15-By: /S/ John Farahi
=============== ===============
Its: CEO Its: CEO
=============== ===============
-33-