-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Dqlkpe/iAQjEXdnij8xJGi477a6AGToyAvUQI3GtRTnY3k2cOuoguSHmt4v3/LG3 vBuJPy6AiDP4jj+QHr9HUg== 0000042246-98-000013.txt : 19981123 0000042246-98-000013.hdr.sgml : 19981123 ACCESSION NUMBER: 0000042246-98-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981116 DATE AS OF CHANGE: 19981120 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MIRAGE RESORTS INC CENTRAL INDEX KEY: 0000042246 STANDARD INDUSTRIAL CLASSIFICATION: 7990 IRS NUMBER: 880058016 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-06697 FILM NUMBER: 98753265 BUSINESS ADDRESS: STREET 1: 3600 LAS VEGAS BOULEVARD SOUTH CITY: LAS VEGAS STATE: NV ZIP: 89109 BUSINESS PHONE: (702) 693-7111 MAIL ADDRESS: STREET 1: 3600 LAS VEGAS BOULEVARD SOUTH CITY: LAS VEGAS STATE: NV ZIP: 89109 FORMER COMPANY: FORMER CONFORMED NAME: GOLDEN NUGGET INC DATE OF NAME CHANGE: 19910813 10-Q 1 MIRAGE 3RD QTR 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 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. 01-6697 Mirage Resorts, Incorporated - - --------------------------------------------------------------------------- (Exact name of Registrant as specified in its charter) Nevada 88-0058016 - - ------------------------------- ------------------------------------ (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 3600 Las Vegas Boulevard South, Las Vegas, Nevada 89109 - - --------------------------------------------------------------------------- (Address of principal executive offices - Zip Code) (702) 693-7111 - - --------------------------------------------------------------------------- (Registrant's telephone number, including area code) 3400 Las Vegas Boulevard South, Las Vegas, Nevada 89109 - - --------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) 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 the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common stock, $0.004 par value, 180,013,056 shares outstanding as of November 12, 1998. PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS The unaudited condensed consolidated financial information as of September 30, 1998 and for the three-month and nine-month periods ended September 30, 1998 and 1997 included in this report was reviewed by Arthur Andersen LLP, independent public accountants, in accordance with the professional standards and procedures established for such reviews by the American Institute of Certified Public Accountants. REVIEW REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ----------------------------------------------- To the Directors and Stockholders of Mirage Resorts, Incorporated We have reviewed the accompanying condensed consolidated balance sheet of Mirage Resorts, Incorporated (a Nevada corporation) and subsidiaries (the "Company") as of September 30, 1998, and the related condensed consolidated statements of income for the three-month and nine-month periods ended September 30, 1998 and 1997 and the related condensed consolidated state- ments of cash flows for the nine-month periods ended September 30, 1998 and 1997. These condensed consolidated financial statements are the respon- sibility of the Company's management. We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to the financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of Mirage Resorts, Incorporated and subsidiaries as of December 31, 1997, and the related consolidated statements of income, stockholders' equity and cash flows for the year then ended (not presented herein), and, in our report dated March 16, 1998, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet of Mirage Resorts, Incorporated and subsidiaries as of December 31, 1997, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. ARTHUR ANDERSEN LLP Las Vegas, Nevada November 13, 1998 -2-
CONDENSED CONSOLIDATED MIRAGE RESORTS, INCORPORATED BALANCE SHEETS - - --------------------------------------------------------------------------------------------------- At September 30, At December 31, 1998 1997 - - --------------------------------------------------------------------------------------------------- (In thousands) (Unaudited) ASSETS Current assets Cash and cash equivalents $ 126,969 $ 99,337 Receivables, net of allowance for doubtful accounts of $51,298 and $42,477 68,897 101,635 Inventories 44,551 29,179 Preopening costs 79,646 14,603 Prepaid expenses and other 89,544 56,168 - - --------------------------------------------------------------------------------------------------- Total current assets 409,607 300,922 Property and equipment, net of accumulated depreciation of $700,714 and $633,563 1,675,014 1,455,125 Construction in progress 1,955,232 1,261,084 Other assets, net 322,516 330,219 - - --------------------------------------------------------------------------------------------------- $4,362,369 $3,347,350 =================================================================================================== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable $ 156,524 $ 151,993 Accrued expenses 129,991 104,467 Current maturities of long-term debt 488 927 - - --------------------------------------------------------------------------------------------------- Total current liabilities 287,003 257,387 Long-term debt, net of current maturities 2,237,143 1,396,728 Other liabilities, including deferred income taxes of $205,552 and $167,415 219,344 180,751 - - --------------------------------------------------------------------------------------------------- Total liabilities 2,743,490 1,834,866 - - --------------------------------------------------------------------------------------------------- Commitments and contingencies Stockholders' equity Common stock: 179,821 and 179,422 shares outstanding 940 940 Additional paid-in capital 737,142 734,547 Retained earnings 1,165,595 1,063,793 Treasury stock, at cost: 55,327 and 55,726 shares (284,798) (286,796) - - --------------------------------------------------------------------------------------------------- Total stockholders' equity 1,618,879 1,512,484 - - --------------------------------------------------------------------------------------------------- $4,362,369 $3,347,350 ===================================================================================================
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. -3-
CONDENSED CONSOLIDATED MIRAGE RESORTS, INCORPORATED STATEMENTS OF INCOME (UNAUDITED) - - --------------------------------------------------------------------------------------------------- Three Months Nine Months ---------------------- ---------------------- For the periods ended September 30 1998 1997 1998 1997 - - --------------------------------------------------------------------------------------------------- (In thousands, except per share amounts) Gross revenues $372,174 $400,631 $1,104,263 $1,168,787 Less - promotional allowances (34,031) (31,478) (100,581) (93,234) - - --------------------------------------------------------------------------------------------------- 338,143 369,153 1,003,682 1,075,553 - - --------------------------------------------------------------------------------------------------- Costs and expenses Casino-hotel operations 209,611 207,935 614,184 609,700 General and administrative 41,939 42,507 121,285 120,879 Depreciation and amortization 21,650 22,216 66,706 65,590 Corporate expense 16,718 9,042 34,810 24,357 - - --------------------------------------------------------------------------------------------------- 289,918 281,700 836,985 820,526 - - --------------------------------------------------------------------------------------------------- Operating income 48,225 87,453 166,697 255,027 - - --------------------------------------------------------------------------------------------------- Other income (expense) Interest cost (34,376) (18,709) (92,619) (45,912) Interest capitalized 32,340 15,114 81,968 36,613 Other, including interest income 2,677 1,215 11,237 2,723 - - --------------------------------------------------------------------------------------------------- 641 (2,380) 586 (6,576) - - --------------------------------------------------------------------------------------------------- Income before income taxes and extraordinary item 48,866 85,073 167,283 248,451 Provision for income taxes 18,762 30,174 61,960 87,962 - - --------------------------------------------------------------------------------------------------- Income before extraordinary item 30,104 54,899 105,323 160,489 Extraordinary item - loss on early retirement of debt, net of applicable income tax benefit - - (3,521) (2,225) - - --------------------------------------------------------------------------------------------------- Net income $ 30,104 $ 54,899 $ 101,802 $ 158,264 =================================================================================================== Income per share before extraordinary item Basic $ 0.17 $ 0.31 $ 0.59 $ 0.90 Diluted 0.16 0.28 0.55 0.83 Net income per share Basic $ 0.17 $ 0.31 $ 0.57 $ 0.89 Diluted 0.16 0.28 0.53 0.82 - - --------------------------------------------------------------------------------------------------- Weighted-average common shares outstanding (used in the computation of basic earnings per share) 179,720 178,842 179,568 178,655 Effect of common stock options under the treasury stock method 10,828 14,556 12,187 13,726 - - --------------------------------------------------------------------------------------------------- Weighted-average common and common equivalent shares (used in the computation of diluted earnings per share) 190,548 193,398 191,755 192,381 ===================================================================================================
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. -4-
CONDENSED CONSOLIDATED MIRAGE RESORTS, INCORPORATED STATEMENTS OF CASH FLOWS (UNAUDITED) - - --------------------------------------------------------------------------------------------------- Nine months ended September 30 1998 1997 - - --------------------------------------------------------------------------------------------------- (In thousands) Cash flows from operating activities Net income $ 101,802 $ 158,264 Adjustments to reconcile net income to net cash provided by operating activities Provision for losses on receivables 15,340 12,441 Depreciation and amortization of property and equipment, including amounts reported as corporate expense 77,271 72,282 Earnings in excess of distributions from Monte Carlo (3,935) (22,792) Amortization of debt discount and issuance costs 4,090 10,974 Loss on early retirement of debt 5,418 3,422 Deferred income taxes 17,196 6,564 Other adjustments (3,037) (876) Changes in components of working capital pertaining to operating activities, net of effect of Boardwalk acquisition Increase in receivables and other current assets (27,628) (11,362) Increase (decrease) in trade accounts payable and accrued expenses 5,800 (20,977) - - --------------------------------------------------------------------------------------------------- Net cash provided by operating activities 192,317 207,940 - - --------------------------------------------------------------------------------------------------- Cash flows from investing activities Preopening costs (66,081) (13,511) Capital expenditures (920,122) (706,517) Increase in construction payables 20,144 30,006 Proceeds from sales of property and equipment 62,071 4,737 Boardwalk acquisition costs, net of cash acquired (55,562) (50,500) Other investing activities (36,943) (15,987) - - --------------------------------------------------------------------------------------------------- Net cash used for investing activities (996,493) (751,772) - - --------------------------------------------------------------------------------------------------- Cash flows from financing activities Net bank credit facility and commercial paper borrowings 675,826 259,584 Issuance of long-term debt 394,728 296,052 Retirement of long-term debt (237,110) - Other financing activities (1,636) 7,151 - - --------------------------------------------------------------------------------------------------- Net cash provided by financing activities 831,808 562,787 - - --------------------------------------------------------------------------------------------------- Cash and cash equivalents Increase for the period 27,632 18,955 Balance, beginning of period 99,337 81,908 - - --------------------------------------------------------------------------------------------------- Balance, end of period $ 126,969 $ 100,863 ===================================================================================================
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. -5- NOTES TO CONDENSED CONSOLIDATED MIRAGE RESORTS, INCORPORATED FINANCIAL STATEMENTS (UNAUDITED) - - --------------------------------------------------------------------------- NOTE 1 - COMPANY DESCRIPTION AND BASIS OF PRESENTATION Mirage Resorts, Incorporated (the "Company"), a Nevada corporation, through wholly owned subsidiaries, owns and operates some of the world's most successful casino-based entertainment resorts. These resorts include The Mirage and Treasure Island on the Las Vegas Strip, the Golden Nugget in downtown Las Vegas and the Golden Nugget-Laughlin located along the Colorado River in Laughlin, Nevada. The Company's newest resort, Bellagio, opened on October 15, 1998. Bellagio is an elegant 3,005-guest room European-style luxury resort located at the center of the Las Vegas Strip. The Company is currently constructing an additional wholly owned resort, Beau Rivage, in Biloxi, Mississippi. Beau Rivage is a luxurious 1,780-guest room beachfront resort being constructed on an approximately 23-acre site where Interstate 110 meets the Gulf Coast. Beau Rivage is currently expected to open in March 1999. The Company is also a 50% partner in a joint venture that owns and operates the Monte Carlo Resort & Casino on the Las Vegas Strip ("Monte Carlo"). Additionally, as discussed in Note 2, on June 30, 1998, the Company acquired the Holiday Inn -Registered Trademark- Casino Boardwalk on the Las Vegas Strip. The accompanying condensed consolidated financial statements have been prepared in accordance with the accounting policies described in the Company's Annual Report on Form 10-K for the year ended December 31, 1997 (the "1997 Annual Report") and should be read in conjunction with the Notes to Consolidated Financial Statements which appear in that report. The Condensed Consolidated Balance Sheet at December 31, 1997 contained herein was derived from audited financial statements, but does not include all disclosures included in the 1997 Annual Report and applicable under generally accepted accounting principles. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for the interim periods have been included. The results for the 1998 interim periods are not necessarily indicative of expected results for the full year. Certain amounts in the 1997 condensed consolidated financial statements have been reclassified to conform with the 1998 presentation. These reclassifications had no effect on the Company's net income. NOTE 2 - ACQUISITION OF BOARDWALK CASINO, INC. On June 30, 1998, the Company, through a wholly owned subsidiary, completed the acquisition of Boardwalk Casino, Inc. ("Boardwalk") and certain related assets for a total price of approximately $112.0 million in cash. Approximately $51.9 million of this amount was expended in 1997. Boardwalk owns and operates the Holiday Inn -Registered Trademark- Casino Boardwalk located on the Las Vegas Strip. The facility includes 653 hotel rooms and 33,000 square feet of casino space. -6- The Boardwalk acquisition was accounted for pursuant to the purchase method, with approximately $135.7 million allocated to the assets acquired and approximately $23.7 million to the liabilities assumed (including $4.1 million of accounts payable and accrued liabilities and $17.5 million of deferred income taxes) based upon their respective estimated fair values. Combined with adjacent land owned by the Company, the Boardwalk acquisition provides an approximately 55-acre site for future development with over 1,200 feet of frontage on the Las Vegas Strip between and contiguous to Monte Carlo and Bellagio. The Company is in the very early design phase for a potential new hotel-casino resort expected to be developed on the site. The design, timing and cost of any such future development, however, are still highly uncertain. Boardwalk is being accounted for as an incidental operation. Under this method, Boardwalk's operations are excluded from the Company's consolidated operating results and its net income is recorded as a reduction in the carrying value of the land. NOTE 3 - LONG-TERM DEBT ISSUANCE. On February 4, 1998, the Company received net proceeds of approximately $394.7 million (after deducting original issue discount and debt issuance costs) from the issuance of $200 million principal amount of 6 5/8% notes due February 1, 2005 and $200 million principal amount of 6 3/4% notes due February 1, 2008. The notes were issued pursuant to a "shelf" registration statement filed with the Securities and Exchange Commission in October 1997 covering a total of up to $750 million (including the $400 million issued in February 1998) of debt or equity securities or any combination thereof. RETIREMENTS. On March 15, 1998, the Company repaid at maturity the $133 million principal amount of its zero coupon first mortgage notes and redeemed all $100 million principal amount of its 9 1/4% senior subordinated notes. The 9 1/4% notes, scheduled to mature in March 2003, were redeemed at 104.11% of the principal amount. The call premium and write-off of the unamortized debt issuance costs associated with the 9 1/4% notes resulted in an extraordinary loss of $3.5 million ($0.02 per share basic and diluted), net of applicable income tax benefit of $1.9 million. -7-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS COMPARISON OF OPERATING RESULTS FOR THE THREE-MONTH PERIODS ENDED SEPTEMBER 30, 1998 AND 1997 FINANCIAL HIGHLIGHTS Three months ended September 30 1998 1997 - - --------------------------------------------------------------------------------------- (Dollars in thousands, except per share and room rate amounts) Gross revenues The Mirage $201,808 $230,444 Treasure Island 100,819 99,475 Golden Nugget 50,478 50,176 Golden Nugget-Laughlin 13,520 13,904 - - --------------------------------------------------------------------------------------- 366,625 393,999 Equity in earnings of Monte Carlo 5,549 6,632 - - --------------------------------------------------------------------------------------- $372,174 $400,631 - - --------------------------------------------------------------------------------------- Net revenues The Mirage $183,285 $213,241 Treasure Island 92,430 91,919 Golden Nugget 44,916 45,093 Golden Nugget-Laughlin 11,963 12,268 - - --------------------------------------------------------------------------------------- 332,594 362,521 Equity in earnings of Monte Carlo 5,549 6,632 - - --------------------------------------------------------------------------------------- $338,143 $369,153 - - --------------------------------------------------------------------------------------- Operating profit The Mirage $ 40,336 $ 64,802 Treasure Island 14,934 18,947 Golden Nugget 3,819 5,828 Golden Nugget-Laughlin 305 286 - - --------------------------------------------------------------------------------------- 59,394 89,863 Equity in earnings of Monte Carlo 5,549 6,632 Corporate expense (16,718) (9,042) - - --------------------------------------------------------------------------------------- $ 48,225 $ 87,453 - - --------------------------------------------------------------------------------------- Operating margin (operating profit/net revenues) The Mirage 22.0% 30.4% Treasure Island 16.2% 20.6% Golden Nugget 8.5% 12.9% Golden Nugget-Laughlin 2.5% 2.3% Company-wide (before Monte Carlo and corporate expense) 17.9% 24.8% - - --------------------------------------------------------------------------------------- Net income $ 30,104 $ 54,899 Net income per share Basic $ 0.17 $ 0.31 Diluted $ 0.16 $ 0.28 - - --------------------------------------------------------------------------------------- Other information (excluding Monte Carlo and Boardwalk) Company-wide table games win percentage 20.8% 25.5% Company-wide occupancy of standard guest rooms 98.8% 98.7% Average standard guest room rate(a) $ 83 $ 86 - - --------------------------------------------------------------------------------------- (a) Cash rate (i.e., excluding complimentary accommodations) at the Company's Las Vegas hotels.
-8- The Company reported 1998 third quarter net income of $30.1 million, or $0.16 per share, versus record third quarter earnings in 1997 of $54.9 million, or $0.28 per share. Earnings during the recent quarter were affected by a decline in the level of baccarat play (affecting earnings by approximately $0.03 per share), a relatively normal table games win percentage versus an exceptionally high win percentage (affecting earnings by approximately $0.06 per share) and higher-than-normal corporate expense. The third quarter of 1997 benefited from high levels of baccarat play and a Company-wide table games win percentage of 25.5%, representing the highest win percentage in any quarter since The Mirage opened in 1989. The Company-wide table games win percentage was 20.8% during the 1998 third quarter. By comparison, the win percentage over the past three calendar years averaged 20.3%. The win percentage can be affected by luck, changes in the mix of table games played and changes in the manner in which customers play the games. The level of baccarat play in the recent quarter was consistent with the levels of the first and second quarters of 1998, reflecting the impact the economic difficulties being experienced by certain Asian countries is having on the Company's international business. The devaluation of certain Asian currencies occurred primarily in the second half of 1997 and began affecting the baccarat component of the Company's revenues in the first quarter of 1998. Apart from the swing in baccarat activity, the other components of the Company's business have generally equaled or exceeded historical levels. In the quarter, for example, the Company's table games play excluding baccarat increased by 4% over the 1997 third quarter and Company-wide slot revenues increased by 5%. Occupancy of the Company's standard guest rooms during the 1998 third quarter was substantially the same as in the prior-year quarter (98.8% versus 98.7%) and the average daily standard room rate at its Las Vegas hotels declined by 3%. There was a significant increase in Las Vegas room inventory during 1996 and 1997, principally on the Strip, and this has resulted in a decline in city-wide occupancy and average room rates. Management anticipates continued pressure on hotel occupancy and room rates during the remainder of 1998 and 1999. The Company's hotel occupancy and average room rates have generally outperformed the Strip averages and this continued to be the case in the third quarter. Operating expenses at the Company's hotel-casinos were approximately equal to the prior-year period, despite the additional staffing necessary to prepare for the opening of Bellagio and Beau Rivage. These spectacular new resorts are increasing the Company's staffing levels from 17,000 to almost 30,000 employees. Many of the new positions have been filled through promotion or transfer of employees from the Company's existing resorts. In order to ensure a smooth transition, the Company hires replacement employees prior to the departure of transferring employees. These additional staffing efforts have resulted in considerably higher payroll and training costs during 1998. These costs were partially offset in the quarter by a reduction in gaming taxes, promotional costs and various other expenses related to the lower level of baccarat revenue. -9- Corporate expense rose significantly over the 1997 third quarter, reflecting certain political contributions and legal expenses, the growth in the size of the Company and expanded activities in pursuit of entertainment attractions for the Company's resorts. The Mirage was particularly impacted by the lower table games win percentage and the decline in baccarat activity, accounting for most of the decrease in the resort's 1998 third quarter revenues and operating income. Excluding baccarat, The Mirage's table games revenues increased by 6% over the 1997 third quarter. Slot revenues increased as well, by 2%. The Mirage's total non-casino revenues were flat in the quarter, but this included a $1.3 million increase in items provided to customers on a complimentary basis, resulting in a similar increase in promotional allowances. The average occupancy rate for The Mirage's standard guest rooms was approximately 99% during both third quarters, with a small increase in the 1998 quarter's average daily rate. Treasure Island reported a modest increase in operating revenues versus the prior-year third quarter. Slot revenues increased by $3.5 million, or 18%, more than offsetting a 5% decline in table games revenues caused by lower baccarat activity and a decline in the overall table games win percentage. Treasure Island's standard guest rooms were nearly 100% occupied during both third quarters. The average daily room rate during the 1998 third quarter, however, was 6% lower than in the prior-year period, contributing to a $1.9 million, or 9%, decline in net room revenues. Net revenues for the Cirque du Soleil production grew by 6%, partially offsetting a combined 2% decline in Treasure Island's other net non-casino revenues. Competitive market conditions have impacted operating results at the Company's two Golden Nugget properties. The new resorts and additional room capacity on the Strip have particularly impacted the downtown Las Vegas market. Weakness in the Laughlin market is largely attributable to competition from Indian casinos in Arizona and Southern California. On November 3, 1998, Proposition 5 was approved by the California electorate. Proposition 5 purports to allow all California Indian tribes the right to operate an unlimited number of certain gaming machines and other forms of casino gaming on California reservations. Several legal challenges to Proposition 5 are expected which may delay or prevent its implementation. If implemented, Proposition 5 may adversely affect Nevada gaming markets, although management is unable to assess the magnitude of the impact to the Company. Monte Carlo achieved gross operating revenues of $66.2 million during the 1998 third quarter, a 3% increase over the $64.2 reported in the prior-year period. Promotional and other operating expenses at the resort also increased, resulting in a $2.8 million decline in operating income. Prior to the 1998 second quarter, the joint venture was using Monte Carlo's operating cash flow principally to reduce its total debt. At September 30, 1998, outstanding debt totaled $91.9 million, versus $126.9 million at September 30, 1997. As a result, interest cost was substantially lower during the 1998 third quarter, partially offsetting the decline in operating income. During the 1998 second quarter, Monte Carlo achieved a favorable pricing tier under its bank credit agreement. At that time, the joint venture decided to begin distributing Monte -10- Carlo's available cash to the partners, which, if continued, should result in the joint venture's debt remaining at approximately $90 million, offset by lower debt at the Company than would otherwise be the case. The increase in interest cost and interest capitalized during the 1998 third quarter primarily reflects the Company's growing investment in Bellagio and Beau Rivage. The category "Other, including interest income" increased by $1.5 million over the 1997 third quarter. This increase primarily reflects earnings on an escrow account established by the Company in October 1997 to fund its portion of the cost of certain road improvements in the Marina area of Atlantic City, New Jersey. The Company's effective income tax rate during the 1998 third quarter of approximately 38% exceeded the statutory rate of 35% principally due to the non-deductibility of the political contributions mentioned previously. The Company's effective income tax rate approximated the statutory rate during the 1997 third quarter. -11-
COMPARISON OF OPERATING RESULTS FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1998 AND 1997 FINANCIAL HIGHLIGHTS Nine months ended September 30 1998 1997 - - --------------------------------------------------------------------------------------- (Dollars in thousands, except per share and room rate amounts) Gross revenues The Mirage $ 586,430 $ 649,605 Treasure Island 301,991 298,679 Golden Nugget 152,194 152,754 Golden Nugget-Laughlin 43,313 44,957 - - --------------------------------------------------------------------------------------- 1,083,928 1,145,995 Equity in earnings of Monte Carlo 20,335 22,792 - - --------------------------------------------------------------------------------------- $1,104,263 $1,168,787 - - --------------------------------------------------------------------------------------- Net revenues The Mirage $ 531,191 $ 597,665 Treasure Island 276,593 276,938 Golden Nugget 137,378 138,213 Golden Nugget-Laughlin 38,185 39,945 - - --------------------------------------------------------------------------------------- 983,347 1,052,761 Equity in earnings of Monte Carlo 20,335 22,792 - - --------------------------------------------------------------------------------------- $1,003,682 $1,075,553 - - --------------------------------------------------------------------------------------- Operating profit The Mirage $ 110,620 $ 171,054 Treasure Island 50,430 61,146 Golden Nugget 17,450 20,642 Golden Nugget-Laughlin 2,672 3,750 - - --------------------------------------------------------------------------------------- 181,172 256,592 Equity in earnings of Monte Carlo 20,335 22,792 Corporate expense (34,810) (24,357) - - --------------------------------------------------------------------------------------- $ 166,697 $ 255,027 - - --------------------------------------------------------------------------------------- Operating margin (operating profit/net revenues) The Mirage 20.8% 28.6% Treasure Island 18.2% 22.1% Golden Nugget 12.7% 14.9% Golden Nugget-Laughlin 7.0% 9.4% Company-wide (before Monte Carlo and corporate expense) 18.4% 24.4% - - --------------------------------------------------------------------------------------- Income before extraordinary item $ 105,323 $ 160,489 Net income $ 101,802 $ 158,264 - - --------------------------------------------------------------------------------------- Income per share before extraordinary item Basic $ 0.59 $ 0.90 Diluted 0.55 0.83 Net income per share Basic $ 0.57 $ 0.89 Diluted 0.53 0.82 - - --------------------------------------------------------------------------------------- Other information (excluding Monte Carlo and Boardwalk) Company-wide table games win percentage 19.2% 21.8% Company-wide occupancy of standard guest rooms 98.7% 99.0% Average standard guest room rate(a) $ 88 $ 91 - - --------------------------------------------------------------------------------------- (a) Cash rate (i.e., excluding complimentary accommodations) at the Company's Las Vegas hotels.
-12- Comparisons for the 1998 nine-month period were likewise difficult, as earnings during the 1997 period represent the highest ever achieved in any comparable nine-month period in the Company's history. Revenues, operating income and income before non-recurring items in the 1997 period all set new records. During the 1998 nine-month period, the Company's income before extraordinary item totaled $105.3 million, or $0.55 per share, versus $160.5 million, or $0.83 per share, in the corresponding 1997 period. Both nine-month periods include debt-related extraordinary charges. As discussed in Note 3 of Notes to Condensed Consolidated Financial Statements, the 1998 period includes a charge of $3.5 million, or $0.02 per share, associated with the redemption of all $100.0 million principal amount of the Company's 9 1/4% notes. The 1997 period includes a similar charge of $2.2 million, or $0.01 per share, associated with amending and increasing the size of the Company's bank credit facility. After deducting such charges, net income for the 1998 period was $101.8 million, or $0.53 per share, compared with $158.3 million, or $0.82 per share, for the 1997 nine months. The Company's earnings during the 1998 nine-month period were similarly affected by the decline in international baccarat business and increased competitive pressures in the Las Vegas market discussed previously in comparing the three-month periods. The level of baccarat play was down 29% from the 1997 nine-month period. The Company-wide table games win percentage was also below the 1997 period, 19.2% versus 21.8%. Excluding baccarat, activity at the Company's other table games was up over the prior-year period, yielding a 2% increase in related revenues. Slot revenues achieved a $5.7 million, or 2%, increase. Despite the additional Las Vegas room capacity, occupancy of the Company's standard guest rooms remained strong at 98.7%, versus 99.0% in the prior-year period. The Company's standard guest room rate at its Las Vegas hotels averaged $88, down approximately 3% from the $91 average during the 1997 nine-month period. The Company incurred higher payroll and training costs throughout the entire 1998 nine-month period due to the Bellagio and Beau Rivage staffing efforts mentioned previously. A substantial portion of the decline in the Company's baccarat activity during 1998 occurred at The Mirage. This, together with a 3.7- percentage point decline in the overall table games win percentage, primarily accounts for a $53.6 million, or 15%, decrease in The Mirage's casino revenues. Revenues at The Mirage's other table games and slots increased by 4% and 3%, respectively, over the 1997 nine-month period. Net non-casino revenues at The Mirage were down 5% from the 1997 period. Standard guest room occupancy was approximately 99% during both nine- month periods. A small decline in the average daily room rate contributed to a 3% decline in room revenues. Treasure Island's overall revenue comparisons were relatively flat for the nine-month period. A $2.0 million, or 2%, increase in casino revenues substantially offset a $2.3 million, or 1%, decline in net non- casino revenues. Slot revenues grew by $4.5 million, or 8%, offsetting a $2.7 million, or 5%, decline in table games revenues caused primarily by a decline in baccarat activity and the win percentage. Activity at Treasure Island's other table games increased by 3% over the 1997 period. Net entertainment revenues were up 5% over the 1997 nine-month period, primarily due to an increase in the average ticket price for -13- Mystere. Occupancy of Treasure Island's standard guest rooms exceeded 99% during both nine-month periods. Net room revenues, however, were down 7%, mainly due to a decline in the average daily room rate. Higher payroll, training and various other costs associated with the additional staffing efforts discussed previously contributed to a 5% increase in Treasure Island's operating expenses and the 3.9-percentage point decline in its operating margin. Competitive market conditions impacted profitability at the Company's two Golden Nugget properties throughout the 1998 nine-month period. Monte Carlo achieved gross revenues of $201.2 million and operating income of $45.6 million during the 1998 nine-month period. This compares with $197.5 million and $53.5 million during the prior-year period. The factors discussed previously in comparing the three-month periods had a similar effect on corporate expense, net interest expense and the Company's provision for income taxes when comparing the nine-month periods. Additionally, in the third quarter of 1997, the Company purchased certain of Boardwalk's previously issued debt securities as part of the acquisition. As a result, "Other, including interest income" during the 1998 nine-month period includes interest earned on the securities until Boardwalk became a wholly owned subsidiary of the Company on June 30. CAPITAL SPENDING, CAPITAL RESOURCES AND LIQUIDITY The capital required for the Company's significant expansion is being provided by net operating cash flow, revolving bank credit facility and commercial paper borrowings and the issuance of long-term unsecured debt. During the 1998 nine-month period, the Company's existing resorts contributed net operating cash flow (as shown in the Condensed Consolidated Statements of Cash Flows) of $192.3 million, versus $207.9 million in the 1997 period. As discussed previously, the Monte Carlo joint venture began making cash distributions of its earnings to the partners in the second quarter of 1998. The Company's operating cash flow for the 1998 nine-month period includes its $16.4 million share of such distributions. Capital expenditures during the 1998 period totaled $920.1 million, compared with $706.5 million in the 1997 nine-month period. Capital expenditures during both periods primarily represent amounts invested in the Bellagio and Beau Rivage projects. Bellagio opened on October 15, 1998 at a total cost, including land, capitalized interest and preopening costs (but excluding fine art acquired for display and resale), of approximately $1.6 billion. Beau Rivage is expected to be completed at a total cost (net of insurance reimbursement as discussed below) of approximately $660 million. At September 30, 1998, the Company had incurred approximately $1.4 billion associated with Bellagio and approximately $433 million associated with Beau Rivage. -14- Hurricane Georges, which battered the Mississippi Gulf Coast in early October 1998, caused substantial damage to the Beau Rivage project. The time necessary to repair the damage is anticipated to delay the scheduled opening date from February 1 to a yet-to-be-determined date in March 1999. The Company is insured against the damage caused by the hurricane as well as the estimated lost profits resulting from the delayed opening and has submitted a claim to its insurance carrier. In January 1998, the Company sold four of the works of art acquired for Bellagio to its Chairman for a total sale price of approximately $25.6 million. The sale price was equal to the amount paid by the Company for the artwork in the fourth quarter of 1997. The Company sold an additional work of art to an independent third party in April 1998 for $10.5 million. Also in April 1998, the Company received net cash proceeds of approximately $23.5 million in connection with the sale of 16 acres of land to the owner of the upscale retail mall adjacent to The Mirage and Treasure Island. The land was previously used for off-site parking for employees of both hotel-casinos. To facilitate the land sale, the Company completed construction in March of an 1,800-space employee parking garage directly behind The Mirage and Treasure Island at a cost of approximately $12.4 million. The owner of the mall intends to use the acquired land for a significant expansion project, which should prove beneficial to both The Mirage and Treasure Island. As discussed in Note 2 of Notes to Condensed Consolidated Financial Statements, the Company completed the acquisition of Boardwalk on June 30, 1998. The acquisition required total cash outlays (including previously acquired Boardwalk debt) of approximately $112.0 million. The Company expended approximately $51.9 million of such amount during 1997. Capital expenditures during the 1998 period include approximately $118.8 million expended in September to acquire approximately 11 acres of land on the Las Vegas Strip. This land, combined with the Boardwalk site and other land previously acquired by the Company, provides an approximately 55-acre site for future development with over 1,200 feet of frontage on the Las Vegas Strip between and contiguous to Bellagio and Monte Carlo. The Company is in the very early design phase for a potential new hotel- casino resort expected to be developed on the site. The design, timing and cost of any such future development, however, are still highly uncertain. Further expansion of the Company is currently being planned for Atlantic City, New Jersey. In January 1998, the City of Atlantic City conveyed to the Company approximately 180 acres (125 acres of which are developable) in the Marina area of the City (the "Marina Site") in exchange for the Company agreeing to develop a hotel-casino on the site and undertaking certain other obligations. The Company has also entered into an agreement with certain State agencies with respect to the construction and joint funding of road improvements necessary to improve access to the Marina area. In connection with such agreement, in October 1997 the Company and one of the State agencies funded their respective $110 million and $125 million portions of the $330 million estimated total cost of the road improvements. The funds were deposited into escrow accounts and are restricted for construction of the road improvement project. The remaining $95 million estimated cost of the project is being provided by the other State agency party to the -15- agreement. The road improvement project is being constructed pursuant to a fixed-price design/build contract. Groundbreaking on the project took place on November 4, 1998, with construction scheduled to be completed in May 2001. The Company is in the early design phase of its planned Marina Site hotel-casino and a project budget has not yet been developed. As part of the project, the Company must remediate the Marina Site, which is a former municipal landfill. Much of the remediation must be completed before the Company can begin construction of its resort. Remediation is expected to commence in November 1998 and require approximately one year to complete. In July 1998, the Company and Boyd Gaming Corporation ("Boyd") entered into an amended and restated joint venture agreement for the development of a hotel-casino on a 25-acre portion of the Marina Site. The agreement calls for the development of a $750 million entertainment resort with at least 1,200 hotel rooms to be connected to the Company's planned hotel-casino. The Company and Boyd each owns 50% of the joint venture. The Company will design and develop the master plan for the Marina Site and Boyd will oversee the design and construction of the joint venture resort, as well as operate it upon completion. Under the terms of the agreement, the Company will contribute the land and $60 million in cash and Boyd will contribute $150 million in cash. The partners will attempt to obtain acceptable financing that will be non- recourse to the Company and Boyd for the remaining development cost of the project. If the requisite permits and financing are obtained, management anticipates that construction of the joint venture resort may commence by the fall of 1999. Numerous governmental permits must be applied for and received and various other conditions must be satisfied before construction can commence on the hotel-casinos planned by the Company and the joint venture. Accordingly, there can be no assurance as to the timing or cost of construction. In February 1998, the Company received net proceeds of $394.7 million from the issuance of $200 million principal amount of 6 5/8% unsecured notes due February 2005 and an equal principal amount of 6 3/4% unsecured notes due February 2008. The notes were issued pursuant to a "shelf" registration statement filed with the Securities and Exchange Commission in October 1997 covering a total of up to $750 million (including the $400 million issued in February 1998) of debt or equity securities or any combination thereof. Approximately $237.1 million of the net proceeds from the offering were effectively used to retire the zero coupon notes and redeem the 9 1/4% notes as discussed in Note 3 of Notes to Condensed Consolidated Financial Statements. Management believes that existing cash balances, operating cash flow and available borrowing capacity will provide the Company with sufficient resources to meet its existing debt obligations and foreseeable capital expenditure requirements. -16- RECENTLY ISSUED ACCOUNTING STATEMENT In April 1998, the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants issued Statement of Position No. 98-5 - Reporting on the Costs of Start-Up Activities ("SOP 98-5"). The provisions of SOP 98-5 are effective for fiscal years beginning after December 15, 1998 and require that the costs associated with start-up activities (including preopening costs of casinos) be expensed as incurred. The Company currently capitalizes preopening costs and amortizes such costs over the 60-day period following opening of the related facility. As a result, the preopening costs related to Bellagio, which are in excess of $85 million, will be fully amortized to expense in the 1998 fourth quarter. Management does not agree with the theory behind SOP 98-5, as its implementation will result in a failure to match the expenses associated with a new project with the related revenues. Nevertheless, as a practical matter, the Company has no choice but to adopt the provisions of SOP 98-5 effective January 1, 1999, and all capitalized preopening costs related to the Beau Rivage and Atlantic City projects (which totaled approximately $35 million at September 30, 1998) will be written off and reflected as a cumulative effect of change in accounting principle, net of income tax, in its 1999 first quarter financial statements. YEAR 2000 READINESS DISCLOSURE BACKGROUND In the past, many computer software programs were written using two digits rather than four to define the applicable year. As a result, date-sensitive computer software may recognize a date using "00" as the year 1900 rather than the year 2000. This is generally referred to as the "Year 2000 issue." If this situation occurs, the potential exists for computer system failures or miscalculations by computer programs, which could disrupt operations. RISK FACTORS The Company is in many ways involved in a low-technology business. Casino employees, for example, do not require computers to deal blackjack or spin a roulette wheel. Likewise, a chef does not require computers to prepare a meal and a maid does not require a computer to clean and prepare a guest room. Slot machines are a type of computer, but there is no date embodied in their basic operation of choosing a random sequence and determining the appropriate payout. Nevertheless, the Company does use computers extensively to assist its employees in providing good service to its guests and to assist management in monitoring the Company's operations. The Company's front desk, for example, is highly computerized so as to expedite check-in and check-out of guests. Similarly, the Company uses computers in the back- of-the-house to facilitate purchasing and maintaining inventory records. The Company's shows and free entertainment attractions also use computers extensively. In the casino, computers are used to monitor gaming activity and maintain customer records, such as credit availability and points earned by members of the Company's slot clubs. -17- Computers on occasion fail, irrespective of the Year 2000 issue. For this reason, where appropriate, the Company maintains paper and magnetic back-ups and the Company's employees are trained in the use of manual procedures. When the front desk computer fails, for example, the Company's employees continue to check guests in and out using manual methods. Numerous such incidents occur each year and generally such failures are unnoticed by guests. This is not to imply that there is no risk to the Company from the Year 2000 issue. The risks could be substantial. Most of the Company's guest rooms, for example, are easily accessed only by elevator, and most elevators incorporate some computer technology. Likewise, the Company's heating, ventilation, life safety and air conditioning systems are highly computerized and, of course, critical to the Company's operations. While some attractions, such as the dolphin exhibit at The Mirage and the Bellagio Gallery of Fine Art, would be relatively unaffected by failure of computer technology, other attractions, such as the Siegfried & Roy and Mystere shows, could not function without computers. The Company is also exposed to the risk that one or more of its vendors or suppliers could experience Year 2000 problems that may impact their ability to provide goods and services. Although this is not considered as significant a risk with respect to the suppliers of goods due to the availability of alternative suppliers, the disruption of certain services, in particular utilities and financial services, could, depending upon the extent of the disruption, have a material adverse impact on the Company's operations. External effects of the Year 2000 issue, such as disruptions in airline service or other domestic or international economic disruptions affecting the Company's customers, could also adversely affect the Company's business. Most of the Company's customers travel in excess of 100 miles to reach the Company's resorts and many of them travel by air. If there is a breakdown of the Federal Aviation Administration's ("FAA") air traffic control system, or if fear of such a breakdown discourages customers from traveling, there could be a material adverse impact on the Company's operations. Of course, the Company anticipates that the arrival of the new millennium will also result in large parties and great activity in the Company's hotel-casinos. A minor breakdown or fear of such breakdown in air travel immediately following the New Year's Eve holiday could also result in extended stays by patrons at the Company's facilities. The Company is not in a position to determine either the readiness of the FAA or the airlines to deal with the Year 2000 issue or the impact that this would have on the Company's business. STRATEGY The Company has an extensive Year 2000 compliance program and has substantially completed an inventory of its various systems that may be sensitive to the Year 2000 issue. The Company has also prioritized the importance of such systems to its operation and formed teams and assigned responsibilities to ensure Year 2000 compliance of all critical systems. Where important to the Company's business, inquiries are also being made of third parties with whom the Company does significant business, such as vendors and suppliers, as to their Year 2000 readiness, and alternatives if a third party encounters a Year 2000 problem are being developed. -18- The Company believes that a substantial majority of its systems are currently Year 2000 compliant. It is the Company's goal to have all systems Year 2000 compliant by mid-year 1999. The Company has not developed a comprehensive contingency plan, although as previously mentioned a number of its critical hotel and casino systems are currently backed up by manual procedures that have been utilized during times of system malfunctions. The Company will continue to assess the need for a comprehensive contingency plan as implementation of its corrective action plan continues. COSTS It is difficult to calculate the cost to the Company of ensuring that its systems are Year 2000 compliant, in part because there are many different solutions to various Year 2000 situations. In the case of the Company's elevators, for example, the Company has requested that the third parties with whom it contracts for its elevator maintenance inspect each elevator system, as part of its normal maintenance, for any Year 2000 issues. For the Company's proprietary casino tracking system, the Company has contracted with a third-party consultant to make such system Year 2000 compliant. At the same time, however, and under the same contract, the consultant is also incorporating several other enhancements to the casino system. During the period from 1997 through 1999, the Company has installed and will be installing new slot accounting, hotel management and financial accounting systems. Each of these new systems is Year 2000 compliant and also has numerous enhancements over the Company's prior systems. The total cost of installing these systems is approximately $30 million, of which approximately $7 million has been incurred through September 30, 1998. Management believes that it would have installed such systems within this time frame irrespective of the Year 2000 issue. Other than the cost of these new systems, the cost of addressing the Year 2000 issue has not been and is not expected to be material to the Company's financial condition or results of operations. CERTAIN FORWARD-LOOKING STATEMENTS Certain information included in this Form 10-Q and other materials filed or to be filed by the Company with the Securities and Exchange Commission (as well as information included in oral statements or other written statements made or to be made by the Company) contains forward- looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements include information relating to plans for future expansion and other business development activities as well as other capital spending, financing sources, the effects of regulation (including gaming and tax regulation) and competition and the status of Year 2000 readiness. 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 by or on behalf of the Company. These risks and uncertainties include, but are not limited to, those relating to development and construction activities, including construction budgets and schedules, dependence on existing management, leverage and debt service (including sensitivity to fluctuations in interest rates), domestic or international economic conditions, pending litigation, the effects of the Year 2000 issue, changes in federal or state tax laws or the administration of such laws and changes in gaming laws or regulations (including the legalization of gaming in certain jurisdictions). -19- PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Reference is made to the litigation between the Registrant and Circus Circus Enterprises, Inc. ("Circus") described under "Legal Proceedings" in Item 3 of the 1997 Annual Report. On October 15, 1998, the Registrant and Circus agreed to dismiss the litigation with prejudice and to release all claims against each other with respect to the subject matter of the litigation. Reference is made to the litigation between the Registrant and the trustee of the bankruptcy estate of Ken Mizuno described under "Legal Proceedings" in Item 3 of the 1997 Annual Report. In August 1998, the court granted the Registrant's motion to dismiss the complaint. The plaintiff has filed a notice of appeal. -20- ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. 10.1 Letter agreement dated July 31, 1998 between Bellagio and Stephen A. Wynn. 10.2 Letter agreement dated August 17, 1998 between Bellagio and Stephen A. Wynn. 10.3 Letter agreement dated September 1, 1998 between Bellagio and Stephen A. Wynn. 10.4 Purchase and Sale Agreement (with Option), dated as of August 12, 1998, between the April Cook Companies and RZ Corporation (without exhibits) (the "Purchase and Sale Agreement"). 10.5 First Amendment to Purchase and Sale Agreement, dated as of August 24, 1998 (without exhibit). 10.6 Second Amendment to Purchase and Sale Agreement, dated as of August 30, 1998 (without exhibit). 15 Letter from independent public accountants acknowledging awareness of the use of their report dated November 13, 1998 in the Registrant's registration statements. 27 Financial Data Schedule. (b) Reports on Form 8-K. The Registrant filed no Current Reports on Form 8-K during the three-month period ended September 30, 1998. -21- 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. Mirage Resorts, Incorporated November 13, 1998 by: DANIEL R. LEE - - ----------------- -------------------------------- Date Daniel R. Lee Senior Vice President - Finance and Development, Chief Financial Officer and Treasurer (Principal Financial Officer) -22- EX-10.1 2 Robert H. Baldwin President BELLAGIO July 31, 1998 Mr. Stephen A. Wynn Chairman of the Board, President and Chief Executive Officer Mirage Resorts, Incorporated 3400 Las Vegas Boulevard South Las Vegas, Nevada 89109 Dear Steve: This confirms the agreement this date between Bellagio and you with respect to the works of fine art entitled "Flag on Orange Field II" by Jasper Johns (1958, encaustic on canvas, 54 x 36-1/4 inches), and "Untitled IX" by Willem de Kooning (1977, oil on canvas, 70 x 80 inches) (collectively, the "Works"), each of which you purchased from an independent party on June 19, 1998 at a purchase price of $13,000,000 and $1,650,000, respectively. 1. The January 14, 1998 agreement between Bellagio and you, as subsequently amended (the "Original Agreement"), is hereby amended to provide that, effective June 19, 1998, the Exhibit`B' Art referenced therein which you are renting to Bellagio shall include the Works. 2. The terms of the rental of the Works shall be the same as those set forth in the Original Agreement with respect to the Exhibit `B' Art, except that the annual rental for the Works, payable in equal monthly installments in advance, shall be $156,000 and $19,800, respectively. Rent for the Works payable for the period prior to the date hereof shall be included in the August 1998 rent payment. 3. The Works shall be maintained on public display and shall be available for educational purposes in any hotel- casino operated by any wholly owned subsidiary of Mirage Resorts, Incorporated in conformity with the requirements of NRS 361.068(k) and NRS 374 and any regulations promulgated thereunder. P.O. BOX 7700, LAS VEGAS, NEVADA 89177-7700 EXHIBIT 10.1 Mr. Stephen A. Wynn Mirage Resorts, Incorporated July 31, 1998 Page Two Please sign below to confirm your agreement to the foregoing. My signature below confirms Bellagio's agreement thereto. Very truly yours, BELLAGIO By: ROBERT H. BALDWIN ___________________________ ROBERT H. BALDWIN President and Chief Executive Officer I hereby agree to the foregoing. STEPHEN A. WYNN ___________________________ STEPHEN A. WYNN cc: Bruce A. Levin Peter C. Walsh James E. Pettis 2 EX-10.2 3 Robert H. Baldwin President BELLAGIO August 17, 1998 Mr. Stephen A. Wynn Chairman of the Board, President and Chief Executive Officer Mirage Resorts, Incorporated 3400 Las Vegas Boulevard South Las Vegas, Nevada 89109 Dear Steve: This confirms the agreement this date between Bellagio and you with respect to the work of fine art entitled "Untitled" by Willem de Kooning (1970-1979, oil on canvas, 55 x 59-1/4 inches) (the "Work"), which you purchased from an independent party on July 14, 1998 at a purchase price of $725,000. 1. You hereby sell the Work to Bellagio and Bellagio hereby purchases the Work from you for $725,000. 2. Bellagio intends that the Work shall be maintained on public display and shall be available for educational purposes in any hotel-casino operated by any wholly owned subsidiary of Mirage Resorts, Incorporated in conformity with the requirements of NRS 361.068(k) and NRS 374 and any regulations promulgated thereunder. P.O. BOX 7700, LAS VEGAS, NEVADA 89177-7700 EXHIBIT 10.2 Mr. Stephen A. Wynn Mirage Resorts, Incorporated August 17, 1998 Page Two Please sign below to confirm your agreement to the foregoing. My signature below confirms Bellagio's agreement thereto. Very truly yours, BELLAGIO By: ROBERT H. BALDWIN __________________________ ROBERT H. BALDWIN President and Chief Executive Officer I hereby agree to the foregoing. STEPHEN A. WYNN ______________________________ STEPHEN A. WYNN cc: Bruce A. Levin Peter C. Walsh James E. Pettis 2 EX-10.3 4 Robert H. Baldwin President BELLAGIO September 1, 1998 Mr. Stephen A. Wynn Chairman of the Board, President and Chief Executive Officer Mirage Resorts, Incorporated 3400 Las Vegas Boulevard South Las Vegas, Nevada 89109 Re: Lease No. 5 Dear Steve: This confirms the agreement this date between Bellagio and you with respect to the works of fine art entitled "Seated Woman" by Pablo Picasso (1949, oil on canvas, 51 x 38-1/4 inches), "Magritte II" by Escobar Marisol (1998, wood, oil paint, plaster, charcoal, cloth, 58 x 30 x 14 inches), and "Untitled XXXII" by Willem de Kooning (1977, oil on canvas, 54 x 60 inches) (collectively, the "Works"), which you purchased from independent parties on July 8, 1998, July 10, 1998 and August 18, 1998, respectively, at a purchase price of $2,750,000, $55,420 and $825,000, respectively. 1. The January 14, 1998 letter agreement between Bellagio and you, as amended by letter agreements dated March 12, 1998, April 21, 1998 and July 31, 1998 (as so amended, the "Original Agreement"), is hereby amended to provide that, effective the date hereof, the Exhibit `B' Art referenced therein which you are renting to Bellagio shall include the Works. 2. The terms of the rental of the Works shall be the same as those set forth in the Original Agreement with respect to the Exhibit `B' Art, except that the annual rental for the Works shall be $33,000, $665 and $9,900, respectively, which shall be payable in equal monthly installments in advance. P.O. BOX 7700, LAS VEGAS, NEVADA 89177-7700 EXHIBIT 10.3 Mr. Stephen A. Wynn Mirage Resorts, Incorporated September 1, 1998 Page Two 3. The Works shall be maintained on public display and shall be available for educational purposes in any hotel- casino operated by any wholly owned subsidiary of Mirage Resorts, Incorporated in conformity with the requirements of NRS 361.068(k) and NRS 374 and any regulations promulgated thereunder. Please sign below to confirm your agreement to the foregoing. My signature below confirms Bellagio's agreement thereto. Very truly yours, BELLAGIO By: ROBERT H. BALDWIN ___________________________ ROBERT H. BALDWIN President and Chief Executive Officer I hereby agree to the foregoing. STEPHEN A. WYNN ___________________________ STEPHEN A. WYNN cc: Bruce A. Levin Peter C. Walsh James E. Pettis 2 EX-10.4 5 PURCHASE AND SALE AGREEMENT (WITH OPTION) BY AND BETWEEN The April Cook Companies, a Nevada corporation and RZ Corporation, a Nevada corporation AUGUST 12, 1998 EXHIBIT 10.4 TABLE OF CONTENTS 1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . 1 2. SALE OF PROPERTY, PURCHASE PRICE AND DEPOSIT; OPTIONS. . . 3 3. TITLE MATTERS. . . . . . . . . . . . . . . . . . . . . . . 5 4. DUE DILIGENCE. . . . . . . . . . . . . . . . . . . . . . . 6 5. SELLER'S REPRESENTATIONS AND WARRANTIES. . . . . . . . . . 7 6. PURCHASER'S REPRESENTATIONS AND WARRANTIES . . . . . . . . 9 7. SURVIVAL OF REPRESENTATIONS AND WARRANTIES . . . . . . . .10 8. COVENANTS PENDING CLOSING. . . . . . . . . . . . . . . . .10 9. EXPRESS CONDITIONS TO CLOSING. . . . . . . . . . . . . . .11 10. THE CLOSING. . . . . . . . . . . . . . . . . . . . . . . .12 11. CLOSING COSTS, EXPENSES AND PRORATIONS . . . . . . . . . .13 12. INDEMNITIES. . . . . . . . . . . . . . . . . . . . . . . .13 13. REMEDIES UPON DEFAULT. . . . . . . . . . . . . . . . . . .14 14. [INTENTIONALLY DELETED]. . . . . . . . . . . . . . . . . .14 15. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . .14 16. 1031 EXCHANGE. . . . . . . . . . . . . . . . . . . . . . .17 LIST OF EXHIBITS EXHIBIT "A" [Assignment and Assumption Agreement]. . . . . . . . 20 EXHIBIT "B" [Deed] . . . . . . . . . . . . . . . . . . . . . . . 21 EXHIBIT "C" [Form of Estoppel Certificate] . . . . . . . . . . . 22 EXHIBIT "D" [Permitted Exceptions] . . . . . . . . . . . . . . . 23 EXHIBIT "E" [Leases] . . . . . . . . . . . . . . . . . . . . . . 24 EXHIBIT "F" [Legal Description of the Property]. . . . . . . . . 25 PURCHASE AND SALE AGREEMENT (WITH OPTION) This Purchase and Sale Agreement (with Option) ("Agreement") is entered into on the Effective Date, by and between The April Cook Companies, a Nevada corporation, or its designee (hereinafter "Purchaser") and RZ Corporation, a Nevada corporation (hereinafter "Seller") based upon the following recitals: A. Seller is the owner of certain Property, as defined below. B. Subject to the terms and conditions as set forth herein, Seller has agreed to sell its interest in the Property to Purchaser and Purchaser has agreed to purchase Seller's interest in the Property from Seller. NOW, THEREFORE, based upon the foregoing and the representations and warranties included herein, in consideration of the mutual promises and covenants hereinafter contained and subject to the conditions hereinafter set forth, the parties agree as follows: 1. DEFINITIONS 1.1 "Assignment" shall be defined as the Assignment and Assumption Agreement in substantially the form of Exhibit "A" attached hereto, whereby Seller assigns its rights, duties and obligations as landlord under the Leases to Purchaser, and Purchaser assumes the same from Seller. 1.2 "Deposit" shall be defined as the sum of Ten Million and No/100 Dollars ($10,000,000.00) and all interest accrued thereon. 1.3 "Closing" shall be defined as set forth in Section 10.1. 1.4 "Condemnation Proceeding" is defined as that certain condemnation proceeding in District Court, Clark County, Nevada, Case No. A374831. 1.5 "Condemned Parcel" shall be defined as that certain parcel of real property, consisting of approximately .77 acres, referenced as APN 162-20-603-010, which is the subject of the Condemnation Proceeding. 1.6 "Deed" shall be defined as the grant, bargain and sale deed in substantially the form of Exhibit "B" attached hereto. 1.7 "Due Diligence Period" shall be defined as the period starting at the Effective Date and ending August 24, 1998. 1.8 "Effective Date" shall mean the date of execution of the Agreement. 1.9 "Environmental Laws" shall be defined as set forth in Section 5.15. 1.10 "Environmental Study" shall be defined as set forth in Section 4.1. 1.11 "Escrow" shall be defined as set forth in Section 2.2. 1.12 "Escrow Agent" shall be defined as Nevada Title Company. 1.13 "Estoppel Certificate" shall be defined as set forth in Section 9.1.4 and in substantially the form set forth in Exhibit "C." 1.14 "FIRPTA" shall be defined as the Foreign Investment Real Property Tax Act, Internal Revenue Code Section 1445. 1.15 "Hazardous Substances" shall be defined as set forth in Section 5.16. 1.16 "Leases" shall be defined as the leases set forth as Exhibit "E" hereto. 1.17 "Options" shall be defined as set forth in Section 2.3. 1.18 "Option Closings" shall be defined as set forth in Section 2.3. 1.19 "Option Consideration" shall be defined as set forth in Section 2.3. 1.20 "Option Periods" shall be defined as set forth in Section 2.3. 1.21 "Permitted Exceptions" shall be defined as set forth in Section 3.3 and Exhibit "D". 1.22 "Preliminary Title Report" shall be defined as set forth in Section 3.3. 1.23 "Property" shall be defined as that certain parcel of real property consisting of approximately 10.55 acres, APN 162-20-603009, generally located at the intersection of Harmon Avenue and Las Vegas Boulevard, in the County of Clark, State of Nevada, as shown on Exhibit "F", together with Seller's interest, if any, in any buildings and improvements located thereon and all rights, licenses and easements appurtenant to the Property hereinabove mentioned. Upon completion of the Survey the legal description of the Property therein shall be used for all purposes hereunder. 2 1.24 "Prorations" shall be defined as set forth in Section 11. 1.25 "Purchase Price" shall be defined as the sum of ONE HUNDRED FOURTEEN MILLION AND NO/100 DOLLARS ($114,000,000.00). 1.26 "Survey" shall be defined as set forth in Section 3.2. 1.27 "Title Company" shall be defined as set forth in Section 3.1. 1.28 "Title Policy" shall be defined as set forth in Section 3.4. 2. SALE OF PROPERTY, PURCHASE PRICE AND DEPOSIT; OPTIONS 2.1 At the Closing, Seller shall sell, assign, transfer and convey to Purchaser and Purchaser shall purchase from Seller the Property free and clear of all liabilities, claims, liens and encumbrances except for the Permitted Exceptions and the Leases. The sale of the Property shall be evidenced by the Deed. 2.2 The Purchase Price shall be payable as follows: 2.2.1 Escrow. No later than one (1) banking day after the Effective Date, Purchaser shall cause an escrow (the "Escrow") to be opened at the office of the Escrow Agent and will deposit the Deposit as earnest money into Escrow. The Deposit shall be placed in an interest-bearing account by the Escrow Agent and shall be applied and disbursed as herein- after set forth. If Purchaser fails to pay the Deposit as set forth in this section, then the Agreement will be deemed automatically ter- minated and will be of no further force and effect. 2.2.2 Balance of Purchase Price. At Closing, Purchaser shall pay through Escrow, in immediately available U.S. funds the balance of the Purchase Price minus the Deposit and subject to the Prorations (the "Closing Payment"). 2.3 Options. Seller hereby grants to Purchaser the following options: 3 2.3.1 The First Option. If the Condemnation Proceeding is abandoned pursuant to NRS 37.180 with respect to all of the Condemned Parcel, then Purchaser shall have a period of one (1) year following the date a written notice of abandonment of the Condemnation Proceeding is filed (the "First Option Period") in which to give Seller notice of its intent to exercise an option to purchase the Condemned Parcel (the "First Option") for the sum of EIGHT MILLION, THREE HUNDRED TWENTY THOUSAND DOLLARS ($8,320,000.00) (the "First Option Consider- ation"). If the Condemnation Proceeding is abandoned pursuant to NRS 37.180 with respect to less than all of the Condemned Parcel, then Purchaser shall have the First Option Period in which to give Seller notice of its intent to exercise the First Option for a pro rata percentage of the First Option Consideration, which shall be determined by the following formula: multiply the fraction in which the numerator is the acreage of the Condemned Parcel that is abandoned pursuant to the Condemnation proceeding and the denominator is .77 acres by the First Option Consideration. In the event Purchaser exercises the First Option, Purchaser shall pay to Seller the First Option Consideration, or the pro rata share thereof as described in this Section 2.3, within ten (10) business days thereafter (the "First Option Closing"). At the First Option Closing: (1) the Condemned Parcel or that portion with respect to which the Condemnation Proceeding has been abandoned, shall be conveyed to Purchaser free and clear of any liens, encumbrances, mortgages, pledges, obligations, etc., imposed by Seller, by grant, bargain and sale deed in sub- stantially the form of Exhibit "B" hereto; (2) Seller shall assign to Purchaser its right, if any, to damages arising from occupancy of the Condemned Parcel pursuant to NRS 37.180(2); and (3) Seller's representations and warranties contained in Sections 5.2 through 5.6 herein shall be true and correct as if originally and additionally made with refer- ence to the Condemned Parcel. In the event the Condemnation Proceeding is abandoned, Seller shall return any compensation as described in NRS 37.100(4) that it received for the Condemned Parcel to the County of Clark or the appropriate governmental entity that first paid said compensation to Seller by no later than the First Option Closing, or, in the alternative, Purchaser may remit said 4 compensation to the County of Clark or the appropriate governmental entity and reduce the Option Consideration by that same amount. 2.3.2 The Second Option. Following the Closing, at any time prior to the expiration of the 30-day period following the entry of a final judgment under the Condemnation Proceeding, or the abandonment of the Condemnation Proceeding, whichever event shall first occur, Purchaser shall have the option to acquire all of Seller's rights in and to the Condemnation Parcel and in the Condemnation Proceeding (the "Second Option") in consideration for payment to the Seller of the sum of Five Million Nine Hundred Sixteen Thousand Five Hundred Dollars ($5,916,500) (the "Second Option Consider- ation"). In the event that Purchaser exercises the Second Option, Purchaser shall pay to Seller the Second Option Consideration within ten (10) business days thereafter (the "Second Option Closing"). At the Second Option Closing (i) Seller's title to the Condemned Parcel shall be conveyed to Purchaser free and clear of any liens, encumbrances, mortgages, pledges, obligations, etc., imposed by Seller, except for the Condemnation Proceeding, by Grant, Bargain, and Sale Deed in substantially the form of Exhibit "B" hereto; (ii) Seller shall take such actions, and execute and deliver such documents, as may reasonably be required to transfer Seller's rights in the Condemnation Proceeding to Purchaser; and (iii) Seller's representations and warranties contained in Sections 5.2-5.6 herein shall be true and correct as if originally and additionally made with reference to the Condemned Parcel. In the event the Condemnation Proceeding is abandoned after Purchaser's exercise of the Second Option, Purchaser shall be obligated to refund to Clark County the sums previously paid to Seller in the Condemnation Proceeding, not to exceed the amount of Two Million Four Hundred Three Thousand Five Hundred Dollars ($2,403,500) plus interest thereon, if any, is required to be paid. 2.3.3 Memorandum of Options. At Closing, the parties shall record a Memorandum of Options to provide public notice that Purchaser has obtained options to acquire the Condemned Parcel from Seller subject to the Condemnation Proceeding. 5 2.3.4 Purchaser's Effort. Purchaser agrees to use reasonable good faith efforts to cause the County of Clark to pursue the Condemnation Proceeding to completion. If the Second Option is exercised, Purchaser shall have no further obligation under the preceding sentence. 3. TITLE MATTERS. 3.1 Title Company. Nevada Title Company shall provide the Title Policy, unless both parties agree that another title company shall provide the Title Policy (the "Title Company"), however, such selection of a substitute title company shall not delay the Closing. 3.2 Survey. Purchaser shall cause the firm of Baughman & Turner, Civil Engineers, or such other firm as Purchaser shall select, to promptly commence preparation of an ALTA-ACSM survey of the Property to be delivered to Purchaser (the "Survey"). The Survey shall comply with all requirements of the Title Company for issuance of the Title Policy, shall show that no private property, other than the Condemned Parcel, exists between Harmon and the Property, and shall be generally and otherwise acceptable to Purchaser. 3.3 Permitted Exceptions. Purchaser has obtained a preliminary report with respect to title to the Real Property ("Preliminary Title Report") from the Title Company dated as of August 3, 1998, No. 98-03-1300 DTL, 2nd Amendment. Purchaser acknowledges and agrees that Purchaser has reviewed the Preliminary Title Report and all exceptions to title of the Real Property dis- closed therein and Purchaser agrees to accept conveyance of and take title to the Property at Closing, upon the Title Company's delivery at Closing of the Title Policy and the endorsements to that Title Policy described in this Agreement, and Seller agrees to convey to Purchaser title to the Property at Closing, subject only to the exceptions set forth on Exhibit "D" hereto (the "Permitted Exceptions"), and the Leases. 3.4 Title Policy. The Closing is subject to the Title Company delivering to Purchaser an ALTA Extended Coverage Owners Policy of Title Insurance ("Title Policy") issued by the Title Company, dated on the date of the Closing, in the amount of the Purchase Price, insuring Purchaser as owner of fee title to the Property subject only to the Permitted Exceptions and the Leases. The cost of the 6 Title Policy shall be apportioned between the parties in such a manner that Seller shall only be obligated to pay that amount which would have been charged for a CLTA policy and Purchaser shall pay the difference between the cost of CLTA policy and the ALTA policy and shall pay for any special endorsements to the Title Policy as Purchaser requires. 3.5 Liens, Encumbrances Etc. Except for the Permitted Exceptions and the Leases, Seller will transfer and convey good and marketable title to the Property to Purchaser at Closing, free and clear of any liens, encumbrances or security interests of any nature whatso- ever, and Purchaser shall not succeed to or be responsible for any liens, claims, charges, encumbrances, mortgages, pledges, obligations or liabilities of any kind whatsoever, whether known or unknown, fixed or contingent, contractual or statutory, of Seller including, without limitation: 3.5.1 Any liabilities or obligations relating to the operation of the businesses conducted on the Property by Seller or its tenants or sub- tenants, or their predecessors, accruing or arising prior to the date of Closing; 3.5.2 Any of Seller's liabilities or obligations for federal, state, local or foreign taxes, assessments, impositions, deficiencies, penalties or interest, whether or not imposed on or measured by income, except for real estate taxes and assessments due following the Closing; 3.5.3 (i) Any liabilities or obligations with respect to any claims, actions, suits or demands, or any legal, administrative, arbitration or other proceedings or judgments, with respect to causes or actions accruing, or arising out of events occurring, on or prior to the date of Closing or based on any state of facts existing on or prior to the date of Closing, or (ii) any claims for personal injury or property damage accruing, or arising out of events occurring on or before the date of Closing; 3.5.4 Any contract obligations with third parties of any nature whatsoever, except as specifically assumed by Purchaser in writing, and in Purchaser's sole and unlimited discretion and except for the Leases; or 7 3.5.5 Any claims for wages or benefits of any of the Seller's employees. 4. DUE DILIGENCE. 4.1 Environmental Study. Purchaser shall cause the firm of Kleinfelder or such other firm as Purchaser shall select, to promptly commence preparation of a Phase I Environmental Study of the Property to be delivered to Purchaser and to be relied upon in connection with the acquisition of the Property (the "Environmental Study"). 4.2 Access to Property. Purchaser and its authorized representatives and agents shall have reasonable access to the Property to conduct such surveys and studies as it deems necessary and proper. Purchaser shall indemnify, defend and hold Seller harmless from any and all claims, demands, damages, judgments, liabilities, costs and expenses (including without limitation attorneys' fees) resulting from or arising out of the inspection and study referred to herein, including, without limitation, the Environmental Study, but excluding (i) liabilities resulting from the Environmental Study discovering conditions requiring remediation, and (ii) damages or injuries caused by Seller's or its agents' negligent acts or omissions. 4.3 Due Diligence Period. During the Due Diligence Period, Purchaser may review the Survey and the Environmental Study. Purchaser may also inspect the Property, as permitted by Subsection 4.2. Any time prior to the expiration of the Due Diligence Period, in Purchaser's sole and unlimited discretion, for any reason, Purchaser may terminate this Agreement and shall be entitled to the return of the Deposit. 5. SELLER'S REPRESENTATIONS AND WARRANTIES. Seller hereby represents and warrants, which representations and warranties shall be true and correct as of the date of Closing (unless otherwise specified below): 5.1 That Seller is the owner of the Property and is able to convey good, marketable title thereto, subject to the matters disclosed in the Preliminary Title Report and the Leases. 5.2 That Seller is duly organized and validly existing as a corporation in its state of incorporation, in good standing and qualified to conduct its business, to own real property and to consummate the transactions 8 contemplated herein under the laws of the State of Nevada. 5.3 That all necessary corporate action has been taken to authorize all transactions herein contemplated. 5.4 That the execution, delivery and performance of this Agreement by Seller will not, with or without the giving of notice and/or the passage of time, violate or constitute a default under any provision of law, any administrative regulation or any judicial, administrative or arbitration order, award, judgment or decree applicable to Seller or the Property or conflict with, violate, result in a breach or termination of or cause a default under Seller's articles of incorporation or bylaws, or any other agreement or obligation by which Seller or the Property are bound. 5.5 That no consent or approval of this Agreement is required by any third party. 5.6 That there are no actions or claims pending or to Seller's knowledge threatened before any court, govern- mental agency, arbitrator or other tribunal which would prevent Seller from completing the transactions provided herein in accordance with the terms of this Agreement. 5.7 That it has not received any notice of zoning changes or any actions threatening condemnation of any part of the Property through exercise of eminent domain by any governmental authority. 5.8 That it has no actual knowledge of any violations of law, municipal or county ordinances or other legal require- ments affecting the Property, or with respect to the use of occupancy thereof. 5.9 That to the best of Seller's knowledge, all documents that will affect title to the Property at Closing have been provided to Purchaser. 5.10 That there are no mechanic's liens recorded against the Property and none threatened to Seller's knowledge; and all contractors, subcontractors, workmen, materialmen and employees engaged by Seller have been paid in full for any labor, services or materials supplied or delivered to the Property. 5.11 That Seller has not caused and shall not cause to be created any encumbrances on the Property in favor of any 9 person other than Purchaser, other than the existing Leases as disclosed in the Preliminary Title Report or liens that have been previously released. 5.12 That all taxes, governmental assessments and utility charges to the Property billed to Seller are current and not delinquent. 5.13 That all representations and warranties made by Seller and all information contained in any of the documents furnished or to be furnished to Purchaser pursuant to this Agreement, do not and shall not contain any untrue statement of a material fact or omit to state any fact necessary in order to make the statements contained here- in or therein not misleading. 5.14 That Seller has not received nor is Seller aware of any notification, demand or request (or any pending or threatened action or litigation) from governmental or quasi-governmental authority having jurisdiction, requiring any work or construction to be done on or affecting the Property or indicating an intent to condemn the Property or any portion thereof. 5.15 Except as disclosed in the Environmental Study or as disclosed below in this Section 5.15, that to the best of its knowledge: (i) Seller is not in violation of any applicable environmental, health and safety laws, ordinances or regulations including those relating to air and water pollution and Hazardous Substances (as defined below) ("Environmental Laws"), in connection with its ownership of the Property or conduct of its activities thereon; (ii) except as noted in Section 6.4, Hazardous Substances are not currently present on the Property and have not been generated, used, treated, stored, trans- ported to or from, or released or disposed of on the Property; (iii) that without limiting the generality of the foregoing, there are not now and have not been any underground storage tanks, asbestos or any transformers or other electrical devices containing polychlorinated biphenyls on the Property; and (iv) that the Property has never been used as a dump or landfill. The Property was used as a staging area by Marnell Corrao Construction in connection with the New York, New York Hotel & Casino and was also used as a staging area for the Strip Beautifi- cation Project. The term "Hazardous Substances" for purposes of this Agreement means (i) petroleum or petroleum products, (ii) radioactive materials, (iii) asbestos in any form, (iv) any items that contains or has contained polychlorinated biphenyls, (v) any other chemicals, materials or substances defined as or included 10 in the definition of "Hazardous Substances," "Hazardous Waste," "Hazardous Materials," "Hazardous Air Pollutants," "Extremely Hazardous Substances," "Restricted Hazardous Waste," "Toxic Substances," "Pollutants," "Contaminants," or words of any similar import under any applicable Environmental Law, and/or any other chemical or substance, exposure to which is pro- hibited, limited or regulated by any governmental authority as harmful under applicable Environmental Laws. Seller has not received any notice from any governmental authority, and has no knowledge of any governmental inquiry, with respect to any actual or alleged violation of any Environmental Laws in connection with the owner- ship of the Property or Seller's activities thereon. 5.16 As of Closing, the Property shall not have generated total revenues in excess of three million dollars $3,000,000.00) during the preceding thirty-six (36) months prior to the Closing. 5.17 That Seller has attached hereto as Exhibit "E" true and correct copies of the Leases and all amendments and modifications thereto; that there are no leases affecting the Property currently in effect not contained in Exhibit "E,"; that the Leases are in full force and effect and that no party thereto is in default; and that the Leases contain no options to purchase any part of the Property. 5.18 That the amount paid to Seller by the County in the Condemnation Proceeding to date is Two Million Four Hundred Three Thousand Five Hundred Dollars ($2,403,500). 6. PURCHASER'S REPRESENTATIONS AND WARRANTIES. Purchaser hereby represents and warrants, which representations and warranties shall be true and correct as of the date of Closing (unless otherwise specified below): 6.1 That the execution, delivery and performance of this Agreement by Purchaser will not, with or without the giving of notice and/or the passage of time, violate or constitute a default under any provision of law, any administrative regulation or any judicial, administrative or arbitration order, award, judgment or decree applicable to Purchaser or conflict with, violate, result in a breach or termination of or cause a default under Purchaser's articles of incorporation or bylaws, or any other agreement or obligation by which Purchaser is bound. 6.2 That no consent or approval of this Agreement is required by any third party. 11 6.3 That there are no actions or claims pending or to Purchaser's knowledge threatened before any court, governmental agency, arbitrator or other tribunal which would prevent Purchaser from completing the transactions provided herein in accordance with the terms of this Agreement. 6.4 That Purchaser has actual knowledge that helicopters are operated on the Property and fuel trucks have serviced and come upon the Property on a daily basis for some period of time to fuel the helicopters, which is a sub- ject of one or more of the Leases. Neither party has any knowledge that any spills have occurred on the Property that require remedial action. 6.5 That Purchaser is duly organized and validly existing as a corporation in its state of incorporation, in good standing and qualified to conduct its business, to own real property and to consummate the transactions contem- plated herein under the laws of the State of Nevada. 6.6 That all necessary corporate action has been taken to authorize all transactions herein contemplated. 6.7 That the execution, delivery and performance of this Agreement by Purchaser will not, with or without the giving of notice and/or the passage of time, violate or constitute a default under any provision of law, any administrative regulation or any judicial, administrative or arbitration order, award, judgment or decree applicable to Purchaser or conflict with, violate, result in a breach or termination of or cause a default under Purchaser's articles of incorporation or bylaws, or any other agreement or obligation by which Purchaser is bound. 6.8 That all representations and warranties made by Purchaser and all information contained in any of the documents furnished or to be furnished to Seller pursuant to this Agreement, do not and shall not contain any untrue statement of a material fact or omit to state any fact necessary in order to make the statements contained here- in or therein not misleading. 12 7. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of Seller's and Purchaser's Representations and Warranties set forth in Sections 5 and 6 shall survive for a period of thirty (30) months. 8. COVENANTS PENDING CLOSING 8.1 Pending and prior to the Closing, Seller covenants and agrees as follows, subject to the provisions of the Leases: 8.1.1 That Seller shall not cause or allow any waste to occur on the Property. 8.1.2 That Seller shall not place or store any Hazardous Substances on or under the Property. 8.1.3 That Seller, without prior written consent of Purchaser, shall not cause any liens or encum- brances to be filed or recorded against the Property and shall not assign, transfer, encumber, hypothecate or convey any or all of Seller's interest in the Property to any third party or parties. 8.1.4 That Seller shall pay or cause to be paid current to Closing, all taxes and expenses related to the Property. 8.1.5 That Seller shall give Purchaser written notice of any casualty occurring on the Property or of any condemnation or proposed condemnation of all or any part of the Property of which Seller has or obtains actual knowledge. 9. EXPRESS CONDITIONS TO CLOSING 9.1 Purchaser's obligation to proceed to Closing shall be subject to satisfaction of the following: 9.1.1 Seller shall not be in material default of any of its covenants set forth herein. 9.1.2 Seller's representations and warranties as set forth herein shall be true and correct as of the date of Closing. 9.1.3 The Title Company shall be irrevocably com- mitted to issue the Title Policy. 9.1.4 Seller shall have executed and delivered into Escrow an Estoppel Certificate from each of the two (2) tenants under the Leases, in 13 substantially the form attached hereto as Exhibit "C," stating that each of said Leases is in full force and effect, there are no breaches or events of default, and that each of said Leases are terminable upon ninety (90) days notice. 9.1.5 Seller shall have executed and delivered the Assignment into Escrow. 9.1.6 Seller shall have executed and delivered into Escrow all other documents and instruments and shall have taken all actions necessary to consummate the transactions contemplated hereby in accordance with the terms of this Agreement. 9.2 Seller's obligation to proceed to Closing shall be sub- ject to satisfaction of the following: 9.2.1 Purchaser shall not be in material default of any of its covenants set forth herein. 9.2.2 Purchaser's representations and warranties as set forth herein shall be true and correct as of the date of Closing. 9.2.3 Purchaser shall have deposited the Closing Pay- ment into Escrow. 9.2.4 Purchaser shall have executed and delivered the Assignment into Escrow. 9.2.5 Purchaser shall have executed and delivered into Escrow all other documents and instruments and shall have taken all actions necessary to consummate the transactions contemplated hereby in accordance with the terms of this Agreement. 10. THE CLOSING 10.1 Subject to satisfaction of the conditions set forth in Article 9, closing of the purchase of the Property (the "Closing") shall occur on August 25, 1998. 10.2 At the Closing, Seller shall deliver or cause to be delivered to Purchaser the following: 10.2.1 The Deed to Escrow for recordation in the property records of Clark County, with subse- quent delivery to Purchaser; 14 10.2.2 A FIRPTA affidavit; 10.2.3 To Purchaser, Escrow Agent or Title Company, as applicable, any other documents, fully executed, as are customarily executed in the State of Nevada in connection with the convey- ance of real property, including all required closing statements, releases, affidavits and any other instrument that the parties may agree to in good faith; 10.2.4 Possession of the Property, subject to the Leases, and the Permitted Exceptions; and 10.2.5 the Assignment. 10.3 At the Closing, Purchaser shall deliver or cause to be delivered the following: 10.3.1 The Purchase Price, subject to the Prorations, in immediately available U.S. funds, to Escrow Agent, for disbursement together with the Deposit pursuant to Seller's instructions; 10.3.2 To Seller, Escrow Agent or Title Company, as applicable, any other documents, fully executed, as are customarily executed in the State of Nevada in connection with the convey- ance of real property, including all required closing statements, releases, affidavits and any other instrument that the parties may agree to in good faith; and 10.3.3 The Assignment. 11. CLOSING COSTS, EXPENSES AND PRORATIONS. All of the following closing costs, expenses and prorations shall be collectively defined as the "Prorations." 11.1 Seller hereby agrees to pay for the following costs and expenses associated with the consummation of this Agree- ment and the Closing: 11.1.1 The premium for the CLTA portion of the Title Policy; 11.1.2 All real property transfer taxes and documenta- tion taxes; 11.1.3 One-half (1/2) of any escrow or closing fees charged by the Escrow Agent; and 15 11.1.4 Any other closing costs customarily paid by a seller of real property in the State of Nevada. 11.2 Purchaser hereby agrees to pay for the following costs and expenses associated with the consummation of this Agreement and the Closing: 11.2.1 Recording fees for the Deed; 11.2.2 One-half (1/2) of any escrow or closing fees charged by the Escrow Agent; 11.2.3 The difference in cost between the CLTA portion of the Title Policy and the ALTA portion of the title Policy and any special endorsements required by Purchaser; 11.2.4 The cost of the Survey; 11.2.5 The cost of the Environmental Study; 11.2.6 Any other closing costs customarily paid by a purchaser of real property in the State of Nevada. 11.3 All real estate taxes, assessments and utilities relating to the Property and not paid by a tenant under the Leases shall be prorated as of the Closing between Seller and Purchaser. Nothing herein shall limit the parties' respective obligations under Section 12. 12. INDEMNITIES 12.1 From and after the Closing, Seller shall indemnify, defend and hold Purchaser harmless from any and all claims, demands, liabilities, judgments or expenses (including without limitation attorney's fees) arising out of or resulting from (i) Seller's breach of any of its representations, warranties or covenants set forth herein, or (ii) events occurring on or with respect to the Property accruing prior to the Closing, except for claims or damages with respect to Hazardous Substances or Environmental Laws unless such claims or damages result from a condition or occurrence not disclosed to Purchaser in breach of Section 5.15, above. 12.2 From and after the Closing, Purchaser shall indemnify, defend and hold Seller harmless from any and all claims, demands, liabilities, judgments or expenses (including without limitation attorney's fees) arising out of or resulting from (i) Purchaser's breach of any of its representations, warranties or covenants set forth here- 16 in, or (ii) events occurring on or with respect to the Property accruing after Closing. 12.3 If either party receives notice of any matter which would give rise to a claim for indemnity under Sections 12.1 and 12.2, that party shall promptly notify the other party, and such other party shall be entitled to defend the claim at its own expense with counsel of its own choosing, subject to the approval of such counsel by the indemnified party, which approval shall not unreasonably be withheld or delayed. 13. REMEDIES UPON DEFAULT 13.1 If Closing fails to occur solely as a result of Seller's default, Purchaser shall be entitled as its only remedies either (i) to a return of the Deposit, reasonable costs spent for Due Diligence, and to terminate the Escrow; or (ii) to obtain a decree of specific performance. 13.2 If Purchaser defaults under this Agreement, Seller, as Seller's sole and exclusive remedy for such default, shall be entitled to the Deposit. It is agreed between Purchaser and Seller that Seller will suffer substantial damages in the event of such default and the Deposit shall be liquidated damages for a default of Purchaser under this Agreement because of the difficulty, incon- venience and uncertainty of ascertaining actual damages for such default. It is further agreed between Purchaser and Seller that such amount of liquidated damages constitute a reasonable estimate of actual damages that would be incurred by Seller as a result of a default by Purchaser. 14. [INTENTIONALLY DELETED] 15. MISCELLANEOUS 15.1 Attorney's Fees. Each party shall pay all attorneys' fees incurred by that party in the negotiation and delivery of this Agreement. However, in the event that any action or proceeding is instituted to interpret or enforce the terms and provisions of this Agreement, the prevailing party shall be entitled to its costs and attorneys' fees, in addition to any other remedies it may obtain or be entitled to. 15.2 Brokers' Commissions. The parties each represent one to the other that no broker, finder or other financial consultant has acted on their behalf in connection with this agreement or the transactions contemplated hereby. The parties each agree to indemnify and hold the other harmless from any claim, settlement, cost or demand for 17 commission or other compensation by any broker, finder, financial consultant or similar agent claiming to have been employed by or on behalf of the indemnifying party, and to bear the cost of legal expenses incurred in defending against such claims. 15.3 Notices. Any notices desired or required to be given hereunder shall be faxed, with the original deposited in the U.S. Mail, postage prepaid, or sent by overnight courier service, and shall be deemed received upon the earlier of attempted delivery or receipt. Either party hereto may change its address hereunder by providing the other party with notice of such changed address. If to Seller, addressed to: A. Robert Zeff, Esq. RZ Corporation 607 Shelby Street, #200 Detroit, MI 48226 Facsimile: (313) 962-6007 With a copy to: Jeff Zucker, Esq. Lionel Sawyer & Collins 300 S. 4th St., 17th Floor Las Vegas, NV 89101 Facsimile: (702) 383-8845 If to Purchaser, addressed to: Peter C. Bernhard The April Cook Companies c/o Bernhard & Leslie 3980 Howard Hughes Parkway, #550 Las Vegas, NV 89109 Facsimile: (702) 650-2995 With a copy to: Terry Jones, Esq. Schreck Morris 300 S. 4th St., 12th Floor Las Vegas, NV 89101 Facsimile: (702) 382-8135 15.4 Counterparts. This agreement may be executed in multiple counterparts, which together shall constitute one and the same document. 18 15.5 Entire Agreement. This Agreement constitutes the entire agreement between Purchaser and Seller regarding the Property, and supersedes all prior discussions, negotiations and agreements between them, whether oral or written. This Agreement may not be amended or modified except in writing signed by both parties hereto. 15.6 Governing Law. This Agreement shall be governed by the laws of the State of Nevada applicable to contracts made in that state. 15.7 Forum. The parties agree that the proper forum and venue for any dispute involving this Agreement or the trans- action contemplated thereby shall be the state and federal courts of Clark County, Nevada. 15.8 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the successors, assigns, nominees, designees and affiliates of the parties hereto. 15.9 Waiver. No waiver of any provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision, whether or not similar, nor shall any waiver constitute a continuing waiver, and no waiver shall be binding unless evidenced by an instrument in writing and executed by the party making the waiver. If any pro- vision, covenant or condition of this Agreement should be held or found to be invalid, void or unenforceable, that provision shall be deemed severable and all provisions, covenants and conditions not held invalid, void or unenforceable shall continue in full force and effect and shall in no way be affected, impaired or invalidated thereby. 15.10Further Assurances. The parties agree to negotiate diligently and in good faith at all times, to execute and deliver such other and further documents and instruments as may be necessary to fully effectuate the transactions contemplated hereby. The parties further agree to execute and deliver to the Escrow Agent and Title Company such other and further escrow instructions, documents and instruments as may be reasonably necessary to effectuate this transaction in accordance with its terms. 16. 1031 EXCHANGE. Seller agrees to cooperate with Purchaser in qualifying this transaction as a tax-free exchange under Section 1031 of the Internal Revenue Code as long as such cooperation does not result in any additional expense, liability, or obligation on the part of Seller or in the delay of the Closing. Failure to qualify this transaction as a tax-free exchange will not release Purchaser from its obligations hereunder. [SIGNATURES ON NEXT PAGE] 19 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year shown opposite their respective signatures below. SELLER: RZ Corporation, a Nevada corporation By: A. ROBERT ZEFF ------------------------------------- Robert Zeff, President Dated: August 12, 1998 PURCHASER: The April Cook Companies, a Nevada corporation By: PETER C. BERNHARD ------------------------------------- Peter C. Bernhard, President Dated: August 12, 1998 TITLE COMPANY RECEIPT AND CONSENT The Title Company acknowledges receipt of an executed copy of the Agreement and agrees to perform as Escrow Agent thereunder. Nevada Title Company, a Nevada corporation By: TROY LOCKHEAD ------------------------------------- Troy Lochhead, Title Officer Dated: August 13, 1998 20 EX-10.5 6 FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT (WITH OPTION) THIS FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT (With Option) (the "First Amendment") is made and entered into as of August 24, 1998 by and between The April Cook Companies, a Nevada corporation ("Purchaser") and RZ Corporation, a Nevada corporation, ("Seller"), based upon the following: RECITALS A. The parties hereto entered into a Purchase and Sale Agree- ment (with Option) dated as of August 12, 1998 (the "Agreement"). B. Section 10.1 of the Agreement provided for a Closing to occur on August 25, 1998. C. The parties hereto are desirous of extending the Closing date and further amending the Agreement in several particulars as hereinafter set forth in this First Amendment. D. Capitalized terms used in this First Amendment shall be defined as set forth in the Agreement. NOW, THEREFORE, based upon the foregoing and in consideration of the mutual covenants herein set forth, it is agreed as follows: 1. Section 1.25 of the Agreement is amended by the addition of the following language: The Purchase Price shall be increased by an amount equal to the product of Twenty One Thousand, Eight Hundred and Sixty Three Dollars ($21,863.00) times the number of calendar days elapsed from but excluding August 25, 1998 to and including the Closing. 2. Section 2 of the Agreement is amended by the addition of the following subsection: 2.3.5 Seller's Covenant. Seller agrees that after the Closing it shall not raise any defenses to the Condemnation Proceeding except those relating to the amount of just compensation. EXHIBIT 10.5 3. Section 5.17 of the Agreement is amended to read: That Seller has attached hereto as Exhibit "E" true and correct copies of the Leases and all amendments and modifications thereto and there are no agreements with respect to the term of such Leases except as set forth on Exhibit "E"; that there are no leases (not including sub- leases) affecting the Property currently in effect not contained in Exhibit "E,"; that the Leases are in full force and effect and that no party thereto is in default; and that the Leases contain no options to purchase any part of the Property. 4. The following sentence shall be added to 9.1.3: The Title Company shall also be irrevocably committed to issue as endorsements to the Title Policy, in addition to such other endorsements to the Title Policy as Purchaser may reasonably request at its sole expense, a CLTA 116.4 contiguity endorsement insuring that the Condemned Parcel is contiguous to the Property; a 103.7 endorsement that the eastern boundary of the Property abuts its entire length upon the public right-of-way for Las Vegas Boulevard South; a special endorsement that the transfer of the Property will not be a violation of the subdivision laws of the State of Nevada as set forth in NRS Chapter 278. Additionally, the Title Company shall be irrevocably committed to issue to Purchaser an Option Policy of title insurance insuring Purchaser in the amount of the Option Consideration that Seller is vested with fee title to the Condemned Parcel sub- ject only to the Permitted Exceptions, and the Condemnation Proceeding, and that the Memorandum of Option has been recorded The Option Policy premium shall be paid and borne by Purchaser. 5. Section 9.1.4 of the Agreement is deleted in its entirety. 6. Section 9.1 of the Agreement is amended by the addition of the following Express Conditions to Closing: 9.1.7 Robert Zeff, as an individual, shall execute and deliver to Purchaser the Indemnity Agreement in the form attached hereto as Exhibit "G". 9.1.8 The Board of County Commissioners of Clark County, Nevada, shall have approved an agreement between Clark County, Nevada and Purchaser, or any affiliate of Purchaser, by the terms of which the County agrees that it shall not abandon the Condemnation Proceeding pursuant to NRS Section 37.180 unless the award is greater than $8.32 million. 2 9.1.9. The County of Clark shall have amended the Complaint, other pleadings and Notice of Lis Pendens in the Condemnation Proceeding to correct the discrepancy in the metes and bounds legal description used by the County in the Condemnation Proceeding in order to conform the same to the drawing of the Clark County Public Works Engineering Division attached as an Exhibit to the Complaint In Eminent Domain filed in the Condemnation Proceeding, consisting of approximately .77 acres, and including the approximately south 30 feet of the approximately westerly 133.16 feet of the Property. 7. Section 10.1 of the Agreement is amended to provide in its entirety as follows: "Subject to satisfaction of the conditions set forth in Article 9, closing of the purchase of the Property (the "Closing") shall occur on Thursday, September 3, 1998, or such other date as may be mutually agreed upon in writing." 8. The following Section 10.4 is added to the Agreement: In the event Closing should fail to occur by reason of a failure of a condition set forth in Section 9.1, not caused by a default of Purchaser, the Deposit shall be refunded to Purchaser by Escrow Agent. 9. Except as modified by the foregoing provisions of the First Amendment, all of the terms and conditions of the Agreement shall remain in full force and effect. 10. This Agreement may be signed in multiple counterparts, which taken together shall constitute one and the same document. IN WITNESS WHEREOF, the parties have caused this First Amendment to be executed as of the day and year first mentioned above. "Seller" "Purchaser" RZ Corporation The April Cook Companies A. ROBERT ZEFF PETER C. BERNHARD By: ________________________ By: _______________________________ Robert Zeff Name: Peter C. Bernhard Title: Its President 3 EX-10.6 7 SECOND AMENDMENT TO PURCHASE AND SALE AGREEMENT (WITH OPTION) This Second Amendment to Purchase and Sale Agreement (With Option) (the "Second Amendment") is made and entered into as of August 30, 1998, by and between The April Cook Companies, a Nevada corporation ("Purchaser") and RZ Corporation, a Nevada corporation ("Seller"), based upon the following: RECITALS A. The Parties hereto entered into a Purchase and Sale Agreement (With Option) dated as of August 12, 1998, (the "Agreement"). B. The Parties entered into a First Amendment to Purchase and Sale Agreement (With Option) dated as of August 24, 1998, (the "First Amendment") amending the Agreement. C. The Parties hereto are desirous of further amending the Agreement as amended by the First Amendment as hereinafter set forth in this Second Amendment. D. Terms used in this Second Amendment shall be defined as set forth in the Agreement. NOW, THEREFORE, based upon the foregoing and in consideration of the mutual covenants hereinafter set forth, it is agreed as follows: 1. The title of the Agreement is amended by striking the words "("With Option")". 2. The definitions set forth in Sections 1.13 ("Estoppel Certificate"); 1.17 ("Options"), 1.18 ("Option Closings"), 1.19 ("Option Consideration"), and 1.20 ("Option Periods") are deleted. 3. The following language shall be added to the Agreement as a new Section 1.17: "Parcel II" shall be defined as meaning that certain real property defined herein as the "Condemned Parcel", the legal description of which is attached hereto on Exhibit F-1. 4. The following language is added to the Agreement as a new Section 1.18: "Parcel II Purchase Price" shall mean the sum of Four Million Five Hundred Ninety-Six Thousand Five Hundred Dollars ($4,596,500.00) to be paid to Seller by Purchaser in consideration for Parcel II, subject to the conditions and in accordance with the provisions set forth in Section 16 hereof. EXHIBIT 10.6 5. Section 1.23 is amended by deleting the last sentence and substituting therefore the following language: "A legal description of the Property is attached hereto on Exhibit F-1." 6. Section 2.3 ("Options") is deleted in its entirety. 7. The last sentence of Section 9.1.3 and all of Sections 9.1.8 and 9.1.9 are deleted and the following substituted at Section 9.1.8: The Board of County Commissioners of Clark County, Nevada shall have approved an agreement with Purchaser or any affiliate of Purchaser, acceptable to Purchaser in its sole discretion, specifically providing, inter alia, (i) that the Harmon Avenue extension to the west of the Strip shall not be constructed upon or adjacent to Parcel II, but shall be relocated to a public right-of-way located elsewhere upon the Property or property belonging to an affiliate of Purchaser, at a location acceptable to Purchaser in its sole discretion, (ii) that the County shall not seek to recover a refund of the Two Million Four Hundred Three Thousand Five Hundred Dollars ($2,403,500.00) previously paid to Seller in the Condemnation Proceeding; provided, however, that the condition set forth in this Section 9.1.8. shall be deemed satisfied or waived by Purchaser unless Purchaser notifies Seller's counsel, Jeff Zucker, Esq., to the contrary, in writing, by facsimile and hand delivery to Mr. Zucker's office no later than 5:00 p.m., Pacific Time, Monday, August 31, 1998. 8. A new Section 17 is added to the Agreement as follows: 17. Purchase and Sale of Parcel II. 17.1 Conditioned upon the concurrent Closing of the sale of the Property from Seller to Purchaser, Purchaser also agrees to purchase from Seller, and Seller agrees to sell to Purchaser Parcel II, together with Seller's interest, if any, in any buildings and improvements located thereon and all rights, licensing and easements appurtenant thereto. 17.2 The closing of the purchase and sale of Parcel II (the "Parcel II Closing") shall occur through escrow utilizing the Escrow Agent. At the Parcel II Closing, the Parcel II Purchase Price shall be paid to Seller by Purchaser in immediately available United States funds for disbursement pursuant to Seller's instructions, subject to the same prorations as are set forth with respect to the Property at Section 11 above. 2 17.3 Parcel II shall be conveyed to Purchaser by Seller free and clear of any liens, encumbrances, mortgages, pledges, obligations, etc., imposed by Seller except for the Condemnation Proceeding, by a grant, bargain and sale deed in substantially the form of Exhibit "B" hereto. 17.4 In the event that the same has not been dismissed, or a stipulation has not been entered into for the dismissal of the Condemnation Proceeding prior to the Parcel II Closing, Seller shall assign and transfer to Purchaser all of Seller's rights and interests in the Condemnation Proceeding as they relate to ownership of Parcel II; provided, however, that Seller shall be entitled to retain the sum of Two Million Four Hundred Three Thousand Five Hundred Dollars ($2,403,500.00) previously received by Seller in the Condemnation Proceeding, and Purchaser covenants and agrees to indemnify, defend and hold Seller harmless from any claims seeking a refund or repayment of said amount or interest thereon. Seller shall be solely responsible for payment of any fees or expenses alleged to be owing or owed from Seller to counsel engaged by Seller and relating to such counsel's representation of Seller in the Condemnation Proceeding. 17.5 The Parcel II Closing is subject to the Title Company delivering to Purchaser a Title Policy dated on the date of the Parcel II Closing, in the amount of the Parcel II Purchase Price, ensuring Purchaser as owner of fee title to Parcel II subject only to the Permitted Exceptions, the Leases, and (if the same has not previously been dismissed) the Condemnation Proceeding. 17.6 The parties' respective conditions to the Parcel II Closing shall be as set forth in Section 9 with respect to the closing of the Escrow for the purchase and sale of the Property. 3 17.7 Seller's representations and warranties with respect to Parcel II shall be limited to the representations and warranties set forth in Sections 5.2 through 5.6 and (to the extent of operating revenues generated from Parcel II) 5.16 hereof. Seller's representations and warranties in this Section 17.7 shall survive for thirty (30) months after the Parcel II Closing. 17.8 From and after the Parcel II Closing, subject to Section 12.3, Seller shall indemnify, defend and hold Purchaser harmless from any and all claims, demands, liabilities, judgments or expenses (including, without limitation, attorney's fees) arising out of or resulting from Seller's breach of any of its represen- tations, warranties or covenants set forth in this Second Amendment. From and after the Parcel II Closing, Purchaser shall indemnify, defend and hold Seller harmless from any and all claims, demands, liabilities, judgments or expenses (including, without limitations, attorney's fees) arising out of or resulting from Purchaser's breach of any of its repre- sentations, warranties or covenants set forth herein. 9. Except as modified by the foregoing provisions of the Second Amendment, all of the terms and conditions of the Agreement as modified by the First Amendment shall remain in full force and effect. 10. This Agreement may be signed in multiple counterparts, which taken together shall constitute one and the same document. 4 IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to be executed as of the day and year first mentioned above. SELLER: RZ Corporation, a Nevada corporation By: A. ROBERT ZEFF ----------------------------------- Robert Zeff, President PURCHASER: The April Cook Companies, a Nevada corporation By: DANIEL R. LEE ----------------------------------- Daniel R. Lee, Secretary/Treasurer 5 EX-15 8 EXHIBIT 15 November 13, 1998 To Mirage Resorts, Incorporated We are aware that Mirage Resorts, Incorporated has incorporated by reference in its Registration Statements on Form S-8 (File No. 33-16037), on Form S-8 (File No. 33-48394), on Form S-8 (File No. 33-63804), on Form S-8 (File No. 33-60183), on Form S-8 (File No. 333-59455) and on Form S-3 (File No. 333-39029) its Form 10-Q for the quarter ended September 30, 1998 which includes our report dated November 13, 1998 covering the unaudited interim financial information contained therein. Pursuant to Regulation C of the Securities Act of 1933, that report is not considered a part of these registration statements or a report prepared or certified by our firm within the meaning of Sections 7 and 11 of the Act. Very truly yours, ARTHUR ANDERSEN LLP EX-27 9
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE REGISTRANT'S CONDENSED CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1998 AND THE RELATED CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS EN- TIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS DEC-31-1998 SEP-30-1998 126,969 0 120,195 51,298 44,551 409,607 4,330,960 700,714 4,362,369 287,003 2,237,143 0 0 940 1,617,939 4,362,369 0 1,003,682 0 598,844 66,706 15,340 10,651 167,283 61,960 105,323 0 (3,521) 0 101,802 0.57 0.53
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