-----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, Vw+zQzTcZppG9gqi+RmcL1mdXIGvAXM+c/IF2ZGg90n3Rn/ff/S+2FnLMNeVfmZ4 R8c1Dr8nhH7vYaL18w5tGQ== 0000892569-98-003108.txt : 19981118 0000892569-98-003108.hdr.sgml : 19981118 ACCESSION NUMBER: 0000892569-98-003108 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981116 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SANDS REGENT CENTRAL INDEX KEY: 0000753899 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS AMUSEMENT & RECREATION [7990] IRS NUMBER: 880201135 STATE OF INCORPORATION: NV FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-14050 FILM NUMBER: 98751261 BUSINESS ADDRESS: STREET 1: 345 N ARLINGTON AVE CITY: RENO STATE: NV ZIP: 89501 BUSINESS PHONE: 7023482200 MAIL ADDRESS: STREET 1: 345 N ARLINGTON AVE CITY: RENO STATE: NV ZIP: 89501 10-Q 1 FORM 10-Q QUARTER ENDED SEPTEMBER 30, 1998 1 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q (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 number 0-14050 --------------------------------------------------------- THE SANDS REGENT - -------------------------------------------------------------------------------- (exact name of registrant as specified in charter) Nevada 88-0201135 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 345 North Arlington Avenue, Reno, Nevada 89501 - -------------------------------------------------------------------------------- (Address of principal executive offices) (zip code) Registrant's telephone number, including area code (702) 348-2200 ----------------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] On November 13, 1998, the registrant had outstanding 4,498,722 shares of its common stock, $.05 par value. 2 THE SANDS REGENT AND SUBSIDIARIES FORM 10-Q TABLE OF CONTENTS Page No. PART I FINANCIAL INFORMATION Item 1. Financial Statements. 1 - 7 Consolidated Statements of Operations 1 Consolidated Balance Sheets 2 - 3 Consolidated Statements of Cash Flows 4 - 5 Notes to Interim Consolidated Financial Statements 6 - 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. 8 - 12 PART II OTHER INFORMATION Item 1. Legal Proceedings. 13 Item 2. Changes in Securities. 13 Item 3. Defaults Upon Senior Securities. 13 Item 4. Submission of Matters to a Vote of Security Holders. 13 Item 5. Other Information. 13 Item 6. Exhibits and Reports on Form 8-K. 13 SIGNATURES 14 3 PART I FINANCIAL INFORMATION Item 1. Financial Statements. THE SANDS REGENT AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, THREE MONTHS except per share amounts) ENDED SEPTEMBER 30, ---------------------------------- 1997 1998 ------------ ------------ Operating revenues: Gaming $ 10,303 $ 9,545 Lodging 3,040 2,772 Food and beverage 2,223 2,106 Other 448 385 ------------ ------------ 16,014 14,808 Less complimentary lodging, food and beverage included above 672 666 ------------ ------------ 15,342 14,142 ------------ ------------ Operating costs and expenses: Gaming 5,342 5,176 Lodging 1,287 1,181 Food and beverage 2,002 1,891 Other 176 149 Maintenance and utilities 1,786 1,761 General and administrative 3,255 3,260 Depreciation and amortization 1,014 1,028 ------------ ------------ 14,862 14,446 ------------ ------------ Income (loss) from operations 480 (304) Other income (deductions): Interest and other income 107 103 Interest and other expense (558) (527) ------------ ------------ (451) (424) ------------ ------------ Income (loss) before income taxes 29 (728) Income tax provision (benefit) -- (245) ------------ ------------ Net income (loss) $ 29 $ (483) ============ ============ Net income (loss) per share, Basic and Diluted $ .01 $ (.11) ============ ============ Weighted average shares outstanding 4,498,722 4,498,722 ============ ============
The accompanying notes are an integral part of these consolidated financial statements. -1- 4 THE SANDS REGENT AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
(Dollars in thousands) JUNE 30, SEPTEMBER 30, 1998 1998 ------------- ------------- ASSETS CURRENT ASSETS: Cash and cash equivalents $ 9,203 $ 10,280 Short-term investments 250 250 Accounts receivable less allowance for possible losses of $72 and $76 550 545 Inventories 625 601 Federal income tax refund receivable 687 930 Prepaid expenses and other assets 1,371 1,495 ------------- ------------- Total current assets 12,686 14,101 ------------- ------------- PROPERTY AND EQUIPMENT: Land 8,093 8,093 Buildings, ship and improvements 45,942 46,227 Equipment, furniture and fixtures 25,654 25,867 Construction in progress 509 344 ------------- ------------- 80,198 80,531 Less accumulated depreciation and amortization 34,552 35,549 ------------- ------------- Property and equipment, net 45,646 44,982 ------------- ------------- OTHER ASSETS: Deferred federal income tax asset 258 331 Other 311 295 ------------- ------------- Total other assets 569 626 ------------- ------------- Total assets $ 58,901 $ 59,709 ============= =============
The accompanying notes are an integral part of these consolidated financial statements. -2- 5 THE SANDS REGENT AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
(Dollars in thousands) JUNE 30, SEPTEMBER 30, 1998 1998 ------------- ------------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 1,927 $ 3,296 Accrued salaries, wages and benefits 2,006 1,582 Other accrued expenses 2,049 2,299 Deferred federal income tax liability 276 346 Current maturities of long-term debt 6,765 10,149 ------------- ------------- Total current liabilities 13,023 17,672 ------------- ------------- LONG-TERM DEBT 14,643 11,285 ------------- ------------- Total liabilities 27,666 28,957 ------------- ------------- STOCKHOLDERS' EQUITY: Preferred stock, $.10 par value, 5,000,000 shares authorized, none issued -- -- Common stock, $.05 par value, 20,000,000 shares authorized, 6,898,722 shares issued 345 345 Additional paid-in capital 13,074 13,074 Retained earnings 40,171 39,688 ------------- ------------- 53,590 53,107 Treasury stock, at cost; 2,400,000 shares (22,355) (22,355) ------------- ------------- Total stockholders' equity 31,235 30,752 ------------- ------------- Total liabilities and stockholders' equity $ 58,901 $ 59,709 ============= =============
The accompanying notes are an integral part of these consolidated financial statements. -3- 6 THE SANDS REGENT AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED (Dollars in thousands) SEPTEMBER 30, ------------------------------ 1997 1998 ------------ ------------ OPERATING ACTIVITIES: Net income (loss) $ 29 $ (483) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 1,014 1,028 (Gain) loss on disposal of property and equipment (2) 2 (Increase) decrease in accounts receivable (122) 5 Decrease in inventories 46 24 (Increase) in prepaid expenses and other current assets (180) (124) (Increase) decrease in other assets (5) 13 Increase (decrease) in accounts payable (209) 1,378 Increase (decrease) in accrued expenses 88 (174) Change in federal income taxes payable/receivable (37) (243) Change in deferred federal income taxes 37 (3) ------------ ------------ NET CASH PROVIDED BY OPERATING ACTIVITIES 659 1,423 ------------ ------------ INVESTING ACTIVITIES: Payments received on note receivable 2 -- Additions to property and equipment (270) (363) Proceeds from sale of property and equipment 2 -- ------------ ------------ NET CASH USED IN INVESTING ACTIVITIES (266) (363) ------------ ------------
The accompanying notes are an integral part of these consolidated financial statements. -4- 7 THE SANDS REGENT AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED (Dollars in thousands) SEPTEMBER 30, ------------------------------- 1997 1998 ------------ ------------ FINANCING ACTIVITIES: Payment of accounts payable for prior period purchases of property and equipment -- (9) Issuance of long-term debt 256 239 Payments on long-term debt (191) (213) ------------ ------------ NET CASH PROVIDED BY FINANCING ACTIVITIES 65 17 ------------ ------------ INCREASE IN CASH AND CASH EQUIVALENTS 458 1,077 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 7,644 9,203 ------------ ------------ CASH AND CASH EQUIVALENTS, END OF PERIOD $ 8,102 $ 10,280 ============ ============ SUPPLEMENTAL CASH FLOW INFORMATION: Interest paid, net of amount capitalized $ 482 $ 344 ============ ============ Federal income taxes paid $ -- $ -- ============ ============
The accompanying notes are an integral part of these consolidated financial statements. -5- 8 THE SANDS REGENT AND SUBSIDIARIES NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 NOTE 1 - BASIS OF PREPARATION These statements should be read in connection with the 1998 Annual Report heretofore filed with the Securities and Exchange Commission as Exhibit 13 to the Registrant's Form 10-K for the year ended June 30, 1998. The accounting policies utilized in the preparation of the financial information herein are the same as set forth in such annual report except as modified for interim accounting policies which are within the guidelines set forth in Accounting Principles Board Opinion No. 28. The Consolidated Balance Sheet at June 30, 1998 has been taken from the audited financial statements at that date. The interim consolidated financial information is unaudited. In the opinion of management, all adjustments, consisting only of normal recurring accruals, necessary to present fairly the financial condition as of September 30, 1998 and the results of operations and cash flows for the three months ended September 30, 1998 and 1997 have been included. Interim results of operations are not necessarily indicative of the results of operations for the full year. The accompanying Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries Zante, Inc. ("Zante"), Patrician, Inc. ("Patrician"), Gulfside Casino, Inc. ("GCI") and Artemis, Inc. ("Artemis"), and Gulfside Casino Partnership ("GCP") (together the "Company"). Patrician, GCI and Artemis are the sole partners in GCP. Zante, Inc. owns and operates the Sands Regency hotel/casino in Reno, Nevada and GCP owns and operates the Copa Casino in Gulfport, Mississippi. See Note 3 - Subsequent Event regarding agreement to sell Patrician, GCI, Artemis and GCP. NOTE 2 - EARNINGS PER SHARE During the three months ended September 30, 1998 and 1997, there were no outstanding convertible securities that would result in dilutive potential common shares. The Company's options to purchase common stock are not included in the computation of diluted Earnings Per Share because to do so would have been antidilutive. NOTE 3 - SUBSEQUENT EVENT On November 6, 1998, The Company entered into an agreement to sell all of the issued and outstanding stock of Patrician, GCI and Artemis, which includes a 100% ownership interest in the Copa Casino, to the two former GCI shareholders for $8.5 million. The agreement provides for an initial payment of $500,000 with the balance payable from 2% of the Copa's gaming revenues. The agreement is subject to the approval of the Mississippi Gaming Commission and further provides for the dismissal of all litigation and claims by the two former GCI shareholders against the Company. -6- 9 THE SANDS REGENT AND SUBSIDIARIES NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 NOTE 3 - SUBSEQUENT EVENT (Continued) The Company's net investment in Patrician, GCI, Artemis and the Copa Casino, including advances, is approximately $1.3 million at September 30, 1998. Upon consumation of the sales transaction, such investment will increase by approximately $1.2 million as a result of the retention of certain deferred tax attributes by the entities being sold that are presently reflected in the Company's consolidated balance sheet. The Company will not recognized income from the above transaction until its investment is recovered from the initial and subsequent payments. Subsequent payments will be made pursuant to a promissory note executed by the Copa Casino and are subject to the continued operation of the Copa Casino. NOTE 4 - RECLASSIFICATIONS Certain reclassifications have been made to the results of operations for the three months ended September 30, 1997 to conform to the presentation for the three months ended September 30, 1998. -7- 10 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Results of operations - First Quarter 1999 Compared to First Quarter 1998 In the three month period ended September 30, 1998, compared to the same three months ended September 30, 1997, revenues decreased to $14.1 million from $15.3 million and income from operations decreased from $480,000 to a loss from operations of $304,000. The decrease in revenues is due to a decline at the Sands Regency of approximately $1.1 million and a decline at the Copa Casino of approximately $150,000. The decrease in income from operations is primarily attributable to the Sands Regency where income from operations decreased from $880,000 in the first quarter of fiscal 1998 to $54,000 in the first quarter of fiscal 1999. At the Copa Casino, the prior year first quarter loss from operations of $401,000 improved slightly to a loss from operations of $358,000 in the current year first quarter. This improvement is a result of a decline in expenses which more than offset the decline in revenues. The decline at the Sands Regency is primarily a result of a decline in hotel occupancy and is due to an overall softening in the Reno area hotel occupancy and a reduction in group business at the Sands Regency. The Company had a net loss of $483,000, or loss per share of $.11, in the quarter ended September 30, 1998 compared to net income of $29,000, or $.01 per share in the quarter ended September 30, 1997. The Sands Regency had a net loss of approximately $149,000 in the first quarter of fiscal 1999 as compared to net income of approximately $400,000 in the first quarter of fiscal 1998. For the same comparable quarters, the net loss at the Copa Casino of $334,000, in the current year first quarter, was a slight improvement over the prior year first quarter net loss of $371,000. The decrease in lodging revenue of $268,000, in the first quarter of fiscal 1999 compared to the same quarter in the prior year, is due to a decrease in hotel occupancy at the Sands Regency. Hotel occupancy declined from approximately 88.7% in the quarter ended September 30, 1997 to 77.5% in the quarter ended September 30, 1998, for the same comparable periods, the average daily room rate increased from approximately $40 to $41. The decrease in gaming revenue of $758,000, in the September 1998 quarter versus the September 1997 quarter, primarily consists of a decrease in gaming revenue from the Sands Regency. Such decrease is significantly due to the decline in hotel occupancy. The slight decrease in food and beverage revenue of $117,000, in fiscal 1999 first quarter compared to fiscal 1998 first quarter, is principally attributable to restaurant revenue at the Sands Regency. In spite of the decline in hotel occupancy, food revenue per occupied room increased from slightly less than $20 in the first quarter of fiscal 1998 to over $21 in the first quarter of fiscal 1999. The Company believes that such increase per occupied room is due, in part, to the updating of food venues and improved menu prices. -8- 11 Results of operations - First Quarter 1999 Compared to First Quarter 1998 (continued) The decrease in gaming costs and expense of $166,000, in the quarter ended September 30, 1998 compared to the quarter ended September 30, 1997, is primarily attributable to the Sands Regency. Such decrease includes a decrease in salaries and wages of approximately $79,000 and a decrease in various other cost and expense items of approximately $78,000. The decrease in lodging costs and expenses at the Sands Regency of $106,000 is also significantly due to a decrease in salaries and wages. The decrease in food and beverage costs and expense of $111,000, in the first quarter of fiscal 1999, compared to the first quarter of fiscal 1998, is primarily attributable to the Copa Casino and is a result of the elimination of the buffet restaurant in July 1998. The slight decrease in maintenance and utilities costs and expenses of $25,000 consists of an increase at the Copa Casino of $61,000 as offset by a decrease from the Sands Regency of $86,000. The increase from the Copa Casino includes an increase in hurricane evacuation expenses of $146,000 as a result of preparedness actions necessary during Hurricane Georges and other Hurricanes that were within a 680 mile radius of Gulfport during the quarter. This increase at the Copa was partially offset by the non-recurrence of dredging costs and expenses which were incurred in the prior year. The decrease at the Sands Regency consists principally of a decrease in utility costs. The slight increase in general and administrative costs and expenses of $5,000 includes an increase from the Sands Regency of approximately $171,000 and a decrease from the Copa Casino of approximately $194,000. The increase at the Sands Regency is primarily due to increased advertising and promotional costs and expenses due, in part, to the implementation of a casino marketing department in mid-fiscal 1998. The decrease from the Copa Casino is attributable to a decrease in legal costs of $311,000 which was offset by an increase in other costs and expenses. The decrease in legal costs is related to the legal actions with the State Port of Mississippi at Gulfport which culminated in a trial in October 1997. Capital resources and liquidity In November 1998, The Company entered into a settlement agreement with the two former GCI shareholders whereby the Company sells all of the issued and outstanding stock of Patrician, GCI and Artemis, which includes the 100% ownership interest in the Copa Casino, to these two former GCI shareholders. The agreement provides for an initial payment to the Company of $500,000 with the $8.0 million balance payable from 2% of the Copa's gaming revenues. This agreement is subject to the approval of the Mississippi Gaming Commission and further provides for the dismissal of all litigation and claims by the two former GCI shareholders against the Company including actions in Chancery Court, the Mississippi Supreme Court, U. S. Bankruptcy Court and U. S. District Court. -9- 12 Results of operations - First Quarter 1999 Compared to First Quarter 1998 (continued) Upon the consumation of the sales transaction, the Company's consolidated balance sheet and statement of operations will no longer include the financial position and operating results of Patrician, GCI, Artemis and the Copa Casino. The Company's consolidated cash, cash equivalents and short-term investments, including the initial payment referred to above, will decrease by approximately $2.9 million. The Company believes that its remaining cash funds of approximately $7.5 million, and cash generated from operations, will continue to be sufficient to meet its needs for the ensuing fiscal year. Other than above, there were no material changes in The Sands Regent's financial condition nor were there any substantive changes relative to matters discussed in the Capital Resources and Liquidity section of Management's Discussion and Analysis of Financial Condition and Results of Operations as presented in the 1998 Annual Report appearing as Exhibit 13 to the Company's Form 10-K for the year ended June 30, 1998. Year 2000 The Year 2000 issue is the result of information technology ("IT") and non-IT (embedded technology such as microcontrollers) hardware and software systems and components utilizing two digits, rather than four digits, to define the year. Date-sensitive hardware and software systems and components may recognize a date using "00" as the year 1900 rather than the year 2000. This is generally referred to as the "Year 2000 Problem" or the "Y2K Problem". This could result in IT and non-IT hardware or software system and component ("Y2K Systems and Components") failures or miscalculations causing disruptions of operations and the ability to engage in normal business activities. The Company has undertaken a study and assessment of its Y2K Systems and Components in order to determine the impact of the Y2K Problem on such Y2K Systems and Components. This study and evaluation includes specifically identifying those Y2K Systems and Components utilized by the Company that may be non-Y2K compliant, evaluating necessary corrective actions and implementing corrective actions, including appropriate testing, so as to minimize the impact of the Y2K Problem on the Company. The Company has generally completed the identification phase of its study and evaluation with respect to those Y2K Systems and Components presently utilized by the Company. The evaluation phase, which includes internal reviews and testing as well as inquires to third parties supplying or maintaining Y2K Systems, is also nearing completion. It is anticipated that the evaluation phase will be finalized in the second quarter of fiscal 1999. The corrective actions implementation phase is also in progress which is anticipated to be completed by the fourth quarter of fiscal 1999. The Company has also undertaken a more limited study and assessment of the Y2K Problem with respect to third party vendors, suppliers, customers and other business associates. Such study and assessment is directed toward third parties that have a material relationship with the Company or may materially affect the Company's operations such as major customers and suppliers, financial institution and communications providers. The scope of -10- 13 Results of operations - First Quarter 1999 Compared to First Quarter 1998 (continued) such limited study and assessment will generally be limited, by necessity, to appropriate inquires of such third parties. The Company believes, based on the wide attention that the Y2K Problem has received, the relative size and prominence of certain third parties and the preliminary information received, to date, from select third parties, that the impact of the Y2K Problem on such third parties will not have a material affect on the Company's operations. The Company anticipates that the Y2K Problem study and assessment, relative to its material third party vendors, suppliers, customers and other business associates, will be completed by the fourth quarter of fiscal 1999. The Company will utilize both internal and external resources to achieve Y2K compliance which will include modifying certain Y2K Systems and Components and replacing others. The Company presently estimates that the remaining costs to assure material Y2K compliance will be less than $100,000 to be incurred over the next 15 months. Such estimate is based upon the Company's study and assessment and is subject to modification as the study and assessment progresses. There can be no guarantees that this estimate will be achieved and actual results could materially differ from the estimate. Costs to date have been immaterial. The Company believes that the scope and time table of its study and assessment of Y2K Systems and Components, to achieve Y2K compliance, is adequate and realistic. Further, the Company believes that those Y2K Systems and Components with a greater likelihood of adversely impacting the Company's business and financial performance will be Y2K compliant in a timely manner. Nevertheless, if one or more of the Company's Y2K Systems and Components fail to achieve Y2K compliance, or are overlooked, there could be a material adverse impact on the Company's business operations or financial performance. Additionally, there can be no assurances that the Y2K Systems and Components of third parties, which may materially affect the Company, will be timely converted to assure Y2K compliance. The Company has not formulated a contingency plan in the event one or more of the Company's, or third party's, Y2K Systems and Components fail to achieve Y2K compliance. The Company will continue to review the necessity for a contingency plan as its Y2K study and assessment progresses. The decision to develop a contingency plan will be based upon an evaluation of potential future unavoided or unavoidable risks of Y2K noncompliance and the adverse impact to the Company. Cautionary statement for purposes of the "Safe Harbor" provisions of the Private Securities Litigation Reform Act of 1995 The foregoing Management's Discussion and Analysis of Financial Condition and Results of Operations contains various "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, which represent the Company's expectations or beliefs concerning future events. Such statements are identified by the words "anticipates", "believes", "expects", "intends", "future", or words of similiar import. Various important factors that could cause actual results to differ materially from those in the forward-looking statements include, without limitation, the following: increased competition in existing markets or the -11- 14 Results of operations - First Quarter 1999 Compared to First Quarter 1998 (continued) opening of new gaming jurisdictions; a decline in the public acceptance of gaming; the limitation, conditioning or suspension of any of the Company's gaming licenses; adverse outcomes in any of the Company's various material legal proceedings in Mississippi; increases in or new taxes imposed on gaming revenues or gaming devices; a finding of unsuitability by regulatory authorities with respect to the Company's officers, directors or key employees; loss or retirement of key executives; significant increases in fuel or transportation prices; adverse economic conditions in the Company's key markets; severe and unusual weather in the Company's key markets and adverse results of significant litigation matters. -12- 15 PART II OTHER INFORMATION Item 1. Legal Proceedings. NONE Item 2. Changes in Securities. NONE Item 3. Defaults Upon Senior Securities. NONE Item 4. Submission of Matters to a Vote of Security Holders. NONE Item 5. Other Information. NONE Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits: 10 (a) Agreement, dated November 6, 1998, by and between Terry W. Green, Joel R. Carter, Sr., Gulfside Casino Partnership and The Sands Regent 27 Financial Data Schedule (b) Reports on Form 8-K: NONE -13- 16 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. THE SANDS REGENT (Registrant) Date: November 13, 1998 By /s/ David R. Wood ----------------------------------------------- David R. Wood, Executive Vice President Principal Accounting and Financial Officer -14- 17 INDEX TO EXHIBITS Sequentially Exhibit Numbered Number Page ------- ------------ 10 (a) Agreement, dated November 6, 1998, by and between Terry W. Green, Joel R. Carter, Sr., Gulfside Casino Partnership and The Sands Regent......................................... 27 Financial Data Schedule......................... EX-10.(A) 2 AGREEMENT DATED NOVEMBER 6, 1998 1 EXHIBIT 10(a) AGREEMENT AGREEMENT made November 6 , 1998 and effective November 5, 1998, between The Sands Regent, a Nevada corporation (the "Seller"), and Terry W. Green and Joel R. Carter, Sr. (the "Purchasers") and the Gulfside Casino Partnership d/b/a Copa Casino ("Gulfside Partnership"). WHEREAS, Seller owns (a) 100% of the issued and outstanding capital stock of Gulfside Casino, Inc. ("GCI"), a Mississippi corporation, (b) 100% of the issued and outstanding capital stock of Patrician, Inc. ("Patrician"), a Nevada corporation, and (c) 100% of the issued and outstanding capital stock of Artemis, Inc. ("Artemis"), a Nevada corporation; WHEREAS, GCI, Patrician and Artemis ("the Companies") are general partners in Gulfside Casino Partnership d/b/a Copa Casino ("Gulfside Partnership"), a Mississippi general partnership doing business as the Copa Casino in Gulfport, Mississippi; and the respective ownership interest of each of the Companies in Gulfside Partnership is: GCI - .006%; Patrician - 98.744%; Artemis - 1.25%; WHEREAS, Seller desires to sell, assign, convey and transfer the capital stock of the Companies and Purchasers desire to purchase and acquire all of the capital stock of the Companies, and to own, manage and operate Gulfside Casino Partnership d/b/a Copa Casino. NOW, THEREFORE, for and in consideration of the mutual covenants contained herein, and other good and valuable consideration, the parties AGREE: 1. Sale of Shares. Seller hereby sells, assigns, transfers and conveys to Purchasers, 100% of the issued and outstanding shares of the capital stock of the Companies as represented by the following share certificates: 2 COMPANY CERTIFICATE NO. NUMBER OF SHARES ------- --------------- ---------------- GCI 11 800 Patrician 1 2,500 Artemis 1 2,500 With respect to each of the Companies, Seller shall transfer and convey said shares to Purchasers as follows: (a) GCI (1) Carter 50% or 400 shares (2) Green 50% or 400 shares (b) Patrician (1) Carter 50% or 1,250 shares (2) Green 50% or 1,250 shares (c) Artemis (1) Carter 50% or 1,250 shares (2) Green 50% or 1,250 shares 2. Payments to Seller. In consideration of its performance under this Agreement and related Exhibits, including the release, satisfaction and cancellation of certain lien rights as described in paragraph 4 below, and the sale, transfer and conveyance of the share certificates, Seller shall receive at closing: (A) a certified check in the amount of $500,000.00 drawn on the account of Gulfside Partnership and payable to the Escrow Agent subject to the terms of the Escrow Agreement attached hereto as Exhibit "C", and (B) a negotiable Promissory Note payable to Seller in the form attached hereto as Exhibit "A", in the principal 2 3 amount of $8,000,000.00, without interest, executed by Gulfside Partnership and guaranteed by each of the Companies. Said Promissory Note shall be paid by payment to Seller on an ongoing basis of a monthly royalty equal to the greater of (i) 2% of the monthly Gross Gaming Revenue of the Gulfside Partnership or any successor to Gulfside Partnership or to its interest in the Copa Casino as set forth in the Royalty Agreement attached as Exhibit "B" or (ii) $15,000 in cash, in accordance with the terms and conditions of a written Royalty Agreement to be executed by Gulfside Partnership in the form of Exhibit "B" attached hereto, which Royalty Agreement may be recorded in memorandum form; provided, however, that the principal amount of payments due under said Promissory Note shall not exceed $8,000,000.00. 3. Closing. Closing shall occur at the Copa Casino, Gulfport, Mississippi, on or before December 31, 1998. The following transactions shall occur at closing: (A) Seller shall endorse and deliver the shares certificates to Purchasers; (B) Seller shall mark "paid" the original of all notes payable to Seller by any of the Companies or by Gulfside Partnership; (C) Seller shall deliver to Purchasers terminations and cancellations of all financing statements, liens or Ship Mortgages securing the notes described above; (D) Gulfside Partnership shall deliver to Seller a certified check, payable to the order of Escrow Agent, for $500,000.00; and (E) Gulfside Partnership shall deliver to Seller the Promissory Note for $8,000,000.00 executed by Gulfside Partnership and the Companies; and (F) Gulfside Partnership shall deliver to Seller the Royalty Agreement executed by Gulfside Partnership; (G) Gulfside Partnership shall deliver to Seller the Escrow Agreement attached as Exhibit "C" executed by Gulfside Partnership, Seller and Escrow Agent; and (H) Gulfside Partnership shall deliver to Seller the Security Agreement attached as Exhibit "D" executed by Gulfside Partnership; and (I) Purchasers shall 3 4 deliver to Seller the General Releases, Orders of Dismissals with Prejudice of certain litigation in the forms attached hereto as Exhibits "D", "E", "F", "G" and "H" executed by each of the Purchasers and their attorneys. Upon execution of this Agreement, the Purchasers, through their attorneys, shall sign and deliver to Seller the Joint Motions to Settle and Compromise Disputed Claims in the forms attached hereto as Exhibits "I" and "J". 4. Cancellation of Existing Debt and Lien Rights. At closing, Seller shall mark "paid" and shall cancel any and all notes, obligations or debts owed to Seller by any of the Companies or by Gulfside Partnership and shall mark "satisfied" and terminate, cancel, discharge and release any liens, security interests or Ship Mortgage which secures such notes or indebtedness. 5. Conditions Precedent. Seller shall have no obligation to close this sale, to transfer the shares, to cancel the notes or indebtedness or to cancel its security interests and liens unless and until the following conditions have occurred: (a) Entry of a Order Approving Settlement and Compromise Agreement by the Bankruptcy Court for the Southern District of Mississippi, which order shall have become final and not appealed or stayed pending an appeal. (b) Approval of the Mississippi Gaming Commission to transfer ownership and control of partners of Gulfside Partnership to Purchasers and approval of the Mississippi Gaming Commission to effectuate this stock sale and the transfer of the gaming license to Purchasers. (c) Approval of the Mississippi Port Authority, if required, to transfer ownership and control of the Companies to Purchasers, or to transfer and assign the Copa Casino lease to 4 5 Purchasers and to release Seller from any liability thereunder. (d) Purchasers shall have delivered all of the documents and items required to be delivered pursuant to Paragraph 3 above. 6. Successors: Binding Agreement. This Agreement and all exhibits, documents, and covenants contemplated by or required pursuant to this Agreement shall be binding upon each of the Purchasers and Gulfside Partnership d/b/a Copa Casino and upon their respective Successors, Assigns, or Transferees. A Successor, Assign, or Transferee of Gulfside Partnership d/b/a Copa Casino shall mean any person(s) or entity who, directly or indirectly by sale, merger, consolidation, operation of law or otherwise, shall acquire of otherwise succeed to a majority or controlling ownership interest in the business and/or assets of Gulfside Partnership d/b/a Copa Casino whether such casino remains at its current location or is relocated, or whether the current facilities are replaced, augmented or otherwise modified. The Purchasers and Gulfside Partnership hereby represent and covenant that they will require each and every such Successor, Assign or Transferee to expressly assume and agree to perform this Agreement and all Exhibits, documents, and covenants contemplated by or required under this Agreement including without limitation the Promissory Note and Royalty Agreement in the same manner and to the same extent that Purchasers and Gulfside Partnership would be required to perform if no such succession, transfer or assignment had taken place. Failure of the Purchasers or Gulfside Partnership to obtain such assumption agreement or the failure of any successor, assignee or transferee to execute and deliver such assumption agreement shall constitute an event of default under this Agreement and the Exhibits attached hereto, unless otherwise agreed in writing by the parties. 5 6 7. Representations, Warranties and Covenants. A. Seller Represents and Warrants: (1) Organization and standing. Seller and each of the Companies is duly organized, validly existing, and in good standing. (2) Capitalization. All issued shares of each of the Companies have been validly issued and are fully paid and nonassessable. None of the Companies has any outstanding subscriptions, contracts, options, warrants, or other obligations to issue, sell or otherwise dispose of, or to purchase, redeem or otherwise acquire any of its shares. (3) Share ownership. Seller is the owner, free and clear of any encumbrances, of the shares conveyed hereby. Seller has full right and authority to transfer said shares. (4) Valid Obligations. This Agreement and the Exhibits and documents to which Seller is a party have been duly authorized, executed and delivered by Seller, and will constitute valid and binding legal obligations in accordance with their terms. (5) Disclosures. Seller has delivered or made available to Purchasers and Purchasers acknowledge inspection and receipt of the following documents, records and information related to the Gulfside Partnership and the Companies: (a) Original General Ledger report for the year ending 6/30/96. (b) Original General Ledger report for the year ending 6/30/97. (c) Original General Ledger report for eleven months ending 5/31/98. (d) Vendor Listing as of 7/8/98. (e) Copies of Adjusting Journal Entries for the 11 months ending 5/31/98. (f) Copies of Adjusting Journal Entries for the 12 months ending 6/30/97. (g) Copies of Adjusting Journal Entries for the 12 months ending 6/30/96. (h) Accounts Payable listing as of June 30, 1998. (i) Accounts Payable Listing as of May 31, 1998. (j) Late Accounts Payable listing as of May 31, 1998. (k) Regular Financial Depreciation Schedule as of May 31, 1998. (l) Impairment Depreciation Schedule as of May 31, 1998. 6 7 (m) Copies of all insurance policies. (n) Copies of contracts and agreements. (o) Listing of all lawsuits. (p) Listing of positions and salary range. (q) Organization chart. (r) Copa Casino Internal Audit Reports for the quarter ended 12/31/97. (s) Copa Casino Internal Audit Reports for the quarter ended 3/31/98. (t) Monthly Financial Statement for the month and year ending 6/30/98. (u) Monthly Financial Statements for each 11 months from 7/31/97 to 5/31/98. (w) Audited Financial Statement as of and for the year ended 6/30/97. (x) Gulfside Casino Partnership 1996 (3/31/97) U.S.Partnership Income Tax Return. (y) Payment Schedule (Agreement) with Phelps Dunbar. (z) Payment Agreement with the Cornell Group, Inc. (aa) Accounts Payable Listing as of 7/31/98. (bb) Purchase Journal for 7/31/98. (cc) Copies of Bank Balance report as of 8/7/98. (dd) Monthly Financial Statement for the month of July, 1998. (ee) Finding of Facts and Conclusion of Law in connection with Port Authority lawsuit. (ff) Audited Financial Statements of Gulfside Partnership for years ended June 30, 1998 and 1997. (gg) A Letter disclosure concerning a potential fine for alleged currency violations. (hh) Purchase Journal for the month ending August 31, 1998. (ii) October 7, 1998 letter to Mississippi Port Authority regarding Hurricane George's chronology. (jj) May 5, 1998 Agreement with Neal Narter. (kk) Monthly financial statements for the three (3) months ending September 30, 1998. Purchasers hereby acknowledge and represent that they have reviewed and inspected said records, and have been given full access to and the opportunity to inspect the records and properties of Gulfside Partnership and the Companies. (6) Title to properties. The Gulfside Partnership has good and marketable title to its properties and assets, real and personal, subject to no material security interests, mortgages, pledge, lien, or encumbrance, except for the lien of IGT on slot machines and the liens which 7 8 are to be terminated pursuant to this Agreement. (7) That all taxes due by Gulfside Partnership and the Companies have been paid. (8) There are no outstanding contracts of a material nature which have not been disclosed. (9) Seller has not knowingly and intentionally made any misstatement of any material fact in connection with any documents, records or information furnished to Purchasers in connection with this Agreement and the transactions contemplated by this Agreement. (10) Comply with all laws, ordinances, governmental rules and regulations to which it is subject including, but not limited to the rules and regulations of the Mississippi Gaming Commission. B. Purchasers and Gulfside Partnership Represent, Warrant and Covenant: Until the Promissory Note attached hereto as Exhibit "A" is paid in the full in accordance with its terms, Purchasers and Gulfside Partnership shall: (1) Business and Existence. Preserve and maintain all material rights, privileges, licenses and franchises of Gulfside Partnership d/b/a Copa Casino and the Companies and maintain qualification and licenses as necessary in order to conduct its casino, restaurant and bar business. (2) Tax Returns. File and cause Gulfside Partnership and the Companies to file all federal, and state tax returns and other reports required by law. (3) Taxes and Liens. Pay and discharge, and cause Gulfside Partnership and each Company, to pay and discharge all taxes, assessments, liens and charges, as and when such taxes, assessments, liens and charges are due and payable, unless in dispute. 8 9 (4) Compliance with Laws. Comply and cause Gulfside Partnership and each Company to comply with all laws, ordinances, governmental rules and regulations to which it is subject including, but not limited to the rules and regulations of the Mississippi Gaming Commission and obtain and maintain all licenses, permits, franchises, leases or other authorizations necessary to the conduct of its business. (5) Business Records. Keep and maintain, and cause Gulfside Partnership and each Company to keep and maintain, adequate records and books of account with respect to its business activities in which proper entries are made in accordance with GAAP reflecting all financial transactions of Gulfside Partnership or the Companies. (6) Royalties. Pay and cause Gulfside Partnership or any successor, assignee or transferee of Gulfside Partnership or its interest in the Copa Casino to timely pay Seller or Escrow Agent the monthly royalty required hereunder. 8. Conduct of business pending closing. Seller covenants that, pending the closing: (a) Gulfside Partnership business will be conducted in the ordinary course. (b) No change will be made in any of the Certificates of Incorporation or Bylaws. (c) No change will be made in any of the authorized or issued shares. (d) No dividend, distribution or payment will be made or declared with respect to any of the shares. (e) No material increase will be made in the compensation payable or to become payable by Gulfside Partnership or any of the Companies to any officer or employee. (f) No contract or commitment will be entered into by or on behalf of Gulfside Partnership or any of the Companies outside of the ordinary course of business. 9 10 (g) Gulfside Partnership debts will be paid as they become due to the extent funds are available to do so. (h) No material contract right of Gulfside Partnership will be waived. (i) No material obligations outside of in the ordinary course of business will be incurred. (j) Advise the Purchasers of any proposed expenditure or incurrance of a liability in excess of $25,000.00 and allow Purchasers a reasonable time to make comments with regard to such proposed liability. 9. Access to Books and Records. From the date of the execution of this Agreement to the closing, Seller will give Purchasers or their representatives reasonable access to the offices, records, files, books of account, and tax returns of Gulfside Partnership and each of the Companies; provided, however, that such access and inspection shall not unreasonably interfere with normal business operations and shall be subject to the terms and conditions of that certain Confidentiality Agreement dated April 7, 1998 between Purchasers and Seller. 10. Indemnity. Gulfside Partnership hereby agrees to defend, indemnify and hold harmless, and to cause each of the Companies to defend, indemnify and hold harmless, Sellers and its directors, officers, employees and agents from and against any and all claims, causes of action, losses, damages, liabilities, costs and expenses, including attorney, expert and accounting fees, court costs and expenses, which may be filed or asserted by or on behalf of John Woodfield, Lee Siepel or Venue Development Company or their successors or assigns arising from, related to or connected with that certain letter agreement dated June 3, 1996 or any rights, duties or liabilities arising therefrom. 10 11 11. Royalty Payments. Gulfside Partnership shall timely pay and Purchasers shall cause Gulfside Partnership or its successor, assignee or transferee to timely pay to Seller or Escrow Agent the monthly royalty payments provided for hereunder. 12. Security Interest and Collateral. To secure the prompt payment and performance to Seller of the obligation to pay the Promissory Note as described herein, Purchasers and Gulfside Partnership hereby grant to Seller a continuing Security Interest and Lien as described in that certain Security Agreement of even date herewith upon the following assets and properties, whether now owned or existing or hereafter acquired or arising, and wherever located, together with all accessions, substitutions and replacements thereof: (A) A first priority lien not subject to subordination on 10% of the Gross Gaming Revenues as defined in the Royalty Agreement of Gulfside Partnership d/b/a Copa Casino. (B) A lien, subject to subordination as described below, on 90% of the Gross Gaming Revenues of Gulfside Partnership d/b/a Copa Casino. (C) A lien second only to the lien of IGT, but subject to subordination as provided below, on all slot machines owned by Gulfside Partnership d/b/a Copa Casino. (D) A lien, subject to subordination as described below upon the following property and assets of Gulfside Partnership: (1) All accounts and accounts receivable. (2) All Inventory. (3) All equipment, furniture and fixtures including without limitation the M/V "Copa", Official No. 1027120. (4) General intangibles. 11 12 (5) All accessions, substitutions or replacements of such products or proceeds. (E) Purchasers and Gulfside Partnership shall execute Financing Statements as provided for by the Uniform Commercial Code and agree to take all such action as may be required to perfect or continue the perfection of Seller's security interest in and to the collateral and hereby authorize Seller to sign and file necessary Financing Statements on behalf of Gulfside Partnership or its successors, assignees or transferees. 13. Agreement to Subordinate. To enable Gulfside Partnership or its successor to obtain loans from banks or commercial lenders (to include investment bankers, insurance companies or other persons or entities regularly engaged in the business of making loans for commercial purposes) for capital improvements, for operating capital, to refinance loans, or for other necessary business purposes, Seller hereby agrees to subordinate its lien rights in and to the collateral, except and excluding its lien rights in and to 10% of the Gross Gaming Revenues, to the lien of such bank or commercial lender where such lien is to secure a loan to Gulfside Partnership d/b/a Copa Casino or its successor for capital improvements, operating capital, to refinance an indebtedness incurred for the business or operations of Gulfside Partnership or for other necessary business purposes; provided, however, that Seller shall not be required to subordinate its liens except upon reasonable notice and opportunity to verify that said loan is made and said loan proceeds shall be used solely for the purposes described above. 14. Events of Default; Rights and Remedies upon Default. (a) Events of Default. The following shall constitute Events of Default by Purchasers: (1) Royalty Payments. Failure to make any royalty payment due hereunder within ten (10) days of the date on which such royalty payment becomes due and payable. 12 13 (2) Misrepresentation. If any warranty or representation contained in this Agreement, or any other material warranty, representation, or other statement made or furnished to Seller by or on behalf of Purchaser in the other documents or in any instrument, certificate or statement furnished in compliance with or in reference to this Agreement or the other documents proves to have been false or misleading in any material respect when made or furnished. (3) Breach of Covenant. Purchaser fails or neglects to perform, keep or observe any term, provision, condition, covenant, warranty or representation contained in this Agreement or in the other documents, which is required to be performed, kept or observed by Purchaser, and the same is not cured to Seller's satisfaction within thirty (30) days after written notice thereof; provided, however, that any default arising from the failure to pay the royalty payments shall be governed by the provisions of the Royalty Agreement, Exhibit "B" and paragraph 14(a)(1) above. (4) Bankruptcy, Insolvency, etc. The commencement of a voluntary proceeding under any bankruptcy or similar laws by Gulfside Partnership or its successor entity, the failure to cause any involuntary bankruptcy proceeding to be promptly dismissed, the appointment of a receiver, trustee, custodian or similar fiduciary, or any assignment for the benefit of creditors. (5) Transfer or conveyance of the principal assets, property or equipment of Gulfside Partnership out of the ordinary course of business. (6) Transfer, loss, cancellation or revocation of the license to own and operate the Copa Casino or its successor entity. (7) Failure to comply with the provisions of the succession clause, Paragraph 6, under this Agreement. (b) Rights and Remedies Upon Default. 13 14 Upon the occurrence of any Event of Default, Seller shall have the following rights and remedies: (1) All of the rights and remedies of a secured party under the Uniform Commercial Code or other applicable law, and all other legal and equitable rights to which Seller may be entitled, all of which shall be cumulative and none of which shall be exclusive, in addition to any other rights or remedies contained in this Agreement or the Security Agreement. (2) After three (3) days written notice to Gulfside Partnership and Purchasers by facsimile, the right to take possession of the Collateral, and (i) require Purchasers and Gulfside Partnership or its successor to assemble the Collateral, at their expense, and make it available to Seller at a place to be designated by Seller which is reasonably convenient, and (ii) enter the premises wherever the Collateral shall be located, without process of law, to take possession of and secure the collateral, and to keep and store the collateral on such premises until sold. (3) The right to foreclose the liens and security interests created under this Agreement and the Security Agreement or under any other agreement relating to the Collateral; (4) The right to sell or to otherwise dispose of all or any Collateral in its then condition, at public or private sale with such notice as may be required by law, in lots or in bulk, for cash or on credit, all as Seller, in its sole discretion, may deem advisable, and the right to apply the first sales proceeds to the cost of selling the collateral. Purchasers and Gulfside Partnership agree that twenty (20) days written notice of any public or private sale or other disposition of the Collateral shall be reasonable notice thereof, and such sale shall be at such location(s) as Seller shall designate in said notice; provided, however, that said sale shall be conducted in compliance with applicable law, and in a manner reasonably calculated to bring maximum value. 14 15 (c) Disposition of Net Proceeds. In the event of foreclosure and sale of the collateral as provided for herein, Seller agrees that, after deducting the reasonable costs of said foreclosure and sale, Seller shall apply fifty percent (50%) of the net proceeds to the balance due under the Promissory Note of even date herewith and shall pay the remaining fifty percent (50%) to Purchasers jointly; and if Seller shall elect to credit bid, then such credit bid shall be jointly submitted on behalf of Seller and Purchasers and, in the event said credit bid is successful, Seller and Purchasers shall own the collateral on a fifty-fifty (50%-50%) basis; it being the intention of the parties to divide any net proceeds of a foreclosure, sale or liquidation of the collateral or own the collateral on the basis of fifty percent (50%) to Seller and fifty percent (50%) to Purchasers jointly. Seller acknowledges that Purchasers are not now, and shall not become at any time, personally liable for repayment of the $8,000,000.00 Promissory Note; provided, this acknowledgment shall not be construed to release Purchasers from any act of fraud or breach of this Agreement. (d) Covenant Not to Sue and Further Assurance. In consideration of the covenants contained herein including the agreement to equally divide the net proceeds in the event of foreclosure and liquidation of collateral as described above, Gulfside Partnership and Purchasers agree that they will not institute any lawsuit, or other action, legal or otherwise, to challenge, set aside or otherwise effect the validity of the security interest granted hereby to Seller or to set aside, void or terminate said security interests including any suit or action to set aside or challenge the validity of Seller's security interest in the M/V "Copa", Official No. 1027120; nor will they assign any such right or claim or allow another to sue in their name(s), or assist anyone else in commencing, filing or prosecuting any such action or proceeding; and further agree that they will execute and deliver any additional security documents as may be reasonably requested by Seller in its judgment to perfect and enforce said security interests including without limitation a Ship Mortgage and/or Deed of Trust with fixture filing. 15. Assumption of Employee Contracts. Purchasers and Gulfside Partnership expressly agree to assume and comply with all terms and conditions of that certain Employment Agreement dated May 5, 1998 by and between Gulfside Casino Partnership and Neal Narter. 16. Payment and Indemnification for Civil Penalty. The Parties hereby acknowledge that the Financial Crimes Enforcement Network ("FINCEN"), Department of the Treasury has made a 15 16 preliminary determination to impose a civil penalty upon Gulfside Partnership in the amount of $1,321,622.00 for the alleged failure to timely file reportable currency transactions between the period September 1, 1993 through December 31, 1994 allegedly in violation of the Bank Secrecy Act of 1970, 31 U.S.C. '5311 et seq. as described in a letter from FINCEN dated June 24, 1998 and the schedule of alleged violations attached thereto; that Gulfside Partnership has retained Deloitte & Touche, LLP, 50 Fremont Street, San Francisco, California to protest and/or negotiate said civil penalty; and that Gulfside Partnership has accrued or will accrue $200,000.00 in an anticipation of payment of a negotiated civil penalty and payment of professional fees necessary to protest and/or negotiate said penalty. Therefore, as among themselves and in consideration of the promises and covenants contained in this Agreement, the Parties further agree: (a) Gulfside Partnership shall continue to employ Deloitte & Touche to protest and/or negotiate said civil penalty until such penalty is finally resolved; (b) To the extent it may become necessary to retain other professionals including attorneys in connection with said proposed penalty, such other professionals shall be retained and employed by Gulfside Partnership only upon the written agreement of both Seller and Purchasers; (c) To the extent a civil penalty is imposed as a result of the violations alleged in the letter of June 24, 1998, Gulfside Partnership shall pay, when and as due, said penalty and all future professional fees associated therewith up to $200,000.00; (d) To the extent of any sums which Sands Regent is actually paid at closing or in monthly royalties pursuant to this Agreement, the Royalty Agreement and Promissory Note, and to the extent the penalty imposed pursuant to the violations alleged in the letter of June 24, 1998 and the related professional fees therefor shall exceed $200,000.00, The Sands Regent shall pay when and as due and 16 17 shall indemnify and hold harmless Gulfside Partnership for payment of such penalty and related expenses in excess of $200,000.00; it being the express agreement and understanding of the Parties that the liability of Sands Regent to pay any indemnity hereunder shall be limited to and shall not exceed the amount it actually receives at closing or in monthly royalties under this Agreement, the Royalty Agreement, and the Promissory Note and that the liability of The Sands Regent to so indemnify Gulfside Partnership is limited to a penalty imposed and future professional fees incurred as a result of the violations alleged in the letter of June 24, 1998. (e) The Parties agree that for the purpose of assuring the promise of The Sands Regent to indemnify Gulfside Partnership with regard to any such civil penalty or related future professional fees in excess of $200,000.00, the $500,000.00 payment due at closing and the monthly royalty payments due hereunder shall be escrowed in accordance with the terms and conditions of the Escrow Agreement attached hereto as Exhibit "C". (f) The Parties agree that Gulfside Partnership shall continue to utilize and employ Deloitte & Touche to protest and negotiate said penalty, and that all Parties will exercise their best efforts to avoid entirely or reduce the final amount of any such penalty. (g) The Parties further agree that, in the event said penalty has not been finally resolved prior to the closing described in paragraph 3 above, the President of The Sands Regent and a CPA or an attorney designated by Purchasers shall be jointly responsible for and shall have sole authority to negotiate and settle the final amount of such penalty, and further agree that until such penalty is finally resolved all Parties will be advised of the status of the protest and the negotiations. 17. Brokerage. Purchasers and Seller jointly represent and warrant that all negotiations relative to this Agreement have been carried on by them directly without the intervention of any 17 18 Broker or Agent other than their respective attorneys. Each party shall indemnify and hold the other party harmless against and in respect of any claim for brokerage fees or other commissions relative to this Agreement, or of the transactions contemplated hereby. 18. Survival of Representations. All statements contained in this Agreement and in any exhibit, document, certificate or other instrument delivered by any party to this Agreement, or in connection with the transaction contemplated hereby, shall be deemed representations and warranties. All representations and warranties made in this Agreement, or pursuant hereto, shall be deemed joint and several, and except as otherwise expressly stated, and shall survive the closing. 19. Entire Agreement. This Agreement and the exhibits and documents contemplated or required hereby constitute the entire agreement among the parties with respect to the subject matter and supersede all prior agreements and negotiations pertaining to the subject matter. The parties expressly acknowledge that they have not relied and are not relying upon any representations other than those set forth in this Agreement. 20. Binding Effect; Benefit. This Agreement shall insure to the benefit of and be binding upon the parties hereto and their respective successors, assigns, executors, administrators, heirs, or legatees, trustees and legal representatives. 21. Attachments. All Exhibits and Schedules mentioned in this Agreement shall be attached to this Agreement and shall form an integral part hereof. 22. Governing Law. This Agreement has been executed in and shall be construed in accordance with the laws of Mississippi. 23. Notices. All notices, requests, demands, and other communications hereunder shall be in writing, and shall be deemed to have been duly given if delivered by facsimile or mailed, first class 18 19 postage prepaid, if to Seller: The Sands Regent 345 North Arlington Reno, Nevada, 89501 Attention: Dave Wood Facsimile no. (702) 348-6241 or at such other address as may be designated in writing with copy to: Luke Dove, Esquire Dove & Chill 1142 Deposit Guaranty Plaza Jackson, Mississippi 39201 Facsimile no. (601) 352-0990 or, if to the Purchasers: Mr. Joel R. Carter, Sr. P. O. Box 29 Gulfport, Mississippi 39502 Facsimile no. (228) 396-9825 Mr. Terry W. Green P. O. Box 440367 Houston, Texas 77244-0367 Facsimile no. (281) 493-2296 Gulfside Casino Partnership d/b/a Copa Casino P. O. Box 1600 Gulfport, Mississippi 39502 Facsimile no. (228) 824-0183 or, at such other address as may be designated in writing with a copy to: William Lee Guice, III Rushing & Guice P. O. Box 1925 Biloxi, Mississippi 39533 Facsimile no. (228) 374-8155 Richard A. Schwartz, Esquire Schwartz, Junell, Campbell & Oathout, L.L.P. 1221 McKinney, Suite 1000 Houston, Texas 77010 Facsimile no. (713) 752-0327 19 20 24. Counterparts. This agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties have duly executed this Agreement. THE SANDS REGENT DATED: 11/6/98 , 1998 BY: /s/ Ferenc B. Szony --------------- -------------------------------- President GULFSIDE CASINO PARTNERSHIP d/b/a COPA CASINO, a Mississippi General Partnership By: Gulfside Casino, Inc., Its General Partner DATED: 11/6/98 , 1998 BY: /s/ David R. Wood --------------- -------------------------------- Vice-President of Gulfside Casino, Inc. TERRY W. GREEN DATED: 11/4/98 , 1998 /s/ Terry W. Green --------------- -------------------------------- JOEL R. CARTER, SR. DATED: 11/5/98 , 1998 /s/ Joel R. Carter Sr. --------------- -------------------------------- 20 21 STATE OF MISSISSIPPI ----------- COUNTY OF HARRISON -------- PERSONALLY came and appeared before me, the undersigned authority in and for the aforesaid County and State, the within named Ferenc B. Szony , who acknowledged to me that he is the President of THE SANDS REGENT, a Nevada corporation, and that for and on behalf of said corporation and as its act and deed, he signed, executed and delivered the above and foregoing Agreement on the day and year therein mentioned and for the purposes therein stated, after having first duly read and understood said Agreement and having been duly authorized by said corporation so to do. GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the 6th day of November, 1998. /s/ Katherine Newbaker ---------------------------- NOTARY PUBLIC "Notary Seal" My Commission Expires: "Notary Public State of Mississippi at Large MY COMMISSION EXPIRES: Nov. 17, 2000 Bonded Thru Notary Public Underwriters" STATE OF MISSISSIPPI ----------- COUNTY OF HARRISON -------- PERSONALLY came and appeared before me, the undersigned authority in and for the aforesaid County and State, the within named David R. Wood , who acknowledged to me that he is the Vice-President of GULFSIDE CASINO, INC., a Mississippi corporation and a General Partner of GULFSIDE CASINO PARTNERSHIP D/B/A COPA CASINO, a Mississippi general partnership, and that for and on behalf of said corporation and as its act and deed, as General Partner, and as its act and deed on behalf of said partnership, he signed, executed and delivered the above and foregoing Agreement on the day and year therein mentioned and for the purposes therein stated, after having first duly read and understood said Agreement and having been duly authorized by said corporation so to do. GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the 6th day of November, 1998. /s/ Katherine Newbaker ---------------------------- NOTARY PUBLIC "Notary Seal" My Commission Expires: "Notary Public State of Mississippi at Large MY COMMISSION EXPIRES: Nov. 17, 2000 Bonded Thru Notary Public Underwriters" 21 22 STATE OF Texas ----- COUNTY OF Harris ------ PERSONALLY came and appeared before me, the undersigned authority in and for the aforesaid County and State, the within named TERRY W. GREEN, who acknowledged to me that he signed, executed and delivered the above and foregoing Agreement on the day and year therein mentioned and for the purposes therein stated, after having first duly read and understood said Agreement. GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the 4th day of November, 1998. /s/ Joann Hutton ----------------------------- NOTARY PUBLIC My Commission Expires: "Notary Seal" 5-21-2000 --------- STATE OF MISSISSIPPI ----------- COUNTY OF HARRISON -------- PERSONALLY came and appeared before me, the undersigned authority in and for the aforesaid County and State, the within named JOEL R. CARTER, who acknowledged to me that he signed, executed and delivered the above and foregoing Agreement on the day and year therein mentioned and for the purposes therein stated, after having first duly read and understood said Agreement. GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the 5 day of Nov., 1998. /s/ Maria M. Cobb ----------------------------- NOTARY PUBLIC "Notary Seal" My Commission Expires: "Notary Public State of Mississippi at Large MY COMMISSION EXPIRES: Nov. 11, 2001 Bonded Thru Notary Public Underwriters" 22 EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS JUN-30-1999 JUL-01-1998 SEP-30-1998 10,280 250 621 76 601 14,101 80,531 35,549 59,709 17,672 11,285 0 0 345 30,407 59,709 2,106 14,142 1,891 8,397 6,049 0 527 (728) (245) (483) 0 0 0 (483) (.11) (.11)
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