-----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, D+jh1ip98umJpOE63ViFt75rcPxCRN2T6B+8u82uXIUVEEy5Ms0lTmgoztIPyqMP V4HULQyO72Z1CUlgebSuhw== 0000891554-97-000162.txt : 19970131 0000891554-97-000162.hdr.sgml : 19970131 ACCESSION NUMBER: 0000891554-97-000162 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19970130 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: REYNOLDS DEBBIE HOTEL & CASINO INC CENTRAL INDEX KEY: 0000790934 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-RACING, INCLUDING TRACK OPERATION [7948] IRS NUMBER: 880335924 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-18864 FILM NUMBER: 97514132 BUSINESS ADDRESS: STREET 1: 305 CONVENTION CENTER DR CITY: LAS VEGAS STATE: NV ZIP: 89109 BUSINESS PHONE: 7027340711 MAIL ADDRESS: STREET 1: 305 CONVENTION CTR DR CITY: LAS VEGAS STATE: NV ZIP: 89109 FORMER COMPANY: FORMER CONFORMED NAME: HALTER VENTURE CORP DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: HALTER RACING STABLES INC DATE OF NAME CHANGE: 19881116 10KSB 1 ANNUAL REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. FORM 10-KSB _X_ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended: December 31, 1995 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: 0-18864 DEBBIE REYNOLDS HOTEL & CASINO, INC. (Exact name of Registrant as specified in its charter) Nevada 88-0335924 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification Number) 305 Convention Center Drive Las Vegas, Nevada 89109 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (702) 734-0711 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.0001 par value 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, and (2) has been subject to such filing requirements for the past 90 days. (1) Yes ___ No _X_ (2) Yes _X_ No ___ Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B, and no disclosure will be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendments to this Form 10-KSB. [X] The Company's revenues for its most recent fiscal year were $9,790,000. The aggregate market value of the voting stock held by nonaffiliates (based upon the average of the bid and asked price of these shares on the over-the-counter market) as of December 24, 1996 was approximately $4,633,500. Class Outstanding at December 24, 1996 Common Stock, $.0001 par value 12,522,831 shares Documents incorporated by reference: None Transitional Small Business Disclosure Format: Yes ___ No _X_ 2 DEBBIE REYNOLDS HOTEL & CASINO, INC. FORM 10-KSB PART I Item 1. Description of Business. (a) Business Development. Debbie Reynolds Hotel & Casino, Inc., formerly Halter Venture Corporation (the "Company" or the "Registrant") originally was incorporated on January 10, 1986 under the laws of the State of Texas. From inception until late 1992, the Company engaged in the business of breeding, training and racing thoroughbred race horses. The Company acquired SWTV Production Services, Inc. ("SWTV"), a mobile television production company, on May 3, 1993 and its operations from that date through March 22, 1994 consisted solely of the direct operations of SWTV. Effective March 22, 1994, the Company acquired Maxim Properties Company ("Maxim"), a privately held Colorado corporation, and Debbie Reynolds Management Company, Inc., formerly Debbie Reynolds Hotel & Casino, Inc. ("DRHC") and Hamlett Production, Ltd. ("HPL"), both privately held Nevada corporations. Pursuant to several mergers, HPL Acquisition Corporation, a wholly-owned subsidiary of the Company, merged with and into DRHC, formerly HPL, the surviving corporation (the "DRHC Merger"). In addition, MPC Acquisition Corporation, another wholly-owned subsidiary of the Company, merged with and into Maxim, the surviving corporation (the "Maxim Merger".) The DRHC Merger and the Maxim Merger are referred to herein collectively as the "DRHC/Maxim Mergers." Pursuant to the DRHC/Maxim Mergers, the Company acquired all of the outstanding securities of DRHC and Maxim in exchange for the issuance of 2,850,833 shares of the Company's Common Stock to the Maxim shareholders and 2,350,833 shares to the DRHC shareholder. In connection with the DRHC/Maxim Mergers the Company also issued 565,000 shares to others. Prior to the closing of the mergers, DRHC merged with and into HPL, and HPL changed its name to Debbie Reynolds Hotel & Casino, Inc. In connection with the DRHC/Maxim Mergers, the Company divested its wholly-owned subsidiary, SWTV Production Services, Inc., to the Company's former President, Lawrence E. Meyers, in exchange for the 2,126,540 shares of Common Stock of the Company owned by Mr. Meyers which have been canceled by the Company. In November 1994, the Company reincorporated in the State of Nevada and changed its name from Halter Venture Corporation to Debbie Reynolds Hotel & Casino, Inc. In connection with the reincorporation, the Company's wholly-owned subsidiary, Debbie Reynolds Hotel & Casino, Inc. changed its name to Debbie Reynolds Management Company, Inc. ["DRMC"]. The Company's operations consist primarily of the hotel operations of DRMC and the timeshare operations of Debbie Reynolds Resorts, Inc. ("DRRI"), a wholly-owned subsidiary of DRMC. DRMC owns and operates the Debbie Reynolds Hotel & Casino (the "Hotel"), a gift shop, the Hollywood Motion Picture Museum, a restaurant and bar and a showroom located on Convention Center Drive in Las Vegas, Nevada. DRMC leased the restaurant to Celebrity Restaurants, Inc., a company wholly-owned by Ms. Reynolds, until August 1, 1996 at which time DRMC was granted a liquor license from Clark County and commenced operating the bar and the restaurant. Until the Company received approval for its own liquor license, Celebrity accommodated the Company by undertaking and operating the restaurant and bar under its liquor license. The Company's operations, through DRRI, also consist of the sale of timeshare units in the Debbie Reynolds Hotel. DRRI obtained a permanent timeshare license on June 28, 1994. In addition, DRMC and its management have a pending application filed for a 3 gaming license from the Nevada gaming authorities; however, there can be no assurance that such license will be granted. Due to the Company's poor capital structure and acting on the advice of counsel, the Company requested the Nevada Gaming Authorities to place a hold on processing its pending gaming applications until its capital structure substantially improves. Prior to March 31, 1996, the Company leased space to a third party for the operation of a casino. The Company served the operator with a termination notice in February 1996 because, pursuant to the terms of the lease agreement, the Company was losing money on a monthly basis. The Company requested Jackpot to cease operations as of June 30, 1996. On March 31, 1996 the operator discontinued its gaming operations on the property, removed all off its gaming equipment and subsequently filed a lawsuit against DRHC. [See Item 3 - Legal Proceedings] On October 30, 1996 the Company entered into an Agreement for Purchase and Sale with ILX Incorporated ("ILX") under which ILX will purchase the Debbie Reynolds Hotel & Casino (the "Hotel"), including all of the Hotel's real and personal property and the Hotel's timeshare operations (the "ILX Agreement"). ILX is a publicly-held corporation based in Phoenix Arizona which principally owns, operates and markets resort properties in Arizona, Florida, Indiana and Mexico. The purchase price for the Hotel is $16,800,000, which will consist of 3,750,000 "free-trading" shares of ILX common stock valued for purposes of the transaction at $2.00 per share, $4,200,000 in cash and $5,100,000 in assumption of mortgage indebtedness. The market value of ILX's common stock has recently been substantially less than $2.00 per share. When the market value of ILX's common stock reduces so does the negotiated purchase price. Under the ILX agreement, immediately after the closing, ILX has agreed to lease certain of the hotel facilities to Debbie Reynolds and /or a designee (the "Hotel Facilities Lease"). The Hotel Facilities Lease is expected to be for a term of 99 years, with a monthly lease payment to be determined, although the ILX Agreement documents specify monthly payments of approximately $150,000 it is unlikely the Lease would be profitable at that rate and there is no guarantee that ILX will agree to an acceptable lower figure. The Hotel Facilities Lease is expected to include the showroom, the museum, the gift shop, the vacant casino space, the back bar and certain joint areas. In addition, in consideration for use of her name and likeness, and associated goodwill and other services, Debbie Reynolds will receive a percentage of the net profit of any timeshare project at the Hotel pursuant to a Timeshare Profit Agreement. Ms. Reynolds will also participate in future activities of the Hotel and other ILX business activities, pursuant to the Debbie Reynolds Participation Agreement. As a condition precedent to the sale, ILX has requested Debbie Reynolds to enter into an agreement with Red Rock Collection Incorporated, a wholly owned subsidiary of ILX. Subsequently, Ms. Reynolds and Todd Fisher have entered into agreements with Red Rock Collections Incorporated. The sale of the Hotel to ILX is subject to the approval of the Company's shareholders, a standard due diligence investigation by ILX, receipt of any necessary governmental approvals, and satisfaction of various other conditions. The Company anticipates that the closing will occur in the first quarter of 1997; however, there can be no assurance that the closing will occur. The Company's recurring losses from operations, its working capital deficiency, its' shareholders equity deficiency, its significant debt service obligations and its default with respect to various agreements raise substantial doubt about the Company's ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on its ability to obtain additional financing to finance its working capital deficit until such time as cash flows from operations are sufficient to finance the Company's operations, including the Company's proposed casino operations. If the sale under the ILX Agreement is not consummated, the Company may need to seek protection under the Federal bankruptcy laws. In order for the Company to continue to operate until the sale under the ILX Agreement is consummated, the Company must obtain a sufficient amount of interim financing to fund its operations. While such interim financing is currently being negotiated, 4 there is no assurance it will be obtained. If the Company is unable to obtain the interim financing the Company may need to seek protection under the Federal bankruptcy laws. The Company's principal executive offices are located at 305 Convention Center Drive, Las Vegas, Nevada 89109 and its telephone number is (702) 734-0711. (b) Business of the Issuer. (b)(1), (2) Principal Products or Services; Markets and Distribution Methods. Background. The Hotel began gaming operations in 1957, under the trade names "The Royal" and later "The Paddle Wheel Hotel & Casino." Debbie Reynolds purchased the Paddle Wheel at auction in 1992 and renamed it the "Debbie Reynolds Hotel & Casino". The Debbie Reynolds Hotel & Casino is located on a 6.13-acre site just off of Las Vegas Boulevard and is located close to the Las Vegas Convention Center. Las Vegas Boulevard, more commonly known as "The Strip," is currently the center of gaming activity in Las Vegas. Hotel. The Debbie Reynolds Hotel includes 193 hotel rooms (of which 43 are being converted into timeshare units), approximately 6,000 square feet of vacant casino space which is currently filled with Hollywood memorabilia, the Hollywood Movie Museum, a 500 seat showroom, a full-service restaurant, a cocktail lounge and bar, one swimming pool and several hundred parking spaces. The Company offers its hotel rooms at modest prices (as of August 31, 1996, the average room rate was approximately $50.00). The Hotel's average occupancy rates were approximately 80%, 82% and 74% for the 1993, 1994 and 1995 fiscal years, respectively. Showroom. Ms. Reynolds' performances in the Company's 500-seat showroom are the primary draw for the Company's facilities and its timeshare sales. Through the Company's approximately $1,000,000 renovation, the showroom has state-of-the-art sound, staging and lighting. When Ms. Reynolds performs, she performs Monday through Friday in the early evenings. Generally other Las Vegas acts perform Monday through Saturday after Ms. Reynolds' show. When Ms. Reynolds is not performing, the showroom attracts other well-known Las Vegas entertainers. For the year ended December 31, 1995 the showroom averaged 84% occupancy for Ms. Reynolds' show with ticket prices of $34.95. Museum. The Debbie Reynolds Hollywood Movie Museum is unique in that it houses two world class collections of authentic Hollywood movie memorabilia owned separately by Ms. Reynolds and the Hollywood Motion Picture and Television Museum, a non-profit organization, "Hollywood". The Museum is a highly technical multimedia presentation which combines the charm of a historical museum and the drama of a modern Hollywood screening room. The Museum has five stages, including three revolving stages, in a surrounding similar to a Hollywood screening room. The Museum has a walk-through portion where guests are able to see up close many pieces from Hollywood classics, such as Marilyn Monroe's dress from the "Seven Year Itch", among many others. Both collections are so extensive that the Museum is only able to display approximately 10% of the collections at any one time. The Company acquired the exclusive licenses to display both extensive collections of movie memorabilia pursuant to license agreements; however, Ms. Reynolds License Agreement has been terminated and Hollywood's License Agreement is in default (See below). Under this License Agreement, which is in default, the Company also has the rights to over 200 film clips from classic Hollywood films, most of which have received an Academy Award in some category. The Museum has a seating capacity of 79 people and runs 14 shows a day at an average ticket price of $7.95. The total costs to complete the Museum were approximately $2,700,000. See Part III, Item 10. "Executive Compensation," for a description of the license agreements. 5 Restaurant and Bar. The restaurant and bar located in the Hotel were previously operated by Celebrity Restaurants, Inc. ("Celebrity"), a company wholly-owned by Ms. Reynolds, pursuant to an oral lease agreement which commenced in August 1994. Under the lease agreement, Celebrity was required to pay the Company 8% of net income for the lease of the restaurant and bar. Under the oral agreement, DRMC was obligated to cover the operating cash shortfalls of Celebrity's operations. On August 1, 1996 DRMC received a liquor license from Clark County and terminated the oral lease agreement. The restaurant and bar are currently operated by DRMC. Until the Company received approval for its own liquor license, Celebrity accommodated the Company by undertaking and operating the restaurant and bar under its liquor license. The restaurant seats 150 people and is open for breakfast, lunch and dinner. As with its hotel accommodations, the food and beverage services provided by the restaurant and bar are moderately priced. The restaurant operations are not intended to be a profit center for the Company but the restaurant services are intended to be an attraction for the timeshare sales, the showroom and the museum and as a convenience for the hotel guests. See Part III, Item 12. "Certain Relationships and Related Transactions- Transactions of Debbie Reynolds Hotel & Casino, Inc. and Hamlett Production, Ltd. Gift Shop. Hollywood-themed souvenirs, collectibles and logoed merchandise are currently available in the gift shop. The gift shop occupies approximately 640 square feet of space on the property. Timeshare. The Company's timeshare operations are conducted through Debbie Reynolds Resorts, Inc. ("DRRI"), a subsidiary of DRMC. The operations of DRRI consist of the sale of timeshare units in the Debbie Reynolds Hotel. DRRI obtained a permanent timeshare license on June 28, 1994 and since then has been aggressively pursuing timeshare sales and the conversion of the timeshare units. Timeshares are sold in units of one week and entitle the purchaser thereof to use the hotel room for the period of time purchased each year. Each timeshare room in the hotel has 52 units, representing each week of the year. As of October 31, 1996, approximately 1,290 timeshare units have been sold. Unit prices have ranged from $6,000 to $10,000 depending upon the size and location of the hotel room. A minimum of 10% of the unit purchase price must be paid in cash, and the Company will arrange financing for qualified purchasers. The rooms that are not converted to timeshare units will continue to be used as hotel rooms. Upon completion of the initial phase of 43 rooms, the Company is considering the idea of applying for timeshare licensing for the remaining 150 rooms which it would intend to designate as timeshare units. While the Company believes it will be able to obtain such additional timeshare licensing, at this time there can be no assurance that such additional licensing will be obtained. The Company is in the process of restructuring its timeshare division and currently is not actively selling timeshare units. The Company's timeshare units are listed with Interval International, an internationally-known timeshare network. The Company has a five-star red-room rating that it has been given by Interval International. The timeshare renovations include extending the balconies and enclosing them in glass. The rooms are decorated with new furniture and new color schemes. The cost of timeshare conversion is approximately $18,500 per room. The Company is marketing its timeshare units through on-site tours, telemarketing and an off premises preview center. Casino. Until March 31, 1996 the gaming operations of the casino were owned and operated by Jackpot Enterprises, Inc. ("Jackpot"), pursuant to a lease agreement. Under the lease, Jackpot paid a fixed monthly rent to the Company based on the number of slot and video poker machines and blackjack tables located in the casino. Prior to March 31, 1996 the casino consisted of 183 such machines located in the casino and two blackjack tables. Under the lease the Company had the option to buy-out the remaining term of the lease based on the value of the machines and other considerations. The Company served the operator with a 6 termination notice in February 1996 because, pursuant to the terms of the lease agreement, the Company was losing money on a monthly basis. The Company requested Jackpot to cease operations as of June 30, 1996. On March 31, 1996 the operator discontinued its gaming operations on the property, removed all of its gaming equipment and subsequently filed a lawsuit against DRHC. [See Item 3 - Legal Proceedings] Since March 31, 1996 there have been no gaming operations on the property. In connection with the leased casino's gaming activities, the Company adhered to a policy of stringent controls in compliance with the standards set by the Nevada Gaming Authorities. See "Regulation and Licensing" under (b)(9) below. The Company and its management have an pending application for a gaming license filed with the Nevada Gaming Authorities; however, there can be no assurance that such license will be granted. Due to the Company's poor capital structure and acting on the advice of counsel, the Company requested the Nevada Gaming Authorities to place a hold on processing its pending gaming applications until its capital structure substantially improves. If the Company is unable to secure its own gaming license, the Company will consider entering into another lease agreement with a licensed casino operator. See "Need for Governmental Approval" under (b)(8) below. Consulting Agreements. In January 1995, the Company entered into a business consulting agreement with Telex, Inc. an unaffiliated company, under which Telex agreed to provide the Company with business and strategic planning consulting services for nine months in consideration of the issuance of 40,000 shares of the Company's Common Stock under a Registration Statement on Form S-8 filed by the Company. During 1995, the Company entered into a business consulting agreement with MBL, an unaffiliated company, which contract was extended, under which the consultant agreed to provide the Company with business and strategic planning consulting services for 12 months in consideration of the issuance of 200,000 shares of the Company's Common Stock under a Registration Statement on Form S-8 filed by the Company. During 1995, the Company extended the business consulting agreement with Miron Lesham, an unaffiliated company, under which the consultants agreed to provide the Company with business and strategic planning consulting services for 12 months in consideration of the issuance of 35,000 shares of the Company's Common Stock under a Registration Statement on Form S-8 filed by the Company. During 1995, the Company entered into a business consulting agreement with Pacific Consulting Group, ("PCG"), an unaffiliated company, under which PCG agreed to provide the Company with business and strategic planning consulting services for twelve months in consideration of the issuance of 50,000 shares of the Company's Common Stock under a Registration Statement on Form S-8 filed by the Company. In December 1995, the Company entered into consulting agreements with Peter Bistrian Consulting, Inc. and Robert C. Brehm Consulting, Inc., ("Consultants"), unaffiliated companies, under which the consultants agreed to provide the Company with business, strategic marketing and strategic planning consulting services for eight months. In consideration for the consulting services, the Company issued options to purchase up to an aggregate of 750,000 shares of the Company's common stock over a period of twenty-four months at an exercise price of $.75 per share. In late 1995 the Company filed a Registration Statement on Form S-8 registering the 750,000 shares of Common Stock underlying the stock options issued to the Consultants. The options were exercised by the Consultants through the issuance of two short-term promissory notes payable to the Company in the principal amounts of $364,000 and $198,000 (collectively the "Notes"). Subsequent to the issuance of 7 the shares, the Consultants defaulted on the payments of the Notes. The Company intends to pursue its remedies against the Consultants, their principals and others with respect to these shares. In January 1996, the Company entered into a business consulting agreement with Baron Marney, ("Baron"), an unaffiliated company, under which Baron agreed to provide the Company with business and strategic planning consulting services for twelve months in consideration of the issuance of 50,000 shares of the Company's Common Stock under a Registration Statement on Form S-8 filed by the Company. (b)(3) Status of Publicly-Announced New Product or Services. Not applicable. (b)(4) Competition. There is intense competition among companies in the resort industry, many of which have significantly greater financial resources than the Company. The Debbie Reynolds Hotel & Casino faces competition from all other hotels in the Las Vegas area. The Company competes directly with a number of other operations targeted to local residents. In the event the Company obtains a gaming license and opens a gaming facility, the Debbie Reynolds Hotel & Casino's operations will compete generally with gaming operations in other parts of the State of Nevada, such as Reno, Laughlin and Lake Tahoe, with facilities in Atlantic City, New Jersey and other parts of the world and with state-sponsored lotteries, on- and off-track wagering, card parlors, riverboat and Native American gaming ventures and other forms of legalized gaming. Certain states have recently legalized, and several other states are currently considering legalizing, casino gaming in designated areas. Legalized casino gaming in other states and on Native American reservations represents additional competition to the Company and could adversely affect the Company's proposed gaming operations, particularly if such gaming were to occur in areas close to the Company's operations. The Company competes directly with Grand Flamingo, Polo Towers, Jockey Club and the Hilton Hotel, all timeshare projects located in Las Vegas. The Company's business strategy emphasizes attracting and retaining older, upper-middle class customers who are familiar with Debbie Reynolds, her collection of memorabilia and who have a reasonable level of disposable income. A significant attraction to the Hotel itself is the Hollywood Movie Museum featuring Ms. Reynolds' extensive collection of movie memorabilia which is one of the largest of its kind in the world. Also, families attracted by Las Vegas's new emphasis on theme resorts and attractions may want to spend time at a resort and museum with an authentic Hollywood theme. The Company believes that Ms. Reynolds is a significant draw for the showroom, and the Museum, which enables the Company to attract customers staying at other hotels in Las Vegas to its facilities. (b)(5) Raw Materials and Principal Suppliers. Not applicable. (b)(6) Significant Customers. Not applicable. (b)(7) Patents and Licenses. The Company previously licensed the exclusive, perpetual, non-transferable rights to display Ms. Reynolds' and Hollywood's extensive collection of movie memorabilia and to use the name, photograph, likeness and signature of Ms. Reynolds for the promotion of the Company and its operations. Both of these licenses are significant to the Company's business; however, the Debbie Reynolds license has been terminated and Hollywood's license is in default and a 30-day termination notice was received from Hollywood. The licenses are currently in default due to non-payment of performance fees and non-issuance of stock. See Part III, Item 10, "Executive Compensation" for a description of these licenses. (b)(8) Need for Governmental Approval. The Company and its affiliates have obtained all required permits and licenses required to conduct its hotel and restaurant operations. 8 Debbie Reynolds Resorts, Inc. ("DRRI"), obtained a permanent timeshare license to conduct its timeshare operations from the Nevada Real Estate Board on June 28, 1994. Pursuant to Nevada state law and Clark County ordinances, prior to the Company receiving any gaming revenues, other than revenues which it might receive under a lease agreement, the Company must obtain state and county approval for gaming activities. The Company is in the process of filing the appropriate gaming applications on behalf of the Company and its officers and directors with the Nevada Gaming Control Board; however, there can be no assurance that a gaming license will be granted. See (b)(9) below. (b)(9) Effect of Governmental Regulations. As of the date of this report, the Company does not have a gaming license and no gaming activities are conducted on its properties; however, the following discussion is included since the Company has a pending application for a gaming license filed with the Nevada Gaming Authorities. Due to the Company's poor capital structure and acting on the advice of counsel, the Company requested the Nevada Gaming Authorities to place a hold on processing its pending gaming applications until its capital structure substantially improves. The ownership and operation of casino gaming facilities in Nevada are subject to: (i) the Nevada Gaming Control Act and the regulations promulgated thereunder (collectively, "Nevada Act"); and (ii) various local regulation. Las Vegas gaming operations are subject to the licensing and regulatory control of the Nevada Gaming Commission ("Nevada Commission"), the Nevada State Gaming Control Board ("Nevada Board"), and the Clark County Commission and/or the Clark County Liquor and Gaming License Board. The Nevada Commission, the Nevada State Gaming Control Board, the Clark County Commission and/or the Clark County Liquor Gaming License Board ("CCLGLB") are collectively referred to as the "Nevada Gaming Authorities." The laws, regulations and supervisory procedures of the Nevada Gaming Authorities are based upon declarations of public policy which are concerned with, among other things: (i) the prevention of unsavory or unsuitable persons from having a direct or indirect involvement with gaming at any time or in any capacity; (ii) the establishment and maintenance of responsible accounting practices and procedures; (iii) the maintenance of effective controls over the financial practices of licensees, including the establishment of minimum procedures for internal fiscal affairs and the safeguarding of assets and revenues, providing reliable record keeping and requiring the filing of periodic reports with the Nevada Gaming Authorities; (iv) the prevention of cheating and fraudulent practices; and (v) to provide a source of state and local revenues though taxation and licensing fees. Changes in such laws, regulations and procedures could have an adverse effect on the Company's proposed gaming operations. The Company has a pending application filed with the Nevada Gaming Authorities for various registrations, approvals, permits and licenses required in order to engage in gaming activities in Nevada; however, there can be no assurance that a gaming license will be granted. Due to the Company's poor capital structure and acting on the advice of counsel, the Company requested the Nevada Gaming Authorities to place a hold on processing its pending gaming applications until its capital structure substantially improves. The gaming license requires the periodic payment of fees and taxes and is not transferable. The Company, if licensed, will be registered by the Nevada Commission as a publicly traded corporation ("Registered Corporation") and as such, it will be required periodically to submit detailed financial and operating reports to the Nevada Commission and furnish any other information which the Nevada Commission may require. No person may become a stockholder of, or receive any percentage of profits from, the Company without first obtaining licenses and approvals from the Nevada Gaming Authorities. 9 The Nevada Gaming Authorities may investigate any individual who has a material relationship to, or material involvement with, the Company or its affiliates or subsidiaries in order to determine whether such individual is suitable or should be licensed as a business associate of a gaming licensee or its affiliates or subsidiaries. Officers, directors and certain key employees of the Company must file applications with the Nevada Gaming Authorities and may be required to be licensed or found suitable by the Nevada Gaming Authorities. Officers, directors and key employees of the Company who will be actively and directly involved in the Company's proposed gaming activities may be required to be licensed or found suitable by the Nevada Gaming Authorities. The Nevada Gaming Authorities may deny an application for licensing for any cause which they deem reasonable. A finding of suitability is comparable to licensing, and both require submission of detailed personal and financial information followed by a thorough investigation. The applicant for licensing or a finding of suitability must pay all the costs of the investigation. Changes in licensed positions must be reported to the Nevada Gaming Authorities and in addition to their authority to deny an application for a finding of suitability or licensure, the Nevada Gaming Authorities have jurisdiction to disapprove a change in a corporate position. If the Nevada Gaming Authorities were to find an officer, director or key employee unsuitable for licensing or unsuitable to continue having a relationship with the Company, the companies involved would have to sever all relationships with such person. In addition, the Nevada Commission may require the Company to terminate the employment of any person who refuses to file appropriate applications. Determinations of suitability or of questions pertaining to licensing are not subject to judicial review in Nevada. As a licensee, the Company would be required to submit detailed financial and operating reports to the Nevada Commission. Substantially all material loans, leases, sales of securities and similar financing transactions by the Company would need to be reported to, or approved by, the Nevada Commission. If it were determined that the Nevada Act was violated by the Company, its gaming licenses could be limited, conditioned, suspended or revoked, subject to compliance with certain statutory and regulatory procedures. In addition, the Company and the persons involved could be subject to substantial fines for each separate violation of the Nevada Act at the discretion of the Nevada Commission. Further, a supervisor could be appointed by the Nevada Commission to operate the Company's gaming properties and, under certain circumstances, earnings generated during the supervisor's appointment (except for the reasonable rental value of the Company's gaming properties) could be forfeited to the State of Nevada. Limitation, conditioning or suspension of any gaming license or the appointment of a supervisor could (and revocation of any gaming license would) materially adversely affect the Company's proposed gaming operations. Any beneficial holder of the Company's voting securities, regardless of the number of shares owned, may be required to file an application, be investigated, and have his suitability as a beneficial holder of the Company's voting securities determined if the Nevada Commission has reason to believe that such ownership would otherwise be inconsistent with the declared policies of the State of Nevada. The applicant must pay all costs of investigation incurred by the Nevada Gaming Authorities in conducting any such investigation. The Nevada Act requires any person who acquires more than 5% of a company's voting securities to report the acquisition to the Nevada Commission. The Nevada Act requires that beneficial owners of more than 10% of a company's voting securities apply to the Nevada Commission for a finding of suitability within thirty days after the Chairman of the Nevada Board mails the written notice requiring such filing. Under certain circumstances, an "institutional investor," as defined in the Nevada Act, which acquires more than 10%, but not 10 more than 15%, of a company's voting securities may apply to the Nevada Commission for a waiver of such finding of suitability if such institutional investor holds the voting securities for investment purposes only. An institutional investor shall not be deemed to hold voting securities for investment purposes unless the voting securities were acquired and are held in the ordinary course of business as an institutional investor and not for the purpose of causing, directly or indirectly, the election of a majority of the members of the board of directors of a company, any change in a company's corporate charter, bylaws, management, policies or operations of a company, or any of its gaming affiliates, or any other action which the Nevada Commission finds to be inconsistent with holding a company's voting securities for investment purposes only. Activities which are not deemed to be inconsistent with holding voting securities for investment purposes only include: (i) voting on all matters voted on by stockholders; (ii) making financial and other inquiries of management of the type normally made by securities analysts for informational purposes and not to cause a change in its management, policies or operations; and (iii) such other activities as the Nevada Commission may determine to be consistent with such investment intent. If the beneficial holder of voting securities who must be found suitable is a corporation, partnership or trust, it must submit detailed business and financial information including a list of beneficial owners. The applicant is required to pay all costs of investigation. Any person who fails or refuses to apply for a finding of suitability or a license within thirty days after being ordered to do so by the Nevada Commission or the Chairman of the Nevada Board, may be found unsuitable. The same restrictions apply to a record owner if the record owner, after request, fails to identify the beneficial owner. Any stockholder found unsuitable and who holds, directly or indirectly, any beneficial ownership of the common stock of a Registered Corporation beyond such period of time as may be prescribed by the Nevada Commission may be guilty of a criminal offense. A company is subject to disciplinary action if, after it receives notice that a person is unsuitable to be a stockholder or to have any other relationship with a company or its affiliates or subsidiaries, a company (i) pays that person any dividend or interest upon voting securities of the Company, (ii) allows that person to exercise, directly or indirectly, any voting right conferred through securities held by that person, (iii) pays remuneration in any form to that person for services rendered or otherwise, or (iv) fails to pursue all lawful efforts to require such unsuitable person to relinquish his voting securities for cash at fair market value. Additionally, the CCLGLB has taken the position that it has the authority to approve all persons owning or controlling the stock of any corporation controlling a gaming license. The Nevada Commission may, in its discretion, require the holder of any debt security of a Registered Corporation to file applications, be investigated and be found suitable to own the debt security of a Registered Corporation. If the Nevada Commission determines that a person is unsuitable to own such security, then pursuant to the Nevada Act, the Registered Corporation can be sanctioned, including the loss of its approvals, if without the prior approval of the Nevada Commission, it: (i) pays to the unsuitable person any dividend, interest, or any distribution whatsoever; (ii) recognizes any voting right by such unsuitable person in connection with such securities; (iii) pays the unsuitable person remuneration in any form; or (iv) makes any payment to the unsuitable person by way of principal, redemption, conversion, exchange, liquidation, or similar transaction. A gaming licensee is required to maintain a current stock ledger in Nevada which may be examined by the Nevada Gaming Authorities at any time. If any securities are held in trust by an agent or by a nominee, the record holder may be required to disclose the identity of the beneficial owner to the Nevada Gaming Authorities. A failure to make such disclosure may be grounds for finding the record holder unsuitable. A company is also required to render maximum assistance in determining the identity of the beneficial owner. The Nevada Commission has the power to require a company's stock certificates to bear a legend 11 indicating that the securities are subject to the Nevada Act. However, to date, the Nevada Commission has not imposed such a requirement on the Company. A Company may not make a public offering of its securities without the prior approval of the Nevada Commission if the securities or the proceeds therefrom are intended to be used to construct, acquire or finance gaming facilities in Nevada, or to retire or extend obligations incurred for such purposes. Such approval, if given, does not constitute a finding, recommendation or approval by the Nevada Commission or the Nevada Board as to the accuracy or adequacy of the prospectus or the investment merits of the securities. Any representation to the contrary is unlawful. Changes in control of a company through merger, consolidation, stock or asset acquisitions, management or consulting agreements, or any act or conduct by a person whereby he obtains control, may not occur without the prior approval of the Nevada Commission. Entities seeking to acquire control of a Registered Corporation must satisfy the Nevada Board and Nevada Commission in a variety of stringent standards prior to assuming control of such Registered Corporation. The Nevada Commission may also require controlling stockholders, officers, directors and other persons having a material relationship or involvement with the entity proposing to acquire control, to be investigated and licensed as part of the approval process relating to the transaction. The Nevada legislature has declared that some corporate acquisitions opposed by management, repurchases of voting securities and corporate defense tactics affecting Nevada gaming licensees, and Registered Corporations that are affiliated with those operations, may be injurious to stable and productive corporate gaming. The Nevada Commission has established a regulatory scheme to ameliorate the potentially adverse effects of these business practices upon Nevada's gaming industry and to further Nevada's policy to: (i) assure the financial stability of corporate gaming operators and their affiliates; (ii) preserve the beneficial aspects of conducting business in the corporate form; and (iii) promote a neutral environmental for the orderly governance of corporate affairs. Approvals are, in certain circumstances, required from the Nevada Commission before a company can make exceptional repurchases of voting securities above the current market price thereof and before a corporate acquisition opposed by management can be consummated. The Nevada Act also requires prior approval of a plan of recapitalization proposed by a company's Board of Directors in response to a tender offer made directly to the Registered Corporation's stockholders for the purposes of acquiring control of the Registered Corporation. License fees and taxes, computed in various ways depending on the type of gaming or activity involved, are payable to the State of Nevada and to the counties and cities in which the Nevada licensee's respective operations are conducted. Depending upon the particular fee or tax involved, these fees and taxes are payable either monthly, quarterly or annually and are based upon either: (i) a percentage of the gross revenues received; (ii) the number of gaming devices operated; or (iii) the number of table games operated. A casino entertainment tax is also paid by casino operations where entertainment is furnished in connection with the selling of food or refreshments. Nevada licensees that hold a license as an operator of a slot route, or a manufacturer's or distributor's license, also pay certain fees and taxes to the State of Nevada. Any person who is licensed, required to be licensed, registered, required to be registered, or is under common control with such persons (collectively, "Licensees"), and who proposes to become involved in a gaming venture outside of Nevada is required to deposit with the Nevada Board, and thereafter maintain, a revolving fund in the amount of $10,000 to pay the expenses of investigation of the Nevada Board of their participation in such foreign gaming. The revolving fund is subject to increase or decrease in the discretion of the Nevada Commission. Thereafter, Licensees are required to comply with certain reporting 12 requirements imposed by the Nevada Act. A Licensee is also subject to disciplinary action by the Nevada Commission if it knowingly violates any laws of the foreign jurisdiction pertaining to the foreign gaming operation, fails to conduct the foreign gaming operation in accordance with the standards of honesty and integrity required of Nevada gaming operations, engages in activities that are harmful to the State of Nevada or its ability to collect gaming taxes and fees, or employs a person in the foreign operation who has been denied a license or finding of suitability in Nevada on the ground of personal unsuitability. (b)(10)Research and Development. None. (b)(11)Compliance with Environmental Laws. Compliance with federal, state and local provisions regulating the discharge of materials into the environment or otherwise relating to the protection of the environment will have no material effect on the capital expenditures, earnings and competitive position of the Company. (b)(12)Employees. As of December 31, 1996, the Company employed a total of 103 employees; 85 of whom are full-time employees, including its 2 executive officers, 10 managers and 9 security personnel. The Company occasionally employs part-time workers as needed. None of the Company's employees are currently covered by any collective bargaining agreement, although the International Alliance Theatrical Stage Employees ("IATSE") are attempting to organize the Star Theater and Movie Museum stage crew. Item 2. Description of Properties. The Debbie Reynolds Hotel & Casino is situated on a 6.13 - acre site just off of the Las Vegas Strip between the Stardust Hotel and the Las Vegas Convention Center. It includes 193 hotel rooms (43 of which are licensed for timeshare sales), approximately 6,000 square feet of vacant casino space, a 500-seat showroom, an 79-seat museum, a full-service restaurant, a cocktail lounge and bar, one swimming pool and several hundred parking spaces. These facilities total approximately 210,380 square feet. As of October 31, 1996 the Company had a total of approximately $6,100,000 in mortgages encumbering its real and personal property, including the Hotel and real property located at 305 Convention Center Drive, Las Vegas, Nevada. See Part II, Item 6 "Management's Discussion and Analysis or Plan of Operations" for a description of these mortgages. The Company believes that these facilities are suitable and adequate for its current needs. Item 3. Legal Proceedings. In January 1994, Edward Stambro, an unaffiliated individual, filed a lawsuit against one of the Company's subsidiaries and others in the District Court of Clark County, Nevada, alleging breach of brokers agreement. The Company's subsidiary filed an answer to the allegations on February 28, 1994. Management and legal counsel for the Company are of the opinion that the plaintiff's claim is without merit and the Company will prevail in defending the suit. On April 28, 1995, Ronald D. Nitzberg and Ron Nitzberg Associates, Inc., an unaffiliated corporation, filed a lawsuit against the Company and others in the District Court of Clark County, Nevada, alleging breach of contract, slander and other claims, relating to his employment with the Company. The plaintiffs seek damages in the amount of approximately $245,000 and an unspecified amount of money damages. The Company has filed a 13 counterclaim against the plaintiff alleging breach of fiduciary duty and breach of contract asking for declaratory relief from consulting and stock agreements. On April 14, 1995, Edward S. Coleman filed a lawsuit against the Company and others in the District Court of Clark County, Nevada, alleging breach of covenant of good faith and fair dealing based on certain services. The plaintiff seeks unspecified money damages in excess of $10,000. On January 26, 1995, American Interval Marketing, Inc., filed a lawsuit in the District Court of Clark County, Nevada, against the Company and others, alleging breach of contract and reasonable value of services. The plaintiff seeks damages of approximately $45,000. On July 14, 1995, Grand Nevada Hotel Corp., filed a lawsuit in the District Court of Clark County, Nevada, against the Company, alleging breach of contract and breach of implied duty of good faith. The plaintiff seeks damages in excess of $10,000. On July 27, 1995, Norman Eugene Watson, filed a lawsuit against the Company and others in the District Court of Clark County, Nevada, alleging breach of contract, fraud and misrepresentation and other claims. The plaintiff seeks damages in excess of $10,000. On August 10, 1995, Fiduciary Trust Company International, as Trustee of the Taylor-Made Ltd. Defined Benefit Pension Plan, filed a lawsuit in the District Court of Clark County, Nevada, against the Company and others, alleging breach of contract and unjust enrichment. The plaintiff seeks damages in excess of $10,000. The Company is negotiating a settlement with respect to this lawsuit. On September 1, 1995, Young Electric Sign Company, filed a lawsuit in the District Court of Clark County, Nevada, against the Company and others, alleging breach of contract. The plaintiff is seeking damages in excess of $10,000. On April 11, 1996 Jackpot Enterprises, Inc., filed a lawsuit in the District Court of Clark County, Nevada, against the Company and others, alleging breach of contract, specific judgment, unjust enrichment and breach of the implied covenant of good faith and fair dealing. The plaintiff is seeking damages in excess of $10,000. In addition to the above mentioned lawsuits, their are numerous other lawsuits filed against the Company by certain of its vendors and other creditors. The Company believes that these lawsuits may be satisfied through payment of the indebtedness to the extent the Company's cash flow permits. Except as otherwise set forth above, the Company is unable to predict, at this time, the likelihood of the Company prevailing in the above lawsuits. Item 4. Submission of Matters to a Vote of Security Holders. Not Applicable. PART II Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters. (a)(1) The principal market on which the Registrant's Common Stock is traded is the over-the-counter market and the Registrant's Common Stock is quoted on the National Quotation Bureau Inc.'s Electronic Bulletin Board. 14 (a)(1)(i) Not applicable. (a)(1)(ii) The range of high and low bid quotations for the Registrant's Common Stock for the last two fiscal years are provided below and were obtained from tradeline. These over-the-counter market quotations reflect inter-dealer prices without retail markup, markdown or commissions and may not necessarily represent actual transactions. High bid Low bid -------- ------- 1/1/94 - 3/31/94 6.00 5.00 4/1/94 - 6/30/94 6.25 5.50 7/1/94 - 9/30/94 6.50 5.13 10/1/94 - 12/31/94 5.50 3.88 1/1/95 - 3/31/95 $4.50 1.13 4/1/95 - 6/30/95 3.00 1.75 7/1/95 - 9/30/95 3.00 2.63 10/1/95 - 12/31/95 2.75 .63 On December 24, 1996, the reported bid and asked prices for the Registrant's Common Stock were $.34 and .41, respectively. (a)(2) Not applicable. (b) On December 24, 1996 the Registrant had approximately 536 holders of record of its Common Stock which does not include approximately 630 holders whose shares were held in street name. (c)(1) The Registrant has paid no dividends with respect to its Common Stock. (c)(2) The Registrant's outstanding 8 3/4% Convertible Subordinated Debentures prohibit the Registrant from paying dividends, other than Common Stock dividends on its preferred stock, while the Debentures are outstanding. Item 6. Management's Discussion and Analysis or Plan of Operations. The following discussion should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere in this report. Liquidity and Capital Resources: As of December 31, 1995, the Company had a working capital deficit of $10,059,000 compared to a working capital deficit of $1,074,000 at December 31, 1994. In addition, the Company is in default in the payment of the following indebtedness; interest payments on mortgages, interest payment on debentures, payroll taxes, property taxes, operating taxes, equipment leases and various other accounts payable. During the year ended December 31, 1995, cash and cash equivalents increased by $160,000. Financings During 1995, the Company's long-term debt increased from $7,162,000 at December 31, 1994 to $8,328,000 at December 31, 1995. During 1994, $1,150,000 of long-term debt was exchanged for 383,333 common shares, $400,000 was exchanged for 2,850,833 common 15 shares (in connection with the DRMC\Maxim Mergers) and $250,000 was exchanged for 213,816 common shares. In 1994, the Company issued $1,273,000 of additional debt which was subsequently exchanged for 424,333 common shares. During 1994 the Company obtained additional financing for its operations totalling net proceeds of approximately $3,868,000 through the sale of 128,515 units in a private offering, each unit consisting of four shares of Series AA Convertible Preferred Stock, $.0001 par value, four two-year Convertible Debentures each in the principal amount of $4.50 and four Class A Common Stock Purchase Warrants, each to purchase one share of Common Stock at $5.50 per share. In connection with the private placement, 116,000 Warrants were issued to the sales agent. In November 1994 the Company closed an additional private placement of 38,961 units totalling net proceeds of $896,000. Each unit consisted of four shares of Series AA Convertible Preferred Stock, $.0001 par value, four four-year Convertible Debentures each in the principal amount of $4.50 and four Class B Common Stock Purchase Warrants, each to purchase one share of Common Stock at $5.50 per share. In March 1994 the Company obtained a $2,500,000 loan from Bennett Management & Development Corp. ("Bennett"), the proceeds of which were used to replace an existing mortgage on the Debbie Reynolds Hotel & Casino of $2,090,000 and the balance of $410,000 was used for working capital. The loan bears interest at 13% per annum and is due on March 15, 1997. The loan requires monthly payments of interest and payments of $1,200 per timeshare unit sold to be applied to accrued interest and principal. In consideration of the loan the Company issued to Bennett 25,000 shares of its Common Stock. Ms. Reynolds executed a personal guarantee with respect to the loan. As of December 31, 1995 the principal amount outstanding was reduced to approximately $2,115,000. In June 1994 the Company and its subsidiaries obtained a $1,000,000 loan from TPM Holdings, Inc. ("TPM"), and Source Capital Corporation ("Source"), both unaffiliated with the Company. The loan bears interest at 13% per annum and was due on June 7, 1996. The loan requires monthly payments of interest and payments of $1,000 per timeshare unit sold to be applied to accrued interest and principal. The loan is secured by the Company's real and personal property, including the Debbie Reynolds Hotel & Casino. As of December 31, 1995 the principal amount outstanding was reduced to approximately $151,000 and the loan was paid off in July 1996. In December 1994 TPM and Source loaned the Company an additional $1,100,000. The loan bears interest at a rate equal to the greater of four percent over the prime rate or 12%, and was due on November 15, 1996. The loan requires monthly payments of interest and payments of between $100 and $1,500 per timeshare unit sold, depending on the actual number of units sold, to be applied to accrued interest and principal. The loan is secured by the Company's real and personal property, including the Debbie Reynolds Hotel & Casino. The principal amount outstanding on the loan as of December 31, 1995 was approximately $885,000. This loan is currently in default. From the proceeds of the loans and sale of securities during 1994, $3,909,000 was invested in building improvements, timeshare, the Museum and furniture and equipment. From the proceeds of the loans and sale of securities during 1995, approximately $650,000 was invested in building improvements, timeshare, the Museum and furniture and equipment. 16 The Company allows purchasers to finance a significant portion of its timeshare sales. To facilitate the sale of timeshares the Company obtained a $25,000,000 (increased to $35,000,000 at March 31, 1995) commitment from Bennett Funding International, Ltd. ("Bennett") whereby Bennett purchases timeshare paper from the Company with recourse, subject to its credit criteria, and advances the Company 85% of the amount financed. Generally, the Company receives at least a 10% down payment from the purchaser and finances the remaining 90% with Bennett. At December 31, 1995 the Company had utilized and was contingently liable for approximately $4,967,000 of this commitment. In January 1995, World Venture Trust, an unaffiliated company, loaned the Company $250,000. The loan bore interest at 10% and was due April 26, 1995 with a principal balance of $275,000. The loan was secured by the Company's real and personal property. The loan was convertible, at the option of the holder, after maturity, into 200,000 shares of the Company's common stock. The Company paid off this loan in September of 1995 with $275,000 in cash and issued the holder 15,745 restricted shares of the Company's common stock. In January 1995, Realecon, a California Corporation, loaned the Company $125,000 and advanced an additional $75,000 in March 1995. The Loan bore interest at 12% and was due July 16, 1995. The amount due at maturity was $235,000. The loan was secured against certain receivables of the Company and required principal and interest payments equal to $1,000 per timeshare interval sold. In consideration of the loan the Company issued Realecon 10,000 restricted shares of the Company's common stock. The Company paid off this loan in June of 1995. In February 1995, the Company obtained a $525,000 loan from Bennett, the proceeds of which were principally used in the construction of the museum and for general corporate purposes. The loan bears interest at 13% and is due and payable March 22, 1997. The loan is secured by the Company's real and personal property. In March 1995, the Company obtained a $245,000 loan from an independent third party, the proceeds of which were principally used in the construction of the museum. The loan bore interest at 6% and was due March 31, 1996. The loan was convertible, at the holder's option, into the Company's restricted common stock at a rate of $1.00 per share. In August 1995 the holder converted the indebtedness into 245,000 shares. In April 1995, the Company obtained a $500,000 loan from TPM Financial/Source Capital, the proceeds of which were principally used in the construction of the museum and for general corporate purposes. The loan bore interest at 13% and was due June 25, 1996. This loan was issued as an addition to the lender's second mortgage. The Company paid off this loan in November of 1995. In May 1995, the Company obtained a $340,000 loan from Bennett, the proceeds of which were principally used for general corporate purposes. The loan bears interest at 13% and is due and payable March 22, 1997. The loan is secured by the Company's real and personal property. In August 1995, the Company obtained a $2,865,000 loan from Bennett Funding International, LTD., the proceeds of which were principally used to pay off existing debt and for general corporate purposes, which includes the $340,000 advanced to the Company in May of 1995 and $525,000 advanced in February of 1995. The loan bears interest at 14% and is due August 23, 1999. The loan is secured by the Company's real and personal property. In October 1995, the Company raised additional financing through a Regulation S offering under the Securities Act of 1933 (the "Act"). The Company sold 300,000 shares of the 17 Company's common stock totalling net proceeds of approximately $205,000. The offering of shares was directed solely to persons who were not residents of the United States. The Company offered a maximum of 2,666,666 shares at $.75 per share. The shares were not registered under the Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration. In addition the shares were subject to a minimum six month restriction on transfer. In December 1995, the Company commenced a Regulation D offering under the Securities Act of 1933 (the "Act"). The Company sold 200,000 units, at $1.00 per unit, consisting of 200,000 shares of the Company's common stock and 200,000 warrants to purchase one share of common stock at $1.00, totalling net proceeds of approximately $182,000. The offering of shares was directed solely to persons who met the definition of "Accredited Investor" set forth in rule 501(A) of Regulation D promulgated under the Act. The Company offered a maximum of 3,000,000 Units, (the "Unit"), each unit consisting of one share of Common Stock and one warrant to purchase one share of common stock at $1.00 per share. In August 1995 the Company offered all holders of the Company's units issued pursuant to the Company's private placement memoranda dated March 25, 1994 and November 17, 1994 the opportunity to convert the Series AA Preferred Stock and Debentures constituting part of the units into restricted shares of the Company's common stock. Each Series AA Preferred Stock and Debenture converted into one share of the Company's common stock at the reduced conversion prices of $2.00 and $2.25, per share, respectively. The total dollar amount converted from Series AA Preferred Stock and Debentures was $2,954,500 which converted into 1,392,240 shares of the Company's common stock. As additional consideration, the Company also offered the unit holders the right to exercise each Class A Warrant to purchase two shares of Common Stock (instead of one) at an exercise price of $1.00 per share (instead of $5.50) for 60 days from the date of the offer. Pursuant to the Warrant offer, the Company received $93,120 from the exercise of warrants to purchase 93,120 shares of Common Stock. As additional consideration to the Company, the unit holders waived the delinquent interest and dividend payments owed. In April 1996, the Company announced the signing of a term sheet with CS First Boston Mortgage Capital Corporation, "CS First", for certain financing. The financing, subject to certain terms and conditions, was to be evidenced by a senior note in the amount of $8,500,000 secured by a senior mortgage of a like amount on the property of the Company. In addition, subject to certain terms and conditions CS First was to fund an additional $1,500,000. The terms of the proposed financing were: a 2-year term, paying interest only at an interest rate of Libor plus 500 basis points (600 basis points when the additional $1,500,000 was funded) payable monthly in arrears. Principal payments to be paid to CS First were initially in the amount of $1,250 for every timeshare interval sold and when certain conditions were met the Company was to commence paying an amount of $2,000 for every timeshare interval sold. Subsequently, the Company and CS First terminated negotiations with respect to the proposed financing. In May 1996, the Company offered all holders of the Company's units issued pursuant to the Company's private placement memorandum dated March 25, 1994 the opportunity to convert the Series AA Preferred Stock and Debentures constituting part of the units into restricted shares of the Company's common stock. Each Series AA Preferred Stock and Debenture converted into one share of the Company's common stock at the reduced conversion prices of $1.10 per share. The total dollar amount converted from Series AA Preferred Stock and Debentures was $884,000 which converted into 803,636 shares of the Company's common stock. As additional consideration, the Company reduced the conversion price for each Series AA Preferred Stock and Debenture issued pursuant to the Private 18 Placement Memorandum dated November 17, 1994 to $2.25. As additional consideration to the Company, the unit holders waived the delinquent interest and dividend payments owed. In August 1996, the Company obtained a $500,000 loan from Gregory Orman, a third party, the proceeds of which were principally used to reduce past due tax obligations, reduce trade payable debt and also allowed the Company to engage its auditors. The loan bears interest at 12% and has $550,000 principal balance due November 1, 1996. This loan is secured with a fourth mortgage on the Company's property and with certain of the Company's receivables. In connection with the financing the Company granted Orman warrants to acquire 260,000 shares of the Company's common stock at an exercise price of $.70 per share. On October 18, 1996, Orman agreed to extend the maturity date to February 1, 1997. In consideration for the extension the Company reduced Orman's exercise price on the warrants to acquire 260,000 shares of the Company's common stock from $.70 per share to $.22 per share. The Company is currently in default under the following obligations: the Bennett Management & Development ("BMD") mortgage is in default due to non-payment of interest and the holder has the right to accelerate the mortgage immediately and make demand on the entire outstanding principal balance; the BMD mortgage had a principal balance of approximately $2,115,000 outstanding at December 31, 1995; the Bennett Funding International, Ltd. ("BFI") mortgage is in default due to non-payment of interest and the holder has the right to accelerate the mortgage immediately and make demand on the entire outstanding principal balance; the BFI mortgage had a principal balance of approximately $2,865,000 outstanding at December 31, 1995; the TPM Holding, Inc. ("TPM") mortgage is in default due to non-payment of interest and the holder has the right to accelerate the mortgage immediately and make demand on the entire outstanding principal balance; the TPM mortgage had a principal balance of approximately $885,000 outstanding at December 31, 1995; and the Company is in default on its unsecured subordinated debentures due to non-payment of monthly interest, the holders have the right to accelerate immediately and make demand on the entire outstanding principal balance. On October 30, 1996 the Company entered into an Agreement for Purchase and Sale with ILX Incorporated ("ILX") under which ILX will purchase the Debbie Reynolds Hotel & Casino (the "Hotel"), including all of the Hotel's real and personal property and the Hotel's timeshare operations (the "ILX Agreement"). ILX is a publicly-held corporation based in Phoenix Arizona which principally owns, operates and markets resort properties in Arizona, Florida, Indiana and Mexico. The purchase price for the Hotel is $16,800,000, which will consist of 3,750,000 "free-trading" shares of ILX common stock valued for purposes of the transaction at $2.00 per share, $4,200,000 in cash and $5,100,000 in assumption of mortgage indebtedness. The market value of ILX's common stock has recently been substantially less than $2.00 per share. When the market value of ILX's common stock reduces so does the negotiated purchase price. Under the ILX agreement, immediately after the closing, ILX has agreed to lease certain of the hotel facilities to Debbie Reynolds and /or a designee (the "Hotel Facilities Lease"). The Hotel Facilities Lease is expected to be for a term of 99 years, with a monthly lease payment to be determined, although the ILX Agreement documents specify monthly payments of approximately $150,000 it is unlikely the Lease would be profitable at that rate and there is no guarantee that ILX will agree to an acceptable lower figure. The Hotel Facilities Lease is expected to include the showroom, the museum, the gift shop, the vacant casino space, the back bar and certain joint areas. In addition, in consideration for use of her name and likeness, and associated goodwill and other services, Debbie Reynolds will receive a percentage of the net profit of any timeshare project at the Hotel pursuant to a Timeshare Profit Agreement. Ms. Reynolds will also participate in future activities of the Hotel and other ILX business activities, pursuant to the Debbie Reynolds Participation Agreement. As a condition precedent to the sale, ILX has requested Debbie Reynolds to enter into an agreement with Red Rock Collection Incorporated, a wholly owned subsidiary of ILX. 19 Subsequently, Ms. Reynolds and Todd Fisher have entered into agreements with Red Rock Collections Incorporated. The sale of the Hotel to ILX is subject to the approval of the Company's shareholders, a standard due diligence investigation by ILX, receipt of any necessary governmental approvals, and satisfaction of various other conditions. The Company anticipates that the closing will occur in the first quarter of 1997; however, there can be no assurance that the closing will occur. The Company's recurring losses from operations, its working capital deficiency, its' shareholders equity deficiency, its significant debt service obligations and its default with respect to various agreements raise substantial doubt about the Company's ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on its ability to obtain additional financing to finance its working capital deficit until such time as cash flows from operations are sufficient to finance the Company's operations, including the Company's proposed casino operations. If the sale under the ILX Agreement is not consummated, the Company may need to seek protection under the Federal bankruptcy laws. In order for the Company to continue to operate until the sale under the ILX Agreement is consummated, the Company must obtain a sufficient amount of interim financing to fund its operations. While such interim financing is currently being negotiated, there is no assurance it will be obtained. If the Company is unable to obtain the interim financing the Company may need to seek protection under the Federal bankruptcy laws. In addition to pursuing the ILX Agreement, management is seeking additional sources of financing to reduce its debt service obligations, complete certain capital projects and fund its working capital needs. In addition, management is implementing cost control measures to increase the cash flow of the Company. There can be no assurance the additional financing can be obtained. Revenues: Revenues for fiscal 1995 totalled $9,790,000 as compared to $8,957,000 for fiscal 1994. This increase is attributed to the timeshare department having a full year of operations during the fiscal year 1995 and the opening of the Hollywood Movie Museum in April of 1995. Revenues from timeshare sales were $3,839,000 and from hotel rooms were $2,444,000 for fiscal year 1995 as compared to respective revenues of $3,514,000 and $2,838,000 for fiscal year 1994. The increase in timeshare sales is attributed to a full year of operations in fiscal year 1995. Showroom revenues totalled $1,938,000 for 1995 as compared to $1,607,000 in 1994. This increase is attributed to additional marketing and the increase in the ticket price of Ms. Reynolds' show. Restaurant revenues totalled $297,000 for the approximate four month period the Company operated the restaurant during 1995 as compared to restaurant revenues totalling $310,000 for the approximate four month period the Company operated the restaurant during 1994. Rental income for 1995 totalled $502,000 all of which was from casino rental. Casino rental income for 1994 totalled $472,000. The Company's gift shop produced revenues of $123,000 for 1995 compared to $133,000 for 1994. Museum revenues for fiscal year 1995 totalled $416,000 as compared to no revenues in 1994. The loss from operations for 1995 totalled $6,002,000 as compared to $3,637,000 for 1994. The increase in the loss from operations for 1995 can be attributed to the expense of approximately $460,000 relating to the conversion of certain of the company's debts into equity, the issuance of common stock and write-off of prepaid consulting services totalling approximately $960,000, the Company reserving an allowance of $450,000 relating to certain of its contingent liabilities, and $126,500 expense relating to the forgiveness of a certain accounts receivable. Because of the investment in building improvements and furniture and equipment, depreciation and amortization increased from $633,000 in 1994 to $1,107,000 in 1995. The net loss for 1994 totalled $4,195,000 as compared to $8,603,000 for 1995. 20 Interest Expense: Interest expense increased from $565,000 in 1994 to $2,601,000 in 1995 as a result of the increase in the Company's borrowings, increase in the cost of borrowings and additional interest costs associated with the conversion of debt into shares of common stock. Item 7. Financial Statements. The following financial statements are filed as a part of this Form 10-KSB and are included immediately following the signature page. Independent Auditor's Report Consolidated Balance Sheet - December 31, 1995 Consolidated Statements of Operations - Years ended December 31, 1995 and 1994 Consolidated Statements of Shareholders' Equity (Deficiency) - Years ended December 31, 1995 and 1994 Consolidated Statements of Cash Flows - Years ended December 31, 1995 and 1994 Notes to Consolidated Financial Statements Item 8. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. (Not Applicable) 21 PART III Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act. (a)(1),(2),(3) Identification of Directors and Executive Officers. Date first appointed to such Name Age Position with the Company position - -------------------------------------------------------------------------------- Debbie Reynolds 64 Chairman, Director March 1994 Secretary May 1995 Todd Fisher 38 Chief Executive Officer, President, May 1995 Chief Financial Officer, Treasurer Director March 1994 (a)(4) The business experience of the Registrant's officers and directors is as follows: Debbie Reynolds. Ms. Reynolds' 48-year business career has made her an internationally known star of more than 30 motion pictures, two Broadway shows and hundreds of television appearances. In December 1996, Paramount Pictures released a feature film called "Mother", starring Ms. Reynolds and Albert Brooks. Hamlett Productions, Ltd., a company owned 50% by Ms. Reynolds, purchased the old Paddle Wheel Hotel and Casino in Las Vegas at auction as a site for a movie museum to house her collection of Hollywood memorabilia, the largest privately held in the world. The extensively renovated property reopened in July 1993 as the Debbie Reynolds Hotel/Casino/Hollywood Movie Museum. The unique, high-tech, multi-media Hollywood Movie Museum opened in early 1995. Ms. Reynolds also is secretary and a director of Debbie Reynolds Management Company, Inc. ("DRMC"), a wholly-owned subsidiary of the Company, is secretary and a director of Debbie Reynolds Resorts, Inc., a wholly-owned subsidiary of DRMC, and is president and sole shareholder of Raymax Production, Ltd., an entertainment company, and Celebrity Restaurants, Inc, a service company. Todd Fisher. Mr. Fisher has more than twenty years of technical and creative experience in television and film. He has designed and built sound stages, recording studios and TV facilities. Mr. Fisher designed the Company's state-of-the-art, 500-seat showroom which doubles as a complete television production studio. He also conceived and designed the Company's unique, high-tech, multi-media Hollywood Movie Museum, which is one of the first sites in the country to exhibit high-definition television. In May 1995 the Board of Directors of the Company appointed Mr. Fisher as the Company's Chief Executive Officer, President, Chief Financial Officer and Treasurer. Mr. Fisher also is president, treasurer and a director of DRMC and is president, treasurer and a director of Debbie Reynolds Resorts, Inc. The Board of Directors has no committees at this time. (a)(5) Directorships Held in Other Reporting Companies. None. (b) Identification of Certain Significant Employees. None. (c) Family Relationships. Ms. Reynolds is the mother of Todd Fisher. Other than this relationship, there are no family relationships between any director or executive officer of the Company. 22 (d) Involvement in Certain Legal Proceedings. During the past five years, no director, executive officer, promoter or control person of the Company has: (1) Had any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that date; (2) Been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) Been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or (4) Been found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, where the judgment has not been reversed, suspended, or vacated. (e) Compliance with Section 16(a) of the Exchange Act. Section 16 of the Securities Exchange Act of 1934, as amended, requires the Company's officers, directors and persons who own greater than 10% of a registered class of the Company's equity securities to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Based solely on a review of the forms it has received and on written representations from certain reporting persons, the Company believes, to the best of its knowledge, that during 1995 all Section 16 filing requirements applicable to its officers, directors and 10% beneficial owners were complied with by such persons. Item 10. Executive Compensation. (a) General. During the fiscal years ended December 31, 1992 and 1993 Lawrence E. Meyers, the President and Chief Executive Officer of Halter Venture Corporation during such years, received aggregate cash compensation from the Company of $20,547 and $35,400, respectively. No executive officer of the Company received compensation in excess of $100,000 during the 1992 and 1993 fiscal years. During the 1994 fiscal year and in connection with the DRMC/Maxim mergers, the Company entered into various compensation agreements with certain of its executive officers. During 1995, some of these compensation agreements were amended. See (g) "Employment Contracts and Arrangements" below. (b) Summary Compensation Table. The following table sets forth certain information regarding the compensation paid or accrued by the Company to or for the account of the executive officers of the Company whose total annual compensation exceeded $100,000 during the fiscal years ended December 31, 1993, 1994 and 1995. 23
Compensation Table ------------------ Annual Compensation Long - Term Compensation ------------------- ------------------------ Securit. Name and Restrctd. Underly. Principal Other Annual Stock Options/ LTIP position Year Salary Bonuses Compensation Awards SARs (#) Payout Other - -------- ---- ------ ------- ------------ ------ -------- ------ ----- Debbie 1995 $965,000(1) -0- N/A -0- -0- -0- -0- Reynolds 1994 $600,000 -0- N/A -0- 50,000(2) -0- -0- Chairman of the 1993 -0- -0- N/A -0- -0- -0- -0- Board, Secretary Todd Fisher 1995 $127,615 -0- N/A -0- -0- -0- -0- CEO, President, 1994 $128,000 -0- N/A -0- 50,000(2) -0- -0- Treasurer, CFO 1993 -0- -0- N/A -0- -0- -0- -0- Henry Ricci 1995 $129,038 -0- N/A -0- -0- -0- -0- Former 1994 $131,250 -0- N/A -0- 275,000(3) -0- -0- President 1993 -0- -0- N/A -0- -0- -0- -0- Donald 1995 $ 39,000 -0- $164,060(4) -0- -0- -0- -0- Granatstein 1994 $120,000 -0- $103,500(5) -0- 300,000(6) -0- -0- Former CFO, 1993 -0- -0- N/A -0- -0- -0- -0- Executive Vice President, and Treasurer
1 Represents amounts paid or accrued to Raymax Productions, Inc., a Company wholly-owned by Ms. Reynolds ("Raymax"), pursuant to an agreement among Raymax, Ms. Reynolds and the Company. For the year ended December 31, 1995 Raymax was paid $170,000.00 and is owed $795,000 in accrued wages and showroom performance fees. See (g) "Employment Contracts and Arrangements" below. 2 Represents shares underlying stock options exercisable at $4.00 per share until October 10, 1999. The fair market value of the Common Stock on the date of grant was $5.00 per share. 3 Represents shares underlying stock options exercisable per diem at $3.00 per share until March 22, 1999. The fair market value of the Common Stock on the date of grant was $5.70 per share. 4 Represents timeshare commissions and advances paid to Roebling totalling $37,560 and $126,500. See (g) "Employment Contracts and Arrangements." 5 Represents timeshare commissions paid to Roebling. See (g) "Employment Contracts and Arrangements." 6 Represents shares underlying stock options exercisable at $3.00 per share until March 22, 1999. The fair market value of the Common Stock on the date of grant was $5.70 per share. N/A: Disclosure is not applicable under the Securities and Exchange Commission's rules. 24 (c) Option/SAR Grants Table. Option/SAR Grants in Last Fiscal Year Individual Grants No options were granted to any of the Named Executive Officers during the 1995 fiscal year. 1994 Stock Option Plan. During 1994 the Company adopted a Stock Option Plan for officers, directors and key employees (the "Plan"). The Company has reserved a maximum of 2,000,000 shares of Common Stock to be issued upon the exercise of options granted under the Plan. The Plan includes: (i) options intended to qualify as "incentive stock options" under Section 422 of the Internal Revenue Code of 1986, as amended; (ii) non-qualified options which are not intended to qualify as "incentive stock options"; and (iii) formula plan options which are non-discretionary and will be granted annually to the disinterested directors of the Company. As of October 1996, options to purchase up to 335,000 shares have been granted under the Plan. The 1994 Stock Option Plan and the 190,000 options previously granted thereunder were approved by the Company's shareholders at the 1994 Stockholders Meeting. 1994 Employee Stock Compensation Plan. The Company adopted in June 1994 an Employee Stock Compensation Plan for employees, officers and directors of the Company and consultants and advisors to the Company (the "1994 ESC Plan"). Employees will recognize taxable income upon the grant of Common Stock equal to the fair market value of the Common Stock on the date of the grant. The shares of Common Stock issuable under the 1994 ESC Plan have been registered under a registration statement on Form S-8. The ESC Plan is administered by the Board of Directors. Of the 1,000,000 shares reserved under the Plan 560,000 had been granted as of December 31, 1995. During 1996 an additional 88,000 shares were granted under the Plan. 25 (d) Aggregated Option/SAR Exercises and Fiscal Year-End Option/SAR Value Table. Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values
Number of Securities Value of Underlying Unexercised Unexercised In-the-Money Options/SARs Options/SARs at at FY-End (#) FY-End ($) Shares Acquired ------------- ------------- on Value Exercisable/ Exercisable/ Name Exercise (#) Realized ($) Unexercisable Unexercisable ---- ------------ ------------ ------------- ------------- Debbie Reynolds -0- -0- 50,000 $-0- exercisable Todd Fisher -0- -0- 50,000 $-0- exercisable Donald Granatstein -0- -0- 300,000 $-0- exercisable Henry Ricci -0- -0- 160,417 $-0- exercisable 114,583 $-0- unexercisable
(e) Long-Term Incentive Plan Awards Table. None. (f) Compensation of Directors. Directors of the Company are not compensated for their services as such but are reimbursed for expenses incurred in attending Board meetings. (g) Employment Contracts and Arrangements. Agreement with Raymax Production, Ltd. DRMC entered into an agreement with Debbie Reynolds and Raymax Production, Ltd., a California corporation wholly-owned by Debbie Reynolds ("Raymax") as of January 25, 1994, and as amended on March 9, 1995. Under the agreement Raymax provided the entertainment, management and promotional services of Ms. Reynolds on an exclusive basis in Las Vegas, Nevada during her lifetime. The agreement was terminable upon Ms. Reynolds' death or a default. Under the agreement Ms. Reynolds was to provide performance in the showroom at the Debbie Reynolds Hotel for a minimum of 30 weeks per year and other managerial and promotional activities. As compensation for her performance services, Raymax was to receive $25,000 per weekly performance (the "Weekly Performance Fee"). Under the agreement Raymax also was to receive annually 10% of the Company's net profits (as defined in the agreement) for her non-entertainment services. Raymax has the right to take a non-refundable monthly draw against the net profits equal to the difference between $60,000 and the Weekly Performance Fees for such month, up to a maximum draw of $1,000,000. If the draw taken for any year exceeded the 10% net profits for such year, such excess will be carried forward as a non-refundable advance against future net profits earned under the agreement. Raymax also was to receive reimbursement of reasonable business and travel expenses. Under the agreement, DRMC is required to carry life insurance on Ms. Reynolds in the amount of $10,000,000 for the benefit of DRMC. During 1994 and under the original terms of the agreement prior to its amendment in March 1995, Ms. Reynolds received compensation of $50,000 per month for her services. 26 During 1994 the Company had advanced $455,000 to Raymax against future amounts owing under this agreement, all of which was outstanding at December 31, 1995. As of December 31, 1995 the Company was in arrears approximately $795,000 pursuant to the weekly performance fee and monthly draw of this agreement. The Company and Raymax have agreed to net the $455,000 advance against the $1,914,000 in arrears as of December 31, 1996. In September, 1996 Raymax and Ms. Reynolds served the Company notice that this agreement was in default due to non-payment. In November 1996, Raymax delivered a notice to the Company terminating this agreement. As of December 31, 1996, the amount the Company was in arrears to Raymax was $1,740,000 plus $174,000 in accrued interest. Ms. Reynolds has agreed to render showroom and other services on an "at will" basis, terminable any time. The terms relating to Ms. Reynolds' services are the same as specified in the terminated agreement except that as to all unpaid past and future sums due Ms. Reynolds, the Company shall pay interest at a rate of prime plus 2%. Exclusive License Agreement Effective March 9, 1995 the Company entered into an agreement with Ms. Reynolds and Raymax under which Ms. Reynolds was to grant the Company the exclusive, perpetual, non-transferable license: (i) to display Ms. Reynolds' extensive Hollywood memorabilia collection at the Company's Hollywood Movie Museum; and (ii) to use the name, photograph, likeness and signature of Ms. Reynolds for the promotion of the Company and its operations. In consideration for the license, the Company was to agree to issue 400,000 shares of restricted Common Stock to Raymax and to insure, maintain and house the memorabilia. As additional consideration for the license, upon Ms. Reynolds' death, the Company would pay to her heirs and/or assigns annually, 10% of the net profits of the Company (as defined in the agreement) in perpetuity. The Company was in default of the agreement with Ms. Reynolds. In November 1996, Ms. Reynolds delivered a notice to the Company terminating this agreement. Exclusive License Agreement Effective March 9, 1995 the Company entered into a license agreement with Hollywood Motion Picture and Television Museum, a non-profit organization ("Hollywood"), which also owns an extensive Hollywood memorabilia collection. Under the agreement with Hollywood, the Company has been granted the license to display Hollywood's memorabilia in its Museum in consideration for the Company's annual payment to Hollywood of $50,000 until the construction costs of the Museum has been recouped from the Museum profits, at which time the annual payment will increase to $100,000. On December 27, 1996 Hollywood sent a default and 30-day termination notice to the Company due to non-performance on the contract. Employment Contract with Henry Ricci. Henry Ricci, formerly the President of the Company, had entered into an Employment Contract with DRMC as of February 14, 1994. Under the contract, Mr. Ricci served as general manager of the Debbie Reynolds Hotel for a term of five years and received annual base compensation of $150,000. In addition, Mr. Ricci would receive an annual bonus equal to two percent of the Hotel's net profits, as defined in the contract. Mr. Ricci also was granted stock options to purchase 275,000 shares of the Company's Common Stock, vesting ratably per diem and exercisable at $3.00 per share for five years from the vesting dates. Mr. Ricci was also furnished with a vehicle. In May 1995, the Company terminated this contract with Mr. Ricci and entered into a modified contract. The modified contract with DRMC was dated June, 1995. Under this contract Mr. Ricci served as Chief of Operations for the Debbie Reynolds Hotel for a term of one year and received annual base compensation of $80,000. Mr. Ricci also received a $30,000 payment as additional consideration from the new contract. As of this date, Mr. Ricci has fully vested into his stock options to purchase 275,000 shares of the Company's Common Stock exercisable at $3.00 per share. During 1996, the Company granted to Mr. Ricci options to purchase an additional 25,000 shares of the Company's Common Stock exercisable at $1.00 per share. In September 1996, Mr. Ricci and the Company mutually terminated his employment. 27 Consulting Arrangement with Roebling. The Company had an oral consulting arrangement with Roebling Investments (Canada), Inc. ("Roebling"), a Canadian company wholly-owned by M. Donald Granatstein, formerly the Executive Vice President, Chief Financial Officer, Treasurer and a director of the Company. In May 1995, the Company and Roebling mutually terminated this consulting agreement through a severance agreement. Under the severance arrangement the Company agreed to continue to defend Mr. Granatstein, to the extent required by paragraph 3 of Section 78.751 of the Nevada Revised Statutes in certain litigation. The Company also waived its rights to collect certain debts due from Mr. Granatstein totalling $126,500 and issued a limited release of claims from Debbie Reynolds Hotel & Casino, Inc., Debbie Reynolds Management Company and Debbie Reynolds Resorts, Inc. The Company also indemnified Mr. Granatstein as to his personal loan guarantee on the Renaldi loan and the $250,000 bond issued in favor of the Nevada Department of Real Estate Timeshare Division. Mr. Granatstein warranted and agreed to pay and/or defend, indemnify, secure and hold the Company harmless from costs, assessments, penalties, damage, fees, attorney fees, interest, employee withholding or other losses arising from any federal or state tax obligations to which the Company is or may be subject by reason of any debts forgiven or payments made by the Company to Mr. Granatstein. Mr. Granatstein also agreed to assist the Company in any matters relating to the business while the Consultant was under contract with the Company. Consulting Agreement with Peter D. Bistrian Consulting, Inc. On December 7, 1995, the Company entered into a Management Consulting Agreement with Peter D. Bistrian Consulting, Inc. ("consultant") pursuant to which the Company agreed to issue to the consultant Options to purchase up to an aggregate of 486,000 shares of Common Stock of the Company in consideration for consulting services to be provided to the Company over an anticipated eight-month period commencing as of the date of the agreement. The option price to exercise the consultants option to purchase 486,000 shares of Common Stock was $.75 per share and the each option was exercisable from December 10, 1995 until its expiration date of December 10, 1997. The Company filed a Registration Statement on Form S-8 registering the 486,000 shares of Common Stock underlying the stock options. The Options were exercised by the consultant through the issuance of a short-term promissory note payable in the principal amount of $364,500 (the "Note"). Subsequent to the issuance of the shares, the consultant defaulted on the payment of the note. The Company plans to pursue its remedies against the consultant, its principal and others with respect to these shares. Consulting Agreement with Robert. C. Brehm Consulting, Inc. On December 7, 1995, the Company entered into a Management Consulting Agreement with Robert C. Brehm Consulting, Inc. ("consultant") pursuant to which the Company agreed to issue to the consultant Options to purchase up to an aggregate of 264,000 shares of Common Stock of the Company in consideration for consulting services to be provided to the Company over an anticipated eight-month period commencing as of the date of the agreement. The option price to exercise the consultants option to purchase 264,000 shares of Common Stock was $.75 per share and the each option was exercisable from December 10, 1995 until its expiration date of December 10, 1997. The Company filed a Registration Statement on Form S-8 registering the 264,000 shares of Common Stock underlying the stock options. The Options were exercised by the consultant through the issuance of a short-term promissory note payable in the principal amount of $198,000 (the "Note"). Subsequent to the issuance of the shares, the consultant defaulted on the payment of the note. The Company plans to pursue its remedies against the consultant, its principal and others with respect to these shares. (h) Report on Repricing of Options/SARs. Not applicable. 28 Item 11. Security Ownership of Certain Beneficial Owners and Management. (a), (b) Security Ownership of Beneficial Owners and Management. The following table sets forth information as of December 24, 1996 with respect to the ownership of the Company's Common Stock for all directors and officers individually, all officers and directors as a group, and all beneficial owners of more than five percent of the Common Stock. Name and Address Amount & Nature Percent of Beneficial of Beneficial of Owner Ownership Class - -------------------------------------------------------------------------------- Debbie Reynolds 2,945,833(1) 22.5% 305 Convention Center Drive Las Vegas, NV 89109 Kennedy Capital 1,852,679(2) 13.9% 425 N. New Ballas Rd. St. Louis, MO. 63141 Michael Weiner 835,056(3) 6.6% 1035 Pearl Street, #402 Boulder, Colorado 80302 Todd Fisher 252,930(4) 2.0% 305 Convention Center Drive Las Vegas, NV 89109 Stephen Cherner 625,000(5) 5.0% 1035 Pearl Street, Suite 402 Boulder, Colorado 80302 All officers and directors 3,198,763(6) 24.2% as a group (2 persons) - ---------- 1 Includes: (i) 2,395,833 shares held of record by the Debbie Reynolds Trust dated February 11, 1986, a revocable trust of which Ms. Reynolds is the sole trustee; (ii) 50,000 and 100,000 shares issuable upon the exercise of presently outstanding options exercisable at $4.00 per share and expiring on October 10, 1999 and $0.80 per share and expiring on February 16, 2000, respectively; (iii) 400,000 shares subscribed to by Ms. Reynolds, pursuant to a license agreement but not issued. See Part III, Item 10 "Executive Compensation" for a description of the license agreement. 2 Includes: (i) 245,000 shares owned by a principal of Kennedy Capital; (ii) 772,727 shares owned by clients of Kennedy Capital for whom Kennedy Capital serves as an investment advisor; (iii) 581,188 shares issuable upon conversion of Series AA Preferred Stock and Debentures owned by clients of Kennedy Capital; and (iv) 253,764 shares of the Company's common stock issuable upon exercise of Class A Warrants, owed by clients of Kennedy Capital, at an exercise price of $1.00. 3 Includes 100,000 shares issuable upon the exercise of presently outstanding options exercisable at $3.50 per share and expiring on August 6, 2000. 4 Includes: (i) 50,000 and 100,000 shares issuable upon the exercise of presently outstanding options exercisable at $4.00 per share and expiring on October 10, 1999 and $0.80 per share and expiring on June 30, 2000, respectively. 29 5 Includes: (i) 300,000 shares owned by the Maxim Profit Sharing Plan of which Mr. Cherner is the primary beneficiary; and (ii) 325,000 shares owned by the Cherner Family Trust of which Mr. Cherner is the trustee, and his children are the beneficiaries. Mr. Cherner disclaims ownership of the 325,000 shares owned by the Cherner Family Trust. 6 Includes 300,000 shares issuable upon the exercise of presently outstanding options. (c) Changes in Control. The Registrant knows of no arrangement, the operation of which may, at a subsequent date, result in change in control of the Registrant. Item 12. Certain Relationships and Related Transactions. Transactions of Debbie Reynolds Hotel & Casino, Inc. and Hamlett Production, Ltd. In December 1992, Debbie Reynolds Hotel & Casino, Inc. was incorporated as a Nevada corporation ("DRMC"). At the time of its formation DRMC issued 500,000 shares of its common stock to Debbie Reynolds in consideration of $500. Ms. Reynolds made subsequent capital contributions to DRMC totalling $50,000. Ms. Reynolds is an officer and director of DRMC. In March 1989, Hamlett Production Ltd. was incorporated as a Nevada corporation ("HPL"). At the time of its formation HPL issued 250,000 shares of its common stock to Debbie Reynolds and 250,000 shares to Richard Hamlett, each in consideration of $250. Subsequently, Ms. Reynolds acquired all of Mr. Hamlett's shares in HPL. In March 1994, DRMC merged with and into HPL, the surviving company, and HPL changed its name to DRMC. At the time of the merger of DRMC with and into HPL, Ms. Reynolds was the sole shareholder of DRMC and HPL and she was an officer and director of both companies. As of December 31, 1993 DRMC and HPL had loans payable to Ms. Reynolds totalling $2,160,000. The loans were unsecured, noninterest-bearing obligations and were due on demand. The proceeds of the loans were used to pay operating expenses for DRMC, HPL and Raymax Production, Ltd. ("Raymax"), a company wholly-owned by Ms. Reynolds. During the quarter ended March 31, 1994 Ms. Reynolds converted $1,761,000 of these obligations into additional capital contributions to the Company and $149,000 was repaid. As of April 8, 1994 the remaining obligations of $250,000 were repaid. During the 1993 fiscal year Ms. Reynolds and Mr. Hamlett negotiated on behalf of DRMC and HPL to obtain financing for such companies from unaffiliated third parties. Although the loans were negotiated on behalf of DRMC and HPL, Ms. Reynolds and Mr. Hamlett signed various notes personally and deposited the money to the respective companies. All payments on the respective obligations have been made by DRMC and HPL directly to the lenders. However, because these individuals signed certain notes personally, these obligations are included in the combined financial statements of DRMC and HPL as amounts due to related parties. The amount outstanding under these obligations totalled $100,000 as of December 31, 1994. During the 1995 fiscal year the $100,000 was converted into equity in exchange for 80,000 shares of the Company's restricted common stock. 30 A company affiliated with a former officer, director and shareholder of HPL loaned HPL $201,000 during 1993, all of which was outstanding as of December 31, 1994. The obligation was unsecured, non-interest bearing and payable upon demand. During 1995, the Company wrote-off this obligation. As of December 31, 1993, DRMC had an operating lease with HPL for the Debbie Reynolds Hotel & Casino, payable $75,000 monthly, with $525,000 outstanding on the obligation as of December 31, 1993. In addition, as of December 31, 1993 DRMC and HPL were obligated under certain capital lease obligations for certain hotel furniture and equipment totalling $984,000, some of which obligations have been paid by one company on behalf of the other. As a result of the merger of DRMC with and into HPL in March 1994, the operating lease between DRMC and HPL and the obligations thereunder have terminated. See "Part I, Item 1. Description of Business." Up until August 1, 1996, the restaurant and bar operations of the Debbie Reynolds Hotel & Casino were leased to Celebrity Restaurants, Inc. ("Celebrity") under an oral lease. Celebrity is wholly-owned by Ms. Reynolds. Rental income was based upon 8% of net income. No money was received under this lease for the years ended December 31, 1995 and 1994, respectively, because the operation of the restaurant produced a net loss. Under the oral agreement, DRMC was obligated to cover the operating cash shortfalls of Celebrity's operations. Until the Company received approval for its own liquor license, Celebrity accommodated the Company by undertaking and operating the restaurant and bar under its liquor license. During the year ended December 31, 1995 the amount DRMC funded to Celebrity was approximately $461,000. On August 1, 1996 DRMC received a liquor license from Clark County and terminated the oral lease agreement. The restaurant and bar are currently operated by DRMC. The showroom operations were leased to Raymax under a five-year operating lease which commenced in June 1993. All revenues from the showroom operations were received directly by DRMC, therefore, no lease payments were made by Raymax to DRMC. As a result of the DRMC/Maxim Mergers, the lease was canceled and DRMC operates the showroom directly. During the year ended December 31, 1993 Raymax made $388,000 in leasehold improvements and furniture, fixture and equipment purchases for the showroom, all of which were transferred to DRMC as additional capital contributions by Ms. Reynolds as of December 31, 1993. During the year ended December 31, 1994 the Company loaned M. Donald Granatstein, the then Chief Financial Officer, Executive Vice President, Treasurer and a director of the Company, an aggregate of $115,900, and as of December 31, 1994 $126,500 in accrued interest and principal was outstanding. The loan bore interest at nine percent and was due on December 31, 1996. The loan was secured by all consulting fees, commissions and all other amounts due Mr. Granatstein from the Company pursuant to his consulting arrangement with the Company. Pursuant to a severance agreement entered into in May 1995 the Company forgave this indebtedness. See Part III, Item 10. "Executive Compensation" for a description of Mr. Granatstein's consulting arrangement and severance agreement with the Company. During 1996, Ms. Reynolds loaned the Company approximately $105,000, of which, all is still outstanding as of December 31, 1996. During the year ended December 31, 1994 and since such time Ms. Reynolds and Mr. Granatstein have personally guaranteed various borrowings of the Company and its subsidiaries. The amounts guaranteed by such persons totalled approximately $8,725,000 as of December 31, 1995. The Company has indemnified Ms. Reynolds and Mr. Granatstein from these personal guarantees. See Part III, Item 10, "Executive Compensation". 31 Transactions of Maxim Properties Company Maxim Properties Company ("Maxim") was incorporated as a Colorado corporation in November 1993. At the time of its formation Maxim issued 1,500,000 shares of its common stock each to Maxim Financial Corp. ("Maxim Financial") and Stephen Cherner in consideration of a total of $100,000. Maxim Financial and Mr. Cherner subsequently transferred all of their shares to other persons, including several of their affiliates. Maxim Financial is controlled by Stephen Cherner. Joe Kowal, a principal shareholder of Maxim at the time of the DRMC/Maxim Mergers, transferred 705,000 of the 830,277 shares of the Company's common stock which he was to receive in exchange for his Maxim shares in the DRMC/Maxim Merger to four entities who he has represented are not affiliated with him. Commencing in September 1993 the Maxim Profit Sharing Plan (the "Maxim Plan") loaned a total of $800,000 to DRMC to pay for the build-out of the showroom and working capital. The loan bore interest at 10% and was due on demand. During 1994 a portion of the loan was repaid. In October 1994 the Company agreed to issue 150,000 shares of the Company's common stock to the Maxim Plan as full and complete consideration for the remaining balance owed to it, including principal and interest. The Company has agreed to register the 150,000 shares issued to the Maxim Plan under the next available registration statement filed by the Company. These shares were issued in November 1994. Stephen Cherner, the beneficial owner of approximately 5.0% of the Company's outstanding common stock (including the 150,000 shares), and a principal of Maxim, is the primary beneficiary of the Maxim Plan. Transactions of Halter Venture Corporation SWTV owed Southwest TNT, Inc. ("SWTNT"), a corporation owned by Lawrence E. Meyers, a former officer, director and principal shareholder of the Company, approximately $2,602 and $254,996 at December 31, 1993 and 1992 for the construction of a mobile television production unit. SWTV had made advances to SWTNT of approximately $29,232 at December 31, 1991. These amounts were offset against the amounts owed for the construction of the new mobile television production unit during 1992. During 1993, SWTV renegotiated the construction price with SWTNT resulting in a reduction in the amount due to SWTNT of $209,264 and a corresponding reduction in the basis of the mobile television production unit to $142,080. Additionally, during 1993, part of the remaining balance due, including additional advances made by SWTNT during 1993 in connection with construction of the mobile television unit, totalling $59,743, were offset against amounts due to a majority shareholder. The Company had advances receivable from Lawrence E. Meyers in the amount of $119,495 at December 31, 1992. The advances bore interest at the applicable Federal rates for long-term obligations, accrued quarterly on the outstanding balance. The amount was partially offset against the amount due to SWTNT, with the balance being settled during 1993. Pursuant to a Divestiture Agreement dated March 23, 1994, after the closing of the DRMC/Maxim Mergers, the Company divested its wholly-owned subsidiary, SWTV Production Services, Inc., to the Company's former President, Lawrence E. Meyers, in exchange for the 2,126,540 shares of common stock of the Company owned by Mr. Meyers, effective March 31, 1994. Mr. Meyers' 2,126,540 shares were canceled by the Company on March 31, 1994. Subsequent to the divestiture, Mr. Meyers was a minority shareholder of the Company. 32 Item 13. Exhibits and Reports on Form 8-K. (a) Exhibits. The following is a complete list of exhibits filed as a part of this Report on Form 10-KSB and are incorporated herein by reference. Exhibit Number Title of Exhibit - ------ ---------------- 2.1 Agreement of Merger and Plan of Reorganization dated February 11, 1994 (1) 2.2 Amended and Restated Agreement of Merger and Plan of Reorganization dated March 10, 1994 (2) 3.1 Articles of Incorporation of Debbie Reynolds Hotel & Casino, Inc. , as filed with the Nevada Secretary of State on November 17, 1994 (4) 3.4 Bylaws (4) 4.1 Specimen common stock certificate (4) 10.1 1994 Employee Stock Compensation Plan (4) 10.2 1994 Stock Option Plan (4) 10.4 Divestiture Agreement dated March 30, 1994 between the Company, Lawrence Meyers and SWTV (3) 10.5 Management Agreement dated January 8, 1994 between DRHC and Grand Nevada Hotel Corporation, as amended and terminated on February 17, 1994 (3) 10.6 Lease Agreement dated April 5, 1993 between DRHC and Grand Nevada Hotel Corporation (3) 10.7 Lease Termination Agreement dated January 10, 1994 between DRHC and Grand Nevada Hotel Corporation (3) 10.8 Agreement of Sublease between John Neumeyer, Edward Haddad and DRHC dated April 27, 1993 (3) 10.9 Termination of Sublease Agreement dated February 11, 1994 between Hollywood Restaurants, Inc. Hamlett Productions, Ltd., and DRHC. (3) 10.10 Amended and Restated Space Lease Agreement dated May 7, 1993 between DRHC, Debbie's Casino Inc., Jackpot Enterprises, Inc., Richard R. Hamlett and Debbie Reynolds (3) 10.11 Agreement dated January 25, 1994 between Hamlett Productions, Ltd., Raymax Productions, Inc. and Debbie Reynolds (3) 10.12 Employment contract dated February 14, 1994 between DRHC and Henry Ricci (3) 10.13 Employment contract dated February 16, 1994 between the Company and Steve Schiffman, as amended (3) 33 10.14 Agreement of Sublease between DRHC and Celebrity Restaurants, Inc. dated April, 1993 (3) 10.15 Loan Agreement between DRHC and Hamlett Production Ltd. and Bennett Management & Development Corp. and Promissory Note and Guarantee and Subordination Agreement, all dated March 7, 1994. (3) 10.16 Contract of Sale Membership Agreements and Installment Purchase Agreements with Recourse between Debbie Reynolds Resorts, Inc. and Resort Funding, Inc. dated March 7, 1994 (3) 10.17 Amendment dated March 9, 1995 to Agreement dated January 25, 1994 between Hamlett Productions, Ltd., Raymax Productions, Inc. and Debbie Reynolds (4) 10.18 Termination Agreement among Registrant, TPM Holdings and Source Capital Corporation dated February 10, 1995.(4) 10.19 Consulting Agreement between the Registrant and MBL Investments dated August 3, 1994. (4) 10.20 Loan Agreement between the Registrant and TPM Holdings, Inc., and Promissory Note, dated June 10, 1994. (4) 10.21 Loan Agreement between the Registrant and Source Capital Corporation, and Promissory Note, dated December 1, 1994. (4) 10.22 Loan Agreement between DRMC and World Ventures Trust, and Promissory Note, all dated April 26, 1995. 10.23 Loan Agreement between the Registrant and RealEcon, and Promissory Note, dated January 16, 1995. 10.24 Loan Agreement between the Registrant and Bennett Funding International Ltd., and Promissory Note, dated July 27, 1995. 10.25 Loan Agreement between the Registrant and Source Capital/TPM Holding, Inc., and Promissory Note, dated March 1995. 10.26 Consulting Agreement between the Registrant and Miron Leshem dated November 6, 1995. 10.27 Amendment to Consulting Agreement between the Registrant and Miron Leshem dated December 12, 1995. 10.28 Consulting Agreement between the Registrant and Pacific Consulting Group dated September 1, 1995. 10.29 Consulting Agreement between the Registrant and Telex, Inc. dated March 27, 1995. 10.30 Consulting Agreement between the Registrant and Peter Bistrian Consulting, Inc., ("Consultant"). 10.31 Consulting Agreement between the Registrant and Robert C. Brehm Consulting, Inc., ("Consultant"). 34 10.32 ILX Incorporated definitive agreement dated October 30, 1996. 23.1 Consent of KPMG Peat Marwick LLP ------------------------------------------------ 1. Incorporated by reference from the like numbered exhibit filed with the Registrant's Form 8-K dated February 11, 1994. 2. Incorporated by reference from the like numbered exhibit filed with the Registrant's Form 8-K dated March 22, 1994. 3. Incorporated by reference from the like numbered exhibit filed with the Registrant's Form 10-K for the year ended December 31, 1993. 4. Incorporated by reference from the like numbered exhibit filed with the Registrant's Form 10-K for the year ended December 31, 1994. (b) Reports on Form 8-K. During the last quarter period covered by this report the Registrant filed no Reports on Form 8-K. 35 SIGNATURES In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DEBBIE REYNOLDS HOTEL & CASINO, INC. By:/s/ Todd Fisher ------------------------- Todd Fisher, President Date: January 23, 1997 In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. /s/ Debbie Reynolds Chairman of the January 23, 1997 - ------------------- Board, Secretary DEBBIE REYNOLDS and Director /s/Todd Fisher Chief Executive Officer, - ------------------- Chief Financial Officer, TODD FISHER Treasurer, and Director January 23, 1997 36 DEBBIE REYNOLDS HOTEL & CASINO, INC. AND SUBSIDIARIES Consolidated Financial Statements December 31, 1995 (With Independent Auditors' Report Thereon) F-1 DEBBIE REYNOLDS HOTEL & CASINO, INC. AND SUBSIDIARIES Table of Contents ----------------- Page ---- Independent Auditors' Report F-3 Consolidated Balance Sheet F-4 Consolidated Statements of Operations F-5 Consolidated Statements of Shareholders' Equity (Deficiency) F-6 Consolidated Statements of Cash Flows F-8 Notes to Consolidated Financial Statements F-10 F-2 Independent Auditors' Report The Board of Directors and Shareholders Debbie Reynolds Hotel & Casino, Inc.: We have audited the accompanying consolidated balance sheet of Debbie Reynolds Hotel & Casino, Inc. and subsidiaries as of December 31, 1995, and the related consolidated statements of operations, shareholders' equity (deficiency), and cash flows for each of the years in the two year period ended December 31, 1995. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Debbie Reynolds Hotel & Casino, Inc. and subsidiaries as of December 31, 1995, and the results of their operations and their cash flows for each of the years in the two year period ended December 31, 1995, in conformity with generally accepted accounting principles. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 8 to the consolidated financial statements, the Company has suffered recurring losses from operations, has a working capital deficiency, has a shareholders' equity deficiency, significant debt service obligations, and is in default with respect to various agreements, that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are described in Notes 8 and 11. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ KPMG Peat Marwick LLP December 20, 1996 Las Vegas, Nevada F-3 DEBBIE REYNOLDS HOTEL & CASINO, INC. AND SUBSIDIARIES Consolidated Balance Sheet December 31, 1995
Assets Current assets: Cash and cash equivalents $ 172,000 Restricted cash 152,000 Accounts receivable, net of allowance of $56,000 1,451,000 Inventories (note 3) 615,000 Prepaid expenses and deposits 114,000 ------------ Total current assets 2,504,000 ------------ Property and equipment (notes 4, 6 and 11): Land and building 7,073,000 Furniture and equipment 3,361,000 ------------ 10,434,000 Less accumulated depreciation and amortization 1,996,000 ------------ Net property and equipment 8,438,000 ------------ Due from affiliates (note 2) 545,000 Deposits and other assets 442,000 ------------ Total assets $ 11,929,000 ============ Liabilities and Shareholders' Equity (Deficiency) Current liabilities: Current maturities of long-term debt and capital lease obligations (note 4) $ 8,078,000 Accounts payable and accrued liabilities 2,967,000 Accrued legal claims (note 9) 450,000 Due to affiliates (note 5) 916,000 Timeshare deposits 152,000 ------------ Total current liabilities 12,563,000 Long-term debt and capital lease obligations, excluding current maturities (note 4) 250,000 ------------ Total liabilities 12,813,000 ------------ Commitments and contingencies (notes 6, 8, 9 and 11) Shareholders' equity (deficiency) (notes 4, 10 and 11): Preferred stock, $.0001 par value. Authorized 50,000,000 shares; 2,000,000 designated as Series AA, 319,844 issued and outstanding ($1,279,000 liquidation preference) -- Common stock, $.0001 par value. Authorized 25,000,000 shares; issued and outstanding 11,484,070 shares 1,000 Additional paid-in capital 14,141,000 Stock subscribed 300,000 Deferred compensation (300,000) Accumulated deficit (15,026,000) ------------ Total shareholders' equity (deficiency) (884,000) ------------ Total liabilities and shareholders' equity $ 11,929,000 ============
See accompanying notes to consolidated financial statements. F-4 DEBBIE REYNOLDS HOTEL & CASINO, INC. AND SUBSIDIARIES Consolidated Statements of Operations Years ended December 31, 1995 and 1994
1995 1994 ------------ ------------ Revenue: Timeshare sales $ 3,839,000 3,514,000 Rooms 2,444,000 2,838,000 Showroom 1,938,000 1,607,000 Museum 416,000 -- Restaurant 297,000 310,000 Casino lease 502,000 472,000 Other 354,000 216,000 ------------ ------------ Total revenue 9,790,000 8,957,000 ------------ ------------ Operating costs and expenses: Timeshares 2,876,000 2,434,000 Rooms 1,591,000 1,358,000 Showroom 2,352,000 1,341,000 Museum 314,000 -- Restaurant 374,000 591,000 Other 263,000 114,000 General and administrative 4,611,000 3,877,000 Bad debt expense -- 70,000 Depreciation and amortization 1,107,000 633,000 Property operations, maintenance and energy 2,304,000 2,176,000 ------------ ------------ Total operating costs and expenses 15,792,000 12,594,000 ------------ ------------ Loss from operations (6,002,000) (3,637,000) ------------ ------------ Other income (expense): Interest income -- 7,000 Interest expense (2,601,000) (565,000) ------------ ------------ Total other income (expense) (2,601,000) (558,000) ------------ ------------ Net loss $ (8,603,000) (4,195,000) ============ ============ Loss per common share $ (.99) (.69) ============ ============ Weighted-average number of common shares outstanding 8,734,362 6,049,651 ============ ============
See accompanying notes to consolidated financial statements F-5 DEBBIE REYNOLDS HOTEL & CASINO, INC. AND SUBSIDIARIES Consolidated Statements of Shareholders' Equity (Deficiency) Years ended December 31, 1995 and 1994
Total Preferred Stock Common Stock Additional Accumu- Deferred Share- --------------- ----------------- Paid-in lated Stock Compen- holders' Shares Amount Shares Amount Capital Deficit Subscribed sation Equity ------ ------ ------ ------ ------- ------- ---------- ------ ------ Balance at January 1, 1994 -- $-- 3,404,314 $ 1,000 $ 50,000 $(2,163,000) $ -- $-- $(2,112,000) Shareholder contribution -- -- 1,761,000 -- -- -- 1,761,000 Shares issued in conjunction with Maxim merger -- -- 2,850,833 -- 400,000 -- -- -- 400,000 Shares issued through conversion of debt -- -- 1,284,842 -- 3,264,000 -- -- -- 3,264,000 Shares issued to officer/director for -- -- 100,000 -- 200,000 -- -- -- 200,000 services rendered Shares issued as loan fees to holder of first mortgage -- -- 25,000 -- 75,000 -- -- -- 75,000 Shares issued for consulting services -- -- 235,000 -- 648,000 -- -- -- 648,000 Shares issued in conjunction with lease termination -- -- 77,991 -- 118,000 -- -- -- 118,000 Shares issued in consideration of obtaining loans -- -- 35,000 -- 85,000 -- -- -- 85,000 Shares issued for professional services -- -- 45,000 -- 226,000 -- -- -- 226,000 Preferred stock dividend 25,924 -- 65,000 (65,000) -- -- -- Net proceeds from sale of pre-ferred stock and warrants in conjunction with the private placement of 667,904 -- -- -- 2,655,000 -- -- -- 2,655,000 securities (note 4) Net loss -- -- -- -- -- (4,195,000) -- -- (4,195,000) ------- ---- --------- -------- ---------- ----------- --------- ----- ----------- Balance at December 31, 1994 667,904 -- 8,083,904 1,000 9,547,000 (6,423,000) -- -- 3,125,000
(Continued) F-6 DEBBIE REYNOLDS HOTEL & CASINO, INC. AND SUBSIDIARIES Consolidated Statements of Shareholders' Equity (Deficiency), Continued Years ended December 31, 1995 and 1994
Total Preferred Stock Common Stock Additional Accumu- Deferred Share- --------------- --------------- Paid-in lated Stock Compen- holders' Shares Amount Shares Amount Capital Deficit Subscribed sation Equity ------ ------ ------ ------ ------- ------- ---------- ------ ------ Balance at December 31, 1994, brought forward 667,904 $ -- 8,083,904 $1,000 $ 9,547,000 $ (6,423,000) $ -- $ -- $ 3,125,000 Shares issued for consulting and other services -- -- 414,061 -- 876,000 -- -- -- 876,000 Shares issued in consideration of obtaining loans -- -- 400,745 -- 419,000 -- -- -- 419,000 Regulation S offering, shares issued for cash -- -- 300,000 -- 225,000 -- -- -- 225,000 Regulation D offering, shares issued for cash -- -- 50,000 -- 50,000 -- -- -- 50,000 Shares issued through conversion of preferred shares to common shares (348,060) -- 696,120 -- -- -- -- -- -- Shares issued through conversion of debt -- -- 696,120 -- 2,158,000 -- -- -- 2,158,000 Shares issued through exercise of warrants -- -- 93,120 -- 93,000 -- -- -- 93,000 Shares issued through exercise of options -- -- 750,000 -- 563,000 -- -- -- 563,000 Uncollected receivable for shares issued through exercise of options (563,000) -- -- -- (563,000) Stock subscribed (note 9) -- -- -- -- -- -- 300,000 -- 300,000 Deferred compensation (note 9) -- -- -- -- -- -- -- (300,000) (300,000) Options issued for services -- -- -- -- 773,000 -- -- -- 773,000 Net loss -- -- -- -- -- (8,603,000) -- -- (8,603,000) -------- ------ ---------- ------ ----------- ------------ -------- --------- ----------- Balance at December 31, 1995 319,844 $ -- 11,484,070 $1,000 $14,141,000 $(15,026,000) $300,000 $(300,000) $ (884,000) ======== ====== ========== ====== =========== ============ ======== ========= ===========
See accompanying notes to consolidated financial statements. F-7 DEBBIE REYNOLDS HOTEL & CASINO, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows Years ended December 31, 1995 and 1994
1995 1994 ----------- ---------- Cash flows from operating activities: Net loss $(8,603,000) (4,195,000) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 1,107,000 663,000 Amortization of debt discount 275,000 -- Amortization of consulting fees 297,000 344,000 Provisions for losses on receivables -- 70,000 Forgiveness of debt from affiliate 108,000 -- Forgiveness of debt to affiliate (201,000) -- Expense associated with conversion of debt to equity 592,000 -- Common stock issued for services rendered 876,000 364,000 Options issued for services 773,000 -- Shares issued as consideration for loans 419,000 -- Changes in assets and liabilities: Increase in accounts receivable (494,000) (994,000) Increase in other receivables 5,000 (126,000) Increase in inventories -- (47,000) (Increase) decrease in prepaid expenses and deposits (13,000) 43,000 Increase in deposits and other assets 473,000 (592,000) Increase in accounts payable and accrued expenses 1,613,000 614,000 ----------- ---------- Net cash used in operating activities (2,773,000) (3,856,000) ----------- ---------- Cash flows from investing activities: Capital expenditures (676,000) (3,579,000) ----------- ---------- Net cash used in investing activities (676,000) (3,579,000) ----------- ---------- Cash flows from financing activities: Proceeds from borrowings from affiliates 838,000 331,000 Payments on amounts due to affiliates (54,000) (641,000) Loans made to affiliates -- (601,000) Net proceeds from private placement of securities -- 4,764,000 Proceeds from issuance of stock 368,000 -- Proceeds from issuance of long-term debt 3,215,000 6,588,000 Principal payments on long-term debt and capital lease obligations (758,000) (3,400,000) Cash acquired in connection with Maxim merger -- 100,000 ----------- ---------- Net cash provided by financing activities 3,609,000 7,141,000 ----------- ---------- Net increase (decrease) in cash and cash equivalents 160,000 (294,000) Cash and cash equivalents at beginning of year 12,000 306,000 ----------- ---------- Cash and cash equivalents at end of year $ 172,000 12,000 =========== ==========
(Continued) F-8 DEBBIE REYNOLDS HOTEL & CASINO, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (Continued) Years ended December 31, 1995 and 1994
1995 1994 ----------- ---------- Supplemental disclosure of cash flow information: Cash paid for interest $ 821,000 171,000 =========== ==========
Supplemental disclosures of noncash investing and financing activities: In March 1994, a subsidiary of the Company acquired Debbie Reynolds Hotel & Casino, Inc. (DRHC) in exchange for issuing 2,350,833 shares of common stock. The Company fully divested itself of its wholly-owned subsidiary, SWTV Production Services, Inc., (SWTV) in exchange for the 2,126,540 shares of the Company's common stock owned by the Company's former President. The 2,126,540 shares were canceled on March 31, 1994. In March 1994, an officer, director and principal shareholder made an additional capital contribution through the conversion of $1,761,000 of debt to equity. In March 1994, a subsidiary of the Company acquired Maxim Properties Company (Maxim) in exchange for issuing 2,850,833 shares of common stock valued at $400,000. During 1994, certain of the Company's lenders and related parties converted debt of $3,264,000 in exchange for 1,284,842 shares of common stock. In consideration for services rendered in 1994 in developing and constructing the showroom and museum, 100,000 shares of common stock, valued at $200,000, were issued to an officer/director. In consideration for services rendered in 1994, the Company issued 235,000 shares of common stock valued at $648,000. In connection with the first mortgage note financing in 1994, the Company issued 25,000 shares, valued at $75,000, to the mortgage holder as loan fees. In connection with a private placement in 1994, $385,000 representing the fair value of the common stock purchase warrants, was recorded as original issue discount on the convertible subordinated debentures. In connection with a subsequent private placement in 1994, $192,000 representing the fair value of the common stock purchase warrants, was recorded as original issue discount on the convertible subordinated debentures. During 1994, the Company issued an aggregate of 25,924 shares of restricted common stock with a value of approximately $65,000 as a dividend on its preferred stock. During 1994, the Company entered into various capital lease obligations aggregating $54,000 for the purchase of furniture and equipment. During 1995, the Company issued 814,806 shares of common stock with a fair market value of approximately $1,233,000 for consulting and other services rendered. The Company completed the construction of its timeshare units and transferred all unsold units with a cost of $557,000 into inventory. The Company issued 696,120 shares of common stock through conversion of 348,060 shares of preferred stock. The Company issued 696,120 shares of common stock valued at $1,566,000 through conversion of debt. See accompanying notes to consolidated financial statements F-9 DEBBIE REYNOLDS HOTEL & CASINO, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 1995 (1) Summary of Significant Accounting Policies (a) Corporate Organization The accompanying consolidated financial statements include the accounts of Debbie Reynolds Hotel & Casino, Inc., formerly Halter Venture Corporation (Halter) and its wholly-owned subsidiaries Debbie Reynolds Management Company, Inc. (DRMC), formerly Debbie Reynolds Hotel & Casino, Inc. (DRHC) and Debbie Reynolds Resorts, Inc. (DRRI) (collectively the Companies). On November 18, 1994, the shareholders of the Company elected at their annual shareholders' meeting to change the name of the Company from Halter Venture Corporation to Debbie Reynolds Hotel & Casino, Inc. (b) Merger Effective February 11, 1994, Halter entered into an Agreement of Merger and Plan of Reorganization, as amended and restated on March 10, 1994 (Agreement), with Maxim Properties Company (Maxim), a privately held Colorado corporation, DRHC and Hamlett Production, Ltd. (HPL), both privately held Nevada corporations, and others. The mergers contemplated by the Agreement were consummated as of March 22, 1994. Under the Agreement, HPL Acquisition Corporation, a wholly-owned subsidiary of Halter, merged with and into DRHC, formerly HPL, the surviving corporation (the DRHC Merger). In addition, MPC Acquisition Corporation, another wholly-owned subsidiary of Halter, merged with and into Maxim, the surviving corporation (the Maxim Merger). The DRHC Merger and the Maxim Merger are referred to herein collectively as the "Mergers." Pursuant to the Mergers, Halter acquired all of the outstanding securities of DRHC and Maxim in exchange for the issuance of 2,850,833 shares of Halter's common stock to the Maxim shareholders and other related parties, and 2,350,833 shares of Halter's common stock to the DRHC shareholder. Prior to the closing, DRHC merged with and into HPL, and HPL changed its name to Debbie Reynolds Hotel & Casino, Inc. In connection with the Mergers, Maxim and its principals obtained financing for DRHC consisting of convertible promissory notes in the amount of $2,553,500 and one other note of $800,000. In conjunction with the Mergers, the convertible notes were converted into 851,167 shares of Halter's common stock. In connection with the Maxim merger, $300,000 of the other note was contributed to the Company. In conjunction with the Mergers, pursuant to a Divestiture Agreement dated March 23, 1994, Halter divested itself of its wholly-owned subsidiary, SWTV Production Services, Inc. (SWTV), to Halter's former President in exchange for the 2,126,540 shares of common stock of Halter owned by the former President. The 2,126,540 shares were then canceled on March 31, 1994. SWTV was acquired by Halter on April 22, 1993 and from that time until divestiture constituted the sole business operations of Halter. F-10 DEBBIE REYNOLDS HOTEL & CASINO, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued For accounting purposes, the Mergers are accounted for as a recapitalization of DRHC, with DRHC the acquirer and the surviving corporation. The accompanying consolidated financial statements reflect only the operations of the Company and its wholly-owned subsidiaries, DRHC and DRRI. The Company continued to operate under the Halter name until the shareholders meeting in November 1994, when it was changed to DRHC. (c) Description of Business DRHC owns and operates a hotel, gift shop and showroom, and leases space to a third party for the operation of a gambling casino, and leases space to an affiliate for the operation of a bar and restaurant located on Convention Center Drive in Las Vegas, Nevada (collectively, the Property). Additionally, at December 31, 1994, the Company was in the process of completing construction on the Debbie Reynolds Hollywood Movie and Memorabilia Museum (Museum), which opened on April 1, 1995. The Company's operations also include the development and sale of timesharing units in the Debbie Reynolds Hotel (Hotel) through DRRI. The Company obtained a timeshare license which was granted by the Nevada Real Estate Board on June 28, 1994. On April 20, 1994, DRHC entered into an agreement with Hollywood Restaurant, Inc. to terminate the existing restaurant lease and begin operating the restaurant, "Celebrity Cafe". In April 1994, the restaurant was leased to the affiliate that operates the bar and liquor operations (see Note 2). (d) Principles of Consolidation The accompanying consolidated financial statements include the accounts of Debbie Reynolds Hotel and Casino, Inc., a Nevada Corporation, and its wholly owned subsidiaries DRMC and DRRI. All intercompany accounts and transactions have been eliminated in consolidation. (e) Cash Equivalents The Company considers all highly liquid debt instruments with original maturities of three months or less at date of purchase to be cash equivalents. (f) Restricted Cash Restricted cash is cash deposits made by timeshare purchasers to hold their unit. (g) Property and Equipment Property and equipment are stated at cost. Property and equipment held under capital leases are stated at the present value of minimum lease payments at the inception of the lease. F-11 DEBBIE REYNOLDS HOTEL & CASINO, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued Depreciation on property and equipment is calculated on the straight-line method over the estimated useful lives of the assets as follows: Building 20 years Building improvements 10 years Furniture and equipment 5 years Property and equipment held under capital leases and leasehold improvements are amortized straight-line over the shorter of the lease term or estimated useful life of the asset. (h) Income Taxes Under the asset and liability method of Statement 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under Statement 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. (i) Self Insurance The Company is self-insured for losses and liabilities related primarily to health care. The Company does not have a maximum self insurance exposure. Losses are accrued based upon the Company's estimates using historical information. (j) Recognition of Timeshare Revenue Revenue from sales of timeshare interests is recognized in accordance with the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 66, Accounting for Sales of Real Estate. No sales are recognized until such time as a minimum of 10% of the purchase price has been received in cash, the buyer is committed to continued payments of the remaining purchase price, the Company has been released of all future obligations for the timeshare interest and the recession period has passed. (k) Earnings Per Share Earnings per common and common equivalent share is based upon the weighted average of common and common equivalent shares outstanding during the year. Primary and fully diluted earnings per share are the same. Earnings available to common shares have been reduced for preferred stock dividends declared of $65,000 in 1994 and preferred stock dividends not declared and in arrears of $65,000 in 1995. F-12 DEBBIE REYNOLDS HOTEL & CASINO, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (l) Use of Estimates Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these financial statements in conformity with generally accepted accounting principles. Actual amounts could differ from these estimates. (m) Inventories Inventory of food and beverage is accounted for at the lower of cost (first-in first-out basis) or net realizable value. (n) Fair Value of Financial Instruments In December 1991, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 107 Disclosure about Fair Value of Financial Instruments (SFAS 107). SFAS 107 requires all entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized on the balance sheet, for which it is practicable to estimate fair value. SFAS 107 defines fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. As of December 31, 1995, the carrying value of all financial instruments approximates fair value based on what the instrument could be exchanged for in a current transaction between willing parties. (o) Recently Issued Accounting Standards The FASB issued SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of in March 1995. This statement, effective for the Company's fiscal year beginning January 1, 1996, requires that long-lived assets and certain identifiable intangibles to be held and used by an entity, be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Management believes that if SFAS No. 121 had been adopted as of December 31, 1995, it would not have had a significant effect on the financial position or results of operations of the Company. The FASB issued SFAS No. 123, Accounting for Stock-Based Compensation in October 1995. This statement, effective for the Company's fiscal year beginning January 1, 1996, requires certain disclosures about the impact on results of operations of the fair value of stock-based employee compensation arrangements. Management believes that if SFAS No. 123 had been adopted as of December 31, 1995, it would not have had a significant effect on the financial position or results of operations of the Company. (p) Reclassifications Certain amounts in the 1994 consolidated financial statements have been reclassified to conform with the 1995 presentation. F-13 DEBBIE REYNOLDS HOTEL & CASINO, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (2) Due From Affiliates In March 1993, the Company entered into an oral agreement with an affiliate to lease the bar and any liquor operations, for a five-year period with five five-year renewal options. Payments to the Company under the agreement are equal to 8% of net liquor sales and are payable monthly. Included in due from affiliates is approximately $62,000 as of December 31, 1995, for working capital advances. On August 1, 1996, DRMC received a liquor license and terminated this lease. The Company advanced $455,000 during 1994 to the chairman of the board of directors. The funds were advances against future profits earned under an employment agreement. (3) Inventories During 1995, the Company finished construction of all timeshare units and transferred the cost associated with these units into inventory. At December 31, 1995, $558,000 of cost relating to units remained in inventory awaiting sale. The Company maintained an inventory of $57,000 of food and beverage for the bar and restaurant area at December 31, 1995. F-14 DEBBIE REYNOLDS HOTEL & CASINO, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (4) Long-Term Debt and Capital Lease Obligations Long-term debt at December 31, 1995 consists of the following: First mortgage note payable, due March 15, 1997, interest at 13% payable monthly; secured by a first deed of trust; payments of $1,200 are due upon sale of each timeshare unit, currently in default (see below) $ 2,115,000 Note payable, due August 23, 1999, interest at 14%, secured by a fourth deed of trust, currently in default (see below) 2,865,000 Note payable, due December 1, 1996, interest at the greater of 12% or 4% above prime rate; secured by a third deed of trust; payments due monthly based on a graduated scale of timeshare sales, currently in default (see below) 885,000 Note payable, due June 7, 1996, interest at 13% payable monthly; secured by a second deed of trust; payments of $1,000 are due upon sale of each timeshare unit (see below) 151,000 Convertible subordinated debentures, interest at 8-3/4%, due March 25, 1996; convertible into one share of common stock at $4.50, net of discount of $180,000 and $360,000 as of December 31, 1995 and 1994, respectively; effective rate of 19%, currently in default 576,000 Convertible subordinated debentures, interest at 8-3/4%, due November 17, 1998; convertible into one share of common stock at $4.50, net of discount of $92,000 and $187,000 as of December 31, 1995 and 1994, respectively; effective rate of 21%, currently in default 591,000 Capital lease obligations (note 6) 688,000 Other 457,000 ----------- Total long term debt and capital lease obligations 8,328,000 Less current maturities (a) (8,078,000) ----------- Long term debt and capital lease obligations, excluding current maturities $ 250,000 ===========
The aggregate scheduled maturities of long-term debt and capital lease obligations for each of the years subsequent to December 31, 1995 are as follows: 1996, $8,078,000(a); 1997, $166,000; 1998, $72,000; 1999, $12,000; and 2000, $-0-. As disclosed above, two notes require aggregate payments of $2,200 upon the sale of each timeshare unit and a third requires graduated payments based on aggregate timeshare sales. The sales of timeshare units will accelerate the principal payments on such notes, however no assumptions regarding such accelerated principal payments have been reflected in the maturities schedule. - -------------- (a) The Company has reclassified $5,549,000 of long term debt to current, because of certain events of default and noncompliance with certain loan covenants at December 31, 1995. F-15 DEBBIE REYNOLDS HOTEL & CASINO, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued On March 22, 1994, the Company obtained a $2,500,000 loan from Bennett Management & Development Corp. (Bennett), the proceeds of which were principally used to repay an existing mortgage on the Hotel and for general corporate purposes. In consideration of the loan the Company agreed to issue to Bennett 25,000 shares of its common stock. The chairman of the board of directors of the Company has personally guaranteed the repayment of the loan. In August 1995, the Company obtained an additional $2,865,000 loan from Bennett, the proceeds of which were principally used to pay off existing debt and for general corporate purposes. On December 1, 1994, the Company obtained a $1,100,000 loan from Source Capital Corporation (Source), the proceeds of which have been used principally to complete construction of the museum and for general corporate purposes. Payments on the loan, although made monthly, are to be facilitated through the following schedule of timeshare sales: Through January 31, 1995: $100 per timeshare sale between 1 and 350 units $500 per timeshare sale between 351 and 515 units $1,500 per timeshare sale in excess of 516 units Subsequent to February 1, 1995: $500 per timeshare sale between 1 and 515 units $1,500 per timeshare sale in excess of 516 units until the loan is repaid. On June 15, 1994, the Company obtained a $1,000,000 loan from TPM Holdings, Inc. (TPM), the proceeds of which have been used principally to continue construction of the museum and for general corporate purposes. The loan agreement provided that in the event that the loan was not paid in full by February 1995, TPM would receive warrants that provided for the conversion of the then outstanding indebtedness into the Company's common shares. The warrants would have entitled the holder to convert the then outstanding indebtedness into the Company's restricted common shares at a price of $3 per share, or in the event of a public offering or private placement of the Company's common stock at an offering price of less than $4 per share, then 75% of that offering price. Additionally, the lender would receive warrants to purchase 75,000 restricted common shares at the lower of $4 per share or in the event of a public offering or private placement of the Company's common stock at less than $4 per share, then 75% of that offering price. Additionally, if the loan was not paid in full by February 1995, TPM could, at its option, require DRHC to exercise its right to terminate the casino operations lease (refer to Note 5), provided that TPM advances DRHC all costs incurred with terminating the lease. Furthermore, TPM could not exercise its right to require the lease termination without prior approval of the Nevada Gaming authorities. Subsequent to December 31, 1994, this option agreement was terminated and replaced with warrants to purchase up to 100,000 shares of restricted common stock. The warrants are exercisable for five years at an exercise price of the lesser of $3.00 or 75% of a public offering or private placement of the Company's common stock. This note has been paid in full by the Company subsequent to December 31, 1995. F-16 DEBBIE REYNOLDS HOTEL & CASINO, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued In April 1995, the Company obtained a $500,000 loan from TPM, the proceeds of which were principally used in the construction of the museum and for general corporate purposes. The loan bore interest at 13% and was due June 25, 1996. This loan was issued as an addition to the lenders second mortgage. The Company paid off this loan in November of 1995. In October 1994, the Company completed a private placement of securities for the Company's expansion and capital improvements, and sold 128,515 units, with total net proceeds of approximately $3,868,000. The units each consist of four shares of Series AA Convertible Preferred Stock, $.0001 par value, four two year Convertible Debentures each in the principal amount of $4.50, and four Class A Common Stock Purchase Warrants, each to purchase one share of common stock at $5.50 per share. The preferred shares accrue a cumulative stock dividend of 8-3/4% based on a conversion rate of $4 per share. The preferred shares are convertible into common stock at $4 per share and have a liquidation preference of $4 per share. In connection with the private placement, the Company issued 514,060 shares of preferred stock. The Company has assigned values to each of the components based on the estimated fair market value at the date of sale, which resulted in an original issue discount for the convertible debentures of $385,000. In November 1994, the Company completed a second private placement of securities for the Company's expansion and capital improvements and sold approximately 38,000 of the 66,000 units offered, with total net proceeds of approximately $896,000. The units each consist of four shares of Series AA Convertible Preferred Stock, $.0001 par value, four four-year Convertible Debentures each in the principal amount of $4.50 and four Class B Common Stock Purchase Warrants, each to purchase one share of common stock at $5.50 per share. The preferred shares accrue a cumulative stock dividend of 8-3/4% based on a conversion rate of $4 per share. The preferred shares are convertible into common stock at $4 per share and have a liquidation preference of $4 per share. In connection with the second private placement, the Company issued 153,844 shares of preferred stock. The Company has assigned values to each of the components based on the estimated fair market value at the date of sale, which resulted in an original issue discount for the convertible debentures of $192,000. In August 1995, the Company offered all holders of the Company's units issued pursuant to the Company's private placement memorandum dated March 25, 1994 and November 17, 1994 the opportunity to convert the Series AA Preferred Stock and Debentures constituting part of the units into restricted shares of the Company's common stock. Each Series AA Preferred Stock and Debenture converted into one share of the Company's common stock at the reduced conversion prices of $2.00 and $2.25, respectively. The total dollar amount converted from Series AA Preferred Stock and Debentures was $2,954,500, which converted into 1,392,240 shares of the Company's common stock. As additional consideration, the Company also offered the unit holders the right to exercise each Class A Warrant to purchase two shares of Common Stock (instead of one) at an exercise price of $1.00 (instead of $5.50) for 60 days from the date of the offer. Pursuant to the Warrant offer, the Company received $93,120 from the exercise of warrants to purchase 93,120 shares of common stock. As additional consideration to the Company, the unit holders waived the past due interest and dividend payments owed. Total expenses associated with this conversion are $592,000. F-17 DEBBIE REYNOLDS HOTEL & CASINO, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued The convertible debentures prohibit the Company from paying any dividends, other than the common stock dividend requirement of the preferred stock, while the debentures are outstanding. In December 1994, the Company issued 25,924 shares of restricted common stock as Convertible Preferred Stock dividends with a value of approximately $65,000. These dividends are at a rate of 8-3/4% and are in accordance with the private placements stated above. In January 1995, World Venture Trust, an unaffiliated company, loaned the Company $250,000. The loan bore interest at 10% and was due April 26, 1995 with a principal balance of $275,000. The loan was secured by the Company's real and personal property. The loan was convertible, at the option of the holder, after maturity, into 200,000 shares of the Company's common stock. The Company paid off this loan in September of 1995 with $275,000 in cash and issued the holder 15,745 restricted shares of the Company's common stock. In January 1995, Realecon, a California Corporation, loaned the Company $125,000 and advanced an additional $75,000 in March 1995. The loan bore interest at 12% and was due July 16, 1995. The amount due at maturity was $235,000. The loan was secured against certain receivables of the Company and required principal and interest payments equal to $1,000 per timeshare interval sold. In consideration of the loan, the Company issued Realecon 10,000 restricted shares of the Company's common stock. The Company paid off this loan in June of 1995. In March 1995, the Company obtained a $245,000 loan from an independent third party, the proceeds of which were principally used in the construction of the museum. The loan bore interest at 6% and was due March 31, 1996. The loan was convertible, at the holders option, into the Company's restricted common stock at a rate of $1.00 per share. In August 1995 the holder converted the indebtedness into 245,000 shares. In October 1995, the Company raised additional financing through a Regulations S offering under the Securities Act of 1933 (the Act). The Company sold 300,000 shares of the Company's common stock for net proceeds of approximately $225,000. The offering of shares was directed solely to persons who are not residents of the United States. The offer was for a maximum of 2,666,666 shares at $.75 per share. The shares were not registered under the Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration. In addition the shares were subject to a minimum six month restriction on transfer. In December 1995, the Company commenced a Regulation D offering under the Act. At December 31, 1995 the Company sold 50,000 units at a $1.00 per unit price, consisting of one share of the Company's common stock and one warrant to purchase one share of common stock. Subsequent to year end, an additional 150,000 units of this offering have been sold. The offering of shares was directed solely to persons who met the definition of "Accredited Investor" set forth in Rule 501(A) of Regulation D promulgated under the Act. The Company offered a maximum of 3,000,000 units (the Unit), each Unit consisting of one share of common stock and one warrant to purchase one share of common stock at $1.00 per share. F-18 DEBBIE REYNOLDS HOTEL & CASINO, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (5) Due to Affiliates Due to affiliates at December 31, 1995 consists of the following: Accounts payable to the Chairman of the Board of Directors of the Company $ 838,000 Unsecured loans payable, without interest, due on demand 78,000 ---------- Total due to affiliates $ 916,000 ========== During 1995, a $201,000 loan from a related party was forgiven and included in other income. (6) Leases (a) Lessee DRHC is obligated under various capital leases for certain hotel furniture and equipment that expire at various dates during the next five years. At December 31, 1995, the gross amount of property and equipment and related accumulated amortization recorded under capital leases is as follows: Furniture and equipment $ 1,154,000 Less accumulated amortization (644,000) --------------- $ 510,000 =============== Amortization of assets held under capital leases is included in depreciation and amortization expense. The Company entered into a lease agreement during 1993 for the Hotel's sign under terms classified as an operating lease. The lease is for a five year period and provides for monthly payments of approximately $8,000, representing principal only. Rent expense for the years ended December 31, 1995 and 1994 aggregated $99,000 and $130,000, respectively, and is included in general and administrative expense in the accompanying consolidated statements of operations. F-19 DEBBIE REYNOLDS HOTEL & CASINO, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued Future minimum lease payments under noncancelable operating leases (with initial or remaining lease terms in excess of one year) and future minimum capital lease payments, as of December 31, 1995 are:
Capital Operating Leases Leases ---------- --------- Year ending December 31: 1996 $ 578,000 99,000 1997 176,000 99,000 1998 81,000 74,000 1999 14,000 -- ========== ========== Total minimum lease payments 849,000 272,000 ========== Less amount representing interest (at rates ranging from 10% to 17.5%) (161,000) ---------- Present value of net minimum capital lease payments $ 688,000 ==========
(b) Lessor The Company leases the casino and bar operations under agreements classified as operating leases, as follows: The Company leases approximately 6,000 square feet of its facility to an unaffiliated third party operator for purposes of operating a casino. The lease is for a four-year period beginning July 1993, with extensions available for an unspecified number of successive one-year periods. Rental income is $175 per slot machine per month but not less than $30,625 in any one month, reduced by 10% until the Company is fully operating two restaurants. Rental income was $502,000 and $472,000 for the years ended December 31, 1995 and 1994, respectively. Included in the lease is a provision whereby between July 1994 and June 1996 the Company has the right to terminate the lease. In exchange, the Company would have to pay the lessee an amount equal to the remaining book value of the slot machines, one-half of the lessee's capitalized expenditures related to the casino operations, and reimburse the lessee for renovations made to the casino area. The Company served the operator with a termination notice in February 1996 and requested that the operator cease operations effective June 30, 1996. On March 31, 1996, the operator discontinued its gaming operations on the property and subsequently filed a lawsuit against the Company. The restaurant and bar and liquor sales operations were leased to an affiliate under a lease that commenced in April 1994 and was terminated in August of 1996. F-20 DEBBIE REYNOLDS HOTEL & CASINO, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (7) Income Taxes Income tax benefit attributable to losses from continuing operations differed from the amount computed by applying the federal income tax rate of 34% to pretax loss from operations as a result of the following: Computed "expected" tax benefit $ 2,925,000 Reduction in income tax benefit resulting from: Change in the valuation allowance for deferred tax assets (2,925,000) ----------- $ -- =========== Prior to March 8, 1994, DRHC was taxed as an S Corporation and HPL as a C Corporation. The S Corporation losses incurred prior to that date are not eligible to be carried over by the Company. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets are presented below: Deferred tax assets: Net operating loss carry forward $ 4,104,000 Allowance for doubtful accounts (5,000) Less valuation allowance (4,099,000) ----------- Total net deferred tax assets $ -- =========== At December 31, 1995 the Company has net operating loss carry-forwards for federal income tax purposes of approximately $18,000,000 which are available to offset future federal taxable income, if any, through 2010. (8) Liquidity and Going Concern The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. The Company's recurring losses from operations, working capital deficiency, debt service obligations, and defaults on various agreements raise substantial doubt about the consolidated entity's ability to continue as a going concern. Management of the Company is seeking additional sources of financing to reduce its debt service obligations and is implementing cost control measures to increase the cash flow of the Company. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. The Company has entered into an agreement to sell substantially all of the assets of the Company (see Note 11). The sale of the Hotel to ILX Incorporated (ILX) is subject to the approval of the Company's shareholders, a standard due diligence investigation by ILX, receipt of any necessary governmental approvals, and satisfaction of various other conditions. The Company anticipates that the closing will occur in the first quarter of 1997; however, there can be no assurance that the closing will occur. F-21 DEBBIE REYNOLDS HOTEL & CASINO, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued On June 28, 1994, the Nevada Real Estate Board granted DRRI its permanent timeshare license. The Company continues to allocate substantial resources to developing the timeshare operations. Through December 31, 1995, 1,082 timeshare units have been sold, proceeds from which total $7,353,000. (9) Commitments and Contingencies The Company finances a significant portion of its timeshare sales. To facilitate the sale of timeshares the Company has obtained a $25,000,000 (increased to $35,000,000 at March 31, 1995) commitment from Bennett Funding International, Ltd. (Bennett) whereby Bennett purchases timeshare notes receivable from the Company with recourse, and subject to its credit criteria, and advances the Company 85% of the amount financed. Generally, the Company receives at least a 10% down payment from the purchaser and finances the remaining 90% with Bennett. At December 31, 1995 the Company had utilized and was contingently liable for approximately $4,967,000 of this commitment. On January 25, 1994, DRHC entered into an agreement with Raymax Production, Ltd. (Raymax), a company wholly owned by the chairman of the board of directors, to provide entertainment services for the remainder of the chairman's life for $50,000 per month. On March 9, 1995, this agreement was amended. Under the agreement, the chairman was to perform in the showroom at the Property for a minimum of 30 weeks per year and perform other managerial and promotional services. As compensation for her performance services Raymax was to receive $25,000 per weekly performance (the Weekly Performance Fee). Under the agreement Raymax also was to receive annually 10% of the Company's net profits (as defined in the agreement) for her non-entertainment services. Raymax had the right to take a non-refundable monthly draw against the net profits equal to the difference between $60,000 and the Weekly Performance Fees for such month, up to a maximum outstanding draw of $1,000,000. If the draw taken for any year exceeds the 10% net profits for such year, such excess would be carried forward as a non-refundable advance against future net profits earned under the agreement. Raymax also was to receive reimbursement of reasonable business and travel expenses. Under the agreement, the Company is required to carry life insurance on the chairman in the amount of $10,000,000 for the benefit of the Company. During 1994, the Company had advanced $455,000 to Raymax against future amounts owed under this agreement, all of which were outstanding at December 31, 1995. The Company is currently in default of this agreement due to non-payment. As of December 31, 1995, the Company was in arrears approximately $795,000 pursuant to the agreement. In November 1996, Raymax delivered a notice to the Company terminating this agreement. Ms. Reynolds has agreed to render showroom and other services on an "at will" basis, terminable anytime. The terms relating to Ms. Reynolds services are the same as specified in the terminated agreement except that as to all unpaid past and future sums due Ms. Reynolds, the Company shall pay interest at a rate of prime plus 2%. Effective March 9, 1995, the Company entered into an agreement with Ms. Reynolds and Raymax under which Ms. Reynolds was to grant the Company the exclusive, perpetual, non-transferable license: (i) to display Ms. Reynolds' extensive Hollywood memorabilia collection at the Company's Hollywood Movie Museum; and (ii) to use the name, photograph, likeness and signature of Ms. Reynolds for the promotion of the Company and its operations. In consideration for the license, the Company was to agree to issue 400,000 shares of restricted common stock to Raymax and to insure, maintain and house the F-22 DEBBIE REYNOLDS HOTEL & CASINO, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued memorabilia. As additional consideration for the license, upon Ms. Reynolds' death, the Company will pay to her heirs and/or assigns annually, 10% of the net profits of the Company (as defined in the agreement) in perpetuity. The Company was in default of the agreement with Ms. Reynolds. In November 1996, Raymax delivered a notice to the Company terminating this agreement. Also on March 9, 1995, the Company entered into an agreement with Hollywood Motion Picture and Television Museum, a non-profit organization (Hollywood), which is the owner of an extensive memorabilia collection which is displayed in the Museum. The Company has agreed to insure, maintain and house the memorabilia. The Company will pay $50,000 per year to Hollywood until the construction costs of the Museum have been recouped from the Museum profits, at which time the annual payments will increase to $100,000. The payments may be made in cash or in movie memorabilia. On February 14, 1994, DRHC entered into an employment agreement with an individual to serve as general manager of the Hotel for a period of five years. As compensation for services performed, the employee will receive an annual salary of $150,000. The employee will also receive a bonus calculated as 2% of DRHC's hotel operation net profits, as defined, which excludes timeshare operations. Additionally, this employee has been granted stock options to purchase 275,000 shares of the Company's restricted common stock, which vest ratably per diem and are exercisable at $3.00 per share for five years from the vesting date. In May 1995, the Company terminated this contract with the employee and entered into a modified contract. The modified contract with DRMC was for the period June 1995 through May 1996. Under this contract the employee served as Chief of Operations for the Debbie Reynolds Hotel for a term of one year and received annual base compensation of $80,000. The employee also received a $30,000 payment as additional consideration from the new contract. As of December 31, 1995, the employee is fully vested into his stock options to purchase 275,000 shares of the Company's common stock exercisable at $3.00 per share. During 1996, the Company granted options to purchase an additional 25,000 shares of the Company's common stock exercisable at $1.00 per share. In September 1996, the employee and the Company mutually terminated his employment. On December 7, 1995, the Company entered into Management Consulting Agreements with two unrelated third party consultants. Pursuant to these agreements, the Company issued 750,000 options to purchase shares of the Company's common stock at $.75 per share in exchange for an anticipated eight months of consulting services. These options were exercised by the consultants through the issuance of two short term promissory notes payable with an aggregate principal value of $563,000. Subsequent to the issuance of the shares, the consultants defaulted on these notes. The Company is involved in various claims and legal actions. In the opinion of management, the ultimate disposition of these matters has been evaluated and those claims considered probable and estimable have been accrued for. As of December 31, 1995, the Company has accrued $450,000 for these claims. F-23 DEBBIE REYNOLDS HOTEL & CASINO, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (10) Stock Plans In June 1994, the Board of Directors of the Company adopted the 1994 Employee Stock Compensation Plan (Plan) for all full-time and part-time employees and consultants and advisors to the Company. The Company reserved an aggregate of 1,000,000 shares of the Company's common stock for issuance under the 1994 Plan. The number of shares granted to an individual is at the discretion of the Board of Directors of the Company. As of December 31, 1995, 560,000 shares have been granted under the Plan. In June 1994, the Board of Directors adopted the 1994 Stock Option Plan (Option Plan) for officers, directors and key employees, approved by shareholders at the November 1994 Annual Shareholders meeting. The Company has reserved an aggregate of 2,000,000 shares of the Company's common stock for issuance under the 1994 Plan. The Option Plan includes options intended to qualify as incentive stock options, non-qualified options, and formula plan options which are non-discretionary and will be granted annually to the disinterested directors of the Company. As of December 31, 1995, the Company has issued options to purchase 190,000 shares of common stock with an exercise price of $4 per share. The options, which vest immediately, expire on October 10, 1999. As of December 31, 1995, none of these options have been exercised. (11) Subsequent Event On October 30, 1996, the Company entered into an agreement with ILX Incorporated (ILX), an Arizona Corporation, for the purchase of substantially all of the assets of the Company for the purchase price of $16,800,000. The purchase price will be payable to the Company in cash, assumption of existing mortgage debt, and issuance of unrestricted ILX common stock. Under the ILX Agreement, immediately after the closing, ILX has agreed to lease certain of the hotel facilities to Debbie Reynolds and/or a designee (the Hotel Facilities Lease). The Hotel Facilities Lease is expected to be for a term of 99 years, with a monthly lease payment of approximately $150,000, and will include the showroom, the museum, the gift shop, the vacant casino space, the back bar and certain joint areas. The sale of the Hotel to ILX is subject to the approval of the Company's shareholders, a standard due diligence investigation by ILX, receipt of any necessary governmental approvals, and satisfaction of various other conditions. The Company anticipates that the closing will occur in the first quarter of 1997; however, there can be no assurance that the closing will occur. In August 1996, the Company obtained a $500,000 loan from an unrelated third party, the proceeds of which were principally used to reduce past due tax obligations and reduce trade payable debt. The loan bears interest at 12% and has a $550,000 principal balance due November 1, 1996. This loan is secured with a fourth mortgage on the Company's property and with certain of the Company's receivables. In connection with the financing the Company granted the unrelated third party warrants to acquire 260,000 shares of the Company's common stock at an exercise price of $.70 per share. On October 18, 1996, the unrelated third party agreed to extend the maturity date to February 1, 1997. In consideration for the extension, the Company reduced the unrelated third party exercise price on the warrants to acquire 260,000 share of the Company's common stock from $.70 per share to $.22 per share. F-24 EX-10.22 2 LOAN AGREEMENT Exhibit 10.22 Loan Agreement between DRMC and World Ventures Trust, and Promissory Note, all dated April 26, 1995. THIS CONVERTIBLE NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THE NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND NEITHER THE NOTE NOR THE SHARES NOR ANY INTEREST IN THE NOTE OR THE SHARES MAY BE SOLD, OFFERED FOR SALE, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION THEREUNDER AND UNDER APPLICABLE STATE LAW, THE AVAILABILITY OF WHICH MUST BE ESTABLISHED TO THE SATISFACTION OF THE MAKER. CONVERTIBLE PROMISSORY NOTE AND NOTE SECURED BY DEED OF TRUST FOR THE VALUE RECEIVED, DEBBIE REYNOLDS HOTEL AND CASINO, INC., a Nevada corporation with its principal executive office in Las Vegas, Nevada ("Maker") promises to pay to the order of WORLD VENTURES, a trust, ("Payee"), the sum of TWO HUNDRED SEVENTY-FIVE THOUSAND DOLLARS ($275,000.00) in legal and lawful money of the United States of America on April 26, 1995 at Las Vegas, Nevada. This Note shall bear interest from the date hereof until paid at the rate of 10 % per annum, payable on maturity. The Maker shall have the right to prepay prior to maturity all or any part of the principal of this Note, together with all accrued interest thereon, without premium or penalty. 1. Conversion. At the option of the Payee, but only after maturity, after a five (5) day notice, the principal and all accrued interest represented by this Note may be converted, in full or in part, into shares of the Common Stock $.0001 par value of Maker ("Shares") at the conversion price of $1.375 per share ("Conversion Price") subject to adjustment as hereinafter provided. In order to exercise the conversion privilege, the holder of this Note shall surrender this Note, duly endorsed or assigned to Maker or in blank, at the principal executive office of Maker, accompanied by written notice to Maker at such office that the holder elects to convert this Note. If the full conversion privilege is exercised, this Note shall be deemed to have been fully converted immediately prior to the close of business on the day of surrender of this Note for full conversion in accordance with this paragraph and at such time the rights of the holder of this Note as such shall cease, and the person or persons entitled to receive the Shares issuable upon full conversion shall be treated for all purposes as the record holder or holders of such Shares at such time. In order to exercise the partial conversion privilege, the holder and the Maker of this Note shall, on the back of this Note, indicate the fraction of the indebtedness converted for Shares and the indebtedness remaining after such partial conversion. In the event of such partial conversion, each party 1 shall affix its signature and the date of such partial conversion to the back of this Note. If the partial conversion privilege is exercised, this Note shall be deemed to have been partially converted immediately prior to the close of business on the date the holder and the Maker indicate such partial conversion on the back of this Note in accordance with this paragraph and at such time the rights of the holder of this Note as to that portion of the Note converted for Shares shall cease, and the person or persons entitled to receive the Shares issuable upon partial conversion shall be treated for all purposes as the record holder or holders of such Shares at such time. As promptly as practicable on or after the conversion date, whether full or partial, the maker shall issue and shall deliver to the holder at the address specified in the notice a certificate or certificates evidencing the ownership of the shares by the holder hereof, which shall bear only a standard restrictive legend that the Shares have not been registered. The Conversion Price and number of Shares purchasable pursuant to this Note shall be subject to adjustment from time to time as hereinafter stated. In the event Maker shall at any time after the date of execution hereof exchange as a whole, by subdivision or consolidation in any manner or by effecting a stock dividend, the number of Shares then outstanding into a different number of Shares, with or without par value, then thereafter the number of Shares which the holder shall have the right to purchase (calculated immediately prior to such change), shall be increased or decreased, as the case may be, in direct proportion to the increase or decrease in the number of Shares of Maker issued and outstanding by reason of such change, and the Conversion Price of the Shares after such change shall in the event of an increase in the number of Shares be proportionately reduced, and in the event of a decrease in the number of Shares be proportionately increased. In case of any consolidation of Maker with, or merger of Maker into, any other corporation (other than a consolidation or merger in which Maker is the continuing corporation), the sale of all the shares of the Company's outstanding Common Stock or any transaction pursuant to which Maker shall become a subsidiary of a holding company, the corporation formed by such consolidation or the corporation resulting from such merger, or such holding company, as the case may be, shall execute an amendment to this Note providing that the holder of this Note then outstanding shall have the right thereafter to convert this Note in full or in part into the Shares upon such consolation, merger, transfer or holding company transaction by the holder into which this Note might have been converted immediately prior to such consolidation, merger, transfer or holding company transaction. The provisions of this paragraph shall similarly apply to successive consolidations, mergers, transfers or holding company transactions. The holder of this Note, by his acceptance hereof, consents and agrees to any and all such amendment or amendments. 2 In the event of the sale of all or substantially all of the assets of Maker, or in the event of any distribution of all or substantially all of its assets in dissolution or liquidation, Maker shall mail notice thereof by registered mail to the holder and shall make no distribution to the shareholders of Maker until the expiration of thirty (30) days from the date of mailing of the aforesaid notice. If the holder shall not exercise this conversion privilege within thirty (30) days from the date of mailing notice to the holder by Maker, that Maker either (i) proposes to sell all or substantially all of its assets or (ii) proposes to distribute assets in dissolution or liquidation, all rights herein granted not exercised within such thirty (30) day period, shall there after become null and void. Maker shall not, however, be prevented from consummating any such sale without waiting the expiration of such thirty (30) period, it being the intent and purpose hereof to enable the holder, upon exercise of this conversion privilege, to participate in the distribution of the consideration to be received to Maker upon any such sale or sublease, or in the distribution of assets upon any dissolution or liquidation. This Note and the Shares issuable upon conversion of the Note have not been registered under the Securities Act of 1933, as amended, (the "Securities Act") or the securities laws of any states and will be offered and sold in reliance on exemptions from the registration requirement of such laws. The Note and the underlying Shares are deemed to be "restricted securities" as that term is defined under Rule 144 promulgated under the Securities Act. Prior to the issuance of the underlying Shares upon the conversion of the Note the Payee will be required to execute an investment letter in substantially the form attached hereto acknowledging that the Shares are "restricted securities" and representing that the Shares are being taken by Payee for investment purposes only and not for distribution. Maker at any time after the Note is converted into the Shares and while the Shares remain "restricted securities" proposes to register under the Securities Act any of its securities, either for its own account or for the account of security holders, other than a registration on Form S-8 or S-14, or any registration on a form which does not permit secondary sales, the Maker shall, at such time, give written notice of such intention to the Payee and upon written request of the Payee received by the Maker within thirty (30) days after the Maker has given such notice, include in such registration (and all related qualifications under state securities laws) all of such Shares held by Payee or a portion thereof specified in such written request. If Payee exercises such right to have the Shares so registered, Payee's registration rights with respect to such registration statement shall be those that are customary in the industry. 2. Interest Savings Clause. Notwithstanding anything to the contrary contained herein, no provision of this Note shall require 3 the payment or permit the collection of interest in excess of the maximum rate (the "Maximum Rate") permitted by applicable law. If any excess of interest in such respect is herein provided for, or shall be adjudicated to be so provided, in this Note or otherwise in connection with the transaction that gave rise to the indebtedness evidenced by this Note, the provisions of this Section shall govern and prevail, and neither Maker nor the successors or assigns of Maker shall be obligated to pay the excess amount of such interest, or any other excess sun paid for the use, forbearance or detention of sums loaned pursuant hereto. If for any reason interest in excess of the maximum rate of interest permitted by applicable law shall be deemed charged, required or permitted by any court of competent jurisdiction, any such excess shall be applied as a payment and reduction of the principal indebtedness evidenced by this Note, and, if the principal amount hereto has been paid in full, any remaining excess shall forthwith be paid to Maker. In determining whether the amount of interest paid or payable under any contingency exceeds the amount of interest paid or payable, if the indebtedness evidenced by this Note had at all times accrued interest at the Maximum Rate, Maker agrees that, to the maximum extent permitted under applicable law, (a) any non principal payment shall be characterized as an expense fee, or premium rather than as interest, (b) prepayments and the effects thereof shall be excluded, (c) the total amount of interest shall be "spread" throughout the entire contemplated term of the Note to and including the maturity date of this Note, and (d) if the indebtedness evidenced by this Note is paid and performed in full prior to the end of the full stated term of this Note and if the aggregate amount of interest received by Payee for the actual period of existence hereof exceeds the amount of interest that would have accrued on the indebtedness evidenced by this Note had such indebtedness at all times from the inception thereof borne interest at the Maximum Rate, Payee shall refund to Maker the amount of such excess, and, in such event Payee shall not be subject to any penalties provided by any laws for contracting for, charging, reserving, taking or receiving interest in any amount in excess of the amount which would have accrued on the indebtedness evidenced by this Note if such indebtedness had, at all times from the inception thereof, borne interest at the Maximum Rate. 3. Waiver. Maker, and any other person liable for the payment of indebtedness evidenced hereby, jointly and severally waive diligence in collecting, presentment for payment, demand, dishonor and bringing suit against any party liable hereon, and all notices, including notice of intention to accelerate the maturity hereof, notice that such acceleration of maturity has occurred, notice of protest, demand, dishonor and nonpayment of the indebtedness evidenced by this Note, (except as otherwise provided in this Note); and expressly agree to any and all extensions, renewals, partial payments, substitutions of evidence of indebtedness and the taking, release or substitution of any security or collateral without notice before or after maturity 4 without in any way affecting the liability of Maker or any other person liable for the indebtedness evidenced hereby. No extension of time for payment of any of the indebtedness or any installment thereof evidenced by this Note made by agreement by Payee with any person now or hereafter liable under this Note shall affect the original liability on this Note of Maker or any other person liable for the payment of the indebtedness or any installment thereof evidenced hereby, even if Maker or other person liable for the payment of the indebtedness evidenced hereby are not parties to such agreement. 4. Deed of Trust and Guaranty. The payment of the indebtedness evidenced by this Note is secured by a Deed of Trust executed on this same date, encumbering the property located at 305 Convention Center Drive, Las Vegas, Nevada 89109, and Payee or any subsequent holder is entitled to the benefits thereof. This Note is also guaranteed by M. Donald Granatstein, pursuant to the Guaranty executed by him as of the date hereof. 5. Events of Default. The occurrence of any one or more of the following events shall constitute an Event of Default, and Maker shall have five (5) days, after written notice is received from Payee, to cure such default or Payee may exercise the Remedies upon Default detailed hereinafter. The events of default are: (a) Maker shall fail to pay this Note when due; (b) Maker shall admit in writing its inability to pay its debts, or shall make a general assignment of its assets or property rights for the benefit of its creditors; or any proceeding shall be instituted by or against Maker seeking to adjudicate Maker a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment or composition of Maker or Maker's debts under any law relating to bankruptcy, insolvency or reorganization or release of debtors, or seeking appointment of a receiver, custodian, trustee, or other similar official for Maker or for any substantial part of Maker's property. (c) Maker dissolves or any action shall be taken by Maker, or the holders of a majority of the issued and outstanding capital stock of Maker, to wind-up or liquidate the business, property or assets of Maker; or (d) The lease for the operation of a gambling casino between Jackpot Enterprises shall be in default or the lessee is not in compliance with all requisite regulatory requirements for the operation of its casino business, or the Maker shall not have received all requisite regulatory approvals required for this loan; or 5 (e) Maker shall sell or attempt to sell substantially all of its assets. 6. Remedies upon Default. Upon the occurrence of any Event of Default, and five (5) days after receipt of notice has elapsed, the holder hereof may at its option: (a) Declare the principal balance of this Note and any accrued interest thereon immediately due and payable without presentment, demand, protest or further notice of any kind, including notice of intention to accelerate and notice of acceleration, all of which are hereby waived by Maker: (b) Exercise any and all right and remedies provided for in, or pursuant to this Note, the Dead of Trust or the Guaranty or by creditors generally; and (c) to the extent permitted by law, bring suit at law, in equity or through other appropriate proceedings, whether for the specific performance of any covenant or agreement contained in the Deed of Trust, for an injection against the violation of the terms hereof or thereof, in aid of the exercise of any power granted hereby or thereby or by law, to recover judgment for any and all amounts due on this Note, under the Deed of Trust or otherwise against Maker and Maker's assets. 7. Cumulative Rights. No delay on the part of the holder of this note in the exercise of any power or right under this Note, under the Deed of Trust, or the Guaranty, shall operate as a waiver hereof. Failure of the holder hereof to exercise any right granted herein shall not constitute a waiver of the right to exercise the same upon the occurrence of a subsequent Event of Default. Enforcement by the holder of this Note of any security for the payment hereof shall not constitute an election by such holder of remedies so as to preclude the exercise of any other remedy available to such holder. 8. Attorneys' Fees and Costs. In the event this Note is placed in the hands of an attorney for collection after the occurrence of an Event of Default, or in the event this Note is collected in whole or in part through legal or judicial proceedings of any nature, including bankruptcy, after the occurrence of an Event of Default, then Make agrees and promises to pay in addition to the remaining unpaid principal and accrued interest on the Note all of the holder's costs of collection, when incurred, including, without limitation, reasonable attorneys' fees, irrespective of whether legal action is filed with a court of competent jurisdiction. 9. Assignment. This Note shall not be assignable by Payee, 6 without prior written consent of the Maker. 10. Governing Law. THIS NOTE IS MADE, ENTERED INTO AND PERFORMABLE IN LAS VEGAS, NEVADA. THE MAKER HAS ITS PRINCIPAL PLACE OF BUSINESS IN LAS VEGAS, NEVADA AND ALL PAYMENTS UNDER THIS NOTE SHALL BE PAID IN CLARK COUNTY, NEVADA CONSEQUENTLY, THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEVADA AND ANY LITIGATION OR OTHER PROCEEDING BETWEEN MAKER AND PAYEE THAT MAY BE BROUGHT, OR ARISE OUT OF, IN CONNECTION WITH OR BY REASON OF THIS NOTE SHALL BE BROUGHT IN THE APPLICABLE FEDERAL OR STATE COURT IN AND FOR CLARK COUNTY, NEVADA WHICH COURTS SHALL BE THE EXCLUSIVE COURTS OF JURISDICTION AND VENUE. IN WITNESS WHEREOF, Maker has caused this Note to be executed by a duly authorized officer of Maker, as of the day and year first above written. MAKER: DEBBIE REYNOLDS HOTEL AND CASINO, INC. By: /S/ DONALD GRANATSTEIN EX-10.23 3 LOAN AGREEMENT Exhibit 10.23 Loan Agreement between the Registrant and RealEcon, and Promissory Note, dated January 16, 1995. SECURED PROMISSORY NOTE $146,000.00 January 16, 1995 FOR VALUE RECEIVED, DEBBIE REYNOLDS HOTEL AND CASINO, INC., a Nevada corporation, and DEBBIE REYNOLDS RESORTS, INC., a Nevada corporation, whose address is 305 Convention Center Drive, Las Vegas, Nevada 89109 (collectively, "Maker"), jointly and severally do hereby promise to pay to the order of REALECON, a California corporation, at 4 Hutton Centre Drive, Suite 410, Santa Ana, California 92707 ("Lender"), or such other place as Lender may designate in writing, in lawful money of the United States of America, the principal sum of One Hundred Forty-Six Thousand Dollars ($146,000.00), together with interest on the outstanding principal balance from time to time outstanding at a rate equal to twelve percent (12%) per annum, compounded annually. Maker is the owner and operator of the Debbie Reynolds Hotel and Casino located in Las Vegas, Nevada (the "Project"), and is currently engaged in the business of, among other things, selling timeshare interests in the Project (the "Timeshare Unit(s)"). This Note is made in connection with a Loan Agreement of even date herewith between Maker and Payee (the "Loan Agreement"). This Note shall mature on May 16, 1995 (the "Maturity Date"). Required payments on this Note of principal and accrued interest shall be due and payable as follows (collectively, the "Required Payments"): (a) Commencing on February 25, 1995 and continuing to and including March 26, 1995 (the "First Payment Period"), Maker, upon the closing of any sale of any Timeshare Unit by Maker during such period, shall cause to be paid to Lender by the escrow holder of such sale, directly out of escrow ("Escrow") from the proceeds of sale of each such Timeshare Unit ("Proceeds"), the amount of One Thousand Dollars ($1,000.00), until a total of Fifty Thousand Dollars ($50,000.00) has been paid to Lender during such First Payment Period. -1- (b) Commencing on March 27, 1995 and continuing to and including April 25, 1995 (the "Second Payment Period"), Maker, upon the closing of any sale of any Timeshare Unit by Maker during such period, shall cause to be paid to Lender by the escrow holder of such sale, directly out of Escrow from the Proceeds, the amount of One Thousand Two Hundred Dollars ($1,200.00), until a total of (i) Sixty-Nine Thousand Six Hundred Dollars ($69,600.00), plus (ii) any deficiency in the amounts which should have been paid to Lender during the First Payment Period, is paid to Lender during such Second Payment Period. (c) Commencing on April 26, 1995 and continuing to and including the Maturity Date (the 'Third Payment Period"), Maker, upon the closing of any sale of any Timeshare Unit by Maker during such period, shall cause to be paid to Lender by the escrow holder of such sale, directly out of Escrow from the Proceeds, the amount of One Thousand Dollars ($1,000.00), until such time as all principal and accrued, but unpaid, interest under this Note is paid in full. (d) In the event of any refinancing of the debt encumbering the Project (a "Refinancing"), Borrower shall pay to Lender, within three (3) days following such Refinancing, all outstanding amounts under this Note, including, without limitation, principal and accrued, but unpaid, interest. All principal and accrued, but unpaid, interest on this Note shall be due and payable on the Maturity Date. All payments on this Note shall, at the option of Lender or the holder of this Note, be applied first to the payment of accrued interest, and after all such interest has been paid, any remainder shall be applied to reduction of the principal balance. Principal and interest shall be payable in lawful money of the United States. Maker shall pay interest on all amounts (including both principal and interest) outstanding under this Note after the Maturity Date (whether by acceleration after a default or otherwise) at a rate equal to twelve percent (12%) per annum, compounded annually, and such interest shall continue to accrue -2- until the date such default is cured pursuant to the provisions of this Note. Anything herein to the contrary notwithstanding, if a late charge is assessed hereunder, such amount shall not exceed the maximum amount permitted by law. DG -------- Initials Maker has the right to prepay at any time, without penalty, all or any part of the unpaid balance of the principal hereof. Maker shall be in default under this Note if (i) any payment of principal or interest is not paid to Lender or the holder of this Note when due; (ii) maker shall be in default under the terms of the Loan Agreement; or (iii) Maker shall make an assignment for the benefit of creditors, admit in writing its inability to pay its debts generally as they become due, files a petition in bankruptcy, be adjudicated insolvent or bankrupt, or petitions or applies to any tribunal for a receiver or for any relief under bankruptcy or other debtor protection statutes. Upon the occurrence of an event of default hereunder, the whole of the unpaid principal and interest owing on this Note shall, at the election of Lender or the holder hereof and without notice, become immediately due and payable. If this Note is not paid when due, whether at maturity or by acceleration, the undersigned promises to pay all costs of collection, including, but not limited to, reasonable attorneys' fees, and all expenses incurred in connection with the protection or realization of any collateral incurred by Lender hereof on account of any such collection, whether or not suit is filed hereon. The undersigned expressly waives presentment, diligence, protest, and demand, notice of protest, demand and dishonor and nonpayment of this Note, and all other notices of any kind, and expressly agrees that this Note or any payment hereunder, may be extended from time to time; and consents to the acceptance of any security for this Note. To the fullest extent permitted by law, the defense of the statute of limitations and any action on this Note is waived by the undersigned. -3- This Note may from time to time be extended or renewed by Lender, with or without notice to the undersigned and any related right may be waived, exchanged, surrendered, or otherwise dealt with, all without affecting the liability of the undersigned. All agreements between the undersigned and Lender hereof are expressly limited so that in no contingency or event whatsoever, whether by reason of advancement of the proceeds hereof, acceleration of maturity of the unpaid principal balance hereof, or otherwise, shall the amount paid or agreed to be paid to Lender hereof for the use, forbearance or detention of the money to be advanced hereunder exceed the highest lawful rate permissible under applicable usury laws. If, from any circumstances whatsoever, fulfillment of any provision hereof or any security agreement securing this Note or any other agreement referred to herein, at the time performance of such provision shall be due, shall involve transcending the limit of validity prescribed by law which a court of competent jurisdiction may deem applicable hereto, then ipso facto, the obligation to be fulfilled shall be reduced to the limit of such validity, and if from any circumstances the holder hereof shall ever receive as interest an amount which would exceed the highest lawful rate, such amount which would be excessive interest shall be applied to the reduction of the unpaid principal balance due hereunder and not to the payment of interest. This provision shall control every other provision of all agreements between the undersigned and the holder hereof. This Note is secured by the collateral assignment to Lender of certain promissory notes payable to Maker pursuant to that certain Assignment of Promissory Notes and that certain Assignment of Deeds of Trust, both of even date herewith executed by Maker in favor of Lender. Should Maker sell, convey, transfer, lease, dispose of, or further encumber or refinance any debt which encumbers the Project, or any portion thereof (whether voluntarily or involuntarily), without providing written notice to Lender and paying to Lender the amounts set forth in subparagraph (d) above, then Lender shall have the right, at its option, to declare all sums under this Note to be immediately due and payable. -4- The provisions hereof shall be binding upon the legal representatives, successors and assigns of the undersigned, and shall inure to the benefit of Lender, its legal representatives, successors and assigns. This Note shall be governed by and construed in accordance with the laws of the State of Nevada and the exclusive forum in the determination of any action relating to the collection, validity, or enforceability of this Note shall be the United States District Court located in the County of Orange, State of California. DEBBIE REYNOLDS RESORTS, INC., DEBBIE REYNOLDS HOTEL AND a Nevada Corporation CASINO, INC., a Nevada Corporation By: /s/ Donald Granatstein By: /s/ Donald Granatstein ------------------------------ ----------------------------- Its: Executive V.P. & Asst. Secretary Its: President & Asst. Secretary -5- AMENDMENT NO. 1 TO LOAN AGREEMENT This Amendment No. 1 to Loan Agreement is made and entered into as March 13, 1995 (the "Effective Date"), by and between (i) REALECON, a California corporation ('Lender"), and (ii) DEBBIE REYNOLDS HOTEL AND CASINO, INC., a Nevada corporation ("DRHCI"), and DEBBIE REYNOLDS RESORTS, INC., a Nevada corporation ("DRRI") (collectively, "Borrower"), with reference to the following facts: R E C I T A L S A. Borrower and Lender have entered into that certain Loan Agreement dated as of January 16, 1995 (the "Loan Agreement") under the terms and conditions of which Borrower borrowed from Lender, and Lender loaned to Borrower, the sum of One Hundred Twenty-Five Thousand Dollars ($125,000.00) in consideration for the repayment by Borrower to Lender of the sum of One Hundred Forty-Six Thousand Dollars ($146,000.00), together with interest on such One Hundred Forty-Six Thousand Dollar ($146,000.00) amount, pursuant to the terms and conditions of that certain Secured Promissory Note dated as of January 16, 1995 executed by Borrower in favor of Lender (the "Note"). B. Borrower desires to Borrower from Lender an additional Seventy-Five Thousand Dollars ($75,000.00) in consideration for increasing the principal amount owed under the terms of the Note by Eighty-Seven Thousand Five Hundred Dollars ($87,500.00), under the terms and conditions set forth herein. AGREEMENT NOW, THEREFORE, in consideration of the foregoing facts, and upon the mutual covenants and conditions hereinafter contained, the parties hereto hereby agree as follows: 1. Defined Terms. All terms used herein with their initial letter capitalized shall have the same meaning as set forth in the Loan Agreement unless otherwise defined herein. 2. Increase in Loan. In consideration for making an additional advance to Borrower of Seventy-Five Thousand Dollars ($75,000.00), Borrower hereby agrees to repay to Lender an additional principal sum under the Note of Eighty-Seven Thousand Five Hundred Dollars ($87,500.00), together with additional interest on such Eighty-Seven Thousand Five Hundred Dollar ($87,500.00) amount, pursuant to the terms and conditions of the Note, as modified by that certain Note Modification Agreement of even date herewith between Lender and Borrower, in the form of that attached hereto as Exhibit "A" and incorporated herein by this reference (the "Note Modification"). Concurrently with the execution hereof, Borrower shall execute and deliver to Lender the Note Modification. -1- 3. Additional Collateral. Borrower's performance under the Note, as modified by the Note Modification, shall be further secured pursuant to Borrower's collateral assignment to Lender, and Borrower hereby grants a security interest to Lender in and to, all of Borrower's right, title, and interest in and to all of Borrower's right to receive any amounts under those certain Vacation Partners Purchase Agreements (Nevada) listed on Exhibit "B" attached hereto and incorporated herein by reference, which evidence amounts owed to Borrower from the buyers' named therein in the aggregate principal amount as of the date hereof of approximately Seventy-Nine Thousand Dollars ($79,000.00) (collectively, the "Additional Collateral Agreements"). Said buyers' performance under the Additional Collateral Agreements are secured by those certain Deeds of Trust which name Borrower as beneficiary, and which are recorded in the county of Clark, state of Nevada, encumbering certain Timeshare Interests purchased by the trustors under such Deeds of Trust (collectively, the "Additional Collateral Deeds of Trust"). The assignment of the Additional Collateral Agreements shall be evidenced by Borrower's execution and delivery to Lender concurrently herewith of an Assignment of Purchase Agreements in the form of that attached hereto as Exhibit "C" and incorporated herein by this reference (the "Additional Collateral Agreements Assignment"). Concurrently herewith, Borrower shall also execute and acknowledge and deliver to Lender an Assignment of Deeds of Trust in the form of that attached hereto as Exhibit "D" assigning to Lender all of Borrower's beneficial interest under the Additional Collateral Deeds of Trust (the "Additional Collateral Deeds of Trust Assignment"). Concurrently herewith, Borrower shall also execute and deliver to Lender a UCC-2 Amendment to Financing Statement in the form of that attached hereto as Exhibit "E." Concurrently herewith, Borrower shall deliver to Lender the originals of all Additional Collateral Agreements and Additional Collateral Deeds of Trust. To the extent that Borrower does not have in its possession any of the Additional Collateral Deeds of Trust, Borrower shall forward such original Additional Collateral Deeds of Trust to Lender immediately following receipt thereof. The Additional Collateral Agreements shall be deemed for all purposes Collateral Agreements under the terms of the Loan Agreement, and the Additional Collateral Deeds of Trust shall be deemed for all purposes Collateral Deeds of Trust under the Loan Agreement, and shall be subject to all of the terms and conditions of the Loan Agreement. 4. Agreement to Provide Additional Ten (10) Collateral Agreements. Borrower acknowledges and agrees that Borrower shall deliver to Lender, and Lender shall be entitled to list on Exhibit "B" attached hereto, the next ten (10) consecutive Vacation Partners Purchase Agreements (Nevada) executed by Borrower and the buyer's named therein with respect to the sale of Timeshare Interests in the Project which actually result in a closing and sale of a Timeshare Interest (the "Future Additional Collateral Agreements"), and such Future Additional Collateral Agreements shall be deemed for all purposes Collateral Agreements under the terms of the Loan Agreement, and shall be subject to all of the terms and conditions of the Loan Agreement; provided, however, Borrower shall not be obligated to pay to Lender, and such sums shall not be added to the amounts due under the Note, any payments made to Borrower attributable to the Future Additional Collateral Agreements through April 30, 1995. Commencing on May 1, 1995, in the event all amounts due under the Note, as amended by the Note Modification, have not been paid to Lender, the Future Additional Collateral Agreements shall be subject to all of the terms and conditions of the Loan Agreement, including, without limitation, paragraph 2 thereof. Borrower shall also deliver to Lender, immediately upon recordation the Deeds of Trust securing the buyers' performance under the Future Additional Collateral Agreements (the "Future Additional Collateral Deeds of Trust), and execute such additional Assignments of Deeds of Trust -2- assigning such deeds of trust to Lender, as Lender may request, and such Future Additional Collateral Deeds of Trust shall be deemed for all purposes Collateral Deeds of Trust under the Loan Agreement, and shall be subject to all of the terms and conditions of the Loan Agreement. 5. Issuance of Stock. In partial consideration for advancing the additional funds described in this Amendment, concurrently herewith, or within ten (10) days following the Effective Date, DRHCI shall deliver to John L. Rainaldi ("Rainaldi") a Stock Certificate executed by the President and Secretary of DRHCI evidencing the issuance to John L. Rainaldi of ten thousand (10,000) shares of common stock of DRHCI, as adjusted by any stock splits or dividends subsequent to the date hereof (the "DRHCI Stock"). DRHCI hereby represents and warrants to Lender and Rainaldi that, upon issuance of the stock certificates representing the DRHCI Stock, the DRHCI Stock shall be duly and validly issued, fully paid, and nonassessable. DRHCI also acknowledges and agrees that the DRHCI Stock shall be owned by Rainaldi and shall not constitute collateral for any amounts loaned to Borrower under the terms hereof or the Loan Agreement. The failure of DRHCI to deliver the stock certificates representing the DRHCI Stock in the manner provided for in this paragraph 5 shall constitute a material default under the terms of the Loan Agreement. 6. Escrow Instruction. Concurrently herewith, Borrower shall execute and deliver to the Escrow Holder Irrevocable Escrow Instructions in the form of those attached hereto as Exhibit "F," instructing Escrow Holder, as a condition of closing of each Timeshare Escrow, to pay the Required Payments to Lender directly out of the proceeds of the sale from each such Timeshare Escrow, pursuant to the terms and conditions of the Note, as amended by the Note Modification, and to deliver the documents referenced in paragraph 4 hereof, as an when escrow closings occur. 7. No Other Changes. Except as modified herein, the remaining terms and conditions of the Loan Agreement shall remain unmodified and in full force and effect. IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first written above. DEBBIE REYNOLDS HOTEL AND CASINO, INC., a Nevada corporation By: /s/ Donald Granatstein --------------------------- Its: Executive Vice President ------------------------ By: /s/ Henry Ricci --------------------------- Its: President ------------------------ [SIGNATURES CONTINUED ON NEXT PAGE] -3- DEBBIE REYNOLDS RESORTS, INC., a Nevada Corporation By: /s/ Donald Granatstein --------------------------- Its: Executive Vice President & Secretary ------------------------------------ REALECON, a California Corporation By: /s/ John L. Rainaldi --------------------------- Its: President EXHIBITS A Note Modification B List of Additional Collateral Agreements C Assignment of Purchase Agreements D Assignment of Deeds of Trust E UCC-2 F Escrow Instructions -4- NOTE MODIFICATION AGREEMENT This Note Modification Agreement ("Agreement") is made and entered into as of March 13, 1995 ("Effective Date"), by and between (i) REALECON, a California corporation ("Lender"), and (ii) DEBBIE REYNOLDS HOTEL AND CASINO, INC., a Nevada corporation, and DEBBIE REYNOLDS RESORTS, INC., a Nevada corporation (collectively, "Maker"). RECITALS A. Maker executed and delivered to Lender that certain Secured Promissory Note dated as of January 16, 1995 in the principal amount of One Hundred Forty-Six Thousand Dollars ($146,000.00) (the "Note"), the definitions of which are incorporated herein by reference. B. Maker and Payee desire to amend the terms of the Note under the terms and conditions set forth herein. AGREEMENT NOW, THEREFORE, in consideration of the foregoing facts, the parties hereto hereby agree as follows: 1. Amendment to Principal Amount. As of the Effective Date, the principal balance of the Note as of the date hereof shall be increased by Eighty-Seven Thousand Five Hundred Dollars ($87,500.00) over and above the principal amount otherwise owing on this Note as of such date. 2. New Maturity Date. The Note shall mature on July 16, 1995 (the "Maturity Date"), and the Third Payment Period and the terms applicable thereto in the Note shall be extended to such new Maturity Date. 3. Payments from Buyers' Under Collateral Agreements. In addition to all other amounts which become due and payable under this Note, an amount equal to any amounts which Borrower receives as payments under those certain Vacation Partners Purchase Agreements (Nevada) from the buyers' thereunder, which have been collaterally assigned to Lender as security for the payment of this Note under the terms and conditions of the Loan Agreement or the Amendment No. 1 to Loan Agreement between Borrower and Lender of even date herewith, shall be due and payable to Lender within five (5) days of receipt of such amounts by Borrower. -1- 4. No Other Changes. Except as expressly modified herein, the remaining terms and conditions of the Note shall remain unmodified, and in full force and effect. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. DEBBIE REYNOLDS HOTEL AND CASINO, INC., a Nevada Corporation By: /s/ Donald Granatsteien --------------------------- Its: Executive Vice President --------------------------- By: Henry Ricci --------------------------- Its: President --------------------------- DEBBIE REYNOLDS RESORTS, INC., a Nevada Corporation By: /s/ Donald Granatstein --------------------------- Its: President & Secretary --------------------------- REALECON, a California corporation By: /s/ John L. Rainaldi --------------------------- Its: President --------------------------- EX-10.24 4 LOAN AGREEMENT Exhibit 10.24 Loan Agreement between the Registrant and Bennett Funding International, Ltd., and Promissory Note, dated July 27, 1995. PROMISSORY NOTE AMOUNT: $ 2,865,000.00 DATE: July 27, 1995 FOR VALUE RECEIVED, Debbie Reynolds Hotel & Casino, Inc., a Nevada Corporation ("Maker"), promises to pay to Bennett Funding International, Ltd. d/b/a Resort Funding, a Delaware Corporation ("lender"), or order, at Two Clinton Square, Syracuse, New York 13202, or at such other place as the holder of this Promissory Note ("Holder") may from time to time designate in writing, in lawful money of the United States of America, the principal sum of up to Two Million Eight Hundred Sixty Five Thousand Dollars ($2,865,000.00) or so much thereof as has been disbursed and not repaid, together with interest on the unpaid principal balance from time to time outstanding until paid, as more fully provided for below ("Note"). The amounts loaned pursuant to this Note shall be made available by Lender for disbursement to Maker on a revolving basis, the maximum amount available hereunder, at any one time, shall be Two Million Eight Hundred Sixty Five Thousand Dollars ($2,865,000.00). Debbie Reynolds Resort, Inc. and Resort Funding, Inc., executed and entered into a Contract of Sale of Membership Agreements and Installment Purchase Agreements with Recourse dated March 7, 1994 ("Agreement"). Maker agreed to execute and deliver this Note with respect to the method and manner in which the Note is to be repaid from and after the date hereof based on the terms of the Agreement. All capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Agreement, the applicable provisions of which are incorporated herein by reference. 1. Interest Interest only shall be due and payable monthly in arrears, shall accrue daily on the basis of a 360-day year and actual days elapsed shall accrue and be payable for a period of twelve (12) months from the date hereof at a rate per annum equal to fourteen percent (14.0%). Thereafter repayment of this Note shall be made, at Holder's option, in thirty-six (36) equal monthly installments of principal and interest or through the timeshare release payment mechanism. In no event shall any interest rate to be charged exceed the maximum contract rate permitted under the applicable Usury Law. Page 1 of 5 If all or any portion of any Interest Installment (as hereinafter defined) is not actually received by Holder from Maker within ten (10) days following the Installment Date that such Interest Installment is due, Maker shall pay on demand to Holder a late charge of two percent (2%) of the amount of such overdue payment. 2. Maturity The initial term of the Loan shall be twelve (12) months from the date of execution of this Note or upon demand of the Holder, but no sooner than ninety (90) days from the date of the execution of this Note, whichever occurs first ("Term"). Such term may be extended at the sole option of the Holder. 3. Security This Note is to be secured by a Mortgage and Security Agreement on the property described in Exhibit "A" attached hereto. 4. Prepayment Prepayment of this Note shall be permitted to be made without premium or penalty pursuant to the payment of release fees as described in Section 10 below. 5. Miscellaneous Every person or entity at any time liable for the payment of the indebtedness evidenced hereby waives: diligence, presentment for payment, protest and demand, notice of protest, demand, dishonor and nonpayment of this Note. Every such person or entity further consents that Holder may renew or extend the time of payment of any part or the whole of indebtedness at any time and from time to time at the request of any other person or entity liable therefor. Any such renewals or extensions may be made without notice to any person or entity liable for the payment of the indebtedness evidenced hereby. This Note is given and accepted as evidence of indebtedness only and not in payment or satisfaction of any indebtedness or obligation. Time is of the essence with respect to all of Maker's obligations and agreements under this Note. This Note and all its provisions, conditions, promises and covenants shall be binding in accordance with the terms hereof upon Maker, its successors and assigns, provided nothing herein shall be deemed consent to any assignment restricted or prohibited by the terms hereof. If more that one person or other entity Page 2 of 5 has executed this Note as Maker, the obligations of such persons and entities shall be joint and several. 6. Default and Remedies The entire unpaid principal amount of this Note, together with all accrued interest thereon, shall, at the option of Holder exercised by written notice to the Maker at its principal executive offices, be due and payable if any one or more of the following events (herein called "Event of Default") shall have occurred (for any reason whatsoever and whether such happening shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body) and be continuing at the time of such notice; (a) if default shall be made in the due and punctual payment of interest or principal of this Note when and as the same shall become due and payable, whether at maturity, by acceleration or otherwise, and such default shall have continued for a period of thirty (30) days after written notice thereof to Maker; (b) if default shall be made in the performance or observance of any of the other covenants, agreements or conditions of Maker contained in this Note, and such default shall have continued for a period of thirty (30) days after written notice thereof to maker; (c) if Maker shall: (i) admit in writing its inability to pay its debts generally as they become due; (ii) file a petition in bankruptcy or a petition to take advantage of any insolvency act; (iii) make any assignment for the benefit of creditors; (iv) consent to the appointment of a receiver of itself or of the whole or any substantial part of its property; (v) on a petition in bankruptcy filed against it, be adjudicated a bankrupt; or Page 3 of 5 (vi) file a petition or answer seeking reorganization or arrangement under the Federal bankruptcy laws or any other applicable law or statute of the United States of America or any State, district or territory thereof; or (d) if default shall be made in the performance or observance of any of the conditions of other agreements as set forth above, and such default shall have continued for a period of thirty (30) days after written notice thereof to Maker; In case any one or more of the Event of Default shall have occurred and be continuing, Holder may proceed to protect and enforce its rights either by suit in equity and/or by action of law, whether for the specific performance of any covenant or agreement contained in this Note or in aid of the exercise of any power granted in this Note, or Holder may proceed to enforce the payment of all sums due upon this Note or to enforce any other legal or equitable right of Holder. No remedy herein conferred upon Holder is intended to limit or restrict any other remedy and each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or otherwise. No course of dealing between Maker and Holder or any delay on the part of Holder in exercising any rights hereunder shall operate as a waiver of any rights or any Holder hereof. Should any proceedings be instituted by Holder to recover any monies due hereunder, Maker agrees to pay all reasonable attorney's fees and costs. 7. Severability In the event that one or more of the provisions of this Note shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Note, but this Note shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein. 8. Governing Law This Note shall be deemed to have been made and executed at Syracuse, New York regardless of the order in which the signatures of the parties shall be affixed hereto, and this Note shall be interpreted, construed, and enforced in accordance Page 4 of 5 with the laws and public policies of the State of New York without regard to the principles of conflicts of law. In any action to enforce this Note, personal jurisdiction and venue shall be at Holder's option in the Supreme Court of the State of New York, County of Onondaga, or in the United States District Court for the Northern District of New York. 9. Modification This Note shall not be modified, amended, changed, terminated, supplemented, or waived except in writing signed by Maker and Holder. 10. Release Fees Maker shall pay release fees to Holder which are generated from the sales of timeshare Periods at the Debbie Reynolds Hotel and Casino in the amount as provided in the Agreement. The release fees shall be applied by Holder to the principal balance due hereunder. On a monthly basis, payment due on Interest Installments shall be re-calculated based on the principal reduction. IN WITNESS WHEREOF, the undersigned sets its hand the date above first written. Debbie Reynolds Hotel & Casino, Inc. By: /s/ Todd Fisher -------------------- Its: CEO Page 5 of 5 EX-10.25 5 LOAN AGREEMENT Exhibit 10.25 Loan Agreement between the Registrant and Source Capital/TPM Holding, Inc., and Promissory Note, dated March 1995. ADDITIONAL ADVANCE PROMISSORY NOTE $500,000.00 Las Vegas, Nevada March _____, 1995 The undersigned, jointly and severally ("the Borrower"), for value received, hereby promise to pay to the order of SOURCE CAPITAL CORPORATION ("Lender") the principal sum of Five Hundred Thousand and No/100 Dollars ($500,000.00) and to pay interest on the unpaid principal hereof, from the date hereof until the principal hereof is paid or renewed, at the rate of fifteen percent (15%) per annum, together with all costs and fees, including reasonable attorneys' fees incurred by Lender in enforcing the obligations of this Note. The principal hereof and interest hereon are payable to Lender at 9016 E. Indiana, Suite 200, Spokane, Washington 99212 or at such other place as the Lender may direct, in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts. Principal and interest shall be advanced and payable as follows: a. Concurrently with the execution hereof, Lender shall advance Borrower up to the sum of $200,000.00, less Lender's loan costs as agreed to by and between Borrower and Lender. b. Upon Borrower's request, but in Lender's sole and exclusive discretion, on or about April , 1995, Lender may advance Borrower an additional sum up to $300,000.00, less Lender's loan costs as agreed to by and between Lender and Borrower. c. Each advance hereunder, as of the date hereof, shall bear interest at the rate of fifteen percent (15%) per annum. d. All payments received hereunder shall be applied first against costs, then against interest, and then against principal. e. In all events, the entire balance, both principal and accrued interest, shall be due and payable no later than June 25, 1995. The undersigned shall have the right at any time to prepay the whole or any part hereof, but any such additional payments shall be credited first upon accrued interest and then upon principal. This Note is secured by a Deed of Trust ("Deed of Trust") executed on or about June 10, 1994, encumbering property located in Clark County, Nevada, to which reference is hereby made for a description of the nature and extent of the security provided thereby and the rights and limitations of rights of the Lender and of the Borrower in respect of such security. If default be made with respect to any payment herein provided for, or in case of an event of default (as defined in the Deed of Trust or any other document executed in connection therewith or -1- referred to therein, to secure this Note, collectively referred to as "Loan Instruments") shall occur, the principal of this Note and any accrued interest and all other indebtedness secured or to be secured thereby may be declared due and payable in the manner and with the effect provided in the Loan Instruments. If default be made in the payment of principal or interest when due hereunder, or if default be made under any of the Loan Instruments and after notice as provided in said security documents, if any, at the option of holder of this note, the whole amount then unpaid shall be due and collectible, whether due by lapse of time or not, and the same shall thereafter bear interest at the rate of nineteen percent (19%) per annum. Failure to exercise this option shall not constitute a waiver of the right to exercise the same at any other time. In the event that Borrower defaults with respect to any payment herein provided for or in case of an event of default under any of the Loan Instruments, the Lender shall have the right, at the Borrower's expense, to retain an attorney or collection agency to make any demand, enforce any remedy, or otherwise protect its rights under this Note and the Loan Instruments. The Borrower hereby promises to pay all costs, fees and expenses so incurred by the Lender, including, without limitation, reasonable attorneys' fees (with or without arbitration or litigation), arbitration and court costs, collection agency charges, notice expenses and title search expenses, and the failure of the defaulting Borrower to pay the same shall, in itself, constitute a further and additional default. In the event that suit or action or arbitration is instituted by the Lender to enforce this Note or any rights under the Loan Instruments, the Borrower hereby promises to pay, in addition to costs and expenses provided by statute or otherwise, such sums as the court may adjudge reasonable as attorneys' fees in such proceeding and on any appeals from any judgment or decree entered therein and the costs and attorneys' fees for collection of the amount due therein. Time is of the essence. All reimbursements and payments required by this paragraph shall be immediately due and payable on demand. The Makers, Borrowers, drawers and endorsers severally waive presentment for payment, protest, notice of protest and notice of nonpayment of this Note. DEBBIE REYNOLDS MANAGEMENT COMPANY, INC., formerly known as DEBBIE REYNOLDS HOTEL & CASINO, INC. By: _____________________________ Its: __________________________ DEBBIE REYNOLDS RESORTS, INC. By: _____________________________ Its: __________________________ -2- AFTER RECORDING, RETURN TO: MICHAEL D. CURRIN Witherspoon, Kelley, Davenport & Toole 422 West Riverside, Ste 1100 Spokane WA 99201-0390 ADDITIONAL ADVANCE MODIFICATION OF DEED OF TRUST THIS MODIFICATION AGREEMENT is entered into this _ day of March, 1995, by and between DEBBIE REYNOLDS MANAGEMENT COMPANY, INC., formerly known as DEBBIE REYNOLDS HOTEL & CASINO, INC. and DEBBIE REYNOLDS RESORTS, INC., (hereinafter referred to as "Borrower"), and SOURCE CAPITAL CORPORATION (hereinafter referred to as "Lender"). RECITALS 1. On or about June 13, 1994, Borrower made, executed and delivered to Lender its Promissory Note, in writing, in the original principal amount of One Million Dollars ($ 1,000,000.00) together with interest thereon at a variable rate (hereinafter referred to as the "Note"). 2. At the same time as the execution and delivery of the Note, and in order to secure repayment of the same, Borrower executed, in favor of Lender, a Deed of Trust (hereinafter referred to as ("Deed of Trust"), encumbering certain real property located in Clark County, Nevada, (the "property"), and legally described as follows, to-wit: See Exhibit "A" attached hereto and by this reference made a part hereof. The Deed of Trust was thereafter recorded under Clark County Instrument No. 00816 ill Book 940615, records of Clark County, Nevada. 3. On or about December 1, 1994, Borrower made, executed and delivered to Lender its Promissory Note in the original principal amount of One Million One Hundred Thousand and No/100 Dollars ($ 1,100,000.00), together with interest thereon at a variable rate, the repayment of which was secured by an additional Deed of Trust encumbering the property (hereinafter referred to as the "Second Note" and "Second Deed of Trust", respectively). The Second Deed of Trust was recorded on or about December 2, 1994, as Instrument No. 01626, in Book 941202, records of Clark County, Nevada. -1- 4. Borrower has requested that Lender advance it additional funds, up to a maximum additional amount of $500,000.00, the repayment of which will be secured by the Deed of Trust. Lender is willing to make the advance to Borrower, upon the terms and conditions set forth herein and in the Additional Advance Promissory Note, to be executed concurrently herewith by Borrower in favor of Lender. 5. The Note, Deed of Trust, Second Note, Second Deed of Trust, and this Modification Agreement, and any other document executed in connection therewith or referred to therein, may hereinafter be referred to as the "Loan Documents." NOW, THEREFORE, in consideration of their mutual benefits contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Borrower and Lender hereby agree as follows: A. Concurrently with the execution of this Modification Agreement, Borrower shall execute and deliver its Additional Advance Promissory Note in the principal amount of Five Hundred Thousand and No/100 Dollars ($500,000.00), together with interest thereon at the rate of fifteen percent (15%) per annum. A true and correct copy of the Additional Advance Promissory Note is attached hereto as Exhibit "B". B. the payment and performance of Borrower's obligations under the Additional Advance Note shall be secured by the Deed of Trust and Loan Documents and in event of default by Borrower in the payment and performance of the Additional Advance Note shall entitle Lender to all the rights and remedies for default under the Deed of Trust and Loan Documents. C. The Deed of Trust and Second Deed of Trust shall continue to secure the payment and performance of Borrower's obligations to Lender under the First Note, Second Note, and the Loan Documents. D. In the event Borrower shall, it any time, be or have been in default hereunder or under the Loan Documents, Lender shall have the right, at Borrower's sole expense, to enter upon the property, either by itself or through its agent, for the purpose of conducting an MAI appraisal of the property. The cost of the appraisal shall be payable by Borrower to lender on demand, and shall bear interest at the Note rate. It is expressly agreed and understood by Borrower that the occurrence of such a default shall be deemed to increase Lender's risk hereunder, thereby creating a need for Lender to have the information contained in an MAI appraisal of the property. E. It is agreed and understood that all of the agreements, covenants and conditions of the Loan Documents shall remain in full force and effect, except for the amendments and modifications expressly mentioned herein. -2- F. Nothing herein contained shall in any manner effect the validity or priority of the lien established by the Deed of Trust or the Second Deed of Trust encumbering the Property referred to in Paragraph 2 above. G. The recitals set forth in Paragraphs 1 through 5 above are incorporated into the substantive provisions of this Agreement. H. Borrower acknowledges that oral agreements or oral commitments to loan money, extend credit or to forebear from enforcing repayment of a debt are not enforceable under Washington law. BORROWER: DEBBIE REYNOLDS MANAGEMENT COMPANY, INC., formerly known as DEBBIE REYNOLDS HOTEL & CASINO, INC. By: _____________________________ Its: __________________________ DEBBIE REYNOLDS RESORTS, INC. By: _____________________________ Its: __________________________ LENDER: SOURCE CAPITAL CORPORATION By: /s/ James Kirschbaum -------------------------------- Its: Executive Vice President ------------------------------ -3- STATE OF NEVADA ) ) ss. County of ) I certify that I know or have satisfactory evidence that _________________ signed this instrument, on oath stated that he/she was authorized to execute the instrument and acknowledged it as ________________________ of DEBBIE REYNOLDS MANAGEMENT COMPANY, INC., to be the free and voluntary act of such corporation, for the uses and purposes mentioned in the instrument. DATED: March _______, 1995. -------------------------------------------- Notary Public in and for the State of Nevada Residing at:________________________________ My commission expires:______________________ STATE OF NEVADA ) ) ss. County of ) I certify that I know or have satisfactory evidence that ___________________ signed this instrument, on oath stated that he/she was authorized to execute the instrument and acknowledged it as ______________________ of DEBBIE REYNOLDS RESORTS, INC., to be the free and voluntary act of such corporation, for the uses and purposes mentioned in the instrument. DATED: March _______, 1995. -------------------------------------------- Notary Public in and for the State of Nevada Residing at:________________________________ My commission expires:______________________ -4- STATE OF WASHINGTON ) ) ss. County of Spokane ) I certify that I know or have satisfactory evidence that JAMES KIRSCHBAUM signed this instrument, on oath stated that he/she was authorized to execute the instrument and acknowledged it as E.V.P. of SOURCE CAPITAL CORPORATION., to be the free and voluntary act of such corporation, for the uses and purposes mentioned in the instrument. DATED: March 27, 1995. /s/: Sharon Frank ------------------------------------------------ Notary Public in and for the State of Washington Residing at: Spokane, Washington My commission expires: 3-22-98 -5- EXHIBIT "A" PARCEL 1: That portion of the Southeast Quarter (SE 1/4) of Section 9, Township 21 South, Range 61 East, M.D.M., Clark County, Nevada described as follows: COMMENCING at the Southeast Corner of said Section 9; THENCE North 04(dg)39'10" West along the East line of said Section 9, a distance of 702.66 feet to the Northeast corner of that certain parcel of land described by "Corporation Grant Deed" to Walter S. Hunsaker, et ux, recorded March 24, 1949 in Book 59 of Deeds, page 504 as Instrument No. 30674S in the Clark County Recorder's Office, Clark County, Nevada; THENCE North 89(dg)05'00" West along the North line of said Parcel of land, 258.90 feet to a Southeast corner of that certain parcel of land described by "Corporation Grant, Bargain, Sale Deed" to Clifford A. Jones, et al, recorded December 4, 1951 in Book 65, Page 461 of Deeds as Instrument No. 378222 in the Clark County Recorder's Office, Clark County, Nevada; THENCE North 00(dg)11'23" East, 234.86 feet to a point on the Southerly right of way line of Convention Center Drive (80.00 feet wide); THENCE North 89(dg)24'14" West along said right of way line 1237.25 feet to the Point of Beginning, which bears South 89(dg)24'14" East, 100.00 feet from the Northwest corner of said Jones Parcel; THENCE South 02(dg)53'34" East parallel with the West line of said Jones Parcel, 277.78 feet to a point on the South line of said Jones Parcel; THENCE South 88(dg)58'00" East along the South line of said Jones Parcel, 237.25 feet to the Northwest corner of that certain parcel of land described by "Corporation Grant, Bargain, Sale Deed" to T.M. Griss, et ux, recorded February 13, 1952 in Book 66 of Deeds, page 26, as Instrument No. 380912 in the Clark County Recorder's Office, Clark County, Nevada; THENCE continuing South 88(dg)58'00" East along the North line of said Griss Parcel, 219.18 feet to the Northeast Corner of "Desert Inn Condominiums" as shown by map thereof on file in Book 26, page 86 in the Clark County Recorder's Office, Clark County, Nevada; THENCE South 03(dg)51'03" East along the East line of said tract, 601.57 feet to a point being 50.00 feet North of the South line of said Section 9 and being on the Northerly right of way line of Desert Inn Road (90.00 feet wide); THENCE South 89(dg)06'04" East along said right of way line, 127.16 feet; THENCE curving to the left along a 25.00 foot radius curve , concave Northwesterly, through a central angle of 95(dg)11'28", an arc length of 41.53 feet to a point on the Westerly right of way line of Mel Drive (Varying width); THENCE along said right of way line, the following Three (3) courses, North 04(dg)17'32" West, 212.70 feet to an angle point in said right of way line; THENCE North 03(dg)16'28" West, 361.01 feet to a point on the South line of the aforementioned Jones Parcel; THENCE North 02(dg)14'14" West, 268.01 feet; THENCE curving to the left along a 1S.00 foot radius curve, concave Southwesterly, through a central angle of 87(dg)10'00", an arc length of 22-82 feet to a point on the aforementioned Southerly right of way line of Convention Center Drive; Page 1 of 3 THENCE North 89(dg)24'14" West along said right of way line, 601.44 feet to the Point of Beginning. EXCEPTING THEREFROM that portion as conveyed to Clark County in a Deed recorded September 2, 1993 in Book 930922 of Official Records, Clark County, Nevada Records, as Document No. 00213, and described as follows: COMMENCING at the South Quarter Corner (S 1/4 cor.) of said Section 9; THENCE along the South line of the Southeast Quarter (SE 1/4) of said Section, South 89(dg)21'56" East, 1691.65 feet; THENCE North 04(dg)06'59" West, 50.17 feet to the Southwest Corner of said Parcel, being the True Point of Beginning; THENCE along the West line of said Parcel, North 04(dg)06'59" West, 15.02 feet; THENCE South 89(dg)21'56" East, 127.03 feet to a point of curvature; THENCE along a curve to the left having a radius of 25.00 feet through a central angle of 95(dg)12'00", an arc length of 41.54 feet (chord North 43(dg)02'04" East 36.92 feet), to a point of tangency on the West right of way line of Mel Avenue; THENCE along said line South 04(dg)33'56" East, 15.06 feet to a point of curvature; THENCE along a curve to the left having a radius of 25.00 feet through a central angle of 95(dg)21'00", an arc length of 41.54 feet (chord South 43(dg)02'04" West 36.92 feet) to a point of tangency on the North right of way line of Desert Inn Road; THENCE along said line North 89(dg)21'56" West, 127.14 feet to the True Point of Beginning. ALSO EXCEPTING THEREFROM that portion of the Southeast Quarter (SE 1/4) of Section 9, Township 21 South, Range 61 East, M.D.M., Clark County, Nevada described as follows: COMMENCING at the Southeast corner of said Section 9; THENCE North 89(dg)06'04" West, along the South line thereof, 863.25 feet; THENCE North 04(dg)17'32" West, departing said South line, 651.78 feet; THENCE North 88(dg)58'00" West, 3.63 feet; THENCE North 02(dg)14'14" West, 250.69 feet; THENCE South 87(dg)45'46" West, 152.35 feet to the Point of Beginning; THENCE South 00(dg)29'26" West, 9.90 feet; THENCE North 89(dg)30'34" West, 3.25 feet; THENCE South 00(dg)29'26" West, 84.00 feet; THENCE South 89(dg)30'34" West, 10.60 feet; THENCE South 00(dg)29'26" West, 19.85 feet; THENCE North 89(dg)30'34" West, 11.97 feet; THENCE North 00(dg)29'26" East, 81.80 feet; THENCE South 89(dg)30'34" East, 29.40 feet; THENCE South 00(dg)29'26" West, 8.50 feet; THENCE South 89(dg)30'34" East, 4.75 feet; THENCE North 00(dg)29'26" East, 7.60 feet; THENCE South 89(dg)30'34" East, 10.60 feet; THENCE North 00(dg)29'26" East, 6.00 feet; THENCE South 89(dg)30'34" East, 91.22 feet; THENCE North 00(dg)29'26" East, 5.30 feet; THENCE South 89(dg)30'34" East, 13.65 feet; THENCE North 00(dg)29'26" East, 9.90 feet; THENCE South 89(dg)30'34" East, 18.80 feet to the True Point of Beginning. Page 2 of 3 PARCEL 2: That portion of the Southeast Quarter (SE 1/4) of Section 9, Township 21 South, Range 61 East, M.D.M., Clark County, Nevada described as follows: COMMENCING at the Southeast corner of said Section 9; THENCE North 89(dg)06'04" West, along the South line thereof, 863.25 feet; THENCE North 0401713211 West, departing said South line, 651.78 feet; THENCE North 88(dg)58'00" West, 3.63 feeT; THENCE North 02(dg)14'14" West, 250.69 feet; THENCE South 87(dg)45'46" West, 152.35 feet to the Point of Beginning; THENCE South 00(dg)29'26" West, 9.90 feet; THENCE North 89(dg)30'34" West, 3.25 feet; THENCE South 00(dg)29'26" West, 84.00 feet; THENCE South 89(dg)30'34" West, 10.60 feet; THENCE South 00(dg)29'26" West, 19.85 feet; THENCE North 89(dg)30'34" West, 11.97 feet; THENCE North 00(dg)29'26" East, 81.80 feet; THENCE South 89(dg)30'34" East, 29.40 feet; THENCE South 00(dg)29'26" West, 8.50 feet; THENCE South 89(dg)30'34" East, 4.75 feet; THENCE North 00(dg)29'26" East, 7.60 feet; THENCE South 89(dg)30'34" East, 10.60 feet; THENCE North 00(dg)29'26" East, 6.00 feet; THENCE South 89(dg)30'34" East, 91.22 feet; THENCE North 00(dg)29'26" East, 5.30 feet; THENCE South 89(dg)30'34" East, 13.65 feet; THENCE North 00(dg)29'26" East, 9.90 feet; THENCE South 89(dg)30'34" East, 18.80 feet to the True Point of Beginning. Page 3 of 3 EX-10.26 6 CONSULTING AGREEMENT Exhibit 10.26 Consulting Agreement between the Registrant and Miron Leshem dated November 6, 1995. INDEPENDENT CONTRACTOR AGREEMENT THE AGREEMENT is made and entered into as of this 6th day of November, 1995 by and between Debbie Reynolds Hotel & Casino, Inc. (Client), with its principal place of business in Las Vegas, Nevada, and Miron Leshem an individual ("ML"), an independent contractor, with his place of business at 108 Sagamore Rd. Apt# 5j, Tuckahoe, NY 10707. RECITALS WHEREAS, Client is engaged in the Timeshare, Hotel and Stock Promotion Industry. WHEREAS, ML is in the business of providing general business consulting services, including strategic business planning services, to companies. WHEREAS, in the operation of Client's business, Client is in need of the services which ML provides and wishes to enter into a business arrangement with ML to provide such services. IN CONSIDERATION of the promises and mutual covenants hereby contained, it is hereby agreed as follows: AGREEMENTS 1. Terms of Contract This Agreement will become effective on November 6, 1995 and will continue in effect for a period of six (6) months unless earlier terminated pursuant to Section 5 of this Agreement. 2. Services to be Performed by Contractor 2.1 Specific Services ML agrees to provide general business consulting services, including strategic business planning services, to Client. 2.2 Independent Contractor Status. It is the express intention of the parties that ML be an independent contractor and not an employee, agent, joint venture or partner of Client. Client shall have no right to and shall not control the manner or prescribe the method by which ML performs the above-described services. ML shall be entirely and solely responsible for its own actions and the actions of its agents, employees or partners while engaged in the performance of services required by this Agreement. Nothing in this Agreement shall be interpreted or construed as creating or establishing the relationship of employer and employee between Client and ML or any employee or agent of ML. Both parties acknowledge that ML is not an employee for state or federal income tax purposes and ML specifically agrees that it shall be exclusively liable for the payment of all income taxes, or other state or federal charges, that are due as a result of receipt of any consideration for the performance of services required by this Agreement. ML agrees that any such consideration is not subject to withholding by the Client for payment of any taxes and ML directs Client not to withhold any sums for the consideration paid to ML for the services provided hereunder. ML shall retain the right to perform services for others during the term of this Agreement. 2.3 Use of Employees of Contractor, ML may, at ML's own expense, use any employees or subcontractors as ML deems necessary to perform the services required of ML by this Agreement. Client may not control, direct or supervise ML's employees or subcontractors in the performance of those services. 2.4 Expense, ML shall be responsible for all costs and expenses incident to the performance of services required by this Agreement, including but not limited to, the cost of materials used by ML, travel, fees, fines, licenses, bonds and taxes required of, or imposed against ML, and all other of ML's costs of doing business. 3. Compensation 3.1 Stock, Client and ML agree that ML shall receive fifteen thousand shares of Client's tradable common stock to be delivered to ML after this agreement has been executed. 4. Obligations of Client 4.1 Cooperation, Client shall comply with all reasonable requirements of ML and provide access to all documents reasonably necessary to the performance of ML's duties under this Agreement. 5. Termination of Agreement 5.1 Termination on Notice. Notwithstanding any other provision of this Agreement, the client may terminate this Agreement at any time by giving thirty (30) days written notice to the other party. Unless otherwise terminated as provided in this Agreement, this Agreement will continue in force for a period of six (6) months. 5.2 Termination on Occurrence of Stated Event, This Agreement will terminate automatically on the occurrence of the following event: (a) bankruptcy or insolvency of either party. 6. General Provisions 6.1 Further Acts, Each party agrees to perform any further acts and execute and deliver any further documents that may be reasonably necessary to carry out the provisions and intent of this Agreement. 6.2 Entire Agreement, This Agreement contains the entire understanding of the parties hereto with respect to the subject matter contained herein and may be amended only by a written instrument signed by the parties affected thereby, or their respective successors or assigns. This Agreement cancels and supersedes all prior agreements, if any, oral or written, among Client and ML. 6.3 Severability, If any provision of this Agreement shall be held invalid such invalidity shall not affect the other provisions hereof, and to this extent the provisions of this Agreement are intended to be and shall be deemed severable. 6.4 Counterparts, This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. 6.5 Notices, Any notice or other communication required or permitted under this Agreement shall be sufficiently given if delivered personally or sent by registered or certified mail, postage prepaid and return receipt requested, to the address of the parties set forth in the first paragraph of this Agreement or at such address as may have been provided in like manner in writing to both of the parties to this Agreement. Any notice that is sent by mail under this Agreement shall be considered received on the date on which it is actually delivered to the premises of the party of whom it is properly addressed, such date to be conclusively evidenced by the date of the return receipt. 6.6 Governing Law, This Agreement shall be construed in accordance with, and governed by the laws of the State of Nevada. 6.7 Assignment, No party to this Agreement may assign this Agreement or its right or obligations hereunder without the written consent of the others. 6.8 Headings, The headings of this Agreement are inserted solely for the convenience of reference and are not part of, and are not intended to govern, limit or aid in the construction of any term or provision hereof. 6.9 Pronouns. All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine or neuter, singular or plural, as the identity of the person, persons, entity or entities may require. 6.10 Waiver, No waiver of any of the provisions of this Agreement shall be deemed, or shall constitute a waiver of any other provisions, nor shall any waiver constitute a continuing waiver. No waiver shall be binding unless executed in writing by the party making the waiver. 6.11 Acknowledgment Concerning Counsel, Each party acknowledges that it had the opportunity to employ separate and independent counsel of its own choosing in connection with this Agreement. 6.12 Arbitration, Any controversy, claim, misunderstanding, course of action, matter in question, breach, disagreement, dispute, or other related matter arising out of, or relating to this Agreement, or the relationship between the parties, shall be decided by mandatory binding arbitration before the American Arbitration Association in Las Vegas, Nevada. In such arbitration, the parties shall be entitled to the full discovery rights accorded to litigants under the Laws of Nevada. The prevailing party shall be entitled to recover all costs and expenses incurred, including its reasonable attorney's fees, related costs, and any advanced arbitration expenses. 6.13 Indemnification, Messr. Miron Leshem will indemnify and hold harmless Client and its officers, directors, agents and employees against any and all losses, or liabilities, including reasonable attorneys fees and costs and expenses, which may be incurred by Client as a result of statements made by ML which are inaccurate or misleading or the failure by ML to state facts, which are necessary to be stated in order to make statements made not misleading. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above. CLIENT: DEBBIE REYNOLDS HOTEL & CASINO, INC. By: /s/ Todd Fisher --------------------- Its:: CEO --------------------- MIRON LESHEM By: /s/ Miron Leshem --------------------- EX-10.27 7 AMENDMENT TO CONSULTING AGREEMENT Exhibit 10.27 Amendment to Consulting Agreement between the Registrant and Miron Leshem dated December 12, 1995. AMENDMENT TO INDEPENDENT CONTRACTOR AGREEMENT THE AMENDMENT is made and entered into this 12th day of December 1995 by and between Debbie Reynolds Hotel & Casino, Inc. (client), with its principal place of business in Las Vegas, Nevada and Miron Leshem, an independent contractor, ("ML"), with his place of business at 108 Sagamore Rd. Apt # 53, Tuckahoe, NY 10707. RECITALS WHEREAS, Client and ML entered into an Independent Contractor Agreement dated November 6, 1995 (the "Agreement") under which ML is providing consulting services to Client with respect to shareholder relations, the maintenance of market makers and strategic planning; WHEREAS, Client and ML have mutually agreed to extend the terms of the Agreement. NOW, THEREFORE, IN CONSIDERATION of the promises and mutual covenants hereby contained, it is hereby agreed as follows: AGREEMENTS Sections 1 and 3 of the Agreement are hereby amended to read as follows: 1. Terms of Contract This agreement will become effective on November 6, 1995, and will continue in effect for a period of twelve (12) months unless earlier terminated pursuant to Section 5 of this Agreement. 3. Compensation 3.1 Stock. Client and ML acknowledge that ML has received fifteen thousand (15,000) shares of Client's free-trading common stock as compensation for its services hereunder. Client and ML agree that ML shall receive an additional twenty thousand (20,000) shares of Client's free-trading common stock as additional compensation for its services hereunder. Except as set forth above, the provisions of the Agreement shall be unchanged and shall remain in full force and effect. IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first written above. CLIENT: DEBBIE REYNOLDS HOTEL & CASINO, INC. By: /s/ Todd Fisher --------------------- Its: CEO --------------------- ML: MIRON LESHEM By: /s/ Miron Leshem --------------------- EX-10.28 8 CONSULTING AGREEMENT Exhibit 10.28 Consulting Agreement between the Registrant and Pacific Consulting Group dated September 1, 1995. INDEPENDENT CONTRACTOR AGREEMENT THE AGREEMENT is made and entered into as of this lst day of September, 1995 by and between Debbie Reynolds Hotel & Casino, Inc. (Client), with its principal place of business in Las Vegas, Nevada, and Pacific Consulting Group, Inc., a Nevada corporation ("PC"), an independent contractor, with its place of business at 1821 WCR27 Brighton, Colorado 80601. RECITALS WHEREAS, Client is engaged in the Timeshare, Hotel Industry. WHEREAS, PC is in the business of providing general business consulting services, including strategic business planning services, to companies. WHEREAS, in the operation of Client's business, Client is in need of the services which PC provides and wishes to enter into a business arrangement with PC to provide such services. IN CONSIDERATION of the promises and mutual covenants hereby contained, it is hereby agreed as follows: AGREEMENTS 1. Terms of Contract This Agreement will become effective on September 1, 1995 and will continue in effect for a period of six (6) months unless earlier terminated pursuant to Section 5 of this Agreement. 2. Services to be Performed by Contractor 2.1 Specific Services PC agrees to provide general business consulting services, including strategic business planning services, to Client. 2.2 Independent Contractor Status. It is the express intention of the parties that PC be an independent contractor and not an employee, agent, joint venturer or partner of Client. Client shall have no right to and shall not control the manner or prescribe the method by which PC performs the above-described services. PC shall be entirely and solely responsible for its own actions and the actions of its agents, employees or partners while engaged in the performance of services required by this Agreement. Nothing in this Agreement shall be interpreted or construed as creating or establishing the relationship of employer and employee between Client and PC or any employee or agent of PC. Both parties acknowledge that PC is not an employee for state or federal income tax purposes and PC specifically agrees that it shall be exclusively liable for the payment of all income taxes, or other state or federal charges, that are due as a result of receipt of any consideration for the performance of services required by this Agreement. PC agrees that any such consideration is not subject to withholding by the Client for payment of any taxes and PC directs Client not to withhold any sums for the consideration paid to PC for the services provided hereunder. PC shall retain the right to perform services for others during the term of this Agreement. 2.3 Use of Employees of Contractor, PC may, at PC's own expense, use any employees or subcontractors as PC deems necessary to perform the services required of PC by this Agreement. Client may not control, direct or supervise PC's employees or subcontractors in the performance of those services. 2.4 Expense, PC shall be responsible for all costs and expenses incident to the performance of services required by this Agreement, including but not limited to, the cost of materials used by PC, travel, fees, fines, licenses, bonds and taxes required of, or imposed against PC, and all other of PC's costs of doing business. 3. Compensation 3.1 Stock, Client and PC agree that PC shall receive fifty thousand shares of Client's tradable common stock to be delivered to PC after this agreement has been executed. 4. Obligations of Client 4.1 Cooperation, Client shall comply with all reasonable requirements of PC and provide access to all documents reasonably necessary to the performance of PC's duties under this Agreement. 5. Termination of Agreement 5.1 Termination on Notice, Notwithstanding any other provision of this Agreement, the client may terminate this Agreement at any time by giving thirty (30) days written notice to the other party. Unless otherwise terminated as provided in this Agreement, this Agreement will continue in force for a period of six (6) months. -2- 5.2 Termination on Occurrence of Stated Event, This Agreement will terminate automatically on the occurrence of the following event: (a) bankruptcy or insolvency of either party. 6. General Provisions 6.1 Further Acts, Each party agrees to perform any further acts and execute and deliver any further documents that may be reasonably necessary to carry out the provisions and intent of this Agreement. 6.2 Entire Agreement, This Agreement contains the entire understanding of the parties hereto with respect to the subject matter contained herein and may be amended only by a written instrument signed by the parties affected thereby, or their respective successors or assigns. This Agreement cancels and supersedes all prior agreements, if any, oral or written, among Client and PC. 6.3 Severability, If any provision of this Agreement shall be held invalid such invalidity shall not affect the other provisions hereof, and to this extent the provisions of this Agreement are intended to be and shall be deemed severable. 6.4 Counterparts, This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. 6.5 Notices. Any notice or other communication required or permitted under this Agreement shall be sufficiently given if delivered personally or sent by registered or certified mail, postage prepaid and return receipt requested, to the address of the parties set forth in the first paragraph of this Agreement or at such address as may have been provided in like manner in writing to both of the parties to this Agreement. Any notice that is sent by mail under this Agreement shall be considered received on the date on which it is actually delivered to the premises of the party of whom it is properly addressed, such date to be conclusively evidenced by the date of the return receipt. 6.6 Governing Law, This Agreement shall be construed in accordance with, and governed by the laws of the State of Nevada. 6.7 Assignment, No party to this Agreement may assign this Agreement or its right or obligations hereunder without the written consent of the others. -3- 6.8 Headings. The headings of this Agreement are inserted solely for the convenience of reference and are not part of, and are not intended to govern, limit or aid in the construction of any term or provision hereof. 6.9 Pronouns, All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine or neuter, singular or plural, as the identity of the person, persons, entity or entities may require. 6.10 Waiver, No waiver of any of the provisions of this Agreement shall be deemed, or shall constitute a waiver of any other provisions, nor shall any waiver constitute a continuing waiver. No waiver shall be binding unless executed in writing by the party making the waiver. 6.11 Acknowledgment Concerning Counsel, Each party acknowledges that it had the opportunity to employ separate and independent counsel of its own choosing in connection with this Agreement. 6.12 Arbitration, Any controversy, claim, misunderstanding, course of action, matter in question, breach, disagreement, dispute, or other related matter arising out of, or relating to this Agreement, or the relationship between the parties, shall be decided by mandatory binding arbitration before the American Arbitration Association in Las Vegas, Nevada. In such arbitration, the parties shall be entitled to the full discovery rights accorded to litigants under the Laws of Nevada. The prevailing party shall be entitled to recover all costs and expenses incurred, including its reasonable attorney's fees, related costs, and any advanced arbitration expenses. 6.13 Indemnification, PC and its principle, Messrs. Randy Sasaki, will indemnify and hold harmless Client and its officers, directors, agents and employees against any and all losses, or liabilities, including reasonable attorneys fees and costs and expenses, which may be incurred by Client as a result of statements made by PC which are inaccurate or misleading or the failure by PC to state facts, which are necessary to be stated in order to make statements made not misleading. -4- IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above. CLIENT: DEBBIE REYNOLDS HOTEL & CASINO, INC. By: /s/ Todd Fisher --------------------- Its: CEO -------------------- PACIFIC CONSULTING GROUP By: /s/ Randy Sasaki --------------------- -5- EX-10.29 9 CONSULTING AGREEMENT Exhibit 10.29 Consulting Agreement between the Registrant and Telex, Inc. dated March 27, 1995. INDEPENDENT CONTRACTOR AGREEMENT THE AGREEMENT is made and entered into as of this ______ day of March, 1995 by and between Debbie Reynolds Hotel & Casino, Inc. ("Client"), with its principal place of business in Las Vegas, Nevada, and Telex, a Nevada trust ("Telex"), an independent contractor, with its place of business at ____________ __________. RECITALS WHEREAS, Client is engaged in the Timeshare, Hotel Industry. WHEREAS, Telex is in the business of providing general business consulting services, including strategic business planning services, to companies, WHEREAS, in the operation of Client's business, Client is in need of the services which Telex provides and wishes to enter into a business arrangement with Telex to provide such services. IN CONSIDERATION of the promises and mutual covenants hereby contained, it is hereby agreed as follows: AGREEMENTS 1. Terms of Contract This Agreement will become effective on March 27, 1995 and will continue in effect for a period of six (6) months, unless earlier terminated pursuant to Section 5 of this Agreement, 2. Services to be Performed by Contractor 2.1 Specific Services Telex agrees to provide general business consulting services, including strategic business planning services, to Client. 2.2 Independent Contractor Status. It is the express intention of the parties that Telex be an independent contractor and not an employee, agent, joint venturer or partner of Client. Client shall have no right to and shall not control the manner or prescribe the method by which Telex performs the above-described services, Telex shall be entirely and solely responsible for its own actions and the actions of its agents, employees or partners while engaged in the performance of services required by this Agreement. Nothing in this Agreement shall be interpreted or construed as creating or establishing the relationship of employer and employee between Client and Telex or any employee or agent of Telex. Both parties acknowledge that Telex is not an employee for state or federal income tax purposes and Telex specifically agrees that it shall be exclusively liable for the payment of all income taxes, or other state or federal charges, that are due as a result of receipt of any consideration for the performance of service required by this Agreement. Telex agrees that any such consideration is not subject to withholding by the Client for payment of any taxes and Telex directs Client not to withhold any sums for the consideration paid to Telex for the services provided hereunder. Telex shall retain the right to perform services for others during the term of this Agreement, 2.3 Use of Employees of Contractor. Telex may, at Telex's own expense, use any employees or subcontractors as Telex deems necessary to perform the services required of Telex by this Agreement. Client may not control, direct or supervise Telex's employees or subcontractors in the performance of those services. 2.4 Expense. Telex shall be responsible for all costs and expenses incident to the performance of services required by this Agreement, including but not limited to, the cost of materials used by Telex, travel, fees, fines, licenses, bonds and taxes required of, or imposed against Telex, and all other of Telex's costs of doing business. 3. Compensation 3.1 Stock Client and Telex agree that Telex shall receive 37,777 shares of Client's tradeable common stock to be delivered to Telex after this agreement has been executed. 4. Obligations of Client. 4.1 Cooperation. Client shall comply with all reasonable requirements of Telex and provide access to all documents reasonably necessary to the performance of Telex's duties under this Agreement. 5. Termination of Agreement 5.1 Termination on Notice. Notwithstanding any other provision of this Agreement, either party may terminate this Agreement at any time by giving thirty (30) days written notice to the other party. Unless otherwise terminated as provided in this Agreement, this Agreement will continue in force for a period of six (6) months. 5.2 Termination on Occurrence of Stated Event. This Agreement will terminate automatically on the occurrence of the following event: (a) bankruptcy or insolvency of either party. -2- 6. General Provisions 6.1 Further Acts. Each party agrees to perform any further acts and execute and deliver any further documents that may be reasonably necessary to carry out the provisions and intent of this Agreement. 6.2 Entire Agreement. This Agreement contains the entire understanding of the parties hereto with respect to the subject matter contained herein and may be amended only by a written instrument signed by the parties affected thereby, or their respective successors or assigns. This Agreement cancels and supersedes all prior agreements, if any, oral or written, among Client and Telex. 6.3 Severability. If any provision of this Agreement shall be held invalid such invalidity shall not affect the other provisions hereof, and to this extent the provisions of this Agreement are intended to be and shall be deemed severable. 6.4 Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument, 6.5 Notices. Any notice or other communication required or permitted under this Agreement shall be sufficiently given if delivered personally or sent by registered or certified mail, postage prepaid and return receipt requested, to the address of the parties set forth in the first paragraph of this Agreement or at such address as may have been provided in like manner in writing to both of the parties to this Agreement. Any notice that is sent by mail under this Agreement shall be considered received on the date on which it is actually delivered to the premises of the party to whom it is properly addressed, such date to be conclusively evidenced by the date of the return receipt. 6.6 Governing Law. This Agreement shall be construed in accordance with, and governed by the laws of the State of Nevada. 6.7 Assignment. No party to this Agreement may assign this Agreement or its right or obligations hereunder without the written consent of the others. 6.8 Headings. The headings of this Agreement are inserted solely for the convenience of reference and are not part of, and are not intended to govern, limit or aid in the construction of any term or provision hereof 6.9 Pronouns. All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine or neuter, singular or plural, as the identity of the person, persons, entity or entities may require. -3- 6.10 Waiver. No waiver of any of the provisions of this Agreement shall be deemed, or shall constitute a waiver of any other provisions, nor shall any waiver constitute a continuing waiver. No waiver shall be binding unless executed in writing by the party making, the waiver. 6.11 Acknowledgment Concerning Counsel. Each party acknowledges that it had the opportunity to employ separate and independent counsel of its own choosing in connection with this Agreement. 6.12 Arbitration. Any controversy, claim, misunderstanding, course of action, matter in question, breach, disagreement, dispute, or other related matter arising out of, or relating to this Agreement, or the relationship between the parties, shall be decided by mandatory binding arbitration before the American Arbitration Association in Las Vegas, Nevada. In such arbitration, the parties shall be entitled to the full discovery rights accorded to litigants under the Laws of Nevada. The prevailing party shall be entitled to recover all costs and expenses incurred, including its reasonable attorney's fees, related costs, and any advanced arbitration expenses. 6.13 Indemnification. Telex and its principles, will indemnify and hold harmless Client and its officers, directors, agents and employees against any and all losses, or liabilities, including reasonable attorneys fees and costs and expenses, which may be incurred by Client as a result of statements made by Telex which are inaccurate or misleading or the failure by Telex to state facts, which are necessary to be stated in order to make statements made not misleading. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above, DEBBIE REYNOLDS HOTEL & CASINO, INC. By: /S/ Donald Granatstein ------------------------- Its: Executive Vice President ------------------------- TELEX By: ------------------------- Its: ------------------------- -4- EX-10.30 10 CONSULTING AGREEMENT Exhibit 10.30 Consulting Agreement between the Registrant and Peter Bistrian Consulting, Inc., ("Consultant") EX-10.31 11 CONSULTING AGREEMENT Exhibit 10.31 Consulting Agreement between the Registrant and Robert C. Brehm Consulting, Inc., ("Consultant") As filed with the Securities and Exchange Commission on December 19, 1995 Registration No.33- ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------- FORM S-8 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ---------- DEBBIE REYNOLDS HOTEL & CASINO, INC. (Exact name of registrant as specified in its charter) NEVADA 88-0335924 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) Debbie Reynolds, President 305 Convention Center Drive Las Vegas, NV 89109 (702) 734-0711 (Address of Registrant's principal executive offices, including zip code) ---------- MANAGEMENT CONSULTING PLAN WITH PETER D. BISTRIAN CONSULTING, INC. MANAGEMENT CONSULTING PLAN WITH ROBERT C. BREHM CONSULTING, INC. (Full title of Plan) 305 Convention Center Drive Las Vegas, Nevada 89109 (702) 734-0711 (Name, address and telephone number of agent (for service) ---------- COPIES TO: M. Richard Cutler, Esq. Horowitz, Cutler & Beam Two Venture Plaza, Suite 380 Irvine, CA 92718 ---------- Approximate Date of Proposed Sale to the Public: As soon as practicable after this Registration Statement becomes effective. ---------- CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------------------------------- Title of Securities Amount to be Proposed Maximum Proposed Maximum Amount of to be Registered Registered Offering Price per Aggregate Offering Registration Fee - -------------------------------------------------------------------------------------------------------- Common Stock $0,0001 Par Value(1) 750,000 50,7500 $562,500 $193.95 - --------------------------------------------------------------------------------------------------------
(1) Includes shares of commons stock issuable upon exercise of options to purchase a total of 750,000 shares of common stock, issuable for counseling and advisory services to Peter D. Bistrian Consulting, Inc (an option to purchase 486,000 shares) and to Robert C. Brehm Consulting, Inc. (an option to purchase 254,000 shares), respectively, and exercisable at $0.75 per share. (2) The registration fee is based upon the exercise price of the options at $0.75 per share calculated pursuant to Rule 457. DEBBIE REYNOLDS HOTEL & CASINO, INC. CROSS REFERENCE SHEET REQUIRED BY ITEM 501(b) OF REGULATION S-K Form S-8 Item Number and Caption Caption in Prospectus -------------------- --------------------- 1. Forepart of Registration Statement Facing Page of Registration and Outside Front Cover Statement and Cover Page of Page of Prospectus Prospectus 2. Inside Front and Outside Back Inside Cover Page of Pro- Cover Pages of Prospectus spectus and Outside Cover Page of Prospectus 3. Summary information, Risk Factors Not Applicable and Ratio of Earnings to Fixed Charges 4. Use of Proceeds Not Applicable 5. Determination of Offering Price Not Applicable 6. Dilution Not Applicable 7. Selling Security Holders Sales by Selling Security Holder 8. Plan of Distribution Cover Page of Prospectus and by Selling Security Holder Sales 9. Description of Securities to be Description of Securities: Registered Management Consulting Agreement with CKN Capital Corporation 10. Interests of Named Experts and Legal Matters Counsel 11. Material Changes Not Applicable 12. Incorporation of Certain information Incorporation of Certain by Reference Documents by Reference 13, Disclosure of commission Position Indemnification of Directors on Indemnification for Securities and Officers; Undertakings Act Liabilities DATED: December 19, 1995 PROSPECTUS DEBBIE REYNOLDS HOTEL & CASINO, INC. 750,000 Shares Common Stock ISSUED PURSUANT TO THE, EXERCISE OF OPTIONS UNDER THE COMPANY'S MANAGEMENT CONSULTING AGREEMENT WITH PETER D. BISTRIAN CONSULTING, INC. AND ROBERT C. BREHM CONSULTING, INC., This prospectus is part of a Registration Statement which registers an aggregate of 750,000 shares of Common Stock, $0.0001 par value (such shares being referred to as the "Shares"), of DEBBIE REYNOLDS HOTEL & CASINO, INC. (the "Company") which may be issued upon exercise of certain options, as set forth herein, to Peter D, Bistrian Consulting, Inc. and Robert C. Brehm Consulting, Inc., consultants to the Company (the "Consultants" or if referred to individually the "Consultant") pursuant to their respective written Management Consulting Agreements dated December 7, 1995 (the "Consulting Agreements" or the "Consulting Agreements") providing for the issuance of such options (such options being hereinafter collectively referred to as the ("Options"). Such selling stockholders may sometimes hereafter be referred to as the "Selling Security Holders." All of the Stocks are being issued to the Consultants Pursuant to their respective Consulting Agreements, The Company has been advised by the Selling Security Holders that it may sell all or a portion of the Shares from time to time in the Bulletin Board market, in negotiated transactions, directly or through brokers or otherwise, and that such shares will be sold at market prices prevailing at the time of such sales or at negotiated prices, and the Company will not receive any proceeds from such sales. The company's principal executive office is located at 305 Convention Center Drive, Las Vegas, Nevada 89109, (702) 734-0711. No person has been authorized by the Company to give any information or to make any representation other than as contained in this Prospectus, and if given or made, such information or representation must not be relied upon as having been authorized by the Company. Neither the delivery of this Prospectus nor any distribution of the Shares issuable under the terms of the Agreement shall, under any circumstances, create any implication that there has been no change in the affairs of the Company since the date hereof. ---------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ---------- THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SECURITIES IN ANY STATE TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH STATE. The date of this Prospectus is December 19, 1995 AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance therewith, files reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission"). Reports, proxy statements and other information filed with the Commission can be inspected and copies at the public reference facilities of the Commission at 450 Fifth Street, N.W., Washington D.C. 20549. Copies of this material can also be obtained at prescribed rates from the Public Reference Section of the Commission at its principal office at 450 Fifth Street, N.W., Washington D.C. 20540. The Company's Common Stock is traded on the Bulletin Board under the symbol "DEBI.' The Company has filed with the Commission a Registration Statement on Form S-8 (the "Registration Statement") under the Securities Act of 1933, as amended (the "Act"), with respect to the resale of up to an aggregate of up to 750,000 shares of the Company's Common Stock offered by this Prospectus, reference is made to the Registration Statement, including the exhibits thereto. Statements in this Prospectus as to any document are not necessarily complete, and where any such document is an exhibit to the Registration Statement or is incorporated by reference herein, each such statement is qualified in all respects by the provisions of such exhibit or other document, to which reference is hereby made for a full statement of the provisions thereof. A copy of the Registration Statement with exhibits, may be obtained from the Commission's office in Washington, D.C. (at the above address) upon payment of the fees prescribed by the rules and regulations of the Commission, or examined there without charge. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents filed by the Company with the Securities and Exchange Commission are incorporated herein by reference and made a part thereof. 1 . The company's Annual Report on Form 10-KSB filed for the year ended December 31, 1994 and the Company's Quarterly Reports on Forms 1O-QSB for the quarters of Match 31, 1995, June 30, 1995 and September 30, 1995; Current Reports on Form 8-K dated June 30, 1995, July 21, 1995 and August 30, 1995; description of the Company's Common Stock contained in the Company's Form 8-A dated October 18, 1990. 2. All reports and documents filed by the Company pursuant to Section 13, 14 or 15(d) of the Exchange Act, prior to the filing of a post-effective amendment which indicates that all securities offered hereby have been sold or which deregisters all securities then remaining unsold, shall be deemed to be incorporated by reference herein and to be a part hereof from the respective date of filing of such documents. Any statement incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein, modifies or supersedes such statement. Any statement modified or superseded shall not be deemed, except as so modified or superseded, to constitute part of this Prospectus. The Company hereby undertakes to provide without charge to each person, including any beneficial owner to whom a copy of the Prospectus has been delivered, on the written or oral request of any such person, a copy of any or all of the documents referred to above which have been or may be incorporated by reference in this Prospectus other than exhibits to such documents. Written requests for such copies should be directed to Corporate Secretary, 305 Convention Center Drive, Las Vegas,, Nevada 89109, (702) 734-0711. INFORMATION WITH RESPECT TO THE COMPANY This Prospectus is accompanied by the Company's Annual Report on Form 10-KSB for the year ended December 31, 1994 and the company's Quarterly Reports on Form 10-QSB for the quarters ended March 31, 1995, June 30, 1995 and September 30, 1995; Current Reports on Form 8-K dated June 30, 1995. July 21, 1995 and August 30,1995; description of the Company's Common Stock contained in the company's Form 8-A dated October 18, 1990. These Annual and Quarterly Reports as well is all other reports filed by the Company pursuant to Sections 13(a), 13(c), 2 14 or 15(d) of the Securities Exchange Act of 1934 are, hereby incorporated by reference in this Prospectus and may be obtained, without charge, upon the oral or written request of any person to the Company at 305 Convention Center Drive, Las, Vegas, Nevada 89109. (702) 734-0711. MANAGEMENT CONSULTING AGREEMENT WITH PETER D. BISTRIAN CONSULTING. INC. General On December 7, 1995, the Company entered into a Management Consulting Agreement with Peter D, Bistrian Consulting, Inc. pursuant to which the Company agreed to issue to the Consultant Options to purchase up to an aggregate of 486,000 shares of common Stock of the Company in consideration for consulting services to be provided to the Company over an anticipated eight-month period commencing as of the date of the agreement. The Consultant is wholly-owned by Mr. Peter D. Bistrian, who is the sole officer and director of the Consultant. The term of the Management Consulting Agreement shall be eight months. Under the terms of the Consulting Agreement the Consultant is to undertake for and consult with the Company concerning management, marketing and operational planning and consulting, strategic planning, corporate organization, and structure, expansion of services and stockholder relations, and shall review and advise the Company regarding its overall progress, needs and condition. In particular, the Consultant shall assist the Company with the implementation of short range and long term strategic planning to fully develop and enhance the Company's assets, resources, products and services; and advise and recommend to the Company additional services related to the present products and services provided by the Company as well as new products and services that may be provided by the Company. Compensation In connection with the Consulting Agreement, the Company has agreed to issue Options to purchase up to 486,000 shares of Common Stock of the Company over the period of twenty-four months and which are not being administered by either the Board of Directors of the Company or any committee of the Board of Directors organized for that purpose. The specific terms of the Options are as follows: (a) Option Price. Options to purchase 486,000 shares of Common Stock shall be exercisable at a price per share of Common Stock of $0.75. (b) Terms of Options. Each Option is exercisable from December 10, 1995 until its expiration date of December 10, 1997. (c) Payment for Shares. The purchase price for the exercise of the Options is payable in cash, and the price for the shares of Common Stock is to be paid in full upon exercise of the Options. (d) Transferability. The Options are not transferable by the holder thereof except pursuant to the laws of descent and distribution to the sole shareholder. (e) Redemption. There are no redemption rights afforded to the Company in connection with the Options. (1) Adjustments. The number of shares of Common Stock of the Company purchasable upon exercise of the Options and the exercise price of the Options are subject to the adjustment involving stock dividends, stock splits, reorganizations, reclassification, consolidations and mergers. There will be no adjustment for the payment of cash dividends by the Company on its Common Stock. The Company is not required to issue fractional shares. Options for fractional shares amounting to less than one share will be disregarded, (g) Miscellaneous. It is intended that the shares of Common Stock issued on exercise of the Options will be fully registered securities under the Securities Act of 1933. 4 MANAGEMENT CONSULTING AGREEMENT WITH ROBERT C. BREHM CONSULTING, INC. General On December 7, 1995, the Company entered into a Management Consulting Agreement with Robert C. Brehm Consulting, Inc. pursuant to which the Company agreed to issue to the Consultant Options to purchase up to an aggregate of 264,000 shares of Common Stock of the Company in consideration for consulting services to be provided to the Company over an anticipated eight-month period commencing as of the date of the agreement. The Consultant is wholly-owned by Mr. Robert C- Brehm, who is the sole officer and director of the Consultant. The term of the Management Consulting Agreement shall be eight months. Under the terms of the Consulting Agreement the Consultant is to undertake for and consult with the Company concerning management, marketing and operational planning and consulting, strategic planning, corporate organization and structure, expansion of services and stockholder relations, and shall review and advise the Company regarding its overall progress, needs and condition. In particular, the Consultant shall assist the Company with the implementation of short range and long term strategic planning to fully develop and enhance the company's assets, resources, products and services, and advise and recommend to the Company additional services relating to the present products and services provided by the Company as well as new products and services that may be provided by the Company. Compensation In connection with the Consulting Agreement, the Company has agreed to issue Options to purchase up to 264,000 shares of Common Stock of the Company over the period of twenty-four months and which are not being administered by either the Board of Directors of the Company or any committee of the Board Directors organized for that purpose. The specific terms of the Options are as follows: (a) Option Price. Options to purchase 264,000 shares of Common Stock shall be exercisable at a price per share of Common Stock of $0.75. (b) Terms of Options, Each Option is exercisable from December 10, 1995 until its expiration date of December 10, 1997. (c) Payment for Shares. The purchase price for the exercise of the Options is payable in cash, and the price for the shares of Common Stock is to be paid in full upon exercise of the Options. (d) Transferability. The Options are not transferable by the holder thereof except pursuant to the laws of descent and distribution to the sole shareholder. (e) Redemption. There are no redemption rights afforded to the Company in connection with the Options. (f) Adjustments. The number of shares of common stock of the Company purchasable upon exercise of the Options and the exercise price of the Options are subject to the adjustment involving stock dividends, stock splits, reorganizations, reclassifications, consolidations and mergers. There will be no adjustment for the payment of cash dividends by the Company on its Common Stock. The Company is not required to issue fractional shares. Options for fractional shares amounting to less than one share will be disregarded. (g) Miscellaneous. it is intended that the shares of Common Stock issued on exercise of the Options will be fully registered securities under the Securities Act of 1933. 5 Restrictions Under Securities Laws The sale of any shares of Common Stock acquired upon the exercise of the Options must be made in compliance with federal and state securities laws. Officers, directors and 10% or greater stockholder of the Company, as well as certain other persons or parties who may be deemed to be "affiliates" of the Company under the Federal Securities Laws, should be aware that resales by affiliates can only be made pursuant to an effective Registration Statement, Rule 144 or any other applicable exemption. Officers, directors and 10% and greater stockholders are also subject to, the "short swing" profit rate of Section 16(b) of the Securities Exchange Act of 1934. Section 16(b) of the Exchange Act generally provides that if an officer, director or 10% and greater stockholder sold any Common Stock of the Company acquired pursuant to the exercise of a stock option or warrant, he would generally be required to pay to the Company and "profits" resulting from the sale of the stock and receipt of the stock option. Section 16(b) exempts all option exercises from being treated as purchases and, instead, treats an option grant as a purchase of the underlying security, which grant/purchase may be matched with any sale or the underlying security within six months of the date of grant. SALES BY SELLING: SECURITY HOLDERS The following table sets forth the name of the Selling Security Holder, the amount of shares of Common Stock held directly or indirectly or underlying the maximum number of Options to be issued to the Selling Security Holder, the amount of shares of Common Stock underlying the Options to be offered by the Selling Security Holder, the exercise price for the Options, the amount of Common Stock to be owned by the Selling Security Holder following sale of such shares of Common Stock and the percentage of shares of Common Stock to be owned by the Selling Security Holder following completion of such offering (based on 9,925,751 shares of Common Stock of the Company outstanding as of December 19, 1995). Unless otherwise indicated, each of the stockholders has sole voting and investment Power with respect to shares beneficially owned.
Exercise Shares to be Percent to be Name of Selling Number of Shares to Price per owned After owned after Security Holder Shares Owned be Offered Share Offering Offering - --------------- ------------ ---------- ----- -------- -------- Peter D, Bistrian 486,000 (1) 486,000 $0.75 0 none Consulting, Inc. Robert C. Brehm 264,000 (2) 264,000 $O.75 0 none Consulting, Inc.
(1) Represents shares underlying a currently execrable option to purchase 468,000 shares of the Company's common stock exercisable at $O.75 per share, which has been issued to Consultant for advisory and consulting services. (2) Represents shares underlying a currently exercisable option to purchase 264,000 shares of the company's common stock exercisable at $O.75 per share, which has been issued to Consultant for advisory and consulting services. 6 DESCRIPTION OF SECURITIES The authorized capital stock of the Company consists of 25,000,000 shares of Common Stock, $.0001 par value, and 50,000,000 shares of preferred stock, $.OOO1 par value. The following summary of certain terms of the Common Stock and Preferred Stock does not purport to be complete and is subject to, and qualified in its entirely by, the provisions of the Company's Certificate of Incorporation and By-laws, which are included as exhibits to the Registration Statement of which this Prospectus is a part, and the provisions of applicable law. Common Stock As of the date of this Prospectus, there are 9,925,751 shares of Common Stock outstanding. Holders of Common Stock are entitled to one vote for each share held of record on all matters submitted to a vote of the stockholders. Holders of Common Stock are entitled to receive ratably such dividends as may be declared by the Board of Directors out of funds legally available therefor. In the event of a liquidation, dissolution or winding up of the Company, holders of Common Stock are entitled to share ratably in all assets remaining after payment of liabilities and the liquidation preference of any then outstanding preferred stock, if any. Holders of Common Stock have no right to convert their Common Stock into any other securities. The Common Stock has no preemptive or other subscription rights. There are no redemption or sinking fund provisions applicable to the Common Stock. All outstanding shares of Common Stock are, and the Common Stock to be outstanding upon completion of this Offering will be, duly authorized, validly issued, fully paid and nonassessable. Preferred Stock The Board of Directors has the authority, without further action by the stockholders, to issue up to 50,000,000 shares of Preferred Stock, $.OOO1 par value, of which 2,000,0OO shares have been designated as Series AA and of which 667,904 shares of its AA Preferred Stock are currently issued and remain outstanding. The Company currently has no plans to issue any additional preferred stock. The Board of Directors of the Company has authority, however, to issue all or any portion of the authorized but unissued preferred stock in one or more series and to fix the rights, preferences, privileges and restrictions thereof, including dividend rights, conversion rights, voting rights, terms of redemption, liquidation preference and the number shares constituting any series at the designation of such series. The issuance of Preferred Stock could adversely affect the voting power of holders of Common Stock and could have the effect of delaying, deferring or preventing a change in control of the Company. Trading Status The Company's Common Stock is traded in the Bulletin Board under the symbol "DEBI". Transfer Agent The Transfer Agent for the shares of Common Stock is American Stock Transfer and Trust, 40 Wall Street. New York, New York 10005, telephone number: (718) 921-8327. LEGAL MATTERS Certain legal matters in connection with the securities being offered hereby will be passed upon for the Company by Horwitz, Cutler & Beam, Irvine California. Shareholders of Horwitz, Cutler & Beam are not the beneficial owners of any of the Company's common stock. 7 PART II Item 3. Incorporation of Documents by Reference. The Registrant incorporates the following documents by reference in the registration statement: (a) The Company's Annual Report on Form 1O-KSB filed for the year ended December 31, 1994 and the Company's Quarterly Reports on Forms 1O-QSB for the quarters ended March 31, 1995, June 30, 1995 and September 30, 1995; Current Reports on Form 8-K dated June 30,1995, July 21, 1995 and August 30, 1995; description of the Company's Common Stock contained in the Company's Form 8-A dated October 19, 1990; All other documents filed in the future by Registrant after the date of this registration Statement under section 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934, prior to the filing of a post-effective amendment Registration Statement which deregisters the securities covered hereunder which remain unsold, shall be deemed to be incorporated by reference in this Registration Statement and to be a part hereof from the date of filing of such documents. Item 4. Description of Securities. The class of securities to be offered is registered under Section 12(g) of the Securities Exchange Act of 1934, as amended. A description of the registrant's Securities is set forth in the Prospectus incorporated as a part of this Registration Statement. Item 5. Interests of Named Experts and Counsel None. Item 6. Indemnification of Officers & Directors The Company's Bylaws and the Nevada General Corporation Law provide for indemnification of directors and officers against certain liabilities. Officers and directors of the Company are indemnified generally against expenses actually and reasonably incurred in connection with proceedings, whether civil or criminal, provided that it is determined that they acted in good faith, were not found guilty, and, in any criminal matter, had reasonable cause to believe that their conduct was not unlawful. The Company's Certificate of Incorporation further provides that a director of the Company shall not be personally liable for monetary damages to the Company or its shareholders for breach of any fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Company or its stockholders; (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) for the unlawful payments or dividends or stock redemption by the Company or (iv) for any transaction from which the director derives an improper Personal benefit. Item 7. Exemption form Registration Claimed Inasmuch as the Consultant who received the options of the Registrant was knowledgeable, sophisticated and had access to comprehensive information relevant to the Registrant such transaction was undertaken in reliance on the exemption from registration provided by Section 4(2) of the Act. 8 Item 8. Exhibits 4(l) Management Consulting Agreement with Peter D. Bistrian Consulting, Inc. 4(2) Management Consulting Agreement with Robert C. Brehm Consulting, Inc. 4(3) Option Agreement with Peter D. Bistrian Consulting, Inc. 4(4) Option Agreement with Robert C. Brehm Consulting, Inc. 5 Opinion of Horowitz, Cutler & Beam, consent included,, relating to the Issuance of the shares of securities pursuant to the Management Consulting Agreement 23(1) Consent of Horowitz, Cutler & Beam. 23(2) Consent of KPMG Peat Marwick LLP. Item 9. Undertakings (a) The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by section 1O(a)(3)) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement including (but not limited to) any addition or election of a managing underwriter. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities offered at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (b) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof, 9 (c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is therefore, unenforeceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel that matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. 10 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this registration statement in be signed on its behalf by the undersigned, thereunto duly authorized in the City of Las Vegas, NV, on December , 1995. DEBBIE REYNOLDS HOTEL & CASINO, INC. By: /s/ Todd Fisher -------------------------------- Todd Fisher President Pursuant to the requirements of the Securities Act of 1933, the registration statement has been signed below by the following persons in the capacities indicated on December , 1995. /s/ Debbie Reynolds - ------------------------ Debbie Reynolds Chairman of the Board /s/ Todd Fisher President, Chief Executive Officer, - ------------------------ Chief Financial Officer & Director Todd Fisher (Principal Executive Officer and Principal Financial Officer) 11 EXHIBIT (4)(1) Managing Consulting Agreement with Peter D. Bistrian Consulting, Inc. PETER D. BISTRIAN CONSULTING, INC. One East Uwchlan Avenue Suite 109 Exton, PA 19341 December 7, 1995 Ms. Debbie Reynolds Chairman DEBBIE REYNOLDS HOTEL & CASINO, INC. 305 Convention Center Drive Las Vegas, Nevada 89109 RE: Management Consulting Agreement ----------------------------------- Dear Ms. Reynolds: Formalizing our earlier discussions this is to acknowledge and confirm the terms of our Management Consulting Agreement ("Consulting Agreement") as follows: 1. Appointment of Peter D. Bistrian Consulting, Inc.. DEBBIE, REYNOLDS HOTEL & CASINO, INC. ("DEBI") hereby engages Peter D. Bistrian Consulting, Inc. ("BISTRIAN") and BISTRIAN hereby agrees to render services to DEBI as a management consultant, strategic planner and advisor. 2. Duties. During the term of this Agreement, BISTRIAN shall provide advice to, undertake for and consult with the Company concerning management, marketing consulting, strategic planning corporate organization and structure, financial matters in connection with the operation of the business of the Company, expansion of services, stockholder relations, and shall review and advise DEBI regarding its overall progress, needs and condition. BISTRIAN agrees to provide on a basis the following enumerated services plus any additional services contemplated thereby. (a) The implementation of short range and long term strategic planning to fully develop and enhance DEBI's assets, resources, products and services; (b) Advise and recommend to DEBI additional services relating to the present business and services provided by DEBI as well as new products and services that may be provided by DEBI. 3. The term of this Consulting Agreement shall be for an eight-month period commencing on the date hereof. 4. Compensation. As compensation for its services hereunder, BISTRIAN shall be issued options (the "Options") to purchase up to 486,000 shares of Common Stock, $.OOO1 par value (the "Shares"), of the Company exercisable at a price of $0.75 per share. 5. Purchase of Shares. The exercise price for the Options shall be paid in cash, and appropriate investment restrictions shall be noted against the Shares. 6. Expenses. BISTRIAN shall be entitled to reimbursement by DEBI of such reasonable out-of-pocket expenses as BISTRIAN may incur in performing services under this Consulting Agreement. Any significant expenses shall be approved in advance in writing by DEBI. 7. Registration. DEBI agrees to provide BISTRIAN with registration rights at DEBI's cost and expenses and include, the underlying shares of Common Stock in a registration statement on Form S-8 to be filed by DEBI with the Securities and Exchange Commission within the proximate future, provided that the Options may not be exercised prior to the registration statement being filed with the SEC. 8. Confidentiality . BISTRIAN will not disclose to any other person, firm or corporation, nor use for its own benefit, during or after the term of this Consulting Agreement, any trade secrets or other information designated as confidential by DEBI which is acquired by BISTRIAN in the course of its performing services hereunder. (A trade secret is information not generally known to the trade which gives DEBI an advantage over its competitors. Trade secrets can include, by way of example, products or services under development, production methods and processes, sources of supply, customer lists, marketing plans and information concerning the filing of pendency of patent applications). Any financial advice tendered by BISTRIAN pursuant to this Consulting Agreement may not be disclosed publicly in any manner without the prior written approval of BISTRIAN. 9. Indemnification. DEBI agrees to indemnify and hold BISTRIAN harmless from and against losses, claims, damages, liabilities, costs or expenses (including reasonable attorneys' fees (collectively the "liabilities") joint and several, arising out of the performance of this Consulting Agreement, whether or not BISTRIAN is a party to such dispute. This indemnity shall not apply, however, and BISTRIAN shall indemnify and hold DEBI, its affiliates, control persons, officers, employees and agents harmless from and against all liabilities, where a court of competent jurisdiction has made final determination that BISTRIAN engaged in gross recklessness and willful misconduct in the performance of its services hereunder which gave rise to the losses, claim, damage, liability, cost or expense sought to be recovered hereunder (but pending any such final determination, the indemnification and reimbursement provisions of this Consulting Agreement shall apply and DEBI shall perform its obligations hereunder to reimburse BISTRIAN for its expenses.) The provisions of this paragraph 8 shall survive the termination and expiration of this Consulting Agreement. 10. Independent Contractor. BISTRIAN and DEBI hereby acknowledge that BISTRIAN is an independent contractor. BISTRIAN shall not hold itself out as, nor shall it take any action from which others might infer, that it is a partner of, agent of or a joint venturer of DEBI. 11. Miscellaneous. This Consulting Agreement sets forth the entire under standing of the parties relating to the subject matter hereof, and supersedes and cancels any prior communications, understandings and agreements between the parties. This Consulting Agreement cannot be modified or changed, nor can any of its provisions be waived except by written agreement signed by a11 parties. This Consulting Agreement shall be governed by the laws of the State of Nevada. In any event or any dispute as to the terms of this Consulting Agreement, the prevailing party in any litigation shall be entitled to reasonable attorney's fees. Please confirm that the foregoing correctly sets forth our understanding by signing the enclosed copy of this letter where provided and returning it to us at your earliest convenience. Very truly yours, PETER D. BISTRIAN CONSULTING, INC. By: ----------------------------- Its: ----------------------------- ACCEPTED AND AGREED TO as of the day of December 1995 DEBBIE REYNOLDS HOTEL & CASINO, INC. By: ------------------------------- Todd Fisher, President EXHIBIT (4)(2) Managing Consulting Agreement with Robert C. Brehm Consulting, Inc. ROBERT C. BREHM CONSULTING, INC. 6965 El Camino Real, Suite 105 Carlsbad, California 92009 December 7, 1995 Ms. Debbie Reynolds Chairman DEBBIE, REYNOLDS HOTEL & CASINO, INC. 305 Convention Center Drive Las Vegas, Nevada 89109 RE: Management Consulting Agreement ------------------------------- Dear Ms. Reynolds: Formalizing our earlier discussions this is to acknowledge and confirm the terms of our Management Consulting Agreement ("Consulting Agreement") as follows: 1. Appointment of Robert C. Brehm Consulting Inc.. DEBBIE REYNOLDS HOTEL & CASINO, INC. ("DEBI") hereby engages Robert C. Brehm Consulting, Inc. ("BREHM') and BREHM hereby agrees to render services to DEBI as management consultant, strategic planner and adviser. 2. Duties. During the term of this Agreement, BREHM shall provide advice to, undertake for and consult with the Company concerning management, marketing consulting, strategic planning corporate organization and structure, financial matters in connection with the operation of the business of the Company, expansion of services, stockholder relations, and shall review and advise DEBI regarding its over-all progress, needs and condition. BREHM agrees to provide on a timely basis the following enumerated services plus any additional services contemplated thereby. (a) The implementation of short range and long term strategic planning to fully develop and enhance DEBI's assets, resources, products and services; (b) Advise and recommend to DEBI additional services relating to the present business and services provided by DEBI as well as new products and services that may be provided by DEBI. 3. Term. The term of this Consulting Agreement shall be for an eight-month period commencing on the date hereof 4. Compensation. As compensation for its services hereunder, BREHM shall be issued Options (the "Options") to purchase up to 264,000 shares of Common Stock, $.OOO1 par value (the "Shares"), of the Company exercisable at a price of $0.75 per share. 5. Purchase of Shares The exercise price for the Options shall be paid in cash, and appropriate investment restrictions shall be noted against the Shares. 6. Expenses. BREHM shall be entitled to reimbursement by DEBI of such reasonable out of pocket expenses as BREHM may incur in performing services under this Consulting Agreement. Any significant expenses shall be approved in advance in writing by DEBI. 7 Registration. DEBI agrees to provide BREHM with registration rights at DEBI's cost and expense; and include the underlying shares of Common Stock in a registration statement on Form S-8 to be filed by DEBI with the Securities and Exchange Commission within the proximate future, provided that the Options may not be exercised prior to the registration statement being filed with the SEC 8. Confidentiality. BREHM will not disclose to any other person, firm or corporation, nor use for its own benefit, during or after the term of this Consulting Agreement, any trade secrets or other information designated as confidential by DEBI which is acquired by BREHM in the course of its performing services hereunder. (A trade secret is information not generally known to the trade which gives DEBI an advantage over its competitors. Trade secrets can include, by way of example, products or services under development, production methods and processes, sources of supply, customer lists, marketing plans and information concerning the filing of pendency of patent applications). Any financial advice tendered by BREHM pursuant to this Consulting Agreement may not be disclosed publicly in any manner without the prior written approval of BREHM. 9. Indemnification. DEBI agrees, to indemnify and hold BREHM harmless from and against all losses, claims, damages, liabilities, costs or expenses (including reasonable attorneys' fees (collectively the "Liabilities") joint and several, arising out of the performance of this Consulting Agreement, whether or not BREHM is a party to such dispute. This indemnity shall not apply, however, and BREHM shall indemnify and hold DEBI, its affiliates, control persons, officers, employees and agents harmless from and against all liabilities, where a court of competent jurisdiction has made a final determination that BREHM engaged in gross recklessness and willful misconduct in the performance of its services hereunder which gave rise to the losses, claim, damage, liability, cost or expense sought to be recovered hereunder (but pending any such final determination, the indemnification and reimbursement provisions of this Consulting Agreement shall apply and DEBI shall perform its obligations hereunder to reimburse BREHM for its expenses.) The provisions of this paragraph 8 shall survive the termination and expiration of this Consulting Agreement. 10. Independent Contractor. BREHM and DEBI hereby acknowledge that BREHM is an independent contractor. BREHM shall not hold itself out as, nor shall it take any action from which others might infer, that it is a partner of, agent of or a joint venturer of DEBI. 11. Miscellaneous. This consulting Agreement sets forth the entire understanding of the parties relating to the subject matter hereof, and supersedes and cancels any prior communications, understandings and agreements between the parties. This Consulting Agreement cannot be modified or changed, not can any of its provisions be waived except by written agreement signed by all parties. This Consulting Agreement shall be governed by the laws of the State of Nevada. In any event of any dispute as to the terms of this Consulting Agreement, the prevailing party in any litigation shall be entitled to reasonable attorneys' fees. Please confirm that the foregoing correctly sets forth our understanding by signing the encloses copy of this letter where provided and returning it to us at your earliest convenience. Very truly yours, PETER D. BISTRIAN CONSULTING, INC. By: ----------------------------- Its: ----------------------------- ACCEPTED AND AGREED TO as of the day of December 1995 DEBBIE REYNOLDS HOTEL & CASINO, INC. By: ------------------------------- Todd Fisher, President EXHIBIT(4)(3) OPTION AGREEMENT OPTION TO PURCHASE COMMON STOCK OF DEBBIE REYNOLDS HOTEL & CASINO, INC. This is to certify that PETER D. BISTRIAN CONSULTING, INC. ("Optionee") is entitled, subject to the terms and conditions hereinafter set forth, to purchase 486,000 shares of Common Stock, $.OOO1 par value per share (the "Common Shares") of DEBBIE REYNOLDS HOTEL & CASINO, INC., a Nevada corporation (the "Company"), from the Company at the price per share and on the terms set forth herein and to receive a certificate of the Common Shares so purchased on presentation and surrender to the Company with the subscription form attached, duly executed and accompanied by payment of the purchase price of each share purchased either in cash or by certified or bank cashier's check or other check payable to the order of the Company. The purchase rights represented by this Option are exercisable commencing December 10, 1995 through and including December 10, 1997 at a price per Common Share of $0.75. Subject to the above conditions, the purchase rights represented by this Option are exercisable at the option of the registered owner hereof in whole at any time, or in part from time to time, within the period specified; provided, however, that such purchase rights shall not be exercisable with respect to a fraction of a Common Share. In case of the purchase of less than all the Common Shares purchasable under this Option, the Company shall cancel this Option on surrender hereof and shall execute and deliver a new Option of like tenor and date for the balance of the shares purchasable hereunder. The Company agrees at all times to reserve or hold available a sufficient number of Common Stock to cover the number of shares issuable on exercise of this and all other Options of like tenor then outstanding. This Option shall not entitle the holder hereof to any voting rights or other rights as a stockholder of the Company, or to any other rights whatever except the rights herein expressed and such as are set forth, and no dividends shall be payable or accrue in respect to this Option or the interest represented hereby or the Common Shares purchasable hereunder until or unless, and except to the extent that, this Option shall be exercised. In the event that the outstanding Common Shares hereunder are changed into or exchanged for a different number or kind of shares or other securities of the Company or of another corporation by reason of merger, consolidation, other reorganization, recapitalization, reclassification, combination of shares, stock split-up or stock dividend: 1 (a) The aggregate number and kind of Common Shares subject to this Option, shall be adjusted appropriately; (b) Rights under this Option, both as to the number of subject Common Shares and the Option price, shall be adjusted appropriately; and (c) Where dissolution or liquidation of the company or any merger or combination in which the Company is not a surviving corporation is involved, this Option shall terminate, but the registered owner of this Option shall have the right, immediately prior to such dissolution, liquidation, merger or combination, to exercise his Option in whole or in part to the extent that it shall not have been exercised. The foregoing adjustments and the application of the foregoing provisions may provide for the elimination of fractional share interests. The Option and all rights hereunder shall not be transferrable otherwise than by will or the laws of descent and distribution and except to the sole shareholder of Optionee. The Company shall not be required to issue or deliver any certificate of Common Shares purchased on exercise of this Option or any portion thereof prior to fulfillment of all the following conditions: (a) The completion of any registration or other qualification of such shares under any federal or state law or under the rulings or regulations of the Securities and Exchange Commission or any other government regulatory body which is necessary; (b) The obtaining of any approval or other clearance from any federal or state government agency which is necessary. The Company agrees to file an appropriate registration statement under the Securities Act of 1933 as soon as practicable in order to register the underlying Common Shares under such Act. IN WITNESS WHEREOF, the Company has caused this Option to be executed by the signature of its duly authorized officer. DEBBIE REYNOLDS HOTEL & CASINO, INC. By: ______________________ Todd Fisher, President Dated: December 5, 1995 SUBSCRIPTION FORM (To be executed by the registered holder to exercise the rights to purchase Common Shares evidenced by the within Option). Debbie Reynolds Hotel & Casino, Inc. 305 Convention Center Drive Las Vegas, Nevada 89109 The undersigned hereby irrevocably subscribes for Common Shares pursuant to and in accordance with the terms and conditions of this Option, and hereunder makes payment of $_______________ therefor, and requests that a certificate of such Common Shares be issued in the name of the undersigned and be delivered to the undersigned at the address stated below, and if such number of shares shall not be all of the shares purchasable hereunder, that a new Option of like tenor for the balance of the remaining Common Shares purchasable hereunder shall be delivered to the undersigned at the address stated below. Dated: ____________________ Signed: _____________________ Address: ____________________ ____________________ ____________________ 3 EXHIBIT (4)(4) OPTION AGREEMENT OPTION TO PURCHASE COMMON STOCK OF DEBBIE REYNOLDS HOTEL & CASINO, INC. This is to certify that ROBERT C. BREHM CONSULTING, INC. ("Optionee") is entitled, subject to the terms and conditions hereinafter set forth, to purchase 264,000 shares of Common Stock, $.0001 par value per share (the "Common Shares") of DEBBIE REYNOLDS HOTEL & CASINO, INC., a Nevada corporation (the "Company"), from the Company at the price per share and on the terms set forth herein and to receive a certificate of the Common Shares so purchased on presentation and surrender to the Company with the subscription form attached, duly executed and accompanied by payment of the purchase price of each share purchased either in cash or by certified or bank cashier's check or other check payable to the order of the Company. The purchase rights represented by this Option are exercisable commencing December 10, 1995 through and including December 10, 1997 at a price per Common Share of $0.75. Subject to the above conditions, the purchase rights represented by this Option are exercisable at the option of the registered owner hereof in whole at any time, or in part from time to time, within the period specified; provided, however, that such purchase rights shall not be exercisable with respect to a fraction of a Common Share. In case of the purchase of less than all the Common Shares purchasable under this Option, the Company shall cancel this option on surrender hereof and shall execute and deliver a new option of like tenor and date for the balance of the shares purchasable hereunder. The Company agrees at all times to reserve or hold available a sufficient number of Common Shares to cover the number of shares issuable on exercise of this and all other Options of like tenor then outstanding. This Option shall not entitle the holder hereof to any voting rights or other rights as a stockholder of the Company, or to any other rights whatever except the rights herein expressed and such as are set forth, and no dividends shall be payable or accrue in respect to this Option or the interest represented hereby or the Common Shares purchasable hereunder until or unless, and except to the extent that, this Option shall be exercised. In the event that the outstanding Common Shares hereunder are changed into or exchanged for a different number or kind of shares or other securities of the Company or of another corporation by reason of merger, consolidation, other reorganization, recapitalization, reclassification, combination of shares, stock split-up or stock dividend: 1 (a) The aggregate number and kind of Common, Shares subject to this option shall be adjusted appropriately; (b) Rights under this Option, both as to the number of subject Common Shares and the Option price, shall be adjusted appropriately; and (c) Where dissolution or liquidation of the company of any merger or combination in which the Company is not a surviving corporation is involved, this Option shall terminate, but the registered owner of this Option shall have the right immediately prior to such dissolution, liquidation, merger or combination, to exercise his Option in whole or in part to the extent that it shall not have been exercised. The foregoing adjustments and the application of the foregoing provisions may provide for the elimination of fractional share interests. The Option and all rights hereunder shall not be transferrable otherwise than by will or the laws of descent and distribution and except to the sole shareholder of Optionee. The Company shall not be required to issue or deliver any certificate Common Shares purchased on exercise of this Option or any portion thereof prior to fulfillment of all the following conditions: (a) The completion of any registration or other qualification of such shares under any federal or state law or under the rulings or regulations of the Securities and Exchange Commission or any other government regulatory body which is necessary; (b) The obtaining of any approval or other clearance from any federal or state government agency which is necessary. The Company agrees to file an appropriate registration statement under the Securities Act of 1933 as soon as practicable in order to register the underlying Common Shares under such Act. IN WITNESS WHEREOF, the Company has caused this Option to be executed by the signature of its duly authorized officer. DEBBIE REYNOLDS HOTEL & CASINO, INC. By: ______________________ Todd Fisher, President Dated: December 5, 1995 2 SUBSCRIPTION FORM (To be executed by the registered holder to exercise the rights to Purchase Common Shares evidenced by the within Option). Debbie Reynolds Hotel & Casino, Inc. 305 Convention Center Drive Las Vegas, Nevada 99109 The undersigned hereby irrevocably subscribes for Common Shares pursuant to and in accordance with the terms and conditions of this Option, and hereunder makes Payment of $_________________ therefor, and request that a certificate of such Common Shares be issued in the name of the undersigned and be delivered to the undersigned at the address stated below, and if such number of shares shall not be all of the shares purchasable hereunder, that a new Option of like tenor for the balance of the remaining Common Shares Purchasable hereunder shall be delivered to the undersigned at the address stated below. Dated: ____________________ Signed: _____________________ Address: ____________________ ____________________ ____________________ 3 EXHIBIT (5) Opinion Of Horwitz, Cutler & Ream relating to issuance of shares of securities Pursuant to the above Management Consulting Agreement Law Office Of HOROWITZ CUTLER & BEAM Two Venture Plaza Suite 380 Irvine, California 92718 (714) 453-0300 (310) 842-8574 FAX: (714) 453-9416 Lawrence W. Horwitz, Esq. *Also Admitted in Texas M. Richard Cutler, Esq.* Gregory B, Beam, Esq. Lawrence R. Bujold, Esq. Lawrence M. Cron, Esq. Iwona Alami, Esq. Dana M. Strabic, Esq. Thomas A Zeigler, Esq. James M. Gilbert, Esq. December 19, 1995 Securities and Exchange Commission 450 Fifth Street, N.W. Judiciary Plaza Washington, DC 2O549 Re: DEBBIE REYNOLDS HOTEL & CASINO, INC. Ladies and Gentlemen: This office represents DEBBIE REYNOLDS HOTEL & CASINO, INC., a Nevada corporation (the "Registrant") in connection with the registrant's Registration Statement on Form S- 8 under the Securities Act of 1933 (the "Registration Statement"), which relates to the registration of a total of 75O,O0O shares of the registrant's Common Stock issuable upon exercise of options issued to Peter D. Bistrian Consulting, Inc. (an option to purchase 486,000 shares) and to Robert C. Brehm Consulting, Inc. (an option to purchase 264,000 shares) for performance of certain consulting and management services of the "Registered Securities"). In connection with our representation, we have examined such documents and undertaken such further inquiry as we consider necessary for rendering the opinion hereinafter set forth. Based upon the foregoing, it is our opinion that the Registered Securities, when sold as set forth in the Registration Statement, will be legally issued, fully paid and nonassessable. We acknowledge that we are referred to under the heading "Legal Matters" in the Prospectus which is a part of the Registrant's Form S-8 Registration Statement relating to the Registered Securities, and we hereby consent to such use of our name in such Registration Statement and to the filing of this opinion as Exhibit 5 to the Registration Statement and with such state regulatory agencies in such states as may require such filing in connection with the registration of the Registered Securities for offer and sale in such states. HOROWITZ, CUTLER & BEAM EXHIBIT (23.1) Consent Of Horowitz, Cutler & Beam relating to issuance of shares Of Securities pursuant to the above Management Consulting Agreements CONSENT OF HORWITZ, CUTLER & BEAM We hereby consent to the use in the Prospectus constituting part of the Registration Statement on Form S-8 of our opinion dated December 19, 1995 relating to the registration of the Securities, as therein defined, of DEBBIE REYNOLDS HOTEL & CASINO, a Nevada corporation, which is attached as Exhibit 5 therein. December ____, 1995 HOROWITZ, CUTLER & BEAM EXHIBIT 23.2 CONSENT OF INDEPENDENT AUDITOR We hereby consent to the use in the Prospectus, constituting part of the Registration Statement on Form S-8 of our report dated __________, 1995 relating to the financial statements of DEBBIE REYNOLDS HOTEL & CASINO, which are incorporated by reference therein. December __, 1995 KMPG Peat Marwick LLP EX-10.32 12 DEFINITIVE AGREEMENT Exhibit 10.32 ILX Incorporated definitive agreement dated October 30, 1996. Debbie Reynolds Hotel Acquisition Memorandum of Understanding ILX Incorporated, an Arizona Corporation (NASDAQ: ILEX), will acquire by purchase the Debbie Reynolds Hotel & Casino situated in Las Vegas, NV from Debbie Reynolds Hotel & Casino, Inc. for the purchase price of $16,800,000, payable as follows: $5,100,000 by assumption of certain existing mortgage indebtedness $4,200,000 payable in cash $7,500,000 payable by issuance of 3,750,000 shares of ILX Incorporated common stock with a registration statement to be filed on an appropriate form with the SEC within 90 days of closing. The obligation of ILEX to consummate this transaction is expressly conditioned upon the execution of a definitive agreement which, among other salient provisions, requires the continued presence, cooperation, and participation of Ms. Debbie Reynolds in future activities of the hotel & casino and other ILEX related businesses to be set forth in detail in another definitive agreement. Both parties will commence immediately to complete all remaining due diligence, take any and all appropriate corporate action and seek governmental approvals, if any, pertaining to the transactions contemplated with a view to closing in the fourth quarter of 1996. Dated this 27th day of September, 1996. Debbie Reynolds Hotel & Casino, Inc. ILX Incorporated /s/ Todd Fisher /s/ Joseph P. Martori - --------------------------- ---------------------------- Todd Fisher, CEO Joseph P. Martori, Chairman AGREEMENT FOR PURCHASE AND SALE OF DEBBIE REYNOLDS HOTEL AND CASINO LAS VEGAS, NEVADA SELLER: DEBBIE REYNOLDS HOTEL & CASINO, INC. a Nevada corporation DEBBIE REYNOLDS RESORTS, INC. a Nevada corporation BUYER: ILX INCORPORATED an Arizona corporation or its nominee DATE October 30, 1996 AGREEMENT FOR PURCHASE AND SALE THIS AGREEMENT FOR PURCHASE AND SALE ("Agreement") is made as of the 30th day of October 1996, by and between DEBBIE REYNOLDS HOTEL & CASINO, INC., a Nevada corporation and its wholly owned subsidiary DEBBIE REYNOLDS RESORTS, INC., a Nevada corporation (collectively "Seller"), and ILX INCORPORATED, an Arizona corporation, or its nominee ("Buyer"). R E C I T A L S A. Seller is the owner of certain real property located in the city of Las Vegas, Clark County, Nevada, comprised of a resort hotel and casino known as Debbie Reynolds Hotel and Casino (a portion of which has been timeshared) and certain related personal property and rights, tangible and intangible, as more particularly described below (the real and personal property and rights may be referred to herein as the "Resort", as such term is more fully defined below). B. Seller has agreed to sell, and Buyer has agreed to purchase, the Resort pursuant to the terms and conditions set forth below. NOW, THEREFORE, In consideration of the mutual covenant and conditions set herein, the sufficiency of such consideration being acknowledged, the parties hereby agree as follows: AGREEMENT Section 1. Sale of Resort 1.01. Seller shall sell to Buyer, and Buyer shall purchase from Seller, at the price and upon the terms and conditions set forth in this Agreement: (a) All that real property located in the County of Clark, State of Nevada, described in Exhibit "B" attached hereto and incorporated herein, together with all rights, privileges, easements and appurtenances thereto, including, without limitation, all of Sellers right, title and interest in and to any appurtenant land lying within the right of way of any street, road or alley, whether completed or proposed (the "Property"). (b) All existing and proposed buildings, parking facilities, structures, signs, improvements, tenements, fixtures and appurtenences presently located on, under or about the Property and any additional items located thereon at the time of Closing ("Improvements"). (c) All of the Resort, restaurant, lounge, museum, showroom, casino, gift shop, back bar, common area, and other furniture, furnishings, equipment , fixtures, improvements, inventory, supplies and other items of personal property and any vehicles customarily located on the Property or used primarily in connection with the Resort, including those items set forth an Exhibit "C" attached hereto and Incorporated herein (the "Personal Property"), but specifically excluding those items set forth on Exhibit "T" attached hereto and incorporated herein; -1- (d) All customer lists, timeshare leads, and rental and booking information owned by Seller (the "Ledgers") and used in conjunction with the operation of the Resort: (e) All of seller's right title and interest in and to: (i) any losses affecting the Resort (the "Leases") that have not been paid as of Closing and that Buyer specifically agrees to assume, if any, and (ii) any management service, concession maintenance, utility and other contracts and agreements with respect to the maintenance and operation of the Resort (the "Service Contracts"); (f) All of seller's right title and interest in and to all architectural drawings, plans and specifications, shop drawings and other design or construction documents relating to the present or future development of the Resort and construction of the Improvements (the "Plans and Specifications"); (g) All of seller's right title and interest in and to any and all of the following to the extent that they arise out of, are related to the construction or development, or are, or have at any time been, used in connection with the Resort (i) warranties, guarantees and Indemnities in favor of Seller and claims of Seller against third parties with respect thereto, with the exception of those claims described on Exhibit 10-KSB attached hereto and incorporated herein. (ii) licenses, permits, certificates of occupancy or similar documents, contract rights and other agreements, whether oral or In writing, incident to the operation of the Resort to the extent transferrable, (iii) the goodwill associated with the Resort (iv) all designs, surveys, site plans, plats, operating materials, engineering reports and other technical descriptions, (v) transferrable licenses and permits necessary to operate the Resort as it is presently being operated, and (vi) all other contracts, assets, and rights owned by Seller, relating to the business, maintenance, construction and/or operation of the Resort (collectively the "Contract Rights and Intangible Assets"); (h) All of seller's right title and interest in and to any transferable licenses and permits, including without limitation alcoholic beverage licenses, used In the operation of the Resort and all other personal property or rights, tangible or intangible, located at and used in the operation of the Resort (collectively "Miscellaneous Items") ; (i) All of seller's right title and interest in Resort telephone numbers and marketing materials used in marketing the Resort, whether located at the Resort or elsewhere, including existing videotapes, photographs, brochures, film copy and anything relating thereto ("Advertising Materials"); and (j) All of Seller's right title and interest in the timeshare operation on the Property and any OPC license or lease (the "Timeshare Operation") and all "in-house" timeshare contracts, purchase agreements and notes receivable resulting from sales of timeshare Intervals at the Resort prior to Closing and not sold to lenders (the "Timeshare Paper"), as more particularly described on Exhibit A. -2- All of the items described in subparagraphs (a) through (j) above are referred to in this Agreement collectively as the "Resort". Any items excluded from the foregoing are set forth on Exhibit "T" attached hereto. 1.02 Seller shall convey and Buyer shall accept title to the Property and improvements in accordance with the terms of this Agreement by general warranty deed (Exhibit "D"), subject to all matters of public record shown on the Owners Title Policy, current taxes and current assessments, and any matter shown on the A.L.T.A. survey of the Property described in paragraph 3.04 below and approved by Buyer (collectively the "Permitted Exceptions"). The Personal Property and Advertising Materials shall be conveyed to Buyer by Bill of Sale (Exhibit "E") to be executed and delivered by Seller at Closing, free and clear of liens and encumbrances except the First Lien (as described hereinafter). The Leases, Service Contracts, Ledgers, Plans and Specifications, Miscellaneous Items, Timeshare Operation, Timeshare Paper, and Contract Rights and Intangible Assets, shall be conveyed by Seller pursuant to an Assignment of Leases, Contract Rights and Intangible Assets (Exhibit "F") or other appropriate assignment or conveyance document free and clear of all liens except the First Lien, to be executed and delivered by Seller and Buyer at Closing. Section 2. Purchase Price, Appointments, Escrow Agent 2.01 The purchase price ("Purchase Price") to be paid by Buyer to Seller for the Resort shall be SIXTEEN MILLION EIGHT HUNDRED THOUSAND DOLLARS ($16,800,000.00), plus any additional sum for inventories existing as of Closing, payable as follows: (a) Four Million Two Hundred Thousand Dollars ($4,200,000.00) In cash at Closing (the "Down Payment"), plus any additional sum representing the cost of any Resort Inventory of liquor, food, beverages and the gift shop (the "Inventory"), to be valued as agreed by the parties at a joint inventory conducted prior to Closing and as close thereto as practicable, all of which shall be used by Seller to satisfy the obligations of Seller described on Exhibit "P".; (b) Five Million One Hundred Thousand Dollars ($5,l00,000.00) (adjusted to the actual balance of principal and interest at Closing) by, at Buyers option, either (i) assumption at Closing of seller's existing obligation on the existing promissory note, deed of trust or mortgage, and other loan and security documents by Seller in favor of Resort Funding, Inc., attached hereto as Exhibit "G" (the " First Lien" or "Loan Documents"), or (ii) paying the loan evidenced by the Loan Documents in full at Closing; and (c) Seven Million Five Hundred Thousand Dollars ($7,500,000.00) by issuance at Closing of three Million seven hundred fifty thousand (3,750,00) shares of ILX incorporated Common Stock (the "Shares"), valued for purposes of this agreement at Two Dollars ($2.00) per share. Such stock will be included in a registration statement to be filed on an appropriate form with the United States Securities & Exchange Commission within thirty (30) days after the date of substantial completion of those Exhibits to be attached hereto hereinafter that provide material Information or additional term to the overall transaction required to be disclosed in such registration statement. -3- 2.02 Except as set forth In paragraph 1.01 and 2.03, Seller shall retain all the rights and all the obligations with respect to all obligations and liabilities of the Resort and its operation arising from or relating to the period on and prior to the date of Closing, including without limitation, all accounts payable, employees and employee claims, salaries and wages payable, vacation pay for vacation earned, and payroll taxes associated therewith , unbooked accounts payable, accounts receivable, cash, cash equivalents, security deposits, utility and telephone payments, utility deposits, bank deposits, bank and operating accounts, and all other obligations for the Resort existing as of and on the Closing Data and for the period prior thereto, as well as for its pro rata share of current real property taxes and current assessments as of the Closing Date. Seller's prorata share of real property taxes and assessments shall be paid to Buyer in cash on the Adjustment Date as defined in paragraph hereof if not known and prorated at Closing. Buyer, its wholly owned subsidiary, or through a management company as Buyer may employ, shall receive payments paid to the Resort on all seller's accounts receivable existing as of the Closing Date as seller's agent and shall remit all amounts received to Seller within thirty (30) days of receipt such receipt of accounts receivable shall be undertaken In the usual and ordinary course of the Resort business and Buyer shall not be required to undertake any solicitations or other effort or legal action to collect Receipt of free accounts receivable as set forth above shall be without cost to Seller. Any payment other than cash delivered for Seller shall be transmitted in kind by Buyer without recourse to Buyer. Adjustment for cash security deposits, prepaid or accrued expenses shall be made as provided In paragraph 2.03 below. 2.03 Buyer and Seller agree that a prorated net adjustment (the "Net Adjustment") shall be computed as of the Closing Date for any amounts actually paid to (or to be paid to) and for any amounts actually paid by (or to be paid by) one party, but otherwise under this Agreement belonging to the other party or chargeable to the other party, as the case may be. The computation of the Net Adjustment will be made as of the Closing Date and exclude the cash payment described in paragraph 2.01 (a) above. Buyer and Seller agree to use their best efforts to ensure that a full accounting of the Net Adjustments be Provided no later than the Closing Date to the extent practicable (the "Adjustment Date"). If Seller owes the Net Adjustment to Buyer, then Buyer shall deduct such amount from the Down Payment as of the Closing Date. If Buyer owes the Net Adjustment to Seller, such amount shall be added to the Down Payment as of the Closing Date. The parties acknowledge that some items subject to adjustment may not be received prior to the Adjustment Date, and wherever the context requires, Adjustment Date shall also mean Supplemental Adjustment Date as defined below. Accordingly, there will be a supplemental adjustment determined thirty (30) days after the Closing Date or such other date or dates as the parties may agree or which may be necessary if all information has not been received (the "Supplemental Adjustment Date(s)") for such items, with such supplemental adjustments to be made as of the Closing Date and paid to the other party within ten(10)days after the Supplemental Adjustment Date. Buyer and Seller agree that adjustments will include, but not necessarily be limited to, the following: (a) Sales and Other Taxes. Any sales, transaction privilege gaming or other periodic taxes (except Seller's corporate income tax) based on Pre-Closing Resort revenue, which taxes having been collected and not paid, or which are due or to become due and the amount known or determinable at Closing, shall be paid by Seller at Closing. All other such amounts not so determinable on or before the Adjustment Date, shall be an adjustment in favor of Buyer unless -4- otherwise paid by Seller. Upon presentation by Buyer of a copy of the sales or other tax return, with an allocation of seller's responsibility therefore, Seller shall reimburse Buyer for such amount within ten (10) business days after the date of such presentation. (b) Insurance. If Buyer continues any insurance that Seller has previously obtained with respect to the Resort, Buyer agrees to reimburse Seller for the proportionate share of insurance costs prepaid by Seller for any coverage continued by Buyer after Closing, shall be prorated as of the Closing Date. (c) Certain Payments. All Lease, Service Contract, utility and telephone payments shall be prorated as of the Closing Date. (d) Customer Deposits and Prepayments. All unearned customer deposits and prepayments for services to be performed or goods to be delivered after Closing shall be prorated in favor of Buyer as of the Closing Date. (e) Utility and Equipment Lease Deposits. All utility and equipment lease deposits shall be assigned to Buyer at Closing and shall be an adjustment in favor of Seller on the Adjustment Date. (f) License Fees. Any prepaid license fees shall be prorated as of the Closing Date and shall be an adjustment in favor of Seller on the Adjustment Date. (g) Employee and Payroll Related Expenses. At buyer's option, Buyer may require that all or any part of the resort's employees resign as of the Closing Date. To the extent not so required by Buyer, any workman's Compensation premium deposits to be utilized by Buyer shall be prorated to the Closing Date, and shall be an adjustment in favor of Seller on the Adjustment Date. Current wages, salaries, vacation and sick leave accrued as of the Closing Date shall be an adjustment in favor of Buyer on the Adjustment Date computed as if the vacation will be taken and the sick leave used. For purposes of the foregoing, paid vacation and sick leave shall be deemed paid on a first accrued-first paid basis, (h) Ledgers. All amounts receivable for lodging provided prior to the Closing Date, as shown on the Ledgers, shall be receivables to be received by Buyer on behalf of Seller or, set forth above. (i) To the extent the foregoing prorations and adjustments are specifically dealt with in the Hotel Facilities Lease, they shall be resolved herein in a manner consistent with that document (j)For all Purposes of proration and allocation of responsibility and liability as described in this Agreement, Closing Date and the period prior thereto are allocated to the Seller and the period after the Closing Date is allocated to the Buyer. The words 'as of' or "on" the Closing or Closing Date or similar wording, as well as the words "Closing"' or "Closing Date" where appropriate in the context shall be interpreted accordingly, -5- 2.04 The items below shall be paid as follows: (a) Seller shall pay all of the obligations described on Exhibit "P" from the Closing funds through the Escrow Agent. (b) Seller and Buyer shall each pay one-half (1/2) of the standard escrow charges in connection with this Agreement. (c) The cost of the owners title policy provided for in Paragraph 8.01 shall be paid on the Closing Date as follows: (i) Seller shall be charged an amount equal to the premium for standard coverage; and (ii) Buyer shall pay the additional premium for extended coverage, and the cost of any special endorsements as may be desired by Buyer. (d) The cost of any extended lender's title insurance policy shall be paid in full by Buyer. 2.05 Seller and Buyer hereby acknowledge and agree that the Purchase Price, for all purposes relating to this Agreement shall be allocated among the various assets comprising the Resort as the parties shall mutually agree In writing prior to the end of the Feasibility Period and attached hereto as Exhibit "H". 2.06 First American Title Insurance Company, Las Vegas, Nevada shall act as the escrow agent ("Escrow Agent") hereunder and shall, among other things, on the Closing Date, assume responsibility for recording and/or filing all necessary documents resulting herefrom, and shall cause the issuance of the policies of title insurance required under Section 8, together with proper issuance of any reinsurance agreements pertaining to such title insurance policies, and otherwise accomplish the provisions by signing in the indicated place on the signature page of this Agreement. The parties agree, if required by Escrow Agent, to execute and enter into Escrow agent's standard form of escrow instructions, all with such modifications as the parties shall reasonably request. Section 3. Feasibility and Investigation 3.01 In consideration of Buyer entering into the mutual covenants in this Agreement at any time on or prior to the sixtieth (60th) day after the date of this Agreement (or as other Terms of this Agreement may specifically extend such period) (the "Feasibility Period"), Buyer may cancel this Agreement and all agreements relating thereto (except for Its Indemnity relating to disturbance of the Resort as described below in this Section) for any reason whatsoever in Buyer's sole and absolute discretion, by providing to Seller and Escrow Agent written notice of such cancellation. ln the event Buyer timely gives notice of cancellation in accordance with the provisions hereof, this Agreement shall become null and void and of no further force or effect whatsoever and neither party shall have any further rights or obligations to the other -6- hereunder or by reason hereof except for those provisions hereof which are expressly stated to survive the termination of this Agreement. If, however, Buyer shall fail to give notice of buyer's election to cancel at the time and in the manner as above provided, then Buyer shall be deemed to have waived its right to do so and Buyer shall continue to be bound by the remaining provisions of this Agreement. 3.02 Buyer shall have the right to enter and examine the Resort and all other items being sold pursuant to this Agreement at any time under the execution of this Agreement and also have the Resort and such items examined and copied by any persons whom it shall designate, including without limitation, accountants, attorneys, contractors, engineers, and environmental testing personnel. Seller shall permit access to the Resort by Buyer and any persons it designates, and shall fully cooperate and afford them the opportunity to inspect such items and perform any tests upon the Resort that Buyer deems necessary or appropriate. Buyer may utilize the office equipment and office facilities at the Resort without charge (except for any long distance telephone service). Buyer will not unreasonably interfere with the business of the Resort. 3.03 As to any physical disturbance of the Property or Improvements or physical injury to person caused by Buyer or seller's agents, upon completion of such studies and investigations, if Buyer cancels the Agreement or thereafter does not close, Buyer agrees to restore any physical damage to the Property or Improvements caused by Buyer or its agents to the condition it was In prior to such damage, and further, without regard to whether or not Buyer shall cancel or close, to defend, indemnify and hold Seller harmless from and against all physical Injury to persons arising from such activities by Buyer. These covenants shall survive cancellation of this Agreement 3.04 Buyer shall pay the cost of any studies and examinations of the Resort conducted by agents of Buyer, including any "Phase 1", environmental report and any testing in connection therewith. Notwithstanding the foregoing, as soon as reasonably practicable execution of this Agreement Seller, at its expense shall provide Buyer with an ALTA Urban Class Survey of the Resort including such Table A items as specified by Buyer, by a Nevada licensed surveyor in good standing, certified to Buyer, the title insurer and any lender connected herewith, with such certification containing such other matters as Buyer shall reasonably request. As soon as practicable after execution, Seller shall provide Buyer with copies of all existing surveys, environmental reports and other studies and reports relating to the Resort in seller's possession or under its reasonable control. 3.05 Prior to the Closing, and under such reasonable terms and conditions as Seller may impose, employees and agents of Buyer may stay at the Resort without charge for lodging, except for incidentals consumed such as long distance telephone, food and beverages, provided such stay is primarily for the purpose of conducting feasibility examinations and investigations or otherwise working on matters related to this transaction. -7- 3.06 Title Report (a) As soon as practicable after execution hereof, Seller will, at Seller's sole cost and expense, deliver to Buyer a commitment for title insurance relating to the Property prepared by Escrow Agent and leading to the Issuance of an extended owners policy, together with complete and legible copies of all recorded documents referred to therein (the "Title Report") and, in the event that the following are subsequently prepared, agrees to cause Escrow Agent to deliver to Buyer any updates and supplements thereto or amendments thereof, in each case together with complete and legible copies of all matters referred to therein ("Amendments"). Buyer shall have until the later of the end of the Period or five (5) business days after the date of delivery of any Amendment (which, at Buyer's option, shall extend the Closing Date accordingly), to notify Seller and Escrow Agent in writing of Buyer's objection to any matter(s) indicated therein (but only, in the case of Amendments, with respect to matters not appearing on the Title Report or any previously delivered Amendment). Notwithstanding the foregoing. Buyer shall not be entitled to object to any exception contained in the Title Report (or any Amendment thereof which is caused by Buyer's activities under Section 3 hereof (excluding those resulting from Buyer's discovery of any existing defect or condition). (b) If Buyer fails to timely object to any title exception matter disclosed in accordance with the above procedure, Buyer shall be deemed to have approved the condition of title to the Property. If Buyer objects to any exception as above provided, Seller shall have until five (5) business days after the date of delivery of Buyer's objections to advise Escrow Agent and Buyer in writing with respect to each specified objection of Seller's election either to (i) take no action in connection therewith (ii) or attempt to cause any such matter(s) to be cured or eliminated at or prior to Close of Escrow. Insuring over any such item may be done only with Buyer's written consent in its sole direction. Seller's failure to give notice within such five (5) business day period with respect to any of Buyer's objections shall be deemed to constitute Seller's election to take no action in connection therewith. (c) In the event Seller elects or is deemed to have elected to take no action with respect to any specified objection, Buyer shall have until the later end of the Feasibility Period or five (5) business days thereafter to advise Escrow Agent and Seller in writing of its election to (a) waive such previously specified objection(s) and close the transaction contemplated hereby in accordance with the remaining provisions of this Agreement and without any abatement or reduction of the Purchase Price, or (b) cancel and terminate the Agreement. Buyer's failure to give written notice within such period shall be deemed to constitute Buyer's election to waive its previously specified objections with respect to those matters as to which Seller has notified or is deemed to have notified Buyer that Seller will take no action. (d) With respect to those matters which Seller has notified Buyer that Seller will attempt to cause to be cured or eliminated (or Insured over with Buyer's consent), Seller shall have until five (5) business days prior to the Closing (which shall be extended in accordance with the time periods herein) within which to accomplish the same; provided, however, that if Seller fails to do so within said period, or if Seller Shall be unable (other than due to its voluntary act after execution -8- hereof causing such disability) to convey title to the Property subject to and in accordance with the provisions of this Agreement at the Closing, then Buyer, as its sole and exclusive remedies, may elect either to (i) waive such previously specified objection(s) and close the transaction contemplated hereby in accordance with the remaining provisions of this Agreement and without any abatement or reduction of the Purchase Price on account thereof, or (ii) cancel this Agreement and the Escrow, said election of remedies to be evidenced by buyer's giving written notice to each of Seller and Escrow Agent at or prior to the Closing. Buyer's failure to give written notice as required by the preceding sentence shall be deemed to constitute Buyer's to waive its previously specified objection(s). If Buyer elects to cancel, this Agreement shall become null and void and of no further force or effect and neither party shall have any further rights or obligations to the other hereunder or by reason hereof, except for the provisions hereof which are expressly stated to survive the termination of the Agreement. (e) Buyer specifically agrees that nothing herein contained shall be deemed to impose on Seller any obligation to bring any action or proceedings, expend any sums or take any other steps of whatever kind or nature in order to insure over, remove or cure matters affecting title or to fulfill any condition or expend any monies therefore unless Seller voluntarily Impairs title to the Property or otherwise voluntarily causes such matter after execution hereof. The acceptance of Deed by Buyer shall not diminish Seller's warranties or any continuing obligation herein. 4. Operations Prior to Closing Seller covenants and agrees that between the date hereof and the Closing, Seller will: 4.01 Continue to operate the Resort as heretofore operated in the normal course of business and in accordance with its customary business practices. 4.02 Perform required maintenance and replacements in accordance with its customary practices. 4.03 Afford Buyer and its representatives full access to the Resort and to Seller's books, and files relating to the Resort and make same available to Buyer whether they are located on or off the Property, at reasonable times, and without undue delay, up to and including the date of the Closing. 4.04 Pay, in the normal course of business, and, in any event prior to Closing, sums due for work, materials or services furnished or a incurred in the ownership and operation of the Resort up to and including the date of Closing, except as otherwise specifically treated in the provisions of this Agreement. Not prepay any material item after the date of this Agreement without the prior written consent of Buyer. 4.05 Except for daily room rental agreements in the ordinary course of business which are not discounted more than twenty-five percent (25%) from the full "rack" rate, not enter into any new material agreement nor renew, amend, modify or terminate any existing material agreement relating to the Resort without having obtained the prior written consent of Buyer in each such instance, which will not be -9- unreasonably withheld or delayed. Material agreements will include, without limitation, airline and travel agent commitments, automobile leases, or room or other facility commitments which are discounted more than twenty-five (25%) from their full rates. 4.06 Not grant or transfer or permit the grant or transfer of any interest in the Resort or any item being sold pursuant to this Agreement or grant any execution rights in connection therewith, except for any items being replaced with comparable items of equal or greater value in the ordinary course of business. 4.07 Not discontinue compliance with governmental requirements applicable to the Resort. 4.08 Promptly advise Buyer of any threatened or actual litigation or governmental investigation or proceeding affecting the Resort, its licenses, its operation, or those persons materially involved in its operation. It shall be a condition precedent to Buyer's obligation to close that there shall be no such matters threatened or pending at Closing having a potential significant and material adverse effect on the Resort or upon Seller's ability to convey the Resort to Buyer. 4.09 Not permit any material alteration, structural modification or additions to the Resort except in the nature of ordinary maintenance. 4.10 Except for daily room rental agreements in the ordinary course of business, not create (or agree to create) any contract grant option, lease, covenant restriction, easement encumbrance or lien on or affecting the Resort nor do anything negatively affecting title thereto, without the prior written consent of buyer. 4.11 As a condition precedent to Buyer's obligation to close, Seller shall have duly performed all covenants and other obligations to be performed by it under this Section 4. Section 5. The Closing 5.01 The consummation of this transaction by recording the General Warranty Deed in accordance with the provisions of the Agreement shall take place ten (10) days (or as such time may be extended in accordance with the specific terms of this Agreement) after the date of expiration of the Feasibility Period or sooner at any time if desired by Buyer upon two (2) days written notice by Buyer. The date of such recording is referred to in this Agreement as the "Closing"' or the "Closing Date" At the Closing, the parties hereto agree to take the following acts and make the following deliveries, all of which will be deemed taken and delivered simultaneously and no one of which will be deemed completed or delivered until all have been completed or delivered: (a) Seller shall execute, acknowledge (as appropriate) and deliver to Buyer and/or Escrow Agent the following documents: (1) A General Warranty Deed in the form attached as Exhibit "D"; -10- (2) Any documents or affidavits required to be filed or recorded therewith In connection with Nevada Law, (3) A Bill of Sale in the form attached as Exhibit "E"; assigning and transferring to Buyer all of Seller's right, title and interest in and to the Personal Property, Advertising Materials, Ledgers, and the Plans and Specifications, including without limitation those items shown on Exhibit "C", free and clear of all claims, liens, security interests, encumbrances and other charges, except for the First Lien; (4) An Assignment of Leases, Contract Rights and Intangible Assets in the form attached as Exhibit "F", free and clear of all claims, liens, security interests, and other charges, except for the First Lien. The schedules to this assignment shall include the Leases, Service Contracts, Ledgers, Plans and Specifications, Contract Rights, Intangible Assets, Timeshare Operation items, Timeshare Paper and related security agreements, and Miscellaneous items; (5) Assignments of Seller's interest in all automobiles and equipment lease-purchase contracts, and appropriate title transfer documentation property executed by Seller for all such items owned by Seller and used for the Resort free and clear of all claims, liens, security interests, encumbrances and other charges, except for the First Lien; (6) Certificate of Non-Foreign Status in the form attached hereto as Exhibit "I"; (7) If requested by Buyer, the resignations of all officers and directors of the Timeshare Operation owners association who are controlled by Seller, and corresponding replacement with persons controlled by Buyer, (8) If requested by Buyer, an assignment of all the developer's and "declarant's" rights in the governing documents of the Timeshare Operation, in the form of Exhibit "J" attached hereto; (9) Such other documents required by this Agreement or as may reasonably be required by Buyer, its counsel, or Escrow Agent in order to consummate the transactions which are the Subject matter of this Agreement, and; (10) An opinion of Seller's counsel. (b) At Closing, Buyer shall pay, execute, acknowledge (as appropriate) and deliver to Seller and/or Escrow Agent the following: (1) The Down Payment In cash or other immediately available funds; (2) An assumption of the Loan Documents, if required; -11- (3) Such other documents required by this Agreement or as may be reasonably required by Seller, its counsel, or Escrow Agent to consummate the transactions which are the subject matter of this Agreement; and (4) An opinion of Buyer's counsel. (c) At Closing, the Escrow Agent shall record and deliver the foregoing documents as appropriate In connection with this Agreement. Section 6. Covenants, Representations and Warranties of Seller Seller represents covenants and warrants to Buyer as following, as of the date hereof and as of the Closing: 6.01 Seller are corporations, duly organized and validly existing under the laws of the State of Nevada. 6.02 Seller has the full right and authority to enter into and fully perform its obligations under this Agreement subject to obtaining shareholder approval of the transaction contemplated hereby. 6.03 The persons signing this Agreement on behalf of Seller are authorized to do so and to bind Seller to the terms hereof. 6.04 All the Closing, Seller is the sole owner of the Resort subject only to the First Lien. 6.05 The Schedule of Leases set forth in Exhibit "M" attached hereto ("Schedule of Leases") is accurate as of the date hereof, and there are no leases or other tenancies in or related to the Resort other than those set forth therein and room rentals in the ordinary course of business. Copies of all Leases will be provided to Buyer during the Feasibility Period and all original Leases shall be delivered to Buyer at Closing. Except as otherwise set forth in the Schedule of Leases or elsewhere in this Agreement all of the Leases are in full force and effect and none of them has been modified, amended or extended. Moreover, Seller has no knowledge of any material breach or default, claim of material breach or default thereunder, or any event which with the passage of time will become a breach or default and has received no written notice of any of the foregoing thereunder. 6.06 A schedule of the Service Contracts, oral or written (indicating which), is attached hereto as Exhibit "N" ("Schedule of Service Contracts"). Except as otherwise set forth in the Schedule of Service Contracts or elsewhere in this Agreement, the Service Contracts are in full force and effect and have not been modified, amended or extended. Moreover, Seller has no knowledge of any breach or default, claim of material breach or default thereunder, or any event which with the passage of time will become a breach or default. Copies of all Service Contracts will be provided to Buyer during the Feasibility Period and the originals shall be delivered to Buyer at Closing. Except as stated on the Exhibit, all Service Contracts may be canceled immediately upon notice of same, without penalty or charge. -12- 6.07 A Permanent Certificate(s) of Occupancy for the Improvements has been issued by the appropriate government authorities and has not been amended or revoked and a copy will be delivered to Buyer during the Feasibility Period. The Resort is located within the boundaries of the City of Las Vegas, Nevada 6.08 Except as set forth in Exhibit "O" attached hereto, the Property and Improvements are, to the best of seller's knowledge, in substantial compliance with the zoning and use requirements of applicable governmental entities. Seller has received no correspondence or formal notice from any governmental authority of any existing violation, which has not been cured, or of any circumstances that with the passage of time or failure to act or both, would constitute a violation of any applicable zoning or use requirement. 6.09 To the best of Seller's knowledge, there is no pending or contemplated condemnation of the Property or Improvements, or any portion thereof, by any governmental authority, nor is there any existing or proposed plan to widen, modify or realign any street, alley or roadway adjoining the Property which would affect access to or use of the Property. 6.10 To the best of Sellers knowledge, and except as qualified by Exhibit "T" attached hereto, and in related documents set forth on the Exhibit and provided to Buyer at least ten (10) days prior to the end of the Feasibility Period, sewage and waste disposal systems and utility and telephone services now serving the Property and the Improvements are adequate for the present operation of the Resort. 6.11 Except as set forth in Exhibit "P" attached hereto, and in related documents set forth on the Exhibit and provided to Buyer at least ten (10) days prior to the end of the Feasibility Period, Seller has not received notice of any uncured violations or infringements of any laws including without limitation gaming laws and laws related to the Timeshare Operation, rules, regulations, ordinances, fire or safety codes, life safety requirements, insurance requirements, covenants, conditions, restrictions including without limitation those relating to the Timeshare Operation on the Property, trademark service mark or tradename registrations, agreements, or rights applicable to the Resort and, to the best of the Seller's knowledge, the Resort as customarily, and presently, operated is in substantial compliance with all applicable laws, rules and regulations. 6.12 Except as set forth in Exhibit "P" attached hereto, and in related documents set forth on this Exhibit and provided to Buyer at least ten (10) days prior to the end of the Feasibility Period, to the best of Seller's knowledge: (a) There are not presently, and have been no, above or underground storage tanks, dry wells, injection wells, or similar facilities, PCB transformers, asbestos or Hazardous Material located on the Resort (b) No notice pursuant to any Environmental Law has been received from, given to, or is presently due to, any governmental authority pursuant to such Environmental Law. (c) There are not presently, and have been no, violations on or by the Resort of any Environmental Law. -13- (d) The Resort is not presently, and has not been, used for the manufacture, collection, storage, handling, treatment or processing of any Hazardous Material, nor as a Sanitary Landfill or open dump, except for normal quantities of customary products used in the operation of the Resort. (e) There is not presently, and has not been, any spill, leakage or release of any Hazardous Material on or into the soil, water or air, on or at the Resort or at any real property within one mile of the boundaries of the Resort. (f) The Resort is not a state or federal "superfund" site or study site pursuant to Environmental Law. (g) Seller agrees to defend, indemnify and hold Buyer harmless from all loss, cost damage and expense arising out of any alleged or actual violation of, or liability under, any Environmental Law, for events and conditions occurring on or to the Resort by act or omission to act of Seller or any person on the Resort property during the period an and prior to the Closing Date. This indemnity does not limit any statutory or other legal rights available to Buyer. Buyer agrees to defend, indemnify and hold Seller harmless from all loss, cost damage and expense arising out or any alleged or actual violation of, or liability under, any Environmental Law, for events and conditions occurring on or to the Resort by act or omission to act of Buyer or any person on the Resort property during the period after the Closing Date. (h) "Environmental Law" means, in relation to the Resort and its operations, any applicable federal, state, county, municipal or other political subdivision or district statute, law, rule, regulation, code, ordinance, or decree relating to health, environment, air, water, soil, improvements and facilities, the protection of same, and the contamination and cleanup thereof. (i) Hazardous Materials means any hazardous waste, materials, gases, liquids, substances, improvements or other items defined in any Environmental Law and regulated thereunder or by any applicable governmental authority pursuant thereto, including any notification requirements thereunder to governmental authorities. 6.13 To the best of Seller's knowledge, and except as set forth on Exhibit "K" attached hereto, no claims, actions, suits, proceedings or investigations by governmental authorities, employees or other employees or other third parties are pending or threatened against or relating to the Resort or its operation in writing or in any court or before any federal, state, municipal or other governmental department agency, commission, board or bureau. 6.14 Except as may be set forth on the Title Report and further except for current property taxes and current assessments, not delinquent, Seller has no knowledge of any delinquent tax, assessment or other obligation affecting the Resort which is, or may become, a lien on the Resort. -14- 6.15 Seller has delivered to Buyer financial statements, Including statements of Income and expenses dated ___________________ (the "Financial Statements") for Seller prepared by KPMG Peat Marwick. To the best of Sellers knowledge the Financial Statements are true, correct and complete as of the date thereof and fairly present the financial operations of the Resort for the period stated. Seller makes no representation as to the future financial performance of the Resort. 6.16 A full and complete schedule of liabilities related to the Resort which are to be assumed by Buyer pursuant to this Agreement is attached hereto as Exhibit "L": ("Existing Liabilities"). The Existing Liabilities to the best of Seller's knowledge are true and correct as to nature and amount. Seller hereby agrees to defend, indemnify and hold Buyer harmless from any sums owing on liabilities of the Seller existing on the Closing Date not set forth as an Existing Liability on Exhibit "L". 6.17 Seller is not prohibited from consummating the transaction contemplated by this Agreement or from conveying the Resort by any law, regulation, agreement, instrument, restriction, order or judgment. No permission, approval or consent by any third party or governmental authority, or any individual or entity connected with Seller (other than that of Seller's shareholders) is required in order for Seller to convey the Resort or to consummate the transaction contemplated by this Agreement 6.18 Seller has paid in full for all labor performed at professional services performed in respect to, and materials, machinery, fixtures and tools delivered to, furnished to or incorporated into the Resort or which would otherwise give rise to a lien or a right to lien the Resort except for the First Lien. 6.19 The Loan Documents are not in default nor is there any existing condition which would cause a default with the mere passage of time, the principal balance and interest due on the Loan Documents does not exceed Five Million One Hundred Thousand Dollars( $5,100,000.00). No additional principal has been advanced or accepted pursuant to the Loan Documents. 6.20 All employees of and at the Resort including without limitation its managers are employees at-will and may legally be discharged without cause at any time, including immediately before Closing, without liability to the Buyer or liability to the Resort if requested by Buyer, Seller will, in writing, give notice to and discharge all employees of the Resort effective immediately prior to Closing, and not do anything to interfere with any immediate rehire after Closing of same or all of such employee's. Prior to any such events, Seller will not encourage, support or entice in any way, any satisfactory employee to leave the employ of the Resort. 6.21 Except as set forth on Exhibit "P" attached hereto and for normal wear and tear, the Resort, including the buildings, systems, furniture, fixtures and equipment are in good condition and repair. 6.22 All licenses and permits necessary to the operation of the Resort are current and in good standing. 6.23 Seller holds, in good standing, current alcoholic beverage license(s) from the appropriate governmental liquor authorities in connection with the operation of the Resort. -15- 6.24 Up to the Closing Date, the Resorts equipment and facilities have been adequate to serve its customers during peak demand periods. 6.25 Except as set forth on Exhibit "P" attached hereto, there are no delinquent taxes, assessments, salaries, wages, contract payments, supplier payments, or any other delinquent payments of any kind or nature owing from Seller or the Resort and relating to the Resort its employees, contractors, governmental authorities, or any other person or entity dealing with the Resort and its operation. Any such delinquent payments listed on Exhibit "P" will be paid by Seller at Closing from the Closing funds through the Escrow Agent. 6.26 Attached hereto as Exhibit "U" is a schedule of all commitments and reservations for "free" rooms and rooms or other facilities discounted more than twenty-five percent (25%) from the full rate therefore for any period after the sixtieth (60th) day following the date of this Agreement. 6.27 The Timeshare Operation has been operated continuously from Its inception to the present in compliance with all laws, rules and regulations applicable thereto, including without limitation the sales connected therewith, and there has been no misrepresentation to purchasers or failure of performance In connection with any representation or written obligation to any purchaser, except for tenth (10th) floor (of the Resort) furnishings represented to the timeshare purchasers. An accurate list of (i) those furnishings, (ii) their brand and purchase source, and (iii) their cost is set forth in Exhibit "V" attached hereto, and such furnishings will properly fulfill the obligations to, and representation made to, the timeshare purchasers. Also shown on Exhibit V is an accurate schedule of all Resort timeshare purchasers (I) whose owners association dues have been waived and the period of such waiver or (II) who are delinquent in the payment of such dues, for how long and the amount of each such delinquency. 6.28 Seller agrees to inform Buyer in writing immediately upon obtaining actual knowledge that any of Seller's representations or warranties are inaccurate, 6.29 It shall be a condition precedent to Buyer's obligation to close this transaction that Seller's covenants, representations and warranties in this Agreement be fully performed and true and accurate as of the Closing, and that the lender will allow Buyer to assume the First Lien without material modification thereof and without any substantial charge or fee to Buyer. 6.30 To the best of Seller's knowledge or references to "Seller's Knowledge" in this Section 6 means any written notice received by Seller relating to a representation and warranty matter herein, and the personal knowledge of Todd Fisher, the general managers of each of the Resorts, hotel operation, casino operation, maintenance operation, food and beverage operation, maintenance operation, entertainment/museum operation and housekeeping operation; David Crabtree and Debbie Reynolds. 6.31 Seller agrees to defend, indemnify and hold Buyer harmless from all loss, cost, damage and expense arising from any breach of, or inaccuracy in, the covenants representations and warranties of Seller in this Agreement. Further, except for liability expressly assumed by Buyer pursuant to the terms hereof, Seller shall defend, indemnify and hold Buyer harmless from any and of loss, cost damage, -16- expense and liability to third parties arising out of the Resort, its condition and operation (including without limitation the Timeshare Operation), and acts or omissions by Seller on or prior to the Closing Date. 6.32 No investigation by, or knowledge of Buyer, shall diminish Sellers indemnities herein or Seller's covenants, representations and warranties. Section 7. Covenants, Representations and Warranties of Buyer Buyer covenants, represents and warrants to Seller as follows: 7.01 Buyer is a corporation duly organized and in good standing under the laws of the State of Arizona. 7.02 Buyer has the full right and authority to enter into and fully perform its obligations under this Agreement. 7.03 The persons signing this Agreement on behalf of Buyer are authorized to do so, and to bind Buyer to the terms hereof. 7.04 Buyer shall assume all of the existing liabilities, as shown on Exhibit "L" attached hereto, and shall pay when due all items appearing thereon. 7.05 Buyer shall defend, indemnify and hold Seller harmless from any and all liability to third parties arising out of, connected to or resulting from any act transaction, or omission of Buyer occurring after the Closing Date with respect to the Resort its condition or the operation thereof, provided however, that such indemnification shall not (except as may be otherwise herein specifically provided) extend to any cost expense or liability arising out of seller's indemnification's and warranties or any omissions or act of Seller on or prior to the Closing Date. 7.06 As of the Closing Date, Buyer has inspected the Resort and the books and records of the Resort and has made all other inquiries which it deem necessary" to satisfy itself as to the condition and the operation of the Resort and agrees to accept possession of the Resort in its "as is" condition, except for the express covenants, representations and warranties of Seller contained in this Agreement 7.07 Buyer accepts Seller's assignment to it of all Leases, Service Contracts and Contract Rights contained in Exhibit "F" related to the Resort and assumes all obligations of Seller thereunder arising after the Closing Date. 7.08 If Buyer assigns its interest in this Agreement to a nominee, Buyer shall guarantee the prompt payment and full performance of the nominee in form approved by Seller. 7.09 Buyer agrees to inform Seller in writing immediately upon obtaining actual knowledge that arty of Buys(s) representations or warranties herein are inaccurate. -17- 7.10 The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby will not violate any provision of, or result in the breach of, any of the terms, provisions, or conditions of, or constitute a default under or conflict with respect to, any other agreement by which Buyer is bound. 7.11 The Shares of common stock described in paragraph 2.01(c) above are authorized but unissued stock of Buyer, and Buyer will deliver or issue to Seller the Shares free and clear of all liens, encumbrances, security agreements, options, claims, charges and restriction (except as may be imposed by Rule 144 or other state or federal securities laws) and fully paid and non-assessable. 7.12 The Financial Statements delivered to Seller have been prepared In accordance with generally accepted accounting principles, and fairly present the financial position of Buyer as of the respective date thereof, and the results of its operations for the period(s) indicated. 7.13 To the best of Buyer's knowledge, there is no suit, action, arbitration or legal, administrative, or other proceeding, or governmental investigation pending or threatened against or affecting Buyer which if resolved adversely to Buyer would have a material adverse affect on Buyer or its business, assets, or financial condition. 7.14 It shall be a condition precedent to Seller's obligation to close this transaction that Buyer's covenants, representations and warranties in this Agreement be fully performed and true and accurate as of the Closing. Section 8 Title Insurance 8.01 Seller agrees to cause Escrow Agent to deliver to Buyer, at the Closing, an ALTA extended coverage owners 1% insurance policy or a binding commitment to issue the same as soon after the Closing as is customary (the "Owners Title Policy") Insuring Buyers title to the Property in The full amount of the Purchase Price subject only to those matters which Buyer approves or is deemed to have approved pursuant to Section 3.06 hereof and the printed exclusions and conditions and customary exceptions set forth in Escrow Agents usual form of ALTA extended coverage owners title insurance policy. If Buyer shall desire any additional endorsements, the cost and responsibility for the acquisition thereof shall be the responsibility of the Buyer. 8,02 Any Lender's title policy required by the First Lien lender at Closing shall be Buyer's responsibility. Section 9 Hotel Facilities Lease 9.01 Immediately after Closing, Buyer will lease certain of the Resort facilities to Debbie Reynolds and/or her nominee ("Lessee") pursuant to the lease to be attached hereto as Exhibit "Q" (the "Hotel Facilities Lease"), which will be executed and delivered by said at Closing. -18- 9.02 In general, the lease will be for a period of ninety-nine (99) years with an approximate monthly lease payment of $150,000 and will include the following facilities: showroom, museum, gift shop, casino, back bar and certain joint use areas. Lessee will maintain such facilities, plus the marquis sign and the portable display signs around the Resort and Lessee will share prorata the Resort's utilities, security, and engineering. ln addition, the lease will provide for a license of the tradename "Debbie Reynolds Hotel & Casino" and all derivatives thereof, and all other logos, trademarks, tradedress and tradenames used in connection with the Resort (collectively "Names and Marks"). Said license will be transferrable with the Resort if approved by Debbie Reynolds, which approval will not be unreasonably withheld so long as the transferree meets certain conditions to be defined in the lease. In the event said approval is not given, then the lease of facilities may be terminated by Seller; 9.03 The above Is Illustrative only, and the final terms of the Hotel Facilities Lease shall be controlling. Section 10 Certain Other Agreements 10.01 In consideration for the Use of her name and likeness and associated goodwill and other services, Debbie Reynolds Will personally receive a percentage of the net profit of any timeshare project at the Resort as set forth in the Timeshare Profit Agreement attached hereto as Exhibit "R", to be executed and delivered at Closing. 10.02 A life insurance policy acceptable to Buyer on Debbie Reynolds' life in the amount of $10,000,000 Will be assigned by Seller to Buyer and made payable to Buyer and delivered to Buyer at Closing. 10.03 On a per project basis, timely, good faith negotiations will take place at either party's request to place Debbie Reynolds memorabilia and/or Debbie Reynolds museum displays at other ILX Incorporated locations. 10.04 Seller Will cause the "Debbie Reynolds Participation Agreement", attached hereto as Exhibit "S", wherein Ms. Reynolds agrees to personally be present, cooperate in and participate in the future activities of the Resort (including without limitation the hotel and casino) and other ILX Incorporated business activities (including without limitation Red Rock Collection Incorporated) and allow for the use of her name and likeness, to be personally executed by Ms. Reynolds and delivered to Buyer at Closing. 10.05 As additional consideration to Buyer and as a condition to Buyer's obligations to consummate the transactions hereunder, Debbie Reynolds shall have entered into a merger agreement and related promotional agreements with Buyer's wholly-owned subsidiary, Red Rock Collection Incorporated. 10.06 With reference to this agreement and the specific terms of paragraph 17.13 concerning the timing of exhibit preparation, both parties will commence immediately, diligently and continuously to complete all remaining due diligence, complete any and all necessary corporate action, procure any -19- necessary government approvals, and negotiate the definitive exhibits to be attached hereto, with the goal of Closing prior to the end of 1996. 10.07 Without modifying any other term of this Agreement, Closing shall be conditional on the procurement of all required governmental approvals for the transactions and activities contemplated by this Agreement and its exhibits and the consummation to Buyers sole and exclusive satisfaction of the matters described in Section 9 above and this Section 10. 10.08 If Seller is unable to procure the required governmental approvals for its activities contemplated pursuant to the Hotel Facilities Lease (including without limitation the appropriate gaming licenses for the casino operation) within six (6) months after the date of Closing, then Buyer shall have no other obligations under the Hotel Facilities Lease with respect to the casino operation and Buyer shall have the right to operate the casino in its name. Section 11 Broker Seller and Buyer hereby covenant and agree that each shall indemnify and defend the other against any costs, claims or expenses, including Attorney's fees, arising out of any real estate or other brokerage contract executed by, or similar activities engaged in by, the indemnifying party. The obligations under this paragraph shall survive the Closing or, if the Closing does not occur, the termination of this Agreement Section 12 Notices 12.01 All notices under this Agreement shall be in writing and shall be effective when addressed to the person(s) and address(s) as set forth below, and either: (a) Delivered to the address(es) by United States Mail or an established, reputable overnight courier such as Federal Express or UPS; (b) Delivered by other messenger to an appropriate employee at such address(es); or (c) Received at the telefacsimile number(s) shown below. 12.02 Proof of delivery or receipt is the obligation of the sender. Refusal of delivery shall constitute delivery. 12.03 Addresses and telephone numbers: If to Buyer Joseph P. Martori, Chairman ILX Incorporated 2777 East Camelback Road -20- Phoenix, AZ 85016 Telefacsimile: 602-957-2780 Telephone: 602-957-2777 with a required copy to: Samuel L. Ciatu, General Counsel ILX Incorporated 2777 East Camelback Road Phoenix, Arizona 85016 and with a required copy to: Elliot R. Eisner, Esq. Kummer Kaempfer Bonner & Renshaw 3800 Howard Hughes Pkwy, Suite 700 Las Vegas, NV 89109 Telefacsimile: 702-796-7181 Telephone: 702-792-7000 If to Seller: Todd Fisher, Chief Executive Officer Debbie Reynolds Hotel & Casino, Inc. 305 Convention Center Drive Las Vegas, Nevada 89109 Telefacsimile: 702-734-2954 Telephone: 702-734-0711 with a required copy to: David Crabtree Debbie Reynolds Hotel & Casino, Inc. 305 Convention Center Drive Las Vegas, Nevada 89109 Telefacsimile: 702-734-2954 Telephone: 702-734-0711 -21- with a required copy to: Matthew Q. Callister Callister & Reynolds 823 Las Vegas Blvd. South Las Vegas, Nevada 891 01 Telefacsimile: 702-385-7743 Telephone: 702-385-3343 If to Escrow Agent: - --------------------------------- - --------------------------------- - --------------------------------- - --------------------------------- Telefacsimile: - --------------------------------- Telephone: - --------------------------------- with a required copy to: - --------------------------------- - --------------------------------- - --------------------------------- - --------------------------------- Telefacsimile: - --------------------------------- Telephone: - --------------------------------- Section 13 Survival of Representations, Warranties, Covenants, and Obligations Except as may be otherwise specifically provided in this Agreement, all representations, warranties, covenants, indemnities, or other obligations of both parties set forth in this Agreement shall not be merged into the deed to Buyer or into any other document relating to the transaction contemplated by this Agreement but shall survive the Closing for a period of three (3) years. -22- Section 14 Uniform Commercial Code - Bulk Transfer 14.01 The parties believe that this sale is exempt from the application of the Uniform Commercial Code bulk sale law as it does not involve a seller whose principal business is the sale of inventory from stock, but involves a resort hotel the business of which is principally the sale of services. 14.02 To the extent such provisions may apply, unless otherwise requested by a party prior to the end of the Feasibility Period, Buyer and Seller agree to waive compliance, as between themselves, with the Bulk Sale provisions of the Uniform Commercial Code as it may be in force in the State of Nevada. Section 15 Risk of Loss 15.01 In the event of any damage or loss to all or any substantial portion of the Property due to casualty or the occurrence of a suit for a taking of any portion thereof by governmental or quasi-governmental authority after the date hereof and prior to the Closing Date, Buyer may, as its sole and exclusive remedy, by written notice given to each of Seller and Escrow Agent on or prior to the Closing Date, elect either to (i) cancel and terminate this Agreement and the Escrow or (ii) receive, by assignment from Seller, all insurance proceeds and/or condemnation awards, if any, received and/or to be received by Seller as a result of such casulty or taking (in which case the parties shall proceed to consummate the transaction without any resulting adjustment of the Purchase Price). Section 16 Cancellation and Termination: Remedies for Failure to Close 16.01 Wherever this Agreement provides that upon the occurrence of a condition other than breach or default, one of the parties hereto may elect or has the right to "cancel and terminate" the Agreement that phrase shall mean that, unless otherwise herein provided, written notice thereof shall be given to both Escrow Agent and the other party, and then this Agreement shall immediately become null and void and of no further force or effect and neither party shall have any further rights or obligations to the other hereunder or by reason hereof except for those which by the provisions hereof are expressly stated to survive any termination of this Agreement. If the notice is one of default or breach and the matter stated in said notice is not cured, corrected or removed within three (3) days after the date of receipt of the aforesaid written notice (Seller and Buyer hereby waiving the "13 day" provision contained in any printed form escrow instructions), then, unless a different time period and result is specificaly stated in this Agreement, the notice may state cancellation shall then occur and this Agreement shall automatically become null and void and of no further force or effect and neither party shall have any further rights or obligations to the other hereunder or by reason hereof except for those which by the provisions hereof are expressly stated to survive any termination of this Agreement 16.02 If Buyer shall breach or fail to perform or fulfill any of Pre-closing or Closing obligations hereunder, then, provided that Seller is not then in (default hereunder, Seller may elect to cancel this Agreement by notice as provided above, or Seller may exercise any and all other remedies then available to it at law or in equity (including without limitation bringing suit for damages, specific performance or any other relief to which it may be entitled). -23- 16.03 If Seller shall breach or fail to perform or fulfill any of its pre-Closing or Closing obligations hereunder, then, provided that Buyer is not then in default hereunder, Buyer may elect to cancel this Agreement by notice as provided above, or Buyer may exercise any and all other remedies then available to it at law or in equity (Including without limitation bringing suit for damages, specific performance or any other relief to which it may be entitled). Section 17 Miscellaneous Provisions 17.01 This Agreement and the various other documents required hereby embody and constitute the entire understanding between the parties with respect to the transaction contemplated herein, and all prior agreements, understandings, representations and statements, oral or written, are merged into this Agreement. Neither this Agreement nor any provision hereof may be waived, modified, amended, discharged or terminated except by an instrument signed by the party against whom the enforcement of such waiver, modification, amendment, discharge or termination is sought and then only to the extent set forth in such instrument. 17.02 This Agreement shall be governed by, and construed in accordance with, the law of the State of Nevada. 17.03 The section and paragraph headings in this Agreement are inserted for convenience of reference only and in no way define, describe, limit, expand or modify the text, scope or intent of this Agreement or any of the provisions hereof. 17.04 This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs or successors and permitted assigns, 17.05 This Agreement shall not be binding or effective until properly executed by both Seller and Buyer. 17.06 As used in this Agreement the masculine shall include the feminine and neuter, the singular shall include the plural and the plural shall include the singular, or vice-versa, all as the context may require. 17.07 Nothing in this Agreement, express or implied, is intended to confer any rights or remedies whatsoever upon any person, other than the parties hereto and their respective successors, assigns and transferees. 17.08 Unless provided to the contrary in any particular provision, all time periods shall refer to calendar days and shall expire at 5:00 p.m., Las Vegas, Nevada time, on the last of such days; provided, however, that if the time for the performance of any obligation expires on a day other than a business day (any day other than a Saturday, Sunday or State of Arizona, State of Nevada or federal paid legal holiday), the time for performance shall be extended to the next succeeding day which is a business day. Subject to the foregoing, Timeliness is the essence of this Agreement and of every term and provision hereof. -24- 17.09 Seller and Buyer hereby acknowledge that this Agreement is the result of continual and ongoing negotiation between the parties. All parties have arrived at this Agreement through the exercise of equal bargaining power and any ambiguities herein should be construed against neither party, but should be given a fair and reasonable interpretation. 17.10 If either Seller or Buyer shall bring any legal action or suit for any relief against the other, declaratory or otherwise, arising out of this Agreement, the losing party shall pay the successful party a reasonable sum for its attorneys fees, expenses, discovery costs and court costs as the court sitting without a jury shall determine. Any party seeking to be indemnified or held harmless by the other under the terms of this Agreement shall provide notice to the Indemnifying party of receipt of any indemnified claim or cause of action, and the indemnifying party shall have the option of joining in the defense of such claim or cause of action. 17.11 Buyer and Seller shall each provide the other prior to the end of the Feasibilty Period with appropriate resolutions in form and substance authorizing the respective entities by and through their agents or officers to enter into and execute this Agreement and the collateral documents associated herewith. 17.12 Neither Buyer nor Seller will make any public announcement concerning the transactions contemplated hereby without the review, comment and approval of the other, which review and comment will be promptly provided and which approval will not ultimately be withheld so long as no securities law violation would occur as a result of such announcement. 17.13 Set forth In Exhibt "A" is a list of any and all amendments, schedules, riders, and other items which are attached hereto but which are not listed elsewhere herein. All exhibits, schedules, riders or other items attached to this Agreement are a part of and incorporated by reference into this Agreement with the same effect as they were recited at length In the body of this Agreement. Exhibits C, G, K, L, M, N, 0, P, T, U, V and the schedules to Exhibit F are to be prepared initially by Seller. Seller will use its best reasonable efforts to prepare, complete and deliver same to Buyer prior to the end of the thirtieth (30th) day after the date of this Agreement failing which, the Feasibility Period shall be extended to the date thirty (30) days after the date the last of the foregoing completed exhibits is delivered to Buyer. The parties will use their best good faith, reasonable efforts to agree upon the form of the remaining exhibits to this Agreement as soon as reasonably practicable, and in no event later than ten (10) days prior to the end of the Feasibility Period. failing which, after the and of the Feasibility Period, either party may cancel this Agreement prior to the occurrence of such Agreement. 17.14 This Agreement may be executed in counterparts and all signature (and any notary) pages may be attached to a single document . A telefacsimile signature shall be valid as, an original signature and it shall be the responsibility of the party (or its agent) telefaxing same to preserve the page containing the original signature for inspection until the receiving party is subsequently supplied with an Identical page containing an original signature, which shall occur within seven (7) days after the date of such telefacsimilie. -25- IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. BUYER: ILX Incorporated, an Arizona corporation By: /s/ Joseph P. Martori, Chairman ----------------------------------- Joseph P. Martori, Chairman SELLER: DEBBIE REYNOLDS HOTEL & CASINO, INC., a Nevada corporation By: /s/ Todd Fisher, CEO ----------------------------------- Todd Fisher, CEO DEBBIE REYNOLDS RESORTS, INC., a Nevada corporation By: /s/ Todd Fisher, CEO ----------------------------------- Todd Fisher, CEO Escrow Agent hereby acknowledges its receipt of a fully executed copy of this Agreement and agrees to perform the functions assigned to Escrow Agent hereunder. Escrow Agent as the party responsible for closing the transaction contemplated hereby within the meaning of Section 6045 (e) (2) (A) of the Internal Revenue Code of 1986, as amended (the "Code"), further agrees to file all necessary Information reports returns and statement regarding the transaction required by the Code of such closing agent including, but not limited to, the reports required pursuant to Section 6045 of the Code. ESCROW AGENT: ----------------------------------- BY:________________________________ Its:____________________________ -26- TABLE OF EXHIBITS Exhibit Title A Riders, Amendments and Miscellaneous Items B Description of Real Property C Schedules of Personal Property D Deed E Bill of Sale F Assignment of Leases, Contract Rights and Intangible Assets G Loan Documents - First Lien H Allocations I Certificate of Non-Foreign Status J Assignment of Declarant's Rights K Suits, Proceedings, Investigations and Claims K-1 Claims Not-Assigned L Existing Liabilities to be Assumed by Buyer M Schedule of Leases N Schedule of Service Contracts O Summary of Existing Zoning and Use Violations P Summary of Certain Problems Q Hotel Facilities Lease R Timeshare Profit Agreement S Debbie Reynolds Participation Agreement T Items Excluded From the Sale U Discounted Room and Facility Committments V Timeshare Operation Items -27- ADDENDUM TO DEBBIE REYNOLDS HOTEL ACQUISITION MEMORANDUM OF UNDERSTANDING In connection with the Memorandum of Understanding (the "MOU") between the undersigned dated September 27, 1996, the undersigned further agree that press releases or other statements by either party or its respective affiliates concerning the MOU, or any resulting definitive agreements, or the transactions contemplated thereby, shall be jointly, expressly approved in writing in advance by both parties, which approval shall not be unreasonably or untimely withheld by either party. Dated this 30th day of October, 1996. Debbie Reynolds Hotel & Casino, Inc. ILX Incorporated /s/ Todd Fisher /s/ Joseph P. Martori - ---------------------------- ------------------------- Chief Executive Officer Chairman EX-23.1 13 INDEPENDENT AUDITORS' CONSENT INDEPENDENT AUDITORS' CONSENT The Board of Directors and Shareholders Debbie Reynolds Hotel & Casino, Inc.: We consent to incorporation by reference in the registration statement (No. 33-82126) on Form S-8 of Debbie Reynolds Hotel & Casino, Inc. of our report dated December 20, 1996, relating to the consolidated balance sheets of Debbie Reynolds Hotel & Casino, Inc. and subsidiaries as of December 31, 1995 and 1994, and the related consolidated statements of operations, shareholders' equity and cash flows for the years then ended, which report appears in the December 31, 1995 annual report on Form 10-KSB of Debbie Reynolds Hotel & Casino, Inc. Our report dated December 20, 1996, contains an explanatory paragraph that states that the Company has suffered recurring losses from operations, has a working capital deficiency, has a shareholders' equity deficiency, significant debt service obligations, and is in default with respect to various agreements, all of which raise substantial doubt about its ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ KPMG Peat Marwick LLP Las Vegas, Nevada January 24, 1996 EX-27 14 FDS
5 Year DEC-31-1995 JAN-31-1995 DEC-31-1995 172,000 0 1,459,000 0 615,000 2,504,000 10,434,000 1,996,000 11,929,000 12,563,000 0 0 0 1,000 14,141,000 11,929,000 9,790,000 9,790,000 0 15,792,000 0 0 2,601,000 0 0 0 0 0 0 (8,603,000) (.99) (.99)
-----END PRIVACY-ENHANCED MESSAGE-----