-----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, UVS4CUXxTiGaITYL2TeKrMn+FsdMFI5+FZQMnSjpCc+5oJosSbif11IzAhBWTZ/u xUmBT5tL18R8YduUh1LuHQ== 0000891105-97-000022.txt : 19971117 0000891105-97-000022.hdr.sgml : 19971117 ACCESSION NUMBER: 0000891105-97-000022 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CASINO MAGIC CORP CENTRAL INDEX KEY: 0000891105 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS AMUSEMENT & RECREATION [7990] IRS NUMBER: 640817483 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-20712 FILM NUMBER: 97720646 BUSINESS ADDRESS: STREET 1: 711 CASINO MAGIC DR CITY: BAY ST LOUIS STATE: MS ZIP: 39520 BUSINESS PHONE: 6014679257 MAIL ADDRESS: STREET 1: PO BOX 3150 CITY: BAY ST LOUIS STATE: MS ZIP: 39521 10-Q 1 FORM 10-Q FOR CASINO MAGIC CORP. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1997 [ ] 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 0-20712 CASINO MAGIC CORP. (Exact name of registrant as specified in its charter) MINNESOTA 64-0817483 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 711 CASINO MAGIC DRIVE, BAY SAINT LOUIS, MS 39520 (Address of principal executive offices) (Zip Code) (228) 466-8099 (Registrant's telephone number, including area code) NOT APPLICABLE (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ______ Indicate the number of shares outstanding of the issuer's classes of common stock, as of the latest practicable date. 35,722,124 shares common stock outstanding as of November 12, 1997 CASINO MAGIC CORP. AND SUBSIDIARIES TABLE OF CONTENTS PART I FINANCIAL INFORMATION PAGE NO. Item 1. Financial Statements Condensed Consolidated Statements of Operations For the three months ended September 30, 1997 and 1996 ........1 Condensed Consolidated Statements of Operations For the nine months ended September 30, 1997 and 1996 ........2 Condensed Consolidated Balance Sheets - September 30, 1997 and December 31, 1996 ......................3 Condensed Consolidated Statements of Cash Flows - For the nine months ended September 30, 1997 and 1996 .........4 Notes to Condensed Consolidated Financial Statements ..............5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ......................6-14 PART II OTHER INFORMATION Item 1. Legal Proceedings ..........................................15 Item 2. Changes in Securities. .....................................15 Item 3. Default Upon Senior Securities ..............................15 Item 4. Submission of Matters to a Vote of Security Holders .........15 Item 5. Other Information ...........................................15 Item 6. Exhibits and Reports on Form 8-K ............................15 SIGNATURES .....................................................16 PART I - FINANCIAL INFORMATION CASINO MAGIC CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) THREE MONTHS ENDED SEPTEMBER 30, 1997 1996 REVENUES: Casino $ 62,680,205 $ 39,849,171 Food and beverage 2,404,469 1,718,984 Rooms 328,578 505,075 Royalty and management fees -- 730,034 Other operating income 1,081,882 467,971 Total revenues 66,495,134 43,271,235 COSTS AND EXPENSES: Casino 30,658,015 16,432,601 Food and beverage 1,767,142 2,010,774 Rooms 140,554 279,844 Other operating costs and expenses 1,017,571 721,940 Advertising and marketing 7,112,014 5,365,483 General and administrative 6,181,399 5,422,144 Property operation, maintenance and energy cost 2,625,158 1,681,739 Rents, property taxes and insurance 1,906,446 1,348,281 Development expenses 56,750 473,117 Depreciation and amortization 4,905,523 4,179,874 Total costs and expenses 56,370,572 37,915,797 INCOME FROM OPERATIONS 10,124,562 5,355,438 OTHER (INCOME) EXPENSE: Equity (income) loss from unconsolidated subsidiaries 176,005 (290,088) Interest expense, net 7,954,345 4,540,596 (Gain) loss from sale of assets (1,337,687) 36,342 Other (57,828) 110,274 Write-off of investment in Porto Carras Casino, S.A. -- 26,982,422 Total other expense 6,734,835 31,379,546 INCOME (LOSS) BEFORE INCOME TAXES AND MINORITY INTEREST 3,389,727 (26,024,108) INCOME TAX EXPENSE (BENEFIT) -- (5,341,377) MINORITY INTEREST IN INCOME OF SUBSIDIARY 715,023 -- NET INCOME (LOSS) $2,674,704 $(20,682,731) NET INCOME (LOSS) PER COMMON SHARE: Primary $ 0.07 $ (0.57) Fully-diluted $ 0.07 $ (0.57) AVERAGE SHARES AND EQUIVALENTS OUTSTANDING: Primary 35,654,174 36,403,759 Fully-diluted 35,735,741 36,404,350 SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. 1 MAGIC CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) NINE MONTHS ENDED SEPTEMBER 30 1997 1996 REVENUES: Casino $186,411,356 $118,123,734 Food and beverage 7,391,186 4,897,699 Room 1,103,592 1,442,641 Royalty and management fees -- 2,860,041 Other operating income 3,327,423 1,439,795 Total revenues 198,233,557 128,763,910 COSTS AND EXPENSES: Casino 88,899,256 49,475,040 Food and beverage 8,364,166 5,543,721 Rooms 509,219 811,275 Other operating costs and expenses 3,326,192 1,883,661 Advertising and marketing 28,517,336 15,288,395 General and administrative 20,261,984 15,288,225 Property operation, maintenance and energy cost 8,669,605 4,818,119 Rents, property taxes and insurance 5,866,014 4,234,866 Development expenses 511,882 1,462,841 Depreciation and amortization 15,258,905 12,564,323 Total costs and expenses 180,184,559 111,370,466 INCOME FROM OPERATIONS 18,048,998 17,393,444 OTHER (INCOME) EXPENSE: Equity (income) loss from unconsolidated Subsidiaries 405,066 (883,337) Interest expense, net 23,703,909 12,250,572 (Gain) loss of sale of assets (2,578,231) 50,302 Other (244,461) 209,296 Write-off of investment in Porto Carras Casino, S.A. -- 26,982,422 Total other expense 21,286,283 38,609,255 INCOME (LOSS) BEFORE INCOME TAXES AND MINORITY INTEREST IN INCOME OF SUBSIDIARY (3,237,285) (21,215,811) INCOME TAX EXPENSE (BENEFIT) (1,935,000) (3,836,505) MINORITY INTEREST 916,535 -- NET INCOME (LOSS) $(2,218,820) (17,379,306) NET INCOME (LOSS) PER COMMON SHARE: Primary $ (.06) $ (.48) Fully-diluted $ (.06) $ (.49) AVERAGE SHARES AND EQUIVALENTS OUTSTANDING: Primary 35,642,780 36,485,878 Fully-diluted 35,642,780 35,387,280 SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. 2 CASINO MAGIC CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS ASSETS SEPTEMBER 30, DECEMBER 31, 1997 1996 (*) (UNAUDITED) CURRENT ASSETS: Cash and cash equivalents $ 26,886,635 $17,561,512 Restricted cash 10,610,051 16,984,654 Other current assets 9,028,863 7,410,331 Total current assets 46,525,549 41,956,497 PROPERTY AND EQUIPMENT, NET 256,365,066 243,692,571 OTHER LONG-TERM ASSETS: Investment in unconsolidated subsidiaries 774,234 957,831 Deferred gaming license cost 38,449,048 38,337,333 Foreign casino concession agreement, net 8,777,279 9,488,950 Other long-term assets 17,226,712 36,168,509 Total other long-term assets 65,227,273 84,952,623 $368,117,888 $370,601,691 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES 47,550,158 48,448,985 OTHER LONG-TERM LIABILITIES -- 266,761 LONG-TERM DEBT, NET OF CURRENT MATURITIES 253,484,013 258,261,231 MINORITY INTEREST 5,444,359 -- COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY: Common stock, $0.01 par, 50,000,000 shares authorized, 35,722,124 issued and outstanding at September 30, 1997 and 35,637,083 issued and outstanding at December 31, 1996 357,221 356,371 Undesignated stock, 2,500,000 shares authorized, none issued Additional paid-in capital 67,122,857 67,123,702 Retained earnings (4,731,892) (2,513,062) Unrealized holding loss on securities (788,156) (850,156) Less unearned compensation (320,672) (492,141) Total shareholders' equity 61,639,358 63,624,714 $ 368,117,888 $370,601,691 See notes to condensed consolidated financial statements. * Derived from audited financial statements 3 CASINO MAGIC CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) NINE MONTHS ENDED SEPTEMBER 30, 1997 1996 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ (2,218,828) (17,379,306) Adjustments for non-cash charges 14,574,699 30,018,664 Changes in assets and liabilities 5,728,959 (5,687,216) NET CASH PROVIDED BY OPERATING ACTIVITIES 18,084,830 6,952,142 Cash flows from investing activities: Acquisitions of property and equipment (28,996,109) (42,202,267) Acquisition of gaming license -- (15,000,000) Investments in unconsolidated subsidiaries (221,469) -- Proceeds from sale of assets 19,833,971 1,209,019 Other, net 366,782 (310,129) NET CASH USED IN INVESTING ACTIVITIES (9,016,825) (56,303,377) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of notes payable long-term debt 6,514,988 121,077,031 Principal payments on notes payable and long-term debt (12,285,515) (48,230,214) Net proceeds from sale of common stock -- 264,676 Other (346,958) __ NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (6,117,485) 73,111,493 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,950,520 23,760,258 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 34,546,166 30,755,698 CASH AND CASH EQUIVALENTS, END OF PERIOD $37,496,686 $54,515,956 SUPPLEMENTAL CASH FLOW INFORMATION CASH PAID DURING THE PERIOD FOR: Interest (net of amount capitalized) $ 25,104,711 $ 6,558,224 Income taxes (net of refunds) (6,382,324) (7,587,982) SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Property and equipment and other asset acquisitions included in accounts and construction payable and accrued expenses 1,658,604 1,225,532 Property and equipment financed with long-term debt 946,004 46,416,570 Gaming license acquisition financed with long-term debt -- 1,042,070 Common stock granted to officers 171,469 135,398 Reclassification of long-term liabilities to accrued expenses -- 250,000 Acquisition of securities available-for-sale through sale of subsidiary -- 1,198,052 Reserve for shut down of Porto Carras -- 4,078,320 SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. 4 CASINO MAGIC CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (INFORMATION WITH RESPECT TO THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 ARE UNAUDITED) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, RISKS AND UNCERTAINTIES: ORGANIZATION AND BASIS OF PRESENTATION: The consolidated financial statements include the accounts of Casino Magic Corp. and its wholly-owned subsidiaries ("the Company"). All significant intercompany accounts and transactions have been eliminated. Investments in unconsolidated affiliates are accounted for using the equity method of accounting. The Company conducts casino gaming operations in Bay Saint Louis, Mississippi ("Casino Magic-BSL"), Biloxi, Mississippi ("Casino Magic-Biloxi"), Bossier City, Louisiana ("Casino Magic-Bossier City") and through a 51% owned subsidiary, in the Argentina Province of Neuquen in the cities of Neuquen City and San Martin de los Andes ("Casino Magic-Neuquen"). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. The accompanying unaudited condensed consolidated financial statements contain all adjustments which are, in the opinion of management, necessary for a fair statement of the results of the interim periods. The results of operations for the interim periods are not indicative of results of operations for an entire year. It is suggested that these consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1996 and Form 10-Q for March 31, 1997 and June 30, 1997. Certain reclassifications have been made to 1996 amounts to conform with the September 30, 1997 presentation. 2. SALE OF ASSET HELD FOR SALE: In September 1997, the Company sold the Crescent City Queen Riverboat ("Crescent City Queen")for $11.7 million, and Other Income for the period ended September 30, 1997 represented recognized gain on the sale of $1.4 million. The proceeds from the sale are restricted by the Indenture governing the $115 First Mortgage Notes issued by Casino Magic-Bossier City. The Indenture restriction requires the proceeds from the sale of the Crescent City Queen to be used for capital improvements at the Casino Magic-Bossier City facility or returned to the Indenture trustee. 3. EARNINGS PER SHARE: In February 1997, the Financial Accounting Standards Board issued Statement No. 128 (FAS 128), "Earnings Per Share", which simplifies the computation of earnings per share. FAS 128 is effective for financial statements issued for periods ending after December 15, 1997 and requires restatement for all prior period earnings per share data presented. Basic earnings per share calculated in accordance with FAS 128 would be $0.08 for the third quarter ended September 30, 1997 but would remain unchanged for the nine months ended September 30, 1997. Diluted earnings per share would remain unchanged $(0.06) per share for the third quarter of the nine months ended September 30, 1997, respectively. Basic and diluted earnings per share calculated in accordance with FAS 128 would remain unchanged at $(0.57) and $(0.48) per share for the third quarter of 1996 and the nine months ended September 30, 1996, respectively. 5 CASINO MAGIC CORP. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The discussions regarding proposed Company developments and operations included in "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" and "NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS" contain forward looking statements that involve a number of risks and uncertainties. These forward-looking statements relate to: (i) completion of a hotel in 1998 at Casino Magic-Biloxi; and (ii) the Company's ability to fund planned developments and debt service obligations over the next twelve months with currently available cash and marketable securities and with cash flow from operations. Construction projects entail significant construction risks, including, but not limited to, cost overruns, delay in receipt of governmental approvals, shortages in materials or skilled labor, labor disputes, unforeseen environmental or engineering problems, work stoppage, fire and other natural disasters, construction scheduling problems and weather interferences, any of which, if it occurred, could delay construction or result in a substantial increase in costs to the Company. The Company's ability to meet its consolidated debt obligations may be dependent upon the successful completion of the hotel at Casino Magic-Biloxi and the other planned construction projects, and the Company's future operating performance, which is itself dependent on a number of factors, such as, prevailing economic and competitive conditions, regulatory compliance, and other factors affecting the Company's operations and business, many of which are outside of the Company's control. In addition to the risks and uncertainties discussed above, other factors that could cause actual results to differ materially are detailed from time to time in the Company's reports filed with the Securities and Exchange Commission. RESULTS OF OPERATIONS The following table sets forth for the periods indicated certain operating information for the Company on a consolidated basis and for its existing properties. The principal operating entities are Casino Magic-BSL and Casino Magic-Biloxi, both dockside casinos operating on the Gulf Coast of Mississippi (together referred to collectiv ely as the "Casino Magic-Gulf Coast"), Casino Magic-Bossier City, a dockside casino operating on the Red River in Bossier City, Louisiana, and Casino Magic Neuquen SA, a 51% owned subsidiary of the Company, which operates gaming facilities at two casino sites in Neuquen City and San Martin de los Andes, Argentina (together referred to collectively as "Casino Magic-Neuquen"). During 1996, the Company had a 49% interest in Porto Carras Casino S.A. ("Porto Carras") which managed a casino at the Porto Carras resort approximately 60 miles south of Thessaloniki, Greece. Porto Carras was written off in September 1996 and subsequently sold for a nominal amount in December 1996. The revenues, costs and expenses of Porto Carras were not included below as Porto Carras was accounted for under the equity method of accounting. 6 CASINO MAGIC CORP. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THREE MONTHS NINE MONTHS ENDED SEPTEMBER 30, ENDED SEPTEMBER 30, 1997 1996 1997 1996 (Dollars in thousands) (Unaudited) REVENUES: Casino Magic-BSL (1) $ 22,658 21,592 68,227 63,630 Casino Magic-Biloxi (2) 15,479 16,734 48,138 49,379 Casino Magic-Neuquen (3) 4,608 4,215 13,392 12,141 Casino Magic-Bossier (4) 23,750 - 68,477 - Corporate and Other (5)(6) - 730 - 3,614 Total revenues 66,495 43,271 198,234 128,764 COST AND EXPENSES: Casino Magic-BSL 17,591 16,804 54,659 49,335 Casino Magic-Biloxi 14,470 14,822 44,141 42,285 Casino Magic-Neuquen 3,038 3,065 9,424 9,361 Casino Magic-Bossier 19,996 - 66,494 - Corporate and Other 1,275 3,224 5,467 10,389 Total costs and expenses 56,370 37,915 180,185 111,370 INCOME (LOSS) FROM OPERATIONS: Casino Magic-BSL 5,067 4,788 13,568 14,295 Casino Magic-Biloxi 1,009 1,912 3,997 7,094 Casino Magic-Neuquen 1,570 1,150 3,968 2,780 Casino Magic-Bossier 3,754 - 1,983 - Corporate and Other (1,275) (2,494) (5,467) (6,775) Total income from operations $10,125 $5,356 $18,049 $17,394 ________________ _________________ (1) Began operations September 30, 1992; expanded casino capacity December 31, 1992. (2) Began operations June 5, 1993; expanded casino capacity December 16, 1993. (3) Began operations on January 1, 1995. (4) Began operations on October 4, 1996: completed facility on December 31, 1996. (5) Includes management fees and royalty fees from Porto Carras which began operations May 18, 1995. Equity in earnings with respect to Porto Carras is reported as non-operating income. Casino Magic divested of Porto Carras in December 1996. (6) Corporate and Other includes the operations of Goldiggers through June 13, 1996. 7 CASINO MAGIC CORP. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS (CONTINUED): THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 1996: Consolidated revenues were $66.5 million for the third quarter of 1997, an increase of $23.2 million over the third quarter of 1996 revenues of $43.3 million. The increase in the 1997 third quarter consolidated revenues is primarily attributable to Casino Magic-Bossier City, which the Company opened in late 1996 and which accounted for $23.7 million in additional revenues. Casino Magic-Biloxi revenues declined by $1.2 million, or 7.7%, to $15.5 million in the third quarter of 1997 compared to $16.7 million in the same period in 1996. Management believes the decline is attributable to intensified competition in the Biloxi market, where Casino Magic-Biloxi is located, and the disruption caused by the on-going construction of a hotel at Casino Magic-Biloxi. Competitive pressures will likely continue to effect Casino Magic-Biloxi's revenues and operating margins. Although there can be no assurances, it is anticipated that revenues and operating margins will improve at such time as the Casino Magic-Biloxi hotel is completed. Competitive pressure will increase upon the opening of a competing hotel casino located in Biloxi that is scheduled to open in late 1997 or early 1998. Casino Magic-BSL revenues increased by $1.1 million or 5.0%, to $22.7 million in the third quarter of 1997 compared to $21.6 million in the third quarter of 1996. The increased revenues at Casino Magic-BSL may in part be attributable to improvements in amenities at the facility, including a golf course and improved food and beverage outlets. Casino Magic-Neuquen revenues increased $0.4 million, or 9.3%, in the third quarter of 1997 compared to the same period in 1996. This increase is associated with the continued increase in slot machine revenues due to increased popularity. Royalty and management revenues declined $0.7 million or 100% in the third quarter of 1997. The Company ceased earning such royalties and management fees when the Company divested itself of its Greek operations in December 1996. Consolidated operating costs and expenses increased $18.5 million, or 48.8%, from $37.9 million in the third quarter of 1996, to $56.4 million in the third quarter of 1997. Of this increase, $20.0 million is related to Casino Magic-Bossier City, which opened in October 1996. Excluding the effects of Casino Magic-Bossier City, operating costs in the third quarter of 1997 decreased by $1.5 million, or 4.0%, as compared to operating costs in the third quarter of 1996. Casino Magic Corp.'s and non-operating subsidiaries' operating costs in the third quarter of 1997 declined by $2.0 million as compared to the same quarter in 1996. This decline is related to reductions in corporate overhead and developmental costs. Operating costs at Casino Magic-Gulf Coast and Casino Magic-Neuquen increased $0.5 million with no significant fluctuations in any identifiable areas between the comparable periods. Earnings before income taxes, depreciation and amortization (EBITDA) increased $5.5 million, or 57.7%, in the third quarter of 1997 compared to the same period in 1996. The third quarter 1996 results include revenues of $0.7 million and EBITDA of $0.7 million from operations in Greece which were sold during December 1996. The remaining increase in EBITDA was the result of the following; (i) EBITDA contribution of $5.3 million from Casino Magic-Bossier City. 8 (ii) EBITDA at Casino Magic-BSL increased to $6.6 million from $6.2 million for the 1997 period compared to 1996. The increased EBITDA is believed to be the result of an increase in revenues primarily achieved through a new golf facility which opened in February 1997 and improved food and beverage outlets. (iii) EBITDA at Casino Magic-Biloxi for the third quarter of 1997 declined to $2.3 million compared with $3.5 million during the same period in 1996. The decline in EBITDA was primarily the result of decreased revenues, which may be primarily attributable to intensified competition in the Biloxi market and the disruption caused by the on-going construction of a hotel at Casino Magic-Biloxi. (iv) EBITDA at Casino Magic-Neuquen increased $0.4 million in the third quarter of 1997 compared to the third quarter of 1996. This increase is the result of increased slot machine revenues. (v) EBITDA at Casino Magic Corp. and non-operating subsidiaries increased $0.4 million in the third quarter of 1997 compared to the third quarter of 1996. This increase is related to reductions in Corporate overhead and developmental costs, which reductions exceeded the loss of royalties and management revenues. Consolidated income from operations increased $4.7 million, or 87.0%, to $10.1 million in the third quarter of 1997 compared to $5.4 million in the third quarter of 1996. In addition to the items described above with respect to EBITDA results, depreciation and amortization increased $1.5 million as the result of the addition of the Casino Magic-Bossier City facility and decreased by $0.7 million related to the Company's divestiture of its Greek investments. Consolidated "Other (income) expense" (non-operating income and expenses) improved by $24.7 million, to a net expense of $6.7 million in the third quarter of 1997, compared to a net expense of $31.4 million in the third quarter of 1996. Approximately $27.0 million of the additional expenses in 1996 were attributable to management's decision to write off its 49% equity interest in a gaming facility in Porto Carras, Greece. Net interest expense increased by $3.4 million in the third quarter of 1997 compared to the same period in 1996. This was due to the increased debt from the issuance of the $115,000,000, 13% Louisiana First Mortgage Notes in late August 1996, and a reduction of $1.7 million in capitalized interest due to the completion of the Casino Magic-Bossier City facility and the golf course at Casino Magic-Casino Magic-BSL. Other income was increased by $1.4 million in the third quarter of 1997 compared to the same period in 1996 due to a gain on the sale of the Crescent City Queen. 9 CASINO MAGIC CORP. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS (CONTINUED): The Company's effective tax rate for the third quarter of 1997 of 0% is the result of an anticipated loss for the year ending 1997 and the allowance against the deferred tax assets. The effective tax rate for the third quarter of 1996 of (20.4%) is the result of an allowance against deferred tax assets. This allowance reduces deferred tax assets, which relate primarily to the Porto Carras write off, to their estimated realizable value. The Company had net income of $2.7 million, or $0.07 per share in the quarter ended September 30, 1997, compared to net loss of $20.7 million, or $0.57 per share for the quarter ended September 30, 1996. The improvement in the net income for the 1997 third quarter compared to the 1996 third quarter is primarily attributable to the $26.7 million write off of Porto Carras Casino S.A. in 1996. NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 1996: Consolidated revenues increased $69.4 million, or 54.0%, to $198.2 million in the first nine months of 1997, compared to $128.8 million in the same period of 1996. The increase in consolidated revenues in the first nine months of 1997 is primarily attributable to Casino Magic-Bossier City, which the Company opened in late 1996 and which accounted for $68.5 million in additional revenues. Casino Magic-Biloxi revenues declined by $1.2 million, or 2.5%, to $48.1 million in the first nine months of 1997, compared to $49.4 million in the same period in 1996. Management believes the decline is attributable to intensified competition in the Biloxi market, where Casino Magic-Biloxi is located, and the disruption caused by the on-going construction of a hotel at Casino Magic-Biloxi which began in December 1996. Competitive pressures will likely continue to effect Casino Magic-Biloxi's revenues and operating margins. Although there can be no assurances it is anticipated that revenues and operating margins will improve when the Casino Magic-Biloxi hotel is completed. Competitive pressure will increase upon the opening of a competing hotel casino located in Biloxi that is scheduled to open in late 1997, or early 1998. Casino Magic-BSL revenues increased by $4.6 million, or 7.2% to $68.2 million in the first nine months of 1997 compared to $63.6 million in the same period of 1996. The increased revenues at Casino Magic-BSL may in part be attributable to improvements in amenities at the facility, including a golf course and improved food and beverage outlets. Casino Magic-Neuquen revenues increased $1.3 million, or 10.7%, in the first nine months of 1997 as compared to the same period in 1996. This increase is associated with the continued increase in slot machine revenues at the casino due to increased popularity. Royalty and management revenues declined $2.9 million, or 100%, in the first nine months of 1997. The Company ceased earning such royalties and management fees when the Company divested itself of its Greek operations in December 1996. 10 CASINO MAGIC CORP. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS (CONTINUED): Consolidated operating costs and expenses increased $68.8 million, or 61.8%, from $111.4 million in the first nine months of 1996 to $180.2 million in the first nine months of 1997. Of this increase, $62.2 million is related to Casino Magic-Bossier City, which opened in October 1996. Excluding the effects of Casino Magic-Bossier City, operating costs in the first nine months of 1997 increased by $2.3 million, or 2.1%, compared to operating costs in the first nine months of 1996. Casino Magic Corp.'s and non-operating subsidiaries' operating costs in the first nine months of 1997 declined by $4.9 million as compared to the same period in 1996, in part as the result of the sale of the casino operation in South Dakota in June 1996, which resulted in a $1.2 decline in operating costs. The remainder of this decline is related to reductions in corporate overhead and developmental costs. Operating costs at Casino Magic-Gulf Coast and Casino Magic-Neuquen increased $7.2 million in the first nine months of 1997 compared to the same period in 1996. Operating costs at Casino Magic-BSL increased $5.3 million, or 10.7%, between the periods. The increases in cost were the result of the operation of the golf course, the associated depreciation and increases in promotional allowances. Operating costs at Casino Magic-Biloxi increased $1.9 million, or 4.4%, in the first nine months of 1997 compared to the same period in 1996. The increased operating cost was primarily the result of increased marketing and advertising costs of $1.9 million. EBITDA increased $3.4 million, or 11.2%, in the first nine months of 1997 compared to the same period in 1996. The first nine months 1996 results include revenues of $3.6 million and EBITDA of $2.6 million from casino operations in South Dakota and Greece which were sold during 1996. The remaining increase in EBITDA is the result of the following; (i) EBITDA contribution of $6.3 million from Casino Magic-Bossier City. (ii) EBITDA at Casino Magic-BSL decreased to $18.6 million from $18.7 million for the 1997 period compared to 1996. The decreased EBITDA is the result of increases in costs associated with the operation of the golf course and increases in promotional allowances; (iii) EBITDA at Casino Magic-Biloxi for the first nine months of 1997 declined to $8.2 million compared with $11.4 million during the same period in 1996. The decrease in EBITDA was primarily the result of decreased revenues and increased marketing, advertising and promotional costs. The decline is attributable to intensified competition in the Biloxi market, and the disruption caused by the construction of a hotel at Casino Magic-Biloxi. The increases in marketing and advertising costs are the result of attempts to stabilize revenues at Casino Magic-Biloxi. (iv) EBITDA at Casino Magic-Neuquen increased $1.2 million in the first nine months of 1997 compared to the first nine months of 1996. This increase is the result of increased slot machine revenues. 11 CASINO MAGIC CORP. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS (CONTINUED): (v) EBITDA at Casino Magic Corp. increased $1.0 million in 1997 as compared to 1996. This increase is related to reductions in corporate overhead and developmental costs, which these reductions more than offset the loss of royalties and management revenues; Consolidated income from operations increased $0.7 million, or 3.8%, to $18.1 million in the first nine months of 1997 compared to $17.4 million in the same period of 1996. In addition to the items described above with respect to EBITDA results, depreciation and amortization increased $4.3 million as the result of the addition of the Casino Magic-Bossier City facility and decreased by $2.1 million related to the Company's divestiture of its Greek investments. Consolidated "Other (income) expense" (non-operating income and expenses) improved $17.3 million, for the first nine month of 1997, from a net expense of $38.6 million to a net expense of $21.3 million in the comparative period of 1996. Approximately $27.0 million of the additional expense in 1996 was due to management's decision to write off its 49% equity interest in its gaming facility in Porto Carras, Greece, in the third quarter of 1996. Net interest expense increased by $11.5 million in the first nine months of 1997 compared to the same period in 1996. This was due to the increased debt from the issuance of the $115,000,000, 13% Louisiana First Mortgage Notes in late August 1996, and a reduction of $2.3 million in capitalized interest due to the completion of the Casino Magic-Bossier City facility and the golf course at Casino Magic-BSL. Other income increased by $2.8 million in the first nine months of 1997 compared to the same period in 1996 due to gains from the sales of a 49% interest in Casino Magic-Neuquen and the sale of the Crescent City Queen. The Company's effective tax rate for the first nine months of 1997 of approximately (59.8%) is the result of anticipated losses for the year ended December 1997. The Company's effective tax rate for the first nine months of 1996 of approximately (18.1%) is the result of an allowance against deferred tax assets. This allowance reduces deferred tax assets, which relate primarily to the Porto Carras write off, to their estimated realizable value. The Company had a net loss of $2.2 million, or $0.06 per share in the current year's first nine months compared to a net loss of $17.4 million, or $0.48 per share in the 1996 period. The improvement in net income for the first nine months of 1997 would not have occurred but for the write off of the Company's investment in Porto Carras Casino S.A. in the third quarter of 1996. 12 CASINO MAGIC CORP. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES At September 30, 1997, the Company had unrestricted cash and marketable securities of $26.9 million compared to unrestricted cash and marketable securities of $17.6 million at December 31, 1996. At September 30, 1997, the Company had $10.6 million in restricted cash related to the sale of the Crescent City Queen (see discussion below). The Company had $17.0 million in restricted cash relating to the $115 million, 13% Louisiana First Mortgage Notes at December 31, 1996. For the nine months ended September 30, 1997, the Company generated $18.1 million of cash flow from operating activities and received $6.5 million of proceeds from the issuance of a long term note payable. During that nine months the Company spent $30.0 million for acquisitions of property, equipment and other long-term assets and reduced long term debt by $12.3 million. Of the $30 million spent, approximately $21.3 million was expended in capital improvements at Casino Magic-Gulf Coast, and $7.4 million in capital expenditures at Casino Magic-Bossier City. The Company plans additional capital improvements at Casino Magic-Gulf Coast and Casino Magic-Bossier City, much of which is subject to cash flows generated by the Company's operations, and the availability of financing. There are no assurances that adequate funding will be available for these planned improvements. The Company opened Casino Magic-Bossier City on October 4, 1996 using a temporary boarding facility, and on December 31, 1996, opened the permanent facility. The Company plans to construct an approximately 200-room convention hotel and related amenities, including restaurants, banquet space and a swimming pool. The construction of the hotel is expected to be funded primarily by the $11.7 million in proceeds received from the sale of the Crescent City Queen and the future operating cash flow of Casino Magic-Bossier City. No assurances can be given that the proceeds from the sale of the Crescent City Queen and the cash flow from the operations of Casino Magic-Bossier City will be sufficient to complete such hotel and related facilities or that these improvements will ever be developed. The Company is currently constructing a hotel tower at Casino Magic-Biloxi above the eight-story parking garage adjacent to the casino. The hotel will consist of approximately 378 rooms, including 86 suites, and will include a swimming pool and conference space. Completion is estimated for 1998. The hotel construction costs are being funded solely out of the cash flow of Casino Magic-BSL and Casino Magic-Biloxi, and any lack of cash flow from operations in the future may delay or prevent completion of the hotel as 13 CASINO MAGIC CORP. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES (CONTINUED): planned. The Company has obtained a commitment for debt financing of furniture, fixtures and equipment for the Casino Magic-Biloxi hotel in the amount of $6.5 million. Under the terms of the Indenture associated with the $135,000,000 First Mortgage Notes, Casino Magic Corp., Mardi Gras Casino Corp., Biloxi Casino Corp. and Casino Magic Finance Corp. have certain restrictions relative to additional borrowings and guarantees. Jefferson Casino Corp and Casino Magic of Louisiana, Corp. have certain restrictions relative to additional borrowings and cash flow under the terms of the Louisiana Indenture associated with the $115,000,000 First Mortgage Notes. The Company commenced operations in 1995 outside the United States becoming subject to certain risks including foreign currency exchange, repatriation of earnings and profits, and adverse foreign tax treatment. In addition, the Company will incur the general business risk associated with operating in foreign county where culture and business practices may vary significantly from that in the United States. Such risks could have a material impact on the operating results and liquidity of the Company. The Company will have a significant need for cash in 1997 and beyond in order to continue its planned development of its existing properties. The Company believes that cash and marketable securities at September 30, 1997, and cash flows from operations will be sufficient to service its operating and debt service requirements, including the completion of the hotel at Casino Magic-Biloxi, through at least the next twelve months, but are not anticipated to be sufficient to complete the Casino Magic-Bossier City Hotel or engage in any other development activities without additional debt or equity financing. There are no assurances that adequate funding will be available for these planned investments at Casino Magic-Biloxi or Casino Magic-Bossier City. 14 CASINO MAGIC CORP. AND SUBSIDIARIES PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Reference is made to the Company's Annual Report on Form 10-K for the year ended December 31, 1996 and Form 10-Q for the six month period ended June 30, 1997 on file with the Securities and Exchange Commission. During the quarter ended September 30, 1997, the Company was not a party to any newly instituted legal proceedings and there were no material developments during such period with respect to existing legal proceedings. ITEM 2. CHANGES IN SECURITIES On September 16, 1997, 18,750 shares of the Company's common stock were issued and sold to five employees of the Company as the result of common stock grants which had previously vested. The shares were issued in consideration for services valued at an aggregate of $100,316. The shares were sold under the exemption from registration provided under Section 4 (2) of the Securities Act of 1933,as amended. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS None. ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits 10.1 Purchase agreement for the sale of a 49% interest in Casino Magic Neuquen S.A. 10.2 Purchase agreement for the sale of the Crescent City Queen Riverboat. 27. Financial Data Schedule (filed electronically only). __________ (b) Reports on Form 8-K: None 15 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CASINO MAGIC CORP. Registrant Date: NOVEMBER 12, 1997 /S/ JAMES E. ERNST JAMES E. ERNST, PRESIDENT AND CHIEF EXECUTIVE OFFICER Date: NOVEMBER 12, 1997 /S/ JAY S. OSMAN JAY S. OSMAN, CHIEF FINANCIAL OFFICER AND TREASURER (PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER) 16 CASINO MAGIC CORP QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30, 1997 INDEX TO EXHIBITS Exhibit Number Page 10.1 Purchase agreement for the sale of a 49% interest in Casino Magic Neuquen S.A. 10.2 Purchase agreement for the sale of the Crescent City Queen Riverboat. 27 Financial Data Schedule (filed electronically only). EX-10.01 2 PURCHASE AGREEMENT 49% ARGENTINA PURCHASE AGREEMENT THIS PURCHASE AGREEMENT dated as of May 31, 1997, by and among CROWN CASINO CORPORATION, a Texas corporation (the "Purchaser"), and CASINO MAGIC CORP., a Minnesota corporation (the "Seller"), being the majority shareholder of CASINO MAGIC NEUQUEN S.A., a Republic of Argentina corporation (the "Company"). W I T N E S S E T H: WHEREAS, the Seller is the owner of 559,998 shares of the issued and outstanding shares of capital stock of the Company, such shares being of the class and value as hereinafter set forth, and the Seller desires to sell 274,399 of such shares to the Purchaser (all of such shares of capital stock to be sold hereunder herein collectively referred to as the "Shares"), and the Purchaser desires to purchase the Shares, all upon the terms and conditions set forth herein; and WHEREAS, contemporaneously with the consummation of the transaction contemplated hereunder, the Purchaser shall acquire from CASINO MAGIC MANAGEMENT SERVICES, INC., a Mississippi corporation ("CMMS"), one (1) share of the capital stock of the Company (the "CMMS Share"), pursuant to which, in conjunction with the purchase of the Shares hereunder, the Purchaser shall acquire an aggregate of 274,400 shares of capital stock of the Company; and WHEREAS, the Company is indebted to the Seller as evidenced by a Promissory Note from the Company to the Seller in the original principal amount of $12,897,740.05 dated November 28, 1995, but effective December 27, 1994, bearing interest at a variable rate per annum based upon the prime rate as quoted in the Wall Street Journal (the "Original Note"), and the Seller desires to sell and assign, and the Purchaser desires to purchase, forty-nine (49%) percent of the Seller's right, title and interest in, to and under the Original Note; and WHEREAS, the Seller has leased to the Company certain gaming equipment (the "Leased Equipment"), and the Seller desires to sell and assign, and the Purchaser desires to purchase, forty-nine (49%) percent of the Seller's right, title and interest in and to (a) the Leased Equipment, (b) the Lease Agreement between the Seller and the Company dated September 25, 1995 (the "Lease Agreement") with respect to the Leased Equipment, and (c) the rentals paid by the Company to the Seller therefor (the "Lease Payments"); and WHEREAS, the Seller and the Company have entered into the Technical Assistance Agreement dated September 25, 1995 (the "Technical Assistance Agreement"), whereby the Seller has agreed to supply to the Company its "know-how" (as defined in the Technical Assistance Agreement), for and in consideration of a fee (the "Technical Assistance Fee") equal to three (3%) percent of the total gross income of the Company from the operation of the Casinos (as hereinafter defined), as more fully described therein, and the Seller desires to sell and assign, and the Purchaser desires to purchase, sixteen and four-tenths (16.4%) percent of the Seller's right, title and interest in, to and under (a) the Technical Assistance Agreement and (b) the Technical Assistance Fee; and WHEREAS, the Seller and the Company have entered into the Trademark and Trade Name License Agreement dated September 25, 1995 (the "Trademark Agreement"), whereby the Seller has licensed to the Company the non-exclusive right to use the trade name "Casino Magic" and the related symbols and logotypes described therein, for and in consideration of a fee (the "Royalty") equal to two (2%) percent of the gross income of the Company from the operation of the Casinos, as more fully described therein, and the Seller desires to sell and assign, and the Purchaser desires to purchase, forty-nine (49%) percent of the Seller's right, title and interest in and to the proceeds from the Royalty; and WHEREAS, this Agreement sets forth the terms and conditions to which the parties have agreed and further contemplates the execution and delivery of certain collateral agreements and the consummation of certain related transactions hereinafter described; NOW, THEREFORE, in consideration of the mutual promises and covenants of the parties, and subject to the terms and conditions set forth herein, the parties agree as follows: 1. Sale and Purchase of Assigned Properties. The Seller agrees, subject to the conditions to the Seller's obligations herein set forth, to sell, assign and convey to the Purchaser on the Closing Date (as hereinafter defined), free and clear of all security interests, pledges, liens, charges and encumbrances, (a) the Shares, (b) forty-nine (49%) percent of the Seller's right, title and interest in and to the Original Note, (c) forty-nine (49%) percent of the Seller's right, title and interest in and to the Leased Equipment, the Lease Agreement and the Lease Payments, (d) sixteen and four-tenths (16.4%) percent of the Seller's right, title and interest in and to the Technical Assistance Agreement and the Technical Assistance Fee, and (d) forty-nine (49%) percent of the Seller's right, title and interest in and to the Royalty. The Purchaser agrees, subject to the conditions to its obligations herein set forth, to purchase and accept the Shares, forty-nine (49%) percent of the Seller's right, title and interest in and to the Original Note, the Leased Equipment, the Lease Agreement and the Lease Payments, and the Royalty, and sixteen and four-tenths (16.4%) percent of the Seller's right, title and interest in and to the Technical Assistance Agreement and the Technical Assistance Fee, as aforesaid, for the consideration set forth in Section 2(a) hereof. The Shares, the forty-nine (49%) percent interest to be acquired by the Purchaser hereunder from the Seller in and to the Original Note, the Leased Equipment, the Lease Agreement and the Lease Payments, the Royalty, and the sixteen and four-tenths (16.4%) percent interest to be acquired by the Purchaser hereunder from the Seller in and to the Technical Assistance Agreement and the Technical Assistance Fee are herein collectively referred to as the "Assigned Properties". 2. Purchase Price, Payment and Allocation. 3. Purchase Price. The total purchase price (the "Purchase Price") for the Assigned Properties is SEVEN MILLION ($7,000,000) DOLLARS, payable by the Purchaser to the Seller on the Closing Date by wire transfer. 4. Allocation. The Purchase Price for the Assigned Properties shall be allocated as follows: Shares $ 764,400 Retained Earnings $ 214,701 Original Note $ 4,226,743 Leased Equipment $ 785,812 Lease Agreement $ 504,312 Technical Assistance Agreement and Technical Assistance Fee $ 168,467 Royalty $ 335,565 Total $7,000,000 5. Further Assurances. The Seller hereby agrees to execute and deliver from time to time at the request of the Purchaser and without further consideration, such additional instruments of conveyance and transfer and to take such other action as the Purchaser may reasonably require more effectively to convey, assign, transfer and deliver the Assigned Properties to the Purchaser. 6. Representations and Warranties of the Seller. The Seller represents and warrants to and agrees with the Purchaser that: 7. Organization and Standing of the Company. The Company is a corporation duly organized, validly existing and in good standing under the laws of the Republic of Argentina and the Province of Neuquen. The Company has full corporate power and authority to conduct its business as it is now being conducted. The Seller has delivered to the Purchaser complete and correct copies of the Articles of Incorporation (certified by the Secretary of the Company) and By-Laws (certified by the Secretary of the Company) of the Company as in effect on the date hereof. 8. Subsidiaries. The Company has one subsidiary, Casino Magic Support Services, S.A. (the "Subsidiary"). Except for the Subsidiary, the Company does not 8. own, directly or indirectly, any of the outstanding capital stock or securities convertible into capital stock of any other corporation, or 8. own, directly or indirectly, any participating interest in any partnership, joint venture or other business enterprise. 9. Capital Stock. The authorized capital stock of the Company consists of 560,000 nominal shares of stock, with a value of one peso ($1) each, of which, on the date hereof, 560,000 shares are validly issued and outstanding, fully paid and nonassessable and 559,998 of which are owned by the Seller and two (2) shares of which are owned by CMMS. The Company does not have any treasury shares, outstanding subscriptions, options or other agreements or commitments obligating it to issue shares of capital stock. Between the date hereof and the Closing Date, the Seller will not, and will not permit the Company to issue or enter into any subscriptions, options, agreements or other commitments in respect of the issuance, transfer, sale, repurchase or encumbrance of any shares of capital stock. 1. Financial Statements. The Seller has delivered to the Purchaser 1. the compiled balance sheet of the Company at its December 31, 1996 fiscal year end and the related compiled statement of earnings for the Company, as certified by the Chief Financial Officer of the Seller; and 1. the compiled balance sheet of the Company at April 30, 1997 (the "Financial Statement Date") and the related compiled statement of earnings of the Company for the four (4) month period then ended, as certified by the Chief Financial Officer of the Seller (hereinafter referred to as "the Company's Financial Statements"). The Company's Financial Statements (x) are in accordance with the books of account and records of the Company and fairly present the financial position of the Company at the date indicated, (y) contain and reflect adequate reserves for all material liabilities and (z) were prepared in accordance with generally accepted accounting principles applied on a basis consistent with prior accounting periods ("GAAP"). Except to the extent reflected or reserved against in the Company's Financial Statements, or any Schedule provided for in this Section 3, the Company is not obligated for, nor are any of its assets or properties subject to, any liabilities (whether accrued, absolute, contingent or otherwise) or adverse obligations, whether or not such liabilities or obligations are normally shown or reflected on a balance sheet, other than liabilities and obligations arising in the ordinary course of business since the date of the Company's Financial Statements, none of which are material and adverse. The Company's Financial Statements correctly reflect the liabilities of the Company at the Financial Statement Date. 1. Absence of Certain Changes or Events. Except as set forth in any Schedule delivered to the Purchaser pursuant to this Section 3 or except as contemplated by this Agreement, since the Financial Statement Date, the Company has not: 2. issued, delivered or agreed to issue or deliver any stock, bonds or other corporate securities (whether authorized and unissued or held in the treasury) or granted or agreed to grant any options, warrants or other rights calling for the issuance thereof; 3. borrowed or agreed to borrow any funds or incurred, or become subject to, any obligation or liability (absolute or contingent) except in the ordinary course of business in customary amounts (not to exceed $100,000); 4. paid any obligation or liability (absolute or contingent) other than current liabilities reflected in or shown on the Company's Financial Statements (or the notes thereto) and obligations or liabilities incurred since the date thereof and permitted to be so incurred by the foregoing clause (ii) of this Section (e); 5. declared or made, or agreed to declare or make, any payment of dividends or distribution of any assets of any kind whatsoever to the Seller or CMMS, or purchased or redeemed any shares of its capital stock; 6. except as otherwise permitted herein, sold or transferred, or agreed to sell or transfer, any of its assets, properties or rights (except sales in the ordinary course of business) or canceled or agreed to cancel, any debts or claims; 7. entered or agreed to enter into any agreement or arrangement granting any preferential rights to purchase substantially all of the assets, properties or rights of the Company (including management and control thereof), or requiring the consent of any party to the transfer and assignment of such assets, properties or rights (or changes in management or control thereof), or providing for the merger or consolidation of the Company with or into another corporation; 8. except in the ordinary course of business, made or permitted any amendment or termination of any contract, agreement or license to which it is a party, including, without limitation, any of the contracts or agreements contained in the Assigned Properties; 9. suffered any material losses or waived any rights of material value; 10. experienced any significant labor trouble; or 11. suffered any damage, destruction or loss, whether or not covered by insurance, which materially and adversely affects its assets or business, or had any material adverse change in the business, operations, financial condition or prospects of the Company. Between the date hereof and the Closing Date, the Seller shall not permit the Company to do any of the things listed in Clauses (i) through (vii) of this Section (e) without the prior written consent of the Purchaser, except as otherwise permitted by this Agreement. 12. Tax Matters. 1. As used herein "Tax" or "Taxes" shall mean taxes of any kind payable to any taxing authority of the Republic of Argentina, the Province of Neuquen, the City of Neuquen, or any other country or jurisdiction including, without limitation, 1. income, gross receipts, admission or head tax, ad valorem, value added, sales, use, service, franchise, profits, real or personal property, capital stock, license, payroll, withholding, employment, social security, workers compensation, unemployment compensation and insurance, utility, severance, production, excise, stamp, occupation, premium, transfer and gains taxes, 1. customs duties, imposts, charges, levies, or other assessments of any kind, 1. interest, penalties, and additions to tax imposed with respect to the above taxes, and 1. any damages, costs, expenses, fees or other liability arising from such Tax or Taxes. 1. The Company has filed all returns for Taxes required to be filed by it and has paid all Taxes (including interest and penalties thereon, if any) owing by it, except for (A) Taxes which have not yet accrued or otherwise become due for which adequate provision has been made in the Company's Financial Statements, and (B) all sums alleged to be due and owing by it to the City of Neuquen for an admission or head tax (the "Head Tax") levied at the rate of one (1) peso for each person admitted to the Company's Casino in the City of Neuquen. The amount of alleged unpaid Head Tax as of May 29, 1997 is approximately 600,000 pesos. 2. Concession Contract. The Seller has delivered to the Purchaser a true and correct copy of the Concession Contract for the Management, Operation, Maintenance and Related Services of the Gaming Houses of the Provincial Casino in the Cities of Neuquen and San Martin de Los Andes dated December 21, 1994 (the "Concession Contract") with respect to the operation of the Company's casinos located in San Martin de Los Andes and Neuquen, Argentina (collectively, the "Casinos"). The Concession Contract has been duly executed by the Company, is currently in effect, is valid and binding upon the parties thereto and is enforceable in all material respects in accordance with its terms. Neither the Company nor the Seller is aware of any facts that would prevent the performance of the Concession Contract. The Company is not in default under the Concession Contract and no claim of default been asserted by the Province of Neuquen. The Company has committed no act and there has been no omission which will result in the breach by it of the Concession Contract. 3. Title to Properties and Related Matters. The assets reflected in the Company's Financial Statements, were at the date thereof, and, except for assets consumed or disposed of in the ordinary course of business since the date thereof, are now owned by the Company by good title, free and clear from all security interests, mortgages, liens, claims, defects and encumbrances except liens, charges or encumbrances discussed or referred to in the Company's Financial Statements or the related notes or schedules thereto. All such assets (including the Leased Equipment) are in good operating condition and repair, subject to ordinary wear and tear. All of such assets have been properly maintained, with no extraordinary maintenance planned or anticipated, and are adequate and sufficient for the operation of the Company's business as historically operated by the Company. There are no material capital expenditures currently contemplated or necessary to maintain the current operation of the Company's business. 4. Consents. Prior to Closing the Company shall have obtained all approvals or consents which must be obtained in order to effectuate the transactions contemplated hereby and to satisfy the terms and conditions of this Agreement 5. Litigation and Proceedings. Except for matters or proceedings with respect to the Head Tax, certain employee matters, none of which individually or in the aggregate are material, and a dispute with the Argentinean customs officials regarding imported gaming equipment, there are no actions, suits or proceedings pending or, to the knowledge of the Seller, threatened against or affecting the Company or the Seller, at law or in equity, or before or by any governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, or before any arbitrator of any kind, which involve the possibility of any judgment or liability not fully covered by casualty or liability insurance; and the Company is not in default with respect to any judgment, order, writ, injunction, decree, award, or, to the best of the Seller's knowledge and belief, in default with respect to any rule or regulation of an court, arbitrator or governmental department, commission, board, bureau, agency or instrumentality. 6. Insurance Coverage. The Company maintains policies of casualty, liability, use and occupancy, and other forms of insurance with reputable and financially sound insurers, covering its properties and assets in amounts and against such losses and risks as are generally maintained for comparable businesses and properties, and valid policies for such insurance are now duly in force. 7. Trademarks and Licenses. The Company owns or has all rights necessary to use all trademarks and copyrights necessary for the conduct of its business as currently conducted, including, without limitation, the right to use the name "Casino Magic", and to the best of the Seller's knowledge and belief, the conduct of such business does not conflict with or infringe upon any trademark, trade name or copyright of others. The Company has, and will continue to have, the right to use the name "Casino Magic" and all marks associated therewith pursuant to the Trademark Agreement. 8. Approvals, Permits, Authorizations and Regulations. To the best of the Seller's knowledge and belief, the Company's business is being conducted in compliance with all applicable laws, ordinances, rules and regulations of all governmental authorities, and neither the Company nor any officer, director, stockholder, agent or employee has violated, in any material respect, any law, ordinance, rule or regulation in connection with the Company's business. Further, the Company has not received any notice (written or otherwise) from any governmental authority asserting or investigating any alleged failure to comply with any applicable law, ordinance or regulation other than matters or proceedings related to the Head Tax and a dispute with the Argentinean customs officials regarding imported gaming equipment. 9. Guarantees, Etc. The Company has not given any guarantee, indemnity, warranty or bond, or incurred any other similar obligation or created any security for or in respect of, liabilities, actual or contingent, of any other person. 10. Absence of Adverse Agreements. The Company is not a party to any instrument or agreement or subject to any charter or other corporate restriction or any judgment, (other than a judgment relating to the enforceability of the Head Tax) order, writ, injunction, decree, award, rule or regulation which materially and adversely affects the business, properties, assets or condition, financial or otherwise, of the Company. 11. No Defaults. The Company is not in default under, nor, to the best of the Seller's knowledge and belief, has any event occurred which with notice or lapse of time or both, could result in a waiver of any material right or default under, any outstanding indenture, mortgage, lease, contract or agreement (including, without limitation, the Concession Contract) to which the Company is a party or by which the Company or its assets may be bound, or under any provision of the Company's Articles of Incorporation or By-Laws (or comparable instruments). All liabilities of the Company are, and will be on the Closing Date, current and not in default. 12. No Conflicts. The execution and performance of this Agreement and the transactions contemplated hereby will not violate any provision of or result in a breach of or constitute a default under the Articles of Incorporation or By-Laws of the Company, or under any order, writ, injunction or decree of any court, governmental agency or arbitration tribunal, or under any contract, agreement or instrument to which the Company is a party or by which its properties may be bound, or, to the best of the Seller's knowledge and belief, under any law, statute or regulation. 13. Books and Records. The books and records of the Company are in all material respects complete and correct and to the best of the Seller's knowledge and belief, have been maintained in accordance with good business practice and reflect a true record of all meetings or proceedings of the Board of Directors and Shareholders of the Company. 14. Brokers. Neither the Company nor the Seller, except for the possible obligation of the Seller with Oppenheimer & Co., Inc., is a party to or in any way obligated under a contract or other agreement, and there are no outstanding claims against either of them, for the payment of any broker's or finder's fees in connection with the origin, negotiation, execution or performance of this Agreement. 15. Title to Shares and Authority. Each of the Seller and CMMS now has and on the Closing Date will have valid title to the Shares and the CMMS Share, respectively, and on the Closing Date will have full right, power and authority and due authorization to sell and transfer such Shares and the CMMS Share hereunder, and upon the delivery of and payment for such Shares and the CMMS Share, the Seller, with respect to the Shares, and CMMS, with respect to the CMMS Share, will transfer to the Purchaser valid title thereto, free and clear of any security interests, pledges, liens or similar encumbrances. This Agreement constitutes the valid and legally binding obligation of the Seller, enforceable in accordance with its terms. 16. Original Note. The unpaid balance of the Original Note is $8,626,007, as of the date hereof. The Original Note has been entered into in accordance with all applicable laws and there are no restrictions, governmental or otherwise, on the payment of the Original Note in accordance with its terms. The Seller has not pledged or assigned its rights under the Original Note, and on the Closing Date the Seller will have full right, power and authority to sell and assign to the Purchaser a forty-nine (49%) percent interest in and to the Original Note, free and clear of all security interests, liens and pledges. The Seller has delivered to the Purchaser a true and correct copy of the Original Note. 17. Leased Equipment. The Seller now has and on the Closing Date will have valid title to the Leased Equipment and on the Closing Date will have full right, power and authority and due authorization to sell and transfer a forty-nine (49%) percent interest in and to the Leased Equipment, the Lease Agreement and the Lease Payments payable with respect thereto, and upon delivery and payment for such interest in and to the Leased Equipment, the Lease Agreement and the Lease Payments, the Seller will transfer to the Purchaser valid title thereto, free and clear of any security interests, pledges, liens or similar encumbrances. A true and correct copy of the Lease Agreement and a list of the Leased Equipment have been delivered to the Purchaser. 18. Trademark Agreement. The Seller has not pledged or assigned its rights under the Trademark Agreement or to the Royalty, and on the Closing Date the Seller will have full right, power and authority to sell and assign to the Purchaser a forty-nine (49%) percent interest in and to proceeds from the Royalty, free and clear of all security interests, liens and pledges. Notwithstanding the foregoing, the Purchaser acknowledges that it is not acquiring, nor shall it be deemed to acquire, any ownership or other rights whatsoever in the trade names, trademark, logotypes and symbols covered by the Trademark Agreement. The Seller has delivered to the Purchaser a true and correct copy of the Trademark Agreement. 19. Technical Assistance Agreement. The Seller has not pledged or assigned its rights under the Technical Assistance Agreement or to the Technical Assistance Fee, and on the Closing Date the Seller will have full right, power and authority to sell and assign to the Purchaser a sixteen and four-tenths (16.4%) percent interest in and to the Technical Assistance Agreement and the Technical Assistance Fee, free and clear of all security interests, liens and pledges. 20. Bankroll and Reserves of the Company. As of the Closing Date, the Company shall have cash on hand for the Casinos' bankroll and reserves for all debts and other obligations of the Company in the amount of not less than $350,000 (the "Reserve Amount"). The Reserve Amount is adequate for the operation of the Casinos and the business of the Company in the ordinary course of business as heretofore conducted. The cash on hand as of the Closing Date in excess of the Reserve Amount shall be paid by the Company to Casino Magic. Such excess cash on hand to be paid to Casino Magic is approximately $321,733. 21. Disclosure. To the best of the Seller's knowledge, neither this Agreement, the Schedules attached hereto, nor any other document furnished by the Company or the Seller to the Purchaser, taken as a whole, contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained herein and therein not misleading, and except as disclosed herein or therein, there is no fact (other than matters of a general economic or a political nature which do not effect the business of the Company uniquely) known to the Seller which materially adversely effects or in the future can be reasonably expected to materially adversely effect the properties, business, operations or financial condition or prospects of the Company. 22. Representations and Warranties of the Purchaser. The Purchaser represents and warrants to the Seller that: 23. Organization, Standing and Authority of the Purchaser. The Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the State of Texas, and has full corporate power and authority to conduct its business as it is now being conducted, to enter into and carry out the provisions of this Agreement. 24. No Violation. Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will 24. violate any provision of the Articles of Incorporation or By-Laws of the Purchaser, 24. violate any provision of any agreement or other obligation to which the Purchaser is a party or by which the Purchaser is bound or to which its assets are subject, 24. violate or result in a breach of, constitute a default under, any judgment, order, decree, rule or regulation of any court, governmental agency or arbitration tribunal to which the Purchaser is subject, or 24. to the best of the Purchaser's knowledge and belief, violate any law, statute or regulation. 25. Corporate Proceedings of the Purchaser. The execution, delivery and performance of this Agreement has been authorized by the Board of Directors of the Purchaser, and this Agreement constitutes the valid and legally binding obligation of the Purchaser, enforceable in accordance with its terms. 26. Brokers. The Purchaser is not a party to or in any way obligated under a contract or other agreement, and there are no outstanding claims against it, for the payment of any broker's or finder's fees in connection with the origin, negotiation, execution or performance of this Agreement. 27. Investment. The Shares will be acquired for investment and not with a view to distribution thereof, nor with any intention of distributing or selling or otherwise disposing of the Shares. 28. Disclosure. To the best of the Purchaser's knowledge, neither this Agreement, nor any other document furnished by the Purchaser to the Seller, taken as a whole, contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained herein and therein not misleading. 29. Conditions to Obligations of the Purchaser. The obligations of the Purchaser to consummate the transaction contemplated hereby shall be subject to the satisfaction, on or before the Closing Date, of all of the following conditions unless expressly waived in writing by the Purchaser: 30. Representations and Covenants. All representations and warranties of the Seller contained in this Agreement shall be true in all material respects on and as of the Closing Date as if such representations and warranties were made on and as of such date (except to the extent any such representation or warranty is made as of a specified date), and the Seller shall have performed all agreements and covenants to be performed by it on or prior to the Closing Date, and the Purchaser shall have received a certificate dated the Closing Date, signed by the Seller, to the effect that such is the case. 31. Opinion of Counsel. The Purchaser shall have received the opinion of Robert A. Callaway, General Counsel for the Seller and the Company, dated the Closing Date, to the effect that: 32. the Company is a corporation duly organized, validly existing and in good standing under the laws of the Republic of Argentina and the Province of Neuquen and has corporate power to carry on its business as it is now being conducted; 33. the authorized capital stock and the outstanding shares of the Company are as set forth in Section 3(c) hereof, and the Shares and the CMMS Share are duly and validly issued, fully paid, non-assessable and outstanding; 34. this Agreement has been duly executed and delivered by the Seller and constitutes the valid and binding obligation of the Seller enforceable in accordance with its terms (except as otherwise limited by bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors' rights and except that such counsel need not express an opinion as to whether any covenant contained herein is specifically enforceable); 35. the CMMS Stock Purchase Agreement (as hereinafter defined) has been duly executed and delivered by CMMS and constitutes the valid and binding obligation of CMMS enforceable in accordance with its terms (except as otherwise limited by bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors' rights and except that such counsel need not express an opinion as to whether any covenant contained herein is specifically enforceable); 36. to such counsel's knowledge, after due inquiry, the transfer of the Assigned Properties from the Seller and the CMMS Share from CMMS shall vest in the Purchaser valid ownership in the Assigned Properties and the CMMS Share, free and clear of all security interests, pledges, liens, encumbrances, charges or assessments, and no other endorsement is required to transfer such ownership to the Purchaser, and such counsel is not aware of any adverse claim with respect to any Assigned Properties and the CMMS Share; 37. except as stated in such opinion or in Section 3 of this Agreement, such counsel does not know of any litigation, proceeding or governmental investigation pending or threatened against or relating to the Company or to the properties or business of the Company or against the Seller relating to the transactions contemplated by this Agreement; 38. to such counsel's knowledge, no authorization, consent or approval of any court or governmental body or authority is necessary to the validity of the transfer by the Seller of the Shares and by CMMS of the CMMS Share to the Purchaser as provided in this Agreement and in the CMMS Stock Purchase Agreement, respectively; and 39. to such counsel's knowledge, the consummation of the transaction contemplated by this Agreement or the CMMS Stock Purchase Agreement will not result in the breach of or constitute a default under the Articles of Incorporation or By-Laws of the Company, or any loan, credit or similar agreement or any court decree to which the Company, the Seller or CMMS is a party and of which such counsel has knowledge, or by which any of them or their properties may be bound. 40. Approval by Board of Directors of the Seller. The Purchaser shall have received resolutions of the Board of Directors of the Seller, certified by the Secretary or an Assistant Secretary of the Seller, approving the transaction contemplated by this Agreement. 41. No Damage or Destruction. Prior to the Closing Date, there shall not have occurred any casualty to any facility, property, equipment or inventory owned or used by the Company as a result of which either 41. the monetary amount of damage or destruction aggregates five (5%) percent or more of the aggregate book value shown on the books of account of the entire facilities, properties and equipment of the Company, or 41. the total monetary amount of damage or destruction is less than five (5%) percent of the aggregate book value shown on the books of account of the entire facilities, properties and equipment of the Company, but more than $100,000, and such loss shall not be substantially covered by valid, existing insurance underwritten by responsible insurers. 42. No Material Adverse Changes. The Seller shall have delivered to the Purchaser its certificate stating that there has been no material adverse change (other than as permitted or contemplated under this Agreement) in the business, operations, financial condition or properties of the Company since the Financial Statement Date. 43. Absence of Litigation. No litigation, governmental action, insolvency, receivership or other proceeding shall have been threatened, asserted or commenced with respect to the transaction contemplated herein. 44. Shareholders' Agreement. The Purchaser and the Seller shall have entered into a Shareholders' Agreement in substantially the form of Exhibit "A" attached hereto. 45. Purchase of CMMS Share. The Purchaser and CMMS shall have entered into a Stock Purchase Agreement (the "CMMS Stock Purchase Agreement") whereby the Purchaser shall have acquired the CMMS Share. 46. Conditions to Obligations of the Seller. The obligations of the Seller to consummate the transaction contemplated hereby shall be subject to the satisfaction, on or before the Closing Date, of all of the following conditions, unless expressly waived in writing by the Seller: 47. Representations and Covenants. All representations and warranties of the Purchaser contained in this Agreement shall be true in all material respects on and as of the Closing Date as if such representations and warranties were made on and as of such date and the Purchaser shall have performed all agreements and covenants to be performed by it on or prior to the Closing Date, and the Seller shall have received a certificate dated the Closing Date, signed by the President or a Vice President of the Purchaser, to the effect that such is the case. 48. Opinion of Counsel. The Seller shall have received the opinion of T. J. Falgout, III, General Counsel for the Purchaser, dated the Closing Date, to the effect that: 49. the Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the State of Texas and has corporate power to carry on its business as it is now being conducted; 50. this Agreement has been duly authorized, executed and delivered by the Purchaser, and (assuming valid execution and delivery by the other parties hereto or thereto) is, or will be upon such execution, the valid and binding obligation of the Purchaser in accordance with its terms (except as otherwise limited by bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors' rights, and except that such counsel need not express an opinion as to whether any covenant contained herein is specifically enforceable); and 51. to such counsel's knowledge, the consummation of the transaction contemplated by this Agreement will not result in the breach of or constitute a default under the Articles of Incorporation or By-Laws of the Purchaser, or any loan, credit or similar agreement or any court decree to which the Purchaser is a party or by which the Purchaser or its properties may be bound. 52. Certified Resolutions. The Seller shall have received resolutions of the Board of Directors of the Purchaser, certified by the Secretary or an Assistant Secretary of the Purchaser, authorizing the execution, delivery and performance of this Agreement. 53. Shareholders' Agreement. The Purchaser and the Seller shall have entered into a Shareholders' Agreement substantially in the form of Exhibit "A" attached hereto. 54. The Closing. The execution and delivery of this Agreement and the instruments, certificates and other documents required hereunder (the "Closing") shall take place at the offices of Crown Casino Corporation, 4040 North MacArthur Boulevard, Suite 100, Irving, Texas, at 10:00 a.m. local time on May 30, 1997, or at such subsequent time and day or other location as may be mutually agreed by the Purchaser and the Seller. The date and time of such execution and delivery is herein called the "Closing Date". On the Closing Date, against delivery of the Purchase Price pursuant to Section 2 hereof, 54. certification of ownership and a copy of the Company's stock register representing the Purchaser's ownership of the Shares and the CMMS Share shall be delivered by the Company, to the Purchaser, 54. the Original Note and the unpaid principal and accrued interest thereon shall be evidenced by two (2) promissory notes (the "New Notes"), one payable to the Seller and one payable to the Purchaser, in the amount of 51% and 49%, respectively, of such unpaid balance, which New Notes shall be substantially the same except for the principal amount, and 54. a bill of sale and assignment conveying to the Purchaser the Purchaser's interest in and to (i) the Leased Equipment, the Lease Agreement and the Lease Payments, (ii) the Technical Assistance Agreement and the Technical Assistance Fee, and (iii) the Royalty. The New Notes referenced in (b) above and bill of sale and assignment referenced in (c) above shall be in substantially the form attached hereto as Exhibits "B" and "C", respectively. 55. Nature and Survival of Representations and Warranties. 56. Nature of Statements. All statements contained in any schedule or any certificate or other instrument delivered by or on behalf of the Seller or the Purchaser pursuant to this Agreement or in connection with the transactions contemplated hereby shall be deemed representations and warranties made by the Seller or the Purchaser, as the case may be. 57. Survival of Representations and Warranties. All representations, warranties, covenants, agreements and undertakings contained herein or in any Schedule, certificate or other document shall remain operative and in full force and effect, and shall survive the Closing and the delivery of all consideration and documents pursuant to this Agreement, and shall continue in effect for a period of four (4) years after the Closing Date and, as to representations made by the Seller concerning or affecting any tax liability of the Company, until a date which is six (6) months after the statute of limitations has run against the applicable taxing authorities; provided, however, that any such representation, warranty, covenant, agreement or undertaking as to which a bona fide claim shall have been asserted during such survival period shall continue in effect until such time as such claim shall have been resolved in accordance with the terms of this Agreement. 58. Indemnification by Seller and Related Matters. 59. Indemnification by Seller. The Seller agrees to defend, indemnify and hold harmless the Purchaser and its successors and assigns, from, against and in respect of any and all loss or damage resulting from: 60. the breach by the Seller of any of the warranties, representations, covenants, agreements or undertakings contained herein; 61. the breach by CMMS of any of the warranties, representations, covenants, agreements or undertakings contained in the CMMS Stock Purchase Agreement; and 62. any liability arising out of any and all actions, suits, proceedings, claims, demands, judgments, costs and expenses (including reasonable legal and accounting fees) incident to any of the foregoing (collectively, the "Losses"). 63. Procedure for Making Claims. If and whenever the Purchaser desires to claim indemnification by the Seller pursuant to the provisions of this Section 9, the Purchaser shall promptly deliver to the Seller a certificate signed by the Chairman of the Board, President or Vice President of the Purchaser (the "Notice of Claim") 63. stating that the Purchaser, its successors and assigns, has paid or properly accrued losses, damages or expenses in an aggregate stated amount to which the Purchaser is entitled to indemnification pursuant to this Section 9, provided, however, such notice shall be given prior to the payment of an indemnity item if reasonable in light of the circumstances causing, or threatening to cause, a loss, and 63. specifying the individual items of loss, damage or expense included in the amount so stated, the date each such item was paid or properly accrued and the nature of the misrepresentation, breach of warranty or claim to which such item is related, provided, however, failure to notify the Seller shall relieve the Seller from liability only if it is prejudiced thereby. The Seller shall have the right to defend any claim by a third party at the expense of the Seller. The Purchaser shall provide to the Seller prompt and complete disclosure of all pertinent information in the possession of or available to the Purchaser and shall extend full and timely assistance in the cooperation in the investigation of the defense of the claim, suit or action, with respect to which such indemnification is claimed. The Seller, in the defense of any such suit, action or proceeding, shall not consent to the entry of any judgment or decree except with the written consent of the Purchaser, nor enter into any settlement (except the written consent of the Purchaser) which does not include as an unconditional term thereof the giving by the claimant or plaintiff to the Purchaser of a release from every liability in respect of such claim, suit, action or proceeding. In any defense of any claim by a third party, the Purchaser shall have the right (but shall not be obligated) to participate in such defense through counsel of its own selection and at its own expense. 64. Head Tax. The Seller agrees to pay to the Company, directly, or if not paid by the Seller directly, on demand by the Purchaser, out of monies owed to the Seller under the Seller's New Note, the Lease Payments, the Technical Assistance Fee and the Royalty, an amount equal to the unpaid Head Tax for all periods prior to the Closing Date, if and when paid by the Company. To the extent the Company pays such Head Tax and subsequently receives a refund thereof or credit or offset therefor, the Seller shall be reimbursed by the Company for the amount paid to the Company by the Seller pursuant to this Section 9(c). 65. Customs Dispute. The Seller agrees to pay the Company, directly, or if not paid by the Seller directly, on demand by the Purchaser, out of monies owed to the Seller under the Seller's New Note, the Lease Payments, the Technical Assistance Fee and the Royalty, an amount equal to the fine, penalty or other assessment (the "Customs Assessment") imposed upon, and paid by, the Company, arising out of the Company's dispute with the Argentinean customs officials regarding the imported gaming equipment. To the extent the Company pays the Customs Assessment and subsequently receives a refund thereof or credit or offset therefor, the Seller shall be reimbursed by the Company for the amount paid to the Company by the Seller pursuant to this Section 9(d). 66. Indemnification by the Purchaser and Related Matters. 67. Indemnification by the Purchaser. The Purchaser agrees to defend, indemnify and hold harmless the Seller and its successors and assigns, from, against and in respect of any and all loss or damage resulting from: 68. the breach by the Purchaser of any of its warranties, representations, covenants, agreements or undertakings contained herein; and 69. any liability arising out of any and all actions, suits, proceedings, claims, demands, judgments, costs and expenses (including reasonable legal and accounting fees) incident to any of the foregoing (collectively, the "Losses"). 70. Procedure for Making Claims. If and whenever the Seller desires to claim indemnification by the Purchaser pursuant to the provisions of this Section 10, the Seller shall promptly deliver to the Purchaser a certificate signed by the Seller (the "Notice of Claim") 70. stating that the Seller, its successors or assigns, have paid or properly accrued losses, damages or expenses in an aggregate stated amount to which the Seller is entitled to indemnification pursuant to this Section 10, and 70. specifying the individual items of loss, damage or expense included in the amount so stated, the date each such item was paid or properly accrued and the nature of the misrepresentation, breach of warranty or claim to which such item is related, provided, however, failure to notify the Purchaser shall relieve the Purchaser from liability only if it is prejudiced thereby. The Purchaser shall have the right to defend any claim by a third party at the expense of the Purchaser. The Seller shall provide to the Purchaser prompt and complete disclosure of all pertinent information in the possession of or available to the Seller and shall extend full and timely assistance in the cooperation in the investigation of the defense of the claim, suit or action, with respect to which such indemnification is claimed. The Purchaser, in the defense of any such suit, action or proceeding, shall not consent to the entry of any judgment or decree except with the written consent of the Seller nor enter into any settlement (except the written consent of the Seller) which does not include as an unconditional term thereof the giving by the claimant or plaintiff to the Seller of a release from every liability in respect of such claim, suit, action or proceeding. In any defense of any claim by a third party, the Seller shall have the right (but shall not be obligated) to participate in such defense through counsel of its own selection and at its own expense. 71. Expenses. The Seller and the Purchaser shall pay their own expenses (including without limitation counsel and accounting fees and expenses) incident to the preparation and carrying out of this Agreement and the consummation of the transactions contemplated hereby. 72. Notices. All notices, demands and requests which may be given or which are required to be given by either party to the other, and any exercise of a right of termination provided by this Agreement, shall be in writing and shall be deemed effective when either: 72. personally delivered to the intended recipient; 72. sent by certified or registered mail, return receipt requested, addressed to the intended recipient at the address specified below; 72. delivered in person to the address set forth below for the party to which the notice was given; 72. deposited into the custody of a nationally recognized overnight delivery service such as Federal Express Corporation, Emery or Purolator, addressed to such party at the address specified below; or 72. sent by facsimile, telegram or telex, provided that receipt for such facsimile, telegram or telex is verified by the sender and followed by a notice sent in accordance with one of the other provisions set forth above. Notices shall be effective on the date of delivery or receipt, of, if delivery is not accepted, on the earlier of the date that delivery is refused or three (3) days after the date the notice is mailed. For purposes of this Paragraph, the addresses of the parties for all notices are as follows (unless changes by similar notice in writing are given by the particular person whose address is to be changed): 73. if to the Seller, to Casino Magic Corp., 711 Casino Magic Drive, Bay St. Louis, MS 39530; Attention: Marlin F. Torguson, Chairman of the Board; Fax (601) 467-7998; With a copy to: Robert A. Callaway, General Counsel, Casino Magic Corp., 711 Casino Magic Drive, Bay St. Louis, MS 39530; Fax (601) 467-3407; 74. or if to the Purchaser, to Crown Casino Corporation; 4040 North MacArthur Boulevard, Suite 100, Irving, Texas 75038; Attention: Edward R. McMurphy, President; Fax (972) 719-4466; With a copy to: T. J. Falgout, III, Executive Vice President and General Counsel, 4040 North MacArthur Boulevard, Suite 100, Irving, Texas 75038; Fax (972) 719-4466. Any party hereto may designate a different address by written notice given to the other parties. 75. Satisfaction of Conditions; Termination. 76. Best Efforts to Satisfy Conditions. The Seller agrees to use its best efforts to bring about the satisfaction of the conditions specified in Section 5 hereof, and the Purchaser agrees to use its best efforts to bring about the satisfaction of the conditions specified in Section 6 hereof. 77. Termination. This Agreement may be terminated, without liability on the part of any party hereto to any other party hereto, by: 78. the Board of Directors of the Purchaser, if a material default shall be made by the Seller in the observance or in the due and timely performance by the Seller of any of the covenants of the Seller herein contained, or if there shall have been a material breach by the Seller of any of the warranties and representations of the Seller herein contained, or if the conditions of this Agreement to be complied with or performed at or before the Closing shall not have been complied with or performed at the time required for such compliance or performance and such non-compliance or non-performance shall not have been waived by the Purchaser; or 79. the Seller, if a material default shall be made by the Purchaser in the observance or in the due and timely performance by the Purchaser of any of the covenants of the Purchaser herein contained, or if there shall have been a material breach by the Purchaser of any of its warranties and representations herein contained, or if the conditions of this Agreement to be complied with or performed by the Purchaser at or before the Closing shall not have been complied with or performed at the time required for such compliance or performance and such non-compliance or non-performance shall not have been waived by the Seller. In the event of termination by the Purchaser or the Seller as provided above, written notice shall forthwith be given to the other party. 80. Miscellaneous. 81. Assignment. This Agreement may not be assigned by any party hereto without the prior written consent of the other parties, provided, however, the Purchaser shall have the right at any time prior to Closing to assign this Agreement to a corporation wholly owned by the Purchaser, so long as the Purchaser, by written agreement acceptable to the Seller, agrees to guarantee the performance by such assignee of the terms and provisions hereof. Subject to the foregoing, this .Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns. 82. Section and Paragraph Headings. The Section and Paragraph headings of this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 83. Amendment. This Agreement may be amended only by an instrument in writing executed by the parties hereto. 84. Entire Agreement. This Agreement and the exhibits, Schedules, certificates and documents referred to herein constitute the entire agreement of the parties, and supersede all understandings with respect to the subject matter hereof. 85. Public Announcements. No publication and/or press release of any nature shall be issued pertaining to this Agreement or the transaction contemplated hereby without the prior written approval of the Purchaser and the Seller, except as may be required by law. 86. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument. 87. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS. 88. Arbitration. All disputes or claims arising out of or in any way relating to this Agreement shall be submitted to and determined by final and binding arbitration under the rules of the American Arbitration Association. Arbitration proceedings may be initiated by any party to this Agreement upon notice to the other party and to the American Arbitration Association and shall be conducted by three (3) arbitrators under the rules of the American Arbitration Association in Dallas, Texas; provided, however, that the parties may agree following the giving of such notice to have the arbitration proceedings conducted with a single arbitrator. The notice must specify in general the issues to be resolved in any such arbitration proceeding. The arbitrators shall be selected by agreement of the parties to the arbitration proceeding from a list of five (5) or more arbitrators proposed to the parties by the American Arbitration Association or may be persons not on such list as agreed to by the parties to such arbitration. If the parties to the arbitration proceedings fail to agree on one (1) or more of the persons to serve as arbitrators within fifteen (15) days after delivery to each party hereto of the list as proposed by the American Arbitration Association, then at the request of any such party to such proceeding, such arbitrators shall be selected at the discretion of the American Arbitration Association. Where the arbitrators shall determine that an arbitration proceeding was commenced by a party frivolously or without a basis or primarily for the purpose of harassment or delay, the arbitrators may assess such party the cost of such proceedings including reasonable attorneys' fees of any other party. In all other cases, each party to the arbitration proceeding shall bear its own costs and its pro-rata share of the fees and expenses charged by the arbitrators and the American Arbitration Association in connection with any arbitration proceeding. Any award or equitable relief granted by the arbitrators shall be enforced in accordance with the provisions of Texas Statutes. Notwithstanding the foregoing, nothing herein will prevent a party from seeking and obtaining equitable relief from a court of competent jurisdiction pending a final decision of the arbitrators and the proper filing of such decision with such court, in which event, each of the parties hereto (i)consents and submits to the jurisdictionof the Courts of the State of Texas and of the Courts of the United States for a judicial district within the territorial limits of the State of Texas for all purposes of this Agreement, including, without limitation, any action or proceeding instituted for the enforcement of any right, remedy, obligation or liability arising under or by reason hereof; and (ii) consents and submits to the venue of such action or proceeding in the City of Dallas and County of Dallas, Texas (or such judicial district of a Court of the United States as shall include the same). IN WITNESS WHEREOF, this Agreement has been duly executed by the parties as of the date and year first above written. PURCHASER: CROWN CASINO CORPORATION By: /s/ Edward R. McMurphy Edward R. McMurphy, President SELLER: CASINO MAGIC CORP. By: /s/ Robert A. Callaway Robert A. Callaway, Secretary EX-10 3 BUY SELL AGREEMENT CRESENT CITY QUEEN 6 BUY - SELL AGREEMENT CASINO MAGIC OF LOUISIANA, CORP. ("Seller") whose office address is 300 Riverside Drive, Bossier City, Louisiana 71111 and Hollywood Park, Inc. ("Buyer") whose mailing address is Box 369, Inglewood, CA 90306-0369, have and do hereby agree as follows: Seller agrees to sell to Buyer and Buyer agrees to purchase from Seller, the Vessel, Crescent City Queen, a description of which is attached hereto as Schedule "A" ("Vessel"), on the sooner of 5:00 p.m. Central Standard Time, October 10, 1997 or within forty eight (48) hours of Seller's notification to Buyer that each of the Conditions Precedent to Closing (as hereinafter set forth) have been satisfied (the "Closing'). Title to the Vessel shall not pass to Buyer until payment of the Purchase Price (as hereinafter defined) is received by Seller at Closing. PURCHASE PRICE The purchase price for the Vessel shall be ELEVEN MILLION SEVEN HUNDRED AND 00/100 ($11,700,000) DOLLARS ("Purchase Price") and shall include all her machinery, engines, equipment, appurtenances, stores and spare parts and does not include any gaming related equipment. Upon execution of this Agreement, Buyer will pay to Seller ONE MILLION AND 00/100 ($1,000,000) DOLLARS (the "Deposit"). At the time of Closing, all of the Deposit will be credited against the Purchase Price. If Closing does not occur as specified above, Seller may terminate this Agreement and shall retain the Deposit as liquidated damages so long as each condition precedent to Closing has been satisfied. CONDITIONS PRECEDENT TO CLOSING 1. Seller shall deliver the Vessel to Buyer in its current condition, ordinary wear and tear excepted. 2. Seller shall deliver to Buyer good title to the Vessel which is free from all encumbrances, leases, maritime liens and/or debts of any kind whatsoever, including but not limited to any preferred ship mortgage. 3. Seller shall deliver to Buyer a valid bill of sale with warranty of title to transfer ownership of the Vessel to Buyer. 4. Seller shall provide Buyer with a corporate officer's certificate authorizing Seller to enter into and consummate the sale of the Vessel to Buyer. 5. Receipt by Seller of any approvals necessary to transfer the Vessel from Seller to Buyer, including but not limited to the Louisiana Gaming Control Board. DELIVERY Seller agrees to deliver possession of the Vessel to Buyer at Closing in New Orleans, Louisiana. At or before the time of Delivery, Seller shall provide to Buyer the Vessel's plans, as builts, schematics, wiring specifications, low voltage wiring diagrams, certified evacuation and safety plan, certified periodic test procedures and all other plans and blueprints related to the Vessel that were provided to Seller at the time Seller acquired the Vessel. Seller makes no representation or warranty as to the accuracy of such documents or drawings. Seller shall deliver the Vessel to Buyer at Closing "as is and where is". Except with regard to title, Seller makes NO WARRANTY of any kind whatsoever, whether expressed or implied, including without limitation, any implied warranty of merchantability, quality, condition, fitness for any particular purpose, seaworthiness, or against any redhibitory vices, or any other vices or defects, hidden, latent or otherwise, all such warranties being expressly WAIVED by Buyer. At the time of Delivery, all risk of loss to the Vessel shall pass to Buyer. Seller will use all reasonable good faith efforts to assist Buyer in obtaining any necessary certificates for the Vessel, including but not limited to a Certificate of Inspection; however, this is not a condition for Closing and all costs and expenses associated with obtaining any such certificates shall be the responsibility of Buyer. Furthermore, Seller shall not be required to provide at Delivery a Certificate of Documentation, FCC License, Society Tonnage, Interim Class, Hull Classification and Machinery Classification Certificate (if applicable) and/or their regulatory equivalent (if applicable) at the time of Delivery; however, Seller shall provide such certificates and documents, if any, that are in Seller's possession within a reasonable time after Delivery, provided, however, the Seller's failure to deliver said Certificates and Documents shall not constitute a breach of this Agreement by Seller, nor shall such failure constitute grounds for Buyer not to close this transaction. MAINTENANCE AND OPERATION During the period of time following receipt of the Deposit by Seller until Closing (the "Period"), the Vessel shall be in the full possession and, other than sale to a third party, at the absolute disposal of Seller for all purposes and under its complete control in every respect. Seller shall, during said Period, take all reasonable steps to maintain the Vessel, her machinery, engines, equipment, appurtenances and spare parts in their current condition, ordinary wear and tear excepted. INSPECTION During the Period, Buyer or its designee shall have the right at any reasonable time to inspect or survey the Vessel to satisfy itself that the Vessel is being properly maintained. Any and all costs or expenses associated with such inspection shall be the responsibility of and be paid by Buyer and Buyer agrees to indemnify, defend and hold harmless Seller any affiliate of Seller against any injuries, cost, or expenses arising from such inspection or survey. TERMINATION This Agreement will terminate: 1. In the event the Vessel is an actual or constructive total loss during the Period; 2. In the event Buyer fails to pay the Deposit; 3. In the event Harrah's Indiana Casino Corporation ("Harrah's") exercises its right to purchase the Vessel pursuant to Paragraph 21 of the Vessel Purchase Agreement dated August 15, 1997 by and between Casino Magic of Louisiana, Corp. and Crawford County Casino Corp. ("Crawford County Agreement"). If this Agreement terminates pursuant to items No. 1 or 3 above, the Deposit will be promptly refunded to Buyer. TAXES It is understood and agreed by Seller and Buyer that the sale of Vessel by Seller constitutes an isolated and occasional sale by Seller, and that no sale, use, transfer or other tax(es) should be payable in connection therewith: however, if any such tax(es) is payable, Buyer shall pay such tax(es) and shall indemnify and hold harmless Seller for any such tax(es). Seller shall be responsible for any ad valorem property taxes applicable to the Vessel prior to Delivery of the Vessel to Buyer, and Buyer will be responsible for all ad valorem property taxes applicable to the Vessel after Delivery. NOTICES Unless otherwise provided in this Agreement, all payments, notices and communications with respect to this Agreement shall be made to Seller at 711 Casino Magic Drive, Bay St. Louis, Mississippi 39520 and to Buyer at Box 369, Inglewood, CA 90306-0369. CONSIDERATION Except as set forth in this Agreement, no consideration has been paid to Seller by Buyer prior to the date hereof and no consideration will be paid to Seller by Buyer until Closing. GOVERNING LAW This Agreement shall be governed by the laws of the United States of America and the State of Mississippi and each party to this Agreement agrees and acknowledges that they are subject to the jurisdiction of the courts in Mississippi for the purpose in resolving any dispute arising under this Agreement. SPECIFIC PERFORMANCE If either Seller or Buyer should default on any of its respective obligations under this Agreement, the non-defaulting party, in addition to and not in derogation of any other of its rights (including Seller's right to certain liquidated damages under the Purchase Price provision), may sue for specific performance of this Agreement. Furthermore, if any legal action or other proceeding is brought for the enforcement of this Agreement or any provision hereof, or because of an alleged dispute, breach, default or misrepresentation in connection with any of the provisions of this Agreement, the prevailing party shall be entitled to recover reasonable attorneys' fees and other reasonable costs incurred in such action or proceeding, in addition to any other relief to which such party shall be entitled. PRIOR AGREEMENTS This Agreement supersedes all prior agreements and constitutes the entire agreement between the parties concerning the subject matter hereof. AMENDMENTS During the Period, this Agreement may not by amended or modified except by a written instrument executed by Seller and Buyer. SEVERABILITY The provisions of the Agreement are separate and severable. If any provision, item or application of this Agreement shall be deemed invalid in whole or in part, such invalidity shall not affect the other provisions, items, or applications of this Agreement which can be given effect without the invalid provision, item or application. LICENSEE Under no circumstance shall any term or condition of this Agreement be construed to give Buyer any ownership, interest and/or control, either actual or constructive, in the Seller, or any of its subsidiaries or its parent corporation. TIME OF THE ESSENCE Time is expressly declared to be of the essence in this Agreement. Except as provided below, if Closing does not occur as specified herein, this will constitute an event of default and the non-defaulting party may elect to terminate this Agreement if it so desires and/or pursue any contractual or legal remedies it may have. Closing shall be extended if the Louisiana Gaming Control Board or any other third party whose approval is necessary for Closing has not rendered a decision by October 10, 1997 on any approvals relative to this Agreement. In such an event, Closing will occur within forty eight (48) hours following receipt of any such approval so long as any such approval is given by December 31, 1997. If such approval has not been given by December 31, 1997, either party may give notice to terminate the Agreement to the other and Buyer's deposit shall be returned to Buyer. CITIZENSHIP Buyer warrants to Seller that it is now, and will remain until Closing, a citizen of the United States of America as defined in 46 U.S.C. 802. LOUISIANA GAMING CONTROL BOARD The effectiveness of this Agreement may be subject to the approval by the Louisiana Gaming Control Board. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives on this 10th day of September, 1997. WITNESSES: CASINO MAGIC OF LOUISIANA, CORP. /s/ Stephanie R. Murray (Seller) /s/ Donna Negrotto BY: /s/ Robert A. Callaway TITLE: Secretary IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives on this 10th day of September, 1997. WITNESSES: HOLLYWOOD PARK, INC. /s/ Anita N. Doran (Buyer) /s/ Alvin G. Segel BY: G. Michael Finnigan TITLE: CFO EXHIBIT A OFFICIAL NUMBER GROSS HAILING NAME TONNAGE PORT Crescent City Queen 1028319 10507 New Orleans, Louisiana EX-27 4 FINANCIAL DATA SCHEDULE
5 9-MOS DEC-31-1997 SEP-30-1997 37496686 5767 9006307 0 1060853 46525549 309853595 53488529 367746580 48448985 253484013 0 0 357221 66727346 367746580 198233557 198233557 0 180184559 (1501091) 0 23703909 (4153820) (1935000) 18048998 0 0 0 (2218818) (.06) (.06)
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