-----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, F03CEy1GoOP/lIdDQmRGI4GVgYOt/czfJuyaKVgxiV8JcWGefdrz6hEiMXV4XSWt 74MBqPxDVUypNoLJq1DpdA== 0000911147-00-000004.txt : 20000314 0000911147-00-000004.hdr.sgml : 20000314 ACCESSION NUMBER: 0000911147-00-000004 CONFORMED SUBMISSION TYPE: 10KSB/A PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000313 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CENTURY CASINOS CENTRAL INDEX KEY: 0000911147 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS AMUSEMENT & RECREATION [7990] IRS NUMBER: 841271317 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB/A SEC ACT: SEC FILE NUMBER: 000-22900 FILM NUMBER: 567837 BUSINESS ADDRESS: STREET 1: 200-220 EAST BENNETT CITY: CRIPPLE CREEK STATE: CO ZIP: 80813 BUSINESS PHONE: 719 689 0333 MAIL ADDRESS: STREET 1: 200-220 EAST BENNETT AVENUE CITY: CRIPPLE CREEK STATE: CO ZIP: 80813 FORMER COMPANY: FORMER CONFORMED NAME: CENTURY CASINOS INC DATE OF NAME CHANGE: 19940802 FORMER COMPANY: FORMER CONFORMED NAME: ALPINE GAMING INC DATE OF NAME CHANGE: 19930824 10KSB/A 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-KSB-A AMENDMENT NO. 1 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended: December 31, 1999 Commission File No 0-22290 --------------- CENTURY CASINOS, INC. ----------------------- (Name of small business issuer in its charter) Delaware 84-1271317 ----------------------- ---------------------------- (State or other jurisdiction of (I.R.S. Employer Identification incorporation or organization) No.) 200 - 220 E. Bennett Ave., Cripple Creek, CO 80813 ---------------------------------------------------- (Address of principal executive offices) (Zip code) (719) 689-9100 --------------- (Issuer's telephone number, including area code) Securities Registered Pursuant to Section 12(b) of the Exchange Act: None. Securities Registered Pursuant to Section 12(g) of the Exchange Act: Common Stock, $.01 Par Value, and 1994 Class I Warrants ------------------------------------------------------- (Title of classes) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 [ ] Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form and no disclosure will be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [ X ] State the issuer's revenues for its most recent fiscal year: $23,584,171 The aggregate market value of the voting common stock held by non-affiliates of the Registrant on February 25, 2000, was approximately $11,073,000 based upon the average of the reported closing bid and asked price of such shares on Nasdaq for that date. As of February 25, 2000, there were 14,486,889 shares of common stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE: Part III incorporates by reference from the Registrant's Definitive Proxy Statement for its 2000 Annual Meeting of Stockholders to be filed with the Commission within 120 days of December 31, 1999. This Amendment includes all information required by Form 10-KSB, as certain required information was unintentionally omitted from the Registrant's previously filed Form 10-KSB. 1 Item 1. Business. - ------- -------- GENERAL Century Casinos, Inc. and its subsidiaries (the "Company"), own and operate a limited-stakes gaming casino in Cripple Creek, Colorado, manage a casino in the Marriott Hotel in Prague, Czech Republic, and regularly pursue gaming opportunities internationally and in the United States. Prior to July 1, 1996, the Company's operations in Cripple Creek consisted of Legends Casino ("Legends"), which the Company had acquired on March 31, 1994, through a merger with Alpine Gaming, Inc. ("Alpine"). On July 1, 1996, the Company acquired the net assets of Gold Creek Associates, L.P. ("Gold Creek"), the owner of Womack's Saloon & Gaming Parlor ("Womacks"), which was adjacent to Legends. Following the acquisition of Womacks, both properties were renovated to facilitate operation and marketing of the combined properties as one casino under the name "Womacks/Legends Casino." The Company's operating revenue for 1999 and 1998 was derived principally from its casino operations in Cripple Creek. See the Consolidated Financial Statements and the notes thereto included herein. The Company was formed in 1992 to acquire ownership interests in, and to obtain management contracts with respect to, gaming establishments. The Company, formerly known as Alpine, is a result of a business combination completed on March 31, 1994, pursuant to which Century Casinos Management, Inc. ("Century Management") shareholders acquired approximately 76% of the then issued and outstanding voting stock of the Company, and all officer and board positions of the Company were assumed by the management team of Century Management. Effective June 7, 1994, the Company reincorporated in Delaware under the name "Century Casinos, Inc." Because the Company is the result of this transaction, the Company's business has been combined with that of Century Management, and references herein to the Company refer to the combined entities, unless the context otherwise requires. Century Management was founded in 1992 by a team of career gaming executives who had worked primarily for an Austrian gaming company that owned and operated casinos throughout the world. These persons held the positions of chief executive officer, deputy to the chief executive office and managing director. Information contained in this Form 10-KSB contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which can be identified by the use of words such as "may," "will," "expect,""anticipate," "estimate" or "continue," or variations thereon or comparable terminology. In addition, all statements, other than statements of historical facts, that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future, and other such matters, are forward-looking statements. The future results of the Company may vary materially from those anticipated by management, and may be affected by various trends and factors, which are beyond the control of the Company. These risks include the competitive environment in which the Company operates, the Company's dependence upon the Cripple Creek, Colorado gaming market, the effects of governmental regulation and other risks described herein. 2 PROPERTY AND PROJECT DESCRIPTIONS WOMACKS/LEGENDS CASINO, CRIPPLE CREEK, COLORADO. On July 1, 1996, the Company purchased substantially all of the assets, and assumed substantially all of the liabilities, of Gold Creek, the owner of Womacks in Cripple Creek, Colorado. Following the Company's acquisition of Gold Creek, the Womacks property was consolidated with the Company's Legends Casino, and the combined properties have been operated and marketed since then as one casino under the name "Womacks/Legends Casino." Management implemented certain consolidation, expansion and capital improvement programs. The Company created openings in the common walls in order to open up and integrate the gaming areas of Legends and Womacks; expanded the existing player tracking system of Womacks to include all of the Legends gaming devices; added and promoted gaming activities on second floor areas; made general interior enhancements; and installed additional gaming devices and replaced older generation equipment. Womacks/Legends Casino is located at 200 to 220 East Bennett Avenue in Cripple Creek, Colorado. The lots comprising 200 to 210 East Bennett Avenue are owned by wholly-owned subsidiaries of the Company and are collateralized by a first mortgage held by Wells Fargo Bank. See Note 5 to the Consolidated Financial Statements for further information. The Company holds a leasehold interest in the real property and improvements located at 220 East Bennett Avenue. An unaffiliated third party, as fee owner of the property, granted first and second deeds of trust for the benefit of Park State Bank ("Park") and Community Banks of Colorado Cripple Creek ("Community"), respectively. The third party then leased the property to Teller Realty, Inc. ("Teller") and granted to Teller an option to acquire the fee interest in the property. Teller subsequently executed a sublease to the property with Gold Creek, and granted to Gold Creek a suboption to purchase the property through Teller's purchase option. The Company's wholly-owned subsidiary which purchased the assets of Gold Creek, WMCK Acquisition Corp. ("WMCK"), has executed separate subordination, non-disturbance and attornment agreements with each of Park and Community, pursuant to which WMCK has agreed that its interest in the sublease is subordinate to the liens arising out of the deeds of trust in the fee estate in favor of Park and Community. In return, Park and Community have each agreed (i) not to disturb WMCK's possessory rights in and to the property, and (ii) to honor the sublease and suboption, should either foreclose on their respective lien, so long as WMCK is not in default under the sublease, and so long as WMCK attorns to Park, Community or any purchaser at a foreclosure. The sublease, as assigned to WMCK, provides for monthly rental payments of $16,000, and expires on June 20, 2005 unless terminated earlier by WMCK with 12 months' notice. The suboption may be exercised at the expiration of the sublease at an exercise price of $1,500,000. Teller, the third party, Gold Creek and WMCK have executed a four-party agreement evidencing the assignment of the sublease and suboption, as well as the consent to these assignments. None of the above entities other than WMCK is affiliated with the Company. In June 1998, the Company acquired 22,000 square feet of land (the "Hicks Property") from an unaffiliated third party. The property, which is zoned for gaming, is adjacent to Womacks/Legends Casino. A partially-completed building structure that occupied a portion of the land was subsequently razed, and the entire property has been improved to provide the first paved customer parking spaces in the Cripple Creek market. The purchase price of $3.6 million was financed through the Company's revolving credit facility with Wells Fargo Bank. 3 Womacks/Legends Casino currently has approximately 608 slot and video devices and eight gaming tables with the potential to add approximately 60 gaming positions without conducting any substantial construction. Womacks/Legends Casino has 150 feet of frontage on Bennett Avenue, the main gaming thoroughfare in Cripple Creek, and 110 feet of frontage on Second Street, with approximately 40,000 square feet of floor space. In the fourth quarter of 1999, the Company began construction of a two-story building in Cripple Creek, which is expected to be completed in the second quarter of 2000. The building, with an estimated total cost of $900,000, will house the Company's corporate headquarters and "The Womacks Center - Cripple Creek." Located next to the Womacks/Legends Casino, the 500-seat Womacks Center is the first of its kind in Cripple Creek and is surrounded by parking lots controlled by the Company. Under the terms of an agreement with the City of Cripple Creek, the City will operate and market the center for its own account and will schedule meetings, conventions, shows and other special events on a year-round basis. Management believes that, in addition to providing an adequate number of hotel rooms, an integral component in attracting gaming patrons to Cripple Creek is the availability of adequate, nearby parking spaces. Management believes that it has secured or will be able to secure adequate parking for the operations of Womacks/Legends Casino. The Company presently owns or leases several hundred parking spaces, with an additional 100 spaces becoming available with the impending purchase of two nearby parcels of land in the second quarter of 2000. In 1997, the Company exercised its purchase option to acquire three lots (formerly known as the "Wright Property"), consisting of 8,250 square feet of land across the street from Womacks/Legends Casino, for $785,000 in cash. This acquisition provides the Company with 30 additional parking spaces. The Company leases 99 contiguous parking spaces from the City of Cripple Creek. Annual rent payments total $90,000 and the lease agreement, as amended on February 17, 2000, expires on May 31, 2010. The agreement contains a purchase option whereby the Company may purchase the property for $3.25 million, less cumulative lease payments, at any time during the remainder of the lease term. The Company has paved the property and currently uses it for customer parking. In March 1999, the Company entered into a purchase option agreement for a piece of property, located in Cripple Creek across Bennett Avenue from its Womacks/Legends Casino. The agreement, as amended in February 2000, provides for an option period through March 31, 2004 and an exercise price of $1.5 million, less 50% of cumulative option payments through the exercise date. In November 1999, the Company entered into a contract to purchase two parcels of land located near the Womacks/Legends Casino for $1.85 million. The purchase is expected to be completed in the second quarter of 2000. The two parcels will provide an estimated additional 100 parking spaces for casino patrons. 4 CASINO MILLENNIUM, PRAGUE, CZECH REPUBLIC In January 1999, the Company reached a 20-year definitive agreement with Casino Millennium a.s., a Czech company, and with B.H. Centrum a.s., a Czech subsidiary of Bau Holding AG, one of the largest construction and development companies in Europe, to operate a casino in the five-star Marriott Hotel in Prague, Czech Republic. The Company provides casino management services in exchange for 10% of the casino's gross revenue, and has provided gaming equipment for 45% of the casino's net profit. The hotel and casino opened in July 1999. In January 2000, the Company entered into a memorandum of agreement to either acquire a 50% ownership interest in Casino Millennium a.s. or to form a new joint venture with B.H. Centrum a.s., which joint venture would acquire all of the assets of Casino Millennium. The Company anticipates that the transaction would be completed in 2000. ADDITIONAL COMPANY PROJECTS In addition to Womacks/Legends Casino in Cripple Creek, Colorado and Casino Millennium in Prague, Czech Republic, the Company has a number of potential gaming projects in various stages of development. Along with the capital needs of these potential projects, there are various other risks which, if they materialize, could materially adversely affect a proposed project or eliminate its feasibility altogether. For example, in order to conduct gaming operations in most jurisdictions, the Company must first obtain gaming licenses or receive regulatory clearances. To date, the Company has obtained gaming licenses or approval to operate gaming facilities in Colorado, Louisiana, on an American Indian reservation in California, and in the Czech Republic. While management believes that the Company is licensable in any jurisdiction, each licensing process is unique and requires a significant amount of funds and management time. The licensing process in any particular jurisdiction can take significant time and expense through licensing fees, background investigation costs, fees of counsel and other associated preparation costs. Moreover, should the Company proceed with a licensing approval process with industry partners, such industry partners would be subject to regulatory review as well. The Company seeks to satisfy itself that industry partners are licensable, but cannot assure that such partners will, in fact, be licensable. Additional risks before commencing operations include the time and expense incurred and unforeseen difficulties in obtaining suitable sites, liquor licenses, building permits, materials, competent and able contractors, supplies, employees, gaming devices and related matters. In addition, certain licenses include competitive situations where, even if the Company is licensable, other factors such as the economic impact of gaming and financial and operational capabilities of competitors must be analyzed by regulatory authorities. All of these risks should be viewed in light of the Company's limited staff and limited capital. Also, the Company's ability to expand to additional locations will depend upon a number of factors, including, but not limited to: (i) the identification and availability of suitable locations, and the negotiation of acceptable purchase, lease, joint venture or other terms; (ii) the securing of required state and local licenses, permits and approvals, which in some jurisdictions are limited in number; (iii) political factors; (iv) the risks typically associated with any new construction project; (v) the availability of adequate financing on acceptable terms; and (vi) for locations outside the United States, all the risks of foreign operations, including currency controls, unforeseen local regulations, political instability and other related risks. Certain jurisdictions issue licenses or approval for gaming operations by inviting proposals from all interested parties, which may increase competition for such licenses or approvals. The development of dockside and riverboat casinos may require approval from the Army Corps of Engineers and will be subject to significant Coast Guard regulations governing design and operation. Most of these factors are beyond the control of the Company. As a result, there can be 5 no assurance that the Company will be able to expand to additional locations or, if such expansion occurs, that it will be successful. Further, the Company anticipates that it will continue to expense certain costs, which have been substantial in the past and may continue to be substantial in the future, in connection with the pursuit of expansion projects, and may be required to write off any capitalized costs incurred in connection with these ventures. The following describes other activities of the Company. SOUTH AFRICA. Recently enacted legislation in South Africa provides for the award of up to 40 casino licenses throughout the country. To date, the Company has entered into agreements with various local consortia to provide consulting services during the application phase, as well as casino management services should the Company's partners be awarded one or more licenses. An application for a casino license in Caledon, province of the Western Cape, was filed in October 1999 with the Western Cape Gambling and Racing Board by Caledon Casino Bid Company (Pty) Limited ("CCBC"). The Company's subsidiary, Century Casinos Africa (Pty) Ltd "CCA"), will have a 50% equity interest in CCBC, by virtue of an agreement entered into between CCA and CCBC, together with various affiliated entities. On February 16, 2000, the Western Cape Board awarded Successful Applicant status to CCBC. The final license is to be issued upon the provision, within 60 days of that date, of the required financial guarantees and the satisfaction of certain other conditions precedent which are primarily procedural in nature. CCBC anticipates that it will be able to satisfy the conditions precedent to the award within the time stipulated. Upon the award of the final license, the Company (through CCA) is obligated to fund R10 million (South African Rands) of equity and R15 million in loans to CCBC (approximately US$1,630,000 and US$2,445,000, respectively, based on the December 31, 1999 currency exchange rate). In December 1999, in anticipation of a successful application, the Company entered into a ten-year casino management agreement with CCBC, which agreement may be extended at the Company's option for multiple ten-year periods. The Company will earn management fees based on percentages of annual gaming revenue and earnings before interest, income taxes, depreciation, amortization and certain other costs. An application was filed in June 1997 with the Gambling and Betting Board (the "Board") in the province of Gauteng for a hotel/casino resort in the greater Johannesburg area. Silverstar Development Ltd. ("Silverstar"), the consortium to which the Company is the contracted casino management partner, and in which the Company holds a minority equity interest, had submitted an application for a proposed $70 million, 1,700 gaming position hotel/casino resort development. The Board had awarded all six casino licenses by the end of April 1998, and Silverstar was not awarded one of the licenses. The Company recorded an impairment allowance against its entire equity investment in Silverstar in the amount of $196,022 in the first quarter of 1998. Silverstar subsequently filed a legal action with the High Court of South Africa (the "High Court") challenging the decision of the Gauteng Board and the provincial government in their failure to award a casino license to Silverstar on the grounds that the decision-making process was legally deficient. In March 1999, the High Court overturned the previous license award that had been sought by Silverstar, and remanded the licensing process for the West Rand region to the provincial government. The competing license applicant appealed the ruling, but in April 1999, the High Court rejected the request for leave to appeal its March ruling. This defendant also made no request for leave to appeal with the Appeals Court, the final court of appeal. In June 1999, the Executive Council of the provincial government resolved not to concur with the Gauteng Board's recommendation of the competing applicant. In July 1999, the competing applicant instituted action in the Court seeking to overturn the Executive Council's decision. No date has yet been set for a hearing in the High Court of the competing applicant's complaint. There can be no certainty regarding an award of this gaming license or that this license will ultimately be awarded to Silverstar. 6 Another application was filed in January 1998, by the Company's partner, Great North Resorts Limited, for a casino license in Pietersburg, the provincial capital of the Northern Province. If successful in receiving a license, the Company would provide consulting/management services with respect to the casino operations of a proposed $40 million casino, hotel, entertainment and resort complex pursuant to a five-year agreement commencing with the opening of the permanent casino. The Company would also provide consulting/management services with respect to the operations of a temporary casino during the development phase of the resort complex. The Company would earn fees based on a percentage of annual gaming revenue. The Company has no significant additional capital obligations with respect to this application. The licensing process in the Northern Province has been overturned as a result of a successful action in the High Court initiated by a competing applicant. There remains the possibility that this decision may be appealed by the provincial authorities and the future of the whole licensing process is presently unclear. RIVERBOAT DEVELOPMENT AGREEMENT - INDIANA. - In December 1995, the Company sold its 80% interest in Pinnacle Gaming Development Corp. ("Pinnacle") to an affiliate of Hilton Gaming Corporation and Boomtown, Inc. ("Hilton/Boomtown"). Pinnacle had been pursuing a riverboat gaming license application in Switzerland County, Indiana. Upon signing the agreement, the Company received a cash payment of $80,000 and recognized a gain on the sale of its investment of $26,627. The agreement provided for additional payments to the Company upon the occurrence of certain events. In September 1998, the Indiana Gaming Commission awarded a Certificate of Suitability to Pinnacle to conduct riverboat gaming in Switzerland County that resulted in the Company receiving a payment of $431,000 in the third quarter of 1998. The Company also received a payment of $1,040,000 in the third quarter of 1999 upon "groundbreaking" of the project. Additionally, the Company was entitled to receive installment payments of $32,000 per month for the first 60 months of the riverboat's operation; however, the Company elected to receive an aggregate discounted amount of $1,380,000, which was received and recorded as income in January 2000. RHODES, GREECE. In 1995, the Company executed a casino management and consulting agreement with Rhodes Casino, S.A., a consortium including Playboy Enterprises, Inc., under which the Company, as an independent contractor, would supply services and assistance in establishing a casino on the island of Rhodes, Greece. The consortium was awarded the exclusive license for casino gaming on Rhodes for a 12-year period commencing with the opening of the casino. The Company's management consulting agreement with the consortium, which had an initial term running through the third anniversary of the casino opening, provided for fees to the Company of $200,000 for services to be rendered in the pre-opening phase, $300,000 per year during the first three years of operation and $50,000 per year thereafter, if renewed. In the fourth quarter of 1996, the Company received $50,000 with respect to certain pre-opening phase services. In the second quarter of 1998, the Company reached a consulting agreement ("current agreement") with Rhodes Casino S.A. and Playboy Gaming International Ltd. ("Playboy") to assign certain of the Company's rights and delegate its responsibilities under the previously executed management and consulting agreement ("previous agreement"). Under the current agreement, in 1998, the Company received from Playboy a payment of $25,000 for additional pre-opening services performed to date. The Company also is to receive annual payments of $50,000 for each of the first three years of the casino's operations, the first of which payments was received in 1999. The Company will have no further obligations under the previous agreement unless, subsequent to the opening of the casino, Playboy is unwilling or unable to perform under the current agreement. In such event, the previous agreement, and the Company's obligations, would be reinstated together with the Company's right to receive up to $300,000 per year for the first three years of casino operations, with an aggregate minimum guarantee of approximately $250,000. 7 NONOPERATING CASINO IN WELLS, NEVADA. In 1994, the Company purchased the Ranch House Casino in Wells, Elko County, Nevada from an unaffiliated party. The total purchase price of $851,504, including a note secured by the property, was determined based on arm's length bargaining with the seller. Also in 1994, the Company purchased a seven-acre parcel of land directly across the street from the casino for $69,000. In April 1997, the Company paid off all amounts owed to the seller and now owns the property free and clear. The property, closed since 1992 but in operable condition, is an 18,000 square foot building with approximately 6,000 square feet of gaming space. Management currently does not intend to pursue a gaming license with respect to the facility, and is seeking a sale or lease of the casino and land. INDIAN TRIBAL MANAGEMENT AGREEMENT - CALIFORNIA - In August 1995, the Company terminated its management agreement with the Soboba Band of Mission Indians with respect to the Legends Casino at Soboba in Riverside County, California. In connection with the termination, an unaffiliated third party issued a three-year promissory note to the Company for $3,100,000, with monthly payments based on a percentage of gross revenue from certain operations of the facility. In March 1998, the Company negotiated an early settlement of the then-remaining outstanding balance. As a result, the Company received cumulative payments through the date of settlement of $2,457,727, of which the final $550,000 was recognized in income in 1998. No further payments will be received under the note. REVOLVING CREDIT FACILITY In March 1997, the Company entered into a four-year revolving line of credit facility (the "RCF") with Wells Fargo Bank ("Wells Fargo"). Various provisions of the RCF were subsequently amended, including an increase in the facility to $20 million in 1998, and decreasing quarterly beginning in the second quarter of 1999. At December 31, 1999, the maximum available under the RCF was $18.3 million. An annual commitment fee of between three-eighths and one-half percent, payable quarterly, is charged on the unused portion of the RCF. The RCF also contains an interest rate matrix that ties the interest rate charged on outstanding borrowings to the Company's leverage ratio, as defined. Largely as a result of an improvement in the Company's leverage ratio, the Company's consolidated weighted-average interest rate on all borrowings decreased from 8.74% in 1998 to 8.64% in 1999. At December 31, 1999, the Company's unused borrowing capacity under the RCF was approximately $9.2 million. The RCF is secured by substantially all of the real and personal property of Womacks/Legends Casino. Under the RCF, the Company is required to comply with certain customary financial covenants, and is subject to certain capital expenditure requirements and restrictions on investments. See Note 5 to the Consolidated Financial Statements for further information. In March 2000, the Company is in the final stages of negotiations with Wells Fargo Bank to increase the RCF to $26 million and extend the maturity date of the agreement until 2004. Management expects the agreement to be finalized before the end of the first quarter 2000, however, there can be no assurances that the line will be renewed or extended on the terms described herein. A portion of the proceeds of borrowings under the RCF is expected to be used for the development of the Company's South Africa projects discussed above. 8 MARKETING STRATEGY The marketing strategy of Womacks/Legends Casino highlights promotion of Womacks Gold Club, a players club with a database containing profiles on nearly 50,000 members. Gold Club members receive benefits from membership, such as cash, merchandise, food and lodging. Those who qualify for VIP status receive additional benefits in addition to regular club membership. Status is determined through player tracking. Members receive monthly newsletters of upcoming events and parties, and, depending on player ranking, also receive invitations to special events and monthly coupons. THE CRIPPLE CREEK MARKET Cripple Creek is a small mountain town located approximately 45 miles southwest of Colorado Springs on the western boundary of Pikes Peak. Cripple Creek is an historic mining town, originally founded in the late 1800's following a large gold strike. Cripple Creek is a tourist town and its heaviest traffic is in the summer months. Traffic generally decreases to its low point in the winter months. Cripple Creek is one of only three Colorado cities where casino gaming is legal, the others being Black Hawk and Central City. Cripple Creek operated approximately 29% of the gaming devices and generated 22% of gaming revenues for these three cities during the year ended December 31, 1999. As of December 31, 1999, there were 18 casinos operating in Cripple Creek. The tables below set forth information obtained from the Colorado Division of Gaming regarding gaming revenue by market and slot machine data for Cripple Creek from calendar 1996 through 1999. This data is not intended by the Company to imply, nor should the reader infer, that it is any indication of future Colorado or Company gaming revenue.
GAMING REVENUE BY MARKET (IN $000'S) % change % change % change % change Over Over Over Over 1996 Prior Year 1997 Prior Year 1998 Prior Year 1999 Prior Year --------- ----------- --------- ----------- -------- ----------- -------- ----------- CRIPPLE CREEK. $ 103,373 9.9% $ 108,628 5.1% $113,230 4.2% $122,385 8.1% Black Hawk $ 219,911 12.3% $ 234,631 6.7% $272,008 15.9% $354,474 30.3% Central City $ 88,870 -5.9% $ 87,391 -1.7% $ 93,980 7.5% $ 73,742 -21.5% COLORADO TOTAL $ 412,154 7.2% $ 430,650 4.5% $479,218 11.3% $550,601 14.9%
9
CRIPPLE CREEK SLOT DATA (IN $000'S) % change % change % change % change Over Over Over Over 1996 Prior Year 1997 Prior Year 1998 Prior Year 1999 Prior Year --------- ----------- --------- ----------- -------- ----------- -------- ----------- Total Slot Revenue $ 97,024 11.1% $ 102,798 6.0% $107,690 4.8% $117,161 8.8% (in $'000) Average Number Of Slots 4,175 8.6% 4,507 8.0% 4,369 -3.1% 4,046 -7.4% Average Win Per Slot Per Day $63 2.0% $62 -1.6% $68 8.1% $81 19.9%
Gaming in Colorado is "limited stakes," which restricts any single wager to a maximum of $5.00. While this limits the revenue potential of table games, management believes that slot machine play, which accounts for over 95% of total gaming revenues, is currently impacted only marginally by the $5.00 limitation. The Company faces intense competition from other casinos in Cripple Creek, including a handful of casinos of similar size and many other smaller casinos. There can be no assurance that other casinos in Cripple Creek will not undertake expansion efforts similar to those recently taken by the Company, thereby further increasing competition, or that large, established gaming operators will not enter the Cripple Creek market. The Company seeks to compete against these casinos through promotion of Womacks Gold Club and superior service to players. Management believes that the casinos likely to be more successful and best able to take advantage of the market potential of Cripple Creek will be the larger casinos that have reached a certain critical mass.
CENTURY CASINOS' PROPERTY IN CRIPPLE CREEK (PRESENTLY "WOMACKS/LEGENDS CASINO") (IN $000'S) % change % change % change % change Over Over Over Over 1996 Prior Year 1997 Prior Year 1998 Prior Year 1999 Prior Year ---------- ----------- ---------- ----------- -------- ----------- -------- ----------- Total Slot Revenue $ 10,078 208.6% $18,102 79.6% $18,597 2.7% $22,235 19.6% Average Number Of Slots 342 98.8% 547 59.9% 565 3.3% 592 4.8% Average Win Per Slot Per Day $80.73 55.2% $90.67 12.3% $90.18 -0.5% $102.56 13.7% Market Share in % 10.39% 177.7% 17.61% 69.5% 17.27% -1.9% 18.91% 9.5%
10 The Company competes, to a far lesser extent, with 19 casinos in Black Hawk and 11 casinos in Central City. Black Hawk and Central City are also small mountain tourist towns, which adjoin each other and are approximately 30 miles from Denver and a two and one-half hour drive from Cripple Creek. The main market for Cripple Creek is the Colorado Springs metropolitan area, and the main market for Black Hawk and Central City is the Denver metropolitan area. In addition, there is intense competition among companies in the gaming industry generally, and many gaming operators have greater name recognition and financial and marketing resources than the Company. The Company competes with many established operators in gaming venues other than Cripple Creek. Many of these operators have greater financial, operational and personnel resources than the Company. There can be no assurance that the number of casino and hotel operations will not exceed market demand or that additional hotel rooms or casino capacity will not adversely affect the operations of the Company. EMPLOYEES The Company employs approximately 200 persons on an equivalent full-time basis, including cashiers, dealers, food and beverage service personnel, facilities maintenance staff, and accounting and marketing personnel. No labor unions represent any employee group. A standard package of employee benefits is provided to full-time employees along with training and job advancement opportunities. In March 1998, the Company adopted a 401(k) Savings and Retirement Plan for its employees. SEASONALITY The Company's business is not considered to be seasonal; however, the anticipated highest levels of business activity, at least in Colorado, will occur in the tourist season (i.e., from May through September). Its base level (i.e., November through May) is expected to remain fairly constant although weather conditions during this period could have a significant impact on business levels in Colorado. GOVERNMENTAL REGULATION The Company's gaming operations are subject to strict governmental regulations at state and local levels. Statutes and regulations can require the Company to meet various standards relating to, among other matters, business licenses, registration of employees, floor plans, background investigations of licensees and employees, historic preservation, building, fire and accessibility requirements, payment of gaming taxes, and regulations concerning equipment, machines, tokens, gaming participants, and ownership interests. Civil and criminal penalties can be assessed against the Company and/or its officers or stockholders to the extent of their individual participation in, or association with, a violation of any of the state and local gaming statutes or regulations. Such laws and regulations apply in all jurisdictions within the United States in which the Company may do business. Management believes that the Company is in compliance with applicable gaming regulations. For purposes of the discussion below, the term "the Company" includes its applicable subsidiaries. 11 COLORADO REGULATION The Colorado Limited Gaming Control Commission ("Commission") has adopted regulations regarding the ownership of gaming establish-ments by publicly held companies (the "Regulations"). The Regulations require the prior clearance of, or notification to, the Commission before any public offering of any securities of any gaming licensee or any affiliated company. The Regulations require all publicly traded or publicly owned gaming licensees to comply with numerous regulatory gaming requirements. These requirements include, but are not limited to, those listed below. A publicly traded gaming licensee that sends to the holders of its voting securities any proxy statements subject to Regulation 14A of the Securities Exchange Act of 1934, as amended (the "1934 Act"), or an information statement subject to Regulation 14C of the 1934 Act, must file such material with the Colorado Division of Gaming (the "Colorado Division"). Whenever any document is furnished to the holders of voting securities of a publicly traded gaming licensee or filed by a publicly traded gaming licensee with the SEC, the publicly traded gaming licensee is required to file a true copy of that document with the Colorado Division. Whenever a publicly traded gaming licensee receives any material document filed with the SEC by any other person relating to the publicly traded gaming licensee, it must file a true copy of the document with the Colorado Division. Each publicly traded gaming licensee must file with the Colorado Division, on an annual basis, a list of the holders of its voting securities. Each publicly traded gaming licensee is required to report promptly to the Colorado Division the election or appointment of any director, any executive officer and any other officers actively and directly engaged in the administration or supervision of the gaming activities at any licensed gaming establishment. The following provisions are required to be included in the certificate of incorporation for every publicly traded gaming licensee or holding company which has a gaming license in the State of Colorado. (i) The entity is precluded from issuing any voting securities except in accordance with the provisions of the Colorado Limited Gaming Act ("Gaming Act") and the regulations promulgated thereunder. The issuance of any voting securities in violation of the Gaming Act is ineffective and such voting securities are deemed not to be issued and outstanding until (a) the entity ceases to be subject to the jurisdiction of the Commission, or (b) the Commission, by affirmative action, validates the issuance or waives any defect in the issuance. (ii) No voting securities issued by the entity and no interest in the entity can be transferred in any manner except in accordance with the provisions of the Gaming Act and its regulations. Any transfer in violation of the Gaming Act is ineffective until (a) the entity ceases to be subject to the jurisdiction of the Commission, or (b) the Commission, by affirmative action, validates the transfer or waives the defect in the transfer. 12 (iii) If the Commission at any time determines that a holder of voting securities of the entity is unsuitable to hold the securities, then the issuer of the securities may, within 60 days after the finding of unsuitability, purchase the securities of the unsuitable person at the lesser of (i) the cash equivalent of such person's investment in the entity, or (ii) the current market price of the date of finding of unsuitability, unless the securities are transferred to a suitable person, as determined by the Commission, within 60 days after the finding of unsuitability. Until the securities are owned by persons found by the Commission to be suitable to own them, (a) the entity is not required or permitted to pay any dividend or interest with regard to the securities, (b) the holder of the securities is not entitled to vote on any matter as the holder of the securities and such securities shall not for any purpose be included in the voting securities of the entity, and (c) the entity is precluded from paying any remuneration in any form to the holder of the securities. The Company has the above provisions in its Certificate of Incorporation. The Regulations also require each person who individually or in association with others acquires, directly or indirectly, beneficial ownership of 5% or more of any class of voting securities of a publicly traded gaming licensee to notify the Colorado Division within 10 days after the person acquired 5% or more of the securities. The person who acquires 5% or more of the securities shall provide any additional information requested by the Colorado Division and be subject to a finding of suitability as required by the Colorado Division. Publicly traded gaming licensees are also required to notify each person subject to the Regulations of the Colorado Division's requirements as soon as the gaming licensee becomes aware of the acquisition. Each person who, individually or in association with others, acquires, directly or indirectly, the beneficial ownership of 10% or more of any class of voting securities of a publicly traded gaming licensee required to contain the above charter provisions is required to apply to the Commission for a finding of suitability within 10 days after acquiring 10% or more of the securities. A publicly traded gaming licensee is also required to notify each person subject to the Regulations of its requirements as soon as the gaming licensee becomes aware of the acquisition. However, the obligations of the person subject to the Regulations are independent of and unaffected by the gaming licensee's failure to give the notice. Any person found unsuitable by the Commission is not permitted ownership of any voting security of a publicly traded gaming licensee, subject to the provisions of the Regulations, and must be removed immediately from any position as a director, officer or employee of the publicly traded gaming licensee. The State of Colorado created the Colorado Division within the Department of Revenue to license, implement, regulate and supervise the conduct of limited gaming. The Director of the Colorado Division, under the supervision of a five-member Colorado Commission, has been granted broad power to ensure compliance with the law, and regulations adopted thereunder. The Director may inspect, without notice, premises where gaming is being conducted; he may seize, impound or remove any gaming device. He may examine and copy any licensee's records, may investigate the background and conduct of licensees and their employees, and may bring disciplinary actions. He may also conduct detailed background checks of persons who loan money to the Company. 13 The Commission is empowered to issue five types of gaming and gaming related licenses. The Colorado Division has broad discretion to revoke, suspend, condition, limit or restrict a license at any time. The license of the Company must be renewed each year. All licenses are revocable, nontransferable and valid only for the particular location initially authorized. No person, such as the Company, can have an ownership interest in more than three retail licenses. Hence, the Company's business opportunities in Colorado could be limited accordingly. All of the Company's employees involved with gaming activities must apply for and receive a support gaming license prior to commencing employment. The Commission has adopted comprehensive rules and regulations which require the Company to maintain adequate books and records and these rules also prescribe minimum operating, security and payoff procedures. The Commission has the power to deny any license or renewal thereof to any person it considers to be "unsuitable," a broad, discretionary standard. The Commission has also promulgated a list of excluded persons; it is unlawful for any person on this list to enter licensed premises or to hold shares in a licensee. Rules regarding gaming, cheating and other fraudulent practices have also been adopted, which rules the Company is obligated to police and enforce. Other state regulatory agencies also impact the Company's operations, particularly its license to serve alcoholic beverages. Rules and regulations in this regard are strict, and loss or suspension of a liquor license could significantly impair, if not ruin, a licensee's operation. Local building, parking and fire codes and similar regulations could also impact the Company's operations and proposed development of its properties. Item 2. Properties. - ------- ---------- The Company's corporate offices are located at its Womacks/Legends Casino at 200 - 220 East Bennett Avenue, Cripple Creek, Colorado. The Company also rents a small office at 999 18th Street, Suite 1810, Denver, Colorado pursuant to a lease with an unaffiliated party. The Company intends to close its Denver office at the end of March 2000. See Item 1. "Business -- Property and Project Descriptions" herein for a description of the Company's other properties. Item 3. Legal Proceedings. - ------- ------------------ The Company is not a party to, nor is it aware of, any pending or threatened litigation which, in management's opinion, could have a material adverse effect on the Company's financial position or results of operations. 14 Item 4. Submission of Matters to a Vote of Security Holders. - ------- ----------------------------------------------------------- The 1999 annual meeting of the stockholders of the Company was held on December 14, 1999. At the annual meeting, (i) the two Class II directors to the Board, Peter Hoetzinger and James D. Forbes, were elected to the Board for a three-year term; (ii) a proposal to amend Article FOURTH of the Company's Certificate of Incorporation to effect a reverse stock split of the Company's common stock on a ratio not to exceed one for 20 was adopted by stockholders of the Company; (iii) a proposal to increase the number of shares reserved for issuance under the Employees' Equity Incentive Plan from 3,500,000 to 4,500,000 was adopted by the stockholders of the Company; and, (iv) a proposal to amend Articles NINTH and TENTH of the Certificate of Incorporation of the Company to add two additional fair price provisions which, in certain circumstances, may require payment of a higher price to stockholders of the Company was not adopted by the stockholders of the Company. On the proposal to elect the Class II directors, the votes were: Peter Hoetzinger, 12,439,435 for, 132,578 against, and 24,350 abstained; James D. Forbes, 12,443,435 for, 132,578 against, and 20,350 abstained. On the proposal with respect to the amendment to Article FOURTH, the results were: 10,681,133 for, 1,903,155 against, and 12,075 abstained. On the proposal with respect to the amendment to the Employees' Equity Incentive Plan, the results were: 7,820,308 for, 513,770 against, 32,150 abstained, and 4,230,135 not voted. On the proposal with respect to amendments to Articles NINTH and TENTH, the results were: 5,853,851 for, 1,955,418 against, 5,150 abstained, and 4,751,944 not voted. Item 5. Market for Registrant's Common Equity and Related Stockholder Matters. - ------ ---------------------------------------------------------------------- The common stock of the Company began trading in the Nasdaq SmallCap Market on November 10, 1993. The following table sets forth the low and high bid price per share quotations as reported on the NASDAQ SmallCap Market of the common stock for the periods indicated. These quotations reflect inter-dealer prices, without retail mark-up, mark down or commission and may not necessarily represent actual transactions. Actual prices may vary.
Quarter Ended Low High - ------------------ ----- ----- March 31, 1998 $0.88 $1.25 June 30, 1998 $0.88 $1.31 September 30, 1998 $0.94 $1.13 December 31, 1998 $0.78 $1.03 March 31, 1999 $0.75 $1.31 June 30, 1999 $0.97 $1.19 September 30, 1999 $0.88 $1.03 December 31, 1999 $0.88 $1.03
At December 31, 1999, the Company had approximately 140 shareholders of record of its common stock; management estimates that the number of beneficial owners is approximately 900. At the present time, management of the Company intends to use any earnings which may be generated to finance the growth of the Company's business. Accordingly, while payment of dividends rests within the discretion of the Board of Directors, no dividends have been declared or paid by the Company, and it does not presently intend to pay dividends. 15 Item 6. - -------- Management's Discussion and Analysis of Financial Condition and Results - ----------------------------------------------------------------------- of Operations - ------------- BUSINESS ENVIRONMENT AND RISK FACTORS The following discussion should be read in conjunction with the Company's consolidated financial statements and related notes included elsewhere herein. The Company's future operating results may be affected by various trends and factors which are beyond the Company's control. These include, among other factors, the competitive environment in which the Company operates, present dependence upon the Cripple Creek, Colorado gaming market, changes in the rates of gaming-specific taxes, shifting public attitudes toward the socioeconomic costs and benefits of gaming, actions of regulatory bodies, dependence upon key personnel, the speculative nature of gaming projects the Company may pursue, risks associated with expansion, and other uncertain business conditions that may affect the Company's business. With the exception of historical information, the matters discussed below under the headings "Results of Operations" and "Liquidity and Capital Resources," may include forward-looking statements that involve risks and uncertainties. The Company cautions the reader that a number of important factors discussed herein, and in other reports filed with the Securities and Exchange Commission, could affect the Company's actual results and cause actual results to differ materially from those discussed in forward-looking statements. RESULTS OF OPERATIONS Net operating revenue increased significantly to $23,584,171 in 1999 from $19,458,852 in 1998. The Company's casino revenue increased from $19,036,621 in 1998 to $22,726,004 in 1999, or 19.4%. Casino revenue in both years was generated by the Womacks/Legends Casino, except for $34,244 that was derived from a concession agreement which expired in January 1998. The Company's share of the Cripple Creek market increased significantly from 16.8% in 1998 to 18.6% in 1999. Womacks/Legends Casino operated approximately 14.6% of the gaming devices in the Cripple Creek market in 1999, with an average win per day per machine of $103 compared with a market average of $81. Gross margin from company-wide casino activities increased from 59% in 1998 to 61% in 1999. The increase in margin is attributable to a continuation of a focused management and marketing approach for Womacks/Legends Casino. At the same time, a significant number of new memberships in the casino's Gold Club were added again in 1999. Additional emphasis was put into further refining the product mix, upgrading both the interior of the facilities, as well as the slot machine mix. Parking capacity was expanded and made more convenient as part of the Company's ongoing efforts to provide the highest quality parking facilities for its customers. Also contributing to the casino margin improvement were proportionately lower payroll costs. Various other initiatives were undertaken that management believes have resulted in greater attention to customer service. 16 Food and beverage revenue increased from $878,991 in 1998 to $933,387 in 1999, or 6.2%. The increase is principally due to improvement in operations that started to take effect in the second quarter of 1999. The cost of food and beverage promotional allowances, which are included in casino costs, increased only slightly from $842,305 in 1998 to $854,565 in 1999. Hotel revenue increased from $62,624 to $149,131, principally as the result of a marketing arrangement with a local hotel that commenced in late 1998 and continued through September 1999. The increase in other revenue from 1998 to 1999 was chiefly due to management fees from Casino Millennium of approximately $109,000 and the Rhodes, Greece casino agreement of $50,000. General and administrative expense increased from $5,850,870 in 1998 to $6,710,215 in 1999, or 14.7%, but decreased as a percentage of net operating revenue, from 30.1% in 1998 to 28.5% in 1999. The Company was able to reduce or eliminate actual expenses for parking lot rent, office relocation, penalties and fines, and workers' compensation insurance which contributed to proportionately lower costs. Depreciation increased from $1,655,176 in 1998 to $1,968,951 in 1999. The increase is attributable to property improvements at Womacks/Legends Casino and acquisition of new gaming equipment in Cripple Creek and Prague. Amortization of goodwill was $1,341,504 in both years. Interest expense decreased from $1,023,906 to $999,922, due to slightly lower borrowings and a lower weighted-average interest rate. The weighted-average interest rate was 8.64% in 1999 and 8.74% in 1998. The other items included in the caption "Other expense, net" in the consolidated statements of income, for both 1999 and 1998, are described in Note 9 to the consolidated financial statements. As more fully discussed in Note 8 to the consolidated financial statements, the Company recognized income tax expense of $1,746,000 in 1999 versus $123,000 in 1998. The provision in 1999 is higher than the prior year's because the 1998 provision was substantially reduced due to a nonrecurring credit of $1,003,580 resulting from the reversal of a valuation allowance against net deferred tax assets established in prior years. LIQUIDITY AND CAPITAL RESOURCES At December 31, 1999, the Company had cash and cash equivalents totaling $2.5 million and net working capital of $1.1 million. Additional liquidity is available under the Company's revolving credit facility ("RCF") with Wells Fargo Bank. See Note 5 to the Consolidated Financial Statements for further information on the RCF. The Company had unused borrowing capacity under the RCF of approximately $9.2 million at December 31, 1999. Net cash provided by operations was $3.8 million in 1999 compared with $4.2 million in 1998, with the decrease primarily attributable to the cash payments for income taxes in 1999, whereas income tax payments in 1998 were reduced due to available net operating loss carryforwards. The Company used cash of $2.6 million for purchases of property and equipment in 1999, principally gaming equipment for Cripple Creek and Casino Millennium in Prague. In 1998, the Company used cash of approximately $5.2 million for purchases, of which $3.6 million was used to purchase property adjacent to Womacks/Legends Casino that was subsequently improved to provide paved parking for casino patrons. As more fully described in Note 5 to the consolidated financial statements, during 1998 the Company renegotiated certain terms of the RCF. Among other provisions, the maximum availability was increased from $13 million to $20 million and the interest rate structure was amended, which will further lower the Company's cost of capital if certain leverage ratios are achieved. 17 In March 2000, the Company is in the final stages of negotiations with Wells Fargo Bank to increase the RCF to $26 million and extend the maturity date of the agreement until 2004. Management expects the agreement to be finalized before the end of the first quarter 2000, however, there can be no assurances that the line will be renewed or extended on the terms described herein. A portion of the proceeds of borrowings under the RCF is expected to be used for purposes described below. In the fall of 1999, the Company began construction of The Womacks Center, described in Item 1 "Business - Property and Project Descriptions - Womacks/Legends Casino, Cripple Creek, Colorado." Through December 31, 1999, the Company had incurred costs of approximately $277,000, with estimated additional costs to complete of approximately $623,000. The Company expects to complete the construction of the building through a combination of existing liquidity and anticipated cash flow. Management has deferred a decision on whether to proceed with the construction of a hotel and parking structure on its property across the street from Womacks/Legends Casino until it has had time to assess the impact of new hotel capacity on the Cripple Creek market. From November 1998 through September 1999, Womacks/Legends Casino had an agreement with the operator of a new local hotel whereby the casino leased a block of rooms from the hotel. The casino made these rooms available to its customers, sometimes on a complimentary basis, and provided a free shuttle service between the casino and the hotel. For the near term, the Company's property, which has been earmarked for construction of a hotel, is being used for customer parking. In January 1999, the Company reached a 20-year definitive agreement with Casino Millennium a.s., a Czech company, and with B. H. Centrum a.s. ("BHC"), a Czech subsidiary of Bau Holding AG, one of the largest construction and development companies in Europe, to operate a casino in the five-star Marriott Hotel, in Prague, Czech Republic. The hotel and casino opened in July 1999. The Company provides casino management services in exchange for ten percent of the casino's gross revenue, and has provided gaming equipment for 45% of the casino's net profit. Through December 31, 1999, the Company purchased gaming equipment totaling $1,266,000 which is being leased to the casino. In January 2000, the Company entered into a memorandum of agreement with BHC to acquire the casino by either a joint acquisition of Casino Millennium a.s. or the formation of a new joint venture. Any funding required by the Company to consummate this transaction would be met through a combination of existing liquidity and anticipated cash flow. The Company continues to pursue several gaming opportunities in South Africa. The Company is the contracted casino management partner to a consortium, Caledon Casino Bid Company (Pty) Limited ("CCBC"), which has been awarded Successful Applicant status for a gaming license in the province of the Western Cape. The final license is expected to be issued to Caledon upon the provision of the required financial guarantees. In the event that Caledon receives the license, the Company would be required to make equity and debt investments totaling approximately $4.1 million. These fundings would be accomplished through additional borrowings under the revolving credit facility. There can be no certainty, however, that Caledon will ultimately be awarded the license. 18 The Company is also the contracted casino management partner to another consortium, Silverstar Development Ltd. ("Silverstar"), which is an applicant for a gaming license in the province of Gauteng, South Africa. The Company has a small equity position in Silverstar. The application process has been the subject of litigation and the successful outcome of Silverstar's application is uncertain. In the event that Silverstar would be awarded a license, the Company would be required to make an additional equity investment of approximately $1.5 million. This funding requirement would be met through borrowings under the revolving credit facility. The Company has also projected additional development costs of up to $500,000 which could be incurred by the Company related to this project. In 1998, the Company's Board of Directors approved a discretionary program to repurchase up to $2 million of the Company's outstanding common stock. The Board believes that the Company's stock is undervalued in the trading market in relation to both its present operations and its future prospects. Through December 31, 1999, the Company had repurchased 1,385,000 shares at an average cost per share of $1.06. Management expects to continue to review the market price of the Company's stock and repurchase shares as appropriate, with funds coming from existing liquidity or borrowings under the RCF. Management believes that the Company's cash and working capital at December 31, 1999, together with expected cash flows from operations and borrowing capacity under the RCF, will be sufficient to satisfy its debt repayment obligations, fund its anticipated capital expenditures and pursue additional business growth opportunities for the foreseeable future. Since the beginning of 2000, the Company has not had any interruptions of its business due to the Year 2000 issue. During the next few months, the Company will continue to monitor its operations and assess whether the Year 2000 issue has an impact on the Company. Item 7. Financial Statements. - ------- --------------------- See "Index to Financial Statements" on page F-1 hereof. Item 8. - ------- Changes In and Disagreements With Accountants on Accounting and Financial - -------------------------------------------------------------------------- Disclosure - ---------- Not applicable. 19 Item 9. Directors, Executive Officers, Promoters and Control Persons; - ------- ------------------------------------------------------------------- Compliance with Section 16(a) of the Exchange Act. -------------------------------------------------------- The information required by this item will be included in the Company's Proxy Statement with respect to its 2000 Annual Meeting of Stockholders to be filed with the Commission within 120 days of December 31, 1999, under the captions "Information Concerning Directors and Executive Officers" and "Compliance with Section 16(a) of the Securities Exchange Act." Item 10. Executive Compensation. - -------- ----------------------- The information required by this item will be included in the Company's Proxy Statement with respect to its 2000 Annual Meeting of Stockholders to be filed with the Commission within 120 days of December 31, 1999, under the caption "Information Concerning Directors and Executive Officers." Item 11. Security Ownership of Certain Beneficial Owners and Management. - -------- -------------------------------------------------------------------- The information required by this item will be included in the Company's Proxy Statement with respect to its 2000 Annual Meeting of Stockholders to be filed with the Commission within 120 days of December 31, 1999, under the caption "Voting Securities." Item 12. Certain Relationships and Related Transactions. - -------- -------------------------------------------------- The information in this item is incorporated by reference from the Company's Definitive Proxy material with respect to the 2000 Annual Meeting of Stockholders to be filed with the Commission within 120 days of December 31, 1999, under the caption "Certain Relationships and Related Transactions." Item 13. Exhibits and Reports on Form 8-K. - -------- ------------------------------------- a. Exhibits Filed Herewith or Incorporated by Reference to Previous -------------------------------------------------------------------- Filings with the Securities and Exchange Commission: ------------------------------------------------------- 1. The following exhibits were included with the filing of the Alpine's Form 10-KSB for the fiscal year ended December 31, 1993 and are Incorporated herein by reference: Exhibit No. Description ------------ ----------- 10.14 Plan of Reorgani-zation and Agreement Among Alpine Gaming, Inc., Alpine Acquisition, Inc. and Century Casinos Management, Inc. - Filed with Form 8-K dated December 24, 1993 and incorporated by reference therein. 10.15 Amendments One, Two and Three to Plan of Reorganization and Agreement Among Alpine Gaming, Inc., Alpine Acquisition, Inc. and Century Casinos Management, Inc. 2. The following exhibits were filed with the Form 10-KSB for the fiscal year ended December 31, 1995 and are incorporated herein by reference: 20 Exhibit No. Description ------------ ----------- 3.1 Certificate of Incorporation (filed with Proxy Statement in respect of 1994 Annual Meeting of Stockholders and incorporated herein by reference). 3.2 Bylaws (filed with Proxy Statement in respect of 1994 Annual Meeting of Stockholders and incorporated herein by reference). 10.51 Asset Purchase Agreement dated as of September 27, 1995 by and among Gold Creek Associates, L.P., WMCK Acquisition Corp. and Century Casinos, Inc., including Exhibits and Schedules, along with First Amendment thereto. 10.57 Stock Purchase Agreement dated December 21, 1995 between Switzerland County Development Corp. ("Buyer") and Century Casinos Management, Inc. and Cimarron Investment Properties Corp. ("Sellers"). 10.58 Consultancy Agreement - Chalkwell Limited. 3. The following exhibits were filed with the Form 8-K Current Report dated July 1, 1996 and are incorporated herein by reference: Exhibit No. Description ------------ ----------- 10.60 Promissory Note dated March 19, 1992, made by Chrysore, Inc. in the original amount of $1,850,000 payable to R. & L Historic Enterprises, together with Assignment dated September 14, 1992 of said Promissory Note to TJL Enterprises, Inc. and Assignment dated May 16, 1996 of said Promissory Note to Century Casinos, Inc. 10.61 Promissory Note dated July 1, 1996, made by WMCK Acquisition Corp. in the original principal amount of $5,174,540 payable to Gold Creek Associates, L.P., together with Guaranty dated July 1, 1996, of said Promissory Note by Century Casinos, Inc. 10.62 Building Lease dated as of July 1, 1996, among TJL Enterprises, Inc., WMCK Acquisition Corp. and Century Casinos, Inc., together with Memorandum of Building Lease with Option to Purchase dated as of July 1, 1996, among the same parties. 10.63 Four Party Agreement, Assignment and Assumption of Lease, Consent to Assignment of Lease, Confirmation of Option Agreement and Estoppel Statements dated as of July 1, 1996, among Harold William Large, Teller Realty, Inc., Gold Creek Associates, L.P., and WMCK Acquisition Corp. 10.64 Consulting Agreement dated as of July 1, 1996, between WMCKAcquisition Corp. and James A. Gulbrandsen. 10.65 Consulting Agreement dated as of July 1, 1996, between WMCK Acquisition Corp. and Gary Y. Findlay. 21 4. The following exhibit was filed with the Form 10-QSB for the quarterly period ended March 31, 1997 and is incorporated herein by reference: Exhibit No. Description ------------ ----------- 10.68 Credit Agreement dated as of March 31, 1997, between Wells Fargo Bank, N.A. ("Lender"); WMCK Venture Corp., Century Casinos Cripple Creek, Inc., and WMCK Acquisition Corp. ("Borrowers"); and Century Casinos, Inc. ("Guarantor"). 5. The following exhibits were filed with the Form 10-KSB for the fiscal year ended December 31, 1997 and are incorporated herein by reference: Exhibit No. Description ------------ ----------- 10.69 First Amendment to the Credit Agreement dated as of March 31, 1997, between Wells Fargo Bank, N.A. ("Lender"); WMCK Venture Corp., Century Casinos Cripple Creek, Inc., and WMCK Acquisition Corp. ("Borrowers"); and Century Casinos, Inc. ("Guarantor"), dated November 11, 1997. 10.70 Second Amendment to the Credit Agreement dated as of March 31, 1997, between Wells Fargo Bank, N.A. ("Lender"); WMCK Venture Corp., Century Casinos Cripple Creek, Inc., and WMCK Acquisition Corp. ("Borrowers"); and Century Casinos, Inc. ("Guarantor"), dated January 28, 1998. 6. The following exhibits were filed with the Form 10-QSB for the quarterly period ended June 30, 1998 and are incorporated herein by reference: Exhibit No. Description ------------ ----------- 10.71 Termination of Stock Transfer and Registration Rights Agreement dated May 1, 1998, between Century Casinos, Inc. and Gary Y. Findlay 10.72 Promissory Note dated April 30, 1998, between Century Casinos, Inc. and Gary Y. Findlay 10.73 Termination of Stock Transfer and Registration Rights Agreement dated June 2, 1998, between Century Casinos, Inc. and James A. Gulbrandsen 10.74 Promissory Note dated June 2, 1998, between Century Casinos, Inc. and James A. Gulbrandsen 10.76 Casino Consulting Agreement dated March 25, 1998, by and between Rhodes Casino S.A., Century Casinos, Inc. and Playboy Gaming International Ltd. 22 7. The following exhibits were filed with the Form 10-KSB for the fiscal year ended December 31,1998 and are incorporated herein by reference: Exhibit No. Description ------------ ----------- 10.77 Third Amendment to the Credit Agreement dated as of March 31, 1997, between Wells Fargo Bank, N.A. ("Lender"); WMCK Venture Corp., Century Casinos Cripple Creek, Inc., and WMCK Acquisition Corp. ("Borrowers"); and Century Casinos, Inc. ("Guarantor"), dated November 4, 1998. 10.78 Parking Lease - Option to Purchase dated June 1, 1998, between the City of Cripple Creek ("Lessor") and WMCK Venture Corporation ("Lessee") 8. The following exhibits were filed with the Form 10-QSB for the quarterly period ended March 31, 1999 and are incorporated herein by reference: Exhibit No. Description ------------ ----------- 10.79 Casino Services Agreement dated January 4, 1999 by and between Casino Millennium a.s., Century Casinos Management, Inc. and B.H. Centrum a.s. 10.80 Option to Purchase Real Property dated March 25, 1999, by and between Robert J. Elliott ("Optionor") and WMCK Venture Corp. ("Optionee"). 10.81 Letter Amendment to Note Agreement dated April 1, 1999, by and between Century Casinos, Inc. and Thomas Graf 9. The following exhibit was filed with the Form 10-QSB for the quarterly period ended June 30, 1999 and is incorporated herein by reference: Exhibit No. Description ------------ ----------- 10.82 Master Lease Agreement dated January 4, 1999 by and between Casino Millennium a.s. and Century Management und Beteiligungs GmbH 10. The following exhibit was filed with the Form 10-QSB for the quarterly period ended September 30, 1999 and is incorporated by reference: Exhibit No. Description ------------ ----------- 10.83 Waiver and Release and Consulting Agreement dated October 15, 1999 by and between Norbert Teufelberger and Century Casinos, Inc. 11. The following exhibits are filed herewith: Exhibit No. Description ------------ ----------- 10.84 Marketing and Investor Relations Agreement, dated November 5, 1999, by and between Century Casinos, Inc. and advice! Investment Services GmbH, and related Warrant Agreement 23 10.85 Fourth Amendment to the Credit Agreement, dated as of March 31, 1997, between Wells Fargo Bank, N.A. ("Lender"); WMCK Venture Corp., Century Casinos Cripple Creek, Inc., and WMCK Acquisition Corp. ("Borrowers"); and Century Casinos, Inc. ("Guarantor"), dated November 15, 1999 10.86 Casino Management Agreement, dated December 3, 1999, by and between Caledon Casino Bid Company (Pty) Limited and Century Casinos Africa (Pty) Ltd. 10.87 Shareholders Agreement, dated December 3, 1999, and Addendum to the Agreement, dated December 9, 1999, by and between Caledon Casino Bid Company (Pty) Limited, Caledon Overberg Investments (Pty) Limited, Century Casinos Africa (Pty) Ltd., Century Casinos, Inc. (not as a shareholder or party, but for clauses 4.2.3 and 6.7 of this agreement only), Caledon Hotel Spa and Casino Resort (Pty) Limited, Fortes King Hospitality (Pty) Limited, The Overberger Country Hotel and Spa (Pty) Limited, and Senator Trust 10.88 Memorandum of Agreement, dated January 7, 2000, by and between B. H. Centrum a.s (a subsidiary of Ilbau and Bau Holding) and Century Casinos, Inc. 10.89 Assumption and Modification Agreement, dated February 7, 2000, by and between Marcie I. Elliott ("Optionor") and WMCK Venture Corporation ("Optionee") 10.90 Commercial Contract to Buy and Sell Real Estate, dated November 17, 1999, by and between WMCK Venture Corporation ("Buyer") and Saskatchewan Investments, Inc. ("Seller") 10.91 Prepayment and Release, dated January 19, 2000, by and between Switzerland County Development Corp. and Century Casinos Management, Inc. 10.92 Amendment No. 1 to Parking Lease - Option to Purchase, dated February 17, 2000, by and between City of Cripple Creek ("Lessor") and WMCK Venture Corporation ("Lessee") 21. Subsidiaries of the Registrant 23.1 Consent of Independent Accountants 27. Financial Data Schedule b. Reports on Form 8-K Filed During the Registrant's Fourth Fiscal Quarter: ------------------------------------------------------------------------ No reports on Form 8-K were filed by the Company during the fourth quarter of its fiscal year ended December 31, 1999. 24 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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, in the City of Cripple Creek, State of Colorado on March 8, 2000. CENTURY CASINOS, INC. By:/s/ Erwin Haitzmann --------------------- Erwin Haitzmann, Chairman of the Board and Chief Executive Officer /s/ Larry Hannappel --------------------- Larry Hannappel, Chief Accounting Officer (Principal Accounting Officer) POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Erwin Haitzmann, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Form 10-KSB, and to file the same, with all exhibits thereto, and other documentation in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities indicated on March 8, 2000. Signature Title - --------- ----- /s/ Erwin Haitzmann Chairman of the Board and - --------------------- Chief Executive Officer Erwin Haitzmann /s/ Peter Hoetzinger Vice Chairman of the Board - --------------------- and President Peter Hoetzinger /s/ James D. Forbes Director - ---------------------- James D. Forbes /s/ Gottfried Schellmann Director - -------------------------- Gottfried Schellmann /s/ Robert S. Eichberg Director - ------------------------- Robert S. Eichberg 25 CENTURY CASINOS, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Number ------------ Independent Auditors' Report F2 Consolidated Balance Sheet as of December 31, 1999 F3 Consolidated Statements of Income for the Years Ended F4 December 31, 1999 and 1998 Consolidated Statements of Comprehensive Income for the F5 Years Ended December 31, 1999 and 1998 Consolidated Statements of Shareholders' Equity for the F6 Years Ended December 31, 1999 and 1998 Consolidated Statements of Cash Flows for the Years F7 Ended December 31, 1999 and 1998 Notes to Consolidated Financial Statements F9 F1 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Shareholders of Century Casinos, Inc. We have audited the accompanying consolidated balance sheet of Century Casinos, Inc. and subsidiaries as of December 31, 1999, and the related consolidated statements of income, comprehensive income, shareholders' equity and cash flows for the two years in the period then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Century Casinos, Inc. and subsidiaries at December 31, 1999, and the results of their operations and their cash flows for the two years in the period then ended in conformity with generally accepted accounting principles. DELOITTE & TOUCHE LLP Denver, Colorado March 6, 2000 F2 CENTURY CASINOS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET - ------------------------------------------
DECEMBER 31, 1999 ------------------- ASSETS CURRENT ASSETS: Cash and cash equivalents $ 2,508,363 Receivables 710,577 Prepaid expenses and other 343,030 ------------------- Total current assets 3,561,970 PROPERTY AND EQUIPMENT, NET 19,533,235 GOODWILL, NET 9,915,626 OTHER ASSETS 1,012,283 ------------------- TOTAL $ 34,023,114 =================== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of long-term debt $ 220,405 Accounts payable and accrued liabilities 2,212,866 ------------------- Total current liabilities 2,433,271 LONG-TERM DEBT, LESS CURRENT PORTION. 10,458,552 COMMITMENTS AND CONTINGENCIES (NOTES 4 AND 7) SHAREHOLDERS' EQUITY: Preferred stock; $.01 par value; 20,000,000 shares authorized; no shares issued and outstanding Common stock; $.01 par value; 50,000,000 shares authorized; 15,861,885 shares issued; 14,476,885 shares outstanding 158,619 Additional paid-in capital 23,329,458 Accumulated other comprehensive loss (32,325) Accumulated deficit (860,779) ------------------- 22,594,973 Treasury stock - 1,385,000 shares, at cost (1,463,682) ------------------- Total shareholders' equity 21,131,291 ------------------- TOTAL $ 34,023,114 ===================
See notes to consolidated financial statements. F3 CENTURY CASINOS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME - ------------------------------------------ FOR THE YEAR ENDED DECEMBER 31, ------------------------------- 1999 1998 ---- ---- OPERATING REVENUE: Casino $ 22,726,004 $ 19,036,621 Food and beverage 933,387 878,991 Hotel 149,131 62,624 Other 428,769 152,769 ------------ ------------ 24,237,291 20,131,005 Less promotional allowances (653,120) (672,153) ------------ ------------ Net operating revenue 23,584,171 19,458,852 ------------ ------------ OPERATING COSTS AND EXPENSES: Casino 8,877,881 7,755,733 Food and beverage 504,466 490,290 Hotel 160,467 27,778 General and administrative 6,710,215 5,850,870 Depreciation and amortization 3,310,455 2,996,680 ------------ ------------ Total operating costs and expenses 19,563,484 17,121,351 ------------ ------------ INCOME FROM OPERATIONS 4,020,687 2,337,501 Other expense, net (53,590) (286,612) ------------ ------------ INCOME BEFORE INCOME TAXES 3,967,097 2,050,889 Provision for income taxes 1,746,000 123,000 ------------ ------------ NET INCOME $ 2,221,097 $ 1,927,889 ============ ============ INCOME PER SHARE, BASIC AND DILUTED $ 0.15 $ 0.13 ============ ============ See notes to consolidated financial statements. F4
CENTURY CASINOS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - --------------------------------------------------- FOR THE YEAR ENDED DECEMBER 31, ------------------------------- 1999 1998 ---- ---- NET INCOME $ 2,221,097 $ 1,927,889 Foreign currency translation adjustments (17,017) 12,469 ----------- ----------- COMPREHENSIVE INCOME $ 2,204,080 $1,940,358 =========== ===========
See notes to consolidated financial statements. F5
CENTURY CASINOS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 Accumulated Additional Other Common Stock Paid -in Comprehensive Accumulated Treasury Stock Total Shares Amount Capital Income (Loss) Deficit Shares Amount ---------- -------- --------- ------------- ----------- ------ ------ ----- BALANCE AT DECEMBER 15,861,885 $158,619 $24,907,543 $(27,777) $(5,009,765) $20,028,620 31, 1997 Amortization of 44,612 44,612 warrants issued to consultant Issuance of cash and (1,629,000) (1,629,000) Notes to former principals of Gold Creek Associates Purchases of 1,157,100 (1,236,839) (1,236,839) treasury stock Other comprehensive 12,469 12,469 income Net income 1,927,889 1,927,889 ---------- ------- ---------- ------- --------- --------- ---------- ---------- BALANCE AT DECEMBER 15,861,885 158,619 23,323,155 (15,308) (3,081,876) 1,157,100 (1,236,839) 19,147,751 31, 1998 ---------- ------- ---------- ------- --------- --------- ---------- ---------- Amortization of 6,303 6,303 warrants issued to directors Purchases of 227,900 (226,843) (226,843) treasury stock Other comprehensive (17,017) (17,017) loss Net income 2,221,097 2,221,097 --------- -------- ----------- --------- ---------- --------- ------------ ----------- BALANCE AT DECEMBER 15,861,885 $158,619 $23,329,458 $(32,325) $(860,779) 1,385,000 $(1,463,682) $21,131,291 31, 1999 ========== ======== =========== ========= ========== ========= ============ ===========
See notes to consolidated financial statements. F6
CENTURY CASINOS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS - ----------------------------------------- FOR THE YEAR ENDED DECEMBER 31, ------------------------------- 1999 1998 ---- ---- CASH FLOW FROM OPERATING ACTIVITIES: Net income $2,221,097 $1,927,889 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 1,968,951 1,655,176 Amortization of goodwill 1,341,504 1,341,504 Amortization of deferred financing costs 127,429 104,044 Income from terminated projects, net (1,040,000) (687,128) (Gain) loss on disposition of assets 9,504 (46,169) Deferred tax benefit (99,000) (499,000) Other noncash charges 6,303 44,612 Changes in operating assets and liabilities: Receivables (513,525) (25,238) Prepaid expenses and other assets (47,204) 85,914 Accounts payable and accrued liabilities (131,530) 320,268 ---------- ---------- Net cash provided by operating activities: 3,843,529 4,221,872 ---------- ---------- CASH FLOW FROM INVESTING ACTIVITIES: Purchases of property and equipment (2,644,756) (5,230,734) Sales (purchases) of short-term investment securities, net 1,038,496 (1,038,496) Proceeds from terminated projects 1,040,000 981,000 Expenditures for deposits and other assets (353,265) (638,034) Proceeds received from disposition of assets 8,200 160,482 Payments to former principals of Gold Creek Associates (534,000) ---------- ---------- Net cash used in investing activities (911,325) (6,299,782) ---------- ---------- CASH FLOW FROM FINANCING ACTIVITIES: Proceeds from borrowings $12,990,550 $14,477,778 Principal repayments and prepayment premium on borrowings (15,363,152) (13,115,144) Deferred financing costs (100,259) Purchases of treasury stock (226,843) (1,236,839) ---------- ---------- Net cash provided by (used in) financing activities (2,599,445) 25,536 ---------- ---------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 332,759 (2,052,374) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 2,175,604 4,227,978 ---------- ---------- CASH AND CASH EQUIVALENTS AT END OF YEAR $2,508,363 $2,175,604 ========== ==========
F7 SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Issuance of notes to former principals of Gold Creek Associates $1,095,000
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid by the Company was $947,000 in 1999 and $1,194,000 in 1998. Income taxes paid by the Company were $1,883,000 in 1999 and $670,000 in 1998. See notes to consolidated financial statements. F8 CENTURY CASINOS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ---------------------------------------------- 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION Century Casinos, Inc. and subsidiaries (the "Company") own and operate a limited-stakes gaming casino in Cripple Creek, Colorado, manage a hotel casino in Prague, Czech Republic, and regularly pursue additional gaming opportunities internationally and in the United States. Prior to July 1, 1996, the Company's operations in Cripple Creek, Colorado, consisted of Legends Casino ("Legends"), which the Company acquired on March 31, 1994, through a merger with Alpine Gaming, Inc. ("Alpine"). On July 1, 1996, the Company acquired the net assets of Gold Creek Associates, L.P. ("Gold Creek"), the owner of Womack's Saloon & Gaming Parlor ("Womacks"), which is immediately adjacent to Legends. Following the Company's acquisition of Womacks, interior renovations were undertaken on both properties to facilitate the operation and marketing of the combined properties as one casino under the name Womacks/Legends Casino. The Company's operating revenue for both 1999 and 1998 is derived principally from its casino operations in Cripple Creek. 2. SIGNIFICANT ACCOUNTING POLICIES CONSOLIDATION - The accompanying consolidated financial statements Include the accounts of the Company and its majority-owned subsidiaries. All significant intercompany transactions and balances have been eliminated. USE OF ESTIMATES - The preparation of the accompanying financial Statements in accordance with generally accepted accounting principles Requires the use of estimates by management in determining the reported amount of certain assets, liabilities, revenues and expenses. Actual results could differ from those estimates. CASH EQUIVALENTS - All highly liquid investments with a maturity of three months or less at the time of purchase are considered to be cash equivalents. FAIR VALUE OF FINANCIAL INSTRUMENTS - In accordance with the reporting and disclosure requirements of Statement of Financial Accounting Standards ("SFAS") No. 107, "Disclosures about Fair Value of Financial Instruments," the Company calculates the fair value of financial instruments and includes this additional information in the notes to its financial statements when the fair value does not approximate the carrying value of those financial instruments. Fair value is determined using quoted market prices whenever available. When quoted market prices are not available, the Company uses alternative valuation techniques such as calculating the present value of estimated future cash flows utilizing risk-adjusted discount rates. Except for an interest rate swap (see Note 5), which has no carrying value in the consolidated financial statements, the Company's carrying value of financial instruments approximates fair value at December 31, 1999. PROPERTY AND EQUIPMENT - Property and equipment are stated at cost. Depreciation of assets in service is provided using the straight-line method over the estimated useful lives or the applicable lease term, if shorter. F9 GOODWILL - Goodwill represents the excess of purchase price over net identifiable assets acquired. Goodwill recognized in the 1994 Alpine acquisition, which is not deductible for income tax purposes, has an unamortized balance of $3,122,436 at December 31, 1999, and is being amortized on a straight-line basis over 10 years. Goodwill recognized in the 1996 Gold Creek acquisition has an unamortized balance of $6,793,190 at December 31, 1999, is being amortized on a straight-line basis over 15 years, and is deductible for income tax purposes. Total accumulated amortization for all goodwill is $6,472,381 as of December 31, 1999. IMPAIRMENT OF LONG-LIVED ASSETS - The Company reviews long-lived assets for possible impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. If there is an indication of impairment, which is estimated as the difference between anticipated undiscounted future cash flows and carrying value, the carrying amount of the asset is written down to its estimated fair value by a charge to operations. Estimates of future cash flows are inherently subjective and are based on management's best assessment of expected future conditions. REVENUE RECOGNITION - Casino revenue is the net win from gaming activities, which is the difference between gaming wins and losses. Management and consulting fees are recognized as revenue as services are provided. PROMOTIONAL ALLOWANCES - Food and beverage furnished without charge to customers is included in gross revenue at a value which approximates retail and then deducted as complimentary services to arrive at net revenue. The estimated cost of such complimentary services is charged to casino operations, and was $854,565 in 1999 and $842,305 in 1998. FOREIGN CURRENCY TRANSLATION - Adjustments resulting from the translation of the accounts of the Company's Austrian and South African subsidiaries from the local functional currency to U.S. dollars are recorded as other comprehensive income or loss in the consolidated statements of shareholders' equity. Adjustments resulting from the translation of transactions which are denominated in a currency other than U.S. dollars are recognized in the statement of operations. INCOME TAXES - The Company accounts for income taxes using the liability method, which provides that deferred tax assets and liabilities are recorded based on the difference between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. STOCK-BASED COMPENSATION - The Company follows the intrinsic value based method for valuing stock options or similar equity instruments granted to employees, as permitted by SFAS No. 123, "Accounting for Awards of Stock-Based Compensation." The intrinsic value based method generally provides that no compensation expense is recognized when the option exercise price is equal to or greater than the trading price of the stock on the date of grant. The Company follows the fair value based method for valuing stock options or similar equity investments granted to non-employees. EARNINGS PER SHARE - The Company follows the provisions of SFAS No. 128, "Earnings per Share," in calculating basic and diluted earnings per share. Basic earnings per share considers only outstanding common stock in the computation. Diluted earnings per share gives effect to all potentially dilutive securities. COMPREHENSIVE INCOME - The Company follows SFAS No. 130, "Reporting Comprehensive Income," which provides for a more inclusive financial reporting measure than net income, and includes all changes in equity during the period, except those resulting from investments by, and distributions to, shareholders of the Company. OPERATING SEGMENTS - Management considers the Company's business to presently comprise a single operating segment, as that term is defined by SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." F10 RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS - In 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," which establishes accounting and reporting standards for derivative instruments and hedging activities. The pronouncement requires that a company designate the intent of a derivative to which it is a party, and prescribes measurement and recognition criteria based on the intent and effectiveness of the designation. The Company will be required to adopt SFAS No. 133 no later than the first quarter of 2001. The Company is in the process of evaluating the impact that will result from the adoption of SFAS No. 133. RECLASSIFICATIONS - Certain reclassifications have been made in the 1998 financial statements to conform with the 1999 presentation. 3. RECEIVABLES FROM OFFICERS/DIRECTORS At December 31, 1999, the Company had outstanding receivables from officers/directors totaling $286,903, of which $195,000 is receivable in 2000 and classified as a current asset. The remaining amounts are due in 2001 and classified as other noncurrent assets. The receivables are noninterest bearing. 4. PROPERTY AND EQUIPMENT Property and equipment at December 31, 1999, consist of the following:
Estimated Service Life in Years -------------- Land $ 8,685,495 Buildings and improvements 7,158,349 7 - 31 Gaming equipment 6,262,530 3 - 7 Furniture and office equipment 1,471,254 5 - 7 Other equipment 936,876 3 - 7 Capital projects in process 432,753 -------------- 24,947,257 Less accumulated depreciation (6,334,527) -------------- 18,612,730 Nonoperating casino and land 920,505 -------------- Property and equipment, net $ 19,533,235 ==============
In June 1998, the Company began leasing parking spaces from the City of Cripple Creek under a five-year agreement which requires annual lease payments of $90,000. The agreement contains a purchase option whereby the Company may purchase the property for $3,250,000, less cumulative lease payments ($142,500 through December 31, 1999), at any time during the lease term. In February 2000, the agreement was amended to extend the term to 2010. F11 In March 1999, the Company entered into a purchase option agreement for a property in Cripple Creek, Colorado, situated across the street from its Womacks/Legends Casino on Bennett Avenue. The agreement, as amended on February 7, 2000, expires March 31, 2004 and provides for option payments as follows: 2000 - $37,500; 2001 - $49,000; 2002 - $24,000; 2003 - $24,000; and 2004 - $6,000. The Company may exercise its option to purchase the property at any time during that period for a price of $1,500,000, less 50% of cumulative monthly option payments.On November 17, 1999, the Company entered into a contract to purchase two parcels of land in Cripple Creek for $1,850,000, of which $185,000 has been paid as a deposit and included in other assets in the accompanying consolidated balance sheet as of December 31, 1999. The closing date is April 17, 2000, unless extended to June 14, 2000, as permitted under certain provisions of the contract, at which time, the remainder of the purchase price is payable. The two parcels are in the immediate vicinity of the Womacks/Legends Casino and will provide additional parking capacity for the casino. 5. LONG-TERM DEBT Long-term debt at December 31, 1999, consists of the following:
Borrowings under revolving line of credit facility with bank $ 9,142,911 Notes payable to former principals of Gold Creek 583,599 Convertible debenture 500,000 Note payable to founding shareholder, unsecured 380,000 Notes payable secured by gaming equipment 72,447 ----------- Total long-term debt 10,678,957 Less current portion (220,405) ----------- Long-term portion $10,458,552 ===========
At December 31, 1999, the Company had a $20 million reducing revolving line of credit facility (the "RCF") with Wells Fargo Bank ("Wells Fargo") that expires on April 1, 2001. The RCF is secured by substantially all of the real and personal property of Womacks/Legends Casino, the Company's principal operating assets. The interest rate on the outstanding amount is equal to the bank's prime rate of 8.5% at December 31, 1999. The interest rate is based on the Company's leverage ratio, as defined, calculated on a trailing-four-quarters basis and adjusted quarterly. Beginning April 1, 1999, the borrowing capacity under the RCF has been reduced by $555,600 quarterly to $18.3 million as of December 31, 1999, resulting in an unused borrowing capacity at December 31, 1999 of approximately $9.2 million. Quarterly repayments of principal are required to the extent that outstanding borrowings exceed borrowing capacity at the beginning of any quarter. Based upon the balance of outstanding borrowings at December 31, 1999, and the scheduled reductions in borrowing capacity over the next 12 months, the entire balance of outstanding borrowings has been classified as long-term in the accompanying balance sheet. Under the RCF, the Company is required to comply with certain customary financial covenants, and is subject to certain capital expenditure requirements and restrictions on investments. F12 As of March 6, 2000, the Company is in the final stages of negotiations With Wells Fargo to increase the RCF to $26 million and extend the maturity date of the agreement until 2004. The proposed agreement would also provide for quarterly principal reductions in the RCF of $722,000 beginning July 2000. Management expects the agreement to be finalized before the end of the first quarter 2000, however, there can be no assurances that the RCF will be renewed or extended on the terms described herein. In 1998, the Company entered into a five-year interest rate swap agreement on $7.5 million notional amount of debt under the RCF, whereby the Company pays a LIBOR-based fixed rate and receives a LIBOR-based floating rate. Generally, the swap arrangement is advantageous to the Company to the extent that interest rates increase in the future and disadvantageous to the extent that they decrease. The net amount paid or received by the Company on a quarterly basis results in an increase or decrease to interest expense. Net additional interest expense to the Company under the swap agreement in 1999 was $14,718. At December 31, 1999, termination of the interest rate swap would have resulted in a gain to the Company of approximately $326,000. During the second quarter of 1998, the Company reached agreement with the two former principals of Gold Creek to pay them a total of $1,629,000, consisting of cash of $534,000 and two promissory notes totaling $1,095,000, in lieu of issuing common stock as previously provided for in connection with the acquisition of Gold Creek's assets. The notes bear interest at 8.75% and require aggregate monthly payments of principal and interest of $16,100 through June 2001, at which time, the remaining aggregate principal of $356,681 is due and payable. On May 30, 1996, the Company issued a convertible debenture in the Principal amount of $500,000 to a private investor. The proceeds were used in financing the Gold Creek acquisition. The debenture bears interest at 10.5%, payable quarterly. The holder has the option to convert, in one or more transactions, all or a portion of the outstanding principal into the Company's common stock at $1.84 per share, subject to a minimum per conversion transaction of $50,000. As of December 31, 1999, the Company has the option to prepay the debenture, in whole or in part, at 122% of the outstanding principal. The prepayment amount declines to 116% after May 30, 2000. The entire unpaid principal is due on May 30, 2001. In April 1999, the terms of an unsecured note payable to a founding shareholder were amended. The previously existing principal balance of $420,360, plus accrued interest of approximately $60,000, were combined into a new principal amount of $480,000. The Company concurrently made a principal repayment of $100,000. The remaining principal of $380,000 bears interest at 6%, payable quarterly. The noteholder, at his option, may elect to receive any or all of the unpaid principal by notifying the Company on or before April 1 of any year. Payment of the principal amount so specified would be required by the Company on or before January 1 of the following year. The entire outstanding principal is otherwise due and payable on April 1, 2004. Accordingly, the note is classified as noncurrent in the accompanying consolidated balance sheet as of December 31, 1999. The Company has acquired certain of its gaming equipment subject to vendor financing at fixed rates of 10% to 10.5%. As of December 31, 1999, scheduled maturities of long-term debt are as follows: 2000 - $220,405 and 2001 -$10,458,552. F13 6. SHAREHOLDERS' EQUITY In February 1998, the Company's Board of Directors approved a discretionary program to repurchase up to $1 million of the Company's outstanding common stock. In October 1998, the Board voted to increase the limit on the stock repurchase program from $1 million to an aggregate of $2 million. Through December 31, 1999, the Company had repurchased 1,385,000 shares at an average cost per share of $1.06. In April 1994, the Board of Directors of the Company adopted the Employees' Equity Incentive Plan (the "Plan"), which was amended effective November 22, 1995, and further amended November 25, 1996. The Plan provides for the grant of awards to eligible employees in the form of stock, restricted stock, stock options, stock appreciation rights, performance shares or performance units, all as defined in the Plan. The Plan provides for the issuance of up to 4,500,000 shares of common stock through the various forms of award permitted. Through December 31, 1999, only stock option awards had been granted under the Plan. Stock options may be either incentive stock options, for which the option price may not be less than fair market value at the date of grant, or nonstatutory options, which may be granted at any option price. All options must have an exercise period not to exceed ten years. Options granted to date have either one-year or two-year vesting periods. On February 8, 1999, the Company's Board of Directors approved the award of options on 809,000 shares of the Company's common stock under the Employees' Equity Incentive Plan. The options have an exercise price of $0.75 per share, will vest in their entirety on February 8, 2000, and have an exercise period of ten years. Transactions regarding the Plan are as follows:
1999 1998 --------------------- ----------------------- Weighted- Weighted- Average Average Exercise Exercise Shares Price Shares Price Incentive Stock Options: Outstanding at January 1 2,606,400 $1.43 2,615,400 $1.44 Granted 809,000 0.75 Cancelled or forfeited (508,900) 1.07 (9,000) 1.50 --------- --------- Outstanding at December 31 2,906,500 1.35 2,606,400 1.43 ========= ========= Options exercisable at 2,273,500 $1.44 2,584,267 $1.44 December 31 ========= =========
F14 Summarized information regarding all options outstanding at December 31, 1999, is as follows:
Weighted- Number Average Exercise Outstanding Remaining Exercisable Price. At Year End Term in Years At Year End - ---------- ----------- ------------- ----------- $0.75 833,000 8.7 180,000 0.94 20,000 2.8 20,000 1.50 2,054,000 5.7 2,054,000 1.63 30,000 6.0 30,000 2.25 9,500 5.4 9,500 ----------- ------------- ---------- 2,946,500. 6.5 2,293,500 ========== ============= ==========
The Company applies Accounting Principles Board Opinion No. 25 and related interpretations in accounting for options granted under the Plan. Accordingly, no compensation cost has been recognized in the accompanying financial statements. Had compensation cost for the Plan been determined based on the fair value at the grant dates for awards under the Plan, consistent with the method recommended, but not required, by SFAS No.123, the Company's net income and earnings per share would have been adjusted to the pro forma amounts indicated below:
1999 1998 ---- ---- Net income As reported $2,221,097 $1,927,889 Pro forma $1,998,097 $1,881,683 Earnings per share, basic and diluted As reported $0.15 $0.13 Pro forma $0.13 $0.12
The fair value of options granted under the Plan was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:
1999 1998 --------- -------- Weighted-average fair value of options granted during the year $0.47 $0.57 Weighted-average risk-free interest rate 5.6% 5.5% Weighted-average expected life 10 yrs. 5 yrs. Weighted-average expected volatility 43 67% Weighted-average expected dividends $0 $0
F15 In 1995, the Company entered into a consulting agreement with a third Party whereby the consultant will assist the Company, from time to time, in seeking investors and business opportunities. The agreement provides that, upon the consummation of certain transactions, the Company will issue to the consultant warrants to purchase the Company's common stock. The number of shares and exercise price are determined based on a formula, which depends upon the type and size of transaction consummated and the recent trading price of the common stock. In connection with a 1995 private placement, the Company issued warrants to the consultant for 71,428 shares exercisable at $1.05 per share. The warrants have a five-year term from the date of issue. The consulting agreement may be terminated by either party upon 30 days notice. In June 1996, the Company completed a private placement of 4,072,233 shares of its common stock at an average price of $1.43 per share, with proceeds, net of selling commissions, of approximately $4,470,000. In connection with this private placement, the Company issued warrants to a placement agent to purchase 150,000 shares of its common stock at $2.36 per share. The warrants expire in June 2001. In connection with a purchase of the Company's common stock in 1994, the Company granted to an unaffiliated third party options to acquire 230,000 shares of common stock at $3.00 per share. The options expired in March 1999. In connection with the business combination with Alpine, warrants were granted to certain key Alpine employees to purchase 235,000 shares of common stock at an exercise price of $3.49; in 1997, the exercise price relating to warrants covering 150,000 shares was reduced to $1.50. The warrants expired in March 1999. Warrants to purchase 1,000,000 shares of common stock at an exercise price of $2.25 were issued in connection with a private placement of common stock in July 1994 and expired in June 1999. In 1995, the Company completed a private placement of 1,460,000 units at $1.50 per unit, each unit consisting of one share of common stock and one warrant to purchase one share of common stock at an exercise price of $2.50 per share. The warrants expired December 31, 1999. 7. COMMITMENTS, CONTINGENCIES AND OTHER MATTERS PRAGUE, CZECH REPUBLIC - In March 1998, the Company entered into a joint venture agreement with B. H. Centrum a.s. ("BHC"), a Czech subsidiary of Bau Holding AG, one of the largest construction and development companies in Europe, to form Century Casinos Praha a.s. The Company was to hold a 49% interest in the venture, which would operate a casino in the five-star Marriott Hotel in Prague, Czech Republic. Subsequent to signing the joint venture agreement, laws governing casino licenses in the Czech Republic were amended to preclude a foreign entity from holding an equity interest in a casino license. In January 1999, the Company entered into a 20-year definitive agreement with Casino Millennium a.s., a Czech company that has secured the leasing rights from the hotel, to provide casino management services for ten percent of the casino's gross revenue, and to provide and lease to the casino certain gaming equipment for 45% of the casino's net profit. During 1999, the Company purchased and leased to Casino Millennium a.s. gaming equipment with a total cost of approximately $1.3 million. In addition, the Company advanced operating funds to the casino of approximately $208,000. In July 1999, Casino Millennium a.s. commenced operations of its casino. Through December 31, 1999, the Company earned management fee income from Casino Millennium totaling $109,000, however, no lease income was earned by the Company. At December 31, 1999, receivables in the accompanying consolidated balance sheet includes $299,110 relating to advances and management fees. F16 Subsequent to the formation of Casino Millennium a.s., the Czech laws were again amended to permit the Czech Republic's Ministry of Finance to make exceptions to the foreign ownership restriction, thereby allowing a foreign entity to hold an equity interest in a casino license. Accordingly, in January 2000, the Company entered into a memorandum of agreement with BHC to continue the casino project on a joint venture basis with each party having a 50% equity interest. It is anticipated that this will be accomplished by the formation of a new joint venture or by the joint acquisition of Casino Millennium a.s. by the Company and BHC. The current shareholders of Casino Millennium a.s. have consented to the sale of their respective equity interests or the sale of its net assets and liabilities. It is the intention of the Company and BHC to enter into new lease and management agreements under the same terms and conditions described above. It is also expected that the Company and BHC will contribute certain casino equipment and improvements currently being leased to Casino Millennium and equalize their respective contributions to the joint venture, taking into consideration previously advanced operating funds. Management is not able to determine what, if any, additional contributions might be required by the Company in order to complete the formation of the joint venture. SOUTH AFRICA-CALEDON - On February 16, 2000, Caledon Casino Bid Company (Pty) Limited ("CCBC") received the only successful applicant status from the Western Cape Gambling and Racing Board (the "Western Cape Board") for a casino project in Caledon, South Africa. The final license is expected to be issued to CCBC upon the provision, within 60 days of the award date, of the required financial guarantees and the satisfaction of certain other conditions precedent which are primarily procedural in nature. CCBC anticipates that it will be able to satisfy the conditions precedent to the award within the time stipulated. The Company's subsidiary, Century Casinos Africa (Pty) Limited ("CCA"), will have a 50% equity interest in CCBC by virtue of an agreement entered into between the Company and CCA, together with various other affiliated (not with the Company) entities. Pursuant to the shareholders' agreement of CCBC, upon the award of the license to and the obtaining of certain debt financing by CCBC, the Company is obligated to fund R10 million (South African Rands) of equity and R15 million in loans to CCBC (approximately $1,630,000 and $2,445,000, respectively, based on the December 31, 1999 currency exchange rate). In December 1999, in anticipation of a successful application, the Company entered into a ten-year casino management agreement with the CCBC, which agreement may be extended at the Company's option for multiple ten-year periods. The Company will receive a management fee consisting of the following: (i) an amount equal to 3% (increasing to 4% and 5% in the second fiscal year of operations, variable based on levels of annual gross revenues) of annual gross revenues, as defined, and (ii) an amount equal to 7.5% of the casino's annual earnings before interest, income taxes, depreciation, amortization and certain other costs. SOUTH AFRICA-GAUTENG - In April 1998, the Gauteng Gambling and Betting Board (the "Gauteng Board") announced the award of the remaining two licenses for the province of Gauteng, South Africa. Silverstar Development Ltd. ("Silverstar"), the consortium to which the Company is the contracted casino management partner, and in which the Company holds a minority equity interest, had submitted an application for a proposed $70 million, 1,700 gaming position hotel/casino resort development. Silverstar was not awarded one of the licenses. The Company recorded an impairment allowance against its entire equity investment in Silverstar in the amount of $196,022, which is included in "other expense, net" in the accompanying consolidated statement of income for the year ended December 31, 1998. Silverstar subsequently filed a legal action with the High Court of South Africa (the "High Court") challenging the decision of the Gauteng Board and the provincial government in their failure to award a casino license to Silverstar on the grounds that the decision-making process was legally deficient. In March 1999, the High Court overturned the previous license award that had been sought by Silverstar, and remanded the licensing process for the West Rand region to the provincial F17 government. The competing license applicant appealed the ruling, but in April 1999, the High Court rejected the request for leave to appeal its March ruling. This defendant also made no request for leave to appeal with the Appeals Court, the final court of appeal. In June 1999, the Executive Council of the provincial government resolved not to concur with the Gauteng Board's recommendation of the competing applicant. In July 1999, the competing applicant instituted action in the Court seeking to overturn the Council's decision; however, the applicant has subsequently withdrawn an application requesting leave to appeal. There can be no certainty regarding an award of this gaming license or that this license will ultimately be awarded to Silverstar. RIVERBOAT DEVELOPMENT AGREEMENT-INDIANA - In September 1998, the Indiana Gaming Commission awarded a Certificate of Suitability to Pinnacle Gaming Development Corporation ("Pinnacle") to conduct riverboat gaming in Switzerland County. In accordance with the terms of the sale of the Company's interest in Pinnacle in 1995, the Company received payments of $1,040,000 in 1999 and $431,000 in 1998, which are included in "other expense, net" in the accompanying consolidated statements of income. Additionally, the Company was entitled to receive installment payments of $32,000 per month for the first 60 months of the riverboat's operation; however, subsequent to 1999, the Company elected to receive an aggregate discounted payment amount of $1,380,000, which was received and recognized as "other expense, net" in 2000. CONSULTING AGREEMENT-RHODES, GREECE - In 1998, the Company reached a consulting agreement (the "current agreement") with Rhodes Casino S.A. and Playboy Gaming International Ltd. ("Playboy") to assign certain of the Company's rights and delegate its responsibilities under a previously executed management and consulting agreement (the "previous agreement") pertaining to the operation of a casino on the island of Rhodes, Greece. In 1998, the Company received from Playboy a payment of $25,000 for certain preopening services performed to date. The Company also received payments totaling $50,000 in 1999 and is to receive additional annual payments of $50,000 in both 2000 and 2001. The Company will have no further obligations under the previous agreement unless, subsequent to the opening of the casino, Playboy is unwilling or unable to perform under the current agreement. In such event, the previous agreement, and the Company's obligations, would be reinstated together with the Company's right to receive up to $300,000 per year for the first three years of casino operations, with an aggregate minimum guarantee of approximately $250,000. SETTLEMENT OF NOTE RECEIVABLE FROM TERMINATED MANAGEMENT AGREEMENT - In March 1998, the Company negotiated an early settlement of its note receivable from SSK Game Enterprises, Inc. ("SSK"), with respect to the Company's casino management agreement with the Soboba Band of Mission Indians in California, which agreement was terminated in August 1995. Aggregate payments received pursuant to the note from August 1995 through the date of settlement were $2,457,727, of which the final $550,000 was recognized in income in 1998 and is included in "other expense, net" in the accompanying consolidated statement of income for the year ended December 31, 1998. No further payments will be received under the note. AGREEMENT WITH FORMER OFFICER/DIRECTOR - In October 1999, in connection with the termination of an officer/director's employment, the Company entered into a noncompetition agreement with the former officer/director with a term through March 31, 2001 for consideration of twelve monthly payments of $14,000 beginning January 2000. The area covered by the noncompetition agreement includes any geographical area in which the Company is present. The Company will reflect the future monthly payments as expense over the term of the noncompetition agreement. The agreement also provides for limited consulting services to be performed by the former officer/director during 2000. The accompanying financial statements as of December 31, 1999 include noncompetition amortization expense and an accrued liability of $28,000 relating to this agreement. F18 COLORADO DIVISION OF GAMING AUDIT - In 1998, the Colorado Division of Gaming (the "Division") conducted an audit of the Company's two Colorado gaming licenses covering the period August 1995 through July 1998. As a result of the audit, the Division alleged certain violations of Colorado gaming regulations and internal control procedures. The licensees have each entered into a Stipulation and Agreement whereby the licensees have agreed to fines totaling $120,000 and have submitted to the Division corrective action plans that are responsive to the Division's concerns. The corrective action plans have been approved by, and will be monitored for compliance by, the Division. Management believes that the licensees are in compliance with the corrective action plans. EMPLOYEE BENEFIT PLAN - In March 1998, the Company adopted the 401(k) Savings and Retirement Plan (the "Plan"). The Plan allows eligible employees to make tax-deferred contributions that are matched by the Company up to a specified level. The Company contributed $23,633 and $16,177 to the Plan in 1999 and 1998, respectively. OPERATING LEASE COMMITMENTS - The Company has entered into certain Noncancelable operating leases for real property and equipment. As of December 31, 1999, future minimum lease payments under existing leases agreements are $421,000 in 2000, $337,000 in 2001, $324,000 in 2002, $230,000 in 2003, $192,000 in 2004 and $80,000 thereafter. Rental expense was $574,052 in 1999 and $573,584 in 1998. STOCK REDEMPTION REQUIREMENT - Colorado gaming regulations require the disqualification of any shareholder who may be determined by the Colorado Division of Gaming to be unsuitable as an owner of a Colorado casino. Unless a sale of such common stock to an acceptable party could be arranged, the Company would repurchase the common stock of any shareholder found to be unsuitable under the regulations. The Company could effect the repurchase with cash, Redemption Securities, as such term is defined in the Company's Certificate of Incorporation and having terms and conditions as shall be approved by the Board of Directors, or a combination thereof.
8. INCOME TAXES The provision for income taxes, before extraordinary item, consists of the following: 1999 1998 ----------- ---------- Current: Federal $1,593,000 $ 512,000 State 252,000 110,000 ----------- ---------- 1,845,000 622,000 ----------- ---------- Deferred: Federal (90,000) (439,000) State (9,000) (60,000) ----------- ---------- (99,000) (499,000) ----------- ---------- $1,746,000 $ 123,000 =========== ==========
F19 The provision for income taxes differs from the amount of income tax Provision calculated by applying the U.S. statutory federal income tax rate of 34% to pretax income as follows:
1999 1998 ---- ---- Expected federal income tax provision at statutory rate $1,349,000 $697,000 Increase (decrease) due to: Goodwill amortization 252,000 252,000 (Income) loss of foreign subsidiary (4,000) 17,000 State income taxes, net of federal benefit 155,000 99,000 Penalties and fines 45,000 Other, net (6,000) 17,000 Change in valuation allowance (1,004,000) ---------- ----------- Provision for income taxes $1,746,000 $123,000 ========== ===========
Deferred income taxes reflect the net tax effects of temporary Differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes Deferred tax assets and liabilities at December 31, 1999, consist of the following:
Deferred tax assets: Property and equipment - noncurrent $439,000 Accrued liabilities and other - current 214,000 --------- 653,000 Deferred tax liabilities: Prepaid expenses - current (55,000) --------- Net deferred tax assets $598,000 =========
Net deferred tax assets of $159,000 and $439,000 are classified as current and noncurrent, respectively, and included in other assets in the accompanying consolidated balance sheet as of December 31, 1999. 9. OTHER EXPENSE, NET Other expense, net, consists of the following:
1999 1998 ---- ---- Interest income $ 43,265 $ 108,041 Interest expense (999,922) (1,023,906) Income from terminated projects, net 1,040,000 687,128 Amortization of deferred financing costs (127,429) (104,044) Gain (loss) on disposal of equipment (9,504) 46,169 ----------- ----------- $ (53,590) $ (286,612) =========== ===========
F20 10. EARNINGS PER SHARE Basic and diluted earnings per share were computed as follows:
1999 1998 ----------- ------------ Basic Earnings Per Share: Net income $ 2,221,097 $ 1,927,889 =========== ============ Weighted average common shares 14,631,719 15,300,516 =========== ============ Basic earnings per share $ 0.15 $ 0.13 =========== ============ Diluted Earnings Per Share: Net income, as reported $ 2,221,097 $ 1,927,889 Interest expense, net of income taxes, on convertible 32,918 32,918 Debenture ----------- ------------ Net income available to common shareholders $ 2,254,015 $ 1,960,807 =========== ============ Weighted average common shares 14,631,719 15,300,516 Effect of dilutive securities: Convertible debenture 271,739 271,73 Stock options and warrants 216,430 63,253 ------------ ----------- Dilutive potential common shares 15,119,888 15,635,508 ============ =========== Diluted earnings per share $ 0.15 $ 0.13 ============ =========== Excluded from computation of diluted earnings per share due to antidilutive effect: Options and warrants to purchase common shares 4,616,566 5,526,009 Weighted average exercise price $ 1.94 $ 1.99
F21 EX-10.84 2 MARKETING AND INVESTOR RELATIONS EXHIBIT 10.84 MARKETING AND INVESTOR RELATIONS AGREEMENT ------------------------------------------ To advice! Investment Services GmbH Attn. Mr. Rainer Goeritz Vienna, 1999 - November - 05 Gentlemen: Following is a summary of our discussions and agreement. WHEREAS, advice! Investment Services GmbH ("Advice" hereinafter) is a company that is able to provide Investor Relations services in various countries in Europe and has expressed a willingness to provide these services to Century Casinos, Inc. WHEREAS, Century Casinos, Inc. ("Advice" hereinafter) is desirous to find a company that is able and willing to provide various Investor Relations services in Austria, Germany and Switzerland. THEREFORE, CCI engages Advice in the manner outlined below. 1. Advice will perform marketing, public relations and investor relations tasks that include, but are not necessarily limited to the following: - - Make contacts on a continuous basis with existing CCI shareholders in Europe. - - Disburse information provided by the company to existing shareholders in Europe. - - Generate interest in CCI. - - Set up contacts with other PR companies in Europe to generate interest in the company in the future. - - Set up contacts with investment banks with regard to a possible financing in combination with a possible listing on a European stock exchange. - - Identify possible new projects and generate leads. - - Do market research for CCI with regard to the marketability of its stock in Europe. 2. The minimum number of hours that Advice will spend on performing the above tasks per month will be 20 hours. 1 3. The term during which Advice will perform its tasks under this Agreement will start with the date of signing this Agreement and will end on December 31, 2000. 4. As compensation for its efforts Advice will receive the option to purchase 360,000 shares of common stock of CCI at the price of US-$ 2.50 per share, such right being in place until December 31, 2000. The specifics of this are outlined in detail in the Warrant Agreement that is attached to this Agreement. 5. If CCI desires for Advice to perform Investor Relations tasks of a specific nature, then the compensation for those will be in cash and will be agreed upon between the parties prior to an engagement for those tasks. These cash payments may also include compensation for third party costs like travel expenses and room, food and beverage. 6. The parties agree to the exclusive jurisdiction of the state courts of Colorado, USA, in the event of any dispute under this Agreement as well as venue in the District Court of the City and County of Denver, Colorado, as exclusive venue for any dispute. If the above meets with your understanding of our agreement, please sign and send or fax back a copy to us. Sincerely, /s/ Erwin Haitzmann ____________________________ For CCI /s/ Rainer Goeritz ______________________________ For advice! 2 WARRANT AGREEMENT THIS WARRANT AGREEMENT is made this 13th day of December 1999, by and between CENTURY CASINOS, INC. ("Company"), and advice! Investment Services GmbH (the "Warrant Holder"); WITNESSETH: WHEREAS, the Warrant Holder has provided and continues to provide valuable public relations services to the Company; and WHEREAS, to induce the Warrant Holder to further its efforts on the Company's behalf, the Company desires to grant to the Warrant Holder a warrant to purchase shares of Common Stock of the Company; and NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the Company and the Warrant Holder hereby agree as follows: 1. Grant of Warrant. The Company hereby grants to the Warrant Holder on ---------------- the date of this Agreement the warrant or option to purchase 360,000 shares of Common Stock of the Company (the "Warrant Stock") subject to the terms and conditions herein contained, subject only to adjustment in such number of shares as provided in Paragraph 10. 2. Warrant Price. During the term of the warrant granted hereby, the -------------- purchase price for the shares of Warrant Stock granted herein is U.S. $2.50 per share (the "Warrant Price"), subject only to adjustment of such price as provided Paragraph 10. 3. Exercisability and Term of Warrant. The warrant granted hereby shall ---------------------------------- vest in its entirety as of the date of this Warrant Agreement. The warrant granted hereby shall terminate on December 31, 2000 at 5:00 p.m., U.S. mountain standard time. 4. Exercise by Warrant Holder. The warrant granted hereby shall be ----------------------------- exercisable only by the Warrant Holder. Furthermore, the warrant granted hereby shall not be transferable by the Warrant Holder, in whole or in part. The warrant granted hereby shall not, voluntarily or involuntarily, be subjected to any lien, directly or indirectly, by operation of law, or otherwise, including execution, levy, garnishment, attachment, pledge or bankruptcy. 5. Manner of Exercise of Warrant Holder. ------------------------ --------------- (a) The warrant granted hereby may be exercised by the Warrant Holder by giving written notice to the Company of an election to exercise such warrant. Such notice shall specify the number of shares Warrant Stock to be purchased hereunder, along with payment of the Warrant Price and shall be delivered to the Company at 200-220 East Bennett Avenue, P.O. Box 373, Cripple Creek, Colorado 80813. Upon receipt of such notice and subject to the other provisions of this Warrant Agreement, the Company shall, within a reasonable time, and upon payment of the full purchase price for the shares to be purchased, deliver to the Warrant Holder a certificate for the Warrant Stock so purchased. An exercise form for the warrant granted hereby is attached hereto. (b) The Warrant Price shall be paid in cash (United States currency) or by cashier's check payable to the order of the Company. 6. Rights as a Shareholder. The Warrant Holder or a transferee of the -------------------------- warrant granted hereby shall have no rights as a shareholder of the Company with respect to any Warrant Stock covered by the warrant granted hereby until the date of the issuance of a stock certificate for such 3 shares. No adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property), distributions or other rights for which the record date is prior to the date such stock certificate is issued. 7. Withholding Taxes. Upon exercise of the warrant granted hereby and ------------------ prior to the issuance of any stock as a result of such exercise, the Warrant Holder shall make appropriate arrangements acceptable to the Company to provide for the amount of withholding required by applicable U.S. federal, state or foreign tax laws. (a) As a condition to the issuance by the Company of the warrant granted hereby and Warrant Stock exercisable pursuant to this Agreement, the Warrant Holder (i) represents that the shares of Warrant Stock, if acquired, are being acquired for investment and not with a present intention of selling or otherwise distributing, and Warrant Holder agrees to make such other representations as may be necessary in order to comply with federal and applicable state securities laws or appropriate to qualify the issuance of the Warrant Stock as exempt from the U.S. Securities Act of 1933 and any other applicable securities laws, and (ii) represent that Warrant Holder shall not dispose of the shares of Warrant Stock in violation of the U.S. Securities Act of 1933 or any other applicable securities laws. The Company reserves the right to place a legend on any stock certificate issued pursuant to the exercise of the warrant granted hereby to assure compliance with the foregoing. (b) Warrant Holder acknowledges that (i) an investment in the Warrant Stock involves significant risks and may represent an illiquid investment, (ii) the Warrant Holder is able to bear the economic risks of an investment in the Warrant Stock and is able to maintain his investment in the Warrant Stock for an indefinite period of time, and (iii) Warrant Holder could bear a total loss of the investment. (c) Warrant Holder has such knowledge and experience in financial and business matters to enable Warrant Holder to evaluate the merits and risks of an investment in the Warrant Stock. Warrant Holder has been strongly encouraged by the Company to consult with a financial, tax or legal advisor before investing in the Warrant Stock. Warrant Holder has received a copy of the Company's Form 10-KSB for the Year Ended December 31, 1998, the Company's Form 10-QSB for the six months Ended June 30, 1999, and its proxy statement in respect of its 1998 Annual Meeting of Stockholders. 9. Compliance with Securities Laws. The warrant granted hereby shall be ------------------------------- subject to the requirement that, if at any time counsel to the Company shall determine that the listing, registration or qualification of the Warrant Stock upon any securities exchange or under any state or U.S. federal law, or the consent or approval of any governmental or regulatory body, is necessary as a condition of, or in connection with, the issuance or purchase of Warrant Stock thereunder, the warrant granted hereby may not be exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained on conditions acceptable to the Board of Directors. Nothing herein shall be deemed to require the Company to apply for or to obtain such listing, registration or qualification. 10. Adjustment for Stock Split, Stock Dividend. Etc. ----------------------------------------------------- (a) If the Company shall at any time increase or decrease the number of its outstanding shares of Common Stock by means of the payment of a stock dividend or any other distribution upon such shares payable in stock, or through a stock split, subdivision, consolidation, combination, reclassification or re-capitalization involving the stock, then in relation to the unexercised Warrant Stock that is affected by one or more of the above events, the numbers, rights and privileges of the unexercised Warrant Stock shall be increased, decreased or changed in like manner as if they had been issued and outstanding, fully paid and non-assessable at the time of such occurrence. (b) If any adjustment or substitution provided for in this Paragraph shall result in the creation of a fractional share of Warrant Stock, the Company shall, in lieu of issuing such fractional share of Warrant Stock, pay to Warrant Holder a cash sum in an amount equal to the product of such fraction multiplied by the fair market value of a share of Common Stock on the date the fractional share of Warrant Stock would otherwise have been issued equal to the mean between the closing bid and asked price of the stock as reported on the Nasdaq System on the trading day prior to the day of exercise. In the case of any such substitution or adjustment affecting the warrant granted hereby, the 4 Warrant Price for the Warrant Stock then subject to the warrant granted hereby shall be equitably adjusted to reflect the greater or lesser number of shares of Warrant Stock or other securities into which the Warrant Stock subject to the warrant granted hereby may have been changed. 11. No Assurances. Neither the Company nor any of its officers, agents, ------------- or representatives have made or can make any assurance that either the granting or the exercise of the warrant granted hereby will not give rise to adverse tax consequences. Certain actions taken or omitted by the Warrant Holder in respect to the warrant granted hereby, or in respect of Warrant Stock acquired by exercise of the warrant granted hereby, may cause the warrant to become unexercisable or may cause adverse tax consequences to flow from the granting and/or exercise of the warrant. Warrant Holder should consult with its own tax advisers with respect to the tax consequences of the warrant granted hereby. Warrant Holder shall have no rights or remedies against the Company or against any of its officers, agents, or representatives on account of any tax consequences flowing from the granting or exercise of the warrant granted hereby. 12. Modifications. This Agreement may only be altered, amended or modified ------------- in writing. 13. Scope of Agreement. This Agreement shall bind and inure to the benefit -------------------- of the Company and its successors and assigns and the Warrant Holder and any successor or successors of the Warrant Holder permitted herein. 14. Governing Law. This Agreement shall be construed in accordance with and -------------- governed by the laws of the State of Colorado, which shall also serve as the exclusive jurisdiction for disputes arising in respect of this Agreement. The parties agree that the exclusive venue for the resolution of any disputes regarding this Agreement shall be the District Court for the City and County of Denver, Colorado. IN WITNESS WHEREOF, the Company and the Warrant Holder have executed this Agreement in the manner appropriate to each, as of the day and year first above written. CENTURY CASINOS, INC. By: /s/ Erwin Haitzmann --------------------- Erwin Haitzmann, Chairman and Chief Executive Officer WARRANT HOLDER By:_/s/ Rainer Goeritz Print Name and Title: Rainer Goeritz 5 EX-10.85 3 FOURTH AMENDMENT TO CREDIT AGREEMENT EXHIBIT 10.85 FOURTH AMENDMENT TO CREDIT AGREEMENT ------------------------------------ THIS FOURTH AMENDMENT TO CREDIT AGREEMENT ("Fourth Amendment") is made and entered into as of the 15th day of November, 1999, by and among WMCK VENTURE CORP., a Delaware corporation, CENTURY CASINOS CRIPPLE CREEK, INC., a Colorado corporation and WMCK ACQUISITION CORP., a Delaware corporation (collectively the "Borrowers"), CENTURY CASINOS, INC., a Delaware corporation (the "Guarantor") and WELLS FARGO BANK, National Association, as Lender and L/C Issuer and as the administrative and collateral agent for the Lenders and L/C Issuer (herein in such capacity called the "Agent Bank" and, together with the Lenders and L/C Issuer, collectively referred to as the "Banks"). R E C I T A L S: WHEREAS: A. Borrowers, Guarantor, Agent Bank and Lender entered into a Credit Agreement dated as of March 21, 1997 (the "Original Credit Agreement") as amended by First Amendment to Credit Agreement dated as of November 11, 1997 (the "First Amendment") and by Second Amendment to Credit Agreement dated January 28, 1998 (the "Second Amendment") and by Third Amendment to Credit Agreement dated November 4, 1998 (the "Third Amendment", and together with the Original Credit Agreement, the First Amendment and Second Amendment, collectively the "Existing Credit Agreement") for the purpose of establishing a reducing revolving line of credit in favor of Borrowers, up to the maximum principal amount of Twenty Million Dollars ($20,000,000.00) B. For the purpose of this Fourth Amendment, all capitalized words and terms not otherwise defined herein shall have the respective meanings and be construed herein as provided in Section 1.01 of the Existing Credit Agreement and any reference to a provision of the Existing Credit Agreement shall be deemed to incorporate that provision as a part hereof, in the same manner and with the same effect as if the same were fully set forth herein. C. Borrowers and Guarantor desire to further amend the Existing Credit Agreement for the following purposes: (i) Permitting the Distribution of up to Five Million Dollars ($5,000,000.00) from the Borrower Consolidation to Guarantor; (ii) excluding from the calculation of the TFCC Ratio the Distribution described in (i) above. 1 D. Banks have agreed to make the amendments set forth in the preceding recital paragraph subject to the terms, conditions and provisions set forth in this Fourth Amendment. NOW, THEREFORE, in consideration of the foregoing and other good and valuable considerations, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do agree to the amendments and modifications to the Existing Credit Agreement in each instance effective as of the Fourth Amendment Effective Date, as specifically hereinafter provided as follows: 1. Definitions. Section 1.01 of the Existing Credit Agreement entitled ----------- "Definitions" shall be and is hereby amended to include the following definitions. Those terms which are currently defined by Section 1.01 of the Existing Credit Agreement and which are also defined below shall be superseded and restated by the applicable definition set forth below: "Caledon Investment" shall mean the investment, directly by Guarantor or through a Subsidiary which is owned or controlled by Guarantor, in a hotel, casino and spa facility located in Caledon, Western Cape Providence of South Africa. "Credit Agreement" shall mean the Existing Credit Agreement as amended by the Fourth Amendment, together with all Schedules, Exhibits and other attachments thereto, as it may be further amended, modified, extended, renewed or restated from time to time. "Excluded Subdebt Reductions" shall mean collective reference to: (i) the meaning ascribed to such term in Paragraph 11 of the Third Amendment, and (ii) each Distribution made under the provisions of Paragraph 2(c) of the Fourth Amendment. "Existing Credit Agreement" shall have the meaning set forth in Recital Paragraph A of the Fourth Amendment. "First Amendment" shall have the meaning set forth in Recital Paragraph A of the Fourth Amendment. "Fourth Amendment" shall mean the Fourth Amendment to Credit Agreement. "Fourth Amendment Effective Date" shall mean November 30, 1999, subject to full satisfaction of each Condition Precedent set forth in Paragraph 4 of the Fourth Amendment. "Fourth Amendment Fee" shall have the meaning set forth in Paragraph 4(c) of the Fourth Amendment. 2 "Johannesburg Investment" shall mean the investment, directly by Guarantor or through a Subsidiary which is owned or controlled by Guarantor, in a partnership or other joint venture arrangement with an entity known as "Silverstar" for a casino operation to be located in Greater Johannesburg, South Africa area. "Original Credit Agreement" shall have the meaning set forth in Recital Paragraph A of the Fourth Amendment "Permitted CNTY Distributions" shall have the meaning ascribed to such term in Paragraph 2 of the Fourth Amendment. "Second Amendment" shall have the meaning set forth in Recital Paragraph A of the Fourth Amendment. "TFCC Ratio" shall be defined as follows: Net profit after cash taxes, plus depreciation and amortization, plus Interest Expense (accrued and capitalized), less Distributions (not including the Excluded Subdebt Reduction and the Permitted CNTY Distributions) paid, less Non-Financed Capital Expenditures incurred during the period under review, Divided by (/) Current portion of scheduled principal and actual interest payments on long term debt and Capitalized Lease Liabilities, excluding payments made on Subordinated Debt. 2. Permitted CNTY Distributions. Notwithstanding anything contained in the ---------------------------- Existing Credit Agreement to the contrary, the Borrower Consolidation may make the following Distributions to Guarantor (collectively, the "Permitted CNTY Distributions") so long as (i) no Default or Event of Default has occurred and remains continuing at the time of such Distributions, (ii) June 30, 2000 shall not have occurred; and (iii) such Permitted CNTY Distributions do not exceed Five Million Dollars ($5,000,000.00) in the aggregate: a. Distribution of the Johannesburg Investment up to a maximum aggregate amount of Two Million Dollars ($2,000,000.00); b. Distribution of the Caledon Investment up to a maximum aggregate amount of Three Million Dollars ($3,000,000.00); c. Distribution to be applied toward a prepayment of principal on the Subordinated Debt up to the maximum aggregate amount of One Million Dollars ($1,000,000.00); and 3 d. Distributions to be used to repurchase the stock of Guarantor. 3. Permitted CNTY Distributions and Subordinated Debt Payment Carve Out -------------------------------------------------------------------- for TFCC Calculation. On and after the Fourth Amendment Effective Date and so - ---------------------- long as no Default or Event of Default has occurred and remains continuing, the - -- Permitted CNTY Distributions and Excluded Subdebt Reductions shall: (i) be excluded from the TFCC calculation under Section 6.03 as provided in the amended "TFCC Ratio" definition set forth in Paragraph 1 of the Fourth Amendment, and (ii) not otherwise constitute a Default or Event of Default under the Credit Agreement. 4. Conditions Precedent to Fourth Amendment Effective Date. The ------------------------------------------------------------- occurrence of the Fourth Amendment Effective Date is subject to Agent Bank having received the following documents and payments, in each case in a form and substance reasonably satisfactory to Agent Bank, and the occurrence of each other condition precedent set forth below on or before November 15, 1999: a. Due execution by Borrowers, Guarantor and Banks of four (4) duplicate originals of this Fourth Amendment; b. Corporate resolutions or other evidence of requisite authority of Borrowers and Guarantor, as applicable, to execute the Fourth Amendment; c. Payment of a fee in the amount of Ten Thousand Dollars ($10,000.00) (the "Fourth Amendment Fee") to Agent Bank to be disbursed by Agent Bank to Lenders in proportion to their respective Syndication Interests in the Credit Facility; d. Reimbursement to Agent Bank by Borrowers for all reasonable fees and out-of-pocket expenses incurred by Agent Bank in connection with the Fourth Amendment, including, but not limited to, reasonable attorneys' fees of Henderson & Morgan, LLC and all other like expenses remaining unpaid as of the Fourth Amendment Effective Date; and e. Such other documents, instruments or conditions as may be reasonably required by Lenders. 5. Representations of Borrowers. Borrowers ------------------------------ hereby represent to the Banks that: 4 a. the representations and warranties contained in Article IV of the Existing Credit Agreement and contained in each of the other Loan Documents (other than representations and warranties which expressly speak only as of a different date, which shall be true and correct in all material respects as of such date) are true and correct on and as of the Fourth Amendment Effective Date in all material respects as though such representations and warranties had been made on and as of the Fourth Amendment Effective Date, except to the extent that such representations and warranties are not true and correct as a result of a change which is permitted by the Credit Agreement or by any other Loan Document or which has been otherwise consented to by Agent Bank; b. Since the date of the most recent financial statements referred to in Section 5.08 of the Existing Credit Agreement, no Material Adverse Change has occurred and no event or circumstance which could reasonably be expected to result in a Material Adverse Change or Material Adverse Effect has occurred; c. no event has occurred and is continuing which constitutes a Default or Event of Default under the terms of the Credit Agreement; and d. The execution, delivery and performance of this Fourth Amendment has been duly authorized by all necessary action of Borrowers and Guarantor and this Fourth Amendment constitutes a valid, binding and enforceable obligation of Borrowers and Guarantor. 6. Affirmation and Ratification of Continuing Guaranty. Guarantor joins --------------------------------------------------- in the execution of this Fourth Amendment for the purpose of ratifying and affirming its obligations under the Continuing Guaranty for the guaranty of the full and prompt payment and performance of all of Borrowers' Indebtedness and Obligations under the Credit Facility and each of the Loan Documents as modified under this Fourth Amendment. 7. Incorporation by Reference. This Fourth Amendment shall be ---------------------------- and is hereby incorporated in and forms a part of the Existing Credit Agreement. 8. Governing Law. This Fourth Amendment to Credit Agreement shall be -------------- governed by the internal laws of the State of Nevada without reference to conflicts of laws principles. 9. Counterparts. This Fourth Amendment may be executed in any number of ------------ separate counterparts with the same effect as if the signatures hereto and hereby were upon the same instrument. All such counterparts shall together constitute one and the same document. 10. Continuance of Terms and Provisions. All of the terms and provisions of ------------------------------------ the Credit Agreement shall remain unchanged except as specifically modified herein. 5 IN WITNESS WHEREOF, the parties hereto have executed this Fourth Amendment as of the day and year first above written. BORROWERS: WMCK VENTURE CORP., a Delaware corporation By /s/Larry J. Hannappel ----------------------- Name Larry J. Hannappel -------------------- Title CFO --- CENTURY CASINOS CRIPPLE CREEK, INC., a Colorado corporation By /s/Larry J. Hannappel ----------------------- Name Larry J. Hannappel -------------------- Title CFO --- WMCK ACQUISITION CORP., a Delaware corporation By /s/Larry J. Hannappel ----------------------- Name Larry J. Hannappel -------------------- Title CFO --- GUARANTOR: CENTURY CASINOS, INC., a Delaware corporation By /s/Larry J. Hannappel ----------------------- Name Larry J. Hannappel -------------------- Title CAO --- BANKS: WELLS FARGO BANK, National Association, Agent Bank, Lender and L/C Issuer By /s/David Kramer___ ---------------- Name David Kramer ------------- Title Vice President --------------- 6 EX-10.86 4 CASINO MANAGEMENT AGREEMENT EXHIBIT 10.86 CASINO MANAGEMENT AGREEMENT THIS CASINO MANAGEMENT AGREEMENT (the "Agreement"), is made and entered into as of the 3 day of December 1999, by and between CALEDON CASINO BID COMPANY (PTY) LIMITED, a South Africa corporation ("Owner") and CENTURY CASINOS AFRICA (PTY) LTD., a South African corporation ("Manager"). WITNESSETH ---------- WHEREAS, Owner shall use its best efforts to obtain all necessary approvals from the Gaming Board of the South African Province of the Western Cape and all other relevant authorities to develop and operate a gaming/entertainment facility (the "Casino") to be situated at a site located in Caledon, Overberg region, within the Western Cape Province, as mutually agreed upon between Owner and Manager (the "Site"), (the Casino and all property and fixtures thereon, the buildings and improvements at the Site are collectively referred to herein as the "Facility"); and WHEREAS, Owner has secured/controls the Site and represents that the Site is suitable for the development and operation of a Casino; and WHEREAS, Owner is seeking experience and. expertise in the operation of the gaming/entertainment business to be conducted at/on the Facility; and WHEREAS, Manager has experience and expertise in the operation and management of gaming facilities and in the gaming/entertainment business; and WHEREAS, Owner desires to engage Manager to provide the management necessary to manage and operate the gaming/entertainment business to be conducted at/on the Facility; and WHEREAS, Manager is willing to provide such services on behalf of and for the account of Owner on the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto agree as follows" 1 ARTICLE I DEFINITIONS ----------- As used in this Agreement, the following terms shall have the respective meanings indicated. Act. The term "Act" shall mean the Gaming/Casino Act of the Province of the --- Western Cape as well as South Africa, as the case may be, and the regulations promulgated pursuant thereto. Advancement Plan. The term "Advancement Plan" shall have the meaning set ----------------- forth in Section 2.7. Affiliate. The term "Affiliate" shall mean a Person that directly or --------- indirectly, or through one or more intermediaries, Controls, is Controlled by, - or is under common Control with the Person in question and any stockholder or partner of any Person referred to in the preceding clause owning (i) more than fifty percent (50%) or more of such Person if such Person is a publicly traded corporation, or (ii) more than fifty percent (50%) or more of an ownership or beneficial interest in any other Person. Annual Operating Budget. The term "Annual Operating Budget" shall have the ------------------------ meaning set forth in Section 7.1. Annual Operating Plan. The term "Annual Operating Plan" shall have the ----------------------- meaning set forth in Section 7. 1. Approval. The term "Approval" means any license, finding of suitability, -------- qualification, approval or permit by or from any Gaming Authority. Approved Legal Counsel. The term "Approved Legal Counsel" shall have the ------------------------ meaning set forth in Section 7.17. Bank Accounts. The term "Bank Accounts" shall have the meaning set in -------------- Section 7.17. Books and Records The term Books and Records" shall have the meaning set ------------------- forth in Section 7.10. Business Day. The term "Business Day" shall have the meaning set forth in ------------- Section 18.14 Capital Replacements. The term "Capital Replacements" shall have the --------------------- meaning set forth in Section 7.8 - Casino. The term "Casino" means the casino improvements and fixtures ------ (temporary and/or permanent), including Casino Gaming Activities, to be - constructed at the Facility, consistent with the concepts set forth in the - Development Plan and in accordance with the Plans and Specifications. Casino Bankroll. The term "Casino Bankroll" shall mean an amount of monies ---------------- determined by Manager as necessary to provide cash-on-hand monies required to operate and maintain Casino Gaming Activities, but in no event shall such amount be less than the amount required by Law. In no event shall the Casino Bankroll include amounts necessary to provide for the payment of Operating Expenses, Working Capital or initial cash needs as described in Section 9.3 herein. The Casino Bankroll shall include the finds in the separate accounts in Manager's name plus any finds located on the casino tables, in the gambling devices, cages, vault, counting rooms, or in any other location in the Casino where funds may be found. 2 Casino Gaming Activities. The term "Casino Gaming Activities" shall mean --------------------------- the casino cage, table games (such as blackjack, baccarat, roulette, craps, mini-baccarat, pai gow, poker or pai gow poker, or any other table game), gaming machines, and other casino-type games operated by Manager in the Casino. Century. The term "Century" shall mean Century Casinos, Inc., a Delaware, ------- USA corporation, or any of its subsidiaries or assignees. Condemnation. The term "Condemnation" shall mean any taking by eminent ------------ domain, condemnation or any other governmental action. Construction Permits. The term "Construction Permits" shall mean all --------------------- licenses, permits, approvals, consents and authorizations from Governmental - Authorities that are necessary to develop and construct the Facility (including, without limitation, certificates of occupancy and other similar permits necessary to occupy the Casino). Consumer Price Index. The term "Consumer Price Index" shall mean the ---------------------- Consumer Price Index from time to time published by the relevant South African - authority. Control. The term "Control" (including derivations such as "controlled" and ------- "controlling") means with respect to a Person, the ownership of more than fifty percent (50%) or more of the beneficial interest or voting power of such Person. Credit Policy. The term "Credit Policy" means the policy prepared by -------------- Manager and approved by Owner regarding the extension and collection of credit - to customers of the Casino, which Credit Policy shall be based on (i) the target markets of the Casino, (ii) the business issues involved, and (iii) such changes and refinements as Owner shall reasonably recommend, all of which shall comply and conform in all respects with any applicable Governmental Requirements (including, without limitation, the rules and regulations of the Gaming Commission). Default. The tern: "Default" shall have the meaning set forth in Section ------- 8.1. Default Rate. The term "Default Rate" shall mean the lesser of (i) the -------------- reference or prime commercial lending rate in South Africa, plus two percent (2%) per annum, or (ii) the highest rate permitted by applicable Law, to the extent applicable Law establishes a maximum rate of interest which may be charged with respect to obligations of the type of questions, until paid. 3 Department. The term "Department" shall have the meaning set forth in Section ----------- 7.9. -- Development Budget. The term "Development Budget" shall have the meaning ------------------- set forth in Section 5.1. Development Plan. The term "Development Plan" shall have the meaning set ----------------- forth in Section 5.1. EBITDA. The term "EBITDA" shall mean Owner's earnings before interest ------ expense, income taxes, depreciation and amortization, and also before any and all costs/expenses beyond the control of Manager (such as F, F&E reserve, any leasing, rental or similar costs/expenses) for the subject monthly, quarterly or annual period, as reported in the financial statements prepared by the Manager. Effective Date. The term "Effective Date" shall mean the execution date of --------------- this Agreement. Enforcement Division. The term "Enforcement Division" shall mean the --------------------- relevant authority to grant casino gaming licenses. - Environmental Damages. The term "Environmental Damages" shall mean all ---------------------- claims, judgments, damages, losses, penalties, fines, liabilities (including strict liability), encumbrances, liens, costs, and expenses of investigation and defense of any claim, whether or not such claim is ultimately defeated, and of any good faith settlement of judgment, of whatever kind or nature, contingent or otherwise, matured or unmatured, foreseeable or unforeseeable, including without limitation reasonable attorneys' fees and disbursements and consultants' fees, any of which are incurred at any time as a result of the existence of Hazardous Material upon, about, beneath the Site, or migrating or threatening to migrate to or from the Site, or the existence of a violation of Environmental Requirements pertaining to the Site, regardless of whether the existence of such Hazardous Material or the violation of Environmental Requirements arose prior to the present ownership or operation of the Site. Environmental Requirements. The term: "Environmental Requirements" shall --------------------------- mean all applicable federal, state and local laws, rules, regulations, ordinances and requirements relating to health and safety, worker health and safety and pollution and protection of the environment, as amended or hereafter amended. Estimated Opening Date. The term "Estimated Opening Date" shall mean that ------------------------ projected opening date of the Facility as set forth in the agreed Construction Schedule. Event of Default. The term "Event of Default" shall have the meaning set - forth in Section 3.1 Extended Term. The term "Extended Term" shall have the meaning set forth in -------------- Section 3.1. 4 Facility. The term "Facility" shall have the meaning set forth in the --------- "WHEREAS" clause of this Agreement. Facility Employee. The term "Facility Employee" shall mean any employee of ------------------ Owner directed by Manager to work at the Facility or in any capacity related to the Facility. FF&E. The term "FF&E" shall mean all furniture, furnishings, equipment, and ---- fixtures, including gaming equipment, computers, housekeeping and maintenance equipment, necessary or appropriate to operate the Facility in conformity with this Agreement. FF&E Requirements. The term "FF&E Requirements" shall have the meaning set ------------------ forth in Section 5.2(c). FF&E Specifications. The term "FF&E Specification" shall have the meaning -------------------- set forth in Section 5.2(a). Financial Statements. The term "Financial Statements" shall mean an income --------------------- statement, balance sheet and a cash flows statement, all prepared in conformity with Generally Accepted Accounting Principles and on a basis consistent in all material respects with that of the preceding period (except as to those changes or exceptions disclosed in such Financial Statements). Fiscal Year. The term "Fiscal Year" shall mean the period beginning on ------------ January 1 and ending on December 31 of each calendar year. Gaming Authorities. The term "Gaming Authorities" or "Authority" shall mean ------------------ all agencies, authorities and instrumentalities of any state, nation, or other governmental entity, or any subdivision thereof, regulating gaming or related activities in South Africa, including, without limitation, the Gaming Commission and the Enforcement Division. Gaming Commission. The term "Gaming Commission" shall mean the Western Cape ----------------- Gambling and Racing Board. Gaming License. The term "Gaming License" shall have the mean all --------------- activities set forth in Section 3.1. ---- Gaming Operations. The term "Gaming Operations" shall mean all activities - ------------------ pertaining to the development and construction of the Casino and the Casino - ------ thereon, all Casino Gaming Activities conducted in the Casino and all activities - ---- conducted at the Facility; related to any of the foregoing. General Laws The term "General Laws shall mean any statute, ordinance, ------------- promulgation, law, treaty, rule, regulation, code, judicial or administrative precedent or order of any court or other body of South Africa and any state law or subdivision thereof, any foreign countries or subdivisions thereof, and shall include all Laws. Generally Accepted Accounting Principles. The term "Generally Accepted ------------------------------------------- Accounting Principles" shall mean generally accepted accounting principles in all material respects as established from time to time by the American Institute of Certified Public Accountants, provided, however, that to the extent there are changes in, or there are implemented by mandates now-existing elective treatments under, Generally Accepted Accounting Principles from and after the date hereof, such changes or implementations shall not be taken into consideration for purposes of defining the term EBITDA. 5 Governmental Authority. The term "Governmental Authorities" or "Authority" ----------------------- means South Africa, Province of the Western Cape and any other political subdivision in which the Facility is located, and any court or political subdivision, agency, commission, board or instrumentality or officer thereof, whether federal, state, local, having or exercising a jurisdiction over Owner, Manager or the Facility, including, without limitation, any Gaming Authority. Governmental Requirements. The term "Governmental Requirements" means all -------------------------- Laws and agreements with any Governmental Authority that are applicable to the acquisition, development, construction and operation of the Facility and including, without limitation, the Purchase, all Required Contracts, Approvals and any rules, guidelines or restrictions created by or imposed by Governmental Authorities (including, without limitation, any Gaming Authority). Gross Casino Revenue. The terms "Gross Gaming Revenue" and "Gross Casino ---------------------- Revenue" shall mean all gross revenues generated by or in the Casino, including gaming receipts less all sums paid out as winnings in connection therewith. Hazardous Materials. The term "Hazardous Materials" shall mean without -------------------- limitation: (i) hazardous materials, hazardous substances, extremely hazardous substances or hazardous wastes, (ii) petroleum, including, without limitation, crude oil or any fraction thereof which is liquid at standard conditions of temperature and pressure (60 degrees Fahrenheit and 14.7 pounds per square inch absolute); (iii) any radioactive material, including, without limitation, any source, special nuclear, or by-product material, and (iv) asbestos in any form or condition. Initial Term. The term "Initial Term" shall have the meaning set forth in ------------- Section 3.1. Law. The term "Law" means any statute, ordinance, promulgation, law, --- treaty, rule, regulation, code, judicial or administrative precedent or order of - any court or any other Governmental Authority, as well as the orders or requirements of any local board of fire underwriters or any other body which man exercise similar functions. Major Casualty. The term "Major Casualty" shall mean any casualty or ---------------- accident which prevents or substantially impairs the conduct of the Facility's - business and the ability to earn or generate revenues and income or its ability to make payments under the Purchase. Major Condemnation. The term "Major Condemnation" shall mean any -------------------- Condemnation which prevents or substantially impairs the conduct of the Facility ----- and the ability to earn or generate revenues and income and/or its ability to make payments under the Purchase. Management Fee. The term "Management Fee" shall have the meaning set forth --------------- in Section 4.1. 6 Manager Denial. The term "Manager Denial" shall have the meaning set forth --------------- in Section 10.3 Manager Indemnitees. The term "Manager Indemnitees" shall have the meaning -------------------- set forth in Section 16.2 Manager Operating Permits. The term "Manager Operating Permits" shall mean -------------------------- all licenses, permits, approvals, consents and authorizations which Manager is required to obtain from any Governmental Authority to perform and carry out its obligations under this Agreement. Manager's Advances. The term "Manager's Advances" shall have the meaning ------------------- set forth in Section 9.7. Manager's Default. The term "Manager's Default" shall mean those ------------------ occurrences described in Section 8.2. ----- Minor Casualty. The term "Minor Casualty" shall mean any casualty or --------------- accident other than a Major Casualty. - Minor Condemnation. The term "Minor Condemnation" shall mean any ------------------- Condemnation other than a Major Condemnation. ----- Net Gaming Proceeds. The term "Net Gaming Proceeds" shall have the exact --------------------- same meaning as "Gross Gamine Revenue". Opening Date. The term "Opening Date" shall mean the first date a ------------- revenue-paying customer is admitted to the Casino. The parties shall hereafter ---- confirm the Opening Date in an Addendum to this Agreement which shall be attached hereto and made a part hereof Operating Expenses. The term "Operating Expenses" shall mean those ------------------- reasonable operating expenses, including payroll, marketing and administration --- incurred on behalf of Owner after the Opening Date in connection with conducting and operating the Facility, computed on an accrual basis, deductible under Generally Accepted Accounting Principles in determining "Operating Income" (as defined in casino industry practice) for purpose of preparing a statement of operations for the Facility. VAT and other taxes shall not be included in Operating Expenses Further. Operating Expenses shall not include depreciation or amortization with respect to the Facility or the F. F&E. Debt Service or Capital Replacements deposits. Operating Expenses shah include the Management Fee. Operating Guidelines The term "Operating Guidelines" means the general --------------------- guidelines for the operation of the Facility which shall be prepared by Manager and shall be included in and constitute a part of each Annual Operating Plan. Operating Guidelines shall include the Credit Policy. Manager's policies regarding (i) restricting access to the Casino to those under the legal age for gaming in South Africa, (ii) assisting compulsive gamblers, and (iii) employee travel, employee expense reimbursement and employee gambling at the Casino. 7 Operating Permits. The term "Operating Permits" shall mean Manager ------------------ Operating Permits and Owner Operating Permits. --- Operating Supplies. The term "Operating Supplies" shall mean gaming ------------------- supplies, paper supplies, cleaning materials, food and beverage, fuel, marketing -- materials, maintenance supplies, linen, china, glassware, silverware, kitchen utensils, uniforms and all other consumable supplies and materials used in the operation of the Facility. Owner Denial. The term "Owner Denial" shall have the meaning set forth in ------------- Section 10. 1 Owner Indemnitees. The term "Owner Indemnitees" shall have the meaning set ------------------ forth in Section 16.1. Owner Operating Permits. The term "Owner Operating Permits" shall mean all ------------------------ licenses, permits, approvals, consents and authorizations from Governmental Authorities that are necessary to own, develop, open, operate and occupy the Facility other than Manager Operating Permits and the Construction Permits. Owner's Advances. The term "Owner's Advances" shall mean the amounts to be ----------------- advanced by Owner to Manager pursuant to Section 9. 1. Owner's Default. The term "Owner's Default" shall have the meaning set ---------------- forth in Section 8.3. Person. The term "Person" shall mean any individual, partnership, ------ corporation, association or other entity, including, but not limited to, any ---- government or agency or subdivision thereof and the heirs, executors, administrators, legal representatives, successors and assigns of such Person where the context so admits. Plans and Specifications. The term "Plans and Specifications" shall have -------------------------- the meaning set forth in Section 5.2(a). Pre-Opening Budget. The term "Pre-Opening Budget" shall mean the budget of ------------------- expenses to be incurred prior to the Opening Date pursuant to Section 6. 1 of the Agreement and with respect to any other provision of the Agreement pertaining to the period prior to the Opening Date. Such expenses shall include, without limitation, all budgeted expenses incurred by Manager or by any of Manager's Affiliates in performing the Pre-Opening Services, the cost of recruitment and training for all employees of the Facility, costs of licensing or other qualification of Facility employees prior to the Opening Date, the cost of pre-opening sales, marketing, advertising, promotion and publicity, the cost of obtaining all Construction Permits and Owner Operating Permits, permits for employees, including the fees of lawyers and other consultants incident thereto, and other Pre-Opening Expenses. 8 Pre-Opening Expenses. The term "Pre-Opening Expenses" shall have the --------------------- meaning set forth in Section 6.2. - Pre-Opening Services. The term "Pre-Opening Services" shall have the --------------------- meaning set forth in Section 6.1. - Project Architects. The term "Project Architects" shall have the meaning ------------------- set forth in Section 5.2(a). Project Designers. The term "Project Designers" shall have the meaning set ------------------ forth in Section 5.2(a). Property Insurance. The term "Property Insurance" shall have the meaning ------------------- set forth in Section 14.2. Purchase. The term "Purchase" shall mean the Purchase or lease agreement -------- for the Site. Required Coverage. The term "Required Coverage" shall have the meaning set ------------------ forth in Section 14.1. Senior Staff. The term "Senior Staff" shall have the meaning set forth in ------------- Section 7.4. Site. The term "Site" shall have the meaning set forth in the "WHEREAS" ---- clause of this Agreement. Technical Services. The term "Technical Services" shall have the meaning ------------------- set forth in Section 5.3. Term. The term "Term" shall mean the Initial Term and any Extended Term for ---- which the option to extend as provided in the Agreement has been properly exercised. Unavoidable Delay. The term "Unavoidable Delay" shall have the meaning set ------------------ forth in Article XIII. Working Capital. The term "Working Capital" shall mean such amount in the ---------------- Bank Accounts as will be sufficient to reasonably assure the timely payment of all current liabilities of the Facility and the uninterrupted and efficient operation of the Facility during the Term of this Agreement to permit Manager to perform its responsibilities and obligations hereunder, all as contemplated by the applicable Annual Operating Plan with reasonable reserves for unanticipated contingencies and for short term business fluctuations resulting from monthly variations between the Annual Operating Plan and operating expenses. 9 ARTICLE II APPOINTMENT OF MANAGER ----------- -- ------- SECTION 2.1 Appointment Owner hereby appoints, hires and employs Manager, ----------- as Owner's exclusive agent, to manage the Gaming Operations on behalf of and for the account of Owner during the term of this Agreement. Manager hereby accepts such appointment upon and subject to the terms, conditions, covenants and provisions set forth herein. SECTION 2.2 Management of the Facility. Manager agrees to act (i) in -------------- ------------- compliance with this Agreement and the requirements of the Gaming Commission and any other Governmental Requirements, (ii) in accordance with the requirements of any carrier of insurance on the Facility or any part thereof, and (iii) in conformity with the applicable Annual Operating Plan and the Operating Guidelines (all of the foregoing being hereinafter collectively referred to as the "Operating Goals"). SECTION 2.3 No Interference. Owner hereby agrees that, subject to the ---------------- limitations described herein, Manager shall have uninterrupted control of the management of the Gaming Operations during the Term of this Agreement, subject to the rights of Owner set forth herein, and that Manager may manage the Gaming Operations free of molestation, eviction or disturbance by Owner or any third party claiming by, through or under Owner, subject in each case, to exercise of the fiduciary duties under applicable law of any other managers of Owner. SECTION 2.4 Limitations on Authority of Manager. In addition to any other --------------------------- ------- limitations on the powers and authority of Manager as set forth herein, except for transactions in the ordinary course of business, Manager shall have no authority to (i) sell or purchase all or any part of the Facility or (ii) cause Owner to acquire any other business entities or sell all or substantially all of the assets thereof. SECTION 2.5 Other Century Casinos. The parties hereto acknowledge and agree --------------------- that Century, Manager or its Affiliates are the beneficial owner and/or managers of existing casinos and may. in the future, have an interest, direct and/or indirect in other casinos, and/or manage or operate other casinos in South Africa, provided that the limited restraint clause (Breeriver region, Western Cape) contained in the shareholders agreement is fulfilled. SECTION 2.6 Employment of Affiliates. Manager may, acting in its sole ------------------------ discretion in the best interests of Owner, employ or retain as consultants or agents any of Manager's Affiliates, or any other entity or Person related to Manager, in fulfilling its obligations pursuant to this Agreement; provided. However, that Manager shall disclose all transactions with any entity related to Manager, as required by Generally Accepted Accounting Principles on the quarterly financial statements required under Section 7.11. All such service agreements shall be on economic terms comparable with agreements negotiated on an arms-length basis and subject to Owner's approval. 10 ARTICLE III TERM OF AGREEMENT ---- -- --------- SECTION 3.1 Term. The operating term of this Agreement shall be ten (10) ---- years (initial Term"), despite the date of execution thereof, shall be deemed to have commenced on the award of a casino license to Owner and the fulfillment of the conditions precedent as outlined in clause 3. of the shareholders agreement (concluded between Caledon Casino Bid Company (Pty) Ltd. Caledon Overberg Investments (Pty) Ltd, Century Casinos Africa (Pty) Ltd, Caledon Hotel Spa and Casino Resort (Pty) Ltd, Fortes King Hospitality (Pty) Ltd, Overberg Country Hotel and Spa (Pty) Ltd and Senator Trust). This Agreement shall be automatically renewed for further multiple ten (10) year periods ("Extended Term"), unless Manager gives six months notice of its intention to withdraw from this Agreement. Owner undertakes, subject to licensing for which Owner shall use its best efforts at any time, throughout the term (Initial and Extended) of this Agreement, to conduct the business of a Casino and Casino Gaming Activities at the Facility. SECTION 3.2 Effect of Termination. All sums owed by either party to the ----------------------- other shall be paid immediately upon termination of this Agreement. In the event of any termination of this Agreement, Owner shall, notwithstanding such termination, be liable to Manager for the fees earned and reasonable out-of-pocket expenses incurred by Manager in conformity with this Agreement prior to such termination as follows: (i) any unpaid accrued portion of the Management Fee and Manager's Advances (including any unpaid accrued interest thereon), if any, plus (ii) all reimbursable costs to Manager which were properly incurred prior to termination in connection with the performance of Manager's obligations in conformity with this Agreement. If the termination of this Agreement is a consequence of Owner's Default, Owner shall also be liable to Manager for all reasonable costs (including, but not limited to, severance pay or settlements and moving expenses of Manager's employees, if any, and any attorney's fees, expenses, and losses as the result of such severance) incurred as a direct result of Owner's Default. If the termination of this Agreement is a consequence of Manager's Default, Manager shall not have the right to collect any amounts due Manager under this Section 3.4 from the Bank Accounts. In such event, Owner shall pay Manager within five (5) Business Days of the date of termination the amounts owed Manager described in clauses (i) and (ii) above through the date of termination. SECTION 3.3 Survival of Representations and Indemnifications. ----------------------------------------------------- Notwithstanding anything contained herein to the contrary, the parties acknowledge that the representations, covenants and indemnifications set forth in Articles XI, XIV, XVI and Sections 18.2, 18.6, 18.8 and 18.9 shall survive the termination or expiration of this Agreement. All amounts due and payable front either party to the other shall survive the termination of the Agreement. 11 ARTICLE IV FEE; EXPENSES ------------- SECTION 4.1 Management Fee. During the Term of this Agreement, Manager ---------------- shall be paid the Management Fee set forth herein. Failure to pay the Management Fee in accordance with the time periods set forth in this Agreement shall constitute a breach of this Agreement. 12 SECTION 4.2. Calculation of Management Fee. The Management Fee shall be ------------------------------- equal to: (a) A fixed amount of R35 000 (thirty five thousand) per month for the pre-operations period (period from award of casino license to opening Date), plus (b) Four percent (4%) of the yearly gross revenues (excluding VAT and any other taxes) generated by or in the Casino (excluding food & beverage), for the applicable Fiscal Year, between zero Rand (R0) and forty million Rands (R40,000,000), plus five percent (5%) of the yearly gross revenues (excluding ---- VAT and any other taxes) generated by or in the Casino (excluding food & beverage), for the applicable Fiscal Year, exceeding forty million Rands (R40,000,000), plus ---- (c) Seven and a half percent (7.5%) of the Casino's yearly EBITDA (excluding food & beverage), for the applicable Fiscal Year. (d) The percentage referred to in the first section of (b) above (four percent) shall be reduced to three percent (3%) for the first twelve months of casino operation. SECTION 4.3 Time of Payment of Management Fee. All out-of-pocket costs and --------------------------------- expenses incurred by Manager shall be invoiced to Owner and Owner shall pay these amounts to Manager within ten days. The fee described in (a) above shall be paid from Owner to Manager on the fifth (5th) day of each month, for the preceding month. That portion of the Management Fee based upon EBITDA shall be paid thirty (30) days after the last day of each calendar month. The aggregate of the Management Fees so paid monthly shall be adjusted quarterly, and an annual adjustment shall be made within ninety (90) days of the end of each Fiscal Year. A partial Fiscal Year at the beginning and end of this Agreement shall be treated as an Fiscal Year for purposes of this Section 4.3. Owner hereby authorizes Manager to pay itself the monthly Management Fee due from the Bank Accounts. Owner shall pay all applicable taxes or fees on the Management Fee. For the last month of the term of this Agreement, Owner shall pay Manager the Management Fee directly. The fee in 4.2.(c) shall not take into account any losses carried forward from any prior financial year. Section 4.4 Place of Payment of Management Fee. It shall be Owner's ---------------------------------------- obligation to ensure that the Management Fees are paid to Manager at such account as may be determined by Manager from time to time. Section 4.5 Expenses. In addition to the Management Fee, within ten (10) --------- Business Days after presentation of expense vouchers or billing invoices, as the case may be, Owner shall reimburse Manager on a monthly basis for (i) all documented expenses properly incurred under this Agreement by Manager, its officers and employees and/or agents in rendering the services provided for in this Agreement, and (ii) all amounts billed to Manager by Persons for such Persons' reasonable fees, charges, costs and expense properly incurred under this Agreement in connection with Manager's performance of its duties hereunder. Notwithstanding the foregoing, all Operating Expenses shall be paid directly from the Bank Accounts pursuant to Section 7.19 herein. Any amounts not reimbursed within ten (10) business days shall bear interest at the Default Rate. No expenses payable to Manager's Affiliates shall be paid out without Owner prior consent. 13 ARTICLE V FACILITY DEVELOPMENT -------- ----------- SECTION 5.1 Development Plan. ----------------- (a) As soon as practicable after the execution date of this Agreement, after Owner has demonstrated and represented, to Manager's reasonable satisfaction, that the necessary financing for the full development of the Facility has been secured, and after a Gaming/Casino License has been issued to Owner, Manager shall present to Owner a proposed development plan (the "Development Plan"). The Development Plan will be Manager's plan and schedule for developing the Casino, and shall contain (i) a development budget (the "Development Budget") for developing the Casino and (ii) the Pre-Opening Budget. Manager shall consult with Owner in the preparation of the Development Plan, provided Owner makes its representatives readily available for such consultation. (b) Within fifteen (15) days of receipt of the proposed Development Plan, Owner shall inform Manager in writing whether it disapproves of the proposed Development Plan and, if so, the specific portions thereof of which it disapproves and the reasons therefor. Owner shall not unreasonably withhold or delay its approval of the Development Plan or any item therein. If Owner does not inform Manager in writing of its disapproval of the Development Plan within the above-described fifteen (15) day period, it shall be deemed to have approved the Development Plan. (c) If Owner reasonably disapproves of the Development Plan or any portion thereof, Manager shall (i) endeavor to make such modifications to the Development Plan as are necessary to resolve the objections raised in Owner's notice pursuant to Section 5.1(b); (ii) within fifteen (15) days of Owner's notice of disapproval, resubmit such Development Plan for review under the terms of Section 5.1(b); and (iii) if necessary, to make further revisions under this Section 5.1(c). (d) If Manager and Owner cannot reach agreement as to matters contained in the Development Plan within forty-five (45) days of Manager's submission of the proposed Development Plan, the disputed matter(s) will be resolved through arbitration pursuant to Article XVII herein. SECTION 5.2 Plans and Specifications -------------------------- (a) Owner will engage and retain, at Owner's sole cost and expense, such architects, engineers, contractors, designers and other specialists as Manager deems necessary to prepare all site plans, grading plans, construction drawings, surveys, materials, specifications, architectural plans and drawings, elevations, construction models, engineering plans and drawings, approved plans and all other plans, drawings, studies or reports required for the construction of the Facility (the "Plans and Specifications") and for the purchase and installation of the FF&E (the "FF&E Specifications), as provided for in the Development Plan. Manager shall consult and advise with the architects (the architects so selected are referred to herein as the "Project Architects") and the designers (the designers so selected are referred to herein as the "Project Designers"), and the Owner on these matters. (b) The Plans and Specifications shall be consistent in all material respects with and based upon the conceptual plans for the Casino as set forth in the Development Plan and shall be subject to any changes necessary to meet applicable requirements of the Act and any other Governmental Requirements. (c) The FF&E shall (i) bear the name or identifying characteristic or logo of the Casino, where appropriate. (ii) be generally consistent in quality and relative scope with other casinos in South Africa, taking into consideration the Construction Budget's limitations, the Development Plan, local conditions, and the image and target markets of the Casino, (iii) comply with all applicable Laws and any other Governmental Requirements, and (iv) be available in quantities required by the FF&E Specifications to meet the Construction Schedule (collectively, the "FF&E Requirements"). 14 SECTION 5.3 Technical Services (Pre-Opening). From the date of the award of -------------------------------- the casino license until the Casino is substantially completed (including the installation of FF&E), Manager, either directly or through one or more of its Affiliates, shall provide the technical services described below (collectively, the "Technical Services"): (i) Manager will prepare specific operational and functional criteria for the Casino for use by the Project Architects and the Project Designers in the preparation of the Plans and Specifications and the FF&E Specifications; (ii) Manager shall advise and consult with the Project Architects in the development of schematic, preliminary and working Plans and Specifications and the Project Designers in the selection and specifications of FF&E; (iii) Manager shall review, critique and make recommendations to Project Architects and the Project Designers in the selection and layout of the FF&E in accordance with the FF&E Specifications and the Plans and Specifications. SECTION 5.4 Opening the Casino. The Casino shall be opened to the public on ------------------ a date established by Manager upon satisfaction of the following: (i) the Project Architects have issued to Owner a certificate(s) of substantial completion confirming that the Facility has been substantially completed in accordance with the Plans and Specifications. (ii) the Project Designers have issued to Owner a certificate(s) of substantial completion confirming that the FE&E has been substantially installed therein in accordance with the FF&E Specifications and the Plans and Specifications, (iii) all Operating Permits (including, without limitation, a certificate of occupancy or local equivalent, gaming/casino, liquor and restaurant licenses and all permits, certificates and other licenses required of any authority) have been obtained, (iv) the initial cash needs for the Casino as set forth in Section 9.3 and the Casino Bankroll has been furnished by Owner, (v) Manager is satisfied that all operational systems have been adequately tested on a "dry-run" basis to the satisfaction of Manager and any appropriate Governmental Authorities, and (vi) all other Governmental Requirements necessary to open, occupy and operate the Facility have been satisfied. Manager shall use all reasonable efforts in the performance of its duties under this Agreement to assist Owner in achieving the satisfaction of all of the foregoing requirements by the Estimated Opening Date. 15 ARTICLE VI PRE-OPENING SERVICES ----------- -------- SECTION 6.1 Pre-Opening Services. Between the date of the casino license --------------------- and the Opening Date, Manager, as agent of Owner, shall perform or arrange for others to perform the following services (in addition to the services described in Article V herein) on behalf of and for the account of Owner but subject to the Pre-Opening Budget contained in the Development Budget (the "Pre-Opening Services"): (a) Pre-Opening Marketing. Manager shall implement the marketing portion of --------------------- the approved Development Plan, including, but not limited to, direct sales, media and direct mail advertising, promotion, publicity and public relations designed to attract customers to the Casino from and after the Opening Date in accordance with the provisions of Section 7.24. (b) Personnel. Manager shall have the sole authority to recruit, hire, --------- provide orientation to, train, supervise, promote and determine the compensation (which must be within normal and reasonable industry standards) of and discharge all executive and general staff of the Facility on behalf of Owner, including all Facility personnel to be utilized during the period from the date hereto until the Opening Date in accordance with the approved Development Plan. The authority granted to Manager pursuant to this Section 6. shall be in addition to all authority granted to Manager pursuant to Sections 7.3 and 7.4 herein, provided that all such personnel and staff shall be suitable under applicable rules, regulations and laws of South Africa. (c) Operating Permits. Manager shall use reasonable efforts in applying ------------------ for, processing and producing all Manager Operating Permits and in assisting Owner in applying for, processing and procuring Owner Operating Permits within the timetables established by the Development Plan (and in any event prior to the Estimated Opening Date). SECTION 6.2 Payment of Pre-Opening Expenses. All costs and expenses ---------------------------------- properly incurred in connection with the Pre-Opening Services (the "Pre-Opening Expenses") shall be paid from the Bank Accounts. Pre-Opening Expenses and the time schedule for incurring such expenses shall be established in the approved Development Budget and Development Plan. Owner shall deposit, in advance, such sums in accordance with the schedule as shall be established by the parties in the Development Budget and the Development Plan and Owner shall maintain sufficient funds therein to pay all Pre-Opening Expenses in accordance with monthly schedules to be prepared by Manager and submitted to Owner. Manager shall not incur any expenses or make any disbursements that are not provided for, or are in excess of one hundred fifty percent (150%) of any the Development Budget without Owner's prior written consent: provided, however, that if a savings of up to five hundred thousand Rands (R500,000) is obtained for a line item, such amount may be reallocated so as to allow an excess disbursement in an amount up to the amount saved with respect to another line item. Manager may, but is not required to, advance funds to pay Pre-Opening Expenses on behalf of Owner. All such Pre-Opening Expenses advanced by Manager, if any, shall be itemized, scheduled and submitted to Owner on a calendar month basis and reimbursement within ten (10) Business Day's after such submission. Any Pre-Opening Expenses advanced day Manager that remain unreimbursed ten (10) Business Days after submission shall bear interest at the Default Rate. SECTION 6.3 Temporary Casino. In the event that Owner is authorized by any ---------------- applicable Governmental Authority to conduct temporary gaming/casino operations, and Owner elects to do so, Manager shall manage such gaming operations for the same management fees as outlined above Manager shall reasonably cooperate with Owner in preparing a pre-opening plan for the temporary casino and such other information as Owner may reasonably request. 16 ARTICLE XIII FACILITY OPERATIONS -------- ---------- SECTION 7.1 Annual Operating Plan and Budget ------------------------------------ (a) On or before the forty-fifth (45th) day preceding the first day of each Fiscal Year subsequent to the Opening Date, Manager shall submit to Owner for its approval an annual operating plan for the operation of the Casino for the forthcoming Fiscal Year (each such annual operating plan that is approved by Owner is referred to herein as an "Annual Operating Plan"), which shall include an annual marketing plan, annual operating budget by month (the "Annual Operating Budget"), annual estimate of key operating statistics, annual projection of sources of cash by month, and a two (2) year projection of capital expenditures. The Annual Operating Plan shall include sufficient amounts for maintenance and repairs to keep the Casino in good operating condition. Manager will consult with Owner and the Casino Manager in preparing the Annual Operating Plan, provided that Owner and Casino Manager make their representatives readily available for such consultations. (b) Within thirty (30) days after the date Manager submits the proposed Annual Operating Plan, Owner shall inform Manager in writing whether it disapproves of the proposed Annual Operating Plan and, if so, the specific portions thereof of which it disapproves. Any notice that disapproves a proposed Annual Operating Plan must contain reasonably detailed objections along with suggestions as to what corrective measures can be taken to make such proposed Annual Operating Plan acceptable to Owner. If Owner fails to provide written notice to Manager of its objections within thirty (30) days after the submission of the proposed Annual Operating Plan, such proposed Annual Operating Plan shall be deemed to be approved as submitted (c) If Owner reasonably disapproves or objects to the proposed Annual Operating Plan, or any portion thereof, Manager shall endeavor to make such modifications to the Annual Operating Plan as are necessary to resolve the objections raised in Owner's notice, and within thirty (30) days of the Owner's notice, to resubmit such Annual Operating Plan for review by Owner under the terms of Section 7.1 and. if necessary, to make further revisions under this Section 7.1. (d) If Owner's objection relates only to certain portions of the proposed Annual Operating Plan or an Annual Operating Budget contained therein, the undisputed portions of the proposed Annual Operating Plan or Annual Operating Budget shall be deemed to be adopted and approved. With respect to objectionable items in any proposed Annual Operating Budget, prior to the adoption of a new Annual Operating Budget, the corresponding item contained in the Annual Operating Budget for the preceding Fiscal Year shall be substituted in lieu of the disputed portions of the proposed Annual Operating Budget, excluding, however, line items in the previous Annual Operating Budget for extraordinary expenses or revenues. In any instance where a portion of an Annual Operating Budget from a preceding Fiscal Year is deemed to be applicable to the Annual Operating Budget in effect until a new Annual Operating Budget is fully approved, corresponding items contained in the Annual Operating Budget for the preceding Fiscal Year shall be automatically adjusted by a percentage equal to the percentage change in the Consumer Price Index during the preceding Fiscal Year. Such calculation of percentage change in the Consumer Price Index shall be made by Manager based upon the most recently published Consumer Price Index data at the time the calculation is made. 17 (e) If Owner and Manager are unable to agree on the amount of any capital expenditure or reserve item in an Annual Operating Budget, only those capital expenditures (or the undisputed amount when the amount is in dispute) with respect to which Owner and Manager have reached an agreement that are approved by Owner or are required to be made by any Governmental Authority shall be made until Owner and Manager otherwise agree on the terms of such Annual Operating Budget or the matter is decided by arbitration. The Annual Operating Plan will be appropriately adjusted to reflect the effect of any delay in capital expenditures. (f) Each proposed Annual Operating Plan shall be prepared by Manager based on the actual and projected results of the current Fiscal Year, the standard of maintaining the Casino and the Facility in good operating condition, information with respect to possible occurrences which may impact the marketing and/or operation of the Casino and the Facility in the future, changes from the previous Fiscal Year results, reasonable predictions for the future and such other information and assumptions that shall be reasonable under the circumstances. (g) Except as otherwise provided in Sections 7.22 or 7.23, Manager shall not, without Owner's prior written consent, incur any expenses or make any disbursements that are either not provided for in an Annual Operating Budget or are in excess of one hundred and fifty percent (150%) of the amount approved for a particular item in such Annual Operating Budget unless otherwise permitted by Sections 7.22 or 7.23. Any request by Manager to make any expenditure or incur any obligation in excess of one hundred fifty percent (150%) of an amount set forth in the Annual Operating Budget contained in the applicable Annual Operating Plan or which falls into any category of expenditures which is required by any Law to have the prior approval of Owner, shall be submitted to Owner in writing with an explanation of such expenditure. Owner shall respond to any request within fifteen (15) days after the receipt thereof. If Owner fails to respond within such fifteen (15) day period, the proposed expenditure shall be deemed approved. SECTION 7.2 Contracts and Expenses. Manager may make, enter into and ------------------------- perform, in the name of, for the account of, on behalf of, and at the expense of Owner, any contracts and agreements provided for under this Agreement and each Annual Operating Plan and Annual Operating Budget, so long as Manager has complied with all the requirements of this Agreement with respect to such contracts and agreements. All costs and expenses incurred by Manager or an Affiliate of Manager in accordance with this Agreement, the Annual Operating Plan and the Annual Operating Budget shall be for and on behalf of Owner and for Owner's account. All debts and liabilities incurred Manager under this Agreement to third parties on behalf of either Owner or the Facility are and shall remain the sole obligations of Owner. Manager shall use commercially reasonable efforts to promote and enforce the goals of the Advancement Plan by Owners contractors, to the extent required by the Advancement Plan. SECTION 7.3 Recruitment. Manager shall establish and implement procedures, ----------- techniques, and programs consistent with the Annual Operating Plan, the Annual Operating Budget and the Advancement Plan to recruit, screen, evaluate, hire, orient and train qualified applicants to become Facility Employees. Manager shall have the sole authority to recruit, hire, provide orientation to, train, supervise, promote, determine the compensation of, and discharge all Facility Employees. 18 SECTION 7.4 Manager's Personnel Decisions. Manager shall have the ------------------------------- authority to recruit, hire, provide orientation to, train, supervise, promote, determine the compensation of, and discharge all personnel, including all management personnel ("Senior Staff") at the Facility on behalf of Owner. Except as otherwise decided by Manager, all of the Senior Staff shall be employees of Owner. Regardless of whether they are employed by Owner or Manager, expenses and costs pertaining to the employment of the Senior Staff, including without limitation, affiliate incentive and stock plans, severance pay and the costs of retirement benefits pertaining to such persons, shall be Operating Expenses of the Facility and reimbursed to Manager on a current basis. SECTION 7.5 Union Contracts. Manager shall assist Owner to negotiate with --------------- any labor union lawfully entitled to represent the Facility Employees. All decisions regarding union contracts applicable to the Facility shall be made by Manager. SECTION 7.6 Payroll Checks. Payroll checks for all Facility Employees --------------- shall be in a form, contain such identifications and be signed by persons specified by Owner (provided such checks shall not identify Manager without Manager's consent). SECTION 7.7 Financial Management. Manager shall be responsible for the --------------------- administration of the day-to-day financial affairs of the Casino. SECTION 7.8 Capital Replacements --------------------- (a) Manager shall have the responsibility and sole authority to plan, contract for, account for and supervise all capital replacements and improvements to the Casino and the Facility or any portion thereof (collectively "Capital Replacements") that are contemplated in any Annual Operating Plan. Manager shall have the right to approve plans and specifications and select architects, engineers, general contractors, subcontractors, suppliers, and materialmen with respect to Capital Replacements, taking into consideration the criteria set forth in the Development Plan and al1 Annual Operating Plans. Any changes in the Casino structure itself or the structure of any of the buildings located at the Facility shall comply with any requirements in the Purchase, or any Governmental Requirements. (b) Manager shall have the right to supervise the general contractor or other person responsible for the Capital Replacements work. To the extent the proposed Capital Replacements will have a material adverse effect on the operation of the Facility during the performance of the work. the plans and specifications applicable thereto shall comply with the terms of the Purchase and any applicable Governmental Requirements. 19 SECTION 7.9 Revisions to Annual Operating Plan and Reallocations of Funds. ------------------------------------------------------------- If, after approval of an Annual Operating Plan for a particular Fiscal Year, in Manager's reasonable business judgment, revisions to the Annual Operating Plan are appropriate, Manager shall revise the Annual Operating Plan and submit such revised Annual Operating Plan to Owner for approval in accordance with the procedures set forth in Section 7.1. Owner shall have the right to suggest revisions to the Annual Operating Plan subject to Manager's approval with disagreements being resolved as set forth in Section 7. 1. Manager, without Owner's consent, may reallocate all or any portion of any line item in an Annual Operating Budget to another item in the same Department in an amount not to exceed five hundred thousand Rands (R500,000) in the aggregate in any Fiscal Year but may not reallocate from one Department to another without Owner's approval. The term "Department" means those general divisional categories in the Annual Operating Budgets and shall not mean or refer to subcategories appearing in a divisional category. Manager shall not make any payments or disbursements in excess of one hundred fifty percent (150%) of the Department or total operating expense amounts in an Annual Operating Plan, except as follows: (i) Pursuant to Sections 7.22 or 7.23; (ii) If expenditures for Operating Expenses bear the same relationship (ratio) to the amount budgeted for such items as actual gross revenue for such month bears to the projected gross revenue for such month (provided that any increase in Operating Expenses is, in Manager's reasonable business judgment, a necessary consequence of the increase in gross revenue); (iii) Any expenditures for which written approval in advance has been obtained from Owner; (iv) For taxes, insurance and utilities to reflect actual costs thereof, subject to Owner s right to contest the validity of such items; and (v) For payment of any final judgment in litigation involving the Facility. SECTION 7.10 Accounting Records. During the Term of this Agreement, Manager ------------------ shall maintain full and adequate books of account and records ("Books and Records") reflecting the results of the operation of the Casino on an accrual basis, all in accordance with Generally Accented Accounting Principles consistently applied in all material respects. The Books and Records shall be kept separate and distinct from all other operations and businesses of Manager or Affiliates of Manager. Manager shall keep all Books and Records, including, without limitation, current vendor invoices, payroll records, general ledgers, credit transactions and other records relating to the Casino at the Facility or at such other location as shall be approved by Owner in writing, subject to such record retention and storage policies and access rights required by any Gaming Authority and any other applicable Governmental Requirements. All such Books and Records shall at all times be the property of Owner and shall not be removed from the Facility or other approved location by Manager without Owner's written approval except as required by General Laws. Upon any termination of this Agreement, all Books and Records shall immediately by turned over to Owner so as to ensure the orderly continuance of the operation of the Facility, but (i) Manager may make and retain copies of all or any portion of the Books and Records needed for its own record keeping and (ii) such Books and Records shall be available to Manager for a period of five years after termination of this Agreement at all reasonable times for inspection, audit, examination and transcription of particulars relating to the period in which Manager managed the Facility. 20 SECTION 7.11 Financial Statements; Meetings. Manager shall provide Owner ------------------------------- with reasonably accurate unaudited Financial Statements of the Casino sixty (60) days after the end of each calendar quarter. The annual Financial Statements shall be audited by Owner's auditors at Owner's expense and provided to Owner within ninety (90) days after the end of the Fiscal Year. In addition, Manager shall provide Owner with daily results (including cash drop) for all games and with a copy of Manager's monthly casino report. SECTION 7.12 Access. Review and Audit. Owner (or its duly appointed agents) ------------------------- and any Gaming Authority (as permitted by Law) shall have the right at reasonable times and during normal business hours, after reasonable written notice to Manager, to examine, audit, inspect and transcribe the Book and Records. With respect to such reviews, Owner and its respective agents shall be subject to the confidentiality covenants in Section 18.8. Section 7.13 Limitation of Responsibility for Annual Operating Budgets. All --------------------------------------------------------- Annual Operating Budgets are intended only to be reasonable estimates based on Manager's best business judgment and Manager shall not be liable or responsible in any event if any of the budgeted figures are not attained or there is any variance between the actual revenues and expenditures and the amounts set forth in any Annual Operating Budgets. Owner acknowledges that Manager has not made any guarantees, warranty or representation of any nature concerning or related to the amounts of Gross Gaming Revenue to be generated and Operating Expenses to be incurred from the operation of the Facility during the Term of this Agreement. SECTION 7.14 Management. Subject at all times to the Operating Guidelines ---------- and those rights of Owner specifically provided in this Agreement. Manager shall have the discretion and authority to determine operating policies and procedures, standards of operation, staffing levels and organization, win payment arrangements, standards of service and maintenance, food and beverage quality and service, pricing, and other policies affecting the Casino, or the operation thereof, to implement all such policies and procedures, and to perform any act on behalf of Owner which Manager deems necessary or desirable in its good faith business judgment for the operation and maintenance of the Casino and the Facility on behalf for the account and at the expense of Owner. including but not limited to the following, as applicable: (i) Manager shall negotiate and consummate such agreements necessary for the furnishing of utilities, services, security, and supplies for the maintenance of utilities, services, security, and supplies for the maintenance and operation of the Casino. (ii) If consistent with the Development Plan, Manager may negotiate and grant concessions and purchases for space in the Casino. (iii) Manager shall have sole authority to make all repairs, replacements, and improvements which are necessary or appropriate. Manager shall report directly to the Board of Directors of Owner as well as to the Board of Directors of Century Casinos, Inc. on all matters. 21 SECTION 7.15 Licenses. Permits, Reports and Accreditation. ------------------------------------------------ (a) Manager shall use its best efforts to apply for, process, obtain and maintain all Manager Operating Permits and, to the extent requested by Owner, Owner Operating Permits, in a manner and within the time periods that will permit the Facility to be operated on a continuous and uninterrupted basis after the Opening Date. If reasonably requested by Owner, Manager shall (i) apprise Owner of the need to renew, reapply or requalify for any Owner Operating Permits and filing any reports relating thereto or required by any Governmental Authority, and (ii) assist Owner in processing all such matters in a timely fashion. All reasonable out-of-pocket costs and expenses reasonably necessary to obtain and maintain Manager Operating Permits shall be reimbursable by Owner and shall constitute Operating Expenses. Owner shall provide all required information for all of the above promptly upon request and such information shall be accurate. (b) If Owner fails to apply (or fails to request that Manager apply (on behalf of Owner) for a necessary Owner Operating Permit, and Manager makes a good-faith determination that such failure jeopardizes the ability to operate the Facility on a continuous and uninterrupted basis after the Opening Date, then Manager may take all necessary or desirable steps to obtain the Owner Operating Permit on behalf of Owner and Owner hereby grants Manager an irrevocable power of attorney, which Owner acknowledges is coupled with an interest, to implement the foregoing. Manager shall be reimbursed by Owner for all expenses incurred in obtaining such Owner Operating Permit. SECTION 7.16 Government Regulations. Upon five (5) Business Day's written ---------------------- notice to Owner, Manager shall be permitted to contest the validity and/or application of any Law or Governmental Requirement pertaining to Gaming Operations before any court or appropriate administrative body unless Owner shall object to such action in writing during said notice period. SECTION 7.17 Legal Actions. All matters of a legal nature involving the -------------- Facility, shall be handled by legal counsel selected by Manager and approved by Owner (such legal counsel is hereinafter referred to as "Approved Legal Counsel") Manager shall notify Owner in writing of the commencement of any legal action or proceeding concerning the Facility as soon as practicable after Manager receives actual notice of the commencement of such legal action which could reasonably be anticipated to involve liability or damage to Owner for which Manager reasonably anticipates liability. Notwithstanding the foregoing. Manager shall notify Owner immediately of any action filed against the business, the Facility, Owner, Manager or the Casino which could result in seizure of the Casino. Except with respect to those legal matters in which Owner advises Manager it desires to be directly involved, Manager shall be responsible for retaining on behalf of Owner the Approved Legal Counsel to take any reasonable or necessary legal actions to protect the assets of the Facility and to insure compliance with the contractual obligations of others and all Governmental Requirements. In any legal action or proceeding for damages in which Owner is to be the plaintiff or complainant, then Manager may not commence such legal action or proceeding without first notifying Owner in writing. Owner shall, by written notice to Manager, within five (5) days of the date of such notice, consent to the commencement of such legal action or proceeding or provide Manager with a good faith material basis for not commencing such legal action or proceeding. SECTION 7.18 Accounting Services. Manager shall establish and maintain -------------------- accounting systems, internal controls, and reporting systems in accordance with the Operating Guidelines that are (i) consistent in all material respects with customary policies and procedures used by Managers' Affiliates engaged in such business and (ii) which comply with all Governmental Requirements and requirements of Gaming Authorities and has obtained all Gaming Authority approvals which Owner or Manager are required to obtain. 22 SECTION 7.19 Bank Accounts. Owner shall establish one or more bank accounts ------------- that are necessary for the operation of the Facility at various banking institutions chosen by Manager and reasonably acceptable to Owner (such accounts are hereinafter collectively referred to as the "Bank Accounts"). The accounts shall be in the name of Owner, but, except as provided in the following sentence, Manager's designees shall be the only persons authorized to draw upon the Bank Accounts. If Manager has committed an Event of Default which continues during the term of any applicable cure periods, or if Manager has acted in bad faith with respect to Owner's funds in the Bank Accounts, then Owner shall have the right to assume sole control of the Bank Accounts upon two (2) Business Days' prior written notice to Manager, whereupon the signatures of two (2) members of Owner shall be required to draw upon the Bank Accounts. Manager's designated signatories must be covered by the fidelity insurance described in Section 14.1. The Bank Accounts shall be interest bearing accounts if such accounts are reasonably available and all interest thereon shall be credited to the Bank Accounts. All gross revenues received by Manager from the operations of the Facility shall be deposited in the Bank Accounts and Manager shall pay out of the Bank Accounts, to the extent of the funds therein, from time to time, all Operating Expenses and other amounts required by Manager to perform its obligations under this Agreement. All funds in the Bank Accounts shall be separate from any other funds and Manager may not commingle any of Managers funds with the funds in the Bank Accounts. Owner shall bear the risk of the insolvency of any financial institution holding such Bank Accounts. SECTION 7.20 Credit. All decisions regarding the granting and collection of ------ credit, if allowed under the Act, shall be governed by the Credit Policy- to be developed by Manager and approved by Owner. All credit shall be for the account of and at the sole risk of Owner. SECTION 7.21 Sales Taxes. Etc. If reasonably requested by Owner and agreed ----------------- to by Manager, Manager shall use its best efforts to comply in all material respects with all applicable Laws with respect to collecting, accounting for and paying to the appropriate Governmental Authorities all applicable excise, sales and use taxes and other similar governmental charges resulting from the operation of the Casino. SECTION 7.22 Emergency Expenditures. Without limiting the generality of ----------------------- this Section 7.22, in the eve at that a condition exists in, on, or about the Facility of a nature reasonably believed by Manager to be an emergency, including structural repairs, which Manager believes requires immediate repair to preserve and protect the Facility and assure its continued operation or to protect the safety and welfare of the Facility customers, guests or employees, Manager, on behalf of and at the expense of Owner, shall take all reasonable steps and make all reasonable expenditures necessary to repair and correct any such condition, whether or not provisions have been made in the applicable budgets for any such emergency expenditures. Expenditures made by Manager in connection with an emergency shall be paid from the Bank Accounts. Owner shall replenish finds paid from the Bank Accounts with any insurance proceeds received by Owner with respect to such emergency condition or situation, and Owner shall replace any difference between the insurance proceeds and the amount used for such emergency from the Bank Accounts. Manager shall promptly notify Owner of any emergency expenditures made pursuant to this Section 7.22. 23 SECTION 7.23 Expenditures Required for Compliance with Law. Without -------------------------------------------------- limiting the generality of this Article VII, if at any time during the Term of this Agreement repairs, additions, changes or corrections in the Facility of any nature shall be required by reason of any Governmental Requirements now or hereafter in force, such repairs, additions, changes or corrections shall be made at the direction of Manager and shall be paid for by Owner. Manager shall inform Owner of the existence of any Governmental Requirements which require expenditures under this Section 7 23 as soon as practicable after learning of such Governmental Requirements and the repairs, additions, changes or corrections which Manager believes are required to be- made and the estimated expenditures to be incurred. If compliance with any Governmental Requirements that are the subject of this Section 7.23 will require expenditures which will make the continued operation of the Facility uneconomical to Owner, Owner shall have the right to cease operating the Facility (to the extent the cessation of Facility operations will not result in any material liability to Manager) and in connection therewith, to terminate this Agreement, which termination shall not constitute a Default by Owner hereunder. In the event Owner reopens the Facility or the Casino at a site different from the Site within three hundred sixty-five (365) days after so ceasing operations, Manager shall have the option to be reinstated and resume as Manager in accordance with the terms of this Agreement. SECTION 7.24 Marketing Programs. Manager shall develop a marketing program ------------------ to implement the marketing plans contained in each Annual Operating Plan. Manager may, at its option, also provide for the Facility, or seek to cause an Affiliate to so provide the followings (i) joint marketing or advertising with similar properties owned or operated by Affiliates of Manager and (ii) major entertainment, sporting events or special attractions sponsored by the Facility. Manager shall use its best efforts to cooperate with Owner in the development of any joint marketing efforts which it determines at its option to provide for the Facility. SECTION 7.25 Limitations on Use of Names and Logos. Owner acknowledges that ------------------------------------- neither this Agreement nor the exercise of any of Owner's rights in respect of the Facility. shall give Owner any rights to the names "Century" or "Legends". SECTION 7.26 Manager's Expenses. In connection with Manager's obligations ------------------- under this Agreement and with Owner's prior approval, Manager may at its option arrange for Century or its Affiliates to provide such reasonable supervisory, accounting, administrative and operational services to Manager as are generally provided by Century or its Affiliates to its other gaming units. Owner shall pay Century (or its Affiliates, as the case may be) a commercially reasonable hourly rate for such services and shall bear the cost of reasonable travel and related expenses for any staff of Century or its Affiliates visiting the Facility for purposes of providing such services to the Facility. SECTION 7.27 Pricing for Hotel Rooms. Food & Beverage. Etc. The parties ----------------------------------------------- agree that Annexure A (outlining pricing for complimentary hotel rooms, food & beverage, etc.) shall be an integral part of this Agreement. 24 ARTICLE VIII DEFAULT/STEP-IN RIGHTS ---------------------- SECTION 8.1 Default or Event of Default. The occurrence of any one or more ------------------- ------- of the events described in Sections 8.2 and 8.3 which is not cured within the time permitted shall constitute a default under this Agreement (hereinafter referred to as a "Default" or an Event of Default) as to the party failing in the performance or effecting the breaching act. SECTION 8.2 Manager's Defaults. Manager shall have committed a "Manager's ------------------ Default" if Manager shall: (i) file a voluntary petition in bankruptcy or insolvency, or a petition for relief or reorganization under any bankruptcy or insolvency law; (ii) consent to an involuntary petition in bankruptcy or fail to vacate any order approving an involuntary petition within sixty (60) days from the date of entry thereof; (iii) have entered against it an order for relief under any bankruptcy code (or any successor statute) or any other order, judgment or decree by any court of competent jurisdiction on the application of a creditor adjudicating Manager insolvent or approve a petition seeking reorganization or appointing a receiver, trustee, custodian or liquidator of all or a substantial part of Manager's assets, and such order, judgment or decree continues unstayed and in effect for a period of ninety (90) days; (iv) have appointed for it a receiver or custodian of or for all or a substantial portion of the assets of Manager unless removed within sixty (60) days: (v) assign for the benefit of its creditors all or any substantial part of its assets, or consent to the appointment of a receiver, liquidator, custodian or trustee in bankruptcy for Manager of all or any substantial part of its assets; (vi) fail to materially perform or materially comply with any of the covenants, agreements, terms or conditions contained in this Agreement to Manager (other than monetary payments) and such failure shall continue for a period of forty-five (45) days after written notice thereof from Owner to Manager specifying in detail the nature of such failure, or, in the case such failure is of a nature that it cannot, with due diligence and good faith, be cured within forty-five (45) days, if Manager fails to proceed promptly and with all due diligence and in good faith to cure the same and thereafter to prosecute the curing of such failure to completion with all due diligence within ninety (90) days thereafter; or 25 (vii) take or fail to take any action to the extent required of Manager under this Agreement that creates a default under any- Governmental Requirement unless Manager cures such default or breach prior to the expiration of applicable notice, grace and cure periods, if any. If the only result of the failure by Manager to act is a monetary loss to Owner which is not otherwise capable of being cured by Manager, then Manager shall not be in Default if Manager reimburses Owner for such losses within thirty (30) Business Days of incurring such loss or otherwise protects Owner against such loss in a manner reasonably acceptable to Owner. SECTION 8.3 Owner's Default. Owner shall have committed an "Owner's ---------------- Default" if Owner shall: (i) file a voluntary petition in bankruptcy or insolvency, or a petition for relief or reorganization under any bankruptcy or insolvency law; (ii) consent to an involuntary petition in bankruptcy or fail to vacate any order approving an involuntary petition within sixty (60) days from the date of entry thereof; (iii) have entered against it an order for relief under any bankruptcy code (or any successor statute) or any other order, judgment or decree by any court of competent jurisdiction on the application of a creditor adjudicating such Owner insolvent or approve a petition seeking reorganization or appointing a receiver, trustee, custodian or liquidator of all or a substantial part of Owner's assets, and such order, judgment or decree continues unstayed and in effect for a period of ninety (90) days; (iv) have appointed for it a receiver or custodian of or for all or a substantial portion of the assets of Owner unless removed within sixty (60) days; (v) assign for the benefit of its creditors all or any substantial part of its assets. or the consent to the appointment of a receiver, liquidator, custodian or trustee in bankruptcy for all or any substantial part of its assets: (vi) fail to make any monetary payment required under this Agreement, including, but not limited to, the Management Fee or Owner's Advances, on or before the cue date recited herein and said failure continues for five (5) Business Days after written notice front Manager specifying such failure: or (vii) fail to perform or materially comply with any of the other covenants. agreements, terms or conditions contained in this Agreement applicable to Owner (other than monetary payments) and such failure shall continue for a period of forty-five (45) days after written notice thereof from Manager to Owner specifying in detail the nature of such failure, or, in the case such failure is of a nature that it cannot, with due diligence and good faith, cure within forty-five (45) days, if Owner fails to proceed promptly and with all due diligence and in good faith to cure the same and thereafter to prosecute the curing of such failure to completion with all due diligence within ninety (90) days thereafter. 26 SECTION 8.4 Delays and Omissions. No delay or omission as to the exercise -------------------- of any right or power accruing upon any Event of Default shall impair the non-defaulting party's exercise of any right or power or shall be construed to be a waiver of any Event of Default shall impair the non-defaulting party's exercise of any right or power or shall be construed to be a waiver of any Event of Default or acquiescence therein. SECTION 8.5 Owner's Remedies. Upon the occurrence of a Manager's Default, ---------------- Owner shall be entitled to (i) terminate this Agreement by Owner's written notice of termination to Manager and such termination shall be effective forty-five (45) days after delivery of such notice; (ii) obtain specific performance of Manager's obligations hereunder and injunctive relief, or (iii) exercise Owner's step-in rights as described in Section 8.7 herein. SECTION 8.6 Manager's Remedies. Upon the occurrence of an Owner's Default, ------------------ Manager shall be entitled to (i) terminate this Agreement by Manager's written notice of termination to Owner, and such termination shall be effective forty-five (45) days after delivery of such notice or such time as a new manager is appointed, whichever is earlier; or (ii) obtain specific performance of Owner's obligations hereunder and injunctive relief In the event of a termination of this Agreement pursuant to clause (i) of this Section 8.6, Manager shall be entitled to accelerated payment of all of its projected Management Fees for the remainder of the then applicable ten year period this Agreement or thirty-six (36) month period following the termination date of this Agreement, whatever is longer, such projected Management Fees to be based on last year's Management Fee increased by 15% (fifteen percent) per annum. The parties hereby agree that the amount payable as liquidated damages described above is a reasonable estimate of the amount of damages for termination of this Agreement arising out of such Owner Default and the termination of this Agreement and upon payment thereof Manager shall have no further rights, claims or entitlement to damages as a consequence of such termination. SECTION 8.7 Step-In Rights. --------------- (a) If Owner's funds are available, and Manager fails to pay when due any amount which it is Manager's responsibility to pay from such Owner's funds pursuant to this Agreement, then Owner, after five (5) days written notice to Manager with respect to any Operating Expense, and with respect to any- non-Operating Expense with such notice, if any as may be reasonable under the circumstances (except in the event that Manager has exposure to potential liability in connection with making such payments in which case Owner shall give Manager five (5) days written notice), may (but shall not be required to) pay such amounts (including fines, penalty, interest and late payment fees) and take all such action as may be necessary in respect thereof. Manager shall, following such payments by Owner, promptly reimburse Owner from the Bank Accounts to the extent funds are available in the amount which Manager failed to pay when due. 27 (b) If Manager fails to take any action which it is Manager's responsibility under this Agreement to take, and the result is to expose Owner to a material loss or Facility patrons to a material risk of physical safety, then Owner, upon five (5) days' written notice to Manager (except in any emergency in which case Owner shall give Manager such notice, if any, as is reasonable under the circumstances), may (but shall not be required to) take such actions as may be necessary to protect Owner's assets from such a material loss and/or to protect the Facility customers. Manager shall, following any payments by Owner made with respect to such actions, promptly- reimburse Owner from the Bank Accounts, to the extent funds are available, the amount which Owner has expanded. SECTION 8.8 Remedies Nonexclusive. No remedy granted to either Owner or ---------------------- Manager under Sections 8.5, 8.6 and 8.7, respectively, is intended to be exclusive of any other remedy herein or by General Law provided, but each shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity. SECTION 8.9 Manager Responsibilities. In the event of termination of this ------------------------ Agreement. Manager will relinquish control of the Bank Accounts. Manager shall make its Senior Staff available to Owner for a period of sixty (60) days at Owner's expense to ensure an orderly and uninterrupted transition of the management of the Facility. Owner shall reimburse Manager for all out-of-pocket expenses, personnel costs and allocated overhead incurred during said sixty (60) day period. 28 ARTICLE IX CERTAIN RIGHTS AND RESPONSIBILITIES OF OWNER ------- ------ --- ---------------- -- ----- SECTION 9.1 Owner's Advances. Owner shall advance to Manager on a timely ----------------- and prompt basis immediately available funds with which to conduct the affairs of and maintain the Facility (hereafter referred to as "Owner's Advances") as set forth in this Agreement and as otherwise provided hereunder. SECTION 9.2 Development Plan Funding.Owner shall timely fund to Manager the ------------------------- initial amounts agreed to by the parties set forth in the Development Plan or any revisions thereof approved by Owner. In the event that Owner or Manager anticipates a delay in the opening of the Facility beyond the Estimated Opening Date, each shall be obligated to immediately notify the other in writing and Owner shall, at the request of Manager, at any time and from time to time, deposit with Manager any additional amounts that are reasonably- necessary to pay the additional Pre--Opening Expenses attributable to the delay, which shall include, without limitation, wages and other expenses relating to the Facility personnel already employed SECTION 9.3 Initial Cash Needs Thirty (30) days prior to the Estimated -------------------- Opening Date, Owner shall fund to Manager the Working Capital necessary to commence operating the Facility, as established by Manager. SECTION 9.4 Working Capital Dome the Term of this Agreement, within five ---------------- (5) business Days after receipt of written notice front Manager, Owner shall fund Owner's Advances adequate to insure that the Working Capital set forth in the applicable Annual Operating Plan as revised pursuant to the provisions of Section 7, is sufficient to support the uninterrupted and efficient ongoing operation of the Facility. The written request for any additional Working Capital shall be submitted by Manager to Owner on a monthly basis based on the Financial Statements and the applicable Annual Operating Plan as revised pursuant to the provisions of Section 7.9. 29 SECTION 9.5 Payment of Expenses. Manager shall pay from Net Gaming Proceeds ------------------- the following items in the order of priority listed below, subject to the General Laws, on or before their applicable due date: (i) Operating Expenses (including the Management Fee), expenditures permitted pursuant to Sections 7.22 and 7.23, and other payments due under the Purchase; and (ii) If applicable, payments due on any Purchase or other financing arrangements relating to the FF&E, and any other expenditures permitted by any Annual Operating Plan; and (iv) If applicable, any other taxes, expenses or fees which Owner is obligated to pay out of Net Gaming Proceeds by contract and Owner has asked Manager to administer such payments (as long as such contract has been brought to the attention of Manager) or under law. Manager's responsibility to make any of the foregoing payments is subject to and conditioned upon Owner making available funds sufficient to make such payments from Net Gaming Proceeds or otherwise in the order set forth above. Owner shall have the right to elect to pay directly (rather than have Manager pay) rental, fees and other payments due under the Purchase, or debt service upon five (5) days' written notice to Manager and in such event Manager shall disburse to Owner from gross revenues (subject to the prior payment of expenses listed in clause (i) above) funds in such amounts and at such times as may be necessary to pay such expenses on or before the date such expenses are due, subject to various Casino Bankroll and Working Capital requirements and the availability of such funds otherwise. Owner shall timely make all payments under this Section 9.5 where Owner has requested the right to make such payments directly and if Owner fails to make such payments, Owner's right to make such payments directly shall cease until Owner has brought all such obligations current. Nothing in this Section 9.5 shall be deemed to relieve Owner from its obligations to pay Management Fees in a timely manner in accordance with Article IV or to comply with the time requirements set forth in Articles IV and VIII or to pay any other obligation of Owner under this Agreement. Notwithstanding anything to the contrary in this Agreement, Manager shall have the right to offset any amounts due from Manager, if any, under this Agreement against any unpaid Management Fee. SECTION 9.6 Casino Bankroll In addition to the initial cash needs described --------------- in Section 9.3 herein, at least fifteen (15) days prior to the Estimated Opening Date. Owner shall provide the initial Casino Bankroll and shall maintain such amount throughout the Term of this Agreement. If the Casino Bankroll required to be provided by Owner pursuant to this Section 9.6 is not sufficient to adequately fund Casino Gaming Activities or is depleted as a result of losses, Owner shall fund Casino Bankroll in an amount sufficient to carry on the Casino Gaming Activities and in a manner which complies with Governmental Requirements. 30 SECTION 9.7 Optional Funding by Manager. In the event Owner fails to fund --------------------------- any Owner's Advance within the specific time period set forth in this Article IX or make any other payment required to be made by Owner hereunder, or if sums are required prior to such time as Owner is obligated to advance the same, Manager may, at its sole option, upon five (5) days' written notice to Owner, without assuming any liability for the payment of any account, advance the amount required, or any portion thereof, on behalf of Owner. The amount advanced and paid on behalf of Owner ("Manager's Advances") shall be reimbursed on demand and shall bear interest at the Default Rate until Manager is reimbursed in full, including all accrued interest. The funding of any Manager's Advance does not in any manner waive any rights or remedies granted to Manager under the terms of this Agreement, including the right to declare Owner in Default as provided in Article VIII and to proceed with any remedies granted under Article VIII. SECTION 9.8 Cooperation of Owner and Manager. Owner and Manager shall ------------------------------------ cooperate fully with each other during the Term of this Agreement to facilitate the performance by Manager of Manager's obligations and responsibilities set forth in this Agreement and to procure and maintain all Construction and Operating Permits. Owner shall provide Manager with such information pertaining to the Purchase, Governmental Requirements and the Facility necessary to the performance by Manager of its obligations hereunder as may be reasonably and specifically- requested by Manager from time to time. ARTICLE X LICENSE PROTECTION ------- ---------- SECTION 10.1 Owner Denial. If at any time (i) either Owner or any Person owning ------------ any partnership interest or any of the issued and outstanding stock of (or beneficial interest in) either Owner or an Affiliate of Owner, or a partner, limited partner, officer or director of either is (x) denied a license, found unsuitable, or is denied any other Approval with respect to the Facility or any other gaming operation anywhere by a Gaming Authority because of such Person's misconduct or association with any other Person who is reputed to be controlled by Persons known to be engaged in criminal activities, or (y) is required by any Gaming Authority to apply for an Approval and does not apply within any required time limit (including extensions, if any), wrongfully withdraws any application for Approval, and if the result of the foregoing has or would have an adverse affect on Manager or any Affiliate of Manager with respect to its operation, or ownership of a casino under any Gaming Authority or does or would materially delay obtaining any Approval affecting Manager or any Affiliate of Manager, or (ii) any Gaming Authority commences any suit or proceeding against either Manager or an Affiliate or to terminate or deny any right or Approval of Manager or any Affiliate because of a final determination of unsuitability or similar finding concerning Owner, any Affiliate of Owner or any Person owning a beneficial interest in Owner or an Affiliate of Owner or (iii) the compliance committee of Manager reasonably determines that Owner, or any Person owning any partnership interest or any of the issued and outstanding stock of (or beneficial interest in) Owner or an Affiliate of Owner may jeopardize Approvals held by Manager or its Affiliates, or the current status of Manager or its Affiliates with any Gaming Authority (all of the foregoing events described in clauses (i)-(iii) above are collectively referred to as an "Owner Denial"), said Owner Denial shall be a Default and shall entitle Manager to its remedies under Article VIII. Said Owner Denial shall not be an Event of Default, however, providing Owner ends such association within such period of time, if any, as the Gaming Authority and/or Manager's compliance committee gives for terminating such association. Owner and all Persons associated with Owner shall promptly, and in all events within any time limit established by law or such Gaming Authority, furnish each Gaming Authority any information requested by such Gaming Authority and shall otherwise fully cooperate with all Gaming Authorities including any required inspections. 31 SECTION 10.2 Manager's South Africa Licensing. Manager shall apply for and -------------------------------- pursue all Manager Operating Permits or licenses, and use best efforts to assist Owner in obtaining Owner Operating Permits or licenses, as expeditiously as possible. Manager shall not be obligated to accept any conditions to obtain any Manager Operating Permit which imposes any liabilities, financial obligations or performance obligations not required by this Agreement. SECTION 10.3 Manager Denial. If at any time (i) either Manager, any --------------- Affiliate of Manager or any Person associated in any way with Manager is denied a license, found unsuitable, or is denied any other Approval with respect to the Facility or any other gaming operation by a Gaming Authority or is required by any Gaming Authority to apply for an Approval and does not apply within any required time limit (including extensions, if any), wrongfully withdraws any application for Approval, and if the result of the foregoing has or would have an adverse effect on Owner or any Affiliate of Owner or any officer or director of Owner or its Affiliates with respect to such person's or its operation of a casino under any Gaming Authority, or does or would materially delay obtaining any Approval affecting Owner or any Affiliate of Owner, or (ii) any Gaming Authority commences any suit or proceeding against either Owner or any Affiliate because of a final determination of unsuitability or similar finding concerning Manager, any Affiliate of Manager or any Person owning a beneficial interest in Manager (all of the foregoing events described in clauses (i) and (ii) above are collectively referred to as a "Manager Denial"), said Manager Denial shall entitle Owner to terminate this Agreement. If Owner exercises its right to terminate this Agreement pursuant to this Section 10.3 solely as the result of an association of Manager or any Person associated with Manager, this Agreement shall not terminate if Manager ends such association within such period of time, if any, as the Gaming Authority gives for terminating such association, Manager and all Persons associated with Manager shall promptly, and in all events within any time limit established by General Law or such Gaming Authority, furnish each Gaming Authority any information requested by such Gaming Authority including any required inspections. The purpose of this Section 10.3 is solely to protect existing licenses of Owner and Owner's Affiliates and of their respective officers and directors. This Section 10.3 does not apply to any-event described above that does not jeopardize the continued viability of such licenses. Any Manager Denial that is attributable in whole or in part to the acts or omissions of Owner shall not entitle Owner to terminate this Agreement. SECTION 10.4 Owner's South Africa Licensing. Owner shall timely obtain and ------------------------------ maintain any Owner Operating Permits the responsibility for the maintenance of which Owner has not requested of Manager pursuant to this Agreement. ARTICLE XI OWNER'S COVENANTS AND REPRESENTATIONS ------- --------- --- --------------- Owner makes the following covenants and representations to Manager, which representations and covenants shall, unless otherwise stated herein, survive the execution and delivery of this Agreement and the Opening Date and shall continue to be true during the Term of this Agreement. SECTION 11.1 Corporate Status. Owner is a company duly organized, validly ---------------- existing, and in good standing under the laws of South Africa and has full corporate power to enter into this Agreement and execute all documents required hereunder. 32 SECTION 11.2 Authorization The making, execution, delivery and performance ------------- of this Agreement by Owner has been duly authorized and approved by all requisite action of the Board of Directors of Owner, and this Agreement has been duly executed and delivered by Owner and constitutes a valid and binding obligation of Owner, enforceable in accordance with its terms. SECTION 11.3 Other Agreements. Neither the execution and delivery of this ---------------- Agreement by Owner nor Owner's performance of its obligations hereunder will result in a violation or breach of or constitute a default with respect to or accelerate the performance required under any other agreement or obligation to which Owner is a party or is otherwise bound or to which the Facility or any part thereof is subject, and will not constitute a violation of any General Law to which Owner or the Facility is subject. SECTION 11.4 Documentation. If necessary to carry out the intent of this ------------- Agreement, Owner agrees to execute and provide to Manager, on or after the date hereof any and all other instruments, documents and agreements necessary to make this Agreement fully and legally effective, binding and enforceable between the parties hereto and as against third parties. SECTION 11.5 Related Contracts. Owner shall cause the timely payment and ------------------ performance of all its obligations under the Purchase, loan documents and all other contracts related to the development and operation of the Facility other than such responsibilities as are imposed upon Manager pursuant to this Agreement; provided, however, that Owner shall fund all such obligations to the extent gross revenues are sufficient therefor. ARTICLE XII MANAGER'S COVENANTS AND REPRESENTATIONS ------------------- ------------------- Manager makes the following covenants and representations to Owner, which covenants and representations shall, unless otherwise stated herein, survive the execution and delivery of this Agreement and the Opening Date and continue to be true during the Term of this Agreement. SECTION 12.1 Corporate Status. Manager is a corporation duly organized, ----------------- validly existing, and in good standing with full corporate power to enter into this Agreement and execute all documents required hereunder. SECTION 12.2 Authorization. The making, execution, delivery and performance ------------- of this Agreement by Manager has been duly authorized and approved by all requisite action of the Board of Directors of Manager, and this Agreement has been duly executed and delivered by Manager and constitutes a valid and binding obligation of Manager, enforceable in accordance with its terms. SECTION 12.3 Other Agreements. Neither the execution and delivery of this ---------------- Agreement by Manager nor Manager's performance of its obligations hereunder will result in a violation or breach of or constitute a default with respect to or accelerate the performance required under any other agreement or obligation to which Manager is a party or is otherwise bound and will not constitute a violation of any General Law to which Manager is subject. SECTION 12.4 Documentation If necessary to carry out the intent of this ------------- Agreement, Manager agrees to execute and provide to Owner, on or after the date hereof any and all other instruments, documents and agreements that may be necessary to make this Agreement fully and legally effective, binding and enforceable between the parties hereto and against third parties. 33 ARTICLEXIII UNAVOIDABLE DELAYS ------------------ The provisions of this Article XIII shall be applicable if there shall occur during the Term of this Agreement any (i) strike(s), lockout(s) or labor dispute(s), (ii) inability to obtain labor or materials, or reasonable substitutes therefor, (iii) acts of God, governmental restrictions, regulations or controls, enemy or hostile governmental action, civil commotion, fire or other casualty, (iv) delay attributable to the failure to obtain any Construction Permit, Operating Permit or any Approval of any Governmental Authority for reasons that are not the fault of or beyond the reasonable control of the party obligated, or (v) other conditions similar to those enumerated in this Article XIII beyond the reasonable control of the party obligated to perform (collectively referred to as "Unavoidable Delay"). If Manager or Owner shall, as the result of any Unavoidable Delay fail punctually to perform any obligation on its part under this Agreement, then, upon written notice to the other within five (5) Business Days of such event, such failure shall be excused and not be a breach of this Agreement by the party claiming an Unavoidable Delay, but only to the extent occasioned by such event. If any right or option of either party to take any action under or with respect to the Term of this Agreement is conditioned upon the same being exercised within any prescribed period of time or at or before a named date, then such prescribed period of time or such named date shall be deemed to be extended or delayed, as the case may be, upon written notice, as provided above, for a time equal to the period of the Unavoidable Delay. Notwithstanding anything contained herein to the contrary, the provisions of this Article XIII shall not be applicable to the time periods for satisfying Manager's or Owner's obligation to make any payments to the other pursuant to the terms of this Agreement nor shall this Article operate to extend any time period set forth in Article X. 34 ARTICLE XIV INSURANCE --------- SECTION 14.1 Operating Insurance -------------------- (a) Owner shall procure all insurance coverages deemed necessary and adequate by Manager (the "Required Coverage") (b) The premiums for all insurance obtained in accordance with this Section XIV shall be Operating Expenses (c) Manager shall be required to provide the following: (i) Prompt reporting of any incident or potential claim on or about the premises: (ii) Assist and cooperate in the adjustment of all claims; (iii) Implementation and monitoring of all loss control practices as required by Owner or various insurance companies; and (iv) Advise Owner of any unsafe conditions or hazards brought to the attention of Manager during the Term of this Agreement. SECTION 14.2 Other Insurance. Owner shall procure and maintain at all times --------------- during the Term of this Agreement insurance (subject to reasonable deductible amounts as determined by Manager and as available and consistent with market conditions) protecting the real and personal property of the Casino against fire, with all risks coverage against fire, with all risk coverage against other perils, including vandalism, malicious mischief, flood, hurricane, tornado, earthquake, lightning, aircraft and explosion, and also including boiler and machinery and business interruption with ordinary payroll coverage and such other insurance as is required by the Purchase or the loan documents (excluding, however, insurance described in Section 14.3) or commonly or prudently maintained by owners of similar properties similarly used, in the full replacement value at an agreed amount, including cost of debris removal and increased cost of construction ("Property Insurance"). Owner shall obtain builder's risk and workman's compensation, commercial general liability and automobile liability c overage during all construction. Owner shall also obtain all insurance necessary to insure the Casino as provided for in the Casino Management Agreement. Owner shall also procure such additional kinds of coverage that Manager determines shall be reasonable and prudent with respect to the Facility or as reasonably required by lender(s) or the terms of the Purchase. SECTION 14.3 Parties to be Covered by Insurance: Location of Policies. All -------------------------------------------------------- policies of insurance procured pursuant to Sections 14.1, 14.2 and any Governmental Requirements shall name Manager (and, if such insurance is procured by Century, Owner) as an additional insured by policy endorsement where permitted by the terms and conditions of the various policies but in all events with respect to all liability insurance. All policies shall name such other parties as may be required by the loan documents, the Purchase and any Governmental Requirements as the insured persons thereunder, as their respective interests may appear, and shall provide that they shall not be canceled, modified or denied renewal without at least thirty (30) days prior written notice (or such longer period as is required by Law) to each party that is a named or additional insured thereunder. Owner shall not be required to cause any Person other than those Persons required to be named pursuant to this Section 14.3 to be insured by any insurance policy until thirty (30) days after Owner has received notice of such Person's interest. SECTION 14.4 Rights of Manager and Owner to Receive Information on ------------------------------------------------------------ Insurance Matters. Owner and Manager shall furnish each other with certificates ---------- of insurance, evidencing that the insurance required herein has been procured, no later than thirty (30) days after the approval of the Development Plan. Any binder issued as interim proof must cc replaced within thirty (30) days of issuance with a certificate of insurance indicating a policy number. 35 SECTION 14.5 Termination of Agreement. In the event of the termination of ------------------------ this Agreement for any reason. Owner shall, at Owner's sole cost and expense, continue to name Manager as an additional insured on the liability insurance coverage required by this Agreement following the date of the termination of this Agreement, provided that Owner's obligations under this sentence are subject to the availability of such coverage from the existing insurance carrier. Owner shall provide Manager with evidence of the foregoing coverages following the date of the termination of this Agreement by the delivery of certificates of insurance evidencing the current in place coverage, together with such other information as may be reasonably requested, from time to time, by Manager. SECTION 14.6 Other Insurance Requirements. All the insurance required under ---------------------------- this Agreement shall be issued by insurance companies authorized to do business in South Africa with a financial rating of at least an A- status as rated in the most recent edition of Best Insurance Reports, or an equivalent rating by a responsible company providing similar services if Best Insurance Reports ceases to be regularly published. 36 ARTICLE XV DAMAGE AND CONDEMNATION ---------- ------------ SECTION 15.1 Minor Casualty. In the event of a Minor Casualty, Manager --------------- shall repair any damage or destruction at Owner's sole cost and expense. SECTION 15.2 Major Casualty. Major Condemnation. In the event of a Major ----------------------------------- Casualty or a Major Condemnation, this Agreement shall remain in full force and effect if the Casino or the Facility is repaired or restored within one (1) year from the date of the Major Casualty or the Major Condemnation. If not repaired or restored within one year, Owner shall pay to Manager the greater of a sum equivalent to five percent (5%) of all insurance monies received or the projected Management Fees for the remainder of this Agreement. Such projected Management Fees shall be equal to the last year's Management Fee increased by 15% (fifteen percent) per annum. SECTION 15.4 Minor Condemnation. In the event a Minor Condemnation occurs, ------------------ this Agreement shall not terminate and Owner shall use the award to repair and restore the Facility, including, without limitation, to the extent required under the Purchase or the loan documents. Manager may separately claim for, prove and receive an award for any separately compensable rights of Manager that are taken in any such condemnation action. 37 ARTICLE XVI INDEMNIFICATION --------------- Section 16.1 Owner lndemnitv. Owner hereby covenants and agrees to ---------------- indemnify, save, and defend at Owner's sole cost and expense and hold harmless. Manager and its officers, directors and Affiliates (collectively, "Owner Indemnitees"), from and against the full amount of any and all Losses. The term: "Losses" shall include, but not be limited to, any and all liabilities, claims, suits, administrative proceedings, losses, damages or costs, which may be asserted against an Owner Indemnitee arising from, or relating to the financing, construction or operation of the Facility and shall include expenses of defense including, without limitation, attorneys' fees. The term "Losses" also includes losses arising out of the negligence or strict liability of any Owner Indemnitee. Each Owner Indemnitee will promptly notify Owner of such action, suit or proceeding which relates to any matter covered by the indemnity in this Section 16.1. SECTION 16.2 Manager Indemnity. Manager hereby covenants and agrees to ------------------ indemnify, save and defend, at Manager's sole cost and expense, and hold harmless, Owner and its officers and directors (collectively, "Manager Indemnitees") from and against liabilities, claims, losses, damages, costs or expenses that may be asserted against a Manager Indemnitee solely arising from or relating to the criminal misconduct or fraud of Manager in breach of any of its duties and obligations under this Agreement. Owner will promptly notify Manager of such action, suit or proceeding which relates to any matter covered by the indemnity in this Section 16.2. SECTION 16.3 Special Environmental Indemnity. Owner agrees to indemnify, -------------------------------- defend, reimburse and hold harmless Manager from and against any and all Environmental Damages arising from the presence of Hazardous Materials upon, about or beneath the Site, or migrating to or from same, or arising in any manner whatsoever out of the violation of any Environmental Requirements pertaining to the Site, whether or not arising out of Manager's negligence, or the breach of any warranty or covenant or the inaccuracy of any representation of Owner contained in this Agreement. SECTION 16.4 Legal Fees. Etc.: Procedures. Each indemnitor under this ------------------------------- Article XVI shall reimburse each indemnitee for any legal fees and costs, including reasonable attorneys' fees and other litigation or proceeding expenses, even if the claim is groundless, false, or fraudulent, reasonably incurred by such indemnitee in connection with investigating or defending against Losses with respect to which indemnity is provided hereunder; provided, however, that an indemnitor shall not be required to indemnify an indemnitee for any payment made by such indemnitee to any claimant in settlement of Losses unless such settlement has been previously approved by the indemnitor. If Losses are asserted, or if any action or suit is commenced with respect thereto, for which indemnity may be sought against an indemnitor hereunder, the indemnitee shall notify the indemnitor in writing within ten (10) days after the indemnitee shall have had actual knowledge of the assertion or commencement of the Losses or a claim which could give rise to Losses, which notice shall specify in reasonable detail the matter for which indemnity may be sought. The indemnitor shall have the right, upon notice to the indemnitee given within thirty (30) days following its receipt of the indemnitee's notice (or shorter period if such notice specifies such shorter period and provides reasonable reason therefor), to take primary responsibility, for the prosecution, defense or settlement of such matter, including the employment of counsel chosen by the indemnitor with the approval of the indemnitee. which approval shall not be unreasonably withheld or delayed, and payment of expenses in connection therewith. The indemnitee shall provide, without cost to the indemnitor, all relevant records and information reasonablv required by the indemnitor for such prosecution, defense or settlement and shall cooperate with the indemnitor to the fullest extent possible The indemnitee shall have the right to employ its own counsel in any matter with respect to which the indemnitor has elected to take primary responsibility for prosecution (without regard to Section 7.17), defense or settlement, but the fees and expenses of such counsel shall be the expense of the indemnitee except when indemnitee has engaged its own counsel due to a conflict of interest between indemnitors and indemnitees interests in which case such fees and expenses shall be paid in accordance with this Section 16.4. 38 ARTICLE XVII RELATIONSHIP, AUTHORITY AND FURTHER ACTIONS ------------- --------- --- ------- ------- SECTION 17.1 No Joint Venture or Ownership. Nothing contained in this --------------------------------- Agreement nor any. acts of the parties shall be deemed or construed by the parties or by any third party as (i) creating the relationship of a partnership or joint venture between the parties to this Agreement, or (ii) creating or vesting any right, title, interest, estate, equity participation or beneficial ownership interest in favor of Manager in or to the Facility except the contractual rights created in Manager by this Agreement. Neither any provisions contained herein nor any acts of the parties shall be deemed to create any relationship between the parties other than the relationship of Owner and Manager, as provided in this Agreement. SECTION 17.2 Manager Affiliates. The parent of Manager and/or other ------------------- Affiliates of Manager may provide service to, provide loans and funds to, negotiate for, provide personnel to, and, from time to time take actions on behalf of or for the benefit of Manager by direct dealings with Owner or those acting for it. The parent corporation(s) or Affiliates of Manager shall not be liable to Owner for obligations or liabilities of Manager. SECTION 17.3 Arbitration. The exact same article about "Arbitration" of the ----------- Hotel Management Agreement between Owner and Fortes King Hospitality (Pty) Ltd., which is of the same date as this Agreement, shall be incorporated into this Agreement. ARTICLE XXIII MISCELLANEOUS ------------- SECTION 18.1 Notices. All notices, demands, consents, requests, approvals, ------- and other communications required or permitted hereunder shall be in writing and shall be deemed effective only upon delivery (whether receipt is accepted or refused) at the addresses set forth below (or at such other addresses as shall be given in writing by any party to the others in accordance with this Section 18.1) Notices may be delivered by hand, registered or certified mail, return receipt requested, or bonded private courier service. If to Owner: _____________________ _____________________ Attention: With a copy to: _______________________ _______________________ _______________________ If to Manager: Centurv Casinos Africa (Pty) Limited c/o Deloitte & Touche Attn: Mr. David Parker Deloitte & Touche Place, The Woodlands Woodland Drive, Woodmead, Sandton 2196 with a copy to: Century Casinos, Inc. 200 220 East Bennett Avenue Cripple Creek, CO 80813, USA 39 SECTION 18.2 Governing Law. This Agreement shall be governed by the laws of ------------- South Africa, without giving effect to the principles of conflicts of law. Notwithstanding the foregoing, this Agreement shall be deemed to include all provisions required by the Act, and shall be conditioned upon the approval of the Gaming Commission and the Enforcement Division. To the extent that any term or provision contained in this Agreement shall be inconsistent with the Act, the provisions of the Act shall govern. All provisions of the Act, to the extent required by law to be included in this Agreement, are incorporated herein by reference as if fully restated in this Agreement. The forum for any actions between Owner and Manager will be a court of competent jurisdiction in the Province where the Facility is located. SECTION 18.3 Limitations on Rights of Third Parties. Except as otherwise --------------------------------------- set forth herein, nothing in this Agreement is intended or shall be construed to confer upon or give any Person, other than the parties hereto and their respective successors, any rights or remedies under or by reason of this Agreement or any transaction contemplated hereby. Provisions herein referring to Century or its Affiliates are included herein for the benefit of such Persons. SECTION 18.4 Assignments. This Agreement will be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns but will not be assignable or delegable by any party without the prior written consent of the other party; provided, however, that nothing in this Agreement is intended to limit Manager's ability to assign its rights or delegate its responsibilities under this Agreement to any directly or indirectly controlled Affiliate of Manager. This Agreement shall not be assignable without the prior approval of the Gaming Commission and the Enforcement Division. SECTION 18.5 Unenforceabilitv. If any provision herein shall be ---------------- held invalid or unenforceable, such provision shall not affect the validity or enforceability of any other provisions hereof all of which other provisions shall, in such case. remain in full force and effect. SECTION 18.6 Entire .Agreement and Amendments. This Agreement constitutes -------------------------------- the entire understanding of the parties with respect to the subject matter hereof and supersedes all other oral or written agreements between the parties. This Agreement may not be amended, modified, altered or waived, in whole or in part, except by a subsequent writing signed by each of the parties hereto. No amendments may be made to this Agreement without the approval of the Gaming Commission. SECTION 18.7 Limitation on Damages. Neither party shall be liable to the ---------------------- other party for any consequential damages resulting from a breach hereof. 40 SECTION 18.8 Confidentialitv. Except as otherwise set forth in Article X, --------------- both parties shall maintain confidentiality with respect to material developments in the course of development and operation of the Facility subject to Governmental Requirements and General Law. Except as required by any General Law (including, without limitation, federal securities exchange and stock exchange or NASD requirements) and Gaming Authorities, material confidential information shall only be made available to such of a party's employees and consultants as are required to have access to the same in order for the recipient party to adequately use such information for the purposes for which it was furnished. Any Person to whom such information is disclosed shall be informed of its confidential nature and shall agree to keep it confidential as provided herein. Information provided by one party to the other shall be presumed confidential unless the information is (i) published or in the public domain other than as a result of any action by the recipient thereof (ii) disclosed to the recipient by a third party or (iii) presented to the recipient under circumstances which clearly and directly indicate the delivering party does not intend such information to be confidential. SECTION 18.9 Securities Law Requirements. Owner acknowledges that Century's --------------------------- parent company, Century Casinos, Inc. is a publicly held company and that trading in its securities based on non-public information or unauthorized disclosure or other use of material developments could expose Manager and Owner to significant penalties. Owner shall take appropriate precautions to inform its employees and independent contractors of such requirements. In the event Owner or any Affiliate of Owner becomes a publicly-held company, Manager shall take appropriate precautions to inform its employees and independent contractors that trading in the securities of Owner or such Affiliate based on non-public information or unauthorized disclosure or other use of material developments could expose Owner and Manager to significant penalties. SECTION 18.10 Payment of Fees. In the event of litigation or arbitration of ---------- ---- any dispute or controversy arising from, in, under or concerning this Agreement and any amendments hereof including, without limiting the generality of the foregoing, any claimed breach hereof any suit for accounting, or action for dissolution, the prevailing party in such action or arbitration shall be entitled to recover from the other party in such action or arbitration, such sum as the court or arbitrator shall fix as reasonable attorneys' fees and expenses incurred by such prevailing party. SECTION 18.11 No Waiverof Default. No consent or waiver, express or --------------------- implied. by any party to or of any breach or default by any other party in the performance by the other of its obligations hereunder shall be deemed or construed to be a consent or waiver to or of any other breach or default in the performance by the other party of the same or any other obligations or such party hereunder. Failure on the part of any party to complain of any act or failure to act of the other party or to declare the other party in default. irrespective of how long such failure continues. shall not constitute a waiver by any such party of its rights hereunder. SECTION 18.12 Counterparts This Agreement may be execute in any number of ------------ Counterparts, all of which, when taken together, shall constitute one and the same instrument. SECTION 18.13 Future Deliveries. Each party will, from time to time, ------------------ execute and deliver such further instruments and do such further acts and things as may be reasonably requested by any other party to carry out the intent and purposes of this Agreement. SECTION 18.14 Computation of Time. In the computation of any period of time --------------- ---- provided for in this Agreement, the day of the act or event from which said period of time runs shall be excluded, and the last day of such period shall be included unless it is a Saturday, Sunday, or national United States or South African holiday, in which case the period shall be deemed to run until the end of the next day which is not a Saturday, Sunday, or national United States or South African holiday. As used in this Agreement "Business Day" for any party shall be a day which is not a Saturday, Sunday or national United States or South African holiday. 41 SECTION 18.15 First Right of Refusal. During the term of this Agreement, so long -------------- ------- as no events of default by Manager have occurred, Owner shall grant Manager the first right of refusal on all of its and/or its Affiliates future gaming casino projects. Such right shall be on terms similar to those outlined in this Agreement. Manager shall have sixty (60) days upon receipt of notice from Owner to either accept or reject an offer to act as manager of Owner's and/or Owner's Affiliates future gaming casino project(s). IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date and year first above written. FOR CALEDON CASINO BID COMPANY (PTY) LTD. By: /s/ Leon Fortes- Witness: ____________________________ ----------------- a duly authorized signatory Print name: ____________________ Position:Director__________ -------- Print name: Leon Fortes FOR CENTURY CASINOS AFRICA (PTY) LTD By:/s/ Peter Hoetzinger Witness: ____________ ---------------------- A duly authorized signatory Print name: ___________ Position: Vice Chairman Print name: Peter Hoetzinger 42 EX-10.87 5 SHAREHOLDERS AGREEMENT ("9 EXHIBIT 10.87 SHAREHOLDERS AGREEMENT between CALEDON CASINO BID COMPANY (PTY) LIMITED ("Bidco") and CALEDON OVERBERG INVESTMENTS (PTY) LIMITED ("Caledon") and CENTURY CASINOS AFRICA (PTY) LTD ('Century SA") and CENTURY CASINOS, INC. (not as a shareholder or party, but for clauses 4.2.3. and 6.7. of this agreement only) and CALEDON HOTEL SPA AND CASINO RESORT (PTY) LIMITED ("Devco") and FORTES KING HOSPITALITY (PTY) LIMITED ("Hospitality") and OVERBERGER COUNTRY HOTEL AND SPA (PTY) LIMITED ("Hotelco") and SENATOR TRUST 1 1. DEFINITIONS AND INTERPRETATION 1.1 Clause headings in this agreement are used for reference purposes only and shall not be used in its interpretation. 1.2 In this agreement, unless the context clearly indicates the contrary intention: 1.2.1 An expression which denotes: 1.2.1.1 the singular includes the plural and vice versa; 1.2.1.2 any one gender includes the other genders; 1.2.1.3 a natural person includes created entities (corporate or unincorporate) and vice versa; 1.2.2 The following expressions bear the meanings assigned to them below and cognate expressions bear corresponding meanings: 1.2.2.1 "ACT" means the Companies Act, 1973; 1.2.2.2 "THE BOARD" means the Western Cape Gambling and Racing Board; 1.2.2.3 "THE CASINO BUSINESS" means the casino business owned by the company excluding, without limitation, the hotel, health spa, tourist village which will be owned by the company; 1.2.2.4 "COMPANY" means Bidco; 1 2 2 5 "LICENCE" means a casino licence for Caledon in the Western Cape; 1 2 2 6 "THE LICENCE APPLICATION" means the licence application submitted by Bidco on 15 October 1999 for the licence; 1.2.2.7 "THE PREFERENCE SHAREHOLDERS" and "MINORITY SHAREHOLDERS" means Overberg Empowerment Company Ltd ("Empowerco"), and The Overberg Community Trust ("Trust"); 1.2.2.8 "THE PROJECT" means the project contemplated in the licence application; 1.2.2.9 "THE REMAINING BIDCO BUSINESS" means the business of Bidco but excluding the casino business; 1.2.2.10 "THE SHAREHOLDERS" means ordinary shareholders and preference shareholders; 1.2.2.11 "THE ORDINARY SHAREHOLDERS" means Century SA and Caledon and any other holder of ordinary shares in Bidco from time to time 1.2.2.12 "THE CALEDON GROUP" means Senator Trust, Caledon, Devco, Hospitality, Hotelco; 2 1.2.2.13 "THE HOTEL BUSINESS" means the Overberger Hotel in Caledon and the land on which it is situated, being Portion 1 Farm 812 Caledon Division 1.2.2.14 "THE ORIGINAL SHAREHOLDERS AGREEMENT" means the agreement entered into between Devco, Bidco, Caledon, Century SA and other parties dated 13 October 1999. 1.2.2.15 "PARTIES" to this agreement are Caledon Group and Century SA. 1.3 Words and expressions defined in the Act, shall bear the same meanings in this agreement. 1.4 If any provision in the definition is a substantive provision conferring rights or imposing obligations on anyone, effect shall be given to it as if it were a substantive provision in the body of this agreement. 1.5 Where any number of days is prescribed in this agreement, same shall be reckoned exclusively of the first and inclusively of the last day unless the last day falls on a Saturday, Sunday or public holiday in the Republic of South Africa, in which case, the last day shall be the next succeeding day which is not a Saturday, Sunday or public holiday in the Republic of South Africa. 2. INTRODUCTION 2.1 On 13 October 1999, Devco, Bidco, Caledon, Century SA and other parties entered into a binding agreement (the original Shareholders Agreement) whereby a bid for a casino licence would be made by those parties. 2.2 On 15 October 1999 Bidco submitted an application for a casino licence for the town of Caledon which inter a/ia provided that a casino resort project be implemented through Bidco. The project consisted of a casino, hotel, health spa, and small tourist village; the casino will be managed by Century SA, the hotel, food & beverage and parking elements will be managed by Hospitality (or the entity to which the agreement referred to in 5.2 has been assigned). The management of all other elements of the resort shall be decided upon by the Board of Directors of the company. 2.3 The parties wish to give effect to the above and the ordinary shareholders of Bidco wish to regulate their relationship inter se as shareholders of Bidco. 3. CONDITIONS PRECEDENT 3.1 The whole of this agreement (with the exception of clauses 1, 2, 3, 6,15,16, 17, 18 and 19 by which the parties shall nevertheless be bound) is subject to the following conditions precedent: 3 3.1.1 The casino licence being granted and irrevocable debt financing undertakings given by funders for the required amount set out in the license application on terms and conditions reasonably satisfactory to Century SA, Bidco and Caledon Group and all the suspensive conditions to which such licence is subject being fulfilled; 3.2 The parties shall use their best endeavours to procure that all the conditions precedent referred to herein are fulfilled as soon as possible after the date of signing of this agreement. Caledon Group represents and warrants that Bidco will have all necessary water rights for the proposed development; 3.3 If all the conditions are not fulfilled or waived in writing by Bidco, Caledon Group and Century SA by 31 December 2000 or if the licence application is formally rejected by the Board, this agreement (save for the provisions of clauses 1, 2, 3, 6, 15, 16, 17, 18 and 19) shall cease to be of any force or effect. No party shall have any claim against any other in consequence of such non-fulfilment, save in circumstances where a party has deliberately frustrated the fulfilment thereof or has breached the provisions of this clause 3. 4. SHAREHOLDING OF BIDCO 4.1 Before the transactions described below take effect, Caledon Group owns 100% of the entire issued ordinary share capital of Bidco. 4.2 The parties shall procure that forthwith (but in any event no later than 30 days) after the conditions precedent have been fulfilled that: 4.2.1 The Caledon Group will sell to Bidco the Hotel Business and the land as scheduled in "Appendix C" as a going concern, both free and clear of any and all debt, financial liens and liabilities, encumbrances, or similar (except for operational undertakings in the ordinary course of business), at their agreed values, which will result in the fulfilment of article 4.2.4 below. The Caledon Group undertakes to procure that to the extent its aggregate loan accounts ("Caledon Group Loan Account") in Bidco exceed R15 000 000 (fifteen million), such excess be transferred to the share premium of Bidco. It is recorded that it is anticipated this transfer will amount to R10 000 000 (ten million) less the nominal value of the issued share capital of Bidco. 4.2.2 Provided that the transactions set out in 4.2.1 have been implemented and all conditions precedent been fulfilled, Century SA will pay (within three days) R10 000 000 (ten million) to Bidco to subscribe for shares constituting 50% of the issued ordinary share capital in Bidco at the time through the issuing of further shares in Bidco and Century SA will (at the same time) loan R15 000 000 (fifteen million) to Bidco by way of loan account1 "Century SA Loan Account". 4 4.2.3 Century jointly and severally with Century SA undertake to provide Bidco with the funds necessary to fulfil clause 4.2.2. 4.2.4 After all the transactions described in this article 4.2 have been completed, the total shareholdings and total loan accounts in Bidco will be as follows: Both Century SA and Caledon will each own 50% (fifty percent) of the entire issued ordinary share capital of Bidco (collectively 100%); Century SA and Caledon Group will each have R15 000 000 (fifteen million) in loan accounts in Bidco, and no other loan accounts shall be outstanding. 4.2.5 All such transactions shall be effected in the most tax efficient manner for both Century SA and Caledon Group. 4.3 The ordinary shareholders and Bidco shall procure that forthwith after the fulfilment or waiver of the condition precedent that: 4.3.1 The authorised share capital of Bidco shall be increased to include 200 preference shares ("the preference shares") of R1,00 each the preference shares having the rights and privileges as set out in annexure A hereto; 4.3.2 200 preference shares shall be allotted and issued to the minority shareholders as follows: 4.3.2.1 100 preference shares shall be allotted and issued to the Trust (which shall subscribe therefor) at par; 4.3.2.2 100 preference shares shall be allotted and issued to the Empowerco (which shall subscribe therefor) at par; 4.4 Century SA shall pay the amount of R100,00 payable by the Trust and Caledon the R100-00 for Empowerco for the subscription of their preference shares. 4.5 After the completion of the transactions referred to above the preference shareholding of Bidco shall be as follows: 4.5.1 Empowerco, will own 100 preference shares of R1,00 each, being 50% of the issued preference shares of Bidco; 4.5.2 the Trust, will own 100 preference shares of R1,00 each, being 50% of the issued preference shares of Bidco. 5 5. MANAGEMENT AGREEMENTS The following Management Agreements will be signed simultaneously with the signature of this agreement. 5.1 CASINO MANAGEMENT AGREEMENT 5.1 .1 Century SA will be awarded and will sign the casino management agreement on the following terms and conditions: Period: For duration of the licence initially 10 years with a guaranteed option to renew for further ten year periods Fees: 1. 4% of gaming revenue (after VAT, but before all other taxes) up to R40 million per year, plus 2. 5% of gaming revenue (after VAT, but before all other taxes) above R40 million per year, plus 3. 7.5% of EBITDA (Earnings before interest, tax, depreciation, amortization and any non-casino management controllable items such as leases, rent or similar). 5.1.2 The percentage referred to in 1 above shall be reduced to three percent (3%) for the first twelve months of casino operation. 5.1.3 The casino department shall report directly to the Board of Directors of Bidco as well as to Century SA. 5.2 HOTEL AND RESORT MANAGEMENT CONTRACT 5.2.1 Hospitality will be awarded and will sign the hotel and resort management agreement (for hotel, food & beverage and parking, and any other element the board of directors of Bidco decides, excluding casino and any other areas in respect of which the company contracts with a third party) on the following terms and conditions: Period: 10 years with a guaranteed option to renew for further ten year periods Fees: 6,5% (six and a half percent) of all hotel/resort revenue (after VAT), excluding casino and any other and any other areas in respect of which a third party may receive management fees, plus 15% of EBITDA of the hotel and resort complex (excluding casino and any other areas in respect of which a third party may receive management fees). 6 5.2.2 The EBITDA percentage referred to above (15%) shall be reduced to ten percent (10%) for the first twelve months of casino/hotel/resort operation. 5.2.3 The hotel and resort department will report directly to the board of directors of Bidco and Hospitality. 5.3 Hospitality shall operate the Hotel for its own account until such a time a~ the casino licence is granted. Hospitality and/or the Caledon Group shall be paid by Bidco simultaneously with the fulfilment of the conditions precedent and the fulfilment of clause 4.2.1, for all refurbishments and improvements (incl. new and additional F, F&E) expended on the Hotel Business since 3 September 1999 up to an amount of R2,5 million (two and one half million rands) by bank guaranteed cheque. 5.4 Bidco has entered, on the same date of this Agreement, into a Hotel Management Agreement with Hospitality for the management of the hotel and into a Casino Management Agreement with Century SA for the management of the casino. Bidco, Hospitality and Century SA agree that the provisions that deal with general (non-hotel or non-casino specific) terms and conditions (such as term, termination rights, timing of fees and expenses payable, arbitration, budget approvals, insurance protection, indemnification, and similar) shall be equal and interpreted equally in both the Hotel Management Agreement and the Casino Management Agreement. If any provisions in either one or both of these Hotel and Casino Management Agreements are in conflict with this clause 5.4, this clause 5.4 shall take precedent. 6. BID FEES 6.1 The bid fees have been budgeted at R800 000, but the final cost depends on the probiety cost and other potential costs/expenses. Caledon and Century SA shall jointly decide on how that budget is actually being spent. 6.2 Century SA has already contributed R250 000 by cheque deposit on 15 October 1999 to Bidco account. 6.3 Basil Read has contributed bid fees of R300 000 in exchange for a fixed competitive priced contributions contract for the work to be down under the casino bid. 7 6.4 The Caledon Group through their associate companies have contributed R250 000 to Bidco and has in conjunction with the parties, prepared the bid and will provide secretarial and administrative support (including printing, stationery, files, etc) as part of this amount. They have already spent as part of their R250 000 the following amounts for the bid (approximate): Registration Fees R20 000 Market Survey R 9 000 Legal Fees Council R14 000 Legal Fee Ladbroke RI5 000 -------- R58 000 -------- The balance in the amount of R192 000 has been put into the bank account of Bidco. Any further amounts that may have been in credit with the Board prior as at 10 October 1999 will be regarded as part of the Caledon Group's contribution to the bid and can be repaid on demand unless agreed by them otherwise. 6.5 Should the casino licence be awarded and the project proceeded with, all bid money will be paid back to the relevant parties on completion of the building contract unless agreed otherwise by written agreement with Bidco as may be the case with Basil Read. 6.6 If no licence is awarded to or the project not proceeded with, the fees will not be paid back and no party shall have any claim against any other party for the fees. 6.7 If any parties probiety investigation causes the bid budget to exceed the R250 000 allocated to probity, then the said party will pay in the direct proportional cost thereof. 7. RIGHT OF FIRST REFUSAL 7.1 Should any ordinary shareholder decide to sell directly or indirectly its shares or part thereof in Bidco to a third party (that is an entity not majority controlled by Century SA or the Caledon Group and excluding their holding companies or fellow controlled subsidiaries) then the party wishing to sell shares must offer the shares to the other party on the same terms and conditions as the offer from the third party. The offer shall remain open for 45 working days and should the other parties not accept such an offer, the seller is free to sell his shares on the same terms and conditions to the third party, subject to the approval of the Gambling Board. The parties agree that, notwithstanding article 13.1 of this agreement, the parties will amend article 94. of the articles of association of the company based on the principle set out in this clause 7.1. but making use of the standard for the right of first refusal wording of the existing wording of the articles of association of Bidco. 8 7.2 The parties agree that, in case any shareholder of the company is found unsuitable to hold a casino/gaming license, article 95. of the company's articles of association shall apply mutatis mutandis, provided that the remaining ordinary shareholders, in case no other purchaser acceptable to the Gambling Board pays the purchase price in cash, shall have the right to pay the purchase price using redemption securities (i.e. loan account). The board of directors of the company shall then decide when payment under such loan account will be made, giving consideration to the cash flow and other financial situations of the company, but acting in a reasonable manner to facilitate payment. 8. DIVIDEND POLICY The shareholders agree that the dividend policy will be determined by the Board of Directors taking into account the capital commitments, earnings and all other relevant matters. 9. SHAREHOLDERS LOANS Interest will be paid on shareholders loans (Century SA Loan Account and Caledon Group Loan Account) at the lower of: prime overdraft rate or the cost of debt funding to the company for sums in excess of R1 million (one million rands), unless the board of directors of the company determines otherwise. Shareholders' loan accounts will be treated equally in all respects and no repayment or payment on interest thereon shall be made without the permission of Century SA and Caledon. 10. BOARD OF DIRECTORS 10.1 Both the Trust and Empowerco will be entitled to nominate and appoint one board member each to Bidco. Century SA and Caledon will be able to nominate and appoint up to four (4) board members each. Initially, however, Century SA and Caledon will appoint three (3) members each. The increase from three to four members each shall be undertaken, if at all, simultaneously by Century SA and Caledon. 10.2 All decisions of the board of directors to be approved will require at least 70% of the directors of the board members agreement. 10.3 The chairman of the directors of the board meetings of the directors shall not have casting vote. 11. ORIGINAL SHAREHOLDERS AGREEMENT 11.1 If any provision of this agreement is in conflict with the original shareholders agreement this agreement should take precedent. 11.2 The following clauses are cancelled in the original shareholders agreement and are of no further full or effect: clauses: 1, 2, 3, 4, 5, 7. 1, 7.2. 9 12. PAYMENT TO LADBROKE OF R7 MILLION 12.1 Notwithstanding any previous agreement or anything contained in this agreement Ladbroke Casino Holdings (SA) (Pty) Ltd will be paid by Bidco the R7 million due in terms of an agreement between them and various other parties including Caledon, (and referred to in clause 20.1 of this agreement) upon request of Caledon, which shall be no sooner than 28 days from the award of a gaming licence. The purpose of this clause is to ensure that all potential or other liabilities, indemnification's and any other commitments have been met by Ladbroke Casino Holdings (SA) (Pty) Ltd and their group companies in terms of the agreement referred to in terms of clause 20.1 of this agreement. Caledon and the Caledon Group shall not request such payment of R7 million, or parts thereof, from Bidco unless Caledon/Caledon Group immediately pays all such monies to Ladbroke or to other parties which were, in the reasonable view of Caledon, indemnified by Ladbroke. All monies not paid out by Caledon/Caledon Group within five days after receipt of monies from Bidco shall be paid back to Bidco immediately. Caledon, Caledon Group or any of its affiliates shall under no circumstance realize any benefit, financial or otherwise, out of this transactions. 12.2 Notwithstanding anything to the contrary herein contained, Century SA shall be entitled on written notice to such effect to the Caledon Group, to require the relevant members of the Caledon Group to exercise any and all rights that they may have against Ladbroke Casino Holdings (SA) Pty Ltd and/or Landbroke Casino (Holding) Ltd. and/or any subsidiary or holding company of that. Should the Caledon Group not do so within a reasonable period after receipt of such notice, the Caledon Group hereby authorizes and empowers Century SA to do so and, for such purposes, each of the members of the Caledon Group hereby appoint Century SA as its duly authorized agent, in rem suam. 12.3 Notwithstanding anything in this clause 12., Bidco shall in absolutely no way be obligated to pay more than. R7 million under this clause 12. 13. AMENDMENT OF THE MEMORANDUM AND ARTICLES OF ASSOCIATION OF THE COMPANY 13.1 Where there is a conflict between the memorandum and articles of association of the company and this agreement, the provisions of this agreement shall prevail. Should it be required by any party hereto, the parties undertake to procure that the articles of association of the company shall be amended to accord with the provisions of this agreement. 13.2 In addition to 7.1, 7.2 and 13.1 and without derogating from the provisions thereof, the ordinary shareholders agree to procure that the memorandum and articles of association shall be amended as follows: 10 13.2.1 the main business should be changed in paragraph 2 of the memorandum to read: "the main business which the company is to carry on to own, develop and operate a hotel, spa, casino and resort in so far as the relevant laws permit and subject to approval by the relevant authorities"; 13.2.2 paragraph 3 of the memorandum be deleted and substituted with the following: "the main object of the company is, to own, develop and operate a hotel, spa, casino and resort in so far as the relevant laws permit and subject to approval by the relevant authorities"~ 13.2.3 in article 9 add "The issue of preference shares however to Empowerco and the Trust may not have their rights varied without the unanimous consent of the ordinary shareholders"; 13.2.4 in article 27.2 delete "Ladbroke Casino Holdings SA (Pty) Ltd" and add "all directors nominated by Caledon Overberg Investments (Pty) Ltd and all directors nominated by Century Casinos Africa (Pty) Ltd"; 13.2.5 in article 28 delete "Ladbroke Casino Holdings (SA) Pty) Ltd' and insert "all directors nominated by Caledon Overberg Investments (Pty) Ltd and all directors nominated by Century Casinos Africa (Pty) Ltd"; 13.2.6 in article 29.3 delete "Ladbroke Casino Holdings SA (Pty) Ltd" and insert Caledon Overberg Investments (Pty) Ltd and Century Casinos Africa (Pty) Ltd. 13.2.7 in article 45.1 delete "Caledon Overberg Investments (Pty) Ltd' and insert after the Overberg Empowerment Company Ltd the word "and". In addition the word "any" shall be replaced by the word "one"; 13.2.8 in article 45.2 delete "Ladbroke Casino Holdings SA (Pty) Ltd" and add the words "Caledon Overberg Investments (Pty) Ltd" and "Century Casinos Africa (Pty) Ltd". Substitute the words "as it" for the words "they are"; add "Caledon Overberg Investments (Pty) Ltd and Century Casinos Africa (Pty) Ltd cannot replace, appoint or remove each others directors"; 13.2.9 in article 49 the name "Ladbroke Casino Holdings SA (Pty) Ltd" shall be substituted by "the Overberg Empowerment Company Ltd and Century Casinos Africa (Pty) Ltd"; 13.2.10 delete article 59.4.1; 13.2.11 delete article 59.4.2; 13.2.12 delete the first paragraph of article 61.1 and replace with the following:"The quorum necessary for the transactions of the business of the directors shall be all directors from Caledon Overberg Investments (Pty) Ltd and all directors from Century Casinos Africa (Pty) Ltd.; 13.2.13 in article 61.3 substitute the words "Ladbroke" with the words "Caledon Overberg Investments (Pty) Ltd and Century Casinos Africa (Pty) Ltd; 11 13.2.14 in article 96.1.1.1 to be cancelled and substituted with a new articles 9.6.1.1.1 which is to read: "any company or close corporation or trust or any other legal entity which is controlled directly or indirectly by the controlling shareholders of Caledon Overberg Investments (Pty) Ltd"; 13.2.15 delete articles 96.1.1.2 and 96.1.1.3 13.2.16 change article 96.1.2 by deleting the contents and substitute a new article 96.1.2 to read: "Century Casinos Africa (Pty) Ltd means any company, close corporation, trust or any other legal entity or person that is controlled directly or indirectly by Century Casinos Africa (Pty) Ltd and/or Century Casinos Incorporated. 13.2.17 in article 56, add clause 56.4 which must read "if required to do so in terms of the Western Cape Gambling and Racing Board or any other similar gambling authority. 13.2.18 in article 59.2, change 7 days to 21 (twenty-one) days. 13.2.19 The name of the company shall be changed to "Century Casinos Caledon (Pty) Ltd.". 13.2.20 A new article shall be included to give effect to the following: should the casino assets of the project be sold and it be necessary to effect the sale, the preference shareholders shall be bought out at the fair market value, as determined by the company's auditors. 13.2.21 Add the following at the end: "Notwithstanding the above, each vote of the preference shareholders shall require ten shares". 13.3. Notwithstanding 13.2.19, Century SA and/or Century Inc shall at any time be entitled, on written notice to the company, to require the company to change its name so as not to include the word "Century" or any word confusingly similar thereto. The company and the ordinary shareholders shall, within 30 days after receipt of such notice, procure that the company changes its name accordingly. 14. BASIS OF ACCOUNTING FOR THE CASINO BUSINESS The basis of accounting for the casino business for the sole purpose of determining the profits available for distribution to the preference shareholders and the amount to be distributed to the preference shareholders are set out in annexure B hereto which annexure shall not be exhaustive. 15. ANNOUNCEMENTS 15.1 The provisions of this agreement shall remain confidential at all times and, save as provided in this agreement, shall not be disclosed to any person. 15.2 Subject to 15.3, no public announcement, communication or circular concerning the transactions referred to or contemplated in this agreement shall be made or dispatched at any time without the prior written consent of the board of directors of the company, such consent not to be unreasonably withheld or delayed. 12 15.3 Where the announcement, communication or circular is required by law or by any rule or any regulatory authority, it shall be made by a party only after reasonable consultation with the other party, if practicable. Caledon acknowledges that Century is a publicly traded company with certain disclosure requirements. 16. WHOLE AGREEMENT, NO AMENDMENT 16.1 This agreement constitutes the whole agreement between the parties relating to the subject matter hereof. 16.2 No amendment or consensual cancellation of this agreement or any provision or term thereof or of any agreement, bill of exchange or other document issued or executed pursuant to or in terms of this agreement and no settlement of any disputes arising under this agreement and no extension of time, waiver or relaxation or suspension of any of the provisions or terms of this agreement or of any agreement, bill of exchange or other document issued pursuant to or in terms of this agreement shall be binding unless recorded in a written document signed by the parties. Any such extension, waiver or relaxation or suspension which is so given or made shall be strictly construed as relating strictly to the matter in respect whereof it was made or given. 16.3 No extension of time or waiver or relaxation of any of the provisions or terms of this agreement or any agreement, bill of exchange or other document issued or executed pursuant to or in terms of this agreement, shall operate as an estoppel against any party in respect of its rights under this agreement, nor shall it operate so as to preclude such party thereafter from exercising its rights strictly in accordance with this agreement. 16.4 No party shall be bound by any express or implied term, representation, warranty, promise or the like not recorded herein. 17. DOMICILIUM CITANDI ET EXECUTANDI 17.1 The parties choose as their dornicilia citandi et execulandi for all purposes under this agreement, whether in respect of court process, notices or other documents all communications of whatsoever nature (including the exercise of any option), the following addresses: Century SA: c/o Deloitte & Touche 13 Att: David Parker Deloitte & Touche Place The Woodlands Woodlands Drive Woodmead Sandton 2196 Telefax: 0912536817531 Century Inc: 200 East Bennett Avenue Cripple Creek, Colorado 80813, USA Telefax: 0917079827586 FKC: 1 Nicol Street Gardens 8001 Telefax: 021 425 3861 Bidco: 1 Nicol Street Gardens 8001 Telefax: 021 425 3861 Devco: 1 Nicol Street Gardens 8001 Telefax: 021 425 3861 Hotelco: 1 Nicol Street Gardens 8001 Telefax: 021 425 3861 Caledon: 1 Nicol Street Gardens 8001 Telefax: 021 425 3861 Hospitality: 1 Nicol Street Gardens 8001 Telefax: 021 425 3861 Century: 200 East Bennett Cripple Creek, Colorado 80813, USA Telefax: 0917079827586 FKC: 1 Nicol Street Gardens 8001 Telefax:: 021 425 3861 Bidco 1 Nicol Street Gardens 8001 Telefax:: 021 425 3861 Devco: 1 Nicol Street Gardens 8001 Telefax:: 021 425 3861 Hotelco: 1 Nicol Street Gardens 8001 Telefax:: 021 425 3861 Caledon: 1 Nicol Street Gardens 8001 Telefax:: 021 425 3861 Hospitality: 1 Nicol Street Gardens 8001 Telefax:: 021 425 3861 14 17.2 Any notice or communication required or permitted to be given in terms of this agreement shall be valid and effective only if in writing but it shall be competent to give notice by telefax. 17.3 Any party may by notice to any other party change the physical address chosen as its domiciliurn citandi et executandi vis-a-vis that party to another physical address or telefax number, provided that the change shall become effective vis--a-vis that addressee on the tenth business day from the deemed receipt of the notice by the addressee. 17.4 Any notice to a party sent by telefax to its chosen telefax shall be deemed to have been received on the date of despatch (unless the contrary is proved). 17.5 Notwithstanding anything to the contrary herein contained a written notice or communication actually received by a party shall be an adequate written notice of communication to it notwithstanding that it was not sent to or delivered at its chosen domicilium citandi et executandi. 18. ARBITRATION 18.1 Save in respect of those provisions of this agreement which provide for their own remedies which would be incompatible with arbitration, a dispute which arises in regard to: 18.1.1 the interpretation of; or 18.1.2 the carrying into effect of; or 18.1.3 any of the parties' rights and obligations arising from; or 18.1.4 the termination or purported termination of or arising from the termination of; or 18.1 .5 the rectification or proposed rectification of; this agreement or out of or pursuant to this agreement or on any matter which in terms of this agreement requires agreement by the parties, other than where an urgent interdict is sought or urgent relief may be obtained from a court of competent jurisdiction, shall be submitted to and decided by arbitration in accordance with the rules of Arbitration Foundation of Southern Africa (or its successor) by an arbitrator appointed by the Foundation. 18.2 Nothing in this agreement shall preclude any party from seeking an urgent interdict or urgent relief from a court of competent jurisdiction. 15 19. COSTS The legal fees and disbursements incidental to the negotiation, preparation and implementation of this agreement and the stamp duty thereon shall be borne by the company, except where any party seeks its own legal advice in which case it will be borne by the party seeking such advice. 20. ALLOCATION OF AMOUNTS TO CASINO BUSINESS Without in any way purporting to be exhaustive and without derogating from the other provisions of this agreement (including annexure B) for the sole purpose of determining the profits available for distribution to the preference shareholders, the following shall be allocated to the casino business and notwithstanding that such amounts may have been incurred prior to the date of this agreement: 20.1 the fee of R7 million payable to Ladbroke Casino Holdings SA (Pty) Ltd in terms of agreement dated 3 September 1999 between Ladbroke Casino (Holdings) Limited; Ladbroke Casino Holdings (SA) (Pty) Limited; Fortes King Properties (Pty) Limited; Leon Fortes; Caledon Casino Bid Company (Pty) Limited; Caledon Hotel Spa and Casino Resort (Pty) Limited; Overberger Country Hotel and Spa (Pty) Limited; Caledon Overberg Investments (Pty) Limited; Fortes King Hospitality (Pty) Limited and Kevin King. 20.2 all direct and indirect costs and fees relating to the licence application or the establishment and development of the casino business. The bid fees of approximately R800 000 shall be repaid to the parties who provided the funding. 20.3 all costs expenses and fees payable or paid by Bidco in terms of agreements or undertakings entered into or given by Bidco prior to the date of this agreement. 21. The parties agree to forthwith enter into an agreement with the minority shareholders to give effect to the terms and conditions contained in this agreement. The parties agree that it is this agreement that shall take precedent over any agreement (i.e. the agreement with the minority shareholders) regulating the relationship and dealings between the parties to this agreement. All terms and conditions of any dealings between the parties to this agreement shall be interpreted according to this agreement only (and not according to the agreement which includes the minority shareholders). 22. An international auditing firm (such as Deloitte & Touche, KPMG or Ernst & Young) nominated by Century SA shall be the joint auditor of the company, together with a joint auditing firm chosen by Caledon. 23. This agreement shall not become effective unless approved by the Board of Directors of Century SA and Century Inc. Such approval shall be forthcoming within five days of the board approval of the Caledon Group. 16 24. The obligations of Caledon Group under this Agreement shall be joint and several. 25. LIMITED RESTRAINT 25.1 For one particular potential opportunity, in the town of Worcester or in the Breeriver Valley in the Western Cape Province of South Africa, the following shall apply, but only during the first two years of this shareholders agreement: should Century or Century SA become involved in this Worcester project, they shall use their best efforts to include Bidco or Caledon Group in this project in a meaningful and substantial manner, similar to the present structure of the Caledon bid. If Caledon Group cannot be included in this project, Century or Century SA, if they become involved and a casino actuallyopens in Worcester with Century or Century SA as casino managers, shall pay to Caledon Group an amount equal to five percent (5%) of the net income stream Century or Century SA derive from this project during the first five years of operation of that project. If Century or Century SA become involved in this Worcester or Breeriver project after two years of this shareholders agreement have elapsed, this provision 25.1 shall be null and void. 25.2 Century, Century SA and the Caledon Group shall endeavour to include each other in a casino bid for Club Mykonos, Westem Cape. 26. ASSIGNMENT This shareholder agreement will be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns but will not be assignable or delegable by any party without the prior written consent of the other party; provided, however, that nothing in this agreement is intended to limit one signatory's or party's ability to assign its rights and responsibilities to any directly controlled affiliate, in which case all other parties need to be notified. Once a party or signatory has assigned its rights and responsibilities, it shall no longer be party or signatory to this agreement. 17 THUS DONE AND SIGNED by Bidco at CAPE TOWN this 3 day of December 1999. /s/ Leon Fortis ----------------- THUS DONE AND SIGNED by Caledon at CAPE TOWN this 3 day of December 1999. /s/ Leon Fortis ----------------- THUS DONE AND SIGNED by CenturySA at CAPE TOWN this 3 day of December 1999. /s/ Peter Hoetzinger ---------------------- Peter Hoetzinger, Vice Chairman Century Casinos Inc. signs for clauses 4.2.3 and 6.7 of this agreement only: /s/ Peter Hoetzinger ---------------------- Peter Hoetzinger,Vice Chairman THUS DONE AND SIGNED by Hotelco at CAPE TOWN this 3 day of December 1999. /s/Leon Fortes --------------- . THUS DONE AND SIGNED by Hospitality at CAPE TOWN this 3 day of December 1999. /s/Leon Fortes --------------- THUS DONE AND SIGNED by Devco at CAPE TOWN this 3 day of December 1999. /s/Leon Fortes --------------- THUS DONE AND SIGNED by Senator at CAPE TOWN this 3 day of December 1999. /s/Leon Fortes --------------- 18 ANNEXURE A The following rights, privileges and conditions shall apply to the preference shares (which for the avoidance of doubt shall not be cumulative) having a par value of R1 each ("preference shares") in the capital of the company - 1. Each preference share shall confer on the holder the right to receive by way of dividend in respect of each financial year of Bidco 0.1% (one tenth of one per cent) of the after tax profits directly attributable to the Caledon casino business in that year and prior to the payment of interest or capital on shareholders' loans (other than shareholders loans provided in respect of the casino business), subject to, as determined by the directors of Bidco in their sole and absolute discretion, any working capital, capital expenditure requirements, loan obligations and liabilities, attributable to the casino business and after taking into account the amount of STC payable in relation to the dividends on the preference shares and distributable reserves of the casino business. The dividend (if any) shall be payable within 3 months after the financial statements of Bidco have been audited and signed by the directors of Bidco. 2. Should the casino business be wound up, each preference share shall confer the right on the holder to receive out of funds which may lawfully be applied for that purpose, in priority to the holders of all other classes of shares in the share capital of the company, 0.1% (one tenth of one per cent) of any surplus directly attributable to the casino business available for distribution after payment of all other liabilities attributable to such casino business. 3. Save as set out herein, the holders of the preference shares shall not be entitled to participate in the profits of the company or any dividend payable on the winding-up of the company. 4. The preference shareholders shall have the right to attend general meetings and adjourned meetings of the company but shall not, save in circumstances envisaged in section 194. of the Company's Act 1973, have the right to vote at any such meeting. 5. Should any preference shareholder wish to dispose of its shares, it shall be required to do so in accordance with the preemptive rights provisions contained in the articles of association of the company. 6. The terms of the preference shares may not be modified, altered, varied, added to or abrogated. 7. The preference shares shall not be redeemable except by agreement between the company and the holders of the preference share willing to have them redeemed. 19 ANNEXURE B Basis of accounting for the casino business of Bidco for the sole purpose of determining the profits available for distribution to the preference shareholders and the amount to be distributed to the preference shareholders 1. DEFINITIONS Words and expressions defined in this annexure shall bear the same meanings as the agreement to which the annexure is annexed. 2. BOOKS OF ACCOUNT 2.1 Bidco shall maintain separate books of account for the casino business. The casino business will be accounted for as a branch of Bidco with "branch accounting" being used. 2.2 The branch accounts of the casino business ("branch accounts") will be used to determine the profits available for distribution to the minority shareholders. 3. CASINO BRANCH CAPITAL AND UNDISTRIBUTED PROFITS 3.1 The casino business will have an initial branch capital of R2.5 million 3.2 The cumulative branch profits of the casino business which have not been distributed, whether by way of dividend to the minority shareholders or by transfer to the remaining Bidco business, will be included as "retained undistributed profits" in the branch accounts. 4. FINANCE FOR CASINO BUSINESS Any finance obtained by Bidco (including for the avoidance of doubt, shareholders' loans) which is related to the operation of the casino business will be allocated directly to the casino business. The interest and other costs and capital repayments of such finance will be met by the casino business prior to the distribution of dividends to minority shareholders. 20 5. BRANCH FIXED ASSETS All fixed assets directly relating to the casino business (for the avoidance of doubt, excluding the casino premises which will be an asset of the remaining Bidco business), will be included within the books of account of the casino business. Similarly all liabilities directly attributable to the casino business shall be recorded as such in the branch accounts and shall be taken into account in determining the profits of the casino business available for distribution. 6. BANK ACCOUNTS AND WORKING CAPITAL 6.1 Separate bank accounts will be maintained for the casino business. 6.2 Surplus funds generated by the casino business will either be placed on deposit with approved banking institutions or may be lent to the remaining Bidco business on terms and conditions as to the repayment of capital and interest only which reflect an arm's length basis. 6.3 If any working capital facilities are arranged by the remaining Bidco business for the casino business, the casino business will be charged with the cost of providing those facilities. 6.4 If any additional working capital is provided by the remaining Bidco business to the casino business, the casino business will be charged for these funds on an arm s length basis and will be required to repay such working capital together with interest prior to any payments of dividends to the minority shareholders. 7. SERVICES PROVIDED BY THE REMAINDER 7.1 Where services are provided to the casino business by the remaining Bidco business, a charge will be made to the casino business on an arm's length basis. Such services include but are not limited to the provision of the casino premises and central resort services and the basis of these charges is set out below. 21 7.2 Rent for the casino premises shall be based on the aggregate of cost of the casino premises to Bidco and the premises leased to the Trust, commencing at 20% of cost and escalating at 9% per annum. The casino business shall bear all costs attributable to such premises including but not limited to maintenance, repairs, insurance and the like. 7.3 Central resort services and other shared services shall be based on the actual cost of providing the services which will be allocated on a basis that reflects usage. 7.4 The cost of any other services provided by the remaining Bidco business shall be charged to the casino business on an arm's length basis. 8. COSTS AND INCOME OF THE CASINO OPERATION It is intended that all costs and all income directly relating to the casino business should be reflected in the branch accounts. 9. TAXATION For the purposes of the branch accounts, the taxation charge relating to the casino business will be calculated as if the casino business is a stand alone company. STC relating to the payment of dividends to the minority shareholders will be charged to the minority shareholders' portion of the casino business. Payments of income tax (including advance payments of taxation) attributable to the casino business will be charged to the casino business on the dates that the payments are or would have been made to the authorities 10. BASIS OF PREPARATION OF BRANCH ACCOUNTS The accounts of the casino business should be prepared using the same accounting policies as used by Bidco in its statutory accounts and the manner of their application thereof, subject to any differences which arise from the intra-company transactions which will be eliminated on the preparation of the company's statutory accounts (e.g. the intra-company charges for central services and rent). 22 11. BRANCH ACCOUNTS TO BE PREPARED ANNUALLY The branch accounts prepared at the financial year end of Bidco will be prepared using an equivalent format, mutatis mutandis, to that used for the statutory accounts of Bidco. In particular, the branch accounts will include a profit and loss account, a balance sheet, a statement of source and application of funds and a statement of the planned capital expenditure over the next two years. The branch accounts will be sent to the minority shareholders. The costs of the branch accounts shall be borne by the casino business. 12. BASIS OF DETERMINATION OF THE DISTRIBUTION TO BE MADE FROM THE BRANCH On the basis of the position shown in those branch accounts, the directors of Bidco will determine in their sole and absolute discretion the amount which can properly be distributed from the after-tax profits shown in the branch accounts having regard to any working capital, capital expenditure requirements, loan obligations and liabilities of the casino business and after taking account of the secondary tax payable in relation to the preference dividends and the distributable reserves within Bidco. Notwithstanding the aforegoing the directors shall in determining such distribution have regard to the fact that the tax reflected in the 1999 branch accounts may be more than the amount actually payable by Bidco as a consequence of any losses incurred by the remaining business. 13. TRANSFER OF RESERVES TO THE REMAINING BIDCO BUSINESS Simultaneously with the distribution of dividends to minority shareholders, the balance of the after tax profits determined by the directors of the company as available for distribution shall be transferred to the remaining Bidco business. 14. PREPARATION OF FINAL BRANCH ACCOUNTS In the event that Bidco were to lose its casino licence, final accounts would be prepared for the branch which would inter alia record the profit/loss arising on the disposal of the fixed assets. 23 APPENDIX C THE PROPERTIES 1. The properties owned by Caledon Hotel Spa & Casino Resort (Pty) Limited are the following: Remaining extent of the farm Oatlands South 408, Caledon Division Held by Deed of Transfer No T 11255/1997 Portion 1 of the farm Oatlands South 408, Caledon Division Held by Deed of Transfer No T 34201/1 997 Portion 3 of the farm Caledon Baths 560, Caledon Division Held by Deed of Transfer T 44647/1 997 Erf2842Caledon Held by Deed of Transfer T90028/1 998 Erf 2843 Caledon Held by Deed of Transfer T 90032/1 998 Erf 2844 Caledon Held by Deed of Transfer T 90032/1998 24 ADDENDUM TO THE AGREEMENT between CALEDON CASINO BID COMPANY (PTY) LIMITED ("Bidco") and CALEDON OVERBERG INVESTMENTS (PTY) LIMITED ("Caledon') and CENTURY CASINO'S AFRICA (PTY) LIMITED and CENTURY CASINO'S INC. (not as a shareholder or party. but for clauses 4.2.3 and 6.7 of this agreement only) and CALEDON HOTEL SPA AND CASINO RESORT (PTY) LIMITED ("Devco") and FORTES KING HOSPITALITY (PTY) LIMITED ("Hospitality") and OVERBERGER COUNTRY HOTEL AND SPA (PTY) LIMITED ("Hotelco") and SENATOR TRUST Dated 3 December 1999 25 It is hereby agreed that clause 26 of this agreement be deleted and that the following new clause 26 is substituted. 26. ASSIGNMENT This shareholder agreement will be binding upon aid inure to the benefit of the parties hereto and their respective successors and permitted assigns but will not be assignable or delegable by any party without the prior written consent of the other party; provided, however, that nothing in this agreement is intended to limit one signatory's or party's ability to assign its rights arid responsibilities to any directly controlled affiliate, provided the prior written consent of the other parties are obtained which' consent shall not unreasonably be withheld. THUS DONE AND SIGNED by Bidco at CAPE TOWN this 9 day of December 1999, /s/Leon Fortes --------------- THUS DONE AND SIGNED by Caledon at CAPE TOWN this 9 day of December 1999. /s/Leon Fortes --------------- THUS DONE AND SIGNED by Century SA at CAPE TOWN this 9 day or December 1999 /s/Peter Hoetzinger -------------------- Peter Hoetzlnger, Vice Chairman Century Casino's Inc. signs for clauses 4.2.3 and 6.7 of this agreement only; . /s/Peter Hoetzinger -------------------- Peter Hoetzinger, Vice Chairman Century Casino's Inc. THUS DONE AND SIGNED by Hotelco at CAPE TOWN this 9 day of December 1999. /s/Leon Fortes --------------- THUS DONE AND SIGNED by Hospitality at CAPE TOWN this 9 day of December 1999. /s/Leon Fortes --------------- THUS DONE AND SIGNED by Devco at CAPE TOWN this 9 day of December 1999. /s/Leon Fortes --------------- THUS DONE AND SIGNED by Senator at CAPE TOWN this 9 day of December 1999. /s/ Leon Fortes - ----------------- Leon Fortes. Trustee 26 EX-10.88 6 MEMORANDUM BH CENTRUM AND CENTURY CASINO EXHIBIT 10.88 MEMORANDUM OF AGREEMENT This Memorandum of Agreement ("MOA") by and between B.H. Centrum a.s. (a subsidiary of Ilbau and Bau Holding) ("BHC") and Century Casinos, Inc. ("CCI") is dated January 7, 2000. PREAMBLE: 1. HC has developed a hotel/retail/office complex in Prague, Czech Republic ("Marriott Hotel" and "MiIlennium Plaza"). The company Casino Millennium a.s. ("CM") has rented space in the complex from BHC for the operation of a casino. CCI (or its subsidiary) has entered into a casino services agreement with CM to assist CM in the management of the casino. The casino opened to the public in July 1999. 2. BHC receives 10% of the casinos gross revenues as rent and CCI receives 10% of the casino's gross revenues as casino services fee. Further, BHC receives 45% of CM's distributable profit in exchange for certain investments (e.g. inside architecture arid design, etc.) and CCI receives 45% of CM's distributable profit in exchange for the provision of gaming equipment. 3. Initially, before the opening of the casino, it has bean the intent of both BHC and CCI to undertake this casino project as a joint venture. Sudden changes in local laws, however, made that impossible at that time. These changes have been reversed in late 1999, opening the way for BHC and CCI to follow their original joint venture intent. AGREEMENT: 1. BHC and CCI agree to continue this project on a 50/50 joint venture basis. This shall be achieved by either forming a new joint venture company, to be owned 50% by BHC and 50% by CCI, or by jointly acquiring the existing company CM. in early 2000. The consent to sell the CM shares has already been obtained from the current CM shareholders. BHC and CCI represent that the attorneys have already been briefed in this regard and a first draft of a joint venture agreement should be forthcoming shortly. 2. BHC and CCI shall have equal representation on the Supervisory Board and the Management Board of that new joint company. The joint company shall rent the casino space under the same terms and conditions from BHC as does CM currently; the joint company shall enter into a casino services agreement with CCI under the same terms and conditions as outlined in the existing casino services agreement between CM and CCI. Agreed to and accepted: /s/ G. Leuthmetzer__________ ------------------------------ DipI. Ing. G. Leuthmetzer B. H. Centrum /s/ Peter Hoetzinger__________ - -------------------------------- Peter Hoetzinger Century Casinos. Inc. 1 EX-10.89 7 MODIFICATION AGREEMENT EXHIBIT 10.89 ASSUMPTION AND MODIFICATION AGREEMENT ---------- --- ------------ --------- THISASSUMPTION AND MODIFICATION AGREEMENT - -------------------------------------------- ("Agreement") is made and entered into this 7th day of February. 2000, by and --------------------------------------- -- ---------------------- between MARCIE I. ELLIOTT ("Elliott") and WMCK VENTURE CORPORATION, a Delaware --------------------------------------------------------------------- -------- corporation ("Optionee"). ------------------------- RECITALS: -------- 1. ROBERT J. ELLIOTT ("Optionor"), as owner in fee of that certain real property ("Real Property") located in the County of Teller, State of Colorado, more particularly described in Exhibit A attached hereto, and the improvements --------- and fixtures thereon ("Improvements") (the Real Property and Improvements are collectively called the "Property"), and Optionee, properly executed and delivered that certain Option Agreement ("Option Agreement"), dated March 25, 1999, pursuant to which Optionor granted to Optionee the option to purchase the Property upon the terms and conditions set forth in the Option Agreement. 2. Optionor and Optionee properly executed and delivered that Memorandum of Option to Purchase ("Memorandum of Option") in respect to the Option Agreement, which was recorded on March 31, 1999 at Reception No. 489749 of the Teller County, Colorado real estate records. 3. Optionor is now deceased. Pursuant to the terms of the Optionor's last will and testament, Elliott shall be appointed as personal representative of the estate of the Optionor (the "Estate") and the Property shall be conveyed from the Estate to Elliott by personal representative's deed ("Personal Representative's deed"), subject to the Option Agreement. 4. Pursuant to the terms and conditions of this Agreement, Elliott and Optionee have mutually agreed to (a) the assumption by Elliott of the Optionor's obligations under the Option Agreement and (b) the modification of the Option Agreement as provided for in this Agreement. NOW, THEREFORE, in consideration of the execution of this Agreement, the mutual promises contained herein1 and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows: 1. Elliott agrees to proceed promptly, diligently and in good faith (a) to accomplish her appointment as personal representative of the Estate and, promptly after such appointment, (b) to cause letters testamentary, evidencing Elliott's appointment as personal representative of the Estate to be recorded in the Teller County real estate records, (c) to execute, deliver and record in the Teller County real estate records the Personal Representative's Deed conveying the Property to Elliott and (d) to take such other actions as may be reasonably necessary to accomplish such appointment and conveyance. 1 Optionee agrees to proceed promptly, diligently and in good faith to accomplish the condition under Section 4(d) below, relating to the Title Commitment, unless waived by Optionee. 2. Effective upon the Effective Date (defined in Section 4 below), Elliott hereby irrevocably and unconditionally assumes, covenants, promises and agrees: (a) to perform each and every covenant, agreement and obligation in the Option Agreement be performed by Optionor; (b) that the representations and warranties of the Optionor are ratified as her own; and (c) to be bound by each and all of the terms and conditions of the Option Agreement as though the Option Agreement had originally been made, executed and delivered by Elliott, as the Optionor. 3. Effective upon the Effective Date (as defined in Section 4 below), Elliott and Optionee agree that the Option Agreement shall be and hereby is modified as follows: a. Article II and Article III of the Option Agreement shall be modified and restated in their entirety as follows: ARTICLE II TERM AND MANNER OF EXERCISE ---- --- ------ -- -------- 2.1 (a) The Option shall be exercisable by Optionee at any time during the initial period commencing April 1, 1999 and terminating at 12:00 midnight Cripple Creek time on March 31, 2000 (the "Initial Option Period") and provided the Option is extended as set forth in Section 2.1(b) below, at any time during the extended period commencing April 1, 2000 and terminating at 12:00 midnight Cripple Creek time on March 31, 2004 (the "Extended Option Period"), by written notice delivered by the Optionee to Optionor in the manner set forth in Section 19.8 hereof prior to the expiration of the Initial Option Period or Extended Option Period, as applicable. If Optionee fails to exercise the Option on or before the last date applicable for such exercise specified above, the Option and this Agreement shall be null and void and of no further force or effect. (b) The Option may be extended for the Extended Option Period by written notice delivered by the Optionee to Optionor in the manner set forth in Section 19.8 hereof prior to the expiration of the Initial Option Period and payment by the Optionee to Optionor of the sum of Fifteen Thousand and No/l00 Dollars ($15,000.00) as provided for in Section 3.1(b) below. ARTICLE III OPTION CONSIDERATION ------ ------------- 3.1 (a) As consideration for the Option, during the Initial Option Period, the Optionee shall pay to the Optionor the sum of Ten Thousand and No/100 Dollars ($10,000.00) on April 1, 1999, and One Thousand Five Hundred and No/100 Dollars ($1,500.00) per month during the Initial Option Period, commencing with the month of April, 1999. 2 (a) As consideration for the Extended Option Period, the Optionee shall pay to the Optionor the sum of Fifteen Thousand and No/100 Dollars ($15,000.00) by no later than March 31, 2000. As consideration for the Option, during the Extended Option Period, the Optionee shall pay to the Optionor Two Thousand and No/100 Dollars ($2,000.00) per month thereafter during the Extended Option Period, commencing with the month of April, 2000. In addition, provided the Option has not been previously exercised, the Optionee shall pay to the Optionor the sum of Twenty-Five Thousand and No/100 Dollars ($25,000.00) on March 31, 2001. (b) The monthly payments during the Initial Option Period and the Extended Option Period, if applicable, shall be paid by the Optionee to the Optionor by the tenth (10th) day of the applicable month by check. In the event a monthly payment is not received by the Optionee by the tenth (10th) of the month, the Optionor shall provide the Optionee with written notice of the same in the manner set forth in Section 19.8 and provided that the Optionor receives the applicable payment within ten (10) days of Optionee's receipt of such notice, together with a late charge ("Late Charge") in the amount of five percent (5.0%) of the late payment, this Option shall continue in full force and effect. (c) Such monthly payments shall be due and payable during the Initial Option Period or Extended Option Period through the effective date of the Optionee's exercise of the Option, but not thereafter. In the event such effective date is a day other than the last day of the month, the option consideration for such month shall be prorated through the effective date of such exercise. 3.2 In the event Optionee elects to exercise the Option, fifty percent (50%) of all monies paid by the Optionee to Optionor under Section 3.1 above, except Late Charges, if any, shall be credited against the Purchase Price of the Property set forth in Section 4 below. 3 b. The notice address for the Optionor, which appears in Section 19.8 of the Option Agreement is amended to read as follows: Marcie I. Elliott 247 East Bennett Avenue Cripple Creek, Colorado 80813 With a copy to: ------------- -- Tyler D. Kraemer, Esq. Kraemer, Kendall & Benson 430 North Tejon, Suite 300 Colorado Springs, CO 80903-1167 4. The "Effective Date" shall be the date upon which the last of the following conditions has been satisfied: (a) Elliott shall have been duly appointecf as personal representative of the Estate, (b) letters testamentary shall have been issued, evidencing such appointment, and such letters shall have been recorded in the Teller County real estate records, (c) Elliott, as personal representative of the Estate, shall have executed and delivered the Personal Representative's Deed conveying the Property from the Estate to Elliott and such Personal Representative's Deed shall have been recorded in the Teller County real estate records and (d) unless waived in writing by the Optionee, the Title Commitment (as defined in Section 5.1 of the Option Agreement) shall have been endorsed, at the Optionee's expense, (i) to show, in Paragraph 3 of Schedule A of the Title Commitment, that Elliott is the owner of the Property and (ii) to show the Option Agreement, as modified by this Agreement, as an exception in Schedule B - Section 2 of the Title Commitment. Elliott and Optionee agree that Sections 2 and 3 of this Agreement shall become effective upon the occurrence of the Effective Date. Under the terms of the modified Article III (set forth in Section 3 above) from and after March 31, 2000, Option consideration is payable by the Optionee to Elliott in amounts which are in excess of the consideration payable under Option Agreement prior to modification. The parties anticipate that the Effective Date will occur prior to March 31, 2000. Nonetheless, in the event the Effective Date occurs after March 31, 2000, the parties agree that any Additional Option Consideration (as defined below) shall be paid by the Optionee to Elliott within fifteen (15) days of the Effective Date. "Additional Option Consideration" shall be the amount which is equal to (a) the Option consideration payable, up to and including the Effective Date, under the modified Article III minus (b) the Option consideration which ----- has been paid, up to and including the Effective Date, by the Optionee to the Estate under Article III of the Option Agreement without modification. 5. Promptly after the occurrence of the Effective Date (as defined in Section 4 above), the parties agree to execute a Memorandum of Modification of Option to Purchase, in the form and content as Exhibit B, which shall be --------- recorded in the Office of the County Recorder of Teller County, Colorado. 6. This Agreement is a modification only and shall relate back to the date of the execution and delivery of the Option Agreement and, except as provided herein, all of the terms and conditions of the Option Agreement shall remain in full force and effect. Elliott and Optionee ratify and confirm the enforceability of the Option Agreement as assumed by Elliott, as if Elliott was the original Optionor, and modified by this Agreement. 4 7. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, and such counterparts shall together constitute but one and the same agreement. IN WITNESS WHEREOF, Elliott and Optionee have executed this Agreement on the day and year first above written. "OPTIONEE" WMCK Venture Corporation, a Delaware corporation By: /s/ Peter Hoetzinger Name: Peter Hoetzinger Its: Director "ELLIOTT" /s/ Marcie I. Elliott Marcie I. Elliott STATE OF COLORADO ) ) ss. COUNTY OF ) The foregoing instrument was acknowledged before me this 7th day of February, 2000, by Peter Hoetzinger, as Director of WMCK Venture Corporation, a Delaware corporation. WITNESS my hand and official seal. [SEAL] /s/ Lori Gray Notary Public STATE OF COLORADO ) ) ss. COUNTY OF ) The foregoing instrument was acknowledged before me this 7th day of February, 2000, by Marcie I. Elliott. WITNESS my hand and official seal. My commission expires: /s/LORI GRAY NOTARY PUBLIC [SEAL STATE OF COLORADO EXHIBIT A Lot 32, Block 16, Freemont (now Cripple Creek), Teller County, Colorado, together with all easements, rights of way, licenses, privileges, hereditaments and appurtenances thereto. 5 EX-10.90 8 COMMERCIAL CONTRACT EXHIBIT 10.90 COMMERCIAL CONTRACT TO BUY AND SELL REAL ESTATE November 17, 1999 1. PARTIES AND PROPERTY. WMCK VENTURE CORPORATION, a Delaware corporation ("Buyer"), agrees to buy, and SASKATCHEWAN INVESTMENTS, INC., a Texas corporation ("Seller"), agrees to sell, on the terms and conditions set forth in this contract ("Contract"), the following described property in the County of Teller, Colorado: Parcel 1: - ---------- The South 75 feet of Lots 1 through 4, inclusive, and the East 19 feet 4 inches of the South 75 feet of Lot 5 and the North 50 feet of Lots 1 through 4, inclusive, and the East 19 feet 4 inches of the North 50 feet of Lot 5, all in Block 29, Fremont, now Cripple Creek, in Teller County, Colorado, and - Lots 1 through 5, inclusive, Block 2, First Addition to Fremont. now Cripple Creek, in Teller County, Colorado (Parcel 1 and Parcel 2 collectively called the "Property"), together with all: (i) privileges, easements, rights of ways, access, licenses, franchises, rights, appendages, tenements, hereditaments and other appurtenances thereto; (ii) any and all fixtures and improvements thereon; (iii) any and all development rights and land use permits, if any, in respect thereto; and (iv) any and all right, title and interest Seller has in and to any and all strips and gores of land, and in, to and under the real property within roads, alleys and access ways serving, abutting and adjoining the real property described above, including, without limitation: 1 (A) that portion of Outlot A, First Addition to Fremont, now Cripple Creek, lying East of the West line of the East 19 feet 4 inches of Lot 5, Block 29, Fremont, now Cripple Creek. extended South. in Teller County. Colorado ("Outlot A"), (B) that portion of the alley in First Addition to Fremont lying between Parcel 1 and Parcel 2 above, being more particularly described as that portion of the North half of the alley, lying East of the West line of the East 19 feet 4 inches of Lot 5, Block 29, Fremont, now Cripple Creek extended South, and that portion of the South half of the alley, lying East of the West line of Lot 5, Block 2, First Addition to Fremont, now Cripple Creek, extended North) in Tcller County, Colorado (collectively the "Alley") and (C) the property to the east ("2nd Street"), which lies between the Property, Outlot A and the Alley, on one hand, and Colorado Highway 67, on the other. The parties acknowledge and agree that the description of Outlot A, the Alley and/or 2nd Street may change as a result of proceedings and applications described in paragraph 9(c) below or otherwise. In the event of any such change. the parties agree to amend this Contract accordingly 2. RESERVED. 3. PURCHASE PRICE AND TERMS. The purchase price shall be $1,850,000.00, payable in U.S. dollars by Buyer as follows: (a) Earnest Money. $185,000.00 in the form of a check, as earnest money deposit and part payment of the purchase price, payable to and held by Security Title Guaranty Company ("Title Agent"), in its trust account on behalf of both Seller and Buyer. Title Agent shall invest the earnest money deposit in an interest-bearing account, acceptable to Buyer, established at Community Banks of Colorado - Cripple Creek. All interest earned on the earnest money deposit shall remain the sole and separate property of the Buyer. The Buyer's taxpayer identification number is 84-1247753. (b) Cash at Closing. $1,665,000.00, plus closing costs to be paid by Buyer at closing in funds which comply with all applicable Colorado laws, which include cash, electronic transfer funds, certified check, savings and loan tellers check, and cashier's check (Good Funds). 4. RESERVED. 5. RESERVED. 6. RESERVED. 2 7. NOT ASSIGNABLE. Except for an assignment by the Buyer to an affiliate of the Buyer which is hereby approved by Seller, this Contract shall not be assignable by Buyer without Seller's prior written consent. In the event of any assignment as hereinbefore contemplated, the Buyer shall not be released from its covenants and undertakings herein and shall remain responsible to Seller. Except as so restricted, this Contract shall enure to the benefit of and be binding upon the heirs, personal representatives, successors and assigns of the parties. 8. EVIDENCE OF TITLE. Seller shall furnish to Buyer at Seller's expense, a current commitment for owner's title insurance policy in an amount equal to the purchase price, on or before December 8, 1999 (Title Deadline). Seller shall cause copies of instruments (or abstracts of instruments) listed in the schedule of requirements ("Requirements") and in the schedule of exceptions (Exceptions) in the title insurance commitment to be furnished to Buyer at Seller's expense. This requirement shall pertain only to instruments shown of record in the office of the clerk and recorder of the designated county or counties. The title insurance commitment, together with any copies or abstracts of instruments furnished pursuant to this Section 8, constitute the title documents (Title Documents). Seller will pay the premium at closing and have the title insurance of First American Title Insurance Company ("Title Company") delivered to Buyer as soon as practicable after closing. The parties agree that the deletion of standard exceptions from the title insurance policy shall be a condition of closing. For such purpose, the Buyer shall deliver a copy of the Survey, defined in paragraph 9.(c) below, to the Title Agent and the Seller shall deliver to the Title Company, on or before the Closing Date, the standard affidavit and indemnity agreement required by the Title Company for the deletion of standard exceptions. Further, the parties agree that the issuance of mineral and access endorsement(s) to the title insurance policy by the Title Company shall be a condition of closing; provided, however, the Buyer shall pay the premiums for issuance of such endorsements. 9. TITLE. (A) TITLE REVIEW. Buyer shall have the right to inspect the Title Documents. Written notice by Buyer of unmerchantability of title or of any other unsatisfactory title condition shown by the Title Documents shall be signed by or on behalf of Buyer and given to Seller on or before January 19, 2000, or within five (5) calendar days after receipt by Buyer of any Title Document(s) or endorsement(s) adding new Exception(s) to the title commitment together with a copy of the Title Document adding new Exception(s) to title, whichever is the last to occur. If Seller does not receive Buyer's notice by the date(s) specified above, Buyer accepts the condition of title as disclosed by the Title Documents as satisfactory. (B) MATTERS NOT SHOWN BY THE PUBLIC RECORDS. Seller shall deliver to Buyer, on or before the Title Deadline set forth in Section 8, true copies of all leases, agreements, entitlements. permits, studies, reports and surveys in Seller's possession pertaining to the Property and shall disclose to Buyer all easements, liens or other title matters not shown by the public records of which Seller has actual knowledge. Buyer shall have the right to inspect the Property to determine if any third party(s) has any right in the Property not shown by the public records (such as an unrecorded easement. unrecorded lease, or boundary line discrepancy). Written notice of any unsatisfactory condition(s) disclosed by Seller or revealed by such inspection shall be signed by or on behalf of Buyer and given to Seller on Or before January 19, 2000. If Seller does not receive Buyer's notice by said date, Buyer accepts title subject to such rights, if any, of third parties of which Buyer has actual knowledge. 3 (C) The parties acknowledge that Parcel 1 and Parcel 2 of the Property, as described in paragraph 1 above, are separated by Outlot A (defined in paragraph 1 (iv)(A) above) and by the Alley (defined in paragraph 1 (iv)(B) above), as shown on the recorded plat for First Addition to Fremont, now Cripple Creek, and the survey (the "Survey") of the Property prepared by Alfred C. Kroeger of Teller County Land Surveying, dated September 23, 1999. In order to gain a contiguity endorsement ("Contiguity Endorsement") insuring that Parcel 1 and Parcel 2 are not physically separated: (i) fee title to Outlot A will need to be obtained by the buyer through acquisition, quiet title action or other appropriate action ("Outlot A Acquisition Condition") and (ii) the Alley will need to be vacated so that title to the Alley becomes vested in the owner of Parcel 1 and Parcel 2 ("Alley Vacation") If the Outlot A Acquisition Condition (the Alley Vacation is not a condition of this Contract, provided, however, as set forth in the next subparagraph, Seller agrees to cooperate with the Buyer in the Buyer's efforts to obtain the Alley Vacation) has not been satisfied by March 15, 2000. then, unless: (i) Buyer waives the Outlot A Acquisition Condition or (ii) Buyer extends the time for satisfaction of the Qutlot A Acquisition Condition, as provided for in the next sentence, by written notice to Seller on or before March 20, 2000, this Contract shall terminate and the earnest money deposit together with the interest earned thereon shall be returned to the Buyer. If the Outlot A Acquisition Condition has not been satisfied by March 15, 2000 and provided Buyer gives written notice to Seller on or before March 20, 2000 of Buyer's election to extend the time for satisfaction of such condition, then the time for satisfaction of the Outlet A Acquisition Condition shall be extended to May 15, 2000 and $18,500.00 of the earnest money deposit shall become non-refundable. In the event of such extension, the Closing Date shall be extended to June 14, 2000. After the mutual execution of this Contract by Seller and Buyer, the Buyer shall, with reasonable promptness and at the Buyer's expense, commence good faith, diligent efforts to cause the Outlot A Acquisition Condition to be satisfied; provided, however, the determination of the amount of consideration to be paid for the acquisition of Outlot A or, if applicable, the determination of the likelihood of success in prevailing upon a quiet title action or other appropriate action concerning Outlot A shall be reserved to and be made by the Buyer, in the exercise of the Buyers sole discretion. The Seller agrees to reasonably, promptly and in good faith cooperate with the Buyer at the Buyer's expense in the Buyer's efforts: 4 (i) to satisfy the Outlot A Acquisition Condition; and (ii) to obtain: (A) the Alley Vacation; and (13) the vacation of 2nd Street (defined in paragraph 1 (iv)(C) above), including, without limitation, acting as the nominal p1aintiff in any quiet title or other proceeding and/or acting as the nominal applicant in any vacation application(s) and/or proceeding(s), and, upon request of the Buyer, allowing the Buyer to be substituted as plaintiff and/or applicant, as the case may be, in such proceedings and/or application(s). Costs and Indemnity. Buyer agrees to be responsible for all cost and expense required for the Outlot A Acquisition as contemplated herein, for the Alley Vacation and the vacation of 2nd Street. Buyer agrees to indemnify and save harmless Seller from all claims, losses, expenses, costs (including, without limitation, attorney fees) which Seller may incur or suffer as a result of the steps taken by Buyer in the Outlot A Acquisition, Alley Vacation and/or the vacation of 2nd Street. (d) Special Taxing Districts. SPECIAL TAXING DISTRICTS MAY BE SUBJECT TO GENERAL OBLIGATION INDEBTEDNESS THAT IS PAID BY REVENUES PRODUCED FROM ANNUAL TAX LEVIES ON THE TAXABLE PROPERTY WITHIN SUCH DISTRICTS. PROPERTY OWNERS IN SUCH DISTRICTS MAY BE PLACED AT RISK FOR INCREASED MILL LEVIES AND EXCESSIVE TAX BURDENS TO SUPPORT THE SERVICING OF SUCH DEBT WHERE CIRCUMSTANCES ARISE RESULTING IN THE INABILITY OF SUCH A DISTRICT TO DISCHARGE SUCH INDEBTEDNESS WITHOUT SUCH AN INCREASE IN MILL LEVIES. BUYER SHOULD INVESTIGATE THE DEBT FINANCING REQUIREMENTS OF THE AUTHORIZED GENERAL OBLIGATION INDEBTEDNESS OF SUCH DISTRICTS. EXISTING MILL LEVIES OF SUCH DISTRICT SERVICING SUCH INDEBTEDNESS, AND THE POTENTIAL FOR AN INCREASE IN SUCH MILL LEVIES. In the event the Property is located within a special taxing district and Buyer desires to terminate this Contract as a result, if written notice is given to Seller on or before January 14, 2000, this Contract shall then terminate and the earnest money deposit, together with the interest earned thereon, shall be returned to the Buyer. If Seller does not receive Buyer's notice by the date specified above, Buyer accepts the effect of the Property's inclusion in such special taxing district(s) and waives the right to so terminate. (C) RIGHT TO CURE. If Seller receives notice of unmerchantability of title or any other unsatisfactory title condition(s) as provided in subsection (a) or (b) above, Seller shall use reasonable effort to correct said unsatisfactory title condition(s) prior to the Closing Date. If Seller fails to correct said unsatisfactory title condition(s) on or before the date of closing, this Contract shall then terminate and the earnest money deposit, together with the interest earned thereon, shall be returned to the Buyer; provided, however, Buyer may, by written notice received by Seller, on or before the Closing Date, waive objection to said unsatisfactory title condition(s). 5 10. INSPECTION. Buyer or any designee, shall have the right to have inspection(s) of the physical condition, including, without limitation, the right to cause an environmental site assessment of the Property to be conducted at Buyer's expense. If written notice of any unsatisfactory physical condition, signed by or on behalf of Buyer, is not received by Seller on or before March 15, 2000 (Objection Deadline), the physical condition of the Property shall be deemed to be satisfactory to Buyer. If such notice is received by Seller as set forth above, and if Buyer and Seller have not agreed, in writing, to a settlement thereof on or before March 31, 2000 (Resolution Deadline), this Contract shall terminate on April 5, 2000: unless, on or before April 5, 2000, Seller receives written notice from Buyer waiving objection to any unsatisfactory condition. In the event of termination, the earnest money deposit, together with the interest earned thereon, shall be returned to the Buyer. Buyer shall carry out and conduct its inspections at such times and in such a manner that it will not interfere with or disrupt the operations and peaceful enjoyment of the property by the Seller's tenant of the Property. Buyer is responsible for and shall pay for any damage which occurs in the Property as a result of inspection of the Property under paragraph 9(b) above and/or this paragraph 10. In addition, Buyer shall indemnify, save and hold Seller and the Property harmless and defend Seller and the Property from any liens, loss, liability or expense, including reasonable attorney's fees and costs, incurred by Seller, or any claims made against Seller and/or the Property, arising from the Buyer's inspecting the Property under paragraph 9(b) above and this paragraph 10. 11. DATE OF CLOSING. The date of closing shall be April 17, 2000, unless extended to June 14, 2000, as provided for in paragraph 9(c) above, (as applicable the "Closing Date"), or by mutual agreement at an earlier date. The hour and place of closing sha1l be as designated by mutual agreement of Buyer and Seller. 12. TRANSFER OF TITLE Subject to tender or payment at closing as required herein and compliance by Buyer with the other terms and provisions hereof, Seller shall execute and deliver a good and sufficient special warranty deed to Buyer, on closing, conveying the Property and those items of property described in subparagraph (i) and (ii) of paragraph 1 above free and clear of all taxes except the general taxes for the year of closing, and except the matters accepted by the buyer as provided for in the remainder of this paragraph. Title shall be conveyed free and clear of all liens for special improvements installed as of the date of Buyer's signature hereon, whether assessed or not; except (i) those matters reflected by the Title Documents accepted by Buyer in accordance with subsection 9(a); (ii) inclusion of the Property within any special taxing district; and (iii) subject to building and zoning regulations. 6 Provided, however, the matters described in clause (iii), immediately preceding, shall be subject to the prior review and approval of Buyer, in the exercise of its sole and unfettered discretion, which approval shall be a condition precedent to the Buyer's obligations hereunder. If written objection as to any of the matters described in said clause, signed by or on behalf of Buyer, is received by Seller on or before March 15, 2000, then this Contract shall terminate and the earnest money deposit, together with the interest earned thereon, shall be returned to the Buyer. Seller shall convey to Buyer by bargain and sale deed or quit-claim assignment, with an after-acquired title clause, as applicable, those items of property described in subparagraphs (iii) and (iv) of paragraph 1 above. 13. PAYMENT OF ENCUMBRANCES. Any encumbrance required to be paid shall be paid at or before closing from the proceeds of this transaction or from any other source 14. CLOSING COSTS, DOCUMENTS AND SERVICES. Buyer and Seller shall pay, in Good Funds, their respective closing costs and all other items required to be paid at closing, except as otherwise provided herein, Buyer and Seller shall sign and complete all customary or required documents at or before closing. Fees for real estate closing services shall not exceed $350.00 and shall be paid at closing one-half by Seller and one-half by Buyer. 15. PRORATIONS. General taxes for the year of closing, based on the taxes for the calendar year immediately preceding closing, water and sewer charges, shall be prorated to date of closing. The apportionment shall be final. 16. POSSESSION. Possession of the Property shall be delivered to Buyer on the Closing Date free of any leases, tenancies or occupancy rights, if Seller, after closing, fails to deliver possession on the date herein specified, Seller shall be subject to eviction and shall be additionally liable to Buyer for payment of $500.00 per day from the date of agreed possession until possession is delivered. 17. CONDITION OF AND DAMAGE TO PROPERTY. Except as otherwise provided in this Contract, the Property shall be delivered in the condition existing as of the date of this Contract, ordinary wear and tear excepted. In the event the property shall be damaged by fire or other casualty prior to time of closing, in an amount of not more than ten percent of the total purchase price, Seller shall be obligated to repair the same before the date of closing. In the event such damage is not repaired within said time or if the damages exceed such sum, this Contract may be terminated at the option of Buyer. If terminated by Buyer, the earnest money deposit, together with all interest earned thereon, shall be returned to Buyer. Should Buyer elect to carry out this Contract despite such damage, Buyer shall he entitled to credit for all the insurance proceeds resulting from such damage to the Property, not exceeding, however, the total purchase price. Should service(s), if any, fail or be damaged between the date of this Contract and the Closing Date, then Seller shall be liable for the repair or replacement of service(s) with a unit of similar size, age and quality, or an equivalent credit, less any insurance proceeds received by Buyer covering such repair or replacement. 18. CONDEMNATION. If any portion of the Property is acquired, or any proceedings commenced to acquire the Property, by authority of any governmental agency in the exercise of its power of eminent domain or by private purchase in lieu thereof, the Buyer may elect, at its sole option, either: (i) to terminate this Contract in which case the earnest money deposit, together with all interest carried thereon, shall be immediately returned to Buyer and both Seller and Buyer shall be released from further responsibility hereunder; or 7 (ii) to waive its right to terminate this Contract and to consummate the transaction contemplated hereby, in which case Seller shall assign to Buyer all of Seller's right to receive the aware or other proceeds, if any, payable as a result of such exercise of the power of eminent domain. 19. TIME OF ESSENCE/REMEDIES. Time is of the essence hereof. If any note or check received as earnest money hereunder or any other payment due hereunder is not paid, honoured or tendered when due, or if any other obligation hereunder is not performed or waived as herein provided, there shall be the following remedies: A. IF BUYER IS 1N DEFAULT: All payments and things of value received hereunder, except for the interest earned on the earnest money deposit, shall be forfeited by Buyer and retained on behalf of Seller and both parties shall thereafter be released from all obligations hereunder. It is agreed that such payments and things of value are LIQUIDATED DAMAGES and (except as provided in subsection (c)) are SELLER'S SOLE AND ONLY REMEDY for Buyer's failure to perform the obligations of this Contract. Seller expressly waives the remedies of specific performance and additional damages. B. IF SELLER IS IN DEFAULT: Buyer may elect to treat this Contract as cancelled, in which case all payments and things of value received hereunder shall be returned and Buyer may recover such damages as may be proper, or Buyer may elect to treat this Contract as being in full force and effect and Buyer shall have the right to specific performance or damages, or both. C. COSTS AND EXPENSES: Anything to the contrary herein notwithstanding, in the event of any arbitration or litigation arising out of this Contract, the arbitrator or court shall award to the prevailing party, an reasonable costs and expenses, including attorney fees 20. EARNEST MONEY DISPUTE. Buyer and Seller agree that, in the event of any controversy regarding the earnest money and things of value held by broker or closing agent, unless mutual written instructions are received by the holder of the earnest money and things of value, broker or closing agent shall not be required to take any action but may await any proceeding, or at broker's or closing agent's option and sale discretion, may interplead all parties and deposit any money or things of value into a court of competent jurisdiction and shall recover court costs and reasonable attorney fees. 21. ALTERNATIVE DISPUTE RESOLUTION: MEDIATION. If a dispute arises between the parties relating to this Contract, the parties agree to submit the dispute to mediation. The parties will jointly appoint an acceptable mediator and will share equally in the cost of such mediator. If mediation proves unsuccessful, the parties may then proceed with such other means of dispute resolution as they so choose. 22. ADDITIONAL PROVISIONS: 8 (A) NOTICES All notices hereunder to the respective parties shall he in writing and shall be served by depositing the same in the United States mail, first class postage prepaid, certified mail, return receipt requested, or air courier service, or by personal delivery or facsimile machine to the following: Seller: Saskatchewan Investments, Inc. 6113 - Harrowgate Drive Austin, Texas 78759 Phone: (512) 335-4816 Fax; (512) 335-6844 with a copy to: David M. Manning, Q.C. C/o Johnson Ming Manning Barristers and Solicitors 4th Floor 4945 -50 Street Red Deer. Alberta T4N 1Y1 Phone: (403) 346-5591 Fax: (403) 346-5599 Buyer: WMCK Venture Corporation Attention: Peter Hoetzinger, Vice-Chairman 200 East Bennett Avenue Cripple Creek, Colorado 80813 Phone: (719)689-0333 Fax: (719) 689-9700 with Copies to; Bruce A. Kolbezen, Esq. Sherman & Howard LLC 90 South Cascade Avenue, Suite 1500 Colorado Springs, Colorado 80903 Phone: (719) 448-4030 Fax: (719) 635-4576 Any notice to the Seller or Buyer shall be deemed to be given and effective the date hand-delivered or transmitted by facsimile machine (fax) or one business day after deposit with a commercial air courier service guaranteeing next day delivery or three (3) days after deposit in the United States mail. A party may change its place for receipt of any notice by delivering a notice of change of address to the other parry in the aforesaid manner. 9 (B) GENERAL PROVISIONS. 1. Subject to the provisions of this Contract, Seller and Buyer each reserve the right to waive any of the conditions precedent to its respective obligations as set forth herein which conditions are inserted solely for the benefit of Seller or Buyer, as the case may be. 2 The performance and interpretation of this Contract shall be controlled by the laws of the State of Colorado. 3. This Contract may not be amended or modified except by a written instrument executed by both Seller and Buyer. 4. If any term or provision of this Contract or an application thereof shall be invalid or unenforceable, the remainder of this Contract and the application of any remaining term or provision shall not be affected thereby. 5. Any provision of this Contract, which by its terms requires performance or observance, subsequent to the time of closing, shall be deemed to survive closing and continue to be binding upon Seller and Buyer. 6. Except as otherwise provided in this Contract, all representations, covenants, and warranties contained in this Contract shall survive closing and shall not be merged thereby. 7. This Contract Constitutes the entire agreement between the parties and supersedes all prior and contemporaneous agreements, representations, and understandings of the parties. 23. TERMINATION. In the event this Contract is terminated, all payments and things of value received hereunder shall be returned and the parties shall be relieved of all obligations hereunder, subject to Section 20. 24. NOTICE OF ACCEPTANCE: COUNTERPARTS. This proposal shall expire unless accepted in writing, by Buyer and Seller, as evidenced by their signatures below, and the offering party receives notice of such acceptance on or before December 7, 1999 (Acceptance Deadline). If accepted, this document shall become a contract between Seller and Buyer. A copy of this document may be executed by each party, separately, and when each party has executed a copy thereof, such copies taken together shall be deemed to be a full and complete contract between the parties. Delivery by facsimile of a party's counterpart of this Contract shall be effective as delivery of an original contract. BUYER. WMCK VENTURE CORPORATION, a Delaware corporation By: /s/ Erwin Haitzmann --------------------- Erwin Haitzmann, Chief Executive Officer Date of Buyer's signature December 3, 1999 SELLER SAKATCHEWAN INVESTMENTS, INC. A Texas corporation By: /s/ V. G. Walls ------------------ Name: V. G. Walls Its: President Date of Seller's signature December 6, 1999 10 EX-10.91 9 PREPAYMENT AND RELEASE EXHIBIT 10.91 PREPAYMENT AND RELEASE This Prepayment and Release Agreement ("Agreement') is entered into this 19th day of January, 2000 by and between Switzerland County Development Corp., a Nevada corporation ("Buyer") and Century Casinos Management, Inc., a Delaware corporation ("Seller"). Buyer and Seller are collectively referred to as "Parties". WHEREAS, on December 21, 1995 the Parties entered into a stock purchase agreement ("Purchase Agreement") whereby Buyer agreed to purchase and Seller, together with Cimmaron Investment Properties Corp., a Colorado Corporation ("Cimarron"), agreed to sell all issued and outstanding shares of capital stock of Pinnacle Gaming Development Corp., a Colorado corporation ("Pinnacle Stock"); and WHEREAS, the Purchase Agreement provides Buyer pay Cimarron and Seller Four Million Three Hundred Thirty-One Thousand Dollars ($4,331,000) for the Pinnacle Stock as follows: i. One Hundred Thousand Dollars ($100,000) at the closing; ii. Four Hundred Thirty One Thousand Dollars ($431,000) to Seller and One Hundred Thousand Dollars ($100,000) to Cimarron within seven (7) business days after receipt by Buyer of a certificate of suitability from the Indiana Gaming Commission; iii. One Million Three Hundred Thousand Dollars ($1,300,000) within seven (7) business days after the groundbreaking by the Buyer for a riverboat casino development; and iv. Forty Thousand Dollars ($40,000) on the first day of each of the sixty (60) months following the month in which the riverboat casino development opens for business; and WHEREAS, the Purchase Agreement provides that all payments pursuant to above clauses i, iii and iv shall be paid eighty percent (80%) to Seller and twenty percent (20%) to Cimarron. WHEREAS, Buyer has paid above items i, ii and iii as provided in the Purchase Agreement; and WHEREAS, only above item iv remains to be paid by Buyer to Seller: and WHEREAS, Buyer has proposed to prepay, and Seller has agreed to accept prepayment, of Seller's portion of the payments specified in clause iv above, upon the terms contained herein; and 1 WHEREAS, with respect to Cimarron, Buyer has made separate arrangements to prepay Cimarron's share of above item iv in full; and WHEREAS, One Million Three Hundred Eighty Thousand Dollars ($1,380,000) is the total sum to be paid to Seller in prepayment of above item iv ("Prepayment Price"); and WHEREAS, the Parties desire to memorialize the prepayment of above item iv and provide for other matters relating thereto. NOW THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by Buyer and Seller, the Parties agree as follows: 1. Other than with respect to matters relating to the prepayment to Cimarron to which Seller is not a party and accordingly, unable to represent and warrant, the above recitals are true and incorporated herein as if fully set forth. 2. The Prepayment Price shall be paid to Seller by Buyer on January 24, 2000, pursuant to wire instructions to be delivered by Seller to Buyer. 3. Upon receipt of the Prepayment Price, Seller acknowledges that all obligations of Buyer to Seller under the Purchase Agreement have been fully discharged and Seller and Buyer agree to forever and unconditionally release, acquit and discharge the other, its subsidiaries, affiliates, successors, assigns, officers, directors, partners, shareholders, agents, and employees from any and all claims, demands, actions, causes of action and damages which have arisen or which might hereafter arise and regardless of type, cause or nature arising from or in any manner related to either the Purchase Agreement, this Agreement. Furthermore, Seller acknowledges that Buyer has made separate arrangements to prepay Cimarron its share of item iv above, and waives any claim that it may be entitled to the benefit of such arrangement. 4. This Agreement shall inure to the benefit of and be binding upon the Parties and their respective successors and assigns. 5. This Agreement may be executed in any number of counterparts, each of which when executed and delivered shall be an original, but all such counterparts shall constitute one and the same Agreement. 2 SWITZERLAND COUNTY DEVELOPMENT CORP., a Nevada corporation By: _/s/ Loren S. Ostrow____________ ----------------------- Loren S. Ostrow, Senior Vice President & General Counsel CENTURY CASINOS MANAGEMENT, INC., a Delaware corporation By: _/s/ Peter Hoetzinger____________ ---------------------- Peter Hoetzinger, Vice Chairman 3 EX-10.92 10 AMENDMENT NO. 1 PARKING LEASE EXHIBIT 10.92 AMENDMENT NO. 1 TO PARKING LEASE - OPTION TO PURCHASE THIS AMENDMENT NO. 1 TO PARKING LEASE - OPTION TO PURCHASE ("First Amendment") is entered into and is effective as of this 17th day of February, 2000; by and between CITY OF CRIPPLE CREEK, a municipal corporation ("Lessor") and WMCK VENTURE CORPORATION, a Delaware corporation ("Lessee"). RECITALS: -------- 1. Lessor and Lessee entered into a Parking Lease - Option to Purchase as of June 1, 1998 ("Lease"), covering certain property (the "Property") described as follows: Lots 11 through 20, Block 28 Fremont Addition to Cripple Creek, Colorado. 2. Lessor and Lessee agree to amend the Lease as hereinafter set forth. NOW, THEREFORE, in consideration of the mutual promises set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows: 1. Effective Date. The effective date ("Effective Date") of this First --------------- Amendment shall be as of the date first written above. 2. The Lease is amended as follows: a. The name of the Lessee is corrected to read, WMCK Venture Corporation, a Delaware corporation. b. The Term of the Lease is extended to and shall end on May 31, 2010. Accordingly, the date May 31, 2010 is substituted for May 31, 2003 in Section 1 of the Lease. c. The following subparagraph is added at the end of Section 2 of the Lease: 1 Consumer Price Index Increases. Subject to the limitations set forth herein, if - ------------------------------- at any time after May 31, 2003 the Events Center Lease, as defined below, has expired without renewal or extension (such expiration date, if any, shall hereinafter be called the "Trigger Date"), the Rent provided for in the first subparagraph of this Section 2 shall be increased as provided below by the percentage of increase, if any, of the United States Bureau of Labor Statistics U.S. Consumer Price Index for All Items - Urban Wage Earners and Clerical Workers ("CPI-W") (base year 1982-84 = 100) (the "Index"). If the Index changes so that the base year differs from that used in this Section, the Index shall be converted in accordance with the conversion factor published by the United States Department of Labor, Bureau of Labor Statistics, to the 1982-84 base. If the Index is discontinued or revised during the Term, such other government index or computation with which it is replaced shall be used in order to obtain substantially the same result as would be obtained if the Index had not been discontinued or revised. The Index published nearest to the Trigger Date of this Agreement shall be the "Beginning Index". The Index published most recently, but at least four (4) months, before the applicable Adjustment Date shall be the "Adjustment Index". The Adjustment Date shall be the first day of June following the Trigger Date, and every June 1st thereafter. The Rent shall be adjusted as follows: On each Adjustment Date, the Rent shall be adjusted by multiplying the initial Rent under this Agreement by a fraction, the numerator of which is the applicable Adjustment Index and the denominator of which is the Beginning Index; provided, however, that in no case shall the increase in Rent over the previously applicable Rent exceed four percent (4.0%); and provided further, in no case shall such adjustment result in a decrease in the previously applicable Rent. The amount so determined shall be the adjusted Rent payable under the first subparagraph of this Section 2 for the lease year beginning on the applicable Adjustment Date until the next Adjustment Date. "Event Center Lease" means that certain lease between Lessor, as lessee, and Lessee, as lessor, of even date herewith, pursuant to which Lessor has leased from Lessee those certain premises, commonly known as Womacks Center-Cripple Creek, which premises are located in a portion of the improvements to be constructed upon Lots 6 through 8, inclusive, First Addition to Fremont, now Cripple Creek, Colorado 3. Effect of Amendment. Except as expressly modified in this First ---------- --------- Amendment, the Lease shall remain unmodified and in full force and effect. -- 4. Counterparts. This First Amendment may be executed in counterparts which ------------ together shall constitute a single original First Amendment. 2 5. Facsimile Delivery. Delivery of facsimile copies of the executed ------------------- counterparts of this First Amendment shall be effective as delivery of the original executed First Amendment. IN WITNESS WHEREOF, the parties have executed this First Amendment as of the date first set forth above. LESSEE: CITY OF CRIPPLE CREEK, a Colorado municipal corporation By: /s/ Thomas L. Litherland --------------------------- Thomas L. Litherland, Mayor ATTEST: By: /s/Kathleen Conley ------------------- Kathleen Conley, City Clerk STATE OF COLORADO ) ) ss. COUNTY OF TELLER ) The foregoing instrument was acknowledged before me this 17th day of February 2000, by Thomas L. Litherland, as Mayor, and Kathleen Conley, as City Clerk, of the City of Cripple Creek, a Colorado municipal corporation. WITNESS My hand and official seal. /s/Melissa A. Beaty --------------------- Notary Public 3 (SEAL) LESSOR: WMCK VENTURE CORPORATION, a Delaware corporation By: /s/Peter Hoetzinger -------------------- Name: Peter Hoetzinger ----------------- Its: Director -------- STATE OF COLORADO ) ) ss. COUNTY OF TELLER ) The foregoing instrument was acknowledged before me this 8th day of February 2000, by Peter Hoetzinger, as Director of WMCK Venture Corporation, a Delaware corporation. WITNESS My hand and official seal. /s/ Lori Gray --------------- Notary Public (SEAL) 4 EX-21 11 SUBSIDIARIES OF REGISTRANT EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT State or Country Name of Incorporation - ---- ----------------- Century Casinos Management, Inc. Delaware Century Casinos - Nevada, Inc. Nevada Century Management und Beteiligungs GmbH Austria Century Casinos Cripple Creek, Inc. Colorado Century Casinos Missouri, Inc. Missouri WMCK Acquisition Corp. Delaware WMCK Venture Corp. Delaware Century Casinos Africa (Pty) Limited South Africa 1 EX-23.1 12 CONSENT OF INDEPENDENT ACCOUNTANTS EXHIBIT 23.1 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement No. 333-13801 on Form S-8 of Century Casinos, Inc. of our report dated March 6, 2000, appearing in this Annual Report on Form 10-KSB of Century Casinos, Inc. for the year ended December 31, 1999. /s/ Deloitte & Touche LLP - ----------------------------- Deloitte & Touche LLP Denver, Colorado March 6, 2000 1 EX-27 13
5 0000911147 Century Casinos Inc. 1 U.S. Dollars 12-MOS DEC-31-1999 JAN-01-1999 DEC-31-1999 1 2508363 0 710577 0 63989 3561030 25867762 6334527 34023114 2433271 10458552 0 0 158619 20972672 34023114 0 23584171 0 9542814 10020670 0 999922 3967097 1746000 2221097 0 0 0 2221097 .15 .15
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