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Triad Resorts Offering Memo 2009 



Triad Resorts Offering Memo 2009

 

 
 
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Published:  January 09, 2010
 
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Slide 1: Confidential Offering Memorandum Series B Preferred LLC Units January 1, 2009 Triad Resorts, LLC 22525 SE 64th Pl., Suite 251 Issaquah, Washington 98027 www.TriadResorts.com
Slide 2: TABLE OF CONTENTS CONFIDENTIAL PRIVATE OFFERING MEMORANDUM
 NOTICE TO INVESTORS FORWARD LOOKING STATEMENTS TERMS OF THE OFFERING SUMMARY OF PROPOSED TERMS RISK FACTORS PRE AND POST OFFERING CAPITALIZATION USE OF PROCEEDS 2
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 STRATEGIC BUSINESS PLAN
 IMPORTANT INFORMATION EXECUTIVE SUMMARY TRIAD RESORTS THE SPANISH BIT RESORT & CASINO THE OPPORTUNITY FINANCIAL INFORMATION APPENDIX A – MANAGEMENT APPENDIX B – AREA MAPS APPENDIX C – SITE PLANS APPENDIX D – CASINO MODEL DESIGN APPENDIX E – JACKPOT APPENDIX F – LEADERSHIP IN ENERGY AND ENVIRONMENTAL DESIGN (LEED) APPENDIX G – DETAILED PROFORMA APPENDIX H – SUBSCRIPTION AGREEMENT 13
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 Confidential Offering Memorandum -1 -
Slide 3: CONFIDENTIAL PRIVATE OFFERING MEMORANDUM 5,200,000 UNITS OF PREFERRED B LLC UNITS This Confidential Offering Memorandum (the “Memorandum”) relates to the private offering (the “Offering”) of up to 5,200,000 units of Series B Preferred LLC Units (the “Units”) of Triad Resorts, LLC (“Triad” or the “Company”). Triad reserves the right to increase or reduce the number of Units in the Offering at any time. All of the Units are being offered by the Company at $1.00 per unit. The Units are being offered only to investors who meet certain qualifications, and Triad reserves the right to reject any subscription tendered. Investors must subscribe for a minimum purchase of $100,000, although Triad reserves the right to accept a subscription for less than the minimum purchase amount, in its sole discretion. The date of this Offering Memorandum is January 1, 2009 Confidential Offering Memorandum -2 -
Slide 4: NOTICE TO INVESTORS The Units offered hereby have not been registered under the United States Securities Act of 1933, as amended (the “Securities Act”), or the securities laws of any state, and are being offered and sold in reliance on exemptions from the registration requirements of the Securities Act and such state securities laws. This Memorandum should be read in conjunction with Triad’s Strategic Business Plan (the “Business Plan”), a copy of which has been delivered to the recipient along with this Memorandum and is incorporated into and made a part of this Memorandum. An investment in the Units involves a high degree of risk. See “Risk Factors.” Prospective investors should thoroughly consider the risk factors as well as the other information described in this Memorandum. There is no public market for the Units, and the Company does not anticipate that a public market will exist at any time in the near future. Only those persons who are able to bear the risk of the complete loss of their investment should consider purchasing the Units. An investment in the Units is speculative and is suitable only for, and may be made only by, an “accredited investor,” as that term is defined in Regulation D under the Securities Act, who has substantial financial resources and no need for liquidity in such investment, and who is able to bear the substantial economic risk of such investment for an indefinite period of time. See “Financial Suitability.” The Units are subject to restrictions on transferability and resale and may not be transferred or resold except as permitted under the Securities Act and applicable state securities laws, pursuant to registration or exemption therefrom. The Offering may be withdrawn, cancelled, modified or terminated at any time by the Company and is specifically made subject to the conditions described herein. The Company reserves the right, in its sole discretion, to accept or reject any subscription, in whole or in part, or to allot to any prospective investor less than the dollar amount of Units subscribed for by such prospective investor. This Memorandum does not constitute an offer to sell or a solicitation of an offer to buy any of the Units to any person in any jurisdiction in which such offer or solicitation would be unauthorized or unlawful. This Memorandum is furnished on a confidential basis. This Memorandum constitutes an offer only to the person to whom it is delivered by the Company (the “Offeree”) and is provided to the Offeree solely for the purpose of evaluating an investment in the Units. By accepting delivery of this Memorandum and receiving any other oral or written information provided by the Company in connection with this Offering, the Offeree agrees (a) to keep confidential the contents of this Memorandum and such other information and not to disclose the same to any third party or otherwise use the same for any purpose other than evaluating an investment in the Units, (b) not to copy, in whole or in part, this Memorandum or any other written information provided by the Company in connection herewith and (c) to return this Memorandum and any such written information to the Company in the event that (i) the Offeree does not subscribe to purchase any Units, (ii) no portion of the Offeree’s subscription is accepted or (iii) this Offering is terminated or withdrawn. Neither the delivery of this Memorandum nor any sales of the Units shall, under any circumstances, create any implication that there has been no change in the affairs of the Company since the date hereof or that the information contained herein is correct as of any time subsequent to the date hereof. Confidential Offering Memorandum -3 -
Slide 5: Although the Company believes that this Memorandum contains a full summary of the material terms of all documents purported to be summarized herein, reference is hereby made to the actual documents for complete information concerning the rights and obligations of the parties thereto. Copies of such documents are available upon request from the Company and all such summaries are qualified in their entirety by reference thereto. Officers of the Company are available to each prospective investor and any representative thereof to answer questions concerning the terms and conditions of the Offering contemplated hereby and to furnish any additional information, to the extent that they possess or can acquire such additional information without unreasonable effort or expense, necessary to verify the accuracy of the information set forth herein. Prospective investors are not to construe the contents of this Memorandum as legal, tax or investment advice. Each prospective investor should consult with his or her own attorney, accountant or business advisor as to the legal, tax and related matters concerning an investment in the Units and its suitability for such prospective investor. This Memorandum has been prepared solely for the purpose of the proposed private placement of the Units. Distribution of this Memorandum to any person other than such prospective investor and those persons, if any, retained to advise such purchaser with respect thereto is unauthorized, and any divulgence of any of its contents, without the prior written consent of the Company, is prohibited. Confidential Offering Memorandum -4 -
Slide 6: FORWARD LOOKING STATEMENTS Some of the statements in this Memorandum constitute forward-looking statements. These statements relate to future events or the Company’s future financial performance. In some cases, you can identify forwardlooking statements by terminology such as “may,” “will,” “should,” “could,” “expects,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of such terms and other comparable terminology. These statements involve known and unknown risks, uncertainties and other factors that may cause Triad’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Although Triad believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, levels of activity, performance or achievements. Confidential Offering Memorandum -5 -
Slide 7: TERMS OF THE OFFERING The Offering The Company is hereby offering up to 5,200,000 Units of Series B Preferred LLC Units (the “Units”). All of the Units are being sold by the Company at $1.00 per unit. Investors must subscribe for a minimum purchase of $100,000, although Triad reserves the right to accept a subscription for less than the minimum purchase amount, in its sole discretion. The Offering will not close, and the Units will not be sold, unless (1) checks or other immediately available funds in the minimum aggregate amount of $100,000 have been delivered by the investors and (2) all conditions of the Closing have been satisfied. The Offering is made only to investors who satisfy the suitability standards described below (including qualification as an “accredited” investor under Securities and Exchange Commission rules). Financial Suitability Purchase of the Units is suitable only for investors of adequate financial means who have no need for liquidity with respect to this investment. The Units will be sold only to investors who: (1) are “accredited investors,” as defined in Securities and Exchange Commission Rule 501; (2) represent that they are acquiring the Units for their own account, for investment only, and not with a view toward the resale or distribution thereof; (3) represent that they are aware that their transfer rights are restricted by applicable federal and state securities laws and by the absence of a market for the Units; and (4) have, in the opinion of the Company, such knowledge and experience in business and financial matters that, together with their advisors, if any, they are capable of evaluating the merits and risks of this investment. Investors will be required to meet the additional suitability conditions, if any, imposed by the jurisdictions in which the Units are sold. Purchaser Representative Any person intending to act as a purchaser representative (as that term is defined in Securities and Exchange Commission Rule 501) of a potential investor in the Units for the purpose of evaluating the merits and risks of the prospective investment offered hereby is required to: (1) promptly advise the Company of such representation; (2) receive a written acknowledgment from the investor that such person is the investor’s purchaser representative in connection with evaluating the merits and risks of the prospective investment in the Units (and to forward copies thereof to the Company); and (3) provide the investor with written disclosure, dated prior to the written acknowledgment described above, of all material relationships between the purchaser representative and its affiliates (as defined in Securities and Exchange Commission Rule 501), and the Company and its affiliates that presently exist, or are mutually contemplated, or that have existed at any time within the past two years, together with any compensation received or to be received as the result of such relationships (and to forward copies thereof to the Company). The Company will be required to deliver to the investor a similar written disclosure statement. Confidential Offering Memorandum -6 -
Slide 8: How to Subscribe To subscribe for the Units offered hereby, each prospective investor will be required to follow the procedures outlined below: 1. Investor Qualification Questionnaire. In order to permit the Company to comply with applicable state and federal securities laws, prospective investors must, immediately upon receipt of this Memorandum, complete and sign the Investor Qualification Questionnaire accompanying this Memorandum and return it to the Company. Subscription Agreements. In order to subscribe for the Units, each prospective investor who meets the suitability standards will be required to complete, execute and deliver the Subscription Agreement accompanying this Memorandum and W-9 Request for Taxpayer Identificaiton Number, together with a check in the amount of the total purchase price of the Units subscribed for, made payable to “Triad Resorts, LLC”, the Subscription Agreement and the check shall be delivered to Triad Resorts, LLC, 22525 SE 64th Place, Suite 251, Issaquah, WA 98027. 2. Plan of Distribution The Units will be distributed directly by the Company upon full execution of the Subscription Agreement. Confidential Offering Memorandum -7 -
Slide 9: SUMMARY OF PROPOSED TERMS Title of Securities: Securities Offered: Series B Preferred LLC Units (the “Units”) Up to 5,200,000 Series B Preferred LLC Units of the Company, representing, if fully subscribed, approximately 25% of the equity interest in the Company on a fully-diluted basis. $1.00 per unit (the “Offering Price”). $5,200,000 $100,000 In the event of any liquidation, dissolution or winding up of the Company, the holders of the Units will be entitled to receive in preference to the holders of Common units and Series A Preferred units. A sale, conveyance or other disposition of all or substantially all of the property or business of the Company, or a merger or consolidation with or into any other corporation (collectively, an “Acquisition” of the Company), other than (i) a consolidation with a wholly-owned subsidiary of the Company; (ii) a merger effected exclusively to change the domicile of the Company, or (iii) an equity financing in which the Company is the surviving corporation, will be deemed to be a liquidation for purposes of the liquidation preference. Unit ownership is non-dilutive unless otherwise agreed to by a majority in interest of the members. The holder of the Units will be entitled to voting rights. The Units will be offered and sold only to accredited investors (as defined in Rule 501 under the Securities Act of 1933, as amended). Offering Price: Maximum Offering: Minimum Offering: Liquidation Preference: Antidilution Provisions: Voting Rights: Form of Offering: Availability of Company Representative Patrick Howard, Managing Member of Triad Resorts, is available for the purposes of answering questions concerning the terms and conditions of this Offering and to provide any reasonably available information necessary to verify the accuracy of the information provided in the Offering materials. Mr. Howard may be contacted at 425.557.5980. His address is 22525 SE 64th Place, Suite 251, Issaquah, Washington 98027. Confidential Offering Memorandum -8 -
Slide 10: RISK FACTORS The purchase of the Units involves a number of significant risks. In addition to general investment risks enumerated elsewhere in this Memorandum, prospective investors should carefully consider the following risks. The following is not intended, and should not be relied upon, as an exhaustive list of all risks involved in an investment in the Company. The Forecasted Financial Statements Contained in This Memorandum Are Based upon Assumptions and May Prove Inaccurate The forecast financial statements prepared by the Company are included in the Strategic Business Plan, which is part of this Memorandum. Although the Company believes the assumptions upon which such forecasts are based are reasonable, there can be no assurance that such forecasts will ultimately prove to be correct or attainable. If any or all such assumptions prove to be incorrect, actual revenues may be substantially lower than those forecasted, or they may be realized later than forecast. In addition, operating expenses and the cost of acquiring fixed assets may be substantially higher than the amounts assumed by the forecasted financial statements. Triad May Fail to Meet Some or All of Its Objectives if It Is Not Able to Sell All Units in This Offering If this Offering is not fully subscribed, it will increase the risk that the Company will be unable to achieve some or all of its business goals as set forth in the Memorandum, including in the “Use of Proceeds” section. In that event, Triad will need to consider raising additional capital earlier than it would otherwise, thereby increasing risks to the business, and risks that the financing will not be available at all, or available on unfavorable terms. The Offering Price of The Units Was Based on Many Factors Not Related to Asset Value, Book Value or Results of Past Operations The offering price of the Units was determined by the Company based on a variety of factors and may not bear any direct relationship to the assets, results of operations, or book value of the Company, or to any other historically-based criteria of value. In determining such price, consideration was given to, among other things, the Company’s prospects and earnings potential, its management and the risks associated with an investment in the Units. Additionally, consideration was given to the general status of the economy, the history and prospects of the secure communications software industry, along with other relevant factors. Because There Is No Public Market for The Units, An Investor Should Be Prepared to Bear The Economic Risks of The Investment for An Indefinite Period of Time The Units are not registered under the Securities Act of 1933, as amended, or any state securities laws, and may not be resold unless such sales are subsequently registered thereunder or an exemption from such registration is available. Although the Company may, in the future, offer its securities to the public, it is not currently anticipated that any public market for the Units will develop. Consequently, shareholders may not be able to liquidate their investments for an indefinite period of time. In addition, an investor should be able to withstand a total loss of its investment. Confidential Offering Memorandum -9 -
Slide 11: The Loss of The Services of Key Principals Could Adversely Affect The Company’s Prospects To a significant degree the Company’s success will depend on its ability to retain the services of its key Principals. While the Company has begun to develop a comprehensive succession plan that will include the addition of key personnel and the Company securing “key person” insurance, the loss of Triad’s Principals for any reason may have an adverse material impact on the Company’s long-term business, results, and prospects. Confidential Offering Memorandum - 10 -
Slide 12: PRE AND POST OFFERING CAPITALIZATION The table below identifies voting unit holder categories of the Company, the number of units owned by each such unit holder category, and the corresponding percentage ownership of such unit holder category (A) prior to the Offering, and (B) after the Offering. Name Existing Unit Holders Founders Series A Preferred LLC Subtotal Series B Preferred LLC Offering Total Number of Units Pre-Offering Ownership Percentage Ownership Percentage After Offering 18,000,000 2,959,000 20,959,000 85.88% 14.12% 100.00% 60.88% 14.12% 75.00% 5,200,000 100.00% 25.00% 100.00% Confidential Offering Memorandum - 11 -
Slide 13: USE OF PROCEEDS Assuming the Maximum Amount is raised, the Company intends to use the funds for the following activities and purposes: (1) Development, engineering, and design; (2) Real estate considerations; (3) Commissioning of market studies for lenders; and (4) Working capital. A per dollar breakdown is set forth in the table below. Design, Development, Engineering and Licensing Real Estate Considerations Market Studies for Lenders Working Capital Preferred A Dividend Total $1,550,000 $2,800,000 $100,000 $300,000 $450,000 $5,200,000 Confidential Offering Memorandum - 12 -
Slide 14: STRATEGIC BUSINESS PLAN January 1, 2009 Triad Resorts, LLC 22525 SE 64th Place, Suite 251 Issaquah, Washington 98027 tel 425.557.5980 fax 425.557.5981 www.TriadResorts.com Confidential Offering Memorandum - 13 -
Slide 15: IMPORTANT INFORMATION This Strategic Business Plan is provided for purposes of information and evaluation only. It does not constitute an offer to sell, or a solicitation of offers to buy, securities or any other interest in the Company. Any such offering will be made only by appropriate documents and in accordance with applicable State and Federal laws. The information contained in this document is absolutely confidential and is intended only for persons to whom it is transmitted by the Company. Any reproduction of this document, in whole or in part, or the divulgence of any of its contents, without the prior written consent of the Company, is expressly prohibited. The Company believes the information set forth herein to be reliable. It must be recognized, however, that predictions and forecasts regarding the Company’s future performance are necessarily subject to a high degree of uncertainty. Therefore, no warranty of such forecasts is expressed or implied. If you desire additional information regarding Triad Resorts, LLC, please contact: Patrick J. Howard Managing Member phoward@triadresorts.com Triad Resorts, LLC 22525 SE 64th Place, Suite 251 Issaquah, Washington 98027 tel 425.557.5980 fax 425.557.5981 Confidential Offering Memorandum - 14 -
Slide 16: EXECUTIVE SUMMARY The Company Triad Resorts, LLC, a Nevada limited liability company (“Triad” or the “Company”), was formed in 2005 for the purpose of developing major entertainment and hospitality centers in destination resort cities throughout the Western U.S. and select international markets. The Company’s mission is to bring sustainable economic stimulus to destination communities through socially responsible and eco-friendly themed resort developments. The Company’s initial Project, the Spanish Bit Resort & Casino, is currently under development in Jackpot, Nevada (the “Project”), with additional projects under review by the Company that will further its mission and business goals. Management Team Triad is managed by its two (2) Managing Members, Hari Ghadia and Patrick Howard, along with a stable of highly experienced professionals who have the skills to provide a direct and meaningful impact to the required stages of development and operations for the Company. Their combined experience includes Wall Street, economic development, project finance, hotel management, technology, and operations, to civil engineering and construction. Spanish Bit Resort & Casino Currently under development in the Nevada border town of Jackpot, situated on the Idaho/Nevada border, the Spanish Bit Resort & Casino (the “Spanish Bit”) will feature 600 rooms in a triad of four or more story buildings, a full-scale casino, a full service spa, retail shopping, restaurants, an indoor events center (hosting roping, rodeo, equestrian events, trade shows, poker tournaments, concerts, etc.), an indoor waterpark, and an outfitters station to coordinate outdoor recreational activities, among other features. The Spanish Bit will be a state of the art development built on green and sustainable practices, utilizing solar, wind, and other energy efficiencies. Triad currently owns 113 acres of land in Jackpot, Nevada. This land has been zoned, with entitlements in place, for the development of what will be the flagship family destination property for Jackpot, Elko County, and the entire region, servicing Southern Idaho, Northeastern Nevada, and Northwestern Utah. The Company has received its grading permits and plans to begin grading by spring 2009. Triad will lead its construction with the resort rooms and casino to generate operating cash flow within 12 months of construction start and will immediately follow with the completion of the indoor events center and then waterpark amenities. While Management believes the project feasibility studies will support the full construction of the planned project, in the event lenders opt for phasing the build-out, the Company will expect to phase the project as follows: • • Phase I – 200 hotel rooms and atrium, casino, 100 employee apartments, spa, outdoor events center, and all infrastructure. [Expected Cost = $80MM] Phase II – 400 hotel rooms, casino, indoor events center, and indoor waterpark. [Expected Cost = $70MM] Confidential Offering Memorandum - 15 -
Slide 17: Triad has also gained site control of two parcels of land comprising 81 acres in Jackpot that will be used for employee housing (30 acres) and for future commercial retail development (51 acres). The Company has also gained control over a local gravel pit for construction needs and has secured 33 acres in Montpelier, ID for a modular building production plant that will be utilized for the hotel and employee housing components of the project, as well as for a potential eco-friendly lodging line consideration, to be branded EcoStay, currently under review. The Market The Town of Jackpot has been an active gaming destination since the mid-1950’s and continues to be the leading gaming center for Southern Idaho with over an average daily traffic count exceeding 4,600 travelers passing through town on U.S. Highway 93, which runs from Canada to Mexico and is the main connector between U.S. Interstates 80 and 84. Jackpot is governed by Elko County and is home to 5 gaming properties, including the $1.0 billion public company Ameristar Casinos (NASDAQ: ASCA), whose properties date back to Jackpot’s beginning in 1954. Operating in a virtual monopoly in Jackpot, Ameristar is currently capturing 25% of the total Elko County gaming win revenues solely from its operations in Jackpot. Jackpot has a total of 6 lodging facilities with approximately 770 rooms that service a geographic base of over 3.5 million people within a 4 hour driving radius (excluding daily traffic), making for a larger market demographic than the entire Colorado gaming market, in comparison. Jackpot has adequate water and sewer capacity to build out its infrastructure and services, so as to capture its full potential such as other successful Nevada border towns like West Wendover, Laughlin, and Mesquite. Return on Investment & Timing of Return Management expects investors to realize a return nearly five (5) times their initial investment over a five (5) year period from project operations (with no sale) and over ten (10) times their initial investment if the Project is sold at the end of five (5) years; the cumulative average annual returns on investment are projected at near 70% and 195% respectively, over the same period. It is possible that the Company will accelerate this schedule by accepting an offer to purchase the resort either during construction or upon completion. This is a reasonable assumption given the fact that the Company has already received inquiries from interested parties for a purchase as noted above, which also substantiates the current entitled value. Furthermore, the projected returns are related to the Spanish Bit alone and do not include associated projects in and around the Spanish Bit and Jackpot, NV, including but not limited to the EcoStay franchise of environmentally friendly lodging facilities, various economic development opportunities including affordable and workforce housing, and Triad’s planned modular building plant in Montpellier, Idaho. The Opportunity Triad Resorts, LLC is seeking to raise $5.2MM in Series B Preferred LLC units of the Company (the “Units”) to further advance its $150MM destination resort development project in Jackpot, Nevada – the Spanish Bit Resort & Casino – and to accelerate its other plans as deemed prudent by Triad’s Management. This is a unique opportunity to participate in the investment benefits of becoming the dominant player in an already proven Elko County market where gaming win revenues currently exceed $300 million annually, with growth exceeding 11% annually, and where there is a proven need for a new destination resort in the town of Jackpot to serve the rapid regional growth that now boasts in excess of 3.5 million people. Management will pursue and execute the growth and exit strategies most advantageous to the Company and its Members. Triad is well positioned for success and to achieve the greatest possible return on investment for its investors. Confidential Offering Memorandum - 16 -
Slide 18: TRIAD RESORTS The Company: Triad Resorts, LLC, a Nevada limited liability company (“Triad” or the “Company”) was formed in 2005 to develop responsibly themed, family oriented recreational resorts and affordable lodging centers in destination markets throughout the Western U.S. and in select international locations that feature amenities with indoor facilities for year round activity. The Company’s mission is to bring sustainable economic stimulus to communities through socially responsible developments that are predicated on eco-conscience and green building practices. The Company’s initial Project, defined below under the section “Spanish Bit Resort & Casino”, is planned for Jackpot, in Elko County, Nevada (the “Project”), with additional projects under review by the Company that will further add to its core mission and values. Triad’s vision of developing themed resorts in remote destination locations such as Jackpot is predicated upon building sustainable economic stimulus within communities through development and tourism, thereby providing new jobs and opportunities previously unavailable. Triad’s vision is carefully calculated and focused on bringing together and integrating entertainment components that are suitable to targeted locations as well as being unavailable elsewhere. Triad's Built Green program signifies the Company's absolute commitment to economic and community development, sustainability, and building green that is established based on Leadership in Energy and Environmental Design (LEED) certification guidelines (see Appendix F – Leadership in Energy and Environmental Design) on all projects; LEED is a program established by the US Green Building Council (USGBC). In connection with this commitment, the Company works with destination communities to promote clean and renewable energy, be it via wind, solar, geothermal, or whatever other resources available. Triad is managed by its two (2) Managing Members, Hari Ghadia as CEO, and Patrick Howard as President/COO, along with a stable of highly experienced professionals who have the skills to provide a direct and meaningful impact to the required stages of development and operations for the Company (see Appendix A – Management). Mr. Ghadia and Mr. Howard have diversified and complementary backgrounds. Mr. Ghadia has extensive experience in hospitality and technology and has held numerous CXO level within numerous public and private organizations. Mr. Howard is a Wall Street veteran whose vast experience and expertise include both economic development and energy project finance. Geneva Mingee, whose background includes previous employment with Ameristar Casinos, handles community relations for the Company and is based in Jackpot, NV. To date, the Company has raised $1.635MM from issuance of its Series A Preferred LLC units, representing 14.12% of the outstanding units of the Company, for startup, pre-development, and syndication of the Company. The Company is now currently in development of its initial project and flagship, the Spanish Bit Resort & Casino, and other projects directly or indirectly related to the Spanish Bit. Vision: Management: Financing: Confidential Offering Memorandum - 17 -
Slide 19: THE SPANISH BIT RESORT & CASINO The Project: The Spanish Bit Resort & Casino (“Spanish Bit” or the “Project”) is expected to cost approximately $150MM. The Project, located on 113 acres of land in Jackpot, Nevada, will consist of the following: • • • • • • 600 room resort hotel (including potential for sales of 100 quarter-share ownership fractional vacation home units). 90,000 square feet (sf) casino building. 30,000 sf for restaurants, retail, luxury spa, wedding chapel, and outfitters station. 120,000 sf indoor events center facility that will entertainment, roping, rodeos, concerts, poker tournaments, tradeshows, and other events. 40,000 sf indoor waterpark and arcade. Off-sites, energy sources, transportation, and housing. The Company’s property is located within the unincorporated City limits of Jackpot, Elko County, Nevada, a highly popular resort and gaming town located in Northeastern Nevada along the Nevada-Idaho border. This state-of-the-art Project is expected to be the largest such facility in the High Desert Area of Northern Nevada and Southern Idaho; an area with a growing regional population base that is currently in excess of 3.5 million people and with a growing base exceeding $300MM in gaming win revenues, leading the state in gaming growth, as reported by the Nevada Gaming Control Board in 2007. The Company purchased 113 acres in August 2005 after receiving the necessary zoning changes, commenced preliminary site work for soils tests in the fall of 2006, and received its grading permits in the fall of 2007. Currently the Company is on schedule to commence grading in the spring of 2009, with full-scale construction to also begin in 2009. Management expects commencement of operations in 2010, with full project completion by 2011. Design site plans are completed for the Project and incorporate a myriad of sustainable building processes, and the use of renewable energy sources, including geothermal, solar, and wind power. The Company has demonstrated its commitment to the overall economic development of Jackpot by supporting a revised Town Master Plan that addresses zoning and future growth for the community, a commitment to build “green” and to provide energy efficiencies through wind energy that will benefit the entire community. The Company has also advanced on providing for such growth by optioning additional land for building workforce housing (30 acres) and for commercial development (51 acres) that is vital for community sustainability on all levels. To further support Jackpot’s future, the Company has created a local advocacy group, the Friends of Jackpot (www.friendsofjackpot.org), in order to facilitate this process and provide a structure for bringing public-private partnerships to Jackpot that will have the community’s best interests at heart. Among other initiatives, Confidential Offering Memorandum - 18 -
Slide 20: this includes pursuing incorporation of Jackpot as an independent City as currently Jackpot is governed by Elko County. The initial response to these initiatives and the Friends of Jackpot have been and continue to be extremely positive. Project Components: The resort hotel, will include up to 600 rooms in a triad of four or more story buildings. The total all-in cost for the resort hotel is estimated at $51MM based on approximately 290,000 total square feet at $176 per square foot cost, including finishing. The hotel rooms will meet the standards of a high quality resort targeting the “middle market” of vacationers in the region. While the Company has received zoning approval to permit a condo-hotel, it will initially lead with full construction as only a hotel to generate cash flow and traffic to the project. Once the hotel and casino are complete and operating, the Company may opt to offer the sale of 100 two-bedroom lock-out rooms as quarter ownership fractional vacation home units. The casino will be operated by an experienced management group (as selected by the Company) for application of a Nevada Class A Operators License for the Project. This operator must be in good standing and approved by the Nevada Gaming Authorities. The Company may opt to sell the casino to the operator in order to comply with Nevada Gaming Authority concerning ownership licensing laws. The casino is expected to be equipped with poker and other table games, 1,400 slot machines, a sports book, and more. Poker rooms, membership status and other amenities will also be featured. The total all-in cost for the casino is estimated at $20.3MM based on 90,000 total square feet at $226 per square foot shell cost. The Company expects the casino management group to design and equip the casino to their specifications at an additional cost. Initial discussions have already occurred with public gaming companies Monarch Casinos, Inc. (NASDAQ: MCRI) and Nevada Gold and Casinos (AMEX: UWN), among others, who have expressed an interest in the Company and Project. Upon selection of the Company’s gaming partner, licensing efforts will commence. Management expects this process to take approximately ten (10) months to complete. Supplementing the casino will be restaurants, entertainment venues, a full spa, and select retail outlets, which will include four (4) restaurants and bars, various retail and gift ships, full-service luxury spa, wedding chapel, and outriggers stations which will coordinate all guest related outdoors activities. The total all-in cost for the indoor restaurant, retail, and spa is estimated at $6.6MM based on 30,000 total square feet at $220 per square foot cost, including finishing. While the spa and wedding chapel will be physically separated from the hotel and casino, the remainder will be located with the atrium hotel entry and casino. The indoor events center will feature a fabric membrane facility design and seat up to a total of 5,000 spectators, with a state-of-the-art design that mobilizes spectators based on the respective event, for optimum viewing and maximum use configurations. The events center will host major events such as rodeo, roping, motocross, concerts, trade shows, poker tournaments, and more. For horse and stock events a practice arena and sufficient storage capacity, including 200+ stalls, will exist for visitors and contestants to border their horses, equipment and trailers. A concessions area and restrooms will be located within the events center. Events will be arranged and promoted by professionals, and will seek to target families and amateur rodeo athletes, including collegiate, who are active in Confidential Offering Memorandum - 19 -
Slide 21: the competitive circuits. The indoor events center will feature state-of-the-art video and broadcasting technologies that will provide the ability to sell event content through various media channels. While Management believes this potential broadcasting and content to eventually become a significant revenue generator for the Project, it is not currently included in the proformas. However, upon completion of the project feasibility studies, the indoor event center broadcasting and content profit center will be fully defined and included in the pro formas. The total all-in cost for the entire events center facilities is estimated at $17.3MM based on 120,000 total square feet at $144 per square foot cost, including finishing. The indoor waterpark is being designed as a lightweight concrete dome building, with features based upon successful indoor waterparks in Wisconsin and Ohio. Indoor waterparks have nearly doubled hotel occupancy rates in these selected markets and have established them as year-round destination resorts. The indoor waterpark is being designed to include 10 waterslides, four pools, a water-based fun center for younger children, an interactive obstacle course with over 70 guest activated water-effects, all maintained at a comfortable temperatures heated by solar and/or geothermal resources, plus an arcade featuring the latest in gaming technologies. Average daily occupancy is expected at 245 persons. The total allin cost for the indoor waterpark is estimated at $15MM based on 40,000 total square feet at $375 per square foot cost, including finishing. The off-sites, energy sources, transportation, housing and other shared cost components to the Project’s development aggregate to approximately $39.8MM. As mentioned above, the Company is pursuing additional real estate acquisitions in Jackpot to use for construction worker and employee housing (300 multi-family apartment units), employee daycare services, and for commercial retail development. Finally, the Company is working with its local advocacy group, The Friends of Jackpot, to address infrastructure, housing, and energy issues for the entire town and to secure its future growth. Property Description: Triad currently owns 113 acres of land in Jackpot, Nevada. This land has been zoned, with entitlements in place for the development of what will be the flagship family destination property for Jackpot, Elko County, and the region. The Company has received its grading permits and plans to begin grading by late fall 2008. The Company will phase construction, leading with the resort rooms and casino to generate operating cash flow within twelve (12) months of commencing construction of the facilities and will immediately follow with the completion of the indoor events center and waterpark amenities. If the Company chooses to sell the 100 allotted rooms as quarter-share ownership vacation units, management expects purchasers to place their units in a hospitality rental pool to be managed by the Company. Triad has also gained site control of two parcels of land comprising 81 acres in Jackpot that will be used for employee housing (30 acres) and for the planned future commercial retail development (51 acres), and an additional 33 acres of land in Southeastern Idaho for a modular building plant. The 113 acres of land was purchased as agricultural land on August 31, 2005 and re-zoned by Elko County to C-2 Commercial on September 29, 2005, allowing for the full build-out of the Spanish Bit, as currently designed. The Company has Confidential Offering Memorandum - 20 -
Slide 22: since secured all required entitlements and has further received an upgrade to its zoning on July 18, 2008 to C-3 Commercial, allowing for increased heights for its building design and an increase to the overall value of the land. Furthermore, the Elko County Commissioners recently ratified a revision of the Town Master Plan for Jackpot that aligns itself with the Company’s plans for Jackpot. The property was most recently appraised as C-2 Commercial by Snyder Valuations MAI back in November 2007 with an as-is value of $2.83MM and with utilities to site, at $7.33MM. The additional 81 acres in Jackpot were appraised for a combined as-is value of $2.2MM. The completed value of the Spanish Bit is estimated at over $300MM (based on a multiple of 8 times EBITDA), with an expected all-in cost to build of approximately $150MM. The Company has received a letter of interest from a private party to purchase the completed project at value that substantiates the estimated completed value. The Company has yet to commit to this proposal as it continues to weigh all of its options. Project Status: The Company has completed soils tests, environmental, transportation and endangered species reports, all of which resulted in favorable findings for the Project. In addition, the Company has rezoned the site to C-3 Commercial from its previous C-2 Commercial in order to increase heights on the indoor events center and waterpark buildings; C-2 zoning limits heights to four (4) stories or 85 feet. As for off-sites, the Company’s engineers have filed a request for sewer and water services with the County, and the County has previously issued a Will-Serve Letter plus a draft Developer’s Agreement letter to the Company; these are currently being negotiated for final resolution. The Company has already received its grading permit from the County. The Company is pushing forward with its designs as well as with its Developer’s Agreement with the County. The Company is also proceeding towards the selection of its operating partners, gaming licenses, and construction financing. Grading is planned to commence by end of Spring 2009 to officially launch Triad’s construction of the Spanish Bit. Project Financing: The Company is seeking financing for the Project as follows: Development Financing – The Company is seeking $5.2MM through this Offering to further ready the Project for construction financing and/or sale. In connection with this equity raise, the Company will seek to obtain additional debt funding for the retirement of a small existing bank loan against the Company’s property and to close on the acquisition of the additional land currently held in escrow. Construction Financing - The Company anticipates the entire Project will cost approximately $150MM to construct and ready for operations. The Company plans to complete an equity offering via a Private Placement Memorandum (the “PPM”) of Spanish Bit Resorts, LLC, a Nevada limited liability company and wholly owned subsidiary of Triad Resorts, LLC. The Company anticipates to raise between $60MM and $80MM through the PPM based on an estimated total Project cost of $150MM; Triad has already received a bona fide interest from third party private investment groups. It is expected that the Project appraisals will demonstrate a completed valuation for the Project in excess of $300MM in year 3, in comparison Confidential Offering Memorandum - 21 -
Slide 23: to $150MM in total build-out costs. Construction funds are also expected to provide future liquidity for the Company’s initial Members. Expected Full Project Build-out Cost (in millions) Resort Hotel Casino Restaurant, Entertainment, Spa, and Retail Indoor Event Center Indoor Water Park Off-Sites, Housing, Energy, Etc. Total $51.0 $20.3 $6.6 $17.3 $15.0 $39.8 $150.0 Confidential Offering Memorandum - 22 -
Slide 24: THE OPPORTUNITY Jackpot, Nevada: Jackpot, Nevada (elevation 5,213 feet) is a quaint resort community located less than 1 mile from the Idaho border, in the high-desert area of Northeast Nevada approximately 45 miles south of Twin Falls, Idaho on U.S. Highway 93. It is conveniently located on a main corridor that connects U.S. Interstate 80 and U.S. Interstate 84, and is within 250 driving miles of the major growth markets of Boise and Salt Lake City (see Appendix B – Area Maps). Within a four (4) hour driving distance, there are over 3.5 million people. Since its founding, Jackpot has a been popular casino gaming destination for residents of Idaho and other neighboring States. Jackpot has a long and distinguished history in gaming and hospitality. After Idaho outlawed all forms of casino gaming in 1954, "Cactus Pete" Piersanti and Don French moved their slot machine operations from Idaho to the Jackpot townsite. Piersanti's and French's gaming establishments were named Cactus Pete's and the Horseshu Club respectively. Cactus Pete's management took over the Horseshu in 1964 to form what would eventually become today’s $1.05B publicly traded Ameristar Casinos, Inc. (NASDAQ: ASCA). The Ameristar-owned Cactus Pete's and Horseshu, as well as the independent Barton's Club 93 and the Four Jacks Casino, form the basis of the town's economy to this day. Jackpot has a permanent population of approximately 1,200, primarily servicing five casinos (approximately 1,600 slot machines and 50 table games) and six hotels (approximately 750 rooms); existing town infrastructure was designed for a population of 4,000 and Management anticipates the addition of 700 new jobs with the Project. The town features an abundance of outdoor recreational opportunities, including a municipal golf course, hunting, finishing, hiking, and horse back riding, to name a few. Jackpot is viewed as one of the last high-desert wilderness areas in the world with an untamed oasis of cattle and sheep country, fresh crystal clean air, vast unfenced ranges, pristine mountaintops and bountiful wildlife making it a perfect destination for the Spanish Bit Resort & Casino. The town has its own schools, golf course and post office. Due to its economic ties with Southern Idaho, particularly the Magic Valley region, Jackpot observes Mountain Time, (one of five locations), although it is officially, like the rest of Nevada other than West Wendover, in the Pacific Time Zone. The Market: The existing Jackpot establishments promote that they serve customers from Idaho, Oregon, Washington, Montana, Utah, Nevada, Northern California, and Southwestern Canadian provinces; this is confirmed in the financial audits of Ameristar Casinos, Inc., owner of local casino properties, Cactus Pete’s Resort Casino and Horseshu Casino. There has been no new region’s market area, growth to a population new investment by the resort development in Jackpot for over twenty years. The including Southern Idaho, has experienced significant of over 3.5 million, in the same period, with virtually no competition. The results for the five (5) casinos and six Confidential Offering Memorandum - 23 -
Slide 25: (6) six hotels in Jackpot, including the flagship Cactus Pete’s Resort Casino, have shown consistent growth and profits throughout the years. Ameristar Casinos alone has disclosed through public filings that it is generating net gaming revenues in excess of $75MM, EBITDA of $20MM on 14.5% revenue growth and 25% Earnings Before Tax Depreciation Amortization (EBITDA) margin. Net profits from its current Jackpot operations were reported in excess of $15MM for 2007. This has been accomplished with little or no marketing and with no recognizable physical improvements to its properties. In essence, Ameristar Casinos maintains a virtual monopoly or oligopoly position in Jackpot. The gaming win revenues for Jackpot are in excess of $100MM, as reported by the Nevada Gaming Commission, with much room for growing the market beyond this current performance. This is confirmed by seeing how the border town of West Wendover, on the Utah/Nevada border, also in Elko County, continues to expand its market base, as evidenced by Peppermill Casinos’ recent announced plans to build a $400MM “mini-Bellagio” resort casino. In addition, tribal casino operations in Idaho, Nevada and Utah have not had a material impact on the Jackpot gaming market as they are limited in their activity or precluded from gaming altogether; for instance, Idaho legislation limits tribal gaming activity to Video Lottery Terminals (VLTs) only, with the nearest property in Ft. Hall, ID, approximately 85 miles away and whose operation is lackluster at best. The Company expects to take significant market share away from those existing operations in Jackpot, as well as bring new business and new growth to the market, as it is the principal gaming and tourism area in the region. Jackpot Market – Gaming Properties Name City State Year Built Guest Rooms ADRs (Room Rate) Ownership Units RV Park Casino Floor (sf) Gaming Stations Slot Machines Table Games Poker Room Dining Facilities Bar/Lounge Facilities Spa Facilities Retail/Shopping Facilities Meeting Facilities Entertainment Entertainment Facility Hotel Swimming Pool Indoor Waterpark Facility Outfitter Facility Cactus Petes Jackpot NV 1956 301 $125.00 No Yes (90 spaces) 26,000 1,074 900 29 Yes 5 3 No Yes Yes Yes Outdoor Outdoor No No Horseshoe Jackpot NV 1954 118 $85.00 No No 3,377 155 119 6 No 1 1 No No No No No No No No Barton's 93 Jackpot NV 104 $95.00 No No 9,550 569 491 13 Yes 1 1 No No No No No No No No Four Jacks Jackpot NV 60 $85.00 No No 2,500 75 75 0 No 1 1 No No No No No No No West Star Jackpot NV 76 $65.00 No No 1,500 42 42 0 No 0 1 No No No No No No No 8 7 42,927 1,915 1,627 48 Total Jackpot NV 2006 659 $102.54 No Spanish Bit Jackpot NV 2008 600 $125.00 Yes No* 50,000 1,500 1,200 50 Yes 5 3 Yes Yes Yes Yes Indoor Outdoor Yes No No Yes * Phase II commercial and retail plans include RV facilities. Confidential Offering Memorandum - 24 -
Slide 26: Market Comparables: The Company has studied the region for opportunity and competition and feels strongly that Jackpot is on the verge of recapturing its place as the region’s leading destination location with gaming as the main attraction (like Sun Valley, Idaho or Park City, Utah for Skiing). The region’s population in excess of 3.5 million makes it stronger than the Denver, Colorado gaming market, which also has gaming limits where Nevada does not. Jackpot is accessible by auto via U.S. Highway 93 or via charter plane into Jackpot’s Hayden Field (062) with a 6,200 foot runway, which is equivalent to the runway in Jackson Hole, Wyoming, which accommodates 757 airplane models. The opportunity in Jackpot can be perhaps most easily understood when comparing it to that of West Wendover, Nevada, which is located in Elko County along Interstate 80 at the Nevada-Utah border, about 125 miles west of Salt Lake City, Utah. The comparison to West Wendover, which has a rapidly growing gaming market of over $200 million in annual gaming win revenues, confirms that Jackpot is undervalued as a market relative to its primary market population base in Southern Idaho; analogous to a stock market value play opportunity for a publicly traded company. Management believes that the West Wendover market demonstrates that there is ample demand for the Project and that there is an opportunity for growth even beyond the addition to the market of the Spanish Bit Resort & Casino. Jackpot Gaming Market Comps Jackpot State Year Built Guest Rooms Casino Floor (sf) Gaming Stations Slot Machines Table Games Primary Market Primary Mkt Population (PMP)* Stations / Guest Room Slots / Guest Room Tables / Guest Room Slots / (PMP / 1000) Rooms / (PMP / 1000) NV 2006 659 42,927 1,915 1,627 48 So. Idaho 1,300,000 2.91 2.47 0.07 1.25 0.51 West Wendover NV 2006 1,841 202,726 5,084 3,992 182 SLC, UT 1,500,000 2.76 2.17 0.10 2.66 1.23 Elko NV 2006 684 28,670 1,093 955 23 Elko, NV (I-80) 50,000 1.60 1.40 0.03 19.10 13.68 * The PMP Captures only the closest market base, as opposed to the entire region market base. Confidential Offering Memorandum - 25 -
Slide 27: Market Revenue Data Gaming Win Revenues Slots Games & Tables Total % of County Total Casino Revenues % of Total Revenues Non-Casino Revenues % of Total Revenue Ameristar 68,193,333 7,773,667 75,967,000 25.02% 84.52% 15.48% West Wendover 147,542,000 42,252,000 189,794,000 62.50% 74.80% 25.20% Other Elko 31,182,667 6,713,333 37,896,000 12.48% 60.10% 39.90% County Total 246,918,000 56,739,000 303,657,000 100.00% 68.20% 31.80% * Source: Nevada Gaming Control Board Performance proformas for the Spanish Bit, detailed in the Financial Information section of this Business Plan (see page 26), reflect gaming win revenues of $65,152,500, which would increase the overall Elko County win by 21.46%, assuming no reduction in other competitors totals. However, Management believes that the Spanish Bit will both increase Elko County’s win revenues by 20% plus take a significant market share from the local competition that will produce better performance than reflected in the proformas detailed herein. Marketing: The Company’s Management has completed internal reviews of the market opportunity associated with the Project, as previously described. The Company expects to further complete engineering, design, marketing and legal structure for the resort, and for securing the remaining equity and debt for the Project, or sale of the Project, as described herein. The Company is prepared to further its existing marketing program to 1) attract construction financing, and 2) to further generate interest in the region and build a “buzz” prior to opening. A scaled model replica of the Project master site plan was commissioned by the Company and gives an excellent view of what the finished resort property will look like (see Appendix D – Casino Model Design). The Company has registered the following web site domains and is working on launching new and revised content: Company Considerations: www.TriadResorts.com/net Resort Considerations: www.SpanishBitResort.com/net www.SpanishBitResorts.com/net www.TheSpanishBit.com/net www.SpanishBitCasino.com/net Community Advocacy www.FriendsOfJackpot.org/com/info Lodging Considerations: www.EcoStayMotel.com/net/us www.EcoStayHotel.com/net/us www.EcoStaySuites.com/net/us www.EcoStayLodging.com/net/us www.EcoSuitesMotel.com/net/us www.EcoSuitesHotel.com/net/us www.EcoSuitesLodging.com/net/us Modular Plant www.EcoBuiltModular.com Confidential Offering Memorandum - 26 -
Slide 28: The Company has also entered into a lease contract for a billboard display sign that currently sits along U.S. Highway 93 near Hollister, Idaho as illustrated below. Trademark and Brands: The Company has applied for and is in the process of securing the following consumer brands, in connection with its development roadmap: Spanish Bit Resort & Casino Jackpot Nevada Destination Resort Brand Type of Mark: Service Mark Serial: 77324708 EcoStay Motel Clean and Green Motel Franchise Type of Mark: Service Mark Serial: 77414667 Friends of Jackpot Community Advocacy Group Confidential Offering Memorandum - 27 -
Slide 29: FINANCIAL INFORMATION As demonstrated in the proforma below, Management expects investors to realize a return of over five (5) times their initial investment over a 5 year period from project operations (with no sale) and over ten (10) times their initial investment if the project is sold at the end of 5 years; the cumulative average annual returns on investment are projected near 70% and 195% respectively, over the same period. It is possible that the Company will accelerate this schedule by accepting an offer to purchase the resort either during construction or upon completion, which is a reasonable assumption given that the Company has already received such consideration. It is also important to note that the Forecasted Financials do NOT include any ancillary business opportunities and ventures that will be pursued in and around the development of the Project. Spanish Bit Proforma Year 1 INCOME Resort Hotel Casino, Restaurant, Retail, Spa Events Center Indoor Waterpark Other Sources TOTAL INCOME OPERATING PROFIT Resort Hotel Casino, Restaurant, Retail, Spa Events Center Indoor Waterpark Other Sources TOTAL EBITDA Interest, Taxes, Insurance, Amortization, & Capital Reserve TOTAL OPERATING PROFIT Dilution Factor, 40% PROFIT DISTRIBUTIONS, Fully Diluted SERIES B INVESTOR DISTRIBUTIONS NO SALE Scenario Series B, 10% of Diluted Project Profits SALE Scenario Series B, 10% of Diluted Project Profits SERIES B INVESTOR RETURNS Cumulative Avg. Annual ROI Fully Diluted Internal Rate of Return, Fully Diluted Return Multiple, Fully Diluted 1. 2. 3. 4. 5. Year 2 $18,767,862 $73,430,358 $7,661,700 $4,421,747 $6,346,620 $110,628,287 Year 3 $19,424,737 $85,395,276 $8,426,660 $4,940,116 $6,568,752 $124,755,541 Year 4 $20,104,603 $92,898,504 $8,721,593 $5,113,021 $6,798,658 $133,636,378 Year 5 $20,808,264 $101,084,184 $9,026,848 $5,291,976 $7,036,611 $143,247,883 $12,088,800 $62,360,250 $7,320,000 $4,375,438 $5,110,000 $91,254,488 $4,170,636 $13,928,674 $2,708,400 $1,400,140 $1,544,000 $23,751,850 ($8,312,703) $15,439,146 ($6,175,659) $9,263,488 $10,186,627 $21,371,602 $2,834,829 $1,414,959 $2,021,148 $37,829,166 ($13,477,832) $24,351,333 ($9,740,533) $14,610,800 $10,466,731 $27,294,251 $3,117,864 $1,580,837 $2,091,888 $44,551,571 ($14,217,297) $30,334,274 ($12,133,710) $18,200,565 $10,753,199 $31,426,494 $3,226,989 $1,636,167 $2,165,104 $49,207,953 ($14,729,499) $34,478,454 ($13,791,381) $20,687,072 $11,046,099 $36,018,597 $3,339,934 $1,693,432 $2,240,883 $54,338,945 ($15,293,908) $39,045,037 ($15,618,015) $23,427,022 $926,349 $926,349 NO SALE 69.0% 57.0% 4.5 $1,461,080 $1,461,080 SALE 194.8% 81.4% 10.7 $1,820,056 $1,820,056 $2,068,707 $2,068,707 $4,842,702 $20,578,278 This proforma table is a summary of a more comprehensive analysis (see Appendix G – Detailed Proforma). Proforma includes the Spanish Bit financial information only and is not reflective of any other Triad Resorts’ developments or opportunities. Proforma assumes $40MM Equity Raise and $60MM in debt in Year 0 and serviced at 9.5% over 10 years. Investor Distributions and Returns assume $2.5MM investment, a 10% profit share and 40% dilution over a 5 year operating period. A sale price in year 5 reflects a 15% capitalization rate of Year 5 EBITDA and repayment of entire project cost. Confidential Offering Memorandum - 28 -
Slide 30: Confidential Offering Memorandum - 29 -
Slide 31: APPENDIX A – MANAGEMENT Principals Hari Ghadia - Managing Member, CEO Mr. Ghadia was originally involved with Triad as an early stage investor and now currently serves as Chief Executive Officer of the Company. Mr. Ghadia is a seasoned high-tech professional with expertise in real estate development and management. Over his twenty (20) plus year professional career he has served Fortune 500 and other reputed high-tech companies at various executive and CXO levels. Mr. Ghadia is a Principal of Moteri management Co, a Seattle based company involved in Hotel / Motel development and management. Mr. Ghadia is also involved in many other companies in various fields including information technology, wind power, solar energy, telecommunications, real estate development, property management, and hospitality. As Technology Strategy Officer at Adaptec (NASDAQ: ADPT), Mr. Ghadia led all business strategy and M&A activities and made numerous successful deals on behalf of the Company. Prior to Adaptec, Mr. Ghadia held Engineering VP and GM level positions at various companies and served on the Board of Directors. Mr. Ghadia is a well-regarded executive with strong technical, finance, real estate and business acumen. Mr. Ghadia is a serial entrepreneur with a solid reputation as a successful businessman. After completing his Electrical Engineering training in India, Mr. Ghadia expanded his engineering reach in the United States and has led a very successful career throughout. Patrick Howard - Founder, Managing Member, President & COO Mr. Howard is a Founder of the Company and serves as President and Chief Operating Officer. Mr. Howard is an experienced financial professional with significant real estate and development finance experience. Mr. Howard’s prior work experience includes: Standard & Poor’s Ratings Group, New York, NY; Cobalt Properties LLC, Seattle, WA; Seattle-Northwest Securities Corporation, Seattle, WA; Capital Access, LLC, Seattle, WA, as well as other consulting assignments for resorts and for a variety of early-stage companies located in the Seattle, WA area. Mr. Howard also serves as a Director for Disaster Preparedness Systems, Inc. and Global Building Systems, Inc. He is highly experienced in all phases of the financing and development process, and has worked within the following sectors: public finance, affordable housing, asset-backed securitizations, mortgage-backed securitizations, commercial real estate, resort projects, health care, higher education, utilities, renewable energy and project finance. A graduate of the University of San Francisco, where he served on the University Board of Governors as student body president, he also attended Washington University in St. Louis where he lettered in football. Mr. Howard has his Series 7, 53, and 63 Securities Licenses, and his Washington Real Estate Sales License. Mr. Howard has his private pilot’s license. Geneva Mingee, Director of Community Affairs Ms. Mingee is the Director of Community Affairs at Triad Resorts and is responsible for all Spanish Bit Resort related community relations and communications. Ms. Mingee has an extensive background in customer and guest services in the hospitality and related industries. Prior to joining the Company in 2006, Ms. Mingee held numerous Management and Administrative positions at Ameristar Casinos' Cactus Pete's and Stations Casino. Prior to that Ms. Mingee worked in customer service in the legal, telecom, and health care industries. Ms. Mingee is the current Chairman of the Board of the Friends of Jackpot, a not-for-profit Jackpot, Nevada advocacy organization, and volunteers at a number of other community service groups. Ms. Mingee currently holds her Nevada Real Estate License. Confidential Offering Memorandum - 30 -
Slide 32: Advisors Victor Woo –Resort Management Mr. Woo is General Manager of KSL Resorts at their Rancho Las Palmas Resort & Spa property in Rancho Mirage, California. Mr. Woo has also worked for KSL Resorts as Director of Sales and Marketing at the Hotel del Coronado in San Diego, California and as interim General Manager at the Claremont in Oakland, California. Mr. Woo has in depth expertise in all elements of the hospitality industry, including: sales, marketing, mergers & acquisitions, finance, management, condo hotels, food & beverage, labor negotiations, union issues, and more. William (“Bill”) Watts – Lead Architect Mr. Watts is the proprietor of Windward Design of San Diego, California. Mr. Watts will provide design and architectural services for the project. Mr. Watts spent 13 years with Sea World Park, retiring as a Director in 1988 where he was the principal design architect for Sea World of Texas. He has been a lecturer for USDA for training inspectors of marine parks, is the exclusive designer of Wet’n Wild Parks’ master plans since 1989, and is the founding Board Member of Colorado’s Ocean Journey Aquarium. Windward Design is an architectural corporation established for the express purpose of providing superior design services for aquatic life attractions and theme parks, and has been actively involved in projects throughout the world. Ramesh Rabadia – Hospitality Mr. Rabadia is an investor in Triad and currently serves on the Company’s Board. Mr. Rabadia is a hospitality industry veteran and has been involved in Hotel / Motel and restaurant businesses for over ten (10) years. He has proven track record of managing properties of various sizes / brands with multiple locations. He is a Principal at Moteri Management Co, a Seattle based property development and management Company renowned for it’s innovative management style and wide offering of services, including: operations, marketing, consulting, asset management, and investment. Mr. Rabadia’s business and expertise also include the areas of high-tech and telecom. Mr. Rabadia is a serial entrepreneur with a reputable track record. Prior to his personal business ventures, Mr. Rabadia held various engineering positions at various public and private information technology companies. Mr. Rabadia graduated with an Electrical Engineering degree from Bangalore, India and moved to the United States in 1993. David Stober - Member, Consultant Mr. Stober is a senior level executive with a broad range of skills and experience in finance, technology, and real estate and development. Mr. Stober has held a number of leadership positions with Aegis Technologies Group, including Interim Chief Executive Officer, Chief Financial Officer, corporate secretary and treasurer, and Manager of Aegis Building, where he lead the acquisition and management of a commercial office and retail building in downtown Seattle. Prior to Aegis, Mr. Stober held senior financial management positions with Excellular, Inc. and Syndeo Systems, Inc. Mr. Stober also serves as Managing Member of an early-stage investment firm Ineo, LLC and is a Director for Helpster, a start-up not-for-profit organization focused on linking causes, volunteers, and resources. Mr. Stober graduated with a BA in Finance Marketing Decisions Sciences from Western Washington University and a Masters in Business Administration from Seattle University. Confidential Offering Memorandum - 31 -
Slide 33: Professional Service Providers (subject to changes) Paul Ferrari, P.E. Ferrari Shields & Associates Reno, Nevada Ferron S. Konakis, P.E. Konakis Engineering LLC Elko, Nevada Michael Shanks, P.E. Shanks Engineering Elko, Nevada Mike Sheppard Michael Clay Corporation Winnemucca, Nevada Brandon Etchemendy, P.E. Aspen Enginering Reno, Nevada Donald Clark, AIA Cathexes LLC Reno, Nevada Alan Gallatin Construction Design Services, Inc. Reno, Nevada Scott Applegate Eco-Block, LLC Andover, Kansas Ramesh Rabadia Moteri Management Co. Seattle, Washington Travis Gerber, Esq. A. Grant Gerber and Associates Elko, Nevada Megan Moschetti, Esq. Hale Lane Peek Dennison and Howard Reno, Nevada Gary Longaker Nevada Rural Housing Authority Carson City, NV James Beavers Global Building Systems, Inc. Prescott, Arizona Ferrari provides consulting engineering services to Triad. structural and civil Konakis provides civil and water resources engineering services to Triad. Shanks provides general civil engineering services to Triad. Michael Clay provides General Contracting services to Triad. Aspen Engineering provides mechanical engineering services to Triad. Cathexes provides interior design services to Triad. Construction Design Services provides complete lighting and power systems design services to Triad. Eco-Block provides eco-friendly construction materials to Triad. Moteri provides hotel / motel management services and counsel to Triad. A. Grant Gerber and Associates handles all complex commercial transactions and business litigation for Triad. Hale Lane provides corporate, gaming, and securities counsel to Triad. Nevada Rural Housing Authority provides affordable and workforce housing services to Triad. GBSI to provide green building systems for Triad’s various building types. Confidential Offering Memorandum - 32 -
Slide 34: APPENDIX B – AREA MAPS Confidential Offering Memorandum - 33 -
Slide 35: Confidential Offering Memorandum - 34 -
Slide 36: APPENDIX C – SITE PLANS Spanish Bit Resort & Casino – 113.36 Acres Confidential Offering Memorandum - 35 -
Slide 37: Spanish Bit Employee Housing – 30.17 Acres Confidential Offering Memorandum - 36 -
Slide 38: Future Commercial & Retail – 51.8 Acres Confidential Offering Memorandum - 37 -
Slide 39: APPENDIX D – CASINO MODEL DESIGN Confidential Offering Memorandum - 38 -
Slide 40: APPENDIX E – JACKPOT View from 113 acres back to town Cactus Pete’s in Background Town of Jackpot from Fly Over View south 113 acres away from town Highway 93 in Background Spring view of Middlestack Mountain Range Confidential Offering Memorandum - 39 -
Slide 41: APPENDIX F – LEADERSHIP IN ENERGY AND ENVIRONMENTAL DESIGN (LEED) Leadership in Energy and Environmental Design (LEED) certification provides independent, third-party verification that a building project meets the highest green building and performance measures. All certified projects receive a LEED plaque, which is the nationally recognized symbol demonstrating that a building is environmentally responsible, profitable and a healthy place to live and work. • • • • • • • • • There are both environmental and financial benefits to earning LEED certification. LEED-certified buildings: Lower operating costs and increased asset value. Reduce waste sent to landfills. Conserve energy and water. Healthier and safer for occupants. Reduce harmful greenhouse gas emissions. Qualify for tax rebates, zoning allowances and other incentives in hundreds of cities. Demonstrate an owner's commitment to environmental stewardship and social responsibility. Eligibility Commercial buildings as defined by standard building codes are eligible for certification under the LEED for New Construction, LEED for Existing Buildings, LEED for Commercial Interiors, LEED for Retail, LEED for Schools and LEED for Core & Shell rating systems. Building types include – but are not limited to – offices, retail and service establishments, institutional buildings (e.g., libraries, schools, museums and religious institutions), hotels and residential buildings of four or more habitable stories. If you are unsure whether your building project is a candidate for LEED certification, review the LEED Rating System Checklist that applies to your project to tally a potential point total. Your project is a viable candidate for certification if it meets all prerequisites and can achieve the minimum number of points necessary to earn the Certified level. LEED Rating System The Leadership in Energy and Environmental Design (LEED) Green Building Rating System™ encourages and accelerates global adoption of sustainable green building and development practices through the creation and implementation of universally understood and accepted tools and performance criteria. LEED is the nationally accepted benchmark for the design, construction and operation of high performance green buildings. LEED gives building owners and operators the tools they need to have an immediate and measurable impact on their buildings’ performance. LEED promotes a whole-building approach to sustainability by recognizing performance in five key areas of human and environmental health: sustainable site development, water savings, energy efficiency, materials selection and indoor environmental quality. Confidential Offering Memorandum - 40 -
Slide 42: Who Uses LEED? Architects, real estate professionals, facility managers, engineers, interior designers, landscape architects, construction managers, lenders and government officials all use LEED to help transform the built environment to sustainability. State and local governments across the country are adopting LEED for public-owned and public-funded buildings; there are LEED initiatives in federal agencies, including the Departments of Defense, Agriculture, Energy, and State; and LEED projects are in progress in 41 different countries, including Canada, Brazil, Mexico and India. How is LEED Developed? LEED Rating Systems are developed through an open, consensus-based process led by LEED committees. Each volunteer committee is composed of a diverse group of practitioners and experts representing a crosssection of the building and construction industry. The key elements of USGBC's consensus process include a balanced and transparent committee structure, technical advisory groups that ensure scientific consistency and rigor, opportunities for stakeholder comment and review, member ballot of new rating systems, and a fair and open appeals process. www.USGBC.com Confidential Offering Memorandum - 41 -
Slide 43: APPENDIX G – DETAILED PROFORMA OPERATING UNITS Revenue Inflator Expense Inflator 1 Hotel Number of Rooms Occupancy Total Occupied Room Nights Average Daily Rate (ADR) Income Room Revenue (RevPar) Room Concessions (casino patrons, -20%) Food & Beverage ($25) Telecommunications ($3) Other Departments ($10) Total Income Expenses Rooms (8.5%) Food & Beverage (20.0%) Telecommunications (0.5%) Other Departments (6.5%) Administrative (9.0%) Marketing (5.0%) Utilities (3.0%) Maintenance (3.5%) Franchise Fees (5.0%) Management Fees (4.5%) Total Expenses (65.5%) EBITDA 1 3.50% 4.50% 2 3.50% 4.50% 3 3.50% 4.50% 4 3.50% 4.50% 5 3.50% 4.50% 600 40.0% 240 $125.00 $10,950,000.00 ($2,190,000.00) $2,190,000.00 $262,800.00 $876,000.00 $12,088,800.00 600 60.0% 360 $129.38 $16,999,875.00 ($3,399,975.00) $3,399,975.00 $407,997.00 $1,359,990.00 $18,767,862.00 600 60.0% 360 $133.90 $17,594,870.63 ($3,518,974.13) $3,518,974.13 $422,276.90 $1,407,589.65 $19,424,737.17 600 60.0% 360 $138.59 $18,210,691.10 ($3,642,138.22) $3,642,138.22 $437,056.59 $1,456,855.29 $20,104,602.97 600 60.0% 360 $143.44 $18,848,065.29 ($3,769,613.06) $3,769,613.06 $452,353.57 $1,507,845.22 $20,808,264.07 ($1,027,548.00) ($2,417,760.00) ($60,444.00) ($785,772.00) ($1,087,992.00) ($604,440.00) ($362,664.00) ($423,108.00) ($604,440.00) ($543,996.00) ($7,918,164.00) $4,170,636.00 ($1,073,787.66) ($2,526,559.20) ($63,163.98) ($821,131.74) ($1,136,951.64) ($631,639.80) ($378,983.88) ($442,147.86) ($938,393.10) ($568,475.82) ($8,581,234.68) $10,186,627.32 ($1,122,108.10) ($2,640,254.36) ($66,006.36) ($858,082.67) ($1,188,114.46) ($660,063.59) ($396,038.15) ($462,044.51) ($971,236.86) ($594,057.23) ($8,958,006.31) $10,466,730.86 ($1,172,602.97) ($2,759,065.81) ($68,976.65) ($896,696.39) ($1,241,579.61) ($689,766.45) ($413,859.87) ($482,836.52) ($1,005,230.15) ($620,789.81) ($9,351,404.22) $10,753,198.75 ($1,225,370.10) ($2,883,223.77) ($72,080.59) ($937,047.73) ($1,297,450.70) ($720,805.94) ($432,483.57) ($504,564.16) ($1,040,413.20) ($648,725.35) ($9,762,165.11) $11,046,098.96 2 Ownership Units 1/4 Share Inventory Available for Sale Total Number of Units (2BR Lock-out units) Occupancy Total Daily Occupied Room Nights Average Daily Rate 2BR (ADR) 400 0 0.0% 0 $145.00 400 0 0.0% 0 $150.08 80 0 0.0% 0 $155.33 20 0 0.0% 0 $160.76 20 0 0.0% 0 $166.39 3 Casino Number of Gaming Positions Occupancy Usage Total Occupied Gaming Positions Average Daily Position Win (ADPW) 1,700 60.0% 1,020 $150.00 1,700 65.0% 1,105 $163.95 1,700 70.0% 1,190 $179.20 1,700 70.0% 1,190 $195.86 1,700 70.0% 1,190 $214.08 Confidential Offering Memorandum - 42 -
Slide 44: Income Gaming WIN Revenues Spa Revenues ($150) Restaurant Revenues ($50) Entertainment Revenues ($25) Food & Beverage ($50) Other Revneues ($10) Total Income Expenses Personnel (15.0%) Gaming Tax & License (8.0%) Food & Beverage (20.0%) Telecommunications (0.5%) Other Departments (4.5%) Administrative (9.0%) Marketing (5.0%) Utilities (3.0%) Maintenance (3.5%) Franchise Fees (5.0%) Management Fees (5.0%) Total Expenses (78.5%) EBITDA ($9,354,037.50) ($4,467,600.00) ($12,472,050.00) ($311,801.25) ($2,806,211.25) ($5,612,422.50) ($3,118,012.50) ($1,870,807.50) ($2,182,608.75) ($3,118,012.50) ($3,118,012.50) ($48,431,576.25) $13,928,673.75 ($9,774,969.19) ($5,290,010.70) ($13,033,292.25) ($325,832.31) ($2,932,490.76) ($5,864,981.51) ($3,258,323.06) ($1,954,993.84) ($2,280,826.14) ($3,671,517.89) ($3,671,517.89) ($52,058,755.54) $21,371,602.28 ($10,214,842.80) ($6,226,749.52) ($13,619,790.40) ($340,494.76) ($3,064,452.84) ($6,128,905.68) ($3,404,947.60) ($2,042,968.56) ($2,383,463.32) ($4,269,763.79) ($6,404,645.69) ($58,101,024.97) $27,294,250.91 ($10,674,510.73) ($6,805,837.22) ($14,232,680.97) ($355,817.02) ($3,202,353.22) ($6,404,706.44) ($3,558,170.24) ($2,134,902.15) ($2,490,719.17) ($4,644,925.20) ($6,967,387.79) ($61,472,010.15) $31,426,493.79 ($11,154,863.71) ($7,438,780.08) ($14,873,151.61) ($371,828.79) ($3,346,459.11) ($6,692,918.23) ($3,718,287.90) ($2,230,972.74) ($2,602,801.53) ($5,054,209.18) ($7,581,313.77) ($65,065,586.66) $36,018,596.90 $55,845,000.00 $558,450.00 $2,792,250.00 $930,750.00 $1,861,500.00 $372,300.00 $62,360,250.00 $66,125,133.75 $626,162.06 $3,130,810.31 $1,043,603.44 $2,087,206.88 $417,441.38 $73,430,357.81 $77,834,368.97 $648,077.73 $3,240,388.67 $1,080,129.56 $2,160,259.12 $432,051.82 $85,395,275.88 $85,072,965.29 $670,760.46 $3,353,802.28 $1,117,934.09 $2,235,868.18 $447,173.64 $92,898,503.93 $92,984,751.06 $694,237.07 $3,471,185.36 $1,157,061.79 $2,314,123.57 $462,824.71 $101,084,183.56 4 Events Center Maximum Event Capacity Occupancy Average Event Occupancy Number of Events per Month Average Event Admission Rate (AEAR) Income Admission Sales Retail Sales ($20) Food & Beverage ($25) Other Revenues ($10) Total Income Expenses Personnel (20.0%) Cost of Goods Sold (15.0%) Administrative (9.0%) Marketing (5.0%) Utilities (6.0%) Maintenance (3.5%) Management Fees (4.5%) Total Expenses (63.0%) EBITDA ($1,464,000.00) ($1,098,000.00) ($658,800.00) ($366,000.00) ($439,200.00) ($256,200.00) ($329,400.00) ($4,611,600.00) $2,708,400.00 ($1,532,340.00) ($1,149,255.00) ($689,553.00) ($383,085.00) ($459,702.00) ($268,159.50) ($344,776.50) ($4,826,871.00) $2,834,829.00 ($1,685,331.90) ($1,263,998.93) ($758,399.36) ($421,332.98) ($505,599.57) ($294,933.08) ($379,199.68) ($5,308,795.49) $3,117,864.02 ($1,744,318.52) ($1,308,238.89) ($784,943.33) ($436,079.63) ($523,295.55) ($305,255.74) ($392,471.67) ($5,494,603.33) $3,226,989.26 ($1,805,369.66) ($1,354,027.25) ($812,416.35) ($451,342.42) ($541,610.90) ($315,939.69) ($406,208.17) ($5,686,914.44) $3,339,933.88 $3,360,000.00 $1,440,000.00 $1,800,000.00 $720,000.00 $7,320,000.00 $2,880,000.00 $1,738,800.00 $2,173,500.00 $869,400.00 $7,661,700.00 $3,477,600.00 $1,799,658.00 $2,249,572.50 $899,829.00 $8,426,659.50 $3,599,316.00 $1,862,646.03 $2,328,307.54 $931,323.02 $8,721,592.58 $3,725,292.06 $1,927,838.64 $2,409,798.30 $963,919.32 $9,026,848.32 5,000 30.0% 1,500 4 $40.00 5,000 35.0% 1,750 4 $41.40 5,000 35.0% 1,750 4 $42.85 5,000 35.0% 1,750 4 $44.35 5,000 35.0% 1,750 4 $45.90 Confidential Offering Memorandum - 43 -
Slide 45: 5 Waterpark Maximum Daily Capacity Occupancy Average Daily Occupancy Average Daily Admission Rate (ADAR) Income Admission Sales Retail Sales ($7.50) Food & Beverage ($15) Other Revenues ($2.50) Total Income Expenses Personnel (20.0%) Cost of Goods Sold (15.0%) Administrative (9.0%) Marketing (5.0%) Utilities (6.0%) Maintenance (8.5%) Management Fees (4.5%) Total Expenses (68.0%) EBITDA ($875,087.50) ($656,315.63) ($393,789.38) ($218,771.88) ($262,526.25) ($371,912.19) ($196,894.69) ($2,975,297.50) $1,400,140.00 ($884,349.38) ($663,262.03) ($397,957.22) ($221,087.34) ($265,304.81) ($375,848.48) ($198,978.61) ($3,006,787.88) $1,414,959.00 ($988,023.29) ($741,017.47) ($444,610.48) ($247,005.82) ($296,406.99) ($419,909.90) ($222,305.24) ($3,359,279.19) $1,580,837.27 ($1,022,604.11) ($766,953.08) ($460,171.85) ($255,651.03) ($306,781.23) ($434,606.74) ($230,085.92) ($3,476,853.96) $1,636,166.57 ($1,058,395.25) ($793,796.44) ($476,277.86) ($264,598.81) ($317,518.57) ($449,817.98) ($238,138.93) ($3,598,543.85) $1,693,432.40 $2,459,187.50 $574,875.00 $1,149,750.00 $191,625.00 $4,375,437.50 $2,107,875.00 $694,161.56 $1,388,323.13 $231,387.19 $4,421,746.88 $2,545,259.06 $718,457.22 $1,436,914.43 $239,485.74 $4,940,116.45 $2,634,343.13 $743,603.22 $1,487,206.44 $247,867.74 $5,113,020.53 $2,726,545.14 $769,629.33 $1,539,258.66 $256,543.11 $5,291,976.25 700 30.0% 210 $27.50 700 35.0% 245 $28.46 700 35.0% 245 $29.46 700 35.0% 245 $30.49 700 35.0% 245 $31.56 6 Other Maximum Daily Capacity Occupancy Average Daily Occupancy Average Daily Admission Rate (ADAR) Income Outrigger Revenues Renewable Energy Revenues Media Company Revenues ($200) All Other Revenues ($10) Total Income Expenses Personnel (20.0%) Cost of Goods Sold (15.0%) Animal Care Costs (9.8%) Administrative (9.0%) Marketing (5.0%) Utilities (3.0%) Maintenance (3.5%) Management Fees (4.5%) Total Expenses (69.8%) ($1,022,000.00) ($766,500.00) ($500,000.00) ($459,900.00) ($255,500.00) ($153,300.00) ($178,850.00) ($229,950.00) ($3,566,000.00) ($1,269,324.00) ($951,993.00) ($517,500.00) ($571,195.80) ($317,331.00) ($190,398.60) ($222,131.70) ($285,597.90) ($4,325,472.00) ($1,313,750.34) ($985,312.76) ($535,612.50) ($591,187.65) ($328,437.59) ($197,062.55) ($229,906.31) ($295,593.83) ($4,476,863.52) ($1,359,731.60) ($1,019,798.70) ($554,358.94) ($611,879.22) ($339,932.90) ($203,959.74) ($237,953.03) ($305,939.61) ($4,633,553.74) ($1,407,322.21) ($1,055,491.66) ($573,761.50) ($633,294.99) ($351,830.55) ($211,098.33) ($246,281.39) ($316,647.50) ($4,795,728.12) $1,277,500.00 $0.00 $3,650,000.00 $182,500.00 $5,110,000.00 $1,586,655.00 $0.00 $4,533,300.00 $226,665.00 $6,346,620.00 $1,642,187.93 $0.00 $4,691,965.50 $234,598.28 $6,568,751.70 $1,699,664.50 $0.00 $4,856,184.29 $242,809.21 $6,798,658.01 $1,759,152.76 $0.00 $5,026,150.74 $251,307.54 $7,036,611.04 200 25.0% 50 $70.00 200 30.0% 60 $72.45 200 30.0% 60 $74.99 200 30.0% 60 $77.61 200 30.0% 60 $80.33 Confidential Offering Memorandum - 44 -
Slide 46: EBITDA $1,544,000.00 $2,021,148.00 $2,091,888.18 $2,165,104.27 $2,240,882.92 7 TOTAL EBITDA $23,751,849.75 $37,829,165.60 $44,551,571.23 $49,207,952.62 $54,338,945.05 8 9 10 11 12 13 Interest (debt service) Taxes & Insurance (6.0%) Depreciation Amortization (loan principal) Capital Reserve (5.0%) TOTAL OPERATING PROFIT ($5,700,000.00) ($1,425,110.99) $0.00 $0.00 ($1,187,592.49) $15,439,146.28 ($5,700,000.00) ($2,269,749.94) $0.00 ($3,616,624.14) ($1,891,458.28) $24,351,333.24 ($5,356,420.71) ($2,673,094.27) $0.00 ($3,960,203.44) ($2,227,578.56) $30,334,274.25 ($4,980,201.38) ($2,952,477.16) $0.00 ($4,336,422.76) ($2,460,397.63) $34,478,453.69 ($4,568,241.22) ($3,260,336.70) $0.00 ($4,748,382.93) ($2,716,947.25) $39,045,036.95 Proforma Assumptions 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Operating Units reflects the various profit centers for the Spanish Bit Resort & Casino. Year 0 reflects start-up / construction period, with all costs being covered from Equity and Debt sources. Revenue and Expense Inflators are applied to income and expense line items in each Operating Unit. Hotel: Number of Rooms reflects total number of approximately 400sf fully furnished hotel rooms. Hotel: Occupancy percentage based on low end estimate of annual average occupancy. Hotel: Total Occupied Room Nights (TORN) is equal to Number of Rooms multiplied by Occupancy percentage and represents the number of rooms occupied in a given night. Hotel: Average Daily Room Rate (ADR) is based on low end estimate of average rates for hotel rooms for one night stay. Hotel/Income: Room Revenue (RevPar) is equal to TORN multiplied by ADR. Hotel/Income: Each income item reflects a $ amount in brackets that is multiplied by TORN and then multiplied by 365 days in the year for its budgeted income figure. Hotel/Expenses: Each expense item reflects a % in brackets that is multiplied by Total Income for its budgeted expense figure. EBITDA is equal to Total Income plus Total Expenses. Ownership Units: Number of Rooms reflects total number of 1,200sf two-bedroom lock-out vacation ownership units (actual gross rooms available for hotel use would equal two times the Number of Rooms). Ownership Units: Total Occupied Room Nights (TORN) is equal to Number of Rooms multiplied by Occupancy percentage and represents the number of rooms occupied in a given night. Ownership Units: Average Daily Room Rate (ADR) is based on low end estimate of average rates for hotel rooms for one night stay. Casino: Number of Gaming Positions represents 1400 total machine games (i.e. slots, video poker, etc.) with 1 person per machine, and 50 table games (i.e. poker, blackjack, craps, etc.) with 6 persons per table. Casino: Occupancy reflects percentage of Gaming Positions that are in use. Casino: Total Occupied Gaming Positions equals Number of Gaming Positions multiplied by Occupancy. Casino: Average Daily Position Win (ADPW) reflects dollar winnings to the house expected per Total Occupied Gaming Position. Casino/Income: Gaming Win Revenues equals ADPW multiplied by Total Occupied Gaming Position multiplied by 365 days. Casino/Income: Each income item reflects a $ amount in brackets that is multiplied by Total Occupied Gaming Positions multiplied by estimated persons per day multiplied by 365 days in the year for its budgeted income figure. Casino/Income: The estimated persons per day in Note 26 are based on a percentage of Total Occupied Gaming Positions: 1% for Spa Revenues (8.4 persons/day), 15% for Restaurant (126 persons/day), and 10% for the others (84 persons/day). Confidential Offering Memorandum - 45 -
Slide 47: 22 23 24 25 26 27 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 Casino/Expenses: Each expense item, except for Gaming Tax & License, reflects a % in brackets that is multiplied by Total Income for its budgeted expense figure. Casino/Expenses: Gaming Tax & License is based on a % in brackets that is multiplied by Gaming WinRevenues for its budgeted expense figure. Events Center: Average Event Occupancy equals Maximum Event Capacity multiplied by Occupancy. Events Center/Income: Admission Sales equals Average Event Occupancy multiplied by Number of Events per Month multiplied by Average Event Admission Rate (AEAR) multiplied by 12 months. Events Center/Income: All other income items are based on Average Event Occupancy multiplied by Number of Events per Month multiplied by $ amount in brackets multiplied by 12 months. Events Center/Expenses: Each expense item reflects a % in brackets that is multiplied by Total Income for its budgeted expense figure. Waterpark: Average Daily Occupancy equals Maximum Daily Capacity multiplied by Occupancy. Waterpark/Income: Admission Sales equals Average Daily Occupancy multiplied by Average Daily Admission Rate (ADAR) multiplied by 365 days. Waterpark/Income: All other income items are based on Average Daily Occupancy multiplied by $ amount in brackets multiplied by 365 days. Waterpark/Expenses: Each expense item reflects a % in brackets that is multiplied by Total Income for its budgeted expense figure. Other: Average Daily Occupancy equals Maximum Daily Capacity multiplied by Occupancy. Other/Income: Outrigger Revenues equals Average Daily Occupancy multiplied by Average Daily Admission Rate (ADAR) multiplied by 365 days. Other/Income: Renewable Energy Revenues is reserved for future revenue opportunities resulting from planned renewable energy sources. Other/Income: Media Company Revenues and all Other Revenues equal Average Daily Occupancy multiplied by $ amount in brackets multiplied by 365 days. Other/Expenses: Each expense item, except for Animal Care Costs, reflects a % in brackets that is multiplied by Total Income for its budgeted expense figure. Other/Expenses: Animal Care Costs is based on estimate provided by Windward Design. Total EBITDA equals all Operating Units EBITDAs added together. Interest (debt service) is based on Debt Financing Terms assumptions. Taxes & Insurance equals Total EBITDA multiplied by % in brackets. Depreciation will be addressed with project appraisal upon completion. Amortization (loan principal) is based on Debt Financing Terms assumption. Capital Reserve equals Total EBITDA multiplied by % in brackets. Total Operating Profit equals Total EBITDA less Interest less Taxes & Insurance less Depreciation less Amortization less Capital Reserve. Confidential Offering Memorandum - 46 -
Slide 48: APPENDIX H – SUBSCRIPTION AGREEMENT Triad Resorts, LLC 22525 SE 64th Place, Suite 251 Issaquah, WA 98027 The undersigned purchaser (the "Purchaser") delivers this subscription agreement (the "Agreement") in connection with the offering of the Preferred B LLC Units by Triad Resorts, LLC, a Nevada limited liability company (the "Company"). 1. Subscription. Subject to the terms and conditions of this Agreement, Purchaser irrevocably subscribes for and agrees to purchase the number of Preferred B LLC Units (as defined below and hereinafter referred to as “Unit(s)”) indicated on the signature page hereof. Each Unit is set at a price of $1.00 (one dollar) per Unit. With this Agreement, Purchaser hereby delivers a cashier’s check or wire transfer to the Company in full payment for the number of Units in the amount set forth on the signature page hereof. 2. Acceptance of Subscription. Purchaser understands and agrees that the Company is not bound by this subscription until it has accepted the subscription in the space provided at the end hereof, and that the Units to be issued and delivered on account of this subscription will only be issued in the name of Purchaser. Purchaser understands that this Agreement is and shall be irrevocable except that Purchaser shall have no obligations hereunder in the event this Agreement is rejected by the Company for any reason. The Company may accept or reject this subscription in its sole and absolute discretion. 3. Risk Factors. PURCHASER UNDERSTANDS AND ACKNOWLEDGES THAT INVESTMENT IN THE UNITS IS EXTREMELY SPECULATIVE AND INVOLVES A NUMBER OF UNUSUAL RISKS WHICH COULD RESULT IN THE LOSS OF THE PURCHASER'S ENTIRE INVESTMENT. Prior to investing in the Units, the Purchaser should carefully learn of and consider the general discussion of the Company's business, products, business strategy and current stage of development, and information relating to the nature of this offering and, the risks associated with investing in the Units. 4. Representations and Warranties of Purchaser. Purchaser represents warrants and agrees as follows: A) Purchaser understands that the Units are being offered and sold under an exemption from registration provided for in Regulation D under the Securities Act of 1933, as amended (the "Act") and similar exemptions from the provisions of applicable state securities or "Blue Sky" laws. Purchaser understands that this transaction has not been scrutinized by the United States Securities and Exchange Commission (the "SEC") or by any administrative agency charged with the administration of the securities laws of any state. B) Purchaser has been provided with the opportunity to review such documents, ask such questions of the Company, and to perform such due diligence or review as Purchaser has requested or deemed necessary to consider an investment in the Company. Purchaser acknowledges receipt of a summary of the beneficial ownership of the Company's securities in the form of a pro forma beneficial ownership table reflecting projected percentage holdings on a fully diluted basis of new investors in this offering. Confidential Offering Memorandum - 47 -
Slide 49: C) Purchaser, in making the decision to purchase the Units, has relied solely upon Purchaser's independent investigations and the advice of Purchaser's representatives and advisors, and Purchaser and any such advisors have been given the opportunity to ask questions of, and to receive answers from, the officers and directors of the Company concerning the Company and the terms and conditions of this offering, and to obtain any additional information Purchaser has requested or deemed necessary to consider an investment in the Company, to the extent such persons possess such information or can acquire it without unreasonable effort or expense, and can disclose the same without jeopardizing the confidentiality of key items of proprietary information. D) Purchaser is able (i) to bear the economic risk of this investment for an indefinite period, and (ii) to afford a complete loss of the investment. E) Purchaser has read the provided information for the Triad Resorts, LLC Jackpot, Nevada Development Project, including the risk factors, and understands that the forecasts provided are speculative, that scheduled distributions may not be made and that there can be no guarantee that the Company itself will succeed. F) Purchaser is acquiring the Units in good faith solely for Purchaser's own personal account, for investment purposes only, and not with a view to or for the resale, distribution, subdivision or fractionalization thereof. Purchaser has no contract, undertaking, understanding, agreement or arrangement, formal or informal, with any person to sell, transfer or pledge to any person the Units, or any part thereof, and Purchaser has no present plans to enter into any such contract, undertaking, agreement or arrangement. G) Purchaser understands that the transferability of the Units is restricted by the Company’s Operating Agreement, applicable federal and state securities laws and by the absence of a market for the Company's securities and that Purchaser must bear the economic risk of the investment for an indefinite period of time. The Units have not been registered under applicable securities laws, and, therefore, cannot be sold unless they are subsequently registered under such laws or an exemption from such registration is available. H) Purchaser understands that the Company is relying on the truth and accuracy of the representations, declarations and warranties made in this Agreement in offering the Units for sale to Purchaser without having first registered the same under the Act or applicable state securities laws. I) Purchaser consents to the following information and to the placement of a legend on the Units, in substantially the following form: "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER ANY STATE SECURITIES LAWS. NO INTEREST IN THESE SECURITIES MAY BE SOLD, DISTRIBUTED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT REGISTRATION UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH TRANSFER DOES NOT REQUIRE REGISTRATION UNDER THE ACT OR ANY OTHER STATE SECURITIES LAWS." J) Purchaser is an "accredited investor" within the meaning of Rule 501 of Regulation D promulgated by the SEC. Specifically, Purchaser qualifies under the following category or categories of "accredited investor" indicated below (PURCHASER MUST INDICATE THE APPLICABLE CATEGORY OR CATEGORIES BY INITIALING EACH APPLICABLE SPACE BELOW Confidential Offering Memorandum - 48 -
Slide 50: _____ _____ _____ _____ _____ Purchaser is a managing member or executive officer of the Company; Purchaser is a natural person and has an individual net worth, or a joint net worth with Purchaser's spouse (if any) at this time in excess of $1 million; Purchaser is a natural person and has had an individual income in excess of $200,000 in each of the two most recent years, or joint income with Purchaser's spouse (if any) in excess of $300,000 in each of those years, and has a reasonable expectation of reaching the same income level in the current year; Purchaser is an organization or entity consisting solely of persons who meet the requirements specified in this Subsection j; Purchaser is another type of "accredited investor" as that term is defined in Regulation D, namely: ________________________________________________. The foregoing representations and warranties and undertakings are made by the Purchaser with the intent that the Company rely on them in determining Purchaser's suitability as a purchaser of Units and Purchaser hereby agrees that such representations and warranties shall survive the issuance of the Units. 5. Transferability. Purchaser agrees not to transfer or assign this Agreement, or any interest herein, and any such transfer or purported transfer shall be void. 6. Revocation. Purchaser may not cancel, terminate or revoke this Agreement or any agreement of Purchaser made hereunder, and this Agreement shall survive the death or disability of Purchaser and shall be binding upon Purchaser's heirs, executors, administrators, successors, and assigns. 7. Closing. The Company may, in its sole and absolute discretion, accept or reject this subscription and payment for the cumulative participating Units. Acceptance of Purchaser's subscription and payment by the Company will occur only when the Company executes this Agreement, and executes and tenders delivery of the documents representing the cumulative participating Units purchased by Purchaser. Purchaser understands that the Company may accept this subscription immediately, and make use of the payment for the cumulative participating Units, without the necessity of prior or concurrent sale of any minimum number of the cumulative participating Units in this offering. 8. Continuing Effect of Representations and Warranties. Purchaser's representations and warranties are true and accurate as of the date of this Agreement and shall be true and accurate as of the date of issuance of the cumulative participating Units, and shall survive such issuance. If in any respect, such representations and warranties shall not be true and accurate prior to the issuance of the cumulative participating Units to Purchaser, Purchaser shall give immediate written notice of such fact to the Company specifying which representations and warranties are not true and accurate and in what respects they are not accurate. 9. Indemnification. Purchaser understands the meaning and legal consequences of the representations and warranties contained in this Agreement and agrees to defend, indemnify and hold harmless the Company and its officers, directors, employees and agents, and their successors and assigns, from and against any and all loss, damage, liability or expense, including without limitation attorneys' fees, due to or arising out of the inaccuracy of any representation or acknowledgement, or the breach of any agreement, warranty, or undertaking of Purchaser contained in this Agreement. 10. Miscellaneous A) All notices or other communications given or made under this Agreement shall be sufficiently given if hand-delivered or mailed by registered or certified mail return receipt requested, postage prepaid, to Purchaser or to the Company at the respective addresses set forth herein, or such other addresses as Purchaser or the Company shall designate to the other by notice in writing. Confidential Offering Memorandum - 49 -
Slide 51: B) This Agreement shall be governed by the laws of the State of Nevada. C) This Agreement constitutes the entire agreement among the parties with respect to the subject matter and may be amended only by a written notice executed by all parties. 11. Signatures. I have read this Subscription Agreement and agree to be bound by its terms. DATED AS OF ______________, 2009 Number of Units: Total Price: “PURCHASER” ______________________________________ Signature ______________________________________ Name (please type or print) ______________________________________ Signature of Co-Signer (if any) ______________________________________ Name of Co-Signer (please type or print) Indicate ownership as: _____ (a) Individual _____ (b) Community Property _____ (c) Joint Tenants with Survivorship _____ (d) Tenants in Common _____ (e) Other (Specify :_______________) State of Residence or Formation:______________ ______________________________________ Address ______________________________________ City, State, Zip Code ______________________________________ Telephone Number Triad Resorts, LLC, a Nevada Limited Liability Company, hereby accepts the foregoing Units subscription subject to the terms and conditions hereof as of ___________________, 2009. Triad Resorts, LLC By: _____________________________ Patrick J. Howard Managing Member Confidential Offering Memorandum - 50 -

   
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